-----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, AMz8KnQYbiZ09OVmIotU6LkZhhEwKbiGlj/kK1aWz34s0nZ+5uTqh70p9v1RtT0N PepVb+4nBhGji7UBhNUZQw== 0001014909-07-000027.txt : 20070427 0001014909-07-000027.hdr.sgml : 20070427 20070427160700 ACCESSION NUMBER: 0001014909-07-000027 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070131 FILED AS OF DATE: 20070427 DATE AS OF CHANGE: 20070427 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: 07795909 BUSINESS ADDRESS: STREET 1: 2582 TAFT COURT CITY: LAKEWOOD STATE: CO ZIP: 80215 BUSINESS PHONE: 3032320292 MAIL ADDRESS: STREET 1: 2582 TAFT COURT CITY: LAKEWOOD STATE: CO ZIP: 80215 FORMER COMPANY: FORMER CONFORMED NAME: FISCHER WATT GOLD CO INC DATE OF NAME CHANGE: 19991025 FORMER COMPANY: FORMER CONFORMED NAME: FISCHER WATT GOLD CO INC DATE OF NAME CHANGE: 19920703 10KSB 1 f10ksb_31jan2007fischerwatt.txt UNITED STATES 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 For the fiscal year ended January 31, 2007 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 0-17386 ------- FISCHER-WATT GOLD COMPANY, INC. ------------------------------- (Name of small business issuer in its charter) Nevada 88-0227654 - ------------------------------- --------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation) 2582 Taft Court, Lakewood Colorado 80215 ---------------------------------------- (Address of principal executive offices) Issuer's telephone number: (303) 232-0292 --------------------- Securities registered under Section 12(b) of the Exchange Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED None None Securities registered under Section 12(g) of the Exchange Act: TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, $0.001 par value None Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 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] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] State issuer's revenues for its most recent fiscal year. Nil ---- State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) As of April 26, 2007, 42,730,825 shares of the Company's Common Stock, no par value per share, were held by non-affiliates, which, based upon market closing price on April 4, 2007, of $0.07 had a value of $2,991,158. (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS) Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] (APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. There were 70,516,819 shares of Common Stock of the Registrant outstanding as of April 26, 2007. There are 662 registered shareholders as of April 26, 2007. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or(c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). Transitional Small Business Disclosure Format (Check One) Yes _____ No __X__ 2 EXCHANGE RATES Except as otherwise indicated, all dollar amounts described in this Form 10(k) Annual Report are expressed in United States dollars ($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 (that 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. In 2000, the Company entered into an agreement to sell its producing metals property to Grupo de Bullet in Colombia. In return the Company was to receive three million dollars ($3,000,000). This company subsequently declared bankruptcy and the amount receivable was written off. Effective February 1, 2001, the Company re-entered the exploration stage as a result of the sale of Compania Minera Oronorte S.A. The Company in the meantime, continued with exploration and feasibility work on its La Balsa copper project in Michoacan, Mexico. This exploration continued to 2005 when the Company entered into an agreement to sell its 65% interest in its Mexican subsidiary, Minera Montoro S.A. de C.V., (Montoro) the entity that controls the La Balsa project, to Nexvu Capital Corp. ("Nexvu") for the sum of $2,235,000. Nexvu is a private Canadian corporation based in Vancouver and is 3 run by mining industry executives. A deposit of $50,000 was received from Nexvu during the year ended January 31, 2006, with the balance payable - $695,000 on April 30, 2006, $745,000 on October 1, 2006, and $745,000 on April 30, 2007. On April 30, and May 31 2006 Nexvu provided FWG with $25,000 in each month, as provided for in the agreement, in order to secure two 30 day extensions for making the April 30, 2006 payment. Subsequently, Nexvu assigned the Agreement to purchase Montoro to an associated Company, Rogue River Resources Inc. (Rogue River). On January 25, 2007, the Company, Montoro and Rogue River entered into a modified stock purchase agreement wherein the Company sells 31%, 31% and 38% of its 65% share ownership in Montoro in three separate transactions. On January 29, 2007, Rogue River completed the first transaction by paying $695,000. Rogue River also paid a $25,000 fee for a 30 day extension related to settlement of the second transaction due in the amount of $745,000. Taxes of 25% were paid to the Mexican Government as a result of the payment received. The second tranche was made on March 30, 2007 in the amount of $745,000. Required taxes of 25% have also been paid to the Mexican Government from these proceeds. There remains one tranche of $745,000 outstanding, which is due April 30, 2007. Rogue River is current in regard to its obligations to the Company at this time. The agreement provides for two, 30 day extensions on the payment of the third tranche, by making payments of $25,000 for each 30 day extension. Fisher-Watt has received a payment of $25,000 to extend the payment date of the third tranche to May 29, 2007. FWG will retain a 1% Net Smelter Return ("NSR") royalty in respect of the porphyry portion of the La Balsa property. Rogue River may purchase 50% of the NSR royalty at any time for $1,000,000. In addition, if the porphyry portion of the La Balsa property has not entered into commercial production by December 4, 2012, Rogue River will, at any time at FWG's sole option, purchase 50% of the NSR royalty for $1,000,000. The Company had no revenue for the year ending January 31, 2007 but had other income of $849,577 being the balance of the first tranche due from Rogue River regarding the sale of Montoro, $695,000, $75,000 in fees related to the extension of payment dates, $75,000 in debt forgiveness, and interest income of $4,577. Exploration expenses for the year amounted to $36,784 vs. $4,253 the previous year, and general and administrative expenses for the year were $175,822 vs. $255,432 the previous year. During the current year, the Company repaid The Astra Ventures Inc. (Astra) the sum of $288,023, being one-third of the $864,068 owing to Astra in connection with the sale of Montoro. An additional $288,023 was paid on March 30, 2007 when the second tranche was received from Rogue River. Astra is a company controlled by a Director of FWG. Astra had contributed capital of $864,068 to FWG, chiefly for exploration work to be undertaken on the La Balsa project, and in return had earned a 21.6% interest in the project. As part of the sale to Nexvu/Rogue River, the Company reclassified these contributions to debt, and Astra relinquished its 21.6% interest in La Balsa, thereby increasing Fisher-Watt's indirect interest in the La Balsa project back to 65%. Operations - ---------- At January 31, 2007, the Company had $466,370 in cash on hand vs.$177,146 at January 31, 2006. The Company is in the process of finalizing its sale of Montoro to Rogue River. Two of the three tranches have been received and the 25% taxes payable owed to the Government of Mexico were paid in February 2007 and April 2007. 