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, 2003
[ ] 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.)
435 Martin Street, Suite 2000
Blaine, Washington 98230
(Address of Principal Executive Offices)
(360) 332-1354 (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 11, 2003
Common Stock, $.00025 par value 521,184*
*Total issued and outstanding shares of Common Stock has been reduced in
accordance with reverse stock split of one-for-three hundred effected August 8,
2003.
Transitional Small Business Disclosure Format (check one)
Yes No X
PART I. FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 2
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 3
INTERMIN CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY 4
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 5
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION 11
ITEM 3. CONTROLS AND PROCEDURES 16
PART II. OTHER INFORMATION 17
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 5. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 22
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
INTERGOLD CORPORATION
(AN EXPLORATION STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(Unaudited)
CONSOLIDATED BALANCE SHEETS
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2003 2002
------------ ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 138 $ 227
------------ ------------
$ 138 $ 227
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 661,838 $ 592,061
Loans payable (Note 3) 393,629 1,258,718
Notes payable -- 51,890
Accrued Series A warrant redemption payable -- 60,000
Accrued interest payable (Note 3) 251,277 534,453
------------ ------------
1,306,744 2,497,122
------------ ------------
CONTINGENCY (Note 1)
STOCKHOLDERS' EQUITY (DEFICIENCY) (Note 4)
Common stock $.00025 par value; 200,000,000 shares authorized
521,097 (2002 - 257,135) post reverse-split shares issued and outstanding 39,081 19,284
Preferred stock, $.001 par value; 75,000,000 shares authorized
Issued and outstanding
Series A - nil shares (2002 - 6,200,000 shares) -- 6,200
Series B - nil shares (2002 - 2,510,000 shares) -- 2,510
Additional paid-in capital 13,974,004 10,298,039
Deficit accumulated during the development stage (15,319,691) (12,822,928)
------------ ------------
(1,306,606) (2,496,895)
------------ ------------
$ 138 $ 227
============ ============
The accompanying notes are an integral part of these interim consolidated financial statements.
2
INTERGOLD CORPORATION
(A Development Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months Six months Six months July 26, 1996
ended June ended June ended June ended June (inception) to
30, 2003 30, 2002 30, 2003 30, 2002 June 30, 2003
------------- ------------- ------------- ------------- -------------
REVENUE
Other income $ -- $ -- $ -- $ -- $ 1,699
------------- ------------- ------------- ------------- -------------
EXPENSES
Mineral property exploration expenses -- -- -- 5,882,078
Directors fees -- -- -- -- 21,500
General and administrative 32,935 23,747 64,852 54,184 4,501,457
Interest expense 25,049 39,618 47,073 77,929 643,804
Loss on settlement of debt -- -- -- -- 1,317,540
Professional fees (recovery) 10,921 (52,191) 17,813 (43,861) 1,868,904
Realized loss on sale of available for
sale investment -- -- -- -- 20,000
Gain on settlement of lawsuit -- -- -- -- (1,589,224)
------------- ------------- ------------- ------------- -------------
68,905 11,174 129,738 88,252 12,666,059
------------- ------------- ------------- ------------- -------------
NET LOSS FOR THE PERIOD $ (68,905) $ (11,174) $ (129,738) $ (88,252) $ (12,664,360)
============= ============= ============= ============= =============
BASIC NET LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============= ============= ============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
156,328,943 77,140,600 128,613,023 77,140,600
============= ============= ============= =============
The accompanying notes are an integral part of these interim consolidated financial statements.
3
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 31, 2002 TO JUNE 30, 2003
(Unaudited)
Common stock Preferred stock
Shares Amount Shares Amount
------------ ------------ ------------ ------------
Balance, December 31, 2002 77,140,600 $ 19,284 8,710,000 $ 8,710
20% cumulative dividends payable on
Conversion of Series A Preferred Stock -- -- -- --
Expiry of Series A Preferred Stock
Share Purchase Warrant -- -- -- --
Issuance of common stock in settlement of
Cumulative dividend on converted Series A
Preferred stock 5,485,900 1,371 -- --
Issuance of common stock pursuant to
Conversion of Series A Preferred stock 6,200,000 1,550 (6,200,000) (6,200)
20% cumulative dividends payable on
Conversion of Series B Preferred Stock -- -- -- --
Issuance of common stock in settlement of
Cumulative dividend on converted Series B
Preferred stock 1,991,100 498 -- --
Issuance of common stock pursuant to
Conversion of Series B Preferred stock 2,510,000 628 (2,510,000) (2,510)
Issuance of common stock in settlement of debt 63,001,343 15,750 -- --
Net Loss, period ended June 30, 2003 -- -- -- --
------------ ------------ ------------ ------------
156,328,943 $ 39,081 -- $ --
============ ============ ============ ============
Table continues on following page.
4
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 31, 2002 TO JUNE 30, 2003
(Unaudited)
(Continued)
Deficit
Accumulated
Additional during
Paid-in Development
Capital Stage Total
------------ ------------ ------------
Balance, December 31, 2002 $ 10,298,039 $(12,822,928) $ (2,496,895)
20% cumulative dividends payable on
Conversion of Series A Preferred Stock -- (1,371,475) (1,371,475)
Expiry of Series A Preferred Stock
Share Purchase Warrant 60,000 -- 60,000
Issuance of common stock in settlement of
Cumulative dividend on converted Series A
Preferred stock 1,370,104 -- 1,371,475
Issuance of common stock pursuant to
Conversion of Series A Preferred stock 4,650 -- --
20% cumulative dividends payable on
Conversion of Series B Preferred Stock -- (995,550) (995,550)
Issuance of common stock in settlement of
Cumulative dividend on converted Series B
Preferred stock 995,052 -- 995,550
Issuance of common stock pursuant to
Conversion of Series B Preferred stock 1,882 -- --
Issuance of common stock in settlement of debt 1,244,277 -- 1,260,027
Net Loss, period ended June 30, 2003 -- (129,738) (129,738)
------------ ------------ ------------
$ 13,974,004 $(15,319,691) $ (1,306,606)
============ ============ ============
During August 2003, the Company completed a reverse stock split of one for three hundred of
the Company's outstanding common stock resulting in a reduction of the then outstanding common
stock from 156,328,943 to 521,097. (Refer to Note 4)
The accompanying notes are an integral part of these interim consolidated financial statements.
