-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oj4yUOmPNQra7leK4pG1Nbr8PoPbTEiMepnnF7QWBuBMTiwbM+Y+WAEEmkl0oTIR ZlnXE59ufcxzoVrRwiqCJQ== 0000931731-05-000097.txt : 20050516 0000931731-05-000097.hdr.sgml : 20050516 20050516152507 ACCESSION NUMBER: 0000931731-05-000097 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050131 FILED AS OF DATE: 20050516 DATE AS OF CHANGE: 20050516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FISCHER WATT GOLD CO INC CENTRAL INDEX KEY: 0000844788 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 880227654 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-17386 FILM NUMBER: 05833907 BUSINESS ADDRESS: STREET 1: 1621 NORTH 3RD STREET STREET 2: SUITE 1000 CITY: COEUR D'ALENE STATE: ID ZIP: 83814-3340 BUSINESS PHONE: 2086646757 MAIL ADDRESS: STREET 1: 1621 NORTH 3RD ST STREET 2: STE 1000 CITY: COEUR DALENE STATE: ID ZIP: 83814 FORMER COMPANY: FORMER CONFORMED NAME: FISCHER WATT GOLD CO INC DATE OF NAME CHANGE: 19920703 10KSB 1 fwgo-10ksb013105.txt FWGO 10KSB 013105 U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended January 31, 2005 ---------------- [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) of THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the Transition period from ________ to ________ Commission file number 0-17386 FISCHER-WATT GOLD COMPANY, INC. ---------------------------------------------- (Name of small business issuer in its Charter) Nevada 88-0227654 - -------------------------------- ------------------- (State or other jurisdiction (IRS Employer of incorporation or organization Identification No.) 1410 Cherrywood Drive Coeur d'Alene, Idaho 83814 - ------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) (Issuer's telephone number, including area code) 208-664-6757 Securities registered under Section 12(b) of the Exchange Act: NONE Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 Par Value (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The issuer's revenues for its most recent fiscal year were $0 The aggregate market value of the voting stock held by non-affiliates as of April 1, 2003(using the average of the Bid and Asked prices) was $1,858,935 The number of Shares of Common Stock, $.001 par value, outstanding on January 31, 2005 was 53,469,111. Documents Incorporated by Reference into this Report: Yes Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] EXCHANGE RATES Except as otherwise indicated, all dollar amounts described in this Form 10(k) Annual Report are expressed in United States dollars ($US). CONVERSION TABLE For ease of reference, the following conversion factors are provided: 1 MILE = 1.6093 KILOMETERS 1 METRIC TONNE = 2,204.6 POUNDS 1 foot = 0.305 meters 1 ounce (troy) = 31.1035 grams 1 acre = 0.4047 hectare 1 imperial gallon = 4.5546 liters 1 long ton = 2,240 pounds 1 imperial gallon = 1.2010 U.S. gallons FORWARD LOOKING STATEMENTS The Company desires to take advantage of the "safe harbor" provisions contained in Section 27A of the Securities Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is including this statement herein in order to do so: From time to time, the Company's management or persons acting on the Company's behalf may wish to make, either orally or in writing, forward-looking statements (which may come within the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act), to inform existing and potential security holders regarding various matters including, without limitation, projections regarding financial matters, timing regarding transfer of licenses and receipts of government approvals, effects of regulation and completion of work programs. Such forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believes," "expect," "anticipate," "goal" or other words that convey the uncertainty of future events or outcomes. Forward-looking statements by their nature are subject to certain risks, uncertainties and assumptions and will be influenced by various factors. Should one or more of these forecasts or underlying assumptions prove incorrect, actual results could vary materially. PART 1 Item 1. DESCRIPTION OF BUSINESS Introduction - ------------ Fischer-Watt Gold Company, Inc. (collectively with its subsidiaries, "Fischer-Watt", "FWG" or the "Company"), was formed under the laws of the State of Nevada in 1986. Fischer-Watt's primary business is mining and mineral exploration, and to that end to own, acquire, improve, sell, lease, convey lands or mineral claims or any right, title or interest therein; and to search, explore, prospect or drill for and exploit ores and minerals therein or thereupon. Prior to and during fiscal year 1999, the Company's only producing metals property was the El Limon Mine in the Oronorte district in Colombia, South America. On November 21, 2000, the Company entered into an agreement to sell its Compania Minera Oronorte, S. A., subsidiary, which included the assets of its El Limon mine and certain other properties to "Grupo de Bullet" (Bullet). Bullet is -2- a privately held Colombian company that is principally engaged in the development and operation of mineral properties in that country. In consideration of this agreement the Company will receive $US3.7 million which will be paid as a production royalty. Fischer Watt's decision to withdraw from Colombia resulted from the continued political instability in that country. During fiscal 2005 the Company continued with its exploration and feasibility study work on its La Balsa copper project in Michoacan, Mexico. As a result of encouraging leach test results on the metallurgical behavior of the Transitional oxide zone ores an additional drill program has been designed to try to expand the reserves of the Transitional oxide zone, which lies beneath the oxide capping. Furthermore, the Company is encouraged by the potential of discovering primary copper porphyry mineralization at depth. The Company had no revenue for the year. General and administrative expenses were $271,065 and exploration expenses were $65,322. The exploration expenses were all related to exploration and feasibility study work at the La Balsa copper property in Mexico. Operations - ---------- With the sale of Oronorte the Company had no cash generating operations. In August 2000, the Company acquired the La Balsa copper property in Michoacan, Mexico. This property has the potential of developing into a profitable copper mine producing cement copper. The Company has dropped its option on the Mercedes claims in order to concentrate its efforts to bring the La Balsa copper project into production. See Item 2 - Description of Properties for a detailed discussion of these projects. Management's plans will require additional financing, reduced exploration activity, or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in these capital-raising endeavors in the past, there can be no assurance that its future efforts, and anticipated operating improvements will be successful. The Company does not currently have adequate capital to continue its contemplated business plan beyond the mid part of calendar year 2004. The Company is presently investigating all of the alternatives identified above to meet its short-term liquidity needs. The Company believes that it can arrange a transaction or transactions to meet its short-term liquidity needs, however there can be no assurance that any such transactions will be concluded or that if concluded they will be on terms favorable to the Company. Cautionary Statements - --------------------- The factors discussed below are believed to be important factors (but not necessarily all the important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Unpredictable or unknown factors not discussed herein could also have material adverse effects on actual results of matters that are the subject of forward-looking statements. The Company does not intend to update these cautionary statements. Exploration Programs and Financing - ---------------------------------- The Company intends to continue its exploration program in Mexico and other countries. It is not known if the expenditures to be made by the Company on its mineral properties will result in discoveries of commercial quantities of ore. If the Company's efforts are not successful at individual properties, the expenditures at those properties will be written off. Regulation - ---------- Mining operations and exploration activities are subject to various governmental laws and regulations governing prospecting, development, mining, production, importing and exporting of minerals; taxes; labor standards; occupational -3- health; waste disposal; protection of the environment; mine safety; toxic substances; and other matters. Licences and permits are required to conduct exploration and mining operations. There is no assurance that such permits will be granted. Amendment to current laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on the Company. Under certain circumstances, the Company may be required to close an operation until a particular problem is remedied or to undertake other remedial actions. Environmental Laws - ------------------ The exploration programs conducted by the Company are subject to governmental regulations regarding environmental considerations. Most operations involving the exploration for or the production of minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of stream and fresh water sources, odour, noise, dust, and other environmental protection controls adopted by governmental authorities as well as the rights of adjoining property owners. The Company may be required to prepare and present to governmental authorities data pertaining to the effect or impact that any proposed exploration or production of minerals may have upon the environment. The Company will be responsible for reclamation costs. Reclamation requirements vary depending on the location and the managing agency, but they are similar in that they aim to minimize long-term effects of exploration and mining disturbance by requiring the operating company to control possible deleterious effluents and to re-establish to some degree pre-disturbance landforms and vegetation. All requirements imposed by any such authorities may be costly, time consuming, and may delay commencement or continuation of exploration or production operations. Future legislation may significantly emphasise the protection of the environment, and that, as a consequence, the activities of the Company may be more closely regulated to further the cause of environmental protection. Such legislation, as well as future interpretation of existing laws, may require substantial increases in equipment and operating costs to the Company and delays, interruptions, or a termination of operations, the extent of which cannot be predicted. Market Factors and Volatility - ----------------------------- The marketability of natural resources, which may be acquired or discovered by the Company, will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations in the prices of minerals, the capacity of processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. Future prices of metals cannot be accurately predicted. Competition - ----------- Numerous companies are engaged in the exploration and development of mineral properties and have substantially greater technical and financial resources than the Company. Title of Properties - ------------------- Properties are held under mining concessions granted by the appropriate authorities. In most cases the concession does not include surface rights. The surface access is subject to successful negotiations with the owners, subject to the appropriate laws and regulations. -4- Foreign Operations - ------------------ The