U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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 September 30, 2001
[ ] 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
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(Exact name of small business issuer as specified in its charter)
NEVADA 88-0365453
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(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
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(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 November 11, 2001
Common Stock, $.00025 par value 77,140,600
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)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2001
Page
----
Consolidated Balance Sheets
Interim Consolidated Statements of Operations
Interim Consolidated Statements of Cash Flows
Notes to Interim Consolidated Financial Statements
INTERGOLD CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 194 $ 406
FIXED ASSETS - 2,962
- ------------------------------------------------------------------------------------------------------------------------------
$ 194 $ 3,368
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 254,660 $ 404,482
Advances payable (Note 3) 1,473,895 898,545
Directors fees payable 54,000 52,000
Notes payable (Note 4) 51,890 551,890
Accrued Series A warrant redemption payable 60,000 60,000
Accrued interest payable 325,579 260,523
- ------------------------------------------------------------------------------------------------------------------------------
2,220,024 2,227,440
- ------------------------------------------------------------------------------------------------------------------------------
CONTINGENCIES (Notes 1 & 9)
STOCKHOLDERS' EQUITY (DEFICIENCY) (Note 5)
Common stock $.00025 par value; 125,000,000 shares authorized
81,140,600 shares issued and outstanding 20,284 20,284
Preferred stock, $.001 par value; 75,000,000 shares authorized
Issued and outstanding
Series A - 6,200,000 shares 6,200 6,200
Series B - 2,510,000 shares 2,510 2,510
Upon liquidation, Series A shares have a $.25 per share preference over other
preferred or common stock, Series B shares have a $.50 preference over common stock
Additional paid-in capital 10,317,039 10,317,039
Deficit accumulated during the exploration stage (12,565,863) (12,570,105)
- ------------------------------------------------------------------------------------------------------------------------------
(2,219,830) (2,224,072)
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$ 194 $ 3,368
==============================================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements
2
INTERGOLD CORPORATION
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months Nine months Nine months July 26, 1996
ended ended ended ended (inception) to
September 30, September 30, September 30, September 30, September 30,
2001 2000 2001 2000 2001
- -----------------------------------------------------------------------------------------------------------------------------
REVENUE
Other Income $ -- $ -- $ -- $ -- $ 1,699
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES
Property exploration expenses -- 25,434 1,600 62,787 5,883,678
Directors fees (recovery) (7,000) -- 2,000 -- 75,500
General and administrative 140,186 301,709 491,024 1,034,107 4,304,114
Interest expense 33,619 -- 99,449 62,770 385,289
Loss on settlement of debt -- 19,663 -- -- 1,424,213
Professional fees 627,016 -- 970,909 -- 1,808,317
Realized loss on sale of available --
for sale investment -- -- -- 20,000 20,000
Gain on settlement of lawsuit (1,569,224) -- (1,569,224) -- (1,569,224)
- ---------------------------------------------------------------------------------------------------------------------------
(775,403) 346,806 (4,242) 1,179,664 12,331,887
- ---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD $ 775,403 $ (346,806) $ 4,242 $ (1,179,664) $(12,330,188)
===========================================================================================================================
BASIC NET INCOME (LOSS) PER SHARE $ 0.010 $ (0.004) $ 0.001 $ ( 0.017)
===========================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
81,140,600 81,045,848 81,140,600 70,566,836
==========================================================================================================
The accompanying notes are an integral part of these interim consolidated financial statements
3
INTERGOLD CORPORATION
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months Nine months July 26, 1996
ended ended September (inception) to
September 30, 30, 2000 September 30,
2001 2001
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 4,242 $ (1,179,664) $(12,330,188)
Adjustments to reconcile net loss to net
cash from operating activities:
- Depreciation 296 444 1,634
- Loss on disposal of fixed assets 2,666 -- 2,666
- Write-off of accounts payable (41,172) -- (41,172)
- Gain on settlement of lawsuit (1,569,224) -- (1,569,224)
- Loss on settlement of debt -- -- 1,424,213
- Loss on sale of investment -- 20,000 20,000
- Non-cash exploration costs -- -- 2,860,000
- Changes in working capital assets and liabilities
Prepaid expenses -- 5,000 --
Advances payable 508,200 -- 597,779
Accounts payable 128,300 (23,517) 508,200
Accrued interest payable 99,330 62,769 385,167
Directors fees payable 2,000 2,000 54,000
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (865,362) (1,112,968) (8,086,925)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale investments -- -- (170,000)
Equipment purchases -- -- (4,300)
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES -- -- (174,300)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock -- 750,000 1,957,658
Sale of Series A preferred stock -- -- 2,500,000
Sale of Series B preferred stock -- -- 1,255,000
Net advances received 67,150 362,482 1,700,761
Net cash received on settlement of lawsuit 798,000 -- 798,000
Note payable -- -- 50,000
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 865,150 1,112,482 8,261,419
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (212) (486) 194
CASH, BEGINNING OF PERIOD 406 1,469 --
- ------------------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 194 $ 983 $ 194
==============================================================================================================================
OTHER NON-CASH TRANSACTIONS:
In connection with the settlement described in Note 9, during the nine month
period ended September 30, 2001, the Company wrote off its notes payable,
accrued interest and certain accounts payable resulting in a gain of $1,569,224.
The accompanying notes are an integral part of these interim consolidated financial statements
4
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
The Company is in the exploration stage of its mineral property development. To
date, the Company has not generated significant revenues from operations and has
a working capital deficit and a stockholders' deficiency of $2,219,830 at
September 30, 2001. The Company's continuance of operations and movement into an
operating basis are contingent on raising additional working capital, settling
its outstanding debts and on the future development of a new business venture.
Advances from certain significant shareholders will form the primary source of
short-term funding for the Company during the next twelve months. Accordingly,
these factors raise substantial doubt about the Company's ability to continue as
a going concern.
