-----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, SKi+xJwBHJnFT9Ly2pmIreiy8UmbZ482p1LrN3a/16PRdfLrjUznxDcREz4tozIJ TflKjBSz2s1b70DHWpwWzQ== 0001021890-97-000184.txt : 19970528 0001021890-97-000184.hdr.sgml : 19970528 ACCESSION NUMBER: 0001021890-97-000184 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951029 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970527 SROS: NASD 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-17386 FILM NUMBER: 97614581 BUSINESS ADDRESS: STREET 1: 1621 NORTH 3RD STREET STREET 2: SUITE 1000 CITY: COEUR D'ALENE STATE: ID ZIP: 83814 BUSINESS PHONE: 208-664-67 MAIL ADDRESS: STREET 1: 1621 NORTH 3RD ST STREET 2: STE 1000 CITY: COEUR DALENE STATE: ID ZIP: 83814 8-K/A 1 AMENDED CURRENT REPORT ON FORM 8-K DATED 10/29/95 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 29, 1995 FISCHER-WATT GOLD COMPANY, INC. ----------------------------------------------------------------------- (Exact name of registrant as specified in charter) NEVADA 0-17386 88-0227654 - ----------------------------------------------------------------------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) file number) Identification No.) 1621 North 3rd Street, Suite. 1000 Coeur d'Alene, Idaho 83814 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 208-664-6757 - ----------------------------------------------------------------------- 1 Item 2. Acquisition or Disposition of Assets. - ------ ------------------------------------- On August 28, 1995, Fischer-Watt Gold Company, Inc. ("FWG") entered into an agreement with Greenstone Resources Ltd., ("Greenstone") to acquire the Oronorte property in northern Colombia, which includes the El Limon Mine, an underground gold mine, and the rights to several exploration concessions effective August 24, 1995. On October 20, 1995, FWG closed the acquisition from Greenstone. All of the outstanding shares of Greenstone Resources of Colombia Ltd. ("GRC"), a Bermuda corporation were acquired. GRC owns 61,540,000 shares of Compania Minera Oronorte S.A.("Oronorte"). FWG completed the acquisition of 470,000 shares of Oronorte from Minas Santa Rosa, a subsidiary of Greenstone. Also on such date, FWG completed the acquisition of 2,800,000 shares of Oronorte from Dual Resources. This significant acquisition resulted in FWG owning, directly or indirectly, 99.9% of Oronorte, which owns the El Limon Mine, a small underground gold mine in the Department of Antioquia, Colombia. FWG assumed operational control of Oronorte on August 24, 1995. In exchange for the various interests in Oronorte, FWG conveyed to Greenstone, all of its interests in Minerales de Copan S.A. de C.V., ("Copan") which included shares and options to purchase shares totaling approximately eight percent of Copan. Copan owns the San Andres Mine in Honduras. FWG's non-recourse debt to Greenstone of $115,000 was canceled in connection with this conveyance. The amount of consideration was not determined by reference to any particular principle, but rather was determined solely as the result of extensive arm's-length negotiations. Subsequent to this acquisition, on April 24, 1996, Mr. Peter Bojtos became Vice President and Vice Chairman of the Board of Directors for FWG. From August 1993 until August 1995, Mr. Bojtos was President and Chief Executive Officer of Greenstone. Item 7. Financial Statements and Exhibits. - ------- ---------------------------------- (a) Financial Statements of Business Acquired. ------------------------------------------ (1) Greenstone Resources Ltd. of Colombia Consolidated Balance Sheets as of December 31, 1995 and 1994 and the related Consolidated Statements of Income (Loss) and Accumulated Deficit and of Consolidated Statements of the two years in the Period Ended December 31, 1995 and the Independant Auditor's Report. See pages 4-23. 2 (b) Pro Forma Financial Information. -------------------------------- (1) Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated Balance Sheet (unaudited) January 31, 1996. See page 24. (2) Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated Statement of Operations (unaudited) for the year ended January 31, 1996. See page 25. (3) Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited). See pages 26 & 27. (c) Exhibits --------- Exhibit Item No. 601 Code Exhibit - ------- -------- ------- 1 2 Closing Agreement dated October 20, 1995 among Fischer-Watt Gold Company, Inc.,and Greenstone Resources Canada Ltd., and Greenstone Resources Ltd. Filed as exhibit 1.2 to Form 8-K filed November 3, 1995 and incorporated herein by reference. The following Schedules are a part of the Closing Agreement dated October 20, 1995 among Fischer-Watt Gold Company, Inc., and Greenstone Resources Canada Ltd., and Greenstone Resources Ltd., and will be provided to the Commission upon request. Schedule 1 Assets of Greenstone of Colombia as at the Effective Time Schedule 2 Liabilities of Greenstone of Colombia as at the Effective Time, including known contingent liabilities Schedule 3 Copan Interests 2 2 August 28, 1995 agreement between Fischer- Watt Gold Company, Inc., and Greenstone Resources Ltd., whereby Fischer-Watt agrees to purchase 100% of Greenstone Resources Ltd.'s wholly-owned Colombian branch, Greenstone of Colombia, filed as Exhibit 2.2 to Form 10-QSB filed September 15, 1995 and incorporated herein by reference. 