4 The Company currently has sufficient capital to conduct its business during the next fiscal year, but does not necessarily have sufficient capital to carry out any significant exploration program or to acquire a significant property. It will carry out an exploration program on its two existing properties, the Cruce Gold project in Pinal County in Arizona, and the Cambridge Vein project in Lyon County near Yerrington, Nevada. The Company continues to review properties in the Western United States with a view to acquire new ground on which to carry out exploration for precious and/or base metals. 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. 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 health; waste disposal; protection of the environment; mine safety; toxic substances; and other matters. Licenses and permits are required to conduct exploration and mining operations. There is no assurance that such permits will be granted. Amendments 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, odor, 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 emphasize 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 5 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. Foreign Operations - ------------------ The Company has nearly completed the sale of its interests 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 judgment 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 6 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 mechanized 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. The probability of an individual prospect ever having "reserves" that meet the requirements of Industry Guide 7 is extremely remote, in all probability the properties do not contain any reserves, and any funds spent on exploration will probably be lost. 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. 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. Taxation Risks - -------------- The tax risks of investing in any foreign country could be significant. Tax legislation is evolving and is subject to varying opinions, frequent changes and inconsistent enforcement at the federal, regional and local levels. 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 Nevada and Arizona. CRUCE GOLD PROJECT - ------------------ The Company, on June 10, 2006, entered into an agreement with private individuals regarding the Cruce Gold exploration project. This property is located in north-west Pinal County, Arizona and has a history of gold and copper exploration. The Company acquired a 100% interest in the mineral lease for $15,000 and the issuance of 100,000 restricted common shares of its stock. The vendors will retain a 2% Net Smelter Return royalty and will receive an advance royalty of $20,000 on the first anniversary of the agreement and $25,000 on subsequent anniversaries. These advance royalties will be deductible from future production royalty payments. The original property is situated on a 60 acre State lease. The Company has now staked additional claims on surrounding BLM ground covering an area of approximately 760 acres. Gold mineralization on the property is hosted within faulted blocks in well-altered sections of the pre-Cambrian age Oracle granite. Adits, shallow shafts and pits of unknown historic age are in evidence on the property. Early 7 work by Spanish prospectors in the 1600's was centered around the Hot Boy inclined shaft. This shaft was deepened to a depth of 165 feet by a Mr. Cruce who made several shipments of ore before abandoning the property. In the early 1960's the Inspiration Copper Company carried out a 20 hole diamond drilling program in search of copper. Hydrothermally altered rocks containing copper mineralization were encountered but, due to a complicated land situation, Inspiration did not continue its exploration. In the early 1980's, core drilling north-east of the Hot Boy shaft by a private partnership reportedly intercepted 106 feet of gold mineralization grading 0.044 ounces of gold per ton (oz. Au/t). This included an intercept of 0.153 oz. Au/t from surface to a depth of 24 feet. Strong gold mineralization in this area was further substantiated in 1987 by a reverse circulation drill hole that intersected 0.054 oz. Au/t from a depth of 30 feet to 60 feet. This included a 5 foot interval of 0.198 oz. Au/t. A work program in 1986 and 87 included surface rock chip and soil sampling on a 200 x 100 foot grid over a 7,000 foot strike length. Approximately 330 rock samples defined several north-south elongate geochemical anomalies exceeding 1 part per million (ppm) gold. Of particular interest, south-east of the Hot Boy shaft, was a 2.6 ppm rock chip zone measuring about 500 feet across in an east-west direction and 1,200 feet north-south. The work program included an 11 hole reverse circulation drill campaign totaling 705 feet. Highlights of this drilling included 30 feet of 0.054 oz.Au/t, 15 feet of 0.015 oz.Au/t and 30 feet of 0.023 oz.Au/t. Between 1988 and 1990, Freeport McMoRan Gold Company carried out geological mapping, a four line Induced Polarization and Resistivity geophysical survey and a wide-spaced 14 hole reverse circulation drilling program totaling 5,805 feet. Hole CR-4 from surface to a depth of 60 feet returned an average grade of 0.032 oz. Au/t. Gold mineralization on the Cruce Gold property is in a favorable structural setting that could be amenable to open-pit mining. Fischer-Watt is presently planning an active field season that will include closer spaced geochemical sampling along with a closer spaced limited drilling program. The project currently has no reserves and there is no assurance that the project will advance from its present exploration stage. CAMBRIDGE MINE PROJECT - ---------------------- On August 1, 2006, the Company entered into an option agreement with Grandcru Resources Corporation ("Grandcru") of Vancouver B.C. to acquire Grandcru's rights to 19 claims in the Cambridge Mining District located 23 miles south of Yerrington, Nevada, in Lyon County. Under the terms of the agreement Fischer-Watt can acquire a 100% interest in the property by completing the following: Cash payments to an underlying claim holder of: $10,000 on August 25, 2006 $15,000 on August 25, 2007 $20,000 on August 25, 2008 $25,000 on August 25, 2009 and cash payments to Grandcru of: $10,000 on August 30, 2007 $15,000 on August 30, 2008 $20,000 on August 30, 2009 $25,000 on August 30, 2010 8 and by satisfying annual work commitments on the property of: $50,000 in the first year of the agreement $75,000 in the second year of the agreement $125,000 in the third year of the agreement $150,000 in the fourth year of the agreement Upon completion of the above, Fischer-Watt will have earned a 100% interest in the property subject to a 2% Net Smelter Return royalty to the underlying claim holder and a 2% Net Smelter Return royalty to Grandcru. These two royalties may be purchased by Fischer-Watt for $2,000,000 and $1,500,000 respectively. The property is comprised of 18 lode claims and 1 placer claim located entirely on BLM ground in the historic Cambridge Mining District. It covers an area of approximately 360 acres, at a moderate elevation of approximately 5,400 feet above Sea Level, which can be accessed year round via county maintained roads. The District is in the Walker Lane geological trend of western Nevada. The Cambridge Vein is a structurally complex, shear hosted, north-south trending, quartz vein system. The veining is hosted in a weakly altered to unaltered coarse grained quartz monzonite granitoid of Cretaceous age. The veining is believed to be of a mesothermal nature and contains high-grade gold. The vein is known to extend along a strike of 1,200 meters and dips at approximately 60 degrees west. There are flexures along the strike and dip of the vein along with intersecting structures and splays. This geological complexity increases the potential of high-grade shoots occurring along the vein as well as multiple vein systems. The mineralization in the area was discovered in the 1860's and mining commenced shortly thereafter. Two shafts were sunk to a depth