Company's present activities are in Mexico. As with all types of international business operations, currency fluctuations, exchange controls, restrictions on foreign investment, changes to tax regimes, political action and political instability could impair the value of the Company's investments. Conflicts of Interest - --------------------- Some of the directors of the Company are also directors of other mining companies that are also engaged in mineral exploration and the acquisition of mineral properties. Situations may arise in connection with potential acquisitions and investments where the interests of these individuals as directors of other companies may conflict with their interest as directors of the Company. These individuals will deal with such matters according to prudent business judgement and the relative financial abilities and needs of the various companies with which they are associated. They have been advised of their fiduciary duties to the Company. Notwithstanding, conflicts of interest among these companies could arise in which the individuals' obligations to or interest in other companies could detract from their efforts on behalf of the Company. Exploration and Development Risks - --------------------------------- Exploration and mining operations are subject to all the hazards and risks typically inherent to the mining industry, any of which could result in damage to life or property, environmental damage and possible legal liability for any or all damage. Personnel are exposed to numerous risks associated with mining, such as unstable geological conditions, and processing of large volumes of materials using mechanised equipment. In addition, there is no certainty that the expenditures to be made by the Company will result in discoveries of commercial quantities of metals. Risk of loss by theft by employees is relatively high and a high degree of security is required to mitigate such loss. The Company may become subject to liability for pollution, cave-ins or other hazards against which it cannot insure or against which it may elect not to insure. As the Company does not carry liability insurance, the payment of such liabilities, were they to be incurred, could have a material adverse effect on the Company's financial position. Calculation of Reserves and Mineral Recovery - -------------------------------------------- There is a degree of uncertainty attributable to the calculation of reserves, resources and corresponding grades being mined or dedicated to future production. Until reserves or resources are actually mined and processed, the quantity of reserves or resources and grades must be considered as estimates only. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are the particular attributes of the deposit, such as the deposit's size, quality, proximity to infrastructure, financing cost and government regulations. Any material change in the quantity of reserves, resource grade, stripping ratio or selling prices may render reserves uneconomic, require a restatement of ore reserves and affect the economic viability of the Company's properties. Canadian National Instrument 43-101 guides the company in the determination of reserves. Short term factors relating to the ore reserves, such as the need for orderly development of ore bodies or the processing of variable ore grades, or other operational problems, may impair the profitability of a mine. Currency Fluctuations and Foreign Exchange The Company uses the United States (US) dollar as its currency of display and measurement. The majority of its transactions are denominated in US dollars. The value of the Mexican Peso, as reflected in the exchange rate against the US dollar, has continued to fluctuate but has shown signs of stability as a result of the election of a new President. -5- Taxation Risks The tax risks of investing in Mexico and other Latin American countries are substantial. Tax legislation is evolving and is subject to varying interpretations, frequent changes and inconsistent enforcement at the federal, regional and local levels. Taxes payable by Mexican companies to federal, regional and local budgets are high and include corporate profits tax, IVA, payments for subsoil use, assets tax, excise tax, road fund taxes, transport taxes and payroll taxes. Changes to taxation rates may have a material adverse impact on the Company. Item 2. DESCRIPTION OF PROPERTY SUMMARY - ------- The following is a description of the Company's mineral properties. The Company holds interests in mineral properties located in Mexico. The Company's interest in the properties varies on a property-by-property basis. COLOMBIAN PROPERTIES - -------------------- On November 21, 2000, The Company entered into an agreement to sell its Compania Minera Oronorte, S. A., subsidiary, which included the assets of its El Limon mine and certain other properties to "Grupo de Bullet". In consideration of this agreement the Company will receive $US3.7 million which will be paid as a production royalty. Bullet assumed the existing liabilities. There is no assurance that Bullet will be successful in its attempt to raise operating capital or return the El Limon mine to profitability. For this reason the receivable is considered to be of no value. The continued political instability in Colombia resulted in the decision to withdraw from the country. MEXICAN PROPERTIES - ------------------ Minera Montoro Properties - ------------------------- During 1989, Fischer-Watt acquired a 49% interest in Minera Montoro S.A. de C. V. ("Montoro"), a corporation duly incorporated in and authorized to conduct business in Mexico. During the fiscal year ended January 31, 1996 that was increased to 50%. Effective July 1996, the Company's interest was increased to 65%. The La Balsa Property - --------------------- In August 2000, Montoro obtained five contiguous mining concessions approximately 15 km east of Lazaro Cardenas, Michoacan. The concessions are referred to as "La Balsa" or "Balsa". The concessions have been expanded from 600 hectares to approximately 1000 hectares. The concessions were obtained as the result of a public auction conducted by Secretaria de Comercio y Fomento Industrial (SECOFI). The concessions primarily contain copper mineralization. Minera Montoro owns 100% of the rights to the concessions and therefore FWG controlled 65% of the assets at the time of acquisition. The exploration and feasibility studies on the property have been funded through cash contributions to the project from Mr. James Seed, Chairman of the Company. In return Mr. Seed has been receiving a Joint Venture interest in the project at a rate of 1% per $40,000 invested. To date Mr. Seed has invested approximately $865,000. -6- History, Location, Accessibility - -------------------------------- The La Balsa copper deposit is located in the state of Michoacan, Mexico, near the port city of Lazaro Cardenas. It is logistically well located and accessibility is excellent. Copper mineralization was discovered on the property by ASARCO in the 1950's. Since then, several companies, including the Mexican subsidiary of Cyprus AMAX Mineral Company (Minera Cuicuilco), have controlled the mineral rights. The property did not meet Cyprus' criteria because of size and the property was idle for several years. Infrastructure - -------------- The property is located near the port city of Lazaro Cardenas, Michoacan. The area infrastructure is excellent. The city has approximately 300,000 residents and is the home of two steel manufacturing facilities, some steel fabricating plants, and a deep-water port. The port has both container and bulk commodities capabilities. A large fertilizer manufacturing plant (Fertinal) is also located in the port area. The area is served by the TFM railroad, which passes through the property, and Federal Highway 37. Electricity is available from a nearby coal fired generating facility and a hydroelectric plant located at Lake Morelos. Lake Morelos is a man made lake created by the damming of Rio Balsa. Water is available from Lake Morelos. The property is accessed by a state maintained dirt road that serves the communities of San Rafael and El Reno. Approximate distances are shown below. Item Distance Item Distance ---- -------- ---- -------- Electrical Line 500 m Phone Line 200m Airport 12 km Port 20 km Main Road 150 m Lazaro Cardenas 15 km Lake 1 km Geology - ------- The La Balsa property is in a region of predominantly metasedimentary and metavolcanic rocks of Precambrian and Paleozoic ages. This metamorphic complex is overlain by rocks of Cretaceous age, which include limestone, sandstone and shales. Locally, volcanic rocks are interbedded with the sedimentary rocks. This sequence of rocks is intruded by an extensive batholith of granitic to granodioritic composition. This igneous unit is estimated to be of Laramide age. The geology of the claim area appears to have undergone moderate to strong hydrothermal alteration and weathering. Argillization, sericitization and silicification, which are the resultants of hydrothermal activity, are common. No petrographic descriptions have been completed. On the basis of the abundance of clays and oxidation, the deposit was divided into three major alteration and mineralization zones: 1) An oxidized zone characterized by the abundance of clay; 2) A rock oxide zone, and 3) A sulfide zone. The three rock types have significant metallurgical differences with the copper recovery in the oxide zone being higher than from the sulfide. The oxide zones may be more extensive than original interpreted projections. The original copper mineralization in the deposit occurs as chalcopyrite and bornite. Most, if not all, of this type of mineralization is in the quartz monzonite and andesites. In the oxide sectors of the deposit, the oxide copper mineralization occurs principally as malachite with minor amounts of chrysocolla and azurite. These oxide copper minerals are most likely the result of the oxidation of chalcocite. Chalcocite is a secondary copper mineral of supergene origin. During FWG's drill program it was noted that several of the drill holes had terminated in porphyry-style, high grade, copper sulfide mineralization or -7- favorable altered host rocks. This same bornite mineralization and porphyry association had also been noted in the drill logs of some of the 70 holes drilled previously by other companies. Fischer-Watt therefore contracted La Cuesta International, Inc. to determine the potential, and to make specific recommendations for future exploration, of this deeper, primary sulfide, target. In its conclusions, La Cuesta International noted that some of the drill holes beneath Zone C had intersected the throat of important, well-mineralized, copper-bearing porphyry intrusive and that "The La Balsa project is a porphyry hosted, bornite dominated, copper-silver-gold mineral system". This system may be a member of the "diorite-type" porphyry copper model but additional work is needed in order to verify this determination. In addition, JRA Geophysics, Inc. reviewed geophysical surveys over La Balsa that had been carried out previously by others. The regional airborne magnetic survey indicates that the main La Balsa mineralization lies in an area where a north-south fault intersects an ENE - WSW striking, regional magnetic high feature. The induced polarization survey data over this area suggests that a 600 meter long sulfide bearing zone exists along the ENE - WSW axis. The zone remains open to the west, north, south and to depth. Drilling - -------- Several mining companies have drilled the property since its discovery in the 1950's. The drilling history is summarized below.