3 GREENSTONE RESOURCES LTD. OF COLOMBIA Consolidated Financial Statements December 31, 1995 and 1994 With Independent Auditors' Reports Thereon 4 GREENSTONE RESOURCES OF COLOMBIA LTD. Table of Contents Independent Auditors' Reports Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Financial Position Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements 5 Independent Auditors' Report ------------------------------ The Board of Directors and Shareholders Greenstone Resources Ltd. We have audited the accompanying consolidated balance sheets of Greenstone Resources of Colombia Ltd., Colombian Branch of Greenstone Resources Ltd., as of December 31, 1995 and 1994, and the related consolidated statements of income (loss) and accumulated deficit, changes in financial position and cash flows for each of the years in the two-year period ended December 31, 1995. These financial statements are the responsibility of the Branch management. Our responsibility is to express an opinion on these financial statements based on our audits. Except as discussed in the following paragraph, we conducted our audits in accordance with generally accepted auditing standards in Colombia. Those standards require that we plan and perform the audit 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. We were unable to obtain sufficient evidence supporting the balance payable to Home Office Greenstone Resources Ltd by Ps 3,259,172 thousands at December 31, 1994, and we were not able to satisfy ourselves as to the amount using other auditing procedures. In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine evidence regarding the balance with Greenstone Resources Ltd, the financial statements referred to in the first paragraph above present fairly, in all material respects, the financial position of Greenstone Resources Ltd. as of December 31, 1995 and 1994, and the results of its operations, changes in its financial position and cash flows for the years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles in Colombia. Generally accepted accounting principles in Colombia vary in certain significant respects from generally accepted accounting principles in the United States. Application of generally accepted accounting principles in the United States would have affected results of operations for each of the years in the two-year period ended December 31 1995 and branch' equity as of December 31, 1995 and 1994, to the extent summarized in note 12 to the financial statements. 6 The accompanying financial statements have been prepared assuming that the Branch will continue as a going concern. As discussed in Note 1 to the financial statements, the Branch has suffered recurring losses from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty /s/ Luis Eduardo Nino Cortes Luis Eduardo Nino Cortes T.P. 3164-T Medellin, Colombia August 5, 1996 7
Greenstone Resources of Colombia Consolidated Balance Sheets December 31, 1995 & 1996 Assets 1995 1995 1994 ---- ---- ---- Thousands of Thousands of constant U.S. dollars Colombian pesos (convenience translation) Current Assets: Cash and cash equivalents ........................ US $ 140 Ps 138,143 184,191 Accounts receivable, net (note2) ................. 743 734,240 488,605 Inventories (note 4) ............................. 553 546,179 579,322 Prepaid expenses ................................. 11 10,783 8,124 ------- --------- --------- 1,447 1,429,345 1,260,242 ------- --------- --------- Depletable assets, net (note 5) .................... 1,662 1,641,423 2,278,516 Property, plant and equipment, net (note 6) ......................................... 1,984 1,959,139 2,511,822 Other assets ....................................... -- 24 6,329 ------- --------- --------- US $ 5,093 Ps 5,029,931 6,056,908 ======= ========= ========= Memorandum accounts ................................ US $ 4,912 Ps 4,851,373 4,352,091 ======= ========= ========= Liabilities and Branch's Equity Current Liabilities: Notes payable to banks ........................... -- -- 6,621 Current installments of long-term debt (note 7) .................................. 60 59,250 634,030 Accounts payable and accured expenses (note 8) .............................. 911 899,376 455,009 ------- --------- --------- Total current liabilities ........... 971 958,626 1,095,660 Due to related parties (note 3) .................... 4,015 3,965,251 3,259,172 Long-term debt, excluding current installments (note 7) .......................... -- -- 62,126 ------- --------- --------- Total liabilities ................... 4,986 4,923,876 4,416,958 ------- --------- --------- Minority interest .................................. 342 337,356 429,104 Branch's equity (note 9) Assigned capital ................................. 4,475 4,419,402 4,419,402 Reserves ......................................... -- 465 465 Equity revaluation ............................... 2,540 2,509,049 3,098,022 Accumulated deficit .............................. (7,250) (7,160,218) (6,307,044) ------- --------- --------- Branch's equity, net ................ (235) (231,302) 1,210,845 Commitments and contingencies (note 10) US $ 5,093 Ps 5,029,931 6,056,908 ======= ========= ========= Memorandum Accounts ................................ US $ 4,912 Ps 4,851,373 4,352,091 ======= ========= =========
See accompanying notes to consolidated financial statements. 8