of 150 feet and were subsequently deepened to 250 feet. The property then became idle until 1940 when the Cambridge Mining Company deepened the North shaft to 400 feet. The vein was reported to be 5 to 7 feet wide at that depth. The mine was shut down in 1942 by the war order and no mining has been carried out since. No drilling has ever been carried out on the property. In a recent surface sampling campaign, by others, it was found that one third of the 32 samples taken along the outcropping vein had grades greater than 10 ppm gold, with several being over 30 ppm. The Company is currently planning its exploration program which is to be carried out during the summer months of 2007. The work will include an initial drilling campaign designed to help trace the vein's geometry as well as help determine where high-grade gold shoots may occur. This will enable Fischer-Watt's geologists to begin defining the extent of the gold mineralization. The project has no reserves at present and there is no assurance that the project will advance from its present exploration stage. MEXICAN PROPERTIES - ------------------- Minera Montoro Properties - -------------------------- Since 1996, the Company has held a 65% interest in Montoro, a corporation duly incorporated in and authorized to conduct business in Mexico. This corporation 9 holds the interest in the La Balsa property. During the fiscal year ended January 31, 2006 the Company entered into a binding letter of agreement to sell it's 65% interest in Montoro to Nexvu for a total consideration of $2,235,000. Nexvu subsequently assigned its interest to Rogue River. As of January 31, 2007, the Company has received the sum of $745,000, being the first tranche, plus late payment fees of $75,000. Subsequent to year end, on March 30, 2007, the Company received the second tranche of $745,000. Rogue River is current in its obligations to the Company, with the final payment of $745,000 due April 30, 2007. Once this payment is received, the Company will no longer hold any interest in Mexico other than a royalty interest. Item 3. LEGAL PROCEEDINGS NONE 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, 2007: Quarter ended April 30, 2006 $ 0.12 $ 0.04 Quarter ended July 31, 2006 0.12 0.05 Quarter ended October 31, 2006 0.11 0.05 Quarter ended January 31, 2007 0.07 0.05 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. 10 At the close of the fiscal year there were 662 beneficial holders of common shares. Mr. James M. Seed, a Director of the Company, controls approximately 28% of the outstanding stock, through various trusts. Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. In 2005, significant changes occurred in the management of the Company when Mr. Peter Bojtos was appointed Chairman, President, CEO, and acting Chief Financial Officer. This appointment was unanimously approved by the Board. Mr. Bojtos has been a director since 1996 and is an experienced mining executive with proven management skills, and possesses an international background in all facets of the mining industry, from acquisitions to exploration, production and financing. Mr. Bojtos is a director of several public companies in the mining industry and has been involved for more than 35 years in many senior management and executive positions within the industry. For the fiscal year ended January 31, 2007, the Company reported net income of $308,471 compared to a net loss of $225,025 the previous year. Because of losses carried forward, no taxes are eligible on earnings for the current year. The Company had no revenue from production during the year ended January 31, 2007 as the Company had no properties in production. The Company did have revenue in the year ended January 31, 2006, of $44,240 being the net proceeds from the sale of gemstones. During the year ended January 31, 2007, the Company received the first tranche regarding the sale of Montoro. This was the first of three tranches for a total of $2,235,000. During the year ended January 31, 2007, the Company incurred exploration costs of $36,784 vs. $4,253 for the year ending January 31, 2006. The Company anticipates increased expenditure in the coming year as it has acquired two new projects, the Cruce Gold project in Arizona and the Cambridge Vein project near Yerrington, Nevada. General and administrative expenses for the fiscal year ending January 31, 2007 amounted to $175,822 vs. $255,432 the previous year. General administrative costs are closely monitored and the Company employs fewer personnel than in the past. The Company incurred stock compensation costs during the year of $144,500, primarily as a result of the granting of 2,650,000 stock options to various parties during the year. Using Black-Scholes calculation of $0.04 per share, the result was a charge to the Consolidated Statement of Operations of $106,000 regarding the granting of the options. The Company also incurred interest expense of $10,250 to related parties regarding outstanding loans of $205,000 made to the Company. These are the only loans subject to interest. During the year, a shareholder forgave $75,000 of accrued liabilities. 11 Liquidity and Financial Condition The Company had cash on hand at January 31, 2007 of $466,370 as a result of receipt of proceeds from the sale of Montoro in Mexico to Rogue River. The Company made debt payment to a Company controlled by a related party of $288,023. The Company provides for payment of 25% of the proceeds from Rogue River, as taxes payable to the Mexican Government. These taxes were paid in February 2007. Subsequent to the year end, the Company received a further $745,000 from Rogue River. The Company made a second debt payment to a Company controlled by a related party of $288,023 and paid 25% tax to the Mexican Government in April 2007. Current liabilities amount to $2,016,279, and current assets amount to $466,370, resulting in a working capital deficit of $1,549,909 at January 31, 2007. Current liabilities consist of accounts payable and accrued expenses of $98,586, notes payable and shareholder accruals of $1,743,943, and income taxes payable of $173,750. While the working capital deficit of $1,549,909 indicates an inability to pay its bills and accrued debt, the Company recognizes that current debt to non-affiliates is not significant, being primarily its accounts payable of $98,586 less $83,886 due to related parties, and that its working capital position will allow it to fund this debt. The Company also recognizes its need for additional funding either from equity sales or borrowings to create a more favorable working capital ratio and allow for a more aggressive property acquisition program. The Company also recognizes that there is no assurance that adequate additional financing is either available or achievable on terms acceptable to it. 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. In the past two years the Company has experienced losses of $225,025 in the year ended January 31, 2006 and net income resulting from the Montoro sale, of $308,471 for the year ended January 31, 2007. In spite of the profit in the current year, the Company's negative working capital position raises substantial doubt about the Company's ability to continue as a going concern. The Company did not complete any private placement financing during the fiscal year ended January 31, 2007.The Company will continue to explore options for financing as it addresses its exploration program for 2007 and examines other resource property opportunities. 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. Any production would be 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. 12 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. 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 The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer /acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. 