4 (Continued)
INTERGOLD CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months Six months July 26, 1996
ended ended (inception) to
June 30, 2003 June 30, 2002 June 30, 2003
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (129,738) $ (88,252) $(12,716,991)
Adjustments to reconcile net loss to net cash from operating activities:
- Depreciation -- -- 1,634
- Loss on disposal of fixed assets -- -- 2,666
- Loss on settlement of debt -- 1,317,540
- Gain on settlement of lawsuit -- -- (1,589,224)
- Loss on sale of investment -- -- 20,000
- Non-cash exploration costs -- -- 2,860,000
- Changes in working capital assets and liabilities
Notes payable -- 69,265 --
Accounts payable 9,776 6,557 639,136
Accrued interest payable 47,073 77,928 641,111
Accrued and unpaid fees payable 60,000 -- 706,600
------------ ------------ ------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (12,889) (3) (8,117,528)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale investments -- -- (170,000)
Equipment purchases -- -- (4,300)
------------ ------------ ------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES -- -- (174,300)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances payable 12,800 -- 1,731,308
Sale of common stock -- -- 1,957,658
Sale of Series A preferred stock -- -- 2,500,000
Sale of Series B preferred stock -- -- 1,255,000
Net cash received on settlement of lawsuit -- -- 798,000
Note payable -- -- 50,000
------------ ------------ ------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 12,800 -- 8,291,166
------------ ------------ ------------
INCREASE (DECREASE) IN CASH (89) (3) 138
CASH, BEGINNING OF PERIOD 227 127 --
------------ ------------ ------------
CASH, END OF PERIOD $ 138 $ 124 $ 138
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
During the period the Company issued shares of common stock in settlement of cumulative dividends payable on Series A and
Series B preferred stock and in settlement of debt. (Refer to Note 4).
The accompanying notes are an integral part of these interim consolidated financial statements.
5
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2003
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
The Company was previously involved in mineral property exploration and
development. To date, the Company has not generated significant revenues from
operations and has a working capital deficit and a stockholders' deficiency of
$1,306,606 at June 30, 2003. 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.
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 have been no material changes in the
information disclosed in the notes to the financial statements for the year
ended December 31, 2002 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 six
months ended June 30, 2003 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2003.
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 Properties
The Company's resource property acquisition, exploration and development costs
are expensed as incurred. Once the Company has determined that a property can be
economically developed, further exploration and development costs are
capitalized. The capitalized costs are depleted on a property by property basis
over the estimated useful lives of the properties upon commencement of
commercial production using the unit-of-production method. Capitalized costs
relating to mineral properties which are sold or abandoned are written off when
such events occur. The proceeds received from property options granted are
applied against the costs of the related property and any excess is included in
earnings for the period. The Company reviews the carrying value of resource
properties whenever events or changes in circumstances indicate that the
carrying value may not be recoverable, at which time a write-down is recorded.
Loss Per Share
As of June 30, 2003, there were 3,450,000 exercisable pre reverse-split options
that can be converted into a total of 3,450,000 shares of pre reverse-split
common stock. As these options would have an anti-dilutive 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.
6
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2003
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
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
In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information. The disclosure provisions of SFAS No. 148 were effective
for the Company for the period ended March 31, 2003 and the required disclosures
have been made below.
The Company has elected to continue to account for stock-based employee
compensation arrangements using the intrinsic value based method in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", ("APB No. 25") and comply with the disclosure
provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under
APB No. 25, compensation expense is recognized based on the difference, if any,
on the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period. 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.
In accordance with SFAS No. 123, the Company applies the fair value method using
the Black-Scholes option-pricing model in accounting for options granted to
consultants.
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.
The Company has also adopted the provisions of the Financial Accounting
Standards Board 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.
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.
Comparative figures
Certain of the comparative figures have been restated to conform to the current
year's presentation.
7
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2003
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 3: LOANS AND ACCRUED INTEREST PAYABLE
Loans payable
Loans payable are comprised of cash advances as follows:
June 30, December 31,
2003 2002
---------- ----------
Sonanini Holdings Ltd. $ -- $ 442,770
Investor Communications International, Inc. 322,798 309,998
Tristar Financial Services Ltd. -- 435,119
Brent Pierce 70,831 70,831
---------- ----------
$ 393,629 $1,258,718
========== ==========
Accrued Interest Payable
Loans and certain accounts payable and accrued liabilities bear 10% simple
interest and are due on demand. There is $251,277 of interest accrued on these
loans and liabilities as of June 30, 2003 (2002 - $439,853). See Note 6 -
Related Party Transactions.
NOTE 4: STOCKHOLDERS' EQUITY
Common Stock
- ------------
On March 15, 2003 the Company settled $1,260,027 in loans, notes and accrued
interest in exchange for the issuance of 210,004 shares of the Company's common
stock.
On March 15, 2003 the holders of 6,200,000 Series A preferred shares elected to
convert their shares to common stock. As a result cumulative undeclared
dividends totaling $1,371,475 became payable on March 15, 2003. Accordingly, the
Company issued 38,953 shares of common stock in exchange for the 6,200,000
Series A preferred shares and settlement of the dividend liability of $1,371,475
in accordance with the terms of the Series A preferred stock described below.
On March 15, 2003 the holders of 2,510,000 Series B preferred shares elected to
convert their shares to common stock. As a result cumulative undeclared
dividends totaling $995,550 became payable on March 15, 2003. Accordingly, the
Company issued 15,004 shares of common stock in exchange for the 2,510,000
Series B preferred shares and settlement of the dividend liability of $995,550
in accordance with the terms of the Series B preferred stock described below.
Effective March 10, 2003, the Company increased the number of authorized shares
of common stock from 125,000,000 to 200,000,000 at a par value of $.00025 per
share.
Preferred Stock
- ---------------
The Company authorized for issuance 5,000,000 shares of Preferred Stock at a par
value of $.001 per share at December 31, 1997.
Effective August 6, 1998, the Company increased the number of authorized shares
of preferred stock from 5,000,000 to 75,000,000 at a par value of $.001 per
share.
Series A
- --------
Pursuant to a private placement memorandum dated August 10, 1998, the Company
offered 50 Series A units at a cost of $50,000 each for a total of $2,500,000.
Each unit consisted of 200,000 shares of Series A Preferred stock with a par
value of $.001 per share and 200,000 warrants. Each warrant entitles the holder
to purchase one share of restricted common stock at $.25 per share. The warrants
expired on July 31, 2001. The Series A preferred shares were redeemable by the
Company at any time after July 31, 2001 for $.25 per share, plus accrued and
8
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2003
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 4: STOCKHOLDERS' EQUITY (cont'd)
unpaid dividends. Dividends accrued cumulatively at the rate of 20% per year but
were payable annually in arrears when, as and if declared by the Company's Board
of Directors or upon conversion at the election of the holders to shares of
common stock. Each Series A preferred share is convertible into one share of
restricted common stock and all then accrued and unpaid dividends are
convertible into restricted common stock at the conversion price of $.25 per
share.