Company Year No of Holes Type Status ------- ---- ----------- ---- ------ ASARCO 1950 Several shallow test holes Percussion Unavailable St. Lucie Exploration 1969 Shallow Holes Percussion Unavailable Minera Cuicuilco 1979 13 Core In database Minera Cuicuilco 1987 35 Reverse Circulation Minera Cuicuilco 1989 28 Core Montoro 2001 8 Core Total 88
Note: 1. Minera Cuicuilco is the Mexican subsidiary of Cyprus Minerals. Subsequent to the drilling Cyprus merged with the Phelps Dodge Corporation. 2. Reportedly, work was done on the property by the Nevada Star Corporation in 1995-96. Efforts to obtain this information have been unsuccessful. The 88 drill holes that are in the database represent 3,234 meters of drilling. On September 28, 2001 the Company began a drilling program at the La Balsa project. This program was initiated to confirm and expand the reserves, provide a better understanding of the geology, and to provide material for additional metallurgical testing. The drilling consisted of 435 meters of core. The work was performed by B.D.W. Drilling, Guadalajara, Jalisco and supervised by Resource Geosciences de Mexico, Hermosillo, Sonora. The samples from the drilling were analyzed in the Vancouver, B.C. laboratory of Bondar Clegg. Results were most favorable with selected assays in excess of 15% copper. -8-
LA BALSA SIGNIFICANT DRILL INTERCEPTS Hole Inclination Azimuth From To Vertical Total Ore # Degrees Degrees Meters Meters Thickness Cu % Type Zone ---- ------- ------- ------ ------ --------- -------- --------- ----- 101 - 90 0 13.5 18.0 4.5 1.31 Oxide West 102 - 90 0 33.0 40.5 7.5 0.99 Sulfide West 103 - 50 030 0.00 10.5 8.0 3.79 Oxide West 18.0 28.5 8.0 2.08 Sulfide West 104 - 90 0 9.0 39.0 30.0 3.87 Oxide East 39.0 58.5 19.5 2.09 Sulfide East 105 -45 090 9.0 51.0 29.7 2.13 Oxide East 106 - 45 315 40.3 60.0 13.9 1.11 Sulfide East* 107 - 45 135 8.0 52.5 31.5 2.78 Oxide East 108 - 45 045 12.0 30.0 12.7 1.20 Oxide East
*Considered very important for porphyry potential. This hole ended in ore grade mineralization outside the current reserve area. Concurrent with the drilling, Seegmiller and Associates, an internationally recognized slope stability firm based in Salt Lake City, Utah, preformed various rock mechanic studies and slope stability analysis. Aguayo and Associates of Hermosillo, Sonora, performed environmental testing for potential acid rock drainage on representative samples. The La Balsa project is rather unusual because, although several companies drilled it since its discovery, no drill core, drill cuttings, sample rejects, pulps, etc. are known to survive. Metallurgy - ---------- The previous owners had metallurgical testing done by Mountain States Research of Tucson, AZ, Metcon Research of Tucson, AZ, and the internal laboratories of Cyprus. Metcon completed the most extensive study and concluded that the material is amenable to heap leaching using sulfuric acid. The results are summarized below. Rock Type Metallurgical Specific Recovery Gravity ---------- -------- ------- Clay Oxide 79.3% 2.44 Rock Oxide 86.1% 2.60 Sulfide 51.8% 2.86 -9- Feasibility Study - ----------------- In October 2000 the Company retained K D Engineering, Tucson, Arizona, to perform a pre-feasibility study on the Balsa Project. Simultaneously, Mintec, Inc., Tucson, Arizona, was retained to determine the ore reserves and complete a mine design. K D Engineering subcontracted the geotechnical portion of the study to the Tucson office of Golder Associates. The pre-feasibility study was completed on January 4, 2001 and is summarized below. Reserves Class Type Tonne %Cu ----- ---- ----- --- Measured Clay Oxide 556,447 0.998 Rock Oxide 2,081,640 0.878 Sulphide 6,481,094 2.677 Sub Total 9,119,181 2.164 Indicated Clay Oxide 103,041 0.939 Rock Oxide 1,246,182 0.548 Sulphide 2,147,934 0.206 Sub Total 3,497,157 0.349 Inferred Clay Oxide 3,221 0.728 Rock Oxide 186,425 0.442 Sulphide 11,684,788 0.154 Sub Total 11,874,434 0.159 Total Clay Oxide 662,709 0.99 Rock Oxide 3,514,247 0.74 Sulphide 20,313,816 0.96 Total 24,490,772 0.93 Class Type Tonne %Cu ----- ---- ----- --- Measured Clay Oxide 659,488 0.989 And Rock Oxide 3,327,822 0.754 Indicated Sulphide 8,629,028 2.062 Sub Total 12,616,338 1.661 -10- Total Tonne mined 3.5 million (Proven & Probable only) Average Grade of Ore Mined 1.42% Cu Striping Ratio (Waste to Ore) 0.68:1 Ton per day of refined copper 14 Type of Copper Produced Electrolytic Total Capital Requirement $10 million (Approximately) Project Life 7.5 years Cash Cost per Lb of Cu $0.54 Revenue @ $0.85 per Lb of Cu $66 million Current Metallurgical Testing - ----------------------------- In September 2001 the Company retained Mountain States R&D International of Tucson, Arizona to perform additional metallurgical testing. This testing was completed by July 2002. The core from the various mineralized zones was characterized into three distinct ore types, namely oxide ore, transitional oxide ore and primary sulfide ore. The head grades of the samples were representative of each of the ore types, namely, oxide ore at 2.75% copper, transitional oxide ore at 1.78% copper and primary sulfide ore at 1.09% copper. Two sets of samples were prepared, one at a crush size of minus 1 inch and the other at minus 1/2 inch. These two sets of samples were column leached for 100 days. The minus 1/2 inch samples returned the best results. The copper recovery in both the oxide and transitional oxide ores was excellent and acid consumption was low in both cases. The recovery curves for the minus 1/2 inch samples showed good leaching characteristics with a total recovery of 93.9% of the copper in the oxide ore and 92.4% of the copper in the transitional oxide ore. Leach, Inc. evaluated the data from the column leach tests for the purpose of projecting copper recoveries under various commercial operating scenarios. The test data indicated that copper recovery is controlled by the availability of the leaching reagents and it was calculated that 90 to 92 percent of the copper could be solubilized in 123 days of leaching using typical heap leach operating parameters. Copper recovery would be somewhat lower than this in practice due to normal inventory build-up in the leach heaps and because of operating inefficiencies. Comparable recoveries can be attained in the period between 76 and 245 days of leaching by varying the operating parameters. The precise operating parameters have not yet been established and will be the subject of the engineering design program currently being planned. The third ore group, the primary sulfide ore, is derived from the deeper La Balsa porphyry mineralization. At the present time this primary sulfide resource represents the second phase of mining that would take place at the property after the oxide and transitional oxide ores have been mined. Copper recovery of 41.7% was much lower in this ore, as expected, and acid consumption was high. However, some interesting metallurgical opportunities were brought to light during the testing. For example, preliminary testwork has indicated that Heavy Media Separation can significantly upgrade this primary sulfide ore prior to flotation. In this way some of the gangue, or waste material, is separated from the ore minerals in a pre-concentration step thereby reducing the quantity of material that has to be treated in the following stage. This reduction would likely appreciably lower the capital cost of the processing plant. There are other options available also for treating the primary sulfide ore and they will be examined as the development of the oxide and transitional oxide ore moves forward. Ore Reserves and Mine Design - ---------------------------- The Company retained Mintec of Tucson, AZ to integrate the recently completed drilling into the ore body model, recalculate reserves and update the mine design. A structural geologist was retained to confirm the geological interpretations. Further work on this aspect of the deposit has been deferred until after the results of the proposed next drill program are available. -11- Plans for La Balsa - ------------------ The significant improvement in copper prices during the fiscal year 2004 has caused the company to re-evaluated its plans for La Balsa and studies are underway to determined the most cost effective way to put the leachable portion of the ore body into production as quickly as possible. FINANCIAL COMMITMENTS - --------------------- The Company has no lease payments or work commitments related to any domestic property it controls. Item 3. LEGAL PROCEEDINGS As part of the agreement to sell Oronorte, Grupo de Bullet assumed all related liabilities. On October 18, 1996, Fischer-Watt Gold Company, Inc. commenced a legal proceeding against Greenstone Resources Canada Ltd. During 2000 Greenstone filed for bankruptcy and its primary creditors have taken control of the assets. The likelihood of success in this legal action is so remote that no further action will be taken. None of the known legal proceedings will have a material effect on the company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fiscal year no matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise. PART II Item 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS Market Information - ------------------ The Company's common stock trades on the OTC Bulletin Board. The high and low bid quotations were obtained from the National Association of Securities Dealers, Inc. Trading and Market Services report. The quotations below reflect inter-dealer prices without retail markup, markdown or commissions and may not necessarily represent actual trades. HIGH BID LOW BID Year Ended January 31, 2004 First Quarter $ 0.09 $ 0.01 Second Quarter 0.08 0.03 Third Quarter 0.09 0.03 Fourth Quarter 0.39 0.05 -12- Cash Dividends: Since inception, the Company has not declared nor paid any cash dividends. It retains all earnings from operations for use in expanding and developing it business. Payment of dividends in the future will be at the discretion of the Company's Board of Directors. Changes in Securities - --------------------- During the year common shares were issued for various reasons. The issuances are discussed in the notes to the attached financial statements. At the close of the fiscal year there were 660 beneficial holders of common shares. Jim Seed, Chairman of the Board, controls approximately 27% of the outstanding stock, through various trusts. Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. Statements which are not historical facts contained herein are forward looking statements that involve risks and uncertainties that could cause actual results to differ from projected results. Such forward-looking statements include statements regarding expected commencement dates of mining or mineral production operations, projected quantities of future mining or mineral production, and anticipated production rates, costs and expenditures, as well as projected demand or supply for the products that FWG and/or FWG Subsidiaries produce, which will affect both sales levels and prices realized by such parties. Factors that could cause actual results to differ materially include, among others, risks and uncertainties relating to general domestic and international economic and political risks associated with foreign operations, unanticipated ground and water conditions, unanticipated grade and geological problems, metallurgical and other processing problems, availability of materials and equipment, the timing of receipt of necessary governmental permits, the occurrence of unusual weather or operating conditions, force major events, lower than expected ore grades and higher than expected stripping ratios, the failure of equipment or processes to operate in accordance with specifications and expectations, labor relations, accidents, delays in anticipated start-up dates, environmental costs and risks, the results of financing efforts and financial market conditions, and other factors described herein and in FWG's quarterly reports on Form 10-QSB. Many of such factors are beyond the Company's ability to control or predict. Actual results may differ materially from those projected. Readers are cautioned not to put undue reliance on forward-looking statements. The Company disclaims any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws. Summary The Company had no revenue for the year. On November 21, 2000, the Company entered into an Agreement to sell the assets of its El Limon mine and certain other properties to "Grupo de Bullet". In consideration of this agreement the Company will receive $US3.7 million which will be paid as a production royalty. There is no assurance that Bullet will be successful in its efforts to acquire the capital necessary to operate El Limon mine. The receivable from Bullet is considered to be without value. The Company reported net loss of $474,858 for the year ended January 31, 2005. For the same time period the General and Administrative expenses were $271,065 and Exploration costs were $65,322. Also during the year ended January 31, 2005, the Company incurred $71,600 of stock compensation expense for services. Additionally, wrote down inventory by $125,000 to market value. The exploration costs are totally applicable to the exploration and feasibility study work being carried out on the La Balsa property and compare to a similar amount of $183,136 -13- spent on the property the previous year. General and Administrative costs decreased to $271,065 from $373,229 in the prior year. The Company has an accumulated deficit of $17.6 million and continues to experience negative cash flow. The ability of the Company to achieve its operating goals, and thus positive cash flows from operations, is dependent upon the future market price of metals. Management's plans may require additional financing or disposition of some of the Company's assets. While the Company has been successful in raising cash in the past, there can be no assurance that its future cash raising efforts and anticipated operating improvements will be successful. Liquidity and Financial Condition As of January 31, 2005 the Company had negative working capital of $(1,595,557) made up of cash of $921 included in current assets of $55,258 included in and current liabilities of $1,650,815 including related party liabilities of $1,288,811. On January 31, 2005, the Company's current ratio of current assets to current liabilities was therefore less than 1:1 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 year and due and payable within the next fiscal year. Cash flows from operations during fiscal 2005 are not expected to be sufficient to fund operating and administrative expenses and exploration expenses. The Company anticipates needing additional funding from equity or borrowings. However, it is presently uncertain if any such financing in adequate amounts will be available to the Company, or will be available on terms acceptable to the Company. The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. FWG has experienced losses for the years ended January 31, 2005 and 2004 of $(474,858) and $(561,865) respectively. These factors raise substantial doubt about the Company's ability to continue as a going concern. Net cash used in operations was $(403,303) for the year ended January 31, 2005 as compared to $(324,922) used over the corresponding period a year earlier. Cash flows from investing activities increased to $383,282 from $281,704 the previous year. This reflects a increased in capital contribution to the La Balsa project by a related party shareholder of $25,000 from $129,500 the prior year as well as proceeds of $178,282 from the exercise of stock options and issuance of common stock and stock subscriptions as compared to $152,204 in the previous year. In, addition, a shareholder purchased $175,000 of precious gems inventory on behalf of the Company for which the Company evidence by demand note with interest at 5% per annum. Other Management believes that the Company has adequately reserved its reclamation commitments. Management also believes that the company is substantially in compliance with all environmental regulations. Forward Sales of Precious Metals The Company does not presently employ forward sales contracts or engage in any hedging activities. All of the production is sold on the spot market that is generally the afternoon closing price for metals on the London Metal Exchange (LME) on the day of delivery. The company plans to continue this policy with future production. COSTS AND EXPENSES General and Administrative: General and administrative costs decreased from $373,229 in fiscal 2004 to $271,065 in fiscal 2005, this reduction in G&A costs was due to concentrating on the La Balsa and dropping the Mercedes option. -14- Other Income and Expenses Net interest expense of $8,806 in the year ended January 31, 2005 resulted from related party loans aggregating $285,000. Item 7. FINANCIAL STATEMENTS. See Index to Financial Statements attached hereto. Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company retains Stark Winter Schenkein & Co, LLP as its principal independent auditor. There has been no material disagreement between the parties during the fiscal year. Item 8A CONTROLS AND PROCEDURES With the participation of management, the Company's chief executive officer and chief financial officer evaluated the Company's disclosure controls and procedures within the 90 days preceding the filing date of this report. Based upon this evaluation, the chief executive officer and chief financial officer concluded that the Company's disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission. There were no significant changes in the Company's internal controls or, to the knowledge of the management of the Company, in other factors that could significantly affect these controls subsequent to the evaluation date. PART III Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT. Directors and Executive Officers: The following table sets forth certain information as to all directors and executive officers of Fischer-Watt:
Positions Held Position Name Age With the Company Held Since - ---- --- ---------------- ---------- George Beattie 77 Chief Executive Officer August 27, 1993 President Gerald D. Helgeson 71 Director March 14, 1994 Secretary Peter Bojtos 56 Director April 24, 1996 Vice Chairman Vice President James M. Seed 64 Chairman of the Board June 1, 1996 Jorge E. Ordonez 65 Director June 12, 1996 William Rapaglia 58 Director October 10, 2003
-15- All of the directors have been elected for a term of one year or until a successor is elected. Directors are subject to election annually by the shareholders. Directors are elected by a simple majority of the shareholders. The position of Chief Financial Officer has been vacant since the resignation of Ms. Michele Wood on April 13, 1998. The duties of the CFO are fulfilled by other Company executives and contract accountants. The Audit Committee is composed of Messrs. Helgeson, Seed and Ordonez who are all independent directors. Each of these directors is financially literate but none of them is a financial expert. There are no family relationships by blood, marriage or adoption among any of the officers or significant employees of the Company. GEORGE BEATTIE George Beattie, born November 22, 1927, has an Engineer of Mines degree from the Colorado School of Mines. He has been active in the mineral industry since 1960, working up from front line supervisory positions to Director of Mining for Callahan Mining Corporation and General Manager, Western Mines for United Nuclear Corp. In 1980, Mr. Beattie formed Mineral Advisors, Inc., a consulting firm offering expertise in the development and management of mineral projects. He is also recognized as an expert in the application of explosives, and has served as a consultant for Western States Energy in the Pacific Northwest. Mr. Beattie became Chief Executive Officer of Fischer-Watt Gold Company, Inc., on August 27, 1993. Mr. Beattie devotes all of his business time to the affairs of the Company. GERALD D. HELGESON Gerald Helgeson was born in St. Cloud, Minnesota on October 3, 1933. After graduating from the University of Minnesota in 1955, Mr. Helgeson founded Jack Frost, Inc., which became the largest integrated poultry complex in the Upper Midwest. In addition, Mr. Helgeson was a member of the Young President's Organization. Mr. Helgeson is now semi-retired and resides in Fallbrook, California and he presently belongs to the Los Angeles YPO Graduate Group. Mr. Helgeson has been a director of the Company since March 14, 1994. Although Mr. Helgeson was appointed Vice President of the Company in October 1995, he does not generally function in an executive officer capacity for the Company. JORGE E. ORDONEZ Jorge Ordonez, born October 22, 1939 in Tulsa, Oklahoma, is a certified professional engineer in Mexico who resides in Mexico City. He received his degree in Geological Engineering