On September 28, 2001 the Company agreed to settle the ongoing litigation
against Auric and Dames & Moore. During the first quarter of 2000, the Company
ceased exploration of the Blackhawk claims located in the State of Idaho. As a
result of the settlement, 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 have been
cancelled. In addition all related promissory notes to Auric and Geneva have
been cancelled and four million shares of common stock previously issued for the
technology sub-license agreement have been returned to the Company for
cancellation. Since further consulting conducted by multiple independent
consultants to the Company indicated that gold is not present in economic
quantities on the Blackhawk claims, all exploration related business operations
have ceased and the Company has abandoned all of its mineral properties. Refer
to Note 9.
Unaudited Interim Financial Statements
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-B. They do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
except as disclosed herein, there has been no material changes in the
information disclosed in the notes to the financial statements for the year
ended December 31, 2000 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim unaudited
consolidated 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, consisting solely
of normal recurring adjustments, have been made. Operating results for the nine
months ended September 30, 2001 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2001.
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 ("IGC"). IGC was
acquired by purchase on July 23, 1997. The acquisition of International Gold
Corporation has been accounted for on the purchase method of accounting. All
significant intercompany transactions and account balances have been eliminated.
Mineral property costs
Mineral property acquisition, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date the
Company has not established any proven reserves on its mineral properties.
Loss Per Share
As of September 30, 2001, there were 3,450,000 exercisable options, 8,710,000
shares of convertible preferred stock and 2,510,000 common stock warrants that
can be converted into a total of 14,670,000 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.
Financial Instruments
The fair value of the Company's financial assets and financial liabilities
approximate their carrying values due to the immediate or short-term maturity of
these financial instruments.
5
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
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.
Stock-Based Compensation
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123. In addition, with
respect to stock options granted to employees, the Company provides pro-forma
information as required by SFAS No. 123 showing the results of applying the fair
value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
Income taxes
The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment.
Recent Accounting Pronouncements
On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which
provides guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events occurring after
December 15, 1998. The Company has determined that the implementation of this
standard does not have a material impact on its financial statements.
NOTE 3: ADVANCES PAYABLE
Advances payable are comprised of cash advances and accrued fees and expenses as
follows:
Sonanini Holdings Ltd. $ 442,770
Investor Communications International, Inc. 725,475
Amerocan Marketing, Inc. 151,000
Tristar Financial Services Ltd. 145,400
Brent Pierce 9,150
Grant Atkins 100
----------
$1,473,895
==========
The advances bear 10% simple interest and are due on demand. There is $314,553
of interest accrued on the advances as of September 30, 2001. See Note 8 -
Related Party Transactions.
6
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 4: NOTES PAYABLE
September December
30, 2001 31, 2000
Auric Metallurgical Laboratories, LLC, pursuant to the technology sub-license
agreement dated March 18, 1999, bearing interest at 3% per annum, simple
interest on the balance outstanding. The note for $250,000 and accrued interest
of $17,137 has been cancelled as per the Settlement Agreement of
September 28, 2001. See Note 9. $ - $ 250,000
Geneva Resources, Inc. pursuant to the technology sub-license agreement dated March 18, 1999,
bearing interest at 3% per annum, simple interest on the balance outstanding. The note for
$250,000 and accrued interest of $17,137 has been cancelled as per the Settlement Agreement of
September 28, 2001. See Note 9. - 250,000
Sonanini Holdings Ltd., bearing interest at 7% per annum, simple interest on the balance
outstanding. The note is dated August 6, 1998 and has no stated maturity date. Accrued interest on
the note through September 30, 2001 totals $11,027. 50,000 50,000
For the redemption of 1,889,750 shares of restricted common stock of the Company payable at par
value of $.00025. 1,890 1,890
----------------------
$ 51,890 $ 551,890
NOTE 5: STOCKHOLDERS' EQUITY
During the third quarter 4,000,000 common shares originally issued pursuant to
the Technology Sub-license agreement were returned to the Company as part of the
litigation settlement agreement and are to be cancelled. See Note 9.
As of September 30, 2001, there are 6,200,000 Series A Preferred shares issued
and outstanding. If the Company's Series A Preferred shareholders elect to
convert the remaining outstanding Series A Preferred shares, an additional
9,856,900 shares of common stock would be issued, including 3,656,900 shares in
settlement of accrued 20% cumulative undeclared dividends totaling $914,225.
As of September 30, 2001, there are 2,510,000 Series B Preferred shares issued
and outstanding. If the Company's Series B Preferred shareholders elect to
convert the remaining outstanding Series B Preferred shares, an additional
3,760,600 shares of common stock would be issued, including 1,250,600 shares in
settlement of accrued 20% cumulative undeclared dividends totaling $625,300.
NOTE 6: EMPLOYEE STOCK OPTION PLAN
During 1997, the Company authorized an Employee Stock Option Plan. The plan
authorized the issuance of 2,000,000 options that can be exercised at $.50 per
share of common stock and an additional 2,500,000 options that can be exercised
to purchase shares of common stock at $1.00 per share. All options granted
expire December 27, 2017. The options are non-cancelable once granted. Shares
which may be acquired through the plan may be authorized but unissued shares of
common stock or issued shares of common stock held in the Company's treasury.
During the year ended December 31, 1999, the Board of Directors of the Company
authorized the grant of stock options to certain officers, directors and
consultants. The options granted consisted of 2,000,000 options with an exercise
price of $.50 per share of common stock and 1,450,000 options with an exercise
price of $1.00 per common share. Selected information regarding the Company's
employee stock options as of September 30, 2001 are as follows:
7
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 6: EMPLOYEE STOCK OPTION PLAN (con't)
September 30, 2001
----------------------------
Weighted
Number of average
options exercise 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 - -
Options Forfeited - -
Options Expired - -
As of September 30, 2001, 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 88 days. There are 3,450,000 options that are
exercisable with a weighted average exercise price of $.71 per share of common
stock.