As of June 30, 2003, there are no Series A Preferred shares issued and
outstanding.
Series B
- --------
During 1999, the Company completed a private placement of Series B units
consisting of 100,000 shares of Series B preferred stock with a par value of
$.001 per share and 100,000 warrants. The terms and conditions of the Series B
unit offering are similar to those of the Series A offering except the cost per
share and any conversion price is at $0.50 per share and the Series B offering
is subordinate to the Series A offering.
As of June 30, 2003, there are no Series B Preferred shares issued and
outstanding.
Reverse Stock Split
Effective August 8, 2003 the Company completed a reverse stock split of
one-for-three hundred of the Company's outstanding common stock, resulting in a
reduction of the then outstanding common stock from 156,328,943 to 521,097. The
par value and the number of authorized but unissued shares of the Company's
common stock was not changed as a result of the reverse stock split.
Except for in the Statement of Stockholders' Equity, unless otherwise noted, all
references to common stock, common shares outstanding, average numbers of common
shares outstanding and per share amounts in these Financial Statements and Notes
to Financial Statements prior to the effective date of the reverse stock split
have been restated to reflect the one-for-three hundred common stock split on a
retroactive basis.
NOTE 5: EMPLOYEE STOCK OPTION PLAN
During 1997, the Company authorized an Non-Qualified Employee Stock Option Plan
for employees. The plan authorized the issuance of 2,000,000 pre reverse-split
options that can be exercised at $.50 per share of common stock and an
additional 2,500,000 pre reverse-split options that can be exercised to purchase
shares of common stock at $1.00 per share. All options granted expire December
27, 2017. 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. As of June 30, 2003 no stock options under the Non-Qualified
SOP have been exercised.
During the fiscal years ended December 31, 1999 and December 31, 2000, 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
pre reverse-split options with an exercise price of $.50 per share of common
stock and 1,450,000 pre reverse-split options with an exercise price of $1.00
per common share. Selected information regarding the Company's employee stock
options as of June 30, 2003 are as follows:
As of August 7, 2003, concurrent with the adoption of a New Stock Option Plan
(described below), the Board of Directors of the Company voted to terminate the
Non-Qualified SOP and to unilaterally cancel the 3,450,000 pre-reverse-split
options as granted. The Board of Directors based its decision regarding
cancellation of the stock options on the fact that the Non-Qualified SOP and
subsequent grants of stock options were done at a time when management
anticipated that the Company would have a viable and ongoing business
development venture relating to the mining claims located on the Blackhawk
Property. The grantees did not perform the services intended as the gold mining
claims did not contain any gold and associated business operations failed. The
business venture was subject to litigation (as previously disclosed in
regulatory filings) and is no longer being pursued by the Company.
9
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
June 30, 2003
- --------------------------------------------------------------------------------
(Unaudited)
NOTE 5: EMPLOYEE STOCK OPTION PLAN (cont'd)
June 30, 2003
----------------------------
Weighted
Number of average
options exercise price
--------- --------------
Outstanding at beginning of year 3,450,000 $.71/share
Outstanding at end of year 3,450,000 $.71/share
Exercisable at end of year 3,450,000 $.71/share
Options granted during year - -
Options exercised during year - -
Options forfeited during year - -
Options expired during year - -
As of June 30, 2003, outstanding pre reverse-split options have exercise prices
ranging from $.50 to $1.00 per share. The weighted average exercise price of all
pre reverse-split options outstanding is $.71 per share of common stock and the
weighted average remaining contractual life is 14 years 180 days.
New Stock Option Plan
By Directors' Resolution dated March 15, 2003 and effective August 7, 2003, the
Company adopted a New Stock Option Plan ("New SOP"). The New SOP shall be deemed
effective August 7, 2003. The New SOP provides authority for the Board to grant
Options, for the purchase of a total number of shares of the Company's post
reverse-split common stock, not to exceed 3,500,000 post reverse-split shares.
The option period of options granted under the New SOP shall be up to 10 years
and the option price per share shall be no less than the fair market value of a
share of common stock on the date of grant of the stock option. As of June 30,
2003 no options have been granted under the New SOP and no options are
outstanding.
NOTE 6: 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 were extended for a further two year term to January 1, 2003.
Subsequent to January 1, 2003, the Agreement with ICI has been extended on a
month-to month basis and the Agreement with Amerocan has expired and will not be
renewed.
One director of Intergold Corporation has been contracted by ICI as part of the
management team provided to Intergold Corporation and its subsidiary. During the
six month period ended June 30, 2003 a total of $60,000 (2002 - $53,350) was
incurred to this private company which is also significant shareholder for
managerial, administrative and investor relations services provided to the
Company and its subsidiary. During the six month period ended June 30, 2003 ICI
paid a total of $19,625 (2002 - $3,300) to this officer and director for
services provided to the Company and its subsidiary. In addition, during the six
month period ended June 30, 2003, ICI and other shareholders paid expenses on
behalf of the Company totaling $12,800 (2002 - $15,915). As of June 30, 2003 the
Company owed ICI a total of $622,805 in accrued management fees payable.
Interest of $47,073 (2002 - $77,929) was accrued on outstanding loans and
management fees payable. Refer to Note 3.
NOTE 7: INCOME TAXES
The Company has adopted FASB No. 109 for reporting purposes. As of June 30,
2003, the Company had net operating loss carry forwards of approximately
$11,000,000 that may be available to reduce future years' income taxable income
and will expire between the years 2006 - 2018. Due to the uncertainty of
realization the Company has provided a full valuation allowance for the deferred
tax assets resulting from these loss carry forwards.
10
Statements made in this Form 10-QSB that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section
21E of the Securities Exchange Act of 1934. These statements often can be
identified by the use of terms such as "may," "will," "expect," "believe,"
"anticipate," "estimate," "approximate" or "continue," or the negative thereof.
The Company intends that such forward-looking statements be subject to the safe
harbors for such statements. The Company wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. Any forward-looking statements represent management's best
judgment as to what may occur in the future. However, forward-looking statements
are subject to risks, uncertainties and important factors beyond the control of
the Company that could cause actual results and events to differ materially from
historical results of operations and events and those presently anticipated or
projected. The Company disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statement or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
GENERAL
Intergold Corporation, a Nevada corporation (the "Company") currently
trades on the OTC Bulletin Board under the symbol IGCPV. The Company's prior
operational business activities were in the business of exploration of gold and
precious metals in the United States. 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"). The Company ceases to hold title to all previously held unpatented
lode mining claims that comprised the Blackhawk Property.
