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, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _______
Commission file number 0-25455
INTERGOLD CORPORATION
---------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0365453
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5000 Birch Street, West Tower, Suite 4000
Newport Beach, California 92660
-------------------------------
(Address of Principal Executive Offices)
(949) 476-3611
--------------
(Issuer's telephone number)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuers classes of common
equity, as of the latest practicable date:
Class Outstanding as of August 13, 1999
- ----- ---------------------------------
Common Stock, $.00025 par value 52,452,000
Transitional Small Business Disclosure Format (check one)
Yes No X
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
The unaudited financial statements of Intergold Corporation (the "Company")
reflect all adjustments which are, in the opinion of management, necessary to
present a fair statement of the operating results for the interim period
presented.
INTERGOLD CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
TABLE OF CONTENTS
-----------------
Page
----
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 14
1
INTERGOLD CORPORATION
(A Development Stage Company)
Balance Sheet
(Unaudited)
June 30,
1999
-----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,187
PROPERTY PLANT AND EQUIPMENT
Equipment (net of depreciation) 3,850
OTHER ASSETS
Available-for-sale investments 65,000
-----------
Total Assets $ 76,037
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 153,851
Advances payable 175,935
Directors fees payable 33,500
Notes payable 551,890
Accrued interest payable 153,993
-----------
Total Liabilities 1,069,169
-----------
STOCKHOLDERS' EQUITY (Deficit)
Preferred stock, $.001 par value; authorized at June 30, 1999
75,000,000 shares; issued and outstanding at June 30, 1999 -
Series A - 10,000,000 shares, 10,000
Series B - 2,510,000 shares 2,510
Upon Liquidation, Series A shares have a $.25 per share preference
over other preferred or common stock, Series B shares have a
$.50 preference over other non-Series A preferred or common stock
Common stock $.00025 par value; authorized at June 30, 1999 -
125,000,000 shares; issued and outstanding at
June 30, 1999, 52,452,000 shares 13,114
Paid - in capital 7,210,144
Accumulated unrealized gain/loss on investments (105,000)
Accumulated deficit through development stage (8,123,900)
-----------
Total Stockholders' Equity (Deficit) (993,132)
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 76,037
===========
See accompanying summary of accounting policies and notes to financial statements.
2
INTERGOLD CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
Inception
For the 3 Months Ended For the 6 Months Ended (July 26,
June 30, June 30, 1996) to
--------------------- --------------------- June 30,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
REVENUES
Other income $ -- $ -- $ -- $ -- $ 1,699
------------ ------------ ------------ ------------ ------------
Total Revenues -- -- -- -- 1,699
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Assay and lab 796 99,107 1,031 185,814 392,025
Geological consultants 63,361 24,639 95,157 74,968 750,060
Independent project consulting 60,788 -- 60,788 -- 60,788
Consultants - survey and mapping 11,273 50,000 11,273 50,000 11,273
Drilling and drill core management 3,324 -- 3,326 -- 216,569
Metallurgical 125,802 -- 125,802 -- 280,639
Research and development 315,000 -- 3,395,000 -- 3,485,000
Claims maintenance and state fees 5,004 28,168 21,732 74,566 135,993
Staking 9,053 20,943 9,053 38,127 169,132
Wages and salaries -- -- 59 -- 65,140
Miscellaneous (1,539) -- -- -- 29,148
Depreciation 148 -- 296 -- 450
Travel -- -- -- -- 4,686
------------ ------------ ------------ ------------ ------------
Total Property Exploration Expenses 593,010 222,858 3,723,517 423,475 5,600,903
------------ ------------ ------------ ------------ ------------
ADMINISTRATIVE EXPENSES
Overhead and Administration 273,900 145,000 582,400 235,000 1,673,400