13 FORWARD LOOKING STATEMENTS As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer / acting Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, the Company's Chief Executive Officer and acting Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no changes in the Company's internal controls or in other factors that occurred during the last fiscal quarter that have materially affected, or likely to materially affect, the internal controls over financial reporting during the period ended January 31, 2007. 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 - ---- --- ---------------- ---------- Peter Bojtos 58 Director, Chairman, April 24, 1996 President, & CEO James M. Seed 66 Director June 1, 1996 George Beattie 79 Director August 27, 1993 Gerald D. Helgeson 73 Director March 14, 1994 Secretary William Rapaglia 60 Director October 10, 2003 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 and Seed who are both independent directors. Each of these directors is financially literate but none of them is a financial expert. 14 There are no family relationships by blood, marriage or adoption among any of the officers or significant employees of the Company. PETER BOJTOS Peter Bojtos, P. Eng. was born on March 26, 1949 and received a Bachelor of Science Honors degree in Geology from Leicester University, England. He has an extensive background in the mining industry, with over 35 years in exploration, production and corporate management. He is currently a Director of several other natural resource companies. Following a 12 year career at Kerr Addison Mines, Limited, where he was latterly Vice-President - Corporate Development, Mr. Bojtos in 1992 became President and Chief Executive Officer of Consolidated Nevada Goldfields Corporation. From August 1993 until 1995, Mr. Bojtos was President and Chief Executive Officer of Greenstone Resources Ltd. Mr. Bojtos became a Vice President and Vice Chairman of the Board of Directors of Fischer-Watt Gold Company, Inc., in April 1996 and became Chairman, President and CEO, and acting Chief Financial Officer of the Company on August 4, 2005. JAMES M. SEED James Seed was born on April 4, 1941. He is a graduate of Brown University (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, both privately owned land development companies. 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 has been a Director of Fischer-Watt Gold Company since June 1, 1996. Mr. Seed resigned as Chairman of the Board of Directors on August 4, 2005. 15 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 has been a director since August 27, 1993 and was President and CEO of the Company until his retirement on August 4, 2005. 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 has been a director of the Company since March 14, 1994. WILLIAM J. RAPAGLIA William J. Rapaglia has over twenty years experience in real estate acquisitions, constructions and development. He is a licensed real estate broker in the state of California. Since 1995, Mr. Rapaglia has been 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. Mr. Rapaglia has been a director since October 10, 2003. Item 10. EXECUTIVE COMPENSATION. The following table presents the compensation awarded to, earned by, or paid to Mr. Bojtos, the Chief Executive Officer, who assumed his position August 1, 2005 and is the only executive officer. His fee is $50,000 per annum. SUMMARY COMPENSATION TABLE Annual Compensation Name and Principal Fiscal Position Year Fees - --------- ---- -------- Peter Bojtos, 2007 $50,000 President, CEO 2006 $50,000 2005 $50,000 In addition to the foregoing, during the year ended January 31, 2007, Mr. Bojtos received 250,000 restricted common shares for services at a value of $0.07 per share for total consideration of $17,500. The Company's chief executive officer is also a director. Directors receive no cash compensation for their services. All directors and officers participate in the Company's stock option plan. During the year ended January 31, 2007, each of the directors was granted 500,000 options to purchase common stock which were valued at $20,000 per grant using the Black-Scholes option pricing model. 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 31, 2007. 16 Name and Address of Amount and nature of beneficial owner beneficial ownership - ------------------- -------------------- Cede & Co. 40,114,910 shares PO Box 222 56.9% owned indirectly. Note 1 New York, NY 10274 Peter Bojtos 3,725,267 shares Officer and Director 5.3% owned directly and 2582 Taft Court indirectly. Note 2 Lakewood, CO 80215 James M. Seed 19,316,600 shares Director 27.4% owned directly and indirectly. 70 South Main Street Note 2, 3 Providence, RI 02903 George Beattie 3,838,727 shares Director 5.4% owned directly and indirectly. 19507 East Shannon Ave Note 2 Spokane Valley, WA 99016 Gerald D. Helgeson 400,000 shares Officer and Director 0.6% owned indirectly. 3770 Poppy Lane Note 2, 4 Fallbrook, CA 92028 William Rapaglia 505,400 shares Director 0.7% owned directly. Note 2 1821 Hillandale Road Durham, NC 27705 Directors and 27,785,994 shares Officers as a Group 39.4% owned directly and indirectly. (Five persons) Note 1 - Cede & Company is a brokerage clearing company. Note 2 - Options to purchase shares are shown below. Note 3 - James M. Seed owns shares, options and warrants directly and through various related companies and trusts. Note 4- Mr. Helgeson has assigned all of his shares and options to his wife, Madelynne Helgeson. 17 Options to purchase Restricted Common Stock granted to Directors and Officers. Amount Price Granted Expires ------ ----- ------- ------- George Beattie 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 500,000 0.10 07/27/06 07/27/11 James Seed 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 500,000 0.10 07/27/06 07/27/11 Peter Bojtos 100,000 0.115 07/06/04 07/31/09 500,000 0.10 07/27/06 07/27/11 Jerry Helgeson 500,000 0.05 06/02/02 06/30/07 100,000 0.115 07/06/04 07/31/09 500,000 0.10 07/27/06 07/27/11 William Rapaglia 500,000 0.05 11/13/03 06/30/07 100,000 0.115 07/06/04 07/31/09 500,000 0.10 07/27/06 07/27/11 Indebtedness of Directors and Officers No Company directors or officers are indebted to the Company. Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During the year, negotiations were completed for the sale of Montoro in Mexico to Nexvu for the sum of $2,235,000. In order to carry out the transaction, the Company reacquired the interest held by Astra, a company controlled by a Director, that in turn had advanced funds in the amount of $864,068 for an interest of 21.6% in La Balsa. The Company has assumed the liability of $864,068 due to Astra and has additionally agreed to compensate Astra with share purchase options of 4,000,000 restricted common shares at $0.30 per share, expiring Dec 5, 2010; 4,000,000 restricted common shares at $0.40 per share, expiring Dec 5, 2012; and 2,000,000 restricted common shares at $0.60 per share, expiring Dec 5, 2015. Due to severe cash shortages in recent years, executives of the corporation had been deferring the payment of their fees and expenses and had loaned money to the Company. Mr. George Beattie, former President and Chief Executive Officer, is owed $446,667 for fees; Mr. Peter Bojtos, now Chairman, President and CEO, is owed $243,249 for fees and loans and $64,056 for expenses, and the James Seed Trust is owed $175,000 for loans. Item 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Item 601 No. Category Exhibit - --- -------- ------- 1 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. 2 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. 