During fiscal year 2001 and 2002, the Company suspended further exploration
of the Blackhawk Property due to the existence of multiple breaches of contract
by AuRIC Metallurgical Laboratories LLC ("AuRIC") and Dames & Moore under the
respective Agreement for Services and the License Agreement and the settlement
of the lawsuit against AuRIC and Dames & Moore, as previously reported in the
Company's filings. Moreover, the Company deemed the probability of commercial
grade gold or silver located in the Blackhawk Property claims to be nil.
Current Business Operations
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.
On July 14, 2003, the Board of Directors of the Company caused a definitive
information statement pursuant to Section 14(c) of the Securities Exchange Act
of 1934, as amended (the "Information Statement"), to be filed with the
Securities and Exchange Commission in connection with the taking of corporate
action without a meeting upon the written consent of the holders of a majority
of the outstanding shares of the Company's common stock. On approximately July
7, 2003, the Information Statement was mailed to shareholders of the Company.
The matters upon which action was taken pursuant to shareholder written consent
effective August 7, 2003 were: (i) authorization for the Board of Directors to
effect a reverse stock split of one-for-three hundred shares of the Company's
outstanding common stock (the "Reverse Stock Split"), depending upon a
determination by the Board of Directors that a Reverse Stock Split was in the
11
best interests of the Company and its shareholders; (ii) approval of the sale of
the Company's subsidiary pursuant to future possible restructuring initiatives,
which included approval and authorization of any sale and purchase agreement
relating thereto (the "Sale and Purchase"); (iii) approval of the election of
one director to serve as a director of the Company until the next annual meeting
of the shareholders or until his successor has been elected and qualified; (iv)
approval of a stock option plan for key personnel of the Company (the "Stock
Option Plan"); and (v) ratification of the selection of LaBonte & Co. as the
Company's independent public accountants for the fiscal year ending December 31,
2003. See "Part II. Other Information. Item 4. Submission of Matters to a Vote
of Security Holders."
Sale and Purchase
As of the date of this Quarterly Report, the Company's wholly-owned
subsidiary, INCG, is deemed to be a non-functioning entity. INGC does not have
any assets and its net book value is $-0-. The Board of Directors of the Company
determined that obtaining shareholder approval of the potential sale of INGC
would be prudent. Therefore, the shareholders pursuant to the Written Consent
authorized and approved the sale of the Company's subsidiary pursuant to future
possible restructuring initiatives, which included approval and authorization of
any sale and purchase agreement relating thereto (the "Sale and Purchase").
The Board of Directors believes that the potential sale of INGC would be
prudent and in the best interests of the shareholders based upon: (i) the
current existence of INGC is as an unproductive subsidiary of the Company with
no book value; (ii) the continued existence of INGC as the Company's subsidiary
presents no value but rather a liability in regards to potential future
operational business prospects and acquisitions; (iii) the current corporate
structure of the Company, which includes INGC, may present operational and
structural problems in regards to potential future operational business
prospects and acquisitions; and (iv) the future ability to easily and quickly
restructure the Company's corporate organization if deemed necessary due to
contractual provisions in regards to potential future operational business
prospects and acquisitions.
Although the Company believes that the sale of INGC provides no monetary
value to any prospective purchaser and may be difficult to consummate, the Sale
and Purchase is expected to provide for the sale by the Company of all of the
issued and outstanding shares of common stock of INGC held by the Company. It is
expected that the Sale and Purchase will contain various customary
representations and warranties made by the Company and the proposed purchaser.
These are expected to include, among other things, representations and
warranties relating to (i) the execution and enforceability of any agreement
relating to the Sale and Purchase; (ii) the financial statements and other
financial and related information; (iii) the absence of undisclosed liabilities;
and (iv) the absence of undisclosed material changes relating to INGC.
As of the date of this Quarterly Report, management of the Company has not
engaged in any material negotiations with a third-party purchaser regarding
INGC.
As of the date of this Quarterly Report, there has been no income realized
from the business operations of the Company. The Company's primary source of
financing during the prior fiscal years has been from proceeds received by the
Company from (i) the conversion of Series A Preferred shares into shares of the
Company's common stock at the redemption price of $0.25 per share; (ii) the
conversion of Series B Preferred shares into shares of the Company's common
stock at the redemption price of $0.50 per share; and (iii) advances provided to
the Company as debt. See "Part I. Financial Information. Item 1. Management's
Discussion and Analysis of Financial Condition or Plan of Operation - Plan of
Operation" and "Part II. Other Information. Item 2. Changes in Securities and
Use of Proceeds."
12
RESULTS OF OPERATION
Six-Month Period Ended June 30, 2003 Compared to Six-Month Period Ended June 30,
2002
The Company's net loss for the six-month period ended June 30, 2003 was
approximately ($129,738) compared to a net loss of approximately ($88,252) for
the six-month period ended June 30, 2002 (an increase of $41,486). During the
six-month periods ended June 30, 2003 and 2002, the Company recorded no income.
During the six-month periods ended June 30, 2003 and 2002, the Company did
not incur any property exploration expenses as a result of the suspension of any
further exploration of the Blackhawk Property. During the six-month period ended
June 30, 2003, the Company recorded operating expenses of $129,738 as compared
to operating expenses of $132,113 recorded during the six-month period ended
June 30, 2002, which operating expenses were offset by recovery of professional
fees of $43,861 resulting in the net loss of ($88,252).
During the six-month period ended June 30, 2003, the Company's operating
expenses consisted primarily of: (i) $64,852 as general and administrative
expenses; (ii) $47,073 as interest expense; and (iii) $17,813 as professional
fees. During the six-month period ended June 30, 2002, the Company's operating
expenses consisted primarily of: (i) $77,929 as interest expense; and (ii)
$54,184 as general and administrative expenses. The decrease in operating
expenses during the six-month period ended June 30, 2003 compared to the
six-month period ended June 30, 2002 was primarily due to a decrease in interest
expense resulting from a decrease in advances payable consisting of cash
advances, services and accrued interest thereon and from related settlement of
debt. General and administrative expenses generally include corporate overhead,
financial and administrative contracted services and consulting costs.
