U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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 0-25455
INTERGOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0365453
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5000 Birch Street, West Tower, Suite 4000
Newport Beach, California 92660
(Address of Principal Executive Offices)
(949) 476-3611
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of August 7, 2000
Common Stock, $.00025 par value 81,000,000
Transitional Small Business Disclosure Format (check one)
Yes No X
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of Intergold Corporation (the "Company")
reflect all adjustments which are, in the opinion of management, necessary to
present a fair statement of the operating results for the interim period
presented.
INTERGOLD CORPORATION
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
TABLE OF CONTENTS
Page
----
Table of Contents 1
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5-9
1
INTERGOLD CORPORATION
(An Exploration Stage Company)
Interim Consolidated Balance Sheet
(Unaudited)
June 30,
2000
------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 31,124
PROPERTY PLANT AND EQUIPMENT
Equipment (net of accumulated depreciation) 3,258
------------
Total Assets $ 34,382
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 253,495
Advances payable (Note 3) 450,770
Directors fees payable 43,000
Notes payable 551,890
Accrued Series A warrant redemption payable 60,000
Accrued interest payable 216,247
------------
Total Liabilities 1,575,402
------------
STOCKHOLDERS' EQUITY (Note 4)
Common stock $.00025 par value;
authorized at June 30, 2000
125,000,000 shares; 81,000,000 shares
issued and outstanding at June 30, 2000 20,249
Preferred stock, $.001 par value;
authorized at June 30, 2000
75,000,000 shares; issued and outstanding
at June 30, 2000
Series A- 6,300,000 shares 6,300
Series B - 2,510,000 shares 2,510
Upon Liquidation, Series A shares have a
$.25 per share preference
over other preferred or common stock,
Series B shares have a $.50 preference
over common stock
Additional Paid - in capital 8,657,086
Accumulated deficit through exploration stage (10,227,165)
------------
Total Stockholders' Equity (Deficit) (1,541,020)
------------
Total Liabilities and Stockholders' Equity $ 34,382
============
See accompanying notes to interim consolidated financial statements.
2
INTERGOLD CORPORATION
(An Exploration Stage Company)
Interim Consolidated Statements of Operations
(Unaudited)
Inception
For the 3 Months Ended For the 6 Months Ended (July 26,
Jun. 30, Jun. 30, 1996) to
----------------------------- ---------------------------- June 30,
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
REVENUE
Other income $ -- $ -- $ -- $ -- $ 1,699
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Property Exploration Expenses 22,114 593,010 37,353 3,723,517 6,044,239
------------ ------------ ------------ ------------ ------------
General and Administrative Expenses 425,742 412,167 732,398 791,339 4,093,062
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 447,856 1,005,177 769,751 4,514,856 10,137,301
------------ ------------ ------------ ------------ ------------
Operating Loss (447,856) (1,005,177) (769,751) (4,514,856) (10,135,602)
OTHER INCOME (EXPENSE)
Sale of profit sharing interest -- -- -- -- 170,000
Realized loss on sale of available
for sale investment -- -- (20,000) -- (20,000)
Interest expense (14,886) (11,074) (43,107) (18,270) (241,563)
------------ ------------ ------------ ------------ ------------
Net Loss $ (462,742) $ (1,016,251) $ (832,858) $ (4,533,126) $(10,227,165)
============ ============ ============ ============ ============
Loss per Share $ (0.006) $ (0.019) $ (0.013) $ (0.090) $ (0.256)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 79,846,154 52,302,549 65,269,753 50,475,315 40,013,920
============ ============ ============ ============ ============
See accompanying notes to interim consolidated financial statements.