NOTE 7: TECHNOLOGY SUB-LICENSE AGREEMENT
On March 18, 1999, the Company entered into a sub-license agreement with Geneva
Resources, Inc. ("Geneva"), to utilize assay and metallurgical technology,
know-how, and rights to technological processes developed specifically for the
Blackhawk mineralization by Auric Metallurgical Laboratories, LLC. (Auric").
This sub-license was for non-exclusive use in the Company's claim area in the
State of Idaho for a period not less than 40 years. Pursuant to this agreement,
the Company issued 1,500,000 restricted common shares to Geneva and 2,500,000
restricted common shares to Auric. Pursuant to the same agreement, the Company
also issued promissory notes to both Geneva and Auric in the amount of $250,000
to each company. These were 3% interest bearing notes and were payable upon the
transfer of the technology.
During September 2001, a settlement was reached and all parties agreed to have
the lawsuit dismissed. As part of the settlement, the Company received $808,000,
the promissory notes totaling $500,000 to AuRIC and Geneva were cancelled along
with accrued interest, 4,000,000 shares issued to AuRIC and Geneva were returned
to treasury and subsequently cancelled, and certain accounts payable were
written off, resulting in a total gain of $1,569,224. See Note 9.
NOTE 8: RELATED PARTY TRANSACTIONS
The Company, on January 1, 1999, entered into a management services agreement
with Investor Communications, Inc. ("ICI") to provide management of the
day-to-day operations of the Company for a two year term. The management
services agreement requires monthly payments not to exceed $75,000 for services
rendered. The Company's subsidiary entered into a similar agreement on January
1, 1999 with Amerocan Marketing, Inc. ("Amerocan") with required monthly
payments not to exceed $25,000 for services rendered for a two year term. Both
agreements have been extended for a further two year term.
Two officers and directors of Intergold Corporation have been contracted by ICI
and Amerocan and are part of the management team provided to Intergold
Corporation and its subsidiary. During the period ended September 30, 2001 a
total of $518,000 was incurred to these private companies which are also
significant shareholders for managerial, administrative and investor relations
services provided to the Company and its subsidiary. During the period ended
September 30, 2001 these companies paid a total of $8,500 to these officers and
directors for services provided to the Company and its subsidiary.
During the period ended September 30, 2001 net cash advances of $67,050 were
received from ICI and other shareholders. Interest of $89,206 was accrued on
outstanding advances.
8
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 8: RELATED PARTY TRANSACTIONS (con't)
During the period ended September 30, 2001 Company accrued $13,500 for
directors' fees and wrote off $11,500 accrued to former directors. At September
30, 2001 $54,000 is owing to two directors.
Refer to Note 9.
NOTE 9: SETTLEMENT OF LAWSUIT
On September 27, 1999, Geneva and IGC filed an action against Auric and Dames &
Moore in the Third Judicial District court in and for Salt Lake County, State of
Utah. On October 8, 1999, IGC and Geneva filed a First Amended Complaint in the
in the Utah Lawsuit in which they added Ahmet Altinay ("Altinay") and Richard
Daniele ("Daniele") as defendants. In the First Amended Complaint, IGC and
Geneva asserted causes of action for breaches of contract, specific performance,
fraud, negligent misrepresentation, failure to repay advances, breach of
fiduciary duties, and professional negligence in the license of metallurgical
technology of engineering services related thereto.
On or about November 17, 1999, Auric, Dames & Moore, Daniele, and Altinay filed
separate answers to the First Amended Complaint, along with counterclaims, and a
Third Party Complaint against IGC, Geneva, the Company, and Brent Pierce for
breach of contract against Geneva, and breach of contract against IGC and
others, defamation against the Company, IGC, Geneva and others, injunctions
against the Company, IGC, Geneva and others, amongst other claims. In their
defamation claim against the Company, the plaintiffs sought damages and punitive
damages in an amount to be determined at trial, as well as attorney's fees and
costs.
On or about June 14, 2000, Dames & Moore filed an action against the Company,
IGC, and others in the District Court of the Fifth Judicial District of the
State of Idaho, in and for the County of Lincoln. In the Idaho lawsuit, Dames &
Moore sought foreclosure of a lien against the Company and/or IGC which
purportedly arose in favour of Dames & Moore. Dames & Moore sought to have the
mining claims sold to compensate Dames & Moore for its services, materials, and
equipment. Dames & Moore also sought its fees and costs incurred in enforcing
its claimed lien. IGC and the Company filed an Answer on or about August 8,
2000. No discovery has occurred in the Idaho Lawsuit. IGC has dropped the bulk
of its mining claims, except for a small group related to this litigation, as
Geneva and IGC believe that the mining claims contain no commercial quantifies
of gold and silver.
On or about July 19, 2000, Geneva and IGC filed a Second Amended Complaint in
which they also named Michael B. Mehrtens ("Mehrtens") and MBM Consultants Inc.
("MBM") as defendants in the Utah Lawsuit. On or about September 26, 2000,
Mehrtens and MBM filed an Answer, Counterclaim and Third-Party Complaint in
which Mehrtens asserted claims against the Company for Intentional Infliction of
Emotional Distress for actual and punitive dames in an amount to be determined
at trial; and Breach of Separation Agreement for actual damages in an amount to
be determined at trial. MBM has also asserted a cause of action for Breach of
Contract/Quantum Meruit against IGC for actual damages in an amount to be
determined at trial.
Geneva and IGC subsequently obtained an order from the District Court to grant
its Motion to Compel. The Order requires that AuRIC and Dames & Moore produce
the alleged proprietary technology for Geneva's and IGC's restricted use by its
legal counsel and industry experts. Geneva and IGC have obtained expert opinions
as to the ineffectiveness of the alleged proprietary technology, as well as
damage calculations.
The Company and Geneva entered into an assignment agreement dated May 9, 2000
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.
On November 10, 2000, Geneva and IGC filed motions for partial summary judgment
against Dames & Moore and AuRIC. Subsequently, on March 19, 2001, the motions
for partial summary judgment were denied. The court, however, provided a
ninety-day period during which both parties were required to prepare for trial,
and after such period the court would set a date for trial.