Of the $129,738 incurred as operating expenses during the six-month period
ended June 30, 2003, an aggregate of $60,000 was incurred payable to Investor
Communications International, Inc. ("ICI") for amounts due and owing for
operational management, administrative and financial services rendered. During
the six-month period ended June 30, 2003, aggregate cash advances of $12,800
were made by ICI and other shareholders to the Company and interest accrued on
such outstanding advances in the amount of $47,073. During the six-month period
ended June 30, 2003, the Company paid $-0- to ICI towards an aggregate principal
amount due of $945,603 due and owing ICI for as advances payable. The Company's
officer/director, Grant Atkins, is employed by ICI and part of the management
team provided by ICI to the Company. During the six-month period ended June 30,
2003, ICI paid an aggregate of $19,625 to Grant Atkins for services provided to
the Company and its subsidiary.
The Company and ICI entered into a two-year consulting services and
management agreement dated January 1, 1999 (the "Consulting Services
Agreement"), whereby ICI performs 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) 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 renewed the
Consulting Services Agreement for an additional two-year period. Subsequent to
January 1, 2003, the Consulting Services Agreement has been extended on a
month-to-month basis.
13
As discussed above, the increase in net loss incurred during the six-month
period ended June 30, 2003 compared to the net loss incurred during the
six-month period ended June 30, 2002 is attributable primarily to the recovery
of professional fees of $43,861 recorded during the six-month period ended June
30, 2002. The Company's net loss during the six-month period ended June 30, 2003
was approximately ($129,738) or $0.00 per share compared to a net loss of
approximately ($88,252) or ($0.00) per share during the six-month period ended
June 30, 2002. The weighted average number of shares outstanding were
128,613,023 for the six-month period ended June 30, 2003 and 77,140,600 for the
six-month period ended June 30, 2002.
Three-Month Period Ended June 30, 2003 Compared to Three-Month Period Ended June
30, 2002
The Company's net loss for the three-month period ended June 30, 2003 was
approximately ($68,905) compared to a net loss of approximately ($11,174) for
the three-month period ended June 30, 2002 (an increase of $57,731). During the
three-month periods ended June 30, 2003 and 2002, the Company recorded no
income.
During the three-month periods ended June 30, 2003 and 2002, the Company
did not incur any property exploration expenses as a result of the suspension of
any further exploration of the Blackhawk Property. During the three-month period
ended June 30, 2003, the Company recorded operating expenses of $68,905 as
compared to operating expenses of $63,365 recorded during the three-month period
ended June 30, 2002, which operating expenses were offset by recovery of
professional fees of $52,191 resulting in the net loss of ($11,174).
During the three-month period ended June 30, 2003, the Company's operating
expenses consisted primarily of: (i) $32,935 as general and administrative
expenses; (ii) $25,049 as interest expense; and (iii) $10,921 as professional
fees. During the three-month period ended June 30, 2002, the Company's operating
expenses consisted primarily of: (i) $39,618 as interest expense; and (ii)
$23,747 as general and administrative expenses. The increase in operating
expenses during the three-month period ended June 30, 2003 compared to the
three-month period ended June 30, 2002 was primarily due to an increase in
general and administrative expenses of approximately $9,188 and the incurrence
of professional fees of $10,921.
As discussed above, the increase in net loss incurred during the
three-month period ended June 30, 2003 compared to the net loss incurred during
the three-month period ended June 30, 2002 is attributable primarily to the
increase in general and administrative expenses during the three-month period
ended June 30, 2003 and the recovery of professional fees of $52,191 recorded
during the three-month period ended June 30, 2002. The Company's net loss during
the three-month period ended June 30, 2003 was approximately ($68,905) or $0.00
per share compared to a net loss of approximately ($11,174) or ($0.00) per share
during the three-month period ended June 30, 2002. The weighted average number
of shares outstanding were 156,328,943 for the three-month period ended June 30,
2003 and 77,140,600 for the three-month period ended June 30, 2002.
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.
14
Six-Month Period Ended June 30, 2003
As of the six-month period ended June 30, 2003, the Company's current
assets were $138 and its current liabilities were $1,306,744, which resulted in
a working capital deficit of $1,306,606. As of the six-month period ended June
30, 2003, the Company's total assets were $138 compared to total assets of $227
for fiscal year ended December 31, 2002. This decrease in total assets from
fiscal year ended 2002 was primarily due to an decrease in cash. As of the
six-month period ended June 30, 2003, the Company's total liabilities were
$1,306,744 compared to total liabilities of $2,497,122 for fiscal year ended
December 31, 2002. This decrease in liabilities from fiscal year ended 2002 was
due primarily to (i) a decrease in loans payable from $1,258,718 to $393,629;
(ii) a decrease in accrued interest payable from $534,453 to $251,277; (iii) a
decrease in accrued Series A warrant redemption payable resulting from
conversion from $60,000 to $-0-; and (iv) a decrease in notes payable from
$51,890 to $-0-.
Stockholders' deficit decreased from ($2,496,895) for fiscal year ended
December 31, 2002 to ($1,306,606) for the six-month period ended June 30, 2003.
The Company has not generated positive cash flows from operating
activities. For the six-month period ended June 30, 2003, net cash flows used in
operating activities was ($12,889) compared to ($3) of net cash flows used in
operating activities for the six-month period ended June 30, 2002. The net
operating loss of ($129,738) increased for the six-month period ended June 30,
2003 from a net operating loss of ($88,252) for the six-month period ended June
30, 2002 and changes in working capital assets and liabilities decreased to an
aggregate of $116,849 for the six-month period ended June 30, 2003 from an
aggregate of $153,750 for the six-month period ended June 30, 2002.
Net cash flows from investing activities was $-0- for both six-month
periods ended June 30, 2003 and 2002.
Net cash flows from financing activities was $12,800 from advances payable
for the six-month period ended June 30, 2003 as compared to $-0- for the
six-month period ended June 30, 2002.
PLAN OF OPERATION
As of the date of this Quarterly Report, there has been no income realized
from the business operations of the Company. The Company's primary source of
financing during the prior fiscal years has been from proceeds received by the
Company from (i) the conversion of Series A Preferred shares into shares of the
Company's common stock at the redemption price of $0.25 per share; (ii) the
conversion of Series B Preferred shares into shares of the Company's common
stock at the redemption price of $0.50 per share; and (iii) advances provided to
the Company as debt.
As of December 31, 2002, there were 6,200,000 Series A Preferred shares
issued and outstanding. Each Series A Preferred share is 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 December 31, 2002, there were 2,510,000 Series B Preferred shares issued and
outstanding. Each Series B Preferred share is 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 $0.50 per share.