3
INTERGOLD CORPORATION
(An Exploration Stage Company)
Interim Consolidated Statements of Cash Flows
(Unaudited)
Inception
(July 26,
For the 3 Months Ended For the 6 Months Ended 1996) to
Jun. 30, Jun. 30, June 30,
2000 1999 2000 1999 2000
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (462,742) $ (1,016,251) $ (832,858) $ (4,533,126) $(10,227,165)
Adjustments to reconcile net (loss) to cash
Depreciation and Amortization (148) (148) (296) 296 (1,042)
Non-Cash Realized loss on sale
of AFS investment -- -- 20,000 -- 20,000
Non-Cash R&D -- -- -- -- 2,360,000
Organization costs -- -- -- 1,771 --
Changes in Working Capital Assets
and Liabilities
Prepaid expenses -- -- 5,000 -- --
Accounts payable (129,338) 76,829 (113,605) 35,229 253,495
Accrued interest payable 14,886 11,075 43,107 18,271 241,563
Director fees payable (8,500) 6,000 (2,500) 12,000 43,000
------------ ------------ ------------ ------------ ------------
Net Cash Flows Used by
Operating Activities (585,842) (922,495) (881,152) (4,465,559) (7,310,149)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Equipment purchases -- -- -- -- (4,300)
------------ ------------ ------------ ------------ ------------
Net Cash Flows Used for Investing Activities -- -- -- -- (4,300)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 750 100 750 1,108 12,986
Sale of preferred stock Series A -- -- -- -- 10,000
Sale of preferred stock Series B -- 1,760 -- 2,510 2,510
Additional paid-in capital 749,250 978,140 749,250 3,726,382 5,449,265
Net advances received (repaid) (152,977) (67,600) 160,807 (6,104) 1,070,812
Convertible debenture -- -- -- -- 250,000
Note payable advances -- -- -- 500,000 550,000
------------ ------------ ------------ ------------ ------------
Net Cash Flows Provided by
Financing Activities 597,023 912,400 910,807 4,223,896 7,345,573
------------ ------------ ------------ ------------ ------------
Net increase in cash 11,181 (9,799) 29,655 (241,663) 31,124
Cash and cash equivalents - Beginning of period 19,943 16,986 1,469 248,850 --
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents - End of period $ 31,124 $ 7,187 $ 31,124 $ 7,187 $ 31,124
============ ============ ============ ============ ============
During 1998, the Company accrued $135,722 of interest on outstanding notes and
advances payable.
During 1999, the Company accrued $62,729 of interest on outstanding notes and
advances payable.
During 2000, the Company accrued $43,107 of interest on outstanding notes and
advances payable.
Since inception the Company has not capitalized any interest.
On Feb. 11, 2000, the Company exchanged its Available for Sale investments for
debt outstanding to a creditor for $150,000.
On March 20, 2000, a shareholder converted 1,000,000 Series A preferred shares
for 1,000,000 common shares.
On March 20, 2000, the Company issued 326,100 common shares as a dividends
pursuant to the conversion of the 1,000,000 Series A preferred shares. The
dividend was valued at $81,525.
On March 31, 2000, the Company issued 20,345,900 common shares in exchange for
advances received and accrued interest owed to creditors in the amount of
$610,378.
See accompanying notes to interim consolidated financial statements.
4
INTERGOLD CORPORATION
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
To date, the Company has not generated significant revenues from
operations and has a working capital deficit of $1,544,278 and a
stockholders' deficit of $1,541,020. The Company's continuance of
operations and movement into an operating basis are contingent on
raising additional working capital and on the development of the
Company's lode mining claims. Advances from certain significant
shareholders will form the primary source of short term funding for
the Company during the next twelve months.
During the first quarter of 2000, the Company ceased exploration of
the Blackhawk claims located in the State of Idaho, pending the
outcome of the Company's ongoing litigation with regard to the
transfer of technology pursuant to the Sub-license Agreement between
the Company and Geneva Resources, Inc. and the Company's Agreement for
Services with Auric Metallurgical Laboratories, LLC. The technology to
be transferred under the Sub-license Agreement may be delayed
indefinitely, or cancelled all together, depending on the outcome of
the Intergold/Geneva litigation. As the alleged assay and
metallurgical recovery technology developed by Auric is deemed
essential to the further development of the Blackhawk claims, and
since further consulting conducted by independent consultants to the
Company indicate that gold is not present in economic quantities on
the claims, business operations are expected to be minimal pending the
outcome of the litigation in process.
The accompanying unaudited interim financial statements have been
prepared in accordance with the rules and disclosure requirements of
Regulation S-B and Form 10-QSB. They do not necessarily include all
information and footnotes required by generally accepted accounting
principles applicable to the Company's annual audited financial
statements. However, except as disclosed herein, there has been no
material change in accounting principles used or the information
disclosed in the notes to the financial statements for the year ended
December 31, 1999 included in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission. The interim
unaudited financial statements should be read in conjunction with
those financial statements included in the Form 10-KSB. In the opinion
of Management, all adjustments considered necessary for a fair
presentation have been made. Operating results for the six months
ended June 30, 2000 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2000.