On June 22, 2001, the Company, IGC, Geneva, Brent Pierce, MBM Consultants, Inc.
and Michael B. Mehrtens entered into a settlement agreement (the "Settlement
Agreement"). Pursuant to the terms of the Settlement Agreement, the parties
agreed to treat the contents of the Settlement Agreement as strictly
confidential and to not disclose such terms and provisions to anyone.
9
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 9: LEGAL PROCEEDINGS AND CONTINGENCIES (con't)
As the Company has not generated revenues and has no liquid assets to commit to
fund the significant estimated future expenses associated with ongoing
litigation, Geneva, the Company, IGC, Tristar Financial Services, Inc.
("Tristar") and Alexander Cox ("Cox") entered into a funds sharing agreement
(the "Funds Sharing Agreement") dated on June 28, 2001, executed in July 2001.
Pursuant to the terms of the Funds Sharing Agreement, (i) Tristar would fund the
direct costs of the litigation on a best efforts basis relating to the Lawsuit
for the period from April 1, 2001 to the date that the Lawsuit was settled; (ii)
as consideration therefore, Tristar would receive thirty percent (30%) of the
gross proceeds received by Geneva, the Company and IGC from any and all
settlements relating to the Lawsuit, plus the repayment of all payments and
advances made by Tristar (the "Tristar Payment"); and (iii) the Tristar Payment
would be shared with Cox in proportion of (a) the funds advanced and paid by Cox
to Tristar for the purpose of funding the costs of the litigation, (b) divided
by the total amount of funds advanced by and paid by Tristar, (c) times the
amount of the Tristar Payment. Cox is a significant shareholder of the Company
and as of the date of this Quarterly Report, holds an approximate 17% equity
interest.
During September 2001, a settlement was reached and all parties agreed to have
the lawsuit dismissed. Geneva, the Company, IGC and other parties received an
aggregate of $808,000 in settlement proceeds. Of the $808,000 in settlement
proceeds, $345,000 was paid for outstanding amounts due and owing to legal
counsel relating to the litigation, $10,000 was paid to Goldstate Corporation,
and the remaining $453,000 was paid to Tristar in full settlement of amounts
incurred by Tristar pursuant to the provisions of the Funds Sharing Agreement.
In addition, the promissory notes totaling $500,000 to AuRIC and Geneva were
cancelled along with accrued interest of $34,274, 4,000,000 shares issued to
AuRIC and Geneva were returned to treasury for cancellation, and all accounts
payable owing to Dames & Moore and MBM totaling $236,950 were written off,
resulting in a gain of $1,569,224. As costs of litigation exceeded the funds
received from the Settlement, as per the lawsuit initiated by Geneva and IGC, on
behalf of the Company, Intergold did not receive any cash benefit from the
Settlement.
Due to the Company's understanding from multiple industry experts that the
Blackhawk Property's unpatented lode mining claims do not contain commercial
quantities of gold or silver and that the alleged proprietary technology
purported to be developed by AuRIC and verified by Dames & Moore was invalid and
ineffective, management has ceased all exploration of the Blackhawk Property.
NOTE 10:INCOME TAXES
The Company has recorded no tax provision for the period ended September 30,
2001 as it has sufficient loss carryforwards available to offset the income in
the period. Also, due to the uncertainty of realization the Company has provided
a full valuation allowance against the deferred tax assets resulting from its
additional unutilised loss carryforwards.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Intergold Corporation, a Nevada corporation (the "Company") was primarily
engaged in the business of exploration of gold and precious metals in the United
States. As of the date of this Quarterly Report, there has been no income
realized from the business operations of the Company and the Company has ceased
all gold exploration activities.
During fiscal year ended December 31, 2000, the Company's primary source of
financing was proceeds received by the Company from the conversion of Series A
Warrants into shares of the Company's Common Stock at the redemption price of
$0.25 per Series A Warrant and cash advances provided to the Company as debt.
During fiscal year ended December 31, 2000, an aggregate of 3,000,000 Series A
Warrants were converted into 3,000,000 shares of the Company's restricted Common
Stock for an aggregate consideration of $750,000. 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. During fiscal year ended December 31, 2000, an
aggregate of 1,100,000 Preferred Series A shares were converted into 1,100,000
shares of the Company's Common Stock and an additional 366,700 shares of the
Company's Common Stock were issued as a dividend pursuant to such conversion.
As of the date of this Quarterly Report, 6,200,000 shares of Series A
Preferred Stock and 6,200,000 Series A Warrants remain outstanding. If the
Series A Preferred Stock is converted by the holders thereof, an additional
9,856,900 shares of Common Stock would be issued, including 3,656,900 shares of
Common Stock as settlement of accrued 20% cumulative undeclared dividends on the
Series A Preferred Stock totaling approximately $914,225.
As of the date of this Quarterly Report, 2,510,000 shares of Series B
Preferred Stock remain outstanding and, if converted, an additional 3,760,600
shares of Common Stock would be issued, including 1,250,600 shares of Common
Stock as settlement of accrued 20% cumulative undeclared dividends on the Series
B Preferred Stock totaling approximately $625,300.
Blackhawk Property and Settlement of Litigation
The Company's prior operational business activities had been carried out
through International Gold Corporation ("INGC"), a private wholly-owned
subsidiary of the Company. INGC's primary assets previously consisted of title
to a block of 321 contiguous unpatented lode mining claims located in Lincoln
County, south-central Idaho (the "Blackhawk Property"). As of the date of this
Quarterly Report, the Company has ceased to hold title to all previously held
unpatented lode mining claims that comprised the Blackhawk Property. The 28
unpatented lode mining claims previously retained by the Company were for
purposes relating only to the litigation initiated by INGC, on behalf of the
Company, against AuRIC Metallurgical Laboratories, LLC ("AuRIC") and Dames &
Moore. Such claims have not been held by the Company since August 31, 2001.