GREENSTONE RESOURCES LTD. OF COLOMBIA Consolidated Statements of Income (Loss) and Accumulated Deficit Years ended December 31, 1995, and 1994 1995 1995 1994 ---- ---- ---- Thousands of Thousands of constant U.S. dollars Colombian pesos (convenience translation) Net sales ..................................................... US $ 3,150 Ps 3,111,247 3,335,978 Costs and expenses: Production costs ............................................ (2,627) (2,594,714) (3,235,152) Administrative expenses ..................................... (532) (525,246) (1,124,478) Selling expenses ............................................ (486) (479,942) (326,401) Depreciation,depletion, and ................................. (681) (672,408) (1,050,486) amortization Provision inventories ....................................... (162) (160,000) -- Provision for sales settlements ............................. -- -- (145,322) ----------- ----------- ----------- (4,488) (4,432,310) (5,881,839) Operating Loss ................................. (1,338) (1,321,063) (2,545,861) Other income (expense) Other income ................................................ 338 333,700 25,360 Gain (loss) on sale of assets ............................... 110 108,619 -- Foreign exchange ............................................ 292 287,959 237,674 Other ....................................................... (683) (674,727) (19,347) Interest expense ............................................ (167) (164,600) (597,625) Net monetary correction (note 11) ........................... 1,514 1,495,482 (372,581) ----------- ----------- ----------- 1,404 1,386,433 (726,519) Income (loss) before income taxes ............................. 66 65,370 (3,272,380) Provision for income taxes .................................... (214) (211,251) 4,674 ----------- ----------- ----------- Net loss ....................................... (148) (145,881) (3,267,705) Accumulated deficit at begining of period ..................................................... (6,386) (6,307,044) (5,496,237) Effect of revaluing to constant pesos ......................... (716) (707,293) 2,456,899 ----------- ----------- ----------- Accumulated deficit at end of period ........................................... US $ (7,250) Ps (7,160,218) (6,307,044) =========== =========== ===========
See accompanying notes to consolidated financial statements. 9
GREENSTONE RESOURCES LTD. OF COLOMBIA Consolidated Statements of changes in financial position Years ended December 31, 1995, and 1994 1995 1995 1994 ---- ---- ---- Thousands of Thousands of constant U.S. dollars Colombian pesos (convenience translation) Uses of working capital: Net Loss .................................................... US $ 148 Ps 145,882 3,267,705 Items that do not us working capital: Depreciation, amortization, and depletion ................................................. (681) (672,408) (1,050,486) Loss in sale of property, plant and equipment ............................................. 110 108,619 (30,706) inventory Provision ........................................ (162) (160,000) (155,157) Inflation adjustments, net ................................. 1,729 1,707,466 (232,022) ----------- ----------- ----------- Working capital used by operations .................................. 1,144 1,129,559 1,799,334 Purchases of property, plant and equipment .................................................. 40 39,152 111,160 Increase in depletable asset ................................ -- -- 1,005,011 Increase in deferred charges ................................ -- -- 186,867 Decrease in long-term debt .................................. -- -- 68,124 Decrease in minority interest ............................... 22 21,667 -- Decrease value added tax payable ............................ -- -- 79,392 Increase in working capital ................................. 222 219,070 451,697 ----------- ----------- ----------- 1,428 1,409,448 3,701,585 =========== =========== =========== Sources of working capital: Decrease other assets ....................................... US $ 5 Ps 5,270 58,871 Proceeds form sales of property, plant and equipment ........................................ 115 113,830 62,410 Increase long-term debt ..................................... 53 51,980 -- Increase in minority interest ............................... -- -- 429,104 Increase in due to related parties .......................... 1,254 1,238,368 3,151,200 ----------- ----------- ----------- 1,427 1,409,448 3,701,585 =========== =========== =========== Changes in components of working capital: Increase(decrease) in current assets: Cash and cash equivalents ................................. (16) Ps (15,966) 169,612 Accounts receivable ....................................... 330 325,434 (42,895) Due from related parties .................................. -- -- (101,716) Inventories ............................................... (53) (52,475) (28,310) Prepaid expenses .......................................... 4 3,986 (52,706) ----------- ----------- ----------- 265 260,979 (56,014) Increase (decrease) in current liabilities: Notes payable to banks ...................................... (6) (5,540) (670,449) Currents installments of long-term debt ............................................. (477) (471,230) 634,030 Accounts payable and accrued expenses ........................................... 525 518,679 (242,485) Income Tax .................................................. -- -- (228,808) ----------- ----------- ----------- 42 41,909 (507,711) ----------- ----------- ----------- US $ 223 219,070 451,697 =========== =========== ===========
See accompanying notes to consolidated financial statements 10