18 (b) Reports on Form 8-K Entry Into a Material Definitive Agreement On January 25, 2007, Fischer-Watt Gold Company, Inc. (the "Company") entered into a Stock Purchase Agreement (the "Agreement") among the Company, Rogue River Resources Corp. ("Rogue River") and Minera Montoro, S.A. De C.V., the Company's Mexican subsidiary ("Minera Montoro"). The Company has completed the first tranche of the sale of its 65% ownership interest in Minera Montoro to Rogue River. At the closing of this first tranche, the Company received $695,000 for 31% of its share ownership in Minera Montoro. 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 fiscal years January 31, 2007 and 2006. 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 the past two years were $23,382 and $21,800 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 - --------- There were no fees billed during the last two fiscal years for professional services rendered for tax compliance. All Other Fees - --------------- There were no other fees billed by during the last two fiscal years for products and services provided. 19 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/Peter Bojtos ----------------------------------- 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/Peter Bojtos April 26, 2007 ------------------------------------------- Director, Chairman, President and CEO, and Acting Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) /s/ Gerald D. Helgeson April 26, 2007 - -------------------------------------------- Director, Secretary /s/ James M. Seed April 26, 2007 - -------------------------------------------- Director /s/ George Beattie April 26, 2007 - -------------------------------------------- Director /s/ William Rapaglia April 26, 2007 - -------------------------------------------- Director 20 Fischer-Watt Gold Company, Inc. Index of Financial Statements Report of Independent Registered Public Accounting Firm F-2 Financial Statements: Consolidated Balance Sheets 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 sheets of Fischer-Watt Gold Company, Inc. (an exploration stage Company) as of January 31, 2007 and 2006 and the related consolidated statements of operations, stockholders' (deficit), and cash flows for the years then ended and the exploration stage period of February 1, 2001 to January 31, 2007. 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 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. (an exploration stage Company) as of January 31, 2007 and 2006, and the consolidated results of their operations and their cash flows for the years then ended, and the period of February 1, 2001 to January 31, 2007 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 has no revenue producing operations, and has working capital and stockholder deficits as of January 31, 2007. 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 April 17, 2007 F-2
Fischer-Watt Gold Company, Inc. (An Exploration Stage Company) Consolidated Balance Sheets January 31, 2007 and 2006 2007 2006 ------------------ ------------------ ASSETS Current Assets: Cash $ 466,370 $ 177,146 ------------------ ------------------ Total current assets $ 466,370 $ 177,146 ================== ================== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities: Accounts payable and accrued expenses $ 98,586 $ 73,060 Income taxes payable 173,750 - Note payable - shareholders 781,045 781,045 Accounts payable and accrued expenses - shareholders 962,898 1,093,898 ------------------ ------------------ Total current liabilities 2,016,279 1,948,003 ------------------ ------------------ Note payable - shareholders - 288,023 ------------------ ------------------ 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, 70,516,819 and 69,166,819 shares issued and outstanding, respectively 70,516 69,166 Additional paid-in capital 15,894,191 15,695,041 Common stock subscriptions 12,750 12,750 Accumulated (deficit) prior to exploration stage (15,353,115) (15,353,115) Accumulated (deficit) during the exploration stage (2,174,251) (2,482,722) ------------------ ------------------ (1,549,909) (2,058,880) ------------------ ------------------ $ 466,370 $ 177,146 ================== ================== See the accompanying notes to the consolidated financial statements
F-3
Fischer-Watt Gold Company, Inc. (An Exploration Stage Company) Consolidated Statements of Operations Years Ended January 31, 2007 and 2006, and February 1, 2001 (Inception of Exploration Stage) to January 31, 2007 February 1, 2001 (Inception of Exploration Stage) 2007 2006 to January 31, 2007 ---------------- ----------------- ------------------- Revenue $ - $ 44,240 $ 44,240 ---------------- ----------------- ------------------- Costs and expenses: Cost of sales - 50,000 50,000 Exploration 36,784 4,253 663,996 Writedown of inventory to market value - - 125,000 Stock compensation 38,500 - 110,100 Stock option expense 106,000 - 106,000 General and administrative 175,822 255,432 1,910,705 ---------------- ----------------- ------------------- 357,106 309,685 2,965,801 ---------------- ----------------- ------------------- (Loss) from operations (357,106) (265,445) (2,921,561) ---------------- ----------------- ------------------- Other income (expense) Interest expense (10,250) (9,580) (49,636) Relief of payables and other indebtedness 75,000 - 141,935 Other income 770,000 50,000 824,184 Interest income 4,577 - 4,577 ---------------- ----------------- ------------------- 839,327 40,420 921,060 ---------------- ----------------- ------------------- Income (loss) before income taxes 482,221 (225,025) (2,000,501) Income taxes (173,750) - (173,750) ---------------- ----------------- ------------------- Net income (loss) $ 308,471 $ (225,025) $ (2,174,251) ================ ================= =================== Per share information - basic and fully diluted Net income (loss) per share Basic $ 0.00 $ (0.00) $ (0.04) Fully-diluted $ 0.00 $ (0.00) $ (0.04) Weighted average shares outstanding Basic 69,910,792 57,186,838 52,614,897 Fully-diluted 87,260,792 57,186,838 52,614,897 See the accompanying notes to the consolidated financial statements
F-4
Fischer-Watt Gold Company, Inc. (An Exploration Stage Company) Consolidated Statement of Stockholders' (Deficit) Years Ended January 31, 2002 to 2007 Common Stock During ------------ Additional Capital Stock Before Exploration Shares Amount Paid in Capital Subscribed Exploration Stage Total ------ ------ --------------- ------------- ----------- ------------ ------------- Balance, January 31, 2001 44,398,384 $ 44,398 $ 14,476,921 $ 41,250 $ (15,353,115) $ - $ (790,546) Contribution to capital - - 263,263 - - - 263,263 Issuance of subscribed shares 825,000 825 40,425 (41,250) - - - Issuance of stock for services 1,000,000 1,000 24,000 - - - 25,000 Net (loss) - - - - - (634,552) (634,552) ---------- ------- ------------ -------- ------------- ----------- ------------ Balance, January 31, 2002 46,223,384 46,223 14,804,609 - (15,353,115) (634,552) (1,136,835) Contribution to capital - - 271,305 - - - 271,305 Issuance of stock options for services - - 75,500 - - - 75,500 Issuance of stock for services at $0.10 per share 250,000 250 24,750 - - - 25,000 Stock subscriptions for cash at $0.03 per share - - - 30,000 - - 30,000 Stock subscriptions for services at $0.04 per share - - - 12,750 - - 12,750 Net (loss) - - - - - (586,422) (586,422) ---------- ------- ------------ -------- ------------- ----------- ------------ Balance, January 31, 2003 46,473,384 46,473 15,176,164 42,750 (15,353,115) (1,220,974) (1,308,702) Contribution to capital - - 129,500 - - 129,500 Issuance of subscribed shares 1,000,000 1,000 29,000 (30,000) - - - Discount on stock issued to affiliates - - 57,000 - - - 57,000 Stock subscriptions for cash at $0.02 to $0.14 per share - - - 166,282 - - 166,282 Issuance of stock for cash at $0.04 per share 3,169,000 3,169 114,035 - - - 117,204 Net (loss) - - - - - (561,865) (561,865) ---------- ------- ------------ -------- ------------- ----------- ------------ Balance, January 31, 2004 50,642,384 50,642 15,505,699 179,032 (15,353,115) (1,782,839) (1,400,581) Reclassification of subcription - - (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 and subscription for services at $0.08 per share 20,000 20 1,580 70,000 - - 71,600 Issuance of stock for cash at $0.07 per share 400,000 900 27,411 - - - 28,311 Stock subscriptions for cash at $0.05 to $0.10 per share - - - 154,971 - - 154,971 Net (loss) - - - - - (474,858) (474,858) ---------- ------- ------------ -------- ------------- ----------- ------------ Balance January 31, 2005 53,469,111 53,469 15,708,065 253,721 (15,353,115) (2,257,697) (1,595,557) Reclassification of capital to shareholder loan - - (864,068) - - - (864,068) Contribution to capital - - 50,500 - - - 50,500 Issuance of subscribed shares 3,392,308 3,392 237,579 (240,971) - - - Issuance of stock for services at $0.05 per share 505,400 505 24,765 - - - 25,270 Issuance of stock for cash at $0.04 per share 5,800,000 5,800 244,200 - - - 250,000 Issuance of stock in settlement of debt at $0.05 per share 6,000,000 6,000 294,000 - - - 300,000 Net (loss) - - - - - (225,025) (225,025) ---------- ------- ------------ -------- ------------- ----------- ------------ Balance January 31, 2006 69,166,819 69,166 15,695,041 12,750 (15,353,115) (2,482,722) (2,058,880) F-5 Issuance of stock in settlement of shareholder payable at $0.10 per share 400,000 400 39,600 - - - 40,000 Issuance of stock for services at $0.07 per share 550,000 550 37,950 - - - 38,500 Issuance of stock options for services - - 106,000 - - - 106,000 Exercise of stock warrants at $0.04 per share 400,000 400 15,600 - - - 16,000 Net income - - - - - 308,471 308,471 ---------- -------- ------------- -------- ------------- ----------- ------------ Balance January 31, 2007 70,516,819 $ 70,516 $ 15,894,191 $ 12,750 $ (15,353,115) $(2,174,251) $ (1,549,909) ========== ======== ============= ======== ============= =========== ============ See the accompanying notes to the consolidated financial statements
F-6
Fischer-Watt Gold Company, Inc. (An Exploration Stage Company) Consolidated Statements of Cash Flows Years Ended January 31, 2007 and 2006, and February 1, 2001 (Inception of Exploration Stage) to January 31, 2007 February 1, 2001 (Inception of Exploration Stage) 2007 2006 to January 31, 2007 ------------- ------------ ------------------- Cash flows from operating activities: Net (loss) $ 308,471 $ (225,025) $ (2,174,251) ------------- ------------ -------------- 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 and other indebtedness (75,000) - (141,935) Depreciation - - 7,062 Issuance of common stock for services and other non-cash items 38,500 35,464 182,564 Stock subscriptions related to services provided - - 82,750 Stock options issued for services - - 75,500 Stock option expense 106,000 - 106,000 Changes in assets and liabilities: Inventory - 50,000 50,000 Other current assets - 4,337 - Accounts payable 25,526 36,362 156,195 Income taxes payable 173,750 - 173,750 Accounts payable and accrued expenses - shareholders - (4,913) 746,317 ------------- ------------ -------------- Total adjustments 268,776 121,250 1,563,203 ------------- ------------ -------------- Net cash provided by (used in) operating activities 577,247 (103,775) (611,048) ------------- ------------ -------------- 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 - 250,000 580,486 Proceeds from exercise of options - - 35,000 Proceeds from notes payable - shareholders - 30,000 40,500 Repayment of note payable - shareholder (288,023) - (288,023) Capital contribution by shareholder - - 689,068 ------------- ------------ -------------- Net cash provided by (used in) financing activities (288,023) 280,000 1,057,031 ------------- ------------ -------------- Increase in cash and cash equivalents 289,224 176,225 445,983 Cash and cash equivalents, beginning of period 177,146 921 20,387 ------------- ------------ -------------- Cash and cash equivalents, end of period $ 466,370 $ 177,146 $ 466,370 ============= ============ ============== Supplemental cash flow information: Cash paid for interest $ - $ - $ - Cash paid for income taxes $ - $ - $ - Non cash investing and financing activities: Reclassification of capital contributions to note payable $ - $ 864,068 $ 864,068 Conversion of notes payable and accrued interest to common stock $ - $ 150,000 $ 150,000 Conversion of amounts due to shareholders to common stock $ 40,000 $ 150,000 $ 190,000 Conversion of amounts due to shareholders upon exercise of stock warrants $ 16,000 $ - $ 16,000 Common shares issued for stock subscriptions $ - $ 240,971 $ 433,813 Conversion of amounts due to affiliate to stock subscription $ - $ - $ 131,282 Purchase of inventory via direct payment by shareholder $ - $ - $ 175,000 See the accompanying notes to the consolidated financial statements
F-7 FISCHER-WATT GOLD COMPANY, INC. (An Exploration Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JANUARY 31, 2007 AND 2006 Note 1. Accounting Policies Business Activities Fischer-Watt Gold Company, Inc. ("Fischer-Watt" or the "Company") was incorporated in the State of Nevada in 1986. 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 mineable 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. F-8 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. Effective February 1, 2006, the Company implemented SFAS 123, "Accounting for Stock-Based Compensation," requiring the Company to provide compensation costs for the Company's stock option plans determined in accordance with the fair value based method prescribed in SFAS 123, as amended. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition over the service period, if any, of the stock option. Prior to February 1, 2006, the Company applied APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for all stock option plans. Under APB Opinion 25, no compensation cost was recognized for stock options issued to employees as the exercise price of the Company's stock options granted equaled or exceeded the market price of the underlying common stock on the date of grant. 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-9 Concentration of Credit Risk The Company maintains cash in accounts which may, at times, exceed federally insured limits. To date, these concentrations of credit risk have not had a significant impact on the Company's financial position or results of operations. 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. The Company has no inventory on hand at January 31, 2007. During the year ended January 31, 2006, inventory was disposed of for total consideration of $44,240. 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 affect 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, 2007. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable and accrued expenses 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. F-10 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 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 June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained upon examination based on the technical merits of the position. This interpretation also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect reported as an adjustment to the opening balance of retained earnings for the fiscal year. We are currently determining the effect of this interpretation on our financial reporting. In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements" (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of SFAS 157 are effective for fiscal years beginning after November 15, 2007. We are currently determining the effect of this statement on our financial reporting In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires companies to recognize a net liability or asset and an offsetting adjustment to accumulated other comprehensive income to report the funded status of defined benefit pension and other postretirement benefit plans. SFAS No. 158 requires prospective application, recognition and disclosure requirements effective for the Company's fiscal year ending January 31, 2008. Additionally, SFAS No. 158 requires companies to measure plan assets and obligations at their year-end balance sheet date. This requirement is effective for the Company's fiscal year ending January 31, 2010. The Company is currently evaluating the impact of the adoption of SFAS No. 158 and does not expect that it will have a material impact on its financial statements. In September 2006, the United States Securities and Exchange Commission ("SEC"), adopted SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements." This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company's balance sheet and statement of operations financial statements and the related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. The Company is currently evaluating the impact, if any, that SAB 108 may have on the Company's results of operations or financial position. The FASB has issued FSP EITF 00-19-2. This FSP states that the contingent obligation to make future payments or other transfers of consideration under a registration payment arrangement, issued as a separate agreement or included as a part of a financial instrument or other agreement, should be separately F-11 recognized and measured in accordance with SFAS 5. Also, a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable GAAP without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. This FSP was adopted on October 1, 2006. Note 2. Financial Condition, Liquidity, and Going Concern The Company had net income of $308,471 for the year ended January 31, 2007 compared to a net loss of $225,025 for the year ended January 31, 2006. The Company had stockholders' and working capital deficits of $1,549,909 at January 31, 2007. 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 entered into an agreement to sell its holdings in a property located in Mexico for a total consideration of $2,235,000. At January 31, 2007, the Company had received $745,000 and subsequent to the year-end, has received an additional $745,000. The final payment of $745,000 is due April 30, 2007. This results from the sale of its 65% interest in its Mexican subsidiary, Minera Montoro S.A. de C.V. (Montoro) to Nexvu Capital Corp. (Nexvu) subsequently assigned its interest to Rogue River Resources Inc. (Rogue River). The ability of the Company to achieve its operating goals and thus positive cash flows from operations is dependent upon its ability to acquire a mineral property and ultimately achieve production status, 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, and exploration activity with respect to mineral properties. While the Company has been successful in capital raising endeavors in the past, there can be no assurance that its future efforts and anticipated operations 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 - Shareholders In 2004, a shareholder advanced $175,000 to the Company by the direct payment for the Company's gemstone inventory. In 2005, another shareholder advanced $30,000 to the Company for working capital purposes and to assist in identification of new mining properties. Both these loans bear interest at 5% per annum and are due on demand. On December 5, 2005, the Company agreed to repay prior capital contributions made by The Astra Ventures, a company controlled by a related party, in the amount of $864,068 in exchange for Astra's 21.6% joint venture interest in the La Balsa property. Upon receipt of the first tranche regarding the sale to Rogue River, a payment of $288,023 has been made to Astra Ventures. Subsequent to the year-end, an additional tranche was received by the Company and a second payment of $288,023 was made to Astra Ventures. The debt is non-interest bearing. Note 4. Stockholders' (Deficit) During the year ended January 31, 2002, The Astra Ventures contributed $263,263 to the capital of the Company to be used primarily for the identification and assessment of new mining properties. The Company issued 825,000 shares of common stock which had been subscribed for in a prior year. The Company issued 1,000,000 shares of common stock in exchange for consulting services, which were valued at their fair market value of $25,000. F-12 During the year ended January 31, 2003, The Astra Ventures contributed $271,305 to the capital of the Company to be used primarily for the identification and assessment of new mining properties. The Company issued 250,000 shares of common stock in exchange for consulting services, which 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. During the year ended January 31, 2004, The Astra Ventures contributed $129,500 to the capital of the Company to be used primarily for the identification and assessment of new mining properties. 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 was charged to operations during the year ended January 31, 2004. During the year ended January 31, 2005, The Astra Ventures contributed $25,000 to the capital of the Company to be used primarily for the identification and assessment of new mining properties. The Company issued 1,906,727 shares of common stock for stock subscriptions of $157,842. The Company issued 400,000 shares of common stock for cash aggregating $28,311. In addition, 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. During the year ended January 31, 2006, the Company issued 3,392,308 shares of common stock for stock subscriptions of $239,971. The Company issued 5,800,000 shares of common stock for cash aggregating $250,000. In addition, loans outstanding in the amount of $250,000 were converted to 6,000,000 shares of common stock. The Company issued 505,400 shares of common stock for services valued at fair market value of $25,270. In addition, $864,068 of capital contributions made by The Astra Ventures in prior years were reclassified as notes payable. During the year ended January 31, 2007, the Company issued 400,000 shares of common stock at $0.10 per share in settlement of amounts to due a shareholder. The Company issued 550,000 shares of common stock for services valued at fair market value of $38,500. In addition, a shareholder exercised warrants to purchase 400,000 shares of common stock at $0.04 per share, reducing amounts owed to him by the Company in the amount of $16,000. 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, 2006, the Company granted the following options to The Astra Ventures: 4,000,000 shares at a price of $0.30 per share expiring December 5, 2010; 4,000,000 shares at a price of $0.40 per share expiring December 5, 2012; and 2,000,000 shares at a price of $0.60 per share expiring December 5, 2015. During the year ended January 31, 2007, the Company granted 2,500,000 options to directors at a price of $0.10 per share, expiring July 27, 2011. The Company also granted 150,000 options to non-affiliates at a price of $0.10 per share, expiring July 27, 2011. F-13 Effective February 1, 2006, the Company implemented the rules of SFAS 123(R), "Accounting for Stock-Based Compensation," which requires the Company to expense as compensation the value of options granted under the Company's stock option plan as determined in accordance with the fair value based method prescribed in SFAS 123(R). The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. During the year ended January 31, 2007, stock options were granted to purchase 2,650,000 shares of common stock at an exercise price of $0.10 per share and a term of five years. Stock option compensation expense of $106,000 was recorded based upon a fair value calculation using the following assumptions: expected life of 2 years, stock price of $0.07 per