The Company also previously owned forty-nine percent (49%) of a future
profit sharing interest in profits to be realized from the exploration of 439
unpatented lode mining claims located in an area adjacent to the Blackhawk
Property (the "Blackhawk II Property"). The Company and its prior joint venture
partner, Goldstate Corporation ("GDSA"), previously held joint title to the 439
unpatented lode mining claims on the Blackhawk II Property. As of the date of
this Quarterly Report, neither the Company nor GDSA hold title to such mining
claims on the Blackhawk II Property.
11
INGC, on behalf of the Company, and AuRIC Metallurgical Laboratories, LLC,
of Salt Lake City, Utah ("AuRIC") had entered into an Agreement for Services
dated March 18, 1999 (the "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
exploration of properties of the Company.
INGC, on behalf of the Company, had also retained the services of Dames &
Moore, an internationally recognized engineering and consulting firm ("Dames &
Moore") to provide validation audits of each major step of the assay and
metallurgical recovery procedures conducted by AuRIC. In November of 1998,
according to independent testing conducted by Dames & Moore, Dames & Moore
validated AuRIC's fire assay and parallel chemical leach procedures as a method
to verify the existence of mineralization. The positive outcome of the testing
program conducted by Dames & Moore formed the subject of a November 30, 1998 and
three further subsequently dated reports regarding the Company's properties.
Dames & Moore verified the fire and chemical assay techniques and procedures
developed by AuRIC and their repeatability as well as metallurgical recovery.
AuRIC and Geneva Resources, Inc., a Nevada corporation ("Geneva") entered
into a Technology License Agreement dated March 17, 1999 (the "License
Agreement") whereby AuRIC agreed to supply the proprietary technology to Geneva
and grant to Geneva the right to sub-license the proprietary technology to the
Company for use on the Blackhawk Property. The Company and Geneva entered into a
Technology Sub-License Agreement dated March 18, 1999 (the "Sub-License
Agreement") whereby the Company acquired from Geneva a sub-license to utilize
AuRIC's proprietary information and related precious metals recovery processes
to carry out assay testing and chemical leach analysis of core samples derived
from any subsequent drilling on the Blackhawk Property.
Pursuant to certain contractual terms and provisions, AuRIC and Dames &
Moore had not been successful in transferring the proprietary fire assay
technology to Geneva or to any independent third party assay laboratory. On
September 27, 1999, Geneva and INGC, on behalf of the Company, initiated legal
proceedings against AuRIC for multiple breaches of contract stemming from the
Agreement for Services and the License Agreement and against Dames & Moore in a
declaratory relief cause of action (the "Lawsuit").
The Company suspended further exploration of the Blackhawk Property
indefinitely due to (i) the independent assessment information which did not
support the claims of AuRIC and Dames & Moore; (ii) the existence of multiple
breaches of contract by AuRIC and Dames & Moore under the Agreement for Services
and the License Agreement; and (iii) the pending Lawsuit and further claims of
action against AuRIC and Dames & Moore. Moreover, the Company deemed the
probability of commercial grade gold or silver located in the Blackhawk Property
claims to be nil.
On approximately September 25, 2001, Geneva, the Company, INGC, and others
entered into settlement agreements and releases with Dames & Moore, et. al., and
AuRIC in which the parties agreed to settle in order to diminish the continuous
burden, cost and expense of protracted ongoing litigation. See "Part II. Other
Information Item 1. Legal Proceedings" for further disclosure.
New Business Endeavors
As of the date of this Quarterly Report, management of the Company is
undertaking research relating to prospective new business endeavors and possible
new acquisitions. This research may result in the Company entering into business
operations that are not in the minerals exploration field.
12
RESULTS OF OPERATION
Nine-Month Period Ended September 30, 2001 Compared to Nine-Month Period Ended
September 30, 2000
The Company's net income for the nine-month period ended September 31, 2001
was approximately $4,242 compared to a net loss of approximately $1,179,664 for
the nine-month period ended September 30, 2000. During the nine-month periods
ended September 30, 2001 and 2000, the Company recorded no income.
During the nine-month period ended September 30, 2001, the Company recorded
operating expenses of $1,564,982 (which included $2,666 incurred as a loss on
disposal of fixed assets). The operating expenses of $1,564,982 were offset by a
recognized gain of $1,569,224, resulting in a recognized net income of $4,242.
During the nine-month period ended September 30, 2000, the Company incurred
operating expenses of $1,179,664 (a decrease of $1,183,906).
During the nine-month period ended September 30, 2001, the Company incurred
property exploration expenses of $1,600 compared to $62,787 of property
exploration expenses recorded in the same period for 2000. Property exploration
expenses decreased by approximately $61,187 during the nine-month period ended
September 30, 2001. This decrease in property exploration expenses resulted from
suspension of any further exploration of the Blackhawk Property compared to the
significant property exploration expenses incurred in the same period for 2000
relating to amounts paid by the Company for preliminary confirmation test work
undertaken by the Company associated with contractual agreements between the
Company and AuRIC, Dames & Moore and Geneva, respectively (resulting in the
litigation between the Company, INGC, Geneva and AuRIC, Dames & Moore and other
parties).
During the nine-month period ended September 30, 2001, the Company incurred
general and administrative expenses of $491,024 as compared to general and
administrative expenses of $1,034,107 incurred during the nine-month period
ended September 30, 2000. General and administrative expenses decreased by
approximately $543,083 during the nine-month period ended September 30, 2001.
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.
Although the Company incurred actual operating expenses of $1,564,982
(which included $2,666 recognized as a loss on disposal of fixed assets) during
the nine-month period ended September 30, 2001, such expenses were offset by the
recognition of $1,569,224 realized as a gain on the settlement of the Lawsuit.
During the nine-month period ended September 30, 2001, this resulted in a
recognized net income of $4,242.
Of the $491,024 incurred as administrative expenses during the nine-month
period ended September 30, 2001, $518,000 was incurred payable to Investor
Communications International, Inc. ("ICI") and Amerocan Marketing, Inc.