GREENSTONE RESOURCES LTD. OF COLOMBIA Consolidated Statements of cash flows Years ended December 31, 1995, and 1994 1995 1995 1994 ---- ---- ---- Thousands of Thousands of constant U.S. dollars Colombian pesos (convenience translation) Cash flows form operating activities: Net loss ........................................................... US $ (148) Ps (145,882) (3,267,705) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation, amoritization, and depletion ...................................................... 681 672,408 1,050,486 Inventory provision ............................................. 162 160,000 155,157 Net monetary inflation adjustment ............................... (1,729) (1,707,466) 232,021 Changes in operational assets and liabilities: Accounts receivable ................................................ (330) (325,434) 42,896 Due from related Companies ......................................... 1,254 1,238,368 -- Inventories ........................................................ 53 52,475 28,310 Prepaid expenses ................................................... (4) (3,986) 52,706 Accounts payable and accrued expenses .............................. (31) (30,789) (94,938) Income tax payable ................................................. -- -- (308,199) Decrease in other assets ........................................... 5 5,270 58,871 ---------- ---------- ---------- Net cash provided by operating activities .................................. US $ (85) Ps (85,036) (2,050,395) ========== ========== ========== Cash flows from investing activities: Increase in depletable assets ...................................... -- -- (1,005,011) Purchases of property, plant and equipment ..................................................... 40 39,152 68,124 Increase in deferred charges ....................................... -- -- (141,865) Procceds from sale of property, plant and equipment ............................................... 115 113,830 62,124 ---------- ---------- ---------- Net cash provided by investing activities .................................. 155 152,982 (897,600) ========== ========== ========== Cash flows from financing activities: Increase (decrease) repayments of notes payable and long term ............................................. (53) (51,980) 68,124 Increase in due to related parties ................................. -- -- 3,049,483 ---------- ---------- ---------- Net cash provided by financing activities .................................. (53) (51,980) 3,117,607 ========== ========== ========== Net increase in cash and cash equivalents .................................. 16 15,966 169,612 Cash and cash equivalents at the beginning of the period ............................................. 186 184,191 17,737 Constant pesos adjustment ............................................ (63) (62,014) (3,158) ---------- ---------- ---------- Cash and cash equivalents at the end of the period ................................................ US $ 140 Ps 138,143 184,191 ========== ========== ========== Supplemental discloure of cash flow information-cash paid: Interest paid ..................................................... 167 164,600 533,237 ---------- ---------- ---------- Tax paid .......................................................... 137 135,488 162,752 ---------- ---------- ----------
See accompanying notes to consolidated financial statements. 11 GREENSTONE RESOURCES LTD. OF COLOMBIA Notes to consolidated financial statements December 31, 1995 (Expressed in thousamd of constant Colombian pesos) (1) Operations and summary of significant accounting principles: ------------------------------------------------------------ Reporting entity - ---------------- Greenstone Resources Ltd. of Colombia is a branch of Greenstone Resources Canada Ltd., a Canadian corporation, legally incorporated in the city of Santafe de Bogota in Colombia on September 11, 1987. On October 20, 1995, Fischer-Watt Gold Company, Inc. acquired from subsidiaries of Greenstone Resources Ltd. the branch Greenstone Resources Ltd. of Colombia Its main objective is to perform activities in connection with the exploration, extraction, exploitation and sale of minerals. The Branch produces concentrates with contents of gold and silver minerals, which or are totally exported to Nippon Mining Co. Ltd., based on a contract entered into with this entity on June 25, 1990. Operations - ---------- In November 1990 the Branch finished the installation of its plant and initiated its operating activities during December 1990. The Branch has suffered recurring losses from operations, which exceeds 50% of the assigned capital, and has an accumulative deficit at December 31, 1995. In order to solve these matters, the home office has confirmed its support increasing the working capital with the purpose of permitting to the Branch to recover its capital deficiency and the payment of unpaid balances with financial entities, suppliers and tax. Convenience translation (unaudited) - ----------------------------------- For the convenience of the reader, the financial statements of the Branch contain translations of certain Colombian peso amounts into US dollars at the December 31, 1995 exchange rate of 986.75 pesos per US$ dollar, the rate reported by the Superintendency of Banks. No representation is made that the Colombian peso amounts have been, could have been, or could be converted into US dollars at such a rate or any other rates. Significant accounting principles - ---------------------------------- The accompanying financial statements are prepared in accordance with generally accepted accounting principles in Colombia: (a) Basis of consolidation ---------------------- 12 The consolidated financial statements include the financial statements of Greenstone Resources Ltd. of Colombia and its 94.92% owned subsidiary, Compania Minera Oronorte S.A. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Inflation accounting -------------------- Consolidated financial statements are adjusted for the effects of inflation on the basis of changes in the official Colombian middle income consumer Price Index ("CPI") established by the National Administrative Statistics Department. This index is applied, on a one- month lagging basis, to non-monetary assets and liabilities, Branch's equity and revenue and expense accounts. Monetary balances are not adjusted because they reflect purchasing power of the currency at the balance sheet date. Foreign currency balances are not adjusted since they are translated into Colombian pesos at the date of the balance sheet and consequently reflect the purchasing power of the currency on that date. The resulting net gain or loss from exposure to inflation is reflected as "Net Monetary Correction" in the statement of operations. Accordingly, the "Net Monetary Correction" reflected in the statements of operations of the Branch is the result of netting or offsetting the following items: . a credit for inflation affecting non-monetary assets; . a charge for inflation affecting non-monetary liabilities and Branch's equity; and . charges and credits representing inflation adjustments made to revenue and expense items, respectively. Such adjustments are included in the individual expense and income captions in the statements of operations. Since monetary inflation adjustments are offset in the Net Monetary Correction account in the statements of operations, the net effect on net income or loss from the expense and income inflation adjustments is zero. Therefore, the only impact on the statements of operations of the effects of inflation is attributable to the restatement of non-monetary assets,liabilities and branch equity accounts. Unless expressly stated otherwise, the financial information included in the accompanying financial statements and notes thereto for all periods presented has been restated into constant Colombian pesos as of December 31, 1995 in order to express all financial information in purchasing power as of that date. The rate of inflation and the CPI factor applied to the Branch's nominal financial statements data for each period is as follows: Rate of inflation CPI constant for the fiscal period peso factor --------------------- ----------- Year ended December 31, 1994 1,1952 Year ended December 31, 1995 19,52% 1,0000 13 (c) Cash and cash equivalents ------------------------- Short-term investments with original maturities of three months or less are considered cash equivalents for the purposes of the cash flow statements due to their high liquidity. (d) Inventories ----------- Ore, concentrate and broken ore inventory are valued at de lower of average production cost or net realizable value. Material and supplies are valued at the lower of average cost or replacement value. (e) Depletable assets ----------------- The Branch records its interest in mineral projects and areas of geological interest at cost less expenses recoveried and receipts from exploration agreements. Exploration costs, and development costs, are deferred until the project to which the related expense is placed in production or abandoned. Deferred costs are amortized over the economic life of the project following commencement of production, by reference to the ratio of units produced to total estimated production (proven and probable reserves), or written off if the mineral properties or projects are sold or abandoned. (f) Property, plant and equipment ----------------------------- Property, plant and equipment are recorded at cost, adjusted for inflation after January 1, 1992. Depreciation of property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets, as follows: Years ----- Buildings 20 Office equipment 10 Computers and communication equipment 5 Vehicles 5 (g) Lease payments -------------- Lease payments are recorded as expense. The total liability under lease contracts is recorded in memorandum accounts. The leased asset is only booked when the purchase option is exercised. (h) Deferred charges ---------------- Deferred charges consist of incorporation costs and expenses during the period of settlement and pre-operations adjusted for inflation. 14 The total amount is amortized over a period not exceeding five years from the start of the production stage that was in December 1990. (i) Minority interest ----------------- Minority interest includes minority ownership in Compania Minera Oronorte S. A. (j) Labor liabilities ----------------- Labor liabilities are adjusted on the basis of legal regulations. (k) Income tax ---------- Income tax is determined on the basis of estimates. The provision for income tax which is charged to the statement of loss includes a minimum tax on imputed income of 5% of the equity taxable at rate of 30%. (l) Revenue recognition ------------------- Revenue is recognized when tittle passes to the purchaser. Subsequent adjustments based on final weights and assays are recorded when determined. (m) Use of estimates ---------------- The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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. (n) Foreing currency transactions ----------------------------- Foreing currency transactions are accounted for at the average market exchange rate in effect on the date of each transaction. Balances receivable or payable at the end of the period are adjusted to such exchange rate in effect on those dates as published by the Superintendency of Banking. (2) Accounts receivable ------------------- The following is a summary of accounts receivable as of December 31: 1995 1994 ---- ---- Trade Ps 308,868 413,922 Income tax 367,352 56,428 Interest -- 3,708 Other 58,020 14,547 ------- ------- Ps 734,240 488,605 ======= ======= 15 (3) Operations with related parties -------------------------------- The following is a summary of the balances with related parties as of December 31 : 1995 1994 ---- ---- Greenstone Resources Canada Ps 3,218,962 3,259,172 Fischer Watt Gold 746,289 -- --------- --------- Ps 3,965,251 3,259,172 ========= ========= (4) Inventories ----------- Inventories consist of the following: 1995 1994 Finished products and products in process Ps 338,209 203,929 Supplies, material and spare parts 360,540 374,807 Material