Reports/information/subscripitions/promotion 14,568 26,735 16,148 26,735 126,500
Legal and accounting 25,170 2,046 44,560 11,324 289,852
Consultants 46,500 -- 56,500 -- 118,500
Travel 23,785 21,297 36,456 21,297 113,201
Directors Fees 6,000 4,500 12,000 10,500 41,500
Advertising 3,049 -- 7,367 -- 7,367
Auto 5,278 -- 7,706 -- 27,887
Courier and postage 4,476 976 5,415 1,926 19,084
Internet design and access 2,308 780 2,308 3,060 10,705
Office rent 667 381 1,244 621 14,582
Office supplies 5,724 2,158 17,627 2,388 21,844
Transfer agent 295 721 545 763 3,061
Bank charges 218 193 660 402 2,934
Security -- -- -- -- 867
Telephone and fax 133 -- 201 -- 3,707
Share issue transactions -- -- -- -- 10,500
Miscellaneous 96 1,106 202 1,106 8,838
Wages and salaries -- -- -- -- 11,944
Utilities -- -- -- -- 34,431
------------ ------------ ------------ ------------ ------------
Total Administrative Expenses 412,167 205,892 791,339 315,122 2,540,704
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 1,005,177 428,750 4,514,856 738,597 8,141,607
------------ ------------ ------------ ------------ ------------
Operating Income (Loss) (1,005,177) (428,750) (4,514,856) (738,597) (8,139,908)
OTHER INCOME (EXPENSE)
Sale of Future Profit Sharing Interest -- -- -- 170,000 170,000
Interest Expense (11,074) (20,720) (18,270) (33,661) (153,992)
------------ ------------ ------------ ------------ ------------
Net (Loss) $ (1,016,251) $ (449,470) $ (4,533,126) $ (602,258) $ (8,123,900)
============ ============ ============ ============ ============
Income (Loss) per Share $ (0.019) $ (0.009) $ (0.090) $ (0.013) $ (0.246)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 52,302,549 47,943,000 50,475,315 47,943,000 32,957,396
============ ============ ============ ============ ============
See accompanying summary of accounting policies and notes to financial statements
3
INTERGOLD CORPORATION
(A Development Stage Company)
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Inception
For the 3 Months Ended For the 6 Months Ended (July 26,
June 30, June 30, 1996) to
------------------- ------------------- June 30,
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(1,016,251) $ (449,470) $(4,533,126) $ (602,258) $(8,123,900)
Adjustments to reconcile net (loss) to cash
Depreciation and Amortization 148 -- 296 -- 450
Changes in Assets and Liabilities
Accounts payable 76,829 -- 35,229 -- 153,851
Director fees payable 6,000 4,500 12,000 10,500 33,500
Accrued interest payable 11,075 20,719 18,271 33,661 153,993
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (922,199) (424,251) (4,467,330) (558,097) (7,782,106)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs -- -- 1,771 -- --
Acquisition of available-for-sale investments -- -- -- (170,000) (170,000)
Equipment purchases -- (2,664) -- (2,664) (4,300)
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Investing Activities -- (2,664) 1,771 (172,664) (174,300)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 100 -- 1,108 -- 13,114
Sale of preferred stock Series A -- -- -- -- 10,000
Sale of preferred stock Series B 1,760 -- 2,510 -- 2,510
Additional paid-in capital 978,140 -- 3,726,382 -- 7,210,144
Advances - net of payments (67,600) 437,512 (6,104) 609,513 175,935
Note payable advances -- -- 500,000 -- 551,890
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 912,400 437,513 4,223,896 609,513 7,963,593
----------- ----------- ----------- ----------- -----------
Net increase in cash (9,799) 10,598 (241,663) (121,248) 7,187
Cash and cash equivalents - Beginning of period 16,986 2,571 248,850 134,417 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 7,187 $ 13,169 $ 7,187 $ 13,169 $ 7,187
=========== =========== =========== =========== ===========
During 1998, the Company accrued $135,722 of interest on outstanding notes and advances payable.
During 1999, the Company has accrued $18,271 of interest on outstanding notes and advances payable.
Since inception the Company has not paid or capitalized any interest.
See accompanying summary of accounting policies and notes to financial statements.