("Amerocan") for amounts due and owing for metals exploration management,
administrative and financial services rendered and/or advances made by ICI and
Amerocan. During the nine-month period ended September 30, 2001, the Company
accrued interest of $44,951 to ICI and Amerocan towards an aggregate principal
amount due of $876,475 plus $195,323.23 in accrued interest. Two of the
Company's officers/directors are employed by ICI and Amerocan are part of the
management team provided by ICI and Amerocan to the Company. See "Item 2.
Management's Discussion and Analysis or Plan of Operation - Liquidity and
Capital Resources".
13
The Company and ICI entered into a two-year consulting services and
management agreement dated January 1, 1999 and the Company's subsidiary,
International Gold Corporation, and Amerocan entered into a similar agreement
dated January 1, 1999 whereby ICI and Amerocan perform a wide range of
management, administrative, financial, marketing and public company services
including, but not limited to, the following: (i) international business
relations and strategy development, (ii) investor relations and shareholder
liaison, (iii) corporate public relations, press release and public information
distribution, (iv) property exploration management, including administration of
metallurgical development, metallurgical liaison, BLM liaison, engineering
company liaison, drilling administration, geologist liaison, mapping, survey and
catalogue, geostatistical liaison, environmental research, geological reports
compilation and due diligence efforts, (v) administration, including auditor and
legal liaison, media liaison, corporate minutebook maintenance and record
keeping, corporate secretarial services, printing and production, office and
general duties, and (vi) financial and business planning services, including
capital and operating budgeting, banking, bookkeeping, documentation, database
records, preparation of financial statements and creation of annual reports. On
January 1, 2001, the Company and ICI and International Gold Corporation and
Ameroca, respectively, renewed its consulting services and management agreement
for an additional two-year period.
As discussed above, the recognition of net income during the nine-month
period ended September 30, 2001 as compared to the net loss incurred during the
nine-month period ended September 30, 2000 is attributable primarily to the (i)
realization of a gain on the settlement of the Lawsuit and the decreased general
and administrative expenses incurred during the nine-month period ended
September 30, 2001. The Company's net income during the nine-month period ended
September 30, 2001 was approximately $4,242 or $0.001 per share compared to a
net loss of approximately ($1,179,664) or ($0.017) per share during the
nine-month period ended September 30, 2000. The weighted average number of
shares outstanding were 81,140,600 for the nine-month period ended September 30,
2001 compared to 70,566,836 for the nine-month period ended September 30, 2000.
Three-Month Period Ended September 30, 2001 Compared to Three-Month Period Ended
September 30, 2000
The Company's net income for the three-month period ended September 31,
2001 was approximately $775,403 compared to a net loss of approximately $346,806
for the three-month period ended September 30, 2000. During the three-month
periods ended September 30, 2001 and 2000, the Company recorded no income.
During the three-month period ended September 30, 2001, the Company
recorded operating expenses of $800,821 (which included $2,666 incurred as a
loss on disposal of fixed assets). The operating expenses of $800,821 were
offset by a recognized gain of $1,576,224, resulting in a recognized net income
of $775,403. During the three-month period ended September 30, 2000, the Company
incurred operating expenses of $346,806.
During the three-month period ended September 30, 2001, the Company did not
incur any property exploration expenses as compared to $25,434 of property
exploration expenses recorded in the same period for 2000. The decrease in
property exploration expenses resulted from suspension of any further
exploration of the Blackhawk Property compared to the minor property exploration
expenses incurred in the same period for 2000.
14
During the three-month period ended September 30, 2001, the Company
incurred general and administrative expenses of $140,186 as compared to general
and administrative expenses of $301,709 incurred during the three-month period
ended September 30, 2000. General and administrative expenses decreased by
approximately $161,523 during the three-month period ended September 30, 2001.
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.
Although the Company incurred actual operating expenses of $880,821 (which
included $2,666 recognized as a loss on disposal of fixed assets) during the
three-month period ended September 30, 2001, such expenses were offset by the
recognition of $1,576,224 resulting from (i) $1,569,224 realized as a gain on
the settlement of the Lawsuit, (ii) a $7,000 write down of directors' fees no
longer due to former directors. During the three-month period ended September
30, 2001, this resulted in a recognized net income of $775,403.
As discussed above, the recognition of net income during the three-month
period ended September 30, 2001 as compared to the net loss incurred during the
three-month period ended September 30, 2000 is attributable primarily to the (i)
realization of a gain on the settlement of the Lawsuit, the write down of
accounts payable and directors' fees, and the decreased general and
administrative expenses incurred during the three-month period ended September
30, 2001. The Company's net income during the three-month period ended September
30, 2001 was approximately $775,403 or $0.010 per share compared to a net loss
of approximately ($346,806) or ($0.004) per share during the three-month period
ended September 30, 2000. The weighted average number of shares outstanding was
81,140,600 for the three-month period ended September 30, 2001 compared to
81,045,848 for the three-month period ended September 30, 2000.
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.
As of the nine-month period ended September 30, 2001, the Company's total
assets were $194 compared to total assets of $3,368 for fiscal year ended
December 31, 2000. This decrease in total assets from fiscal year ended 2000 was
due primarily to a decrease in cash and in the write-off of fixed assets.
As of the nine-month period ended September 30, 2001, the Company's total
liabilities were $2,220,024 compared to total liabilities of $2,227,440 for
fiscal year ended December 31, 2000. This slight decrease in liabilities from
fiscal year ended December 31, 2000 was due primarily to the cancellation of
certain notes payable in the amount of $500,000 which was offset, however, by an
increase of $575,350 in advances and related interest accruals due and owing by
the Company to significant shareholders and debt holders. As of the nine-month
period ended September 30, 2001, advances payable were due and owing in the
amount of $1,473,895 plus accured interest in the amount of $325,579. Of the
$1,473,895 in advances payable, approximately $725,475 and $151,000 in principal
is due and owing to ICI and Amerocan, respectively.