share at date of grant, dividend yield of 0%, expected volatility of 1.227 and risk-free interest rate of 3.8%. Prior to February 1, 2007, the Company applied APB Opinion 25, "Accounting for Stock Issued to Employees", and disclosed pro-forma information regarding net income and earnings per share as if stock based compensation cost had been determined using a fair value based method. Under the provisions of SFAS 123, the Company's net loss for the year ended January 31, 2006 would have been $585,025 and the loss per share would have been $0.01 per share. The following table summarizes the stock option activity: Weighted-average Stock Options Price per Share ------------- ---------------- Outstanding at January 31, 2005 5,550,000 $0.06 Granted 10,000,000 $0.40 Exercised - Expired (850,000) ---------- Outstanding at January 31, 2006 14,700,000 $0.29 Granted 2,650,000 $0.10 Exercised - Expired (1,050,000) $0.04 ---------- ----- Outstanding January 31, 2007 16,300,000 $0.28 The following table summarizes information about fixed-price stock options at January 31, 2007: Options Outstanding Options Exercisable ------------------------- ---------------------- Weighted- Weighted- Weighted- Average Average Average Range of Number Contractual Exercise Number Exercise Prices Outstanding Life Price Exercisable Price -------- ----------- ----------- --------- ----------- -------- $0.05-$0.12 6,300,000 2.3 years $0.08 6,300,000 $0.08 $0.30-$0.60 10,000,000 5.7 years $0.40 10,000,000 $0.40 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-14 Note 6. Income Taxes The components of net (loss) before taxes for the Company's domestic and foreign operations were as follows: January 31, 2007 2006 - ------------ ---- ----- Domestic $(461,528) $(225,025) Foreign 770,000 -- Net income (loss) before taxes $ 308,472 $(225,025) The difference between the federal statutory tax rate and the effective tax rate on net income before taxes is as follows: January 31, 2007 2006 - ------------ ---- ----- 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 carry forwards of approximately $8.1 million at January 31, 2007, 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 carry forwards. The deferred tax asset of approximately $2.5 million resulting from the net operating loss carry forwards 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 year the Company completed negotiations for the sale of all of its interest in the Montoro property to Rogue River Resources Inc. (an unrelated third party) for a total consideration of $2,235,000. The first payment of $695,000 (a deposit of $50,000 was received previously) was received January 30, 2007. Subsequent to the year end, the second payment of $745,000 was also received. The balance payable, $745,000 is due April 30, 2007. In order to complete the sale to Rogue River Resources Inc, the Company repurchased the 21.6% interest held by The Astra Ventures Inc. a holding company controlled by a former Chairman of the Company and a Director. The Company has agreed to repay The Astra Ventures Inc. $864,068, to be repaid in conjunction with the receipt of proceeds from Rogue River Resources Inc. One-third of each payment received will be applied to the retirement of the debt to The Astra Ventures Inc. As consideration to The Astra Ventures Inc for the lost business opportunity, the Company has agreed to grant an option to them for a total of 10,000,000 shares of common stock. The option granted is for 4,000,000 shares of common stock at $0.30 per share, 4,000,000 shares of common stock at $0.40 per share and 2,000,000 shares of common stock at $0.60 per share. At January 31, 2007, the first of three installments had been repaid to The Astra Ventures Inc. Subsequent to year end, the second installment was made. This debt to The Astra Ventures Inc is included in note payable - shareholder. During the year ended January 31, 2006, a shareholder forgave a note payable of $10,500 that was owed to him by the Company, and another shareholder forgave accrued liabilities of $40,000. In addition, a shareholder exchanged a note payable and accrued interest of $150,000 for 3,000,000 shares of common stock, and two shareholders exchanged accrued liabilities of $150,000 for 3,000,000 shares on common stock. In the year ended January 31, 2007, a shareholder forgave debt of $75,000. F-15 Note 8. Mineral Properties Cruce Gold Project - ------------------ The Company, on June 10, 2006, entered into an agreement with private individuals regarding the Cruce Gold exploration project. This property is located in north-west Pinal County, Arizona and has a history of gold and copper exploration. The Company acquired a 100% interest in the mineral lease for $15,000 and the issuance of 100,000 restricted common shares of its stock. These shares were valued at fair market value of $7,000 and recorded as stock compensation. The vendors will retain a 2% net smelter return royalty and will receive an advance royalty of $20,000 on the first anniversary of the agreement and $25,000 on subsequent anniversaries. These advance royalties will be deductible from future production royalty payments. Cambridge Mine Project - ---------------------- On August 1, 2006, the Company entered into an option agreement with Grandcru Resources Corporation ("Grandcru") of Vancouver B.C. to acquire Grandcru's rights to 19 claims in the Cambridge Mining District located 23 miles south of Yerrington, Nevada, in Lyon County. Under the terms of the agreement Fischer-Watt can acquire a 100% interest in the property by completing the following: Cash payments to an underlying claim holder of: $10,000 on August 25, 2006 $15,000 on August 25, 2007 $20,000 on August 25, 2008 $25,000 on August 25, 2009 and cash payments to Grandcru of: $10,000 on August 30, 2007 $15,000 on August 30, 2008 $20,000 on August 30, 2009 $25,000 on August 30, 2010 and by satisfying annual work commitments on the property of: $50,000 in the first year of the agreement $75,000 in the second year of the agreement $125,000 in the third year of the agreement $150,000 in the fourth year of the agreement Upon completion of the above, Fischer-Watt will have earned a 100% interest in the property subject to a 2% Net Smelter Return royalty to the underlying claim holder and a 2% Net Smelter Return royalty to Grandcru. These two royalties may be purchased by Fischer-Watt for $2,000,000 and $1,500,000 respectively. The Company is currently planning its exploration program which will be carried out during the summer months of 2007. The work will include an initial drilling campaign designed to help trace the vein's geometry as well as help determine where high-grade gold shoots may occur. This will enable Fischer-Watt's geologists to begin defining the extent of the gold mineralization. The project has no reserves at present and there is no assurance that the project will advance from its present exploration stage. F-16 EX-31 2 exh32_1.txt 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, Peter Bojtos, 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-KSB for the year ended January 31, 2007 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/ Peter Bojtos - -------------------------------------- April 26, 2007 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. EX-32 3 exh31_1.txt EXHIBIT 31.1 ------------ CERTIFICATE OF PRINCIPAL EXECUTIVE OFFICER I, Peter Bojtos, 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. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known by me to 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 is my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; -1- 5. I have disclosed, based on my 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. Date: April 26, 2007 /s/ Peter Bojtos - --------------------------- Peter Bojtos -----END PRIVACY-ENHANCED MESSAGE-----