On March 15, 2003, the Company received conversion notices from all
remaining holders of Series A Preferred shares. Based upon the respective
conversion notices, the Board of Directors of the Company authorized the
issuance of an aggregate 11,685,900 shares of common stock (pre-Reverse Stock
Split) as follows: (i) 6,200,000 shares of common stock for the conversion of
6,200,000 shares of Series A Preferred Stock on a one-to-one basis; and (ii)
5,485,900 shares of common stock for conversion of the accrued and unpaid
dividends at the conversion price of $0.25 per share.
15
On March 15, 2003, the Company received conversion notices from all
remaining holders of Series B Preferred shares. Based upon the respective
conversion notices, the Board of Directors of the Company authorized the
issuance of an aggregate 4,501,100 shares of common stock (pre-Reverse Stock
Split) as follows: (i) 2,510,000 shares of common stock for the conversion of
2,510,000 shares of Series B Preferred Stock on a one-to-one basis; and (ii)
1,991,000 shares of common stock for conversion of the accrued and unpaid
dividends at the conversion price of $0.50 per share.
Funding
Current management of the Company anticipates a possible increase in
operating expenses in order to successfully research and identify new business
endeavors. The Company may finance these expenses with further issuances of
common stock of the Company. The Company believes that any anticipated private
placements of equity capital and debt financing, if successful, may be adequate
to fund the Company's operations over the next six months. Thereafter, the
Company expects it will need to raise additional capital to meet long-term
operating requirements. The Company may encounter business endeavors that
require significant cash commitments or unanticipated problems or expenses that
could result in a requirement for additional cash before that time. If the
Company raises additional funds through the issuance of equity or convertible
debt securities other than to current shareholders, the percentage ownership of
its current shareholders would be reduced, and such securities might have
rights, preferences or privileges senior to its common stock. Additional
financing may not be available upon acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, the Company
may not be able to take advantage of prospective new business endeavors or
opportunities, which could significantly and materially restrict the Company's
business operations.
Material Commitments
A significant and estimated commitment for the Company for fiscal year 2003
is the principal amount of $989,800 and $226,228 in accrued interest thereon due
and owing as advances payable to related parties: (i) $914,604 in aggregate
principal due and owing to ICI; (ii) $70,831 in aggregate principal due and
owing to a private individual; and (iii) $4,365 in aggregate principal due and
owing to the director/officer of the Company. The advances accrue interest at
10% per annum and are due on demand.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, the Company does not have any
off-balance sheet arrangements that have or are reasonably like to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors. The
term "off-balance sheet arrangement" generally means any transaction, agreement
or other contractual arrangement to which an entity unconsolidated with the
Company is a party, under which the Company has (i) any obligation arising under
a guarantee contract, derivative instrument or variable interest; or (ii) a
retained or contingent interest in assets transferred to such entity or similar
arrangement that serves as credit, liquidity or market risk support for such
assets.
ITEM III. CONTROLS AND PROCEDURES
(a) The Company, under the supervision of the President, has conducted an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures within ninety (90) days of the filing date of
this Quarterly Report. Based upon the results of this evaluation, the Company
believes that they maintain proper procedures for gathering, analyzing and
disclosing all information in a timely fashion that is required to be disclosed
in its reports under the Securities Exchange Act of 1934, as amended. There have
been no significant changes in the Company's controls subsequent to the
evaluation date.
(b) There were no significant changes in the Company's internal control or
in other factors that could significantly affect the Company's internal controls
subsequent to the evaluation date.
16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No report required.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
DEBT SETTLEMENTS
On March 15, 2003, the Board of Directors of the Company authorized the
execution of settlement agreements between the Company and certain creditors of
the Company, and the subsequent issuance of 63,001,343 shares of its restricted
common stock (pre-Reverse Stock Split) as follows.
(a) The Company had incurred a debt inclusive of accrued interest in the
aggregate amount of $659,862.25 to Sonanini Holdings Ltd. ("Sonanini") for prior
advances made by Sonanini to the Company evidenced by certain promissory notes
and accrued interest thereon. Therefore, the Company and Sonanini entered into a
settlement agreement dated March 25, 2003 (the "Sonanini Settlement Agreement").
Pursuant to the terms of the Sonanini Settlement Agreement, (i) the Company
agreed to settle the $659,862.25 aggregate debt due and owing to Sonanini by the
issuance of 32,993,113 shares of its restricted common stock at the rate of
$0.02 per share (based on the average trading price of $0.013 per share on total
volume of 1,382,900 shares of the Company's common stock trading on the OTC
Bulletin Board from October 1, 2002 to January 17, 2003); and (ii) Sonanini
agreed to accept the issuance of the 32,993,113 shares of restricted common
stock as settlement and full satisfaction of the aggregate debt due and owing it
as of the date of the Sonanini Settlement Agreement.
(b) The Company had incurred a debt inclusive of accrued interest in the
aggregate amount of $600,164.60 to TriStar Financial Services, Inc. ("TriStar")
for (i) prior services rendered by TriStar on behalf of the Company including,
but not limited to, financial, administrative and managerial; and (ii) prior
advances made by TriStar to the Company evidenced by certain promissory notes
and accrued interest thereon. Therefore, the Company and Tri Star entered into a
settlement agreement dated March 25, 2003 (the "TriStar Settlement Agreement").
Pursuant to the terms of the TriStar Settlement Agreement, (i) the Company
agreed to settle the $600,164.60 debt due and owing TriStar by the issuance of
30,008,230 shares of its restricted common stock at the rate of $0.02 per share
(based on the average trading price of $0.013 per share on total volume of
1,382,900 shares of the Company's common stock trading on the OTC Bulletin Board
from October 1, 2002 to January 17, 2003); and (ii) TriStar agreed to accept the
issuance of the 30,008,230 shares of restricted common stock as settlement and
full satisfaction of the aggregate debt due and owing it as of the date of the
TriStar Settlement Agreement.
CONVERSION OF SERIES A AND SERIES B PREFERRED SHARES
On March 15, 2003, the Board of Directors of the Company received certain
conversion notices regarding conversion of Series A Preferred shares and Series
B Preferred shares and all then accrued and unpaid dividends into shares of
common stock, and authorized the subsequent issuance of 16,187,000 shares of its
restricted common stock (pre-Reverse Stock Split) as follows.
(a) On March 15, 2003, the Company received conversion notices from certain
holders of Series A Preferred shares. Based upon the respective conversion
notices, the Board of Directors of the Company authorized the issuance of an
aggregate 11,685,900 shares of common stock (pre-Reverse Stock Split) as
follows: (i) 6,200,000 shares of common stock for the conversion of 6,200,000
Series A Preferred shares on a one-to-one basis; and (ii) 5,485,900 shares of
common stock for conversion of the accrued and unpaid dividends at the
conversion price of $0.25 per share.