Stockholders' deficit decreased from ($2,224,072) for fiscal year ended
December 31, 2000 to ($2,219,830) for the nine-month period ended September 30,
2001.
15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
General
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,
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 and Geneva; (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 (collectively, the
"Lawsuit").
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.
On or about November 17, 1999, AuRIC, Dames & Moore, Richard Daniele and
Ahmet Altinay filed separate answers to the amended complaint, along with
counterclaims and a third party complaint against Geneva, INCG, the Company and
others for breach of contract against Geneva, INCG and others, defamation
against the Company, INCG, Geneva and others, injunctions against the Company,
INCG, Geneva and others, amongst other claims. In their defamation claim against
the Company, the plaintiffs sought damages and punitive damages in an amount to
be determined at trial, as well as attorney's fees and costs. In connection with
the cause of action for preliminary and permanent injunctions against the
Company, AuRIC and Ahmet Altinay sought attorney's fees and costs.
On approximately June 14, 2000, Dames & Moore filed an action against the
Company, INGC and others in the District Court of the Fifth Judicial District of
the State of Idaho, in and for the County of Lincoln (the "Idaho Lawsuit"). In
the Idaho Lawsuit, Dames & Moore sought foreclosure of a lien against the
Company and/or INGC which purportedly arose in favor of Dames & Moore. INGC has
dropped the bulk of its mining claims, except for a small group related to this
litigation as the Company and INGC believed that the mining claims contain no
commercial quantities of gold or silver. Dames & Moore sought to have the mining
claims sold to compensate Dames & Moore for its services, materials and
equipment. Dames & Moore also sought its fees and costs incurred in enforcing
its claimed lien. The Company and INGC filed an answer on or about August 8,
2000.
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 the
Company. The amendment also added certain claims of other entities involved
through Geneva against the defendants. The proprietary technology formed 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, alleged 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.
16
Geneva and INGC subsequently obtained an order from the District Court to
grant its Motion to Compel. The Order required 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,
obtained an expert opinion as to the absence of validity and or ineffectiveness
of the proprietary technology through industry respected specialists.
On November 10, 2000, Geneva and INGC filed motions for partial summary
judgment against Dames & Moore and AuRIC. Subsequently, on March 19, 2001, the
motions for partial summary judgment were denied. The court, however, provided a
ninety-day period during which both parties were required to prepare for trial,
and after such period the court would set a date for trial. At a scheduling
conference held on July 31, 2001, the court set trial for a period of fifteen
days commencing October 16, 2001. The court date was subsequently changed to
October 26, 2001 pursuant to mutual consent of the parties in an attempt to
mediate the dispute. Such mediation was unsuccessful.
Agreements Relating to Litigation
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 had under the
Sub-License Agreement with Geneva.
On June 22, 2001, the Company, INGC, Geneva, Brent Pierce, MBM Consultants,
Inc. and Michael B. Mehrtens entered into a settlement agreement (the "Mehrtens
Settlement Agreement"). Pursuant to the terms of the Mehrtens Settlement
Agreement, the parties agreed to treat the contents of the Settlement Agreement
as strictly confidential and to not disclose such terms and provisions to
anyone.
As the Company has not generated revenues and has no liquid assets to
commit to fund the significant estimated future expenses associated with ongoing
litigation, on June 28, 2001, Geneva, the Company, INGC, Tristar Financial
Services, Inc. ("Tristar") and Alexander Cox ("Cox") entered into a funds
sharing agreement (the "Funds Sharing Agreement"). Pursuant to the terms of the
Funds Sharing Agreement, (i) Tristar would fund the direct costs of the
litigation on a best efforts basis relating to the Lawsuit for the period from
April 1, 2001 to the date that the Lawsuit was settled; (ii) as consideration
therefore, Tristar would receive thirty percent (30%) of the gross proceeds
received by Geneva, the Company and INGC from any and all settlements relating
to the Lawsuit, plus the repayment of all payments and advances made by Tristar
(the "Tristar Payment"); and (iii) the Tristar Payment would be shared with Cox
in proportion of (a) the funds advanced and paid by Cox to Tristar for the
purpose of funding the costs of the litigation, (b) divided by the total amount
of funds advanced by and paid by Tristar, (c) times the amount of the Tristar
Payment. Cox is a shareholder of the Company and as of the date of this
Quarterly Report, holds an approximate 17.12% equity interest.
On September 21, 2001, Geneva, the Company, INGC and other parties entered
into a settlement agreement with AuRIC and Ahmet Altinay (the "AuRIC Settlement
Agreement"). Pursuant to the terms of the AuRIC Settlement Agreement, the
parties agreed that: (i) significant additional expense and time would be
incurred to proceed with and resolve the Lawsuit and therefore desired to settle
the Lawsuit; (ii) AuRIC would pay $10,000.00; (iii) AuRIC would return three
promissory notes in the principal amounts of $250,000 marked cancelled payable
to AuRIC by the Company, Goldstate Corporation and Vega-Atlantic Corporation,
respectively; (iii) AuRIC would return all stock certificates received from the
Company, Goldstate Corporation and Vega-Atlantic Corporation, respectively; (iv)
the parties would execute and jointly file a motion to dismiss the parties'
respective claims and counterclaims in the Lawsuit; (v) the parties would
release one another from any and all claims and liabilities, whether known or
unknown, arising from or based upon the Lawsuit; and (vi) the Agreement for
Services, the License Agreement and the related Sub-License Agreement would be
deemed null, void and without further force or effect.