and spare parts in transit 7,430 586 ------- ------- Ps 706,179 579,322 Less - Allowance 160,000 -- ------- ------- 546,179 579,322 ======= ======= (5) Depletable assets ----------------- Depletable assets consist of the following: 1995 1994 ---- ---- Capitalized exploration and development cost Ps 4,896,891 4,741,269 Less accumulated depletion 3,255,468 2,462,753 --------- --------- Ps 1,641,423 2,278,516 ========= ========= Depletion expense was Ps 28,424 and Ps 307,256 for the year ended December 31, 1995 and year ended December 31, 1994, respectively. (6) Property, plant and equipment ----------------------------- Property, plant and equipment consist of the following: 1995 1994 ---- ---- Land Ps 35,988 35,973 Buildings 1,160,263 1,250,639 Machinery and equipment 3,551,572 3,517,340 Furniture and fixtures 175,535 169,483 Transportation equipment 53,987 52,305 16 Machinery in transit 42,696 -- --------- --------- 5,020,041 5,025,740 Less accumulated depreciation 3,060,902 2,513,918 --------- --------- Ps 1,959,139 2,511,822 ========= ========= Depreciation expense was Ps 700.832 and Ps 624,764 for the year ended December 31, 1995 and year ended December 31, 1994, respectivyle. (7) Long - term debt ---------------- Long - term debt consists of the following: 1995 1994 ---- ---- Loans payable to banks and corporations in Colombian pesos, interest rate between 26% and 39%, maturing in 1996 Ps 59,250 634,030 Loan payable to bank in Colombian pesos with interest of 36.31%, collateralized by certain equipment. -- 62,126 ------- -------- 59,250 696,156 Less current installments 59,250 634,030 ------- ------- Long-term debt , excluding current installments Ps -- 62,126 ======= ======= (8) Accounts payable and accrued expenses ------------------------------------- Accounts payable and accrued expenses consist of the following: 1995 1994 ---- ---- Suppliers Ps 326,753 95,794 Interest -- 8,504 Professional fees 12,139 37,082 Technical services 13,275 10,317 Insurance 36,518 10,415 Labor liabilities 35,282 20,486 Withholding taxes 97,766 -- Royalties 41,709 -- Other 335,934 272,411 ------- ------ Ps 899,376 455,009 ======= ======= 17 (9) Assigned capital ---------------- In accordance with current regulations, the Branch will be required to maintain a legal reserve, setting aside a minimum of 10% of net income each year until the reserve reaches 50% of the subscribed capital. Amounts appropriated to legal reserve cannot be reduced below 50% of the subscribed capital unless they are applied to cover losses in excess of retained earnings. In accordance with exchange control provisions in effect, there is no limit on dividend remittances abroad. Article 133 of the law 6 of 1992 established a rate of 8% withholding at source on remittance of dividends or equity earned by companies or other foreign entities without a domicile in the country. This rate was effective through 1995, decreased to 7% for 1996 and thereafter. (10) Commitments and contingencies ----------------------------- The Branch has signed financial leasing agreements with purchase options for the acquisition of drilling equipment. with maturities up to the year 1998. The minimum leasing payments as of December 31, 1995 are as follows: 1996 Ps 186,012 1997 172,796 1998 26,679 ------- Ps 385,487 The Branch is subject to various legal proceedings, claims and liabilities which arise in the ordinary course of its business amounting to Ps 45,000 approximately for labor claims. In the opinion of management, the amount of the ultimate liability with respect to these actions will not have a material adverse effect on the Branch's results of operations, cash flow or financial position. The tax return for the taxable years 1993, 1994 and 1995, and the exchange declarations for exchange currency corresponding to the years 1995, 1994, 1993 and part of the year 1992, are subject to inspection by the tax authorities. (11) Monetary Correction ------------------- The effect of inflation on the affected accounts in the financial statements during the years ended December 31, follows: 1995 1994 Balance sheets: Inventories Ps 113,947 130,490 Property, plant and equipment,net 523,520 321,096 Deferred charges and depletable assets, net 577,667 247,680 Revaluation of branch's equity (7,840) (1,023,497) --------- --------- 1,207,294 (324,231) Operations: Revenues (109,528) (511,742) Cost and expenses 397,716 463,392 --------- --------- Income (expense), net Ps 1,495,482 (372,581) ========= ========= 18 (12) Summary of the Significant Differences between Colombian and ------------------------------------------------------------ United States Accounting Principles - ----------------------------------- The Branch's financial statements are prepared in accordance with Colombian generally accepted accounting principles (Colombian GAAP), which differ in certain significant respects from accounting principles generally accepted in the United States (US GAAP) as described below. The effects of price - level adjustments have not been eliminated in the reconciliation to US GAAP not has the Branch reflected monetary gains or losses associated with the various US GAAP adjustments. All material differences between Colombian GAAP and US GAAP and the effect on net loss and total Branch's equity are presented below. The explanation of the adjustments is described after the effect on the branch's equity. (a) Reconciliation of net loss -------------------------- 1995 1994 ---- ---- Net loss reported under Colombian GAAP Ps 145,882 2,734,024 US GAAP adjustments for: (a) Deferred charges -- (388,384) (b) Lease properties (158,080) (35,623) (c) Depletable assets (231,076) 53,565 (d) Deferred taxes (255,106) -- Less provision 255,106 -- -------- --------- Net (income) loss under US GAAP Ps (243,275) 2,363,582 ======== ========= (b) Reconciliation of Branch's equity --------------------------------- 1995 1994 ---- ---- Branch's equity reported under Colombian GAAP Ps (231,301) 1,013,089 US GAAP adjustments for: (a) Inflation adjustments 33,201 184,935 (b) Deferred charges -- -- (c) Lease properties 196,041 37,961 (d) Depletable assets 663,371 432,295 -------- --------- Branch's equity under US GAAP Ps 661,312 1,668,280 ======== ========= 19 (c) Analysis of changes in Branch's equity -------------------------------------- 1995 1994 ---- ---- Balance at beginning of period Ps 1,668,280 4,218,258 Effects of constant peso restatement (1,250,243) (186,396) Net income (loss) 243,275 (2,363,582) ---------- --------- Balance at end of period Ps 661,312 1,668,280 ========== ========= (a) Inflation adjustments --------------------- In accordance with Colombian GAAP, accounting for the effects of inflation has been required and regulated by Colombian law since January 1, 1992. The balances of non monetary assets as well as the balances of equity and statement of income accounts, must be adjusted in accordance with changes in the country's general consumer price index. Financial statements are adjusted for inflation under US GAAP when an entity operates in a hyperinflationary environment. The US GAAP adjustment required represents providing the cumulative inflation adjustment on the entity's non monetary assets for inflation occurring prior to January 1, 1992. (b) Deferred Charges ---------------- The Branch has capitalized certain costs as deferred charges. Under US GAAP such costs would be expensed as incurred. (c) Capital Leases -------------- Under Colombian GAAP, lease payments are recorded as expense. The total liability under lease contracts is recorded in memorandum accounts. The leased asset is only recorded when the purchase option is exercised. Under US GAAP, the cost of equipment under capital leases is recorded as an asset and a liability is recorded for the present value of minimum lease payments at the inception of the lease. This equipment is depreciated over the estimated useful life of the asset. (d) Depletion --------- Under Colombian GAAP, depletion of depletable assets is determinated by reference to the ratio of units produced to total estimated proved reserves production. Under US GAAP, depletion is determinated by reference to the ratio of units produced to total estimated proven and probable reserves production. (e) Deferred Tax ------------ The Branch has not recorded deferred income tax for its recurring losses due to the question of its ability to continue as a going concern. 20 Effect of Constant Peso Restatement - ----------------------------------- To give effect to the change in the constant peso restatement to reflect the changes in beginning and ending Branch's equity. Additional Requirements required by US GAAP - ------------------------------------------- (a) Concentration of Credit Risk ---------------------------- Financial instruments which potentially subject the Branch to concentration of credit risk consist principally of accounts receivable resulting from the single customer. The Branch does not require collateral or other security to support receivables. The balance of receivables as of December 31, 1995 was collected during 1996. (b) Accounting for Impairment of Long-lived Assets and for -------------------------------------------------------Long-lived assets to be Disposed of - ----------------------------------- Effective for fiscal years beginning after December 15, 1995 SFAS No.121 requires that long-lived assets and certain identifiable intangibles held by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Branch after quantifying the impact of SFAS 121, will not required to record an impairment loss, given that their expected future cash flows will cover the carrying amount of their long-lived assets. (c) Fair Value of Financial Instruments ----------------------------------- The carrying amounts of cash and cash equivalents, trade and other receivables and accounts payables approximate fair value because of the short maturity of these instruments. 21
Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated Balance Sheets (unaudited) January 31, 1996 HISTORICAL PRO FORMA --------------------------- --------------------------- FWG GRC ADJUSTMENTS COMBINED (A) CURRENT ASSETS: Cash ....................................................... $ 126,000 $ 140,000 $ $ 266,000 Accounts receivable ........................................ 33,000 743,000 776,000 Due from related parties ................................... 853,000 -- (755,000)(2) 98,000 Inventories ................................................ -- 553,000 52,000(4) 605,000 Other current assets ....................................... 8,000 11,000 19,000 ------------ ----------- ----------- Total current assets ................................ 1,020,000 1,447,000 1,764,000 MINERAL ASSETS ............................................... 1,661,000 1,662,000 (122,000)(1,3) 3,201,000 (4) PROPERTY, PLANT & EQUIPMENT Equipment .................................................. 50,000 2,000,000 (461,000)(1,4) 1,589,000 Less: Accumulated depreciation ............................................... (32,000) (17,000) 17,000 (3,4) (32,000) ------------ ----------- ----------- Property, plant and equipment, net ......................................... 18,000 1,984,000 1,557,000 OTHER ASSETS Investments ................................................ 1,257,000 -- (1,257,000)(2) -- Other ...................................................... 