5
INTERGOLD CORPORATION
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, International Gold
Corporation, incorporated in Nevada.
Loss Per Share
--------------
As of June 30, 2000, there were 3,450,000 exercisable options,
8,810,000 shares of convertible preferred stock and 2,510,000 common
stock warrants that can be converted into 14,770,000 shares of common
stock. As these options, convertible preferred stock and warrants
would have an antidilutive effect on the presentation of loss per
share, a diluted loss per share calculation is not presented.
Use of Estimates
----------------
The preparation of 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 period. Actual results could differ from those
estimates.
Financial Instruments
---------------------
The fair value of the Company's current assets and current liabilities
were estimated to approximate their carrying values due to the
immediate or short-term maturity of these financial instruments.
NOTE 3: ADVANCES PAYABLE
Advances are comprised of the following:
Sonanini Holdings Ltd. $ 442,770
Tristar Financial Services Ltd. 8,000
---------
$ 450,770
=========
The advances bear 10% simple interest and are due on demand. There is
$216,243 of interest accrued on the advances as of June 30, 2000.
Advances decreased from $603,747 at March 31, 2000 to $450,770 at June
30, 2000 pursuant to debt settlements by issuance of common stock.
6
INTERGOLD CORPORATION
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 4: STOCKHOLDERS' EQUITY
Common Stock
-----------
On February 16, 2000, the Company settled advances and associated
accrued interest totalling $488,478 at $.03 per share, which
represents a 35% discount on the value of the common stock as of
February 16, 2000, for a total of 16,282,600 shares. The Company
settled advances and associated accrued interest of the Company's
wholly owned subsidiary, International Gold Corporation totalling
$121,899 at $.03 per share, which represents a 35% discount on the
value of the common stock as of February 16, 2000, for a total of
4,063,300 shares.
On March 20, 2000, the Company shareholders converted 1,000,000 Series
A preferred shares into 1,000,000 shares of the Company's common
stock. On March 20, 2000, an additional 326,100 shares of the common
stock were issued with regard to deemed dividends issued upon
conversion of the 1,000,000 Series A preferred shares into 1,000,000
common shares.
On May 5, 2000, 3,000,000 common shares were issued from the exercise
of 3,000,000 Series A warrants for a total of $750,000.
Preferred Stock
---------------
Series A
--------
On October 27, 1999, the Company issued a notice of redemption on all
remaining outstanding Series A Preferred warrants. The Company has
redeemed the warrants at $.01 per warrant and has recorded a $60,000
redemption liability for the 6,000,000 warrants that were outstanding.
During the first quarter of 2000, 1,000,000 of the Series A Preferred
shares were converted into the Company's common stock. The Company
also issued an additional 326,100 common shares at $.25 per share
representing the accumulated dividend of $81,525 on the 1,000,000
converted Series A Preferred Shares. If the Company's Series A
Preferred shareholders elect to convert the remaining outstanding
Series A Preferred stock, an additional 6,300,000 shares of common
stock would be issued, plus accrued 20% cumulative undeclared
dividends totalling $625,675 at June 30, 2000.
Series B
--------
As of June 30, 2000, the Company has $309,700 of undeclared dividends
on the Series B Preferred shares. If the Company's Series B Preferred
shareholders elect to convert the remaining outstanding Series B
Preferred stock, an additional 3,129,400 shares of common stock would
be issued, which represents 2,510,000 shares for the remaining
preferred stock and 619,400 shares for the undeclared dividends.
7
INTERGOLD CORPORATION
(An Exploration Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2000
(Unaudited)
- --------------------------------------------------------------------------------
NOTE 5: EMPLOYEE STOCK OPTION PLAN
Selected information regarding the Company's employee stock options as
of June 30, 2000 are as follows:
June 30, 2000
---------------------------
Weighted
Number Average
of Exercise
Options Price
---------------------------
Outstanding at Beg. of Period 3,450,000 $.71/share
Outstanding at End of Period 3,450,000 $.71/share
Exercisable at End of Period 3,450,000 $.71/share
Options Granted 3,450,000 $.71/share
Options Exercised -0- -0-
Options Forfeited -0- -0-
Options Expired -0- -0-
As of June 30, 2000, outstanding options have exercise prices ranging
from $.50 to $1.00 per share. The weighted average exercise price of
all options outstanding is $.71 per share of common stock and the
weighted average remaining contractual life is 16 years 187 days.