On September 25, 2001, Geneva, the Company, INGC, and other parties entered
into a settlement agreement and release with Dames & Moore, et. al. (the "Dames
& Moore Settlement Agreement"). Pursuant to the terms of the Dames & Moore
Settlement Agreement, the parties agreed that: (i) solely to save the burden,
cost and expense of continued litigation, the Lawsuit and the Idaho Lawsuit
would be settled without any admission of liability by any party; (ii) the
parties would execute and jointly file a motion to dismiss the parties'
respective claims and counterclaims in the Lawsuit and the Idaho Lawsuit with
prejudice; (iii) the parties would release one another from any and all claims
and liabilities, whether known or unknown, arising from or based upon the
Lawsuit and the Idaho Lawsuit, including those arising from or related to the
Blackhawk projects, mining claims and property; (iv) each party would bear its
own respective attorneys' fees and costs incurred in connection with the
Lawsuit, the Idaho Lawsuit and the Dames & Moore Settlement Agreement; and (v)
Dames & Moore would pay $798,000.
17
Results of Settlement
Pursuant to the Assignment Agreement, the Company transferred and conveyed
to Geneva the potential claims and causes of action that the Company may have
had under the Sub-License Agreement with Geneva. The amount of damages to be
recovered by Geneva and INGC pursuant to the Dames & Moore Settlement Agreement
and the AuRIC Settlement Agreement were primarily used for payment of attorneys
fees, expert witness fees, and associated costs of litigation. The Company,
therefore, was not in a position to retain any portion of the cash settlement
damages.
The Company and INGC had paid an aggregate of $938,805 in cash to AuRIC and
Dames & Moore for services before the litigation commenced. The Company and INGC
also owed a further $219,469 to Dames & Moore for disputed but unpaid services.
Prior to the litigation, (i) AuRIC received 2,500,000 shares of Common Stock
from the Company and a promissory note in the principal amount of $250,000, and
(ii) Geneva received 1,500,000 shares of Common Stock from the Company and a
promissory note in the principal amount of $250,000.
As of the date of this Quarterly Report and as a result of the settlements,
the Company has received: (i) the share certificate issued to AuRIC representing
2,500,000 shares of Common Stock, which has been cancelled and the shares
returned to treasury; (ii) the share certificate issued to Geneva representing
1,500,000 shares of Common Stock, which has been cancelled and the shares
returned to treasury; (iii) the promissory note in the principal amount of
$250,000 payable by INGC to Geneva, which has been cancelled; and (iv) the
promissory note in the principal amount of $250,000 payable by INGC to AuRIC,
which has been cancelled. As a result of the settlements, the Company's
financial statements for the period ended September 30, 2001 reflect a write-
down of all outstanding accounts payable owed to Dames & Moore and certain other
parties. See "Financial Statements".
Geneva, the Company, INGC and other parties received an aggregate of
$808,000 in settlement proceeds. An aggregate of approximately $2,000,000 was
incurred as legal fees and associated costs relating to the litigation. Of the
$808,000 in settlement proceeds, $345,000 was paid for outstanding amounts due
and owing to legal counsel relating to the litigation, $10,000 was paid to GDSA,
and the remaining $453,000 was paid to Tristar pursuant to the provisions of the
Funds Sharing Agreement.
At the time the respective settlement agreements were entered into,
management of the Company estimated that future additional costs to continue to
proceed with litigation through the trial stage could have been approximately
$1,000,000, with no guarantee of success. Management further believed that if
the litigation proceeded to trial, any positive future monetary award in favor
of the Company and INGC could have been subjected to a lengthy appeals process
and further legal costs. While Dames & Moore, currently a subsidiary of URS
Corporation, has approximately $2 billion in annual revenues representing a
formidable resource for future legal expenses, the Company has not generated
revenues and has no liquid assets to commit to such significant estimated future
expenses associated with ongoing litigation. Management of the Company believes,
therefore, that settlement of the litigation and execution of the respective
settlement agreements was in the best interests of the Company and its
shareholders.
18
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In conjunction with the Dames & Moore Settlement Agreement, certain stock
certificates evidencing an aggregate of 4,000,000 shares of Common Stock were
returned to the Company and subsequently cancelled after September 30, 2001,
thus subsequently reducing the aggregate issued and outstanding shares of Common
Stock by 4,000,000. As of the date of this Quarterly Report, there are
77,140,600 shares of Common Stock issued and outstanding.
The following table sets forth the name and address, as of the date of this
Quarterly Report, and the approximate number of shares of common stock owned of
record or beneficially by each person who owned of record, or was known by the
Company to own beneficially, more than five percent (5%) of the Company's common
stock, and the name and shareholdings of each officer and director and all
officers and directors as a group.
- --------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature Percent of
Beneficial Owner of Class Class
- --------------------------------------------------------------------------------
Common Stock Alexander Cox 14,445,000 18.73%
428 - 755 Burrard Street
Vancouver, British Columbia
Canada V6Z 1X6
Common Stock Calista Capital Corporation 10,040,263 13.02%
P.O. Box W-961
St. Johns, Antigua
Common Stock Buffy Holdings Ltd. 8,467,400 10.98%
C/O Frederick Gottlieb
P.O. Box AB20405
Marsh Harbor, Abaco Bahamas
Common Stock Intergold Mining Corporation 17,424,300 22.59%
3305 W. Spring Mountain Road
Suite 60
Las Vegas, Nevada 89102
Common Stock Investor Communications 6,992,000 9.06%
International, Inc.
435 Martin Street, Suite 2000
Blaine, Washington 98320
Common Stock Amerocan Marketing, Inc. 6,917,000 8.97%
219 Broadway, Suite 505
Laguna Beach, California 92651
Common Stock Phoenix Asset Corp. 5,709,300 7.40%
P.O. Box W-960
St. Johns, Antigua
Common Stock All officers and directors 1,100,000 (1) 0.14%
as a group (2 persons)
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(1) Includes the assumption of the exercise of options by each option holder
pursuant to the terms of the Non-Qualified Stock Option Plan to purchase an
aggregate of 1,100,000 shares of restricted Common Stock at $0.50 per share
and $1.00 per share, respectively.
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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) Report on Form 8-K filed October 31, 2001.
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: December 11, 2001 By: /s/ Gary Powers
-----------------------------------
Gary Powers, President
Dated: December 11, 2001 By: /s/ Grant Atkins
-----------------------------------
Grant Atkins, Secretary
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