from the Universidad Nacional Autonoma de Mexico in Mexico City in 1962 and his Masters from Stanford University in 1965. As President of Ordonez Profesional, S.C., Jorge Ordonez is a consultant to World Bank, international and Mexican Mining Companies, and the Mexican government. In addition to his affiliation with the Company, Mr. Ordonez is presently Managing Director of Altos Hornos de Mexico, S.A. de C.V., Managing Director of Grupo Gan, Mining Division, Managing Director of Minera Carbonifera Rio Escondido, Vice President of Minera Montoro, S.A. and a member of the Board of Directors of Hecla Mining Company (HL-NYSE). The Mexican National Geology Award was awarded to Mr. Ordonez in 1989, recognizing contributions made to the mining industry as an Academician with the Mexican Academy of Engineering and in leading roles with the Mexican Silver Council, the Silver Institute and the North America Society of Economic Geologists. He has been a Director of Fischer-Watt Gold Company, Inc. since June 5, 1996. -16- PETER BOJTOS Peter Bojtos, P. Eng., was born on March 26, 1949 and received a Bachelor of Science Honours degree in Geology from Leicester University, England. He has an extensive background in the mining industry, with over 30 years in exploration, production and corporate management. He is a member of the Board of Directors of several natural resource companies. From August 1993 until 1995, Mr. Bojtos was President and Chief Executive Officer of Greenstone Resources Ltd. From 1992 to August 1993 he was President and Chief Executive Officer of Consolidated Nevada Goldfields Corporation. Prior to that Mr. Bojtos held several key positions, including vice-president of Corporate Development, during his twelve years with Kerr Addison Mines, Limited. Mr. Bojtos became a Vice President and Vice Chairman of the Board of Directors of Fischer-Watt Gold Company, Inc., in April 1996. JAMES M. SEED James Seed was born on April 4, 1941. He was graduated from Brown University in 1963 and received his MBA from Stanford University in 1965. He is Chairman, President and Owner of The Astra Ventures Incorporated and The Astra Projects Incorporated, privately owned land development companies focusing on creating building sites in the Minneapolis suburban communities and a community surrounding a Robert Trent Jones, II championship golf course. He has been with these companies since 1979. From November 1979 to May 1989, he was the President and Owner of Buffinton Box Company. From February 1971 to November 1979, Mr. Seed was with Fleet Financial Group, spending his last two years there as Treasurer of the Corporation. Mr. Seed is a Commissioner of Rhode Island Investment Commission and a Trustee of The Galaxy Funds, an $8.4 billion family of 33 mutual funds. He was a Trustee of Brown University from 1984 to 1990. Mr. Seed became a Director of Fischer-Watt Gold Company, on June 1, 1996, and was appointed Chairman of the Board on October 20, 1999. WILLIAM J. RAPAGLIA William J. Rapaglia has over twenty years experience in real state, acquisitions, constructions and development. As a principal or partner in real state development projects, Mr. Rapaglia`s responsibilities ranged from construction management, permit expedition, entitlements, forming syndication's, investor relations, capitalization, legal liaison, marketing and project promotion. He is a licensed real estate broker in the state of California. Since 1995, Mr. Rapaglia has been intricately involved with the management, direction, growth and development of both private and public companies. Since 1997, he has been involved in the mining industry. He is currently a Director of Nevada Mining Company, a closely held corporation. -17- He was President and Director of a small publicly traded investment banking firm, Institutional Equities Corporation. In his capacity as President, he oversaw all aspects of running a public company. Mr. Rapaglia maintains strong business relations with investment bankers and market makers throughout the United States and Europe. Subsequent to 9/11 he formed a company, which has provided logistical support to the U.S. Militaries Operation Enduring Freedom in Afghanistan. Mr. Rapaglia has worked and traveled extensively overseas. After serving in the United States Marine Corps from 1965 to 1969, he attended Arizona State University and the University of Tubingen in Germany. Item 10. EXECUTIVE COMPENSATION. The following table presents the compensation awarded to, earned by, or paid to Mr. George Beattie, the Chief Executive Officer, the only executive officer whose total annual salary and bonus exceeds $100,000. SUMMARY COMPENSATION TABLE Annual Compensation Long Term Compensation Name and Principal Fiscal Position Year Salary $ - -------- ---- -------- George Beattie, 2004 100,000 President, CEO 2003 100,000 2002 100,000 2001 100,000 2000 100,000 1999 100,000 1998 100,000 The Company's chief executive officer is also a director. Directors receive no cash compensation for their services except directors who are not employees receive a communications allowance of $250 each six months. All directors and officers participate in the Company's stock option plan. Due to a severe cash shortage, none of the executives or employees of the Company were paid during the year. The moneys due are included in accounts payable and accrued expenses - shareholders. Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Security ownership of certain beneficial owners, management and all owners of more than 5% of the outstanding common stock as of January 3 1, 2005. -18-
Name and Address of Amount and nature of % of beneficial owner beneficial ownership Class - ---------------- -------------------- ----- Cede & Co. 28,586,803 Shares 61.5 PO Box 222 Owned indirectly. Note 1 New York, NY 10274 Peter Bojtos 3,150,000 shares Officer and Director owned directly and 2582 Taft Court indirectly. Note 2 4.4% Lakewood, CO 80215 James M. Seed 14,941,600 shares Director and Chairman of the Board owned indirectly, 70 South Main Street Note 2, 3 27.3% Providence, RI 02903 George Beattie 938,727 shares Officer and Director owned directly, 1410 Cherrywood Drive Note 2 0.1% Coeur d' Alene, ID Gerald D. Helgeson 400,000 shares Officer and Director owned directly, 3770 Poppy Lane Note 2, 4 0.0% Fallbrook, CA Jorge E. Ordonez No shares Director owned directly 0.0% Ave. Paseo de las Palmas 735-205 Note 2 Mexico City, Mexico Directors and 18,492,600 shares Officers as a Group owned directly, (Six persons) and indirectly 31.5%
Note 1 - Cede & Company is a brokerage clearing company. Note 2 - The options to purchase shares is shown below. Note 3 - James M. Seed owns no shares, options or warrants directly, but through various related trusts. Mr. Seed was appointed Chairman of the Board on Oct 20, 1999. Note 4- Mr. Helgeson has assigned all of his options to his wife, Madelynne Helgeson. Mrs. Hegelson was issued 400,000 shares of common stock during the year ended January 31, 2005 for stock subscriptions. -19- Options to purchase Common Stock Granted to Directors and Officers as of April 15, 2004 update Amount Price Granted Expires ------ ----- ------- ------- George Beattie 500,000 0.01 10/27/99 10/31/05 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 James Seed 500,000 0.01 10/27/99 10/31/05 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 Peter Bojtos 1,050,000 0.04 09/08/03 09/07/06 100,000 0.115 07/06/04 07/31/09 Jorge Ordonez 500,000 0.01 10/27/99 10/31/05 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 Jerry Helgeson 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 William Rapaglia 500,000 0.05 11/13/03 06/30/07 100,000 0.115 07/06/04 07/31/09 Indebtedness of Directors and Officers No Company directors or officers are indebted to the Company. Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Mr. Jorge E. Ordonez became a Director of the Company on June 5, 1996. Mr. Ordonez has numerous interests and is a director of Hecla Mining Company, which is also in the mining business. Mr. Ordonez is a principal shareholder in Minera Montoro S.A. de C.V. ("Montoro"), a Mexican corporation. The Company holds a 65% interest in Montoro. During the past two fiscal years no significant or material transactions have occurred between the Company and Montoro. The Company owed Kennecott Exploration Company (Kennecott) $500,000 plus accrued interest for various business transactions occurring in 1995 and 1996. On March 1999, Kennecott forgave this obligation in return for a one-time payment of $100,000. The Company borrowed the payment from Mr. James Seed, a Director and Chairman of the Board, under normal commercial conditions with payment due in March 2001. The amount has not yet been repaid and is accruing interest at an annual rate calculated at prime plus 2%. The exploration and feasibility studies on the La Balsa property have been largely funded through cash contributions to the project from Mr. James Seed, Director and Chairman of the Company. In return Mr. Seed has been receiving a Joint Venture interest in the project at a rate of 1% per $40,000 invested. To date Mr. Seed has invested approximately $865,000 Due to a severe cash shortage, executives of the corporation have been deferring the payment of their salaries. Mr. George Beattie, President and Chief Executive -20- Officer, is owed $621,333 and Mr. Peter Bojtos, Vice-President, is owed $304,167. These amounts are included in accounts payable and accrued expenses - shareholders. Item 13. EXHIBITS AND REPORTS ON FROM 8-K (a) Exhibits Exhibit Item 601 No. Category Exhibit - --- -------- ------- 1 2 Mining Property Purchase Agreement dated September 30, 1996, between Fischer-Watt Gold Company, Inc. and Kennecott Exploration Company ("KEC") whereby FWG purchased mining claims owned by KEC in Esmeralda County, Nevada, and, upon closing, delivered to KEC a Promissory Note in the amount of $700,000 and filed as Exhibit 6.2 to Form 10-QSB filed October 18, 1996 and incorporated herein by reference. 2 3 By-laws of the Corporation. Amended and restated. Filed as Exhibit 3.3 to Form 10-QSB filed December 16,1996 and incorporated herein by reference. 3 10 Option effective June 1, 1996, whereby Fischer-Watt Gold Company, Inc., grants Gerald D. Helgeson an option to purchase 100,000 shares of Fischer-Watt restricted common stock. Filed as Exhibit 31.10 to Form 10-KSB filed September 26, 1996 and incorporated herein by reference. 