27,000 1,000 23,000 (4) 51,000 ------------ ----------- ----------- Total assets: ....................................... $ 3,983,000 $ 5,093,000 $ 6,573,000 ------------ ----------- ----------- CURRENT LIABILITIES: Accounts payable and accrued expenses ......................................... $ 628,000 $ 911,000 593,000(1,4) $ 2,132,000 Intercompany payables ...................................... -- 4,015,000 (3,715,000)(1,2,4 ) 300,000 Notes payable to others .................................... 125,000 -- 125,000 Notes payable to banks ..................................... -- 60,000 60,000 Income payable ............................................. 96,000 -- 96,000 ------------ ----------- ----------- Total liabilities: .................................. $ 849,000 $ 4,986,000 $ 2,713,000 ------------ ----------- ----------- Minority Interest ............................................ -- 342,000 (342,000)(1,4) -- SHAREHOLDER'S EQUITY (DEFICIT) ........................................... $ 3,134,000 $ (235,000) $ 961,000(1,2) $ 3,860,000 ----------- ----------- (3,4) ---------- Total liabilities and shareholder's equity ....................................... $ 3,983,000 $ 5,093,000 $ 6,573,000 ------------ ----------- -----------
See notes to Pro Forma Condensed Consolidated Financial Statements (unaudited). 22
Fischer-Watt Gold Company, Inc. Pro Forma Condensed Consolidated Statement of Operations (unaudited) January 31, 1996 HISTORICAL PRO FORMA ---------------------------- ------------------------- FWG GRC ADJUSTMENTS COMBINED (A) REVENUES: SALES OF PRECIOUS METALS .............................................. $ -- $ 3,150,000 192,000(4) $3,342,000 COSTS APPLICABLE TO SALES ............................................. -- 3,956,000 (320,000)(2) 3,636,000 (3,4) GAIN ON SALE OF MINERAL INTERESTS ............................................................. 1,528,000 -- 1,528,000 COSTS & EXPENSES: Abandoned and impaired mineral interests ................................................. 267,000 267,000 Selling, general and administrative ................................................ 241,000 532,000 (211,000)(2,4) 562,000 Exploration ......................................................... 3,000 -- 3,000 Other expense (net) .................................................. 74,000 402,000 (163,000)(4) 313,000 ------------ ------------ ---------- INCOME (LOSS)FROM OPERATIONS .......................................... 943,000 (1,740,000) 89,000 ------------ ------------ ---------- OTHER INCOME (EXPENSE): Gain(loss) on sale of trading securities ................................................. 206,000 206,000 Interest expense, net ................................................ (26,000) 1,514,000 (1,561,000)(4) (73,000) Currency exchange gains, net .......................................................... -- 292,000 158,000(2,4) 450,000 ------------ ------------ ---------- NET INCOME (LOSS) BEFORE TAXES ........................................ 1,123,000 66,000 672,000 TAX PROVISION ......................................................... (93,000) (214,000) 149,000 (158,000) ------------ ------------ ---------- NET INCOME (LOSS) ..................................................... $ 1,030,000 $ (148,000) $ 514,000 ------------ ------------ ---------- EARNINGS PER SHARE .................................................... $ .07 -- $ .03 WEIGHTED AVERAGE ...................................................... 14,883,000 -- 14,883,000 SHARES OUTSTANDING
See notes to Pro Forma Condensed Consolidated Financial Statements (unaudited). 23 Fischer-Watt Gold Company, Inc. Notes to Pro-Forma Condensed Consolidated Financial Statements (unaudited) Note A- Pro-Forma Adjustments (1) To reflect the acquistion of GRC and the allocation of the purchase price on the basis of the fair values of the assets acquired and liabilities assumed. The components of the purchase price and its allocation to the assets and liabilities of GRC are as follows:
Components of purchase price: Value of net interests in Minerales de Copan, S.A. de C.V. $ 885,000 Note payable assumed 300,000 Acquistion and organization costs incurred 72,000 --------- Total purchase price $1,257,000 ========= Allocation of purchase price: Reduction in mineral interests $ (546,000) Reduction in equipment (636,000) Increase in contingent reserves (500,000) Reduction in intercompany payables 2,765,000 Reduction in minority interest 552,000 Elimination of shareholder's deficit (378,000) ---------- Allocated Purchase Price $1,257,000 ========= (2) Elimination of intercompany balances: Intercompany payables 755,000 Intercompany receivables (755,000) Common Stock 1,257,000 Investments (1,257,000) Intercompany payables 198,000 Selling, general, and administrative (68,000) Currency exchange gains, net (130,000) (3) Reduction of depletion and depreciation for purchase price allocation adjustment over 14 years: Mineral interests 67,000 Accumulated depreciation 16,000 Costs applicable to sales (83,000) (4) Adjustment to reflect restatement of GRC amounts discovered after purchase: Balance Sheet: Inventories $ 52,000 Mineral interests 357,000 Equipment 175,000 Accumulated depreciation 1,000 Other assets 23,000 Accounts payable (93,000) 24 Intercompany payables (3,000) Minority interest (210,000) Shareholder's equity (951,000) Statement of Operations: Sales of precious metals (192,000) Costs applicable to sales (169,000) Selling, general, and administrative (211,000) Other expense (163,000) Interest expense, net 1,561,000 Currency exchange gains, net (28,000) Tax provision (149,000)
Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Fischer-Watt Gold Company, Inc. /s/ Michele D. Wood --------------------------------------- Dated May 27, 1997 Michele D. Wood, Chief Financial Officer 25 -----END PRIVACY-ENHANCED MESSAGE-----