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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, 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
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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 [X] NO [ ].
Number of Shares outstanding at September 30, 2002: 1,888,450
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2002 2001
(UNAUDITED)
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents .................. $ 379,811 $ 570,842
Short-term investments ..................... 897,470 877,304
Interest receivable and other current assets 46,708 42,261
----------- -----------
Total current assets .................. 1,323,989 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 .................... 36,797 33,651
----------- -----------
71,105 59,740
Less accumulated depreciation ......... (36,421) (33,919)
----------- -----------
34,684 25,821
----------- -----------
Total assets .......................... $ 1,491,353 $ 1,648,908
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ... $ 13,278 $ 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 ........................ (7,535,550) (7,390,649)
----------- -----------
Total shareholders' equity ............ 1,478,075 1,622,976
----------- -----------
$ 1,491,353 $ 1,648,908
=========== ===========
2
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS
AND ACCUMULATED DEFICIT
FOR THE THREE AND NINE MONTHS ENDED
September 30, 2002 and 2001
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 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 .............. (87,062) (27,405) (141,131) (45,868)
General and administrative (86,432) (64,069) (279,237) (251,604)
----------- ----------- ----------- -----------
Total expenses ........ (173,494) (91,474) (420,368) (297,472)
----------- ----------- ----------- -----------
Operating loss ........ (173,494) (91,474) (170,368) (47,472)
Other income:
Interest and other income 6,445 15,471 25,467 58,554
----------- ----------- ----------- -----------
Net income (loss) ..... $ (167,048) $ (76,003) $ (144,901) $ 11,082
----------- ----------- ----------- -----------
Income (loss) per share ..... $ (0) $ (0) $ (0) $ 0
=========== =========== =========== ===========
Weighted average common
shares outstanding basic
and diluted .............. 1,888,450 1,888,450 1,888,450 1,888,450
=========== =========== =========== ===========
ACCUMULATED DEFICIT:
Beginning of period ...... $(7,368,502) $(7,210,082) $(7,390,649) $(7,297,167)
----------- ----------- ----------- -----------
End of period ............ $(7,535,550) $(7,286,085) $(7,535,550) $(7,286,085)
=========== =========== =========== ===========
3
GOLDEN CYCLE GOLD CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
September 30, 2002 and 2001
(Unaudited)
2002 2001
----------- ----------
Cash flows from operating activities:
Net income (loss) .............................. $(144,901) $ 11,082
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation expense ..................... 2,502 1,883
Decrease (increase) in interest receivable
and other current assets ............... (4,447) 4,568
Decrease in accounts payable
and accrued liabilities ................ (12,654) (4,223)
--------- ---------
Net cash provided by (used in)
operating activities .............. (159,500) 13,310
--------- ---------
Cash flows from investing activities, net
Decrease (increase) in short-term investments .. (20,166) 255,999
Purchase of property and equipment ............. (6,784) (6,075)
Mineral property development costs ............. (4,581) --
--------- ---------
Net cash provided by (used in)
investing activities .............. (31,531) 249,924
--------- ---------
Net increase (decrease) in cash and
cash equivalents .................. (191,031) 263,234
Cash and cash equivalents, beginning of period ..... 570,842 91,591
--------- ---------
Cash and cash equivalents, end of period ........... $ 379,811 $ 354,825
========= =========
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 September 30, 2002, the Company's share of accumulated
unrecorded losses from the Joint Venture was $18,637,058.
(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 were 177,000 shares of dilutive securities outstanding during the
nine months ended September 30, 2002 not reported in loss per share for the
three and nine months ended September 30, 2002, as they would be anti-dilutive
due to net loss. There were no dilutive securities outstanding during the nine
months ended September 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 $339 million
were outstanding at September 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 used by operations was approximately $159,000 in the nine months
ended September 30, 2002 compared to cash provided by operations of
approximately $13,000 during the same period in 2001. Prior to 1993, the
$250,000 Minimum Annual
6
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 $1,311,000 at September
30, 2002 compared to $1,464,000 at December 31, 2001. Working capital decreased
by approximately $153,000 at September 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, 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 a net loss, for the nine months ended September 30, of
approximately $145,000 in 2002, compared to net income of approximately $11,000
in the comparable 2001 period.
The net loss for the first nine 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 September
30, 2002, the Company's share of accumulated unrecorded losses from the Joint
Venture was
7
$18,637,058.
The Manager reported that the Joint Venture incurred a net loss of
approximately $12.9 million for the nine months ended September 30, 2002 as
compared to a net loss of $11.7 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 3 are not being reported due to a lack of circumstances
that require a response.
Item 4. Controls and Procedures.
a. Evaluation of disclosure controls and procedures. The
Company, under the supervision and with the participation of the Company's
management, including its Chief Executive Officer, carried out an evaluation of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rules 240.13a-14(c) and 15d-14(c) under
the Securities Exchange Act of 1934 (the "Exchange Act") as of a date within
ninety days before the filing date of this quarterly report (the "Evaluation
Date"). Based upon this evaluation, the Chief Executive Officer concluded that,
as of the Evaluation Date, the Company's disclosure controls and procedures were
effective for the purposes of recording, processing, summarizing and timely
reporting information required to be disclosed by the Company in the reports
that it files under the Securities Exchange Act of 1934 and that such
information is accumulated and communicated to the Company's management in order
to allow timely decisions regarding required disclosure.
b. Changes in internal controls. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the Company's disclosure controls and procedures
subsequent to the Evaluation Date, nor were there any significant deficiencies
or material weaknesses in the Company's internal controls.
8
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
99.1 -- Certification of Chief Financial Officer
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, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Golden Cycle Gold
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant, and I have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
9
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors:
a. all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
November 14, 2002
/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)
10
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Certification of Chief Financial Officer