4
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Intergold Corporation (the Company) was incorporated on July 26, 1996 under
the laws of the State of Nevada. The Company is a development stage
company.
International Gold Corporation's sole asset is a block of 321 contiguous
unpatented lode mining claims (the Blackhawk Claim Group) located within
T4S, R17E (Boise Meridian) in Lincoln County, south-central Idaho.
The Company engaged the services of consultants to examine the geology and
gold mineralization within the claim group and if warranted to recommend a
program for the further exploration of the property. The Company further
retained the services of Bateman Engineering International to independently
verify the Company's findings and results pursuant to its Blackhawk 1
claims that included independent drilling and assay work. The Company has
also engaged Dames and Moore to provide independent verification of assay
and metallurgical recovery work performed by Auric Metallurgical
Laboratories, as well as environmental assessment, and other services.
Basis of Accounting
-------------------
The Company utilizes the accrual basis of accounting. Financial statements
have been prepared using generally accepted accounting principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements for the three months ended June 30,
1999 and June 30, 1998 and for the six months ended June 30, 1999 and June
30, 1998 include the accounts of Intergold and its wholly owned subsidiary,
International Gold Corporation. International Gold Corporation 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.
Research, Development and Exploration Costs
-------------------------------------------
Research, development and exploration costs are expensed as incurred.
5
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash Equivalents
----------------
For purposes of the Statement of Cash Flows, cash equivalents are defined
as investments with maturities of three months or less.
Depreciation
------------
The Company presently depreciates all equipment over 7 years using the
straight-line method.
NOTE 2: ADVANCES AND NOTES PAYABLE
Advances and Notes Payable are comprised of the following:
Advances
--------
June 30, 1999
-------------
Investor Communications Int'l, Inc. $ (17,404)
Tri Star Financial Services, Inc. 26,566
Amero-can Marketing, Inc. 166,773
---------
$ 175,935
=========
The advances all bear 10% simple interest and are due on demand. There is
$146,567 of interest accrued on the advances as of June 30, 1999.
6
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 2: ADVANCES AND NOTES PAYABLE (continued)
Notes Payable
-------------
For the redemption of 1,889,750 shares of restricted
common stock of the Company payable at par value of
$.00025. $ 1,890
To Sonanini Holdings, 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 June 30, 1999
totals $3,152. 50,000
To 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. Maturity is upon transfer
of technology and is expected to be by the Fall of
1999. Accrued interest on the note through June 30,
1999 totals $2,137. 250,000
To 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. Maturity is upon transfer of
technology and is expected to be by the Fall of 1999.
Accrued interest on the note through June 30, 1999
totals $2,137. 250,000
Total $ 551,890
=========
NOTE 3: STOCKHOLDERS' EQUITY
Common Stock
------------
On August 23, 1996, 1,013,000 shares were issued under an SEC Exemption
Reg. D-504 offering with gross proceeds of $10,130.
On July 23, 1997, the Company issued 42,000,000 pursuant to the
Stock-For-Stock Agreement entered into with Intergold Mining Corporation in
connection with the acquisition of International Gold Corporation.
On August 6, 1997, 1,000,000 shares were issued under an SEC Exemption Reg.
D-504 offering with gross proceeds of $500,000.
On September 9, 1997, 450,000 shares were issued under an SEC Exemption
Reg. D-504 offering with gross proceeds of $450,000.
On December 31, 1998, 79,000 shares were issued under Section 4(2) of the
Securities Act of 1933 in exchange for $39,500 of amounts owed to outside
vendor.
7
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 3: STOCKHOLDERS' EQUITY (continued)
Effective August 6, 1998, the Company increased the number of authorized
shares of common stock from 80,000,000 to 125,000,000 at a par value of
$.00025 per share.
On January 6, 1999, 30,000 shares were issued under Section 4(2) of the
Securities Act of 1933 in exchange for $15,000 owed to an outside vendor.
On March 18, 1999, the Company issued 4,000,000 restricted shares pursuant
to a sublicense agreement for metallurgical and assay technology and
know-how (See Note 6).