There are 3,450,000 options that are exercisable with a weighted
average exercise price of $.71 per share of common stock.
NOTE 6:LEGAL PROCEEDINGS
International Gold Corporation, in conjunction with Geneva Resources,
Inc., is continuing with legal claims against Dames & Moore and Auric
Metallurgical Laboratories, LLC, and other individuals named. The
Company has proceeded through initial deposition and document
discovery stages. See Company press release dated July 20, 2000.
NOTE 7:RELATED PARTY TRANSACTIONS
During the six month period ended June 30, 2000 net cash advances of
$160,807 were received from related companies and/or persons, interest
of $33,857 was accrued on advances outstanding, an advance was
partially settled in the amount of $150,000 by the disposal of an
investment held by the Company, and 20,112,600 shares were issued to
settle partial amounts of outstanding advances in the amount of
$603,378 including interest of $25,311.
During the six month period ended June 30, 2000 a director of the
Company was paid $30,000 for management fees.
During the six month period ended June 30, 2000 a total of $500,387
was paid to two private companies associated with certain directors
for management and administration services provided to the Company and
its subsidiary.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
To date, there has been no income realized from the business operations of
the Company. During fiscal year ended December 31, 1999 and the six-month period
ended June 30, 2000, the Company's primary source of financing has been from
cash advances provided to the Company and the conversion of Series A Warrants
into shares of the Company's restricted Common Stock at the redemption price of
$0.25 per Series A Warrant.
Pursuant to a letter from the Company which provided notice to the holders
of Series A Preferred Shares that the Company intended to redeem in whole the
outstanding Series A Warrants, as of March 31, 2000, 1,000,000 Series A Warrants
had been converted into 1,000,000 shares of the Company's restricted Common
Stock for an aggregate consideration of $250,000.00. On May 1, 2000, the Company
issued a warrant to a Series A Preferred shareholder who did not timely convert
its Series A Warrants in exchange for the settlement and discharge of the
redemption liability of $30,000 owed by the Company to the Series A Preferred
shareholder. On May 1, 2000, the Series A Preferred shareholder converted such
warrant into 3,000,000 shares of the Company's restricted Common Stock at the
conversion price of $0.25 per share for an aggregate consideration of $750,000.
As of June 30, 2000, an aggregate of 4,000,000 Series A Warrants had been
converted into 4,000,000 shares of the Company's restricted Common Stock for an
aggregate consideration of $1,000,000. As of June 30, 2000, 6,000,000 Series A
Warrants remained outstanding, which the Company will redeem at $0.01 per Series
A Warrant and has booked as a redemption liability for $60,000. See " -
Liquidity and Capital Resources."
Each Series A Preferred share is also convertible into one share of Common
Stock of the Company and all then accrued and unpaid dividends are convertible
into Common Stock at the conversion price of $0.25 per share. As of March 31,
2000, the holders of Series A Preferred shares had converted an aggregate of
3,700,000 Series A Preferred shares into 3,700,000 shares of the Company's
Common Stock, and an additional 902,100 shares of Common Stock were issued by
the Company as a dividend pursuant to such conversion. As of June 30, 2000, no
other Series A Preferred shareholder had converted any Series A Preferred shares
into shares of the Company's Common Stock, thus no additional shares of Common
Stock were issued as a dividend.
RESULTS OF OPERATION
Six-Month Period Ended June 30, 2000 Compared to Six-Month Period Ended June 30,
1999
For the six-month period ended June 30, 2000, the Company recorded a net
loss of $914,383 compared to a net loss of $4,533,126 in the corresponding
period of 1999. During the six-month period ended June 30, 2000 and June 30,
1999, the Company recorded no income.
During the six-month period ended June 30, 2000, the Company recorded
operating expenses of $769,751 compared to $4,514,856 of operating expenses
recorded in the same period for 1999. Property exploration expenses decreased by
approximately $3,686,164 during the six-month period ended June 30, 2000 as
compared to the six-month period ended June 30, 1999. This decrease in property
exploration expenses resulted from suspension of any further exploration of the
Blackhawk Property and the cessation of work orders for research, development
and metallurgical services compared to the significant property exploration
expenses incurred in the same period for 1999 relating to amounts paid by the
Company for research, development and metallurgical services performed
associated with contractual agreements between the Company and AuRIC
Metallurgical Laboratories LLC ("AuRIC") and Geneva Resources, Inc. ("Geneva"),
respectively.
9
Administrative expenses decreased approximately $58,941 during the
six-month period ended June 30, 2000 as compared to the six-month period ended
June 30, 1999. This decrease in administrative expenses was due primarily to a
decrease in overhead and administrative expenses resulting from the decreasing
scale and scope of overall corporate activity pertaining to exploration and
administration of the Blackhawk Property.
As discussed above, the decrease in net loss during the six-month period
ended June 30, 2000 as compared to the six-month period ended June 30, 1999 is
attributable primarily to the substantial decrease in property exploration
expenses. The Company's net earnings (losses) during the six-month period ended
June 30, 2000 were approximately ($914,383) or ($0.013) per share compared to a
net loss of approximately ($4,533,126) or ($0.090) per share during the
six-month period ended June 30, 1999. The weighted average number of diluted
shares outstanding were 65,269,753 for the six-month period ended June 30, 2000
compared to 50,475,315 for the six-month period ended June 30, 1999.
Three-Month Period Ended June 30, 2000 Compared to Three-Month Period Ended June
30, 1999
For the three-month period ended June 30, 2000, the Company recorded a net
loss of $462,742 compared to a net loss of $1,016,251 in the corresponding
period of 1999. During the three-month period ended June 30, 2000 and June 30,
1999, the Company recorded no income.
During the three-month period ended June 30, 2000, the Company recorded
operating expenses of $447,856 compared to $1,005,177 of operating expenses
recorded in the same period for 1999. Property exploration expenses decreased by
approximately $570,896 during the three-month period ended June 30, 2000 as
compared to the three-month period ended June 30, 1999. Administrative expenses
increased approximately $13,575 during the three-month period ended June 30,
2000 as compared to the three-month period ended June 30, 1999. This increase in
administrative expenses was due primarily to costs associated with the ongoing
litigation involving the Company. Interest expense increased by $3,812 during
the three-month period ended June 30, 2000 as compared to the three-month period
ended June 30, 1999.
As discussed above, the decrease in net loss during the three-month period
ended June 30, 2000 as compared to the three-month period ended June 30, 1999 is
attributable primarily to the substantial decrease in property exploration
expenses. The Company's net earnings (losses) during the three-month period
ended June 30, 2000 were approximately ($462,742) or ($0.006) per share compared
to a net loss of approximately ($1,016,251) or ($0.019) during the three-month
period ended June 30, 1999. The weighted average number of diluted shares
outstanding were 79,846,154 for the three-month period ended June 30, 2000
compared to 52,302,549 for the three-month period ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared assuming that it will
continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should the Company be unable to continue in
operation.
10
As of the six-month period ended June 30, 2000, the Company's total assets
were $34,382. This increase from fiscal year ended December 31, 1999 was due
primarily to an increase in cash and cash equivalents. As of the six-month
period ended June 30, 2000, the Company's total liabilities were $1,605,402.
This decrease from fiscal year ended December 31, 1999 was due primarily to (i)
settlement of advances and accrued interest due and owing by the Company in the
amount of $488,478 by issuance of 16,282,600 shares of the Company's restricted
Common Stock, and (ii) settlement of advances and accrued interest due and owing
by the Company's wholly-owned subsidiary, International Gold Corporation, in the
amount of $121,899 by issuance of 4,062,300 shares of the Company's restricted
Common Stock. See "Part II. Item 2. Changes in Securities and Use of Proceeds".
Stockholders' Equity (deficit) decreased from ($1,858,278) for the
three-month period ended March 31, 2000 to ($1,571,020) for the six-month period
ended June 30, 2000. Stockholders' Equity (deficit) decreased from ($2,248,539)
for fiscal year ended December 31, 1999 to $(1,571,020) for the six-month period
ended June 30, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 27, 1999, Geneva and INGC, on behalf of the Company, initiated
legal proceedings against AuRIC and Dames & Moore by filing its complaint in the
District Court of the Third Judicial District for Salt Lake City, State of Utah.
INGC and AuRIC entered into an Agreement for Services whereby AuRIC agreed
to perform certain services, including the development of proprietary technology
and know-how relating to fire and chemical assay analysis techniques and
metallurgical ore extraction procedures developed specifically for the Blackhawk
Property (the "Proprietary Technology"). Dames & Moore verified the fire and
chemical assay techniques and procedures developed by AuRIC and their
repeatability. The Company subsequently entered into multiple work orders with
Dames & Moore relating to a variety of services. Gevena and AuRIC entered into a
License Agreement whereby AuRIC agreed to (i) supply the Proprietary Technology
to Geneva, (ii) grant to Geneva a license to use the Proprietary Technology on
claims located adjacent to the Blackhawk Property and the right to sub-license
the Proprietary Technology to the Company for use on the Blackhawk Property. The
Company and Geneva simultaneously entered into the Sub-License Agreement whereby
the Company acquired from Geneva a sub-license to utilize AuRIC's Proprietary
Technology and related precious metals recovery processes on the Blackhawk
Property.
On September 27, 1999, Geneva and INGC, on behalf of the Company, initiated
legal proceedings against AuRIC for: (i) multiple breaches of contract relating
to the Agreement for Services and the License Agreement, respectively,
including, but not limited to, establishment and facilitation of the Proprietary
Technology and fire assay procedures developed by AuRIC at an independent assay
lab and failure to deliver the Proprietary Technology and procedures to the
Company, Geneva and Dames & Moore; (ii) breach of the implied covenant of good
faith and fair dealing; (iii) negligent misrepresentation; (iv) specific
performance, (v) non-disclosure injunction; (vi) failure by AuRIC to repay
advances, and (vii) quantum meruit/unjust enrichment. INGC, on behalf of the
Company, also named Dames & Moore in the legal proceeding in a declaratory
relief cause of action.
On October 8, 1999, Geneva and INGC, on behalf of the Company, amended its
complaint by naming as defendants AuRIC, Dames & Moore, Ahmet Altinay General
Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames & Moore and
specifying damages in excess of $10,000,000. The damages sought by Geneva and
INGC, on behalf of the Company, are based on the general claims and causes of
action set forth in the amended complaint relating to reliance on the assays and
representations made by AuRIC, the actions and engineering reports produced by
Dames & Moore and, specifically, the negligent misrepresentations and
inaccuracies contained within some or all of those Dames & Moore reports and
breaches of contract by AuRIC and Dames & Moore.
11
On June 21, 2000, Geneva and INGC, on behalf of the Company, filed a second
amended complaint in the District Court of the Third Judicial District for Salt
Lake City, State of Utah. The second amended complaint increased detail
regarding the alleged breaches of contract and increased causes of action
against other parties involved by adding two new defendants, MBM Consulting,
Inc. and Dr. Michael B. Merhtens, who provided consulting services to INGC. The
second amended complaint also added certain claims of other entities involved
through Geneva against the defendants. The Proprietary Technology forms the
basis of claims made by Geneva and INGC, on behalf of the Company, in the
complaints as filed with the District Court. Geneva and INGC, on behalf of the
Company, allege that the Proprietary Technology does not exist and that Geneva
and INGC were fraudulently, recklessly and/or negligently deceived by AuRIC,
Dames & Moore, and other parties to the lawsuit.
Geneva and INGC subsequently obtained an order from the District Court
granting its Motion to Compel. The Order requires that AuRIC and Dames & Moore
produce the Proprietary Technology for Geneva's and INGC's restricted use by its
legal counsel and industry experts. Geneva and INGC, on behalf of the Company,
intend to obtain an expert opinion as to the validity or ineffectiveness of the
Proprietary Technology.
As of the date of this Quarterly Report, various depositions have been
taken by various parties to the lawsuit, with more expected in the scheduling
process. Discovery and document production have been conducted by both sides to
the dispute, but not completed. Geneva and INGC, on behalf of the Company,
continue to pursue all such legal actions and review further legal remedies
against AuRIC and Dames & Moore. Management believes that the legal proceedings
will prove that the Proprietary Technology is invalid.