17
(b) On March 15, 2003, the Company received conversion notices from certain
holders of Series B Preferred shares. Based upon the respective conversion
notices, the Board of Directors of the Company authorized the issuance of an
aggregate 4,501,100 shares of common stock (pre-Reverse Stock Split) as follows:
(i) 2,510,000 shares of common stock for the conversion of 2,510,000 Series B
Preferred shares on a one-to-one basis; and (ii) 1,991,000 shares of common
stock for conversion of the accrued and unpaid dividends at the conversion price
of $0.50 per share.
REVERSE STOCK SPLIT
The Board of Directors of the Company and the shareholders pursuant to the
Written Consent authorized and approved a reverse stock split of one-for-three
hundred of the Company's issued and outstanding shares of common stock (the
"Reverse Stock Split").
The Reverse Stock Split was effectuated based on market conditions and upon
a determination by the Board of Directors that the Reverse Stock Split was in
the best interests of the Company and the shareholders. In the Board's judgment
the Reverse Stock Split would result in the greatest marketability of the common
stock based upon prevailing market conditions and the likely effect on the
market price of the Common Stock and other relevant factors. The intent of the
Reverse Stock Split is to increase the marketability of the Company's common
stock.
The Reverse Stock Split was effectuated on August 8, 2003 (the "Effective
Date") upon filing the appropriate documentation with NASDAQ. The Reverse Stock
Split reduced the Company's issued and outstanding shares of common stock from
156,328,943 to approximately 521,184 shares of common stock. The common stock
will continue to be $0.00025 par value.
As a result of the issuance of an aggregate 79,188,343 shares of restricted
common stock (pre-Reverse Stock Split) pursuant to the Sonanini Settlement
Agreement, the Tri Star Settlement Agreement and conversion of Series A
Preferred stock and Series B Preferred stock, there was a change in control of
the Company. 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 officers and director, and
all officers and directors as a group. As of the date of this Quarterly Report,
there are 521,097 shares of the Company's common stock issued and outstanding.
- --------------------------------------------------------------------------------
Title of Class Name and Address Amount and Nature Percent of
of Beneficial Owner of Beneficial Ownership of Class
- --------------------------------------------------------------------------------
(1)
Common Stock Sonanini Holdings Ltd. 114,089 21.89%
1006 - 100 Park Royal
Vancouver, British Columbia
Canada V7T 1A2
(1)
Common Stock TriStar Financial 106,526 20.44%
Services Inc.
435 Martin Street, Suite 2000
Blaine, Washington 98270
(1)
Common Stock Intergold Mining 58,081 11.14%
Corporation
3305 W. Spring Mountain Road
Suite 60
Las Vegas, Nevada 89102
(1)
Common Stock Alexander W. Cox 76,375 14.65%
428 - 755 Burrard Street
Vancouver, British Columbia
Canada V6Z 1X6
Common Stock All officers and directors -0- 0%
as a group (1 person)
- --------------------------------------------------------------------------------
(1)
These are restricted shares of common stock.
18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Based upon review of a wide variety of factors considered in connection
with evaluation of the Sale and Purchase and the Reverse Stock Split and the
Board of Directors' determination that such actions would be fair to and in the
best interests of the Company and its shareholders, the Board of Directors
authorized and directed the submission of an Information Statement pursuant to
Section 14(c) of the Securities Exchange Act of 1934, as amended (the
"Information Statement").
The preliminary Information Statement was filed with the Securities and
Exchange Commission on May 2, 2003 and the definitive Information Statement was
filed on July 14, 2003. The Information Statement was circulated to the
shareholders of the Company in connection with the taking of corporate action
without a meeting upon the written consent of ten (10) or less shareholders
holding of record a majority of the outstanding shares of the Company's common
stock (the "Written Consent"). As of June 10, 2003, (the "Record Date"), there
were 156,128,943 shares of the Company's common stock issued and outstanding.
The names of the shareholders who signed the Written Consent and their
respective equity ownership of the Company as of the Record Date are as follows:
(i) Sonanini Holdings Ltd. holding of record 34,226,513 shares of common stock
(21.89%); (ii) TriStar Financial Services Inc. holding of record 31,957,630
shares of common stock (20.44%); and (iii) Alexander W. Cox holding of record
22,912,400 shares of common stock (14.66%).
The matters upon which action was taken effective August 7, 2003 pursuant
to the Written Consent include the: (i) authorization of the Board of Directors
to effect a reverse stock split of one-for-three hundred (the "Reverse Stock
Split") of the Company's issued and outstanding shares of common stock; (ii)
approval of the sale of the Company's subsidiary pursuant to future possible
restructuring initiatives, which included approval and authorization of any sale
and purchase agreement relating thereto (the "Sale and Purchase"); (iii)
approval of the election of Grant R. Atkins to serve as a director of the
Company until the next annual meeting of the shareholders or until his successor
has been elected and qualified; (iv) approval of a stock option plan for key
personnel of the Company (the "Stock Option Plan"); and (v) ratification of the
selection of LaBonte & Co. as the Company's independent public accountants for
the fiscal year ending December 31, 2003.
Stock Option Plan
On March 15, 2003, the Board of Directors of the Company unanimously
approved and adopted a stock option plan (the "Stock Option Plan"), which is
attached hereto as an exhibit. The purpose of the Stock Option Plan is to
advance the interests of the Company and its shareholders by affording key
personnel of the Company an opportunity for investment in the Company and the
incentive advantages inherent in stock ownership in the Company. Pursuant to the
provisions of the Stock Option Plan, stock options (the "Stock Options") will be
granted only to key personnel of the Company, generally defined as a person
designated by the Board of Directors upon whose judgment, initiative and efforts
the Company may rely including any director, officer, employee or consultant of
the Company.
19
The Stock Option Plan is to be administered by the Board of Directors of
the Company, which shall determine (i) the persons to be granted Stock Options
under the Stock Option Plan; (ii) the number of shares subject to each option,
the exercise price of each Stock Option; and (iii) whether the Stock Option
shall be exercisable at any time during the option period of ten (10) years or
whether the Stock Option shall be exercisable in installments or by vesting
only. The Stock Option Plan provides authorization to the Board of Directors to
grant Stock Options to purchase a total number of shares of common stock of the
Company, not to exceed 3,500,000 post-Reverse Stock Split shares as at the date
of adoption by the Board of Directors of the Stock Option Plan. At the time a
Stock Option is granted under the Stock Option Plan the Board of Directors shall
fix and determine the exercise price at which shares of common stock of the
Company may be acquired; provided, however, that any such exercise price shall
not be less than that permitted under the rules and policies of any stock
exchange or over-the-counter market which is applicable to the Company.