4 10 Option effective June 1, 1996 whereby Fischer-Watt Gold Company, Inc., grants Peter Bojtos an option to purchase 100,000 shares of Fischer-Watt restricted common stock. Filed as Exhibit 33.10 to Form 10-KSB filed September 26, 1996 and incorporated herein by reference. 5 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. 6 10 Promissory note dated September 30, 1996, whereby Fischer-Watt Gold Company, Inc., promises to pay $700,000 to Kennecott Exploration Company, Inc. and filed as Exhibit 48.10 to Form 10-QSB filed October 18, 1996 and incorporated herein by reference. 7 10 Option effective February 1, 1997, whereby Fischer-Watt Gold Company, Inc., Grant R. M. Robb an option to purchase 100,000 shares of restricted common stock. And incorporated herein by reference. 8 10 Option effective October 31, 2000, whereby Fischer-Watt Gold Company, Inc., Grant George Beattie, Peter Bojtos, Jim Seed, Jorge Ordonez, Jerry Helgeson and R. M. Robb each an option to purchase 100,000 shares common stock and incorporated herein by reference. (b) Reports on Form 8-K None -21- Exhibit Number 21 - Subsidiaries of Company Name of Subsidiary Ownership Incorporated In - ------------------ --------- --------------- Minera Montoro, S. A. de C. V. 65% Mexico Item 14. Principal Accountant Fees and Services The Company's board of directors reviews and approves audit and permissible non-audit services performed by its independent accountants, as well as the fees charged for such services. In its review of non-audit service fees and its appointment of Stark Winter Schenkein & Co., LLP as the Company's independent accountants, the board of directors considered whether the provision of such services is compatible with maintaining independence. The board of directors approved all of the services provided and fees charged by Stark Winter Schenkein & Co., LLP in 2004and 2005. Audit Fees - ---------- The aggregate fees billed by for professional services for the audit of the annual financial statements of the Company and the reviews of the financial statements included in the Company's quarterly reports on Form 10-QSB for 2003 and 2004 were $13,500 and $18,000 respectively, net of expenses. Audit-Related Fees - ------------------ There were no other fees billed by during the last two fiscal years for assurance and related services that were reasonably related to the performance of the audit or review of the Company's financial statements and not reported under "Audit Fees" above. Tax Fees - -------- The aggregate fees billed during the last two fiscal years for professional services rendered for tax compliance for 2003 and 2004 were $3,700 and $3,500 respectively. All Other Fees - -------------- There were no other fees billed by during the last two fiscal years for products and services provided. -22- SIGNATURES In accordance with Section 13 or 15(d) 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. /s/George Beattie ----------------------------------- President, Chief Executive Officer, (Principal Executive Officer), In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature and Title Date ------------------- ---- /s/George Beattie ............................................. May 13, 2005 ------------------------------------------- Acting Chief Financial Officer Principal Financial and Accounting Officer) /s/ Donald D. Helgeson ........................................ May 13, 2005 - ------------------------------------------- Director, Secretary /s/ James M. Seed ............................................. May 13, 2005 - ------------------------------------------- Director Chairman of the Board and Director /s/ George Beattie ............................................ May 13, 2005 - ------------------------------------------- President, Chief Executive Officer (Principal Executive Officer) /s/ Peter Bojtos .............................................. May 13, 2005 - ------------------------------------------- Director and Vice President Vice Chairman of the Board /s/ Jorge Ordonez ............................................. May 13, 2005 - ------------------------------------------- Director
-23- Fischer-Watt Gold Company, Inc. Contents Report of Independent Registered Public Accounting Firm F-2 Financial Statements: Consolidated Balance Sheet F-3 Consolidated Statements of Operations F-4 Consolidated Statement of Stockholders' (Deficit) F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Fischer-Watt Gold Company, Inc. We have audited the accompanying consolidated balance sheet of Fischer-Watt Gold Company, Inc. as of January 31, 2005 and the related consolidated statements of operations, stockholders' (deficit), and cash flows for the years ended January 31, 2005 and 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fischer-Watt Gold Company, Inc. as of January 31, 2005, and the consolidated results of their operations and their cash flows for the years ended January 31, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred net losses from operations during the periods presented, has no revenue producing operations, and has working capital and stockholder deficits as of January 31, 2005. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Stark Winter Schenkein & Co., LLP - -------------------------------------------- Denver, Colorado May 10, 2005 F-2 Fischer-Watt Gold Company, Inc. Consolidated Balance Sheet January 31, 2005 ASSETS Current Assets: Cash $ 921 Inventory 50,000 Other current assets 4,337 ------------ Total current assets $ 55,258 ============ LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities: Accounts payable $ 76,504 Note payable - shareholder 285,500 Accounts payable and accrued expenses - shareholders 1,288,811 ------------ Total current liabilities 1,650,815 ------------ Stockholders' (Deficit): Preferred stock, non-voting, convertible, $2 par value, 250,000 shares authorized, none outstanding -- Common stock, $.001 par value, 200,000,000 shares authorized, 53,469,111 shares issued and outstanding 53,469 Additional paid-in capital 15,708,065 Common stock subscriptions 253,721 Accumulated (deficit) (17,610,812) ------------ (1,595,557) ------------ $ 55,258 ============ See the accompanying notes to the consolidated financial statements. F-3 Fischer-Watt Gold Company, Inc. Consolidated Statements of Operations Years Ended January 31, 2005 and 2004 2005 2004 ------------ ------------ Revenue $ -- $ -- ------------ ------------ Costs and expenses: Exploration 65,322 183,136 Writedown of inventory to market value 125,000 -- Stock compensation 71,600 -- General and administrative 271,065 373,229 ------------ ------------ 532,987 556,365 ------------ ------------ (Loss) from operations (532,987) (556,365) ------------ ------------ Other income (expense): Interest expense (8,806) (5,500) Other income - gain on relief of payables 66,935 -- ------------ ------------ 58,129 (5,500) ------------ ------------ Net (loss) $ (474,858) $ (561,865) ============ ============ Per share information - basic and fully diluted Net (loss) per share $ (0.01) $ (0.01) ============ ============ Weighted average shares outstanding 70,104,734 48,824,967 ============ ============ See the accompanying notes to the consolidated financial statements. F-4
Fischer-Watt Gold Company, Inc. Consolidated Statement of Stockholders' (Deficit) Years Ended January 31, 2004 and 2005 Additional Common Stock Paid in Capital Stock Accumulated Shares Amount Capital Subscribed (Deficit) Total ---------- ------------ ------------ ------------ ------------ ------------ Balance, January 31, 2003 46,473,384 $ 46,473 $ 15,176,164 $ 42,750 $(16,574,089) $ (1,308,702) Issuance of subscribed shares 1,000,000 1,000 29,000 (30,000) -- -- Contribution to capital -- -- 129,500 -- -- 129,500 Discount on stock issued to affiliates -- -- 57,000 -- -- 57,000 Stock subscriptions -- -- -- 166,282 -- 166,282 Issuance of stock for cash 3,169,000 3,169 114,035 -- -- 117,204 Net (loss) for the year -- -- -- -- (561,865) (561,865) ---------- ------------ ------------ ------------ ------------ ------------ Balance, January 31, 2004 50,642,384 50,642 15,505,699 179,032 (17,135,954) (1,400,581) Reclassification of subscription -- -- (12,560) 12,560 -- -- Issuance of subscribed shares 1,906,727 1,407 156,435 (157,842) -- -- Issuance of stock for options 500,000 500 4,500 (5,000) -- -- Contribution to capital -- -- 25,000 -- -- 25,000 Issuance of stock for services 20,000 20 1,580 70,000 -- 71,600 Issuance of stock for cash 400,000 900 27,411 -- -- 28,311 Stock subscriptions -- -- -- 154,971 -- 154,971 ---------- ------------ ------------ ------------ ------------ ------------ Net (loss) for the year -- -- -- -- (474,858) (474,858) Balance January 31, 2005 53,469,111 $ 53,469 $ 15,708,065 $ 253,721 $(17,610,812) $ (1,595,557) ========== ============ ============ ============ ============ ============
See the accompanying notes to the consolidated financial statements. F-5
Fischer-Watt Gold Company, Inc. Consolidated Statements of Cash Flows Years Ended January 31, 2005 and 2004 2005 2004 ----------- ----------- Cash flows from operating activities: Net (loss) $ (474,858) $ (561,865) ----------- ----------- Adjustments to reconcile net (loss) to net cash (used in) operating activities: Writedown of inventory to market value 125,000 -- Gain on relief of payables 66,935 -- Issuance of common stock for services and other non-cash items 1,600 57,000 Stock subscriptions related to services provided 70,000 -- Changes in assets and liabilities: Inventory (175,000) -- Other current assets (4,337) -- Accounts payable (92,893) (29,021) Accounts payable and accrued expenses - shareholders 80,250 208,964 ----------- ----------- Total adjustments 71,555 236,943 ----------- ----------- Net cash (used in) operating activities (403,303) (324,922) ----------- ----------- Cash flows from investing activities: Net cash provided by (used in) investing activities -- -- Cash flows from financing activities: Proceeds from issuance of common shares and stock subscriptions 178,282 152,204 Proceeds from exercise of options 5,000 -- Proceeds from note payable shareholder 175,000 -- Capital contribution by shareholder 25,000 129,500 ----------- ----------- Net cash provided by financing activities 383,282 281,704 ----------- ----------- Increase (decrease) in cash and cash equivalents (20,021) (43,218) Cash and cash equivalents, beginning of period 20,942 64,160 ----------- ----------- Cash and cash equivalents, end of period $ 921 $ 20,942 =========== =========== Supplemental cash flow information: Cash paid for interest $ -- $ -- Cash paid for income taxes $ -- $ -- Non cash investing and financing activities: Common shares issued for stock subscriptions $ 162,842 $ 30,000 Conversion of amounts due to affiliate to stock subscription $ -- $ 131,282
See the accompanying notes to the consolidated financial statements. F-6 FISCHER-WATT GOLD COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2005 Note 1. Accounting Policies Business Activities Fischer-Watt Gold Company, Inc. ("Fischer-Watt" or the "Company"), and its subsidiaries are engaged in the business of mining and mineral exploration. Operating activities of the Company include locating, acquiring, exploring, developing, improving, selling, leasing and operating mineral interests, principally those involving metals. Principles of Consolidation The consolidated financial statements include the accounts of Fischer-Watt, and its majority owned subsidiaries. Ownership interests in corporations where the Company maintains significant influence over but not control of the entity are accounted for under the equity method. Joint ventures involving non-producing properties are accounted for at cost. Cash and Cash Equivalents For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Mineral Interests Costs of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially minable property. Mine development costs incurred either to develop new ore deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are also capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates, at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Statement of Financial Accounting Standards (SFAS) 144, "Accounting for Impairment or Disposal of Long-Lived Assets." Property, Plant & Equipment Property, plant, and equipment are stated at cost. Depreciation on mining assets is provided by the units of production method by reference to the ratio of units produced to total estimated production (proven and probable reserves). Depreciation on non-mining assets is provided by the straight-line method over the estimated service lives of the respective assets, ranging from 2 to 7 years. Stock-Based Compensation The Company accounts for equity instruments issued to employees for services based on the fair value of the equity instruments issued and accounts for equity instruments issued to other than employees based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. F-7 The Company accounts for stock based compensation in accordance with SFAS 123, "Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans. Revenue Recognition Sales revenue is recognized upon the production of metals having a fixed monetary value. Metal inventories are recorded at estimated net realizable value, except in cases where there is no immediate marketability at a quoted market price, in which case they are recorded at the lower of cost or net realizable value. Gains on the sale of mineral interests include the excess of the net proceeds from sales over the Company's net book value in that property. Generative exploration program fees, received as part of an agreement whereby a third party agrees to fund a generative exploration program in connection with mineral deposits in areas not previously recognized as containing mineralization in exchange for the right to enter into a joint venture in the future to further explore or develop specifically identified prospects, are recognized as revenue in the period earned. Foreign Currency Translation The Company accounts for foreign currency translation in accordance with the provisions of SFAS 52, "Foreign Currency Translation". The assets and liabilities of any foreign subsidiaries are translated at the rate of exchange in effect at the balance sheet date. Income and expenses are translated using the weighted average rates of exchange prevailing during the period, which the foreign subsidiary was owned. The related translation adjustments are reflected in the accumulated translation adjustment section of stockholders' (deficit). Environmental and Reclamation Costs The Company currently has no active reclamation projects, but expenditures relating to ongoing environmental and reclamation programs would either be expensed as incurred or capitalized and depreciated depending on the status of the related mineral property and their future economic benefits. The recording of provisions generally commences when a reasonably definitive estimate of cost and remaining project life can be determined. Income Taxes The Company accounts for income taxes in accordance with the provisions of SFAS 109 "Accounting for Income Taxes". SFAS 109 requires the recognition of deferred income taxes to provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect in the years in which the temporary differences are expected to reverse. F-8 Concentration of Credit Risk The Company will sell most of its metal production to a limited number of customers. However, due to the nature of the metals market, the Company is not dependent upon a significant customer to provide a market for its products. Although the Company could be directly affected by weakness in the metals processing business, the Company monitors the financial condition of its customers and considers the risk of loss to be remote. Inventory Inventory is valued at the lower of cost or market on a first-in first-out basis and consists of uncut gemstones with an original cost of $175,000. An impairment charge of $125,000 has been charged to operations to reflect the fair market value at January 31, 2005, of $50,000. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of January 31, 2005. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and notes payable. Fair values were assumed to approximate carrying values for these financial instruments because they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Impairment of Long Lived Assets Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. Management has not identified any material impairment losses as of the date of these financial statements. Loss Per Share The Company calculates net income (loss) per share as required by SFAS 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when they are anti dilutive common stock equivalents are not considered in the computation. Reclassifications Certain prior year amounts have been reclassified to conform to the current year's presentation. Segment Information The Company follows SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." Certain information is disclosed, per SFAS 131, based on the way management organizes financial information for making operating F-9 decisions and assessing performance. The Company currently operates in a single business segment and will evaluate additional segment disclosure requirements as it expands its operations. Recent Pronouncements In December 2003, the Financial Accounting Standards Board issued FASB Interpretation Number 46-R "Consolidation of Variable Interest Entities." FIN 46-R, which modifies certain provisions and effective dates of FIN 46, sets for the criteria to be used in determining whether an investment is a variable interest entity should be consolidated. These provisions are based on the general premise that if a company controls another entity through interests other than voting interests, that company should consolidate the controlled entity. The Company believes that currently, it does not have any material arrangements that meet the definition of a variable interest entity which would require consolidation. In November 2004, the FASB issued SFAS 151, "Inventory Costs." SFAS 151 amends the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter 4, "Inventory Pricing." Paragraph 5 of ARB 43, Chapter 4, previously stated that "...under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges...." This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS 151 to have a material impact on the Company's financial statements. In December 2004, the FASB issued SFAS 152, "Accounting for Real Estate Time-Sharing Transactions." The FASB issued this Statement as a result of the guidance provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions." SOP 04-2 applies to all real estate time-sharing transactions. Among other items, the SOP provides guidance on the recording of credit losses and the treatment of selling costs, but does not change the revenue recognition guidance in SFAS 66, "Accounting for Sales of Real Estate," for real estate time-sharing transactions. SFAS 152 amends Statement 66 to reference the guidance provided in SOP 04-2. SFAS 152 also amends SFAS 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects", to state that SOP 04-2 provides the relevant guidance on accounting for incidental operations and costs related to the sale of real estate time-sharing transactions. SFAS 152 is effective for years beginning after June 15, 2005, with restatements of previously issued financial statements prohibited. Management does not expect adoption of SFAS 152 to have a material impact on the Company's financial statements. In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets," an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions." Statement 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periods beginning after December 16, 2004. Management does not expect adoption of SFAS 153 to have a material impact on the Company's financial statements. F-10 In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS 123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity's shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity's shares or other equity instruments. This statement is effective (1) for public companies qualifying as SEC small business issuers, as of the first interim period or fiscal year beginning after December 15, 2005, or (2) for all other public companies, as of the first interim period or fiscal year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal year beginning after December 15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on the Company's financial statements. Note 2. Financial Condition, Liquidity, and Going Concern The Company incurred operating losses of $474,858 and $586,422 for the years ended January 31, 2005 and 2004, and has stockholders' and working capital deficits of $1,595,557 at January 31, 2005. In addition, the Company has no revenue producing operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company is attempting to develop mineral properties in Mexico as Mexico is supportive of the mining industry and NAFTA has made doing business there attractive. The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon the future market price of metals, future capital raising efforts, and the ability to achieve future operating efficiencies anticipated with increased production levels. Management's plans will require additional financing, reduced exploration activity or disposition of or joint ventures with respect to mineral properties. While the Company has been successful in these capital raising, endeavors in the past, there can be no assurance that its future efforts and anticipated operating improvements will be successful. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern. Note 3. Notes Payable - Shareholder During December 1999 a shareholder of the Company advanced $100,000 to the Company to be used to settle the Company's obligation to a vendor. The note evidencing the loan bears interest at prime plus 2% and is payable on demand. In addition, in previous years another shareholder advanced the Company $10,500 with interest at 5% per annum which is due on demand. During 2004, a shareholder advanced $175,000 to the Company by the direct payment for the Company's gemstone inventory. The Company accrues interest on this advance at 5% per annum, which is due on demand. F-11 Note 4. Stockholders' (Deficit) During the years ended January 31, 2005 and 2004, a shareholder contributed $25,000 and $129,500 to the capital of the Company to be used primarily for the identification and assessment of new mining properties. During the year ended January 31, 2003 the Company issued 250,000 shares of common stock in exchange for consulting services. These shares were valued at their fair market value of $25,000. During the year ended January 31, 2003 the Company received cash aggregating $30,000 related to a stock subscription for 1,000,000 common shares from a director. In addition, the Company agreed to issue 325,000 shares of common stock for services. These shares were valued at their fair market value of $12,750 and charged to operations during the year ended January 31, 2003. The 1,000,000 shares were issued during the year ended January 31, 2004. During the year ended January 31, 2004 the Company issued an aggregate of 3,169,000 shares of common stock for cash of $117,204. In addition, the company accepted stock subscriptions for 1,300,000 shares of common stock for cash of $35,000 and 937,727 shares of common stock for the forgiveness of salary due to an officer of $131,282. One of the cash subscriptions for 1,050,000 shares is with an affiliate and the discount on the shares from fair market value of $31,500 has been charged to operations during the year ended January 31, 2004. During the year ended January 31, 2005 1,906,727 shares of common stock were issued for stock subscriptions of $157,842. The Company issued 400,000 shares of common stock for cash aggregating $28,311. In addition, a shareholder contributed $25,000 to the capital of the Company and certain affiliates exercised options to purchase 500,000 shares of common stock for $5,000. The Company also issued 20,000 shares of common stock for services and recorded a subscription for 875,000 shares of common stock valued at fair market value of $70,000 for services. In addition the Company received $154,971 for stock subscriptions. Note 5. Common Stock Options and Warrants The Company's Stock Option Plan states that the exercise price of each option will be granted at an amount that equals the market value at the date of grant. All options vest at a time determined at the discretion of the Company's Board of Directors. All options expire if not exercised within 10 years from the date of grant, unless stated otherwise by the Board of Directors upon issuance. During the year ended January 31, 2004 the Company issued options to purchase 1,550,000 shares of common stock at $.04 to $.05 per share to employees and directors. The excess of the fair market value over the exercise price of the options of $25,500 has been charged to operations during the year ended January 31, 2004. These options expire between September 2006 and June 2007. During the year ended January 31, 2005, the Company granted options to purchase 650,000 shares at a price of $0.12 to employees and directors. . These options expire July 31, 2009 The Company accounts for stock-based compensation by applying APB 25. SFAS 123 requires the Company to provide pro forma information regarding net income and earnings per share as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS 123. The fair value of the option grants is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions for grants during the years ended January 31, 2005 and 2004: expected life of options of 5 years and 3 to 3.5 years, expected volatility of 1.14 and 1.25, risk-free interest rate of 3.0% and 3% and no dividend yield. The F-12 weighted average fair value at the date of grant for options granted during the years ended January 31, 2005 and 2004 approximated $.10 and $.03 per option. These results may not be representative of those to be expected in future years. Under the provisions of SFAS 123, the Company's net (loss) and (loss) per share would have been (increased) to the pro forma amounts indicated below: January 31, 2005 2004 - ----------- ---- ---- Net (loss) As reported $ (474,858) $ (561,865) Pro forma $ (539,858) $ (613,365) Earnings (loss) per share - basic and fully diluted As reported $(0.01) $(0.01) Pro forma $(0.01) $(0.01) The following table summarizes the stock option activity: Stock Weighted-average Options Price per Share Outstanding at January 31, 2003 8,761,000 0.09 Granted 1,550,000 0.04 Exercised (2,900,000) 0.03 Expired (1,361,000) Outstanding at January 31, 2004 6,050,000 $0.04 Granted 650,000 $0.12 Exercised (500,000) $0.01 Expired - Outstanding at January 31, 2005 6,200,000 - ------------------------------- --------- The following table summarizes information about fixed-price stock options: Outstanding at January 31, 2005
Options Outstanding Options Exercisable -------------------------------- -------------------------------- Weighted- Weighted- Weighted- Average Average Average Range of Number Contractual Exercise Number Exercise Prices Outstanding Life Price Exercisable Price - ------------ ----------- ----------- --------- ----------- --------- $ 0.03-$0.12 $ 6,200,000 2.7 years $0.04 6,050,000 $0.04
The Company accounts for transactions with individuals other than employees in which goods or services are the consideration received for the issuance of equity instruments in accordance with the provisions of SFAS 123, based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. F-13 Note 6. Income Taxes The components of net (loss) before taxes for the Company's domestic and foreign operations were as follows: January 31, 2005 2004 - ----------- ---- ---- Domestic $ (474,858) $ (561,865) Foreign -- -- Net loss) before taxes $ (474,858) $ (561,865) The difference between the federal statutory tax rate and the effective tax rate on net income before taxes is as follows: January 31, 2005 2004 - ----------- ------- ------- Federal statutory rate (34.0)% (34.0)% Increase in net deferred tax asset valuation allowance 34.0 34.0 ------- ------- 0.0% 0.0% The Company has federal tax loss carryforwards of approximately $7.4 million at January 31, 2005, which expire through 2025. The principal difference between the net operating loss for income tax purposes and the net operating loss per the Company's books results from losses incurred in a foreign country of approximately $8 million and expired loss carryforwards. The deferred tax asset of approximately $2.5 million resulting from the net operating loss carryforwards is entirely offset by a valuation allowance as management does not believe the Company has met the "more likely than not" standard imposed by SFAS 109 to allow recognition of a net deferred tax asset. Note 7. Transactions With Related Parties During the years ended January 31, 2005 and 2004 certain employee shareholders deferred salaries and expenses aggregating $111,250 and $175,000. These advances and deferrals are included in accounts payable and accrued expenses - shareholders in the accompanying consolidated financial statements. The exploration and feasibility studies on the La Balsa property have been largely funded through cash contributions to the project from a Director of the Company. In return he has been receiving a Joint Venture interest in the project at a rate of 1% per $40,000 invested. To date he has invested approximately $865,000 F-14 EX-31.1 2 ex31-1.txt CERT 302 - CEO, CFO EXHIBIT 31.1 ------------ CERTIFICATE OF PRINCIPAL EXECUTIVE OFFICER I, George Beattie, Chief Executive Officer and Chief Financial Officer of Fischer-Watt Gold Company, Inc. (the "Registrant") certify that: 1. I have reviewed this annual report on Form 10-KSB of Registrant 2. Based on my knowledge, this annual 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this annual 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 are our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; -1- 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function) (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. The Registrant's other certifying officers and I have indicated in this annual 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 our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 13, 2005 /s/ George Beattie - -------------------------- George Beattie EX-32.2 3 ex32-1.txt CERT 906 - CEO, CFO EXHIBIT 32.1 ------------ CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, George Beattie, Chief Executive Officer and Chief Financial Officer of Fischer Watt Gold Company, Inc. (the "Company"), certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Company's Annual Report on Form 10-K for the year ended January 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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/ George Beattie - ------------------------------------- May 13, 2005 This certification accompanies this report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. This certification shall not be deemed incorporated by reference in any filing under the Securities and Exchange Act, except to the extent that the Company specifically incorporates it by reference. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form with the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----