If the Proprietary Technology is proven to be invalid and not transferable,
and INGC/Geneva are not successful in the outcome of the litigation and damages
are not awarded, the Company may not be able to recover its potential losses and
expenses incurred due to the breach of the Sub-License Agreement by Geneva.
However, if the Proprietary Technology is proven to be invalid and not
transferable, and INGC/Geneva are successful in the outcome of the litigation,
INGC/Geneva may then receive damages from AuRIC, Dames & Moore, and other
parties to the lawsuit. Geneva's damages result primarily from its inability to
transfer the Proprietary Technology to the Company in accordance with the
provisions of the Sub-License Agreement.
The Company and Geneva entered into an assignment agreement dated May 9,
2000 (the "Assignment Agreement") that transferred and conveyed to Geneva the
potential claims and causes of action that the Company may have under the
Sub-License Agreement with Geneva. If damages are recovered in the lawsuit
initiated by Geneva and INGC, on behalf of the Company, the Company will receive
a pro rata share of such damages relating to its claims and causes of action in
relation to all other claims and causes of action for which damages are
recovered. Thus, Geneva will receive any such pro rata share of the damages
recovered pursuant to the terms and provisions of the Assignment Agreement.
Management believes that the Company will, under these circumstances, be
entitled to receive a pro-rata portion of the awarded damages for potential
losses incurred due to the breach of the Sub-License Agreement by Geneva.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
o On March 30, 2000, the Company entered into separate settlement
agreements with certain creditors whereby the Company agreed to issue
an aggregate 20,345,900 shares of its restricted Common Stock at the
rate of $0.03 per share to settle an aggregate debt of $610,377.52.
Under the terms of the respective settlement agreements, the creditors
each agreed to accept their proportionate issuance of shares of Common
Stock as payment for the respective debt owed to such creditor. The
Company issued the shares in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933,
as amended (the "Securities Act"). The creditors each represented to
the Company that they acquired the shares for their own respective
account, and not with a view to distribution, and that the Company
made available all material information concerning the Company.
o As of March 31, 2000, 1,000,000 Series A Warrants were converted into
1,000,000 shares of the Company's restricted Common Stock at the
conversion price of $0.25 per share for an aggregate consideration of
$250,000. As of March 31, 2000, the holders of Series A Preferred
shares converted an aggregate of 3,700,000 Series A Preferred shares
into 3,700,000 shares of the Company's Common Stock, and an additional
902,1000 shares of Common Stock were issued by the Company as a
dividend pursuant to such conversion. The Company issued the shares of
Common Stock pursuant to Section 4(2) of the Securities Act and
Regulation D, Rule 506 promulgated thereunder. The investors had
previously executed subscription agreements and acknowledged that the
securities to be issued have not been registered under the Securities
Act, that the investors understood the economic risk of an investment
in the securities, and that the investors had the opportunity to ask
questions of and receive answers from the Company's management
concerning any and all matters related to the acquisition of
securities. No underwriter is involved in the transactions, and no
commissions or other remuneration will be paid in connection with the
issuance of the securities.
o On May 1, 2000, the Company issued a warrant to a Series A Preferred
shareholder who did not timely convert its Series A Warrants in
exchange for the settlement and discharge of the redemption liability
of $30,000 owed by the Company to the Series A Preferred shareholder.
On May 1, 2000, the Series A Preferred shareholder converted such
warrant into, and the Company issued, 3,000,000 shares of the
Company's restricted Common Stock at the conversion price of $0.25 per
share for an aggregate consideration of $750,000. The Company issued
the warrant and the shares of Common Stock pursuant to Section 4(2) of
the Securities Act and Regulation D, Rule 506 promulgated thereunder.
No underwriter was involved in the transaction, and no commissions or
other remuneration will be paid in connection with the issuance of the
securities.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits required.
(b) Form 8-K was filed on August 11, 2000 regarding a change in the
Company's independent principal auditors.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERGOLD CORPORATION
Dated: August 14, 2000 By: /s/ Gary Powers
---------------------------
Gary Powers, President
Dated: August 14, 2000 By: /s/ Grant Atkins
----------------------------
Grant Atkins, Secretary
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