In the event an optionee who is a director or officer of the Company ceases
to serve in that position, any Stock Option held by such optionee generally may
be exercisable within up to ninety (90) calendar days after the effective date
that his position ceases, and after such 90-day period any unexercised Stock
Option shall expire. In the event an optionee who is an employee or consultant
of the Company ceases to be employed by the Company, any Stock Option held by
such optionee generally may be exercisable within up to sixty (60) calendar days
(or up to thirty (30) calendar days where the optionee provided only investor
relations services to the Company) after the effective date that his employment
ceases, and after such 60- or 30-day period any unexercised Stock Option shall
expire.
No Stock Options granted under the Stock Option Plan will be transferable
by the optionee, and each Stock Option will be exercisable during the lifetime
of the optionee subject to the option period of ten (10) years or limitations
described above. Any Stock Option held by an optionee at the time of his death
may be exercised by his estate within one (1) year of his death or such longer
period as the Board of Directors may determine.
The exercise price of a Stock Option granted pursuant to the Stock Option
Plan shall be paid in cash or certified funds upon exercise of the option.
Incentive Stock Options
The Stock Option Plan further provides that, subject to the provisions of
the Stock Option Plan and prior shareholder approval, the Board of Directors may
grant to any key personnel of the Company who is an employee eligible to receive
options one or more incentive stock options to purchase the number of shares of
common stock allotted by the Board of Directors (the "Incentive Stock Options").
The option price per share of common stock deliverable upon the exercise of an
Incentive Stock Option shall be no less than fair market value of a share of
common stock on the date of grant of the Incentive Stock Option. In accordance
with the terms of the Stock Option Plan, "fair market value" of the Incentive
Stock Option as of any date shall not be less than the closing price for the
shares of common stock on the last trading day preceding the date of grant. The
option term of each Incentive Stock Option shall be determined by the Board of
Directors, which shall not commence sooner than from the date of grant and shall
terminate no later than ten (10) years from the date of grant of the Incentive
Stock Option, subject to possible early termination as described above.
As of the date of this Quarterly Report, no Stock Options nor Incentive
Stock Options have been granted. The Company may cause to be filed with the
Securities and Exchange Commission registration statements on "Form S-8 - For
Registration Under the Securities Act of 1933 of Securities to Be Offered to
Employees Pursuant to Employee Benefit Plans". An S-8 registration statement may
become effective registering Stock Options under the Stock Option Plan in the
amount of 3,500,000 shares at $0.50 per share. Upon approval by the shareholders
of the Stock Option Plan, the Board of Directors will be authorized, without
further shareholder approval, to grant such options from time to time to acquire
up to an aggregate of 3,500,000 shares of the Company's restricted common stock.
20
Previous Non-Qualified Stock Option Plan
During 1997, the Board of Directors of the Company authorized a
Non-Qualified Stock Option Plan (the "Non-Qualified SOP"). The Non-Qualified SOP
authorized the issuance of 2,000,000 stock options that can be exercised at $.50
per share of common stock and an additional 2,500,000 stock options that can be
exercised to purchase shares of common stock at $1.00 per share. All stock
options granted expire December 27, 2017. Shares which may be acquired through
the Non-Qualified SOP may be authorized but unissued shares of common stock or
issued shares of common stock held in the Company's treasury.
During fiscal years ended 1999 and 2000, the Board of Directors of the
Company authorized the grant of stock options to certain officers, directors and
significant consultants. As of the date of this Quarterly Report, there are
11,500 stock options (3,450,000 pre-Reverse Stock Split) granted and outstanding
which are exercisable into 11,500 shares of common stock (3,450,000 pre-Reverse
Stock Split). As of the date of this Quarterly Report, no stock options under
the Non-Qualified SOP have been exercised.
Subsequent to June 30, 2003, and as of the date of this Quarterly Report,
the Board of Directors of the Company voted to terminate the Non-Qualified SOP
and to unilaterally cancel the 11,500 stock options (3,450,000 pre-Reverse Stock
Split) as granted. The Board of Directors based its decision regarding
cancellation of the stock options on the fact that the Non-Qualified SOP and
subsequent grants of stock options were done at a time when management
anticipated that the Company would have a viable and ongoing business
development venture relating to the mining claims located on the Blackhawk
Property. The grantees did not perform the services intended as the gold mining
claims did not contain any gold and associated business operations failed. The
business venture was subject to litigation (as previously disclosed in
regulatory filings) and is no longer being pursued by the Company.
ITEM 5. OTHER INFORMATION
No report required.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
10.1 Stock Option Plan.
99.1 Certifications Pursuant to 18 U.S.C. Section 1350.
Reports:
Report on Form 8-K filed on March 31, 2003 regarding
Item 1. Changes in Control of Registrant.
21
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 11, 2003 By: /s/ Grant Atkins
--------------------
Grant Atkins, President and
Chief Executive Officer
Dated: August 11, 2003 By: /s/ Vaughn Barbon
---------------------
Vaughn Barbon, Chief Financial
Officer
22
LETTERHEAD OF INTERGOLD CORPORATION
CERTIFICATION
I, Grant Atkins, certify that:
1. I have reviewed and read this Quarterly Report on Form 10-QSB of Intergold
Corporation (the "Company");
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
Quarterly Report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-14 and 15d-14) for the
Company and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
subsidiary, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
(b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
(c) presented in this Quarterly Report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the Company's
auditors and board of directors performing the equivalent functions of an
audit committee:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
6. I have indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Grant Atkins
----------------
Grant Atkins, President and Chief
Executive Officer
LETTERHEAD OF INTERGOLD CORPORATION
CERTIFICATION
I, Vaughn Barbon, certify that:
1. I have reviewed and read this Quarterly Report on Form 10-QSB of Intergold
Corporation (the "Company");
2. Based on my knowledge, this Quarterly Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
Quarterly Report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-14 and 15d-14) for the
Company and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
subsidiary, is made known to us by others within those entities,
particularly during the period in which this Quarterly Report is being
prepared;
(b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this Quarterly Report (the "Evaluation Date"); and
(c) presented in this Quarterly Report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the Company's
auditors and board of directors performing the equivalent functions of an
audit committee:
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
controls; and
6. I have indicated in this Quarterly Report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
/s/ Vaughn Barbon
-----------------
Vaughn Barbon, Chief Financial Officer