On May 4, 1999, the Company received $100,000 for the exercise of 400,000
Series A warrants to purchase 400,000 restricted shares of common stock at
$0.25/share pursuant to the Preferred Series A private placement memorandum
dated August 10, 1998.
At June 30, 1999 there were 52,452,000 shares of common stock outstanding.
Preferred Stock
---------------
The Company authorized for issuance 5,000,000 shares of Preferred Stock 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.
Pursuant to a private placement memorandum dated August 10, 1998, the
Company offered Series A units at a cost of $50,000. 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 expire
on July 31, 2001. The Series A preferred shares are redeemable by the
Company at any time after July 31, 2001 for $.25 per share, plus accrued
and unpaid dividends. Dividends will accrue cumulatively at the rate of 20%
per year, and will be paid annually in arrears when, as and if declared by
the Company's Board of Directors. The Company may redeem the warrants at
any time at a cost of $.01 per warrant. 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.
Through June 30, 1999, the Company has issued 10,000,000 Series A preferred
shares. The issuance generated $2,500,000. As of June 30, 1999, there are
10,000,000 Series A preferred shares and 9,600,000 Series A warrants
outstanding.
8
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 3: STOCKHOLDERS' EQUTY (continued)
The Company has prepared a private placement offering memorandum dated
December 15, 1998 to offer Series B units at a cost of $50,000 per unit.
Each unit consists 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 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. The Series B
offering comprises a total of 5,000,000 convertible, redeemable preferred
shares and 5,000,000 warrants. As of June 30, 1999, the Company had
received $1,255,000, representing 2,510,000 shares of Series B preferred
stock and an equal number of warrants, pursuant to this private placement
memorandum.
NOTE 4: JOINT VENTURE AGREEMENT
On December 11, 1997, the Company and subsidiary entered into a Joint
Venture Agreement with Goldstate Corporation, an OTC Bulletin Board public,
non-reporting company. Under terms of the agreement, the Company has
received 1,000,000 restricted common shares in the capital of Goldstate
Corporation in exchange for the sale of a future profit sharing interest.
In 1997, Goldstate Corporation also reimbursed the Company $100,000 for
Blackhawk II claims maintenance and staking expenses incurred during 1997
pursuant to the agreement. Goldstate Corporation will be responsible for
providing all funding and will initially retain 80% of the profits
resulting from the agreement, while the Company will retain 20% of the
profits. After Goldstate Corporation is repaid all of its invested capital,
the profit distribution will be 51% to Goldstate and 49% to the Company.
Originally, International Gold Corporation held possessory title to 439
unpatented lode mining claims that form the subject of this agreement known
as Blackhawk II. These claims are in addition to the 321 Blackhawk I claims
that form the basis of the Company's current business prospects. The
Company completed the transfer of the 439 unpatented lode mining claims to
Goldstate Corporation via a quit claim deed on June 10, 1999. As of June
30, 1999, there were no jointly controlled assets pursuant to the agreement
and no profits had been generated. Accordingly, the Company has not
included any related amounts in its financial statements pursuant to this
agreement.
The sole director of Goldstate Corporation is also a director of Intergold
Corporation.
9
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 5: INVESTMENTS
AVAILABLE FOR SALE INVESTMENTS
Pursuant to the Joint Venture Agreement discussed in Note 4 with Goldstate
Corporation, the Company now owns 1,000,000 restricted common shares in
Goldstate Corporation. This represented approximately 10 percent of the
total common stock issued by Goldstate Corporation as of December 31, 1998.
As these shares can not be marketed for a period of twelve months from
issuance the Company has valued the investment at 50% of the trading value
of the Goldstate Corporation stock. Pursuant to this methodology, this
investment was recorded at the discounted fair value as of the date of
stock issuance, $170,000. This investment is classified as an
available-for-sale investment. Accordingly any unrealized gain/loss on the
change in discounted value of the investment is reported in the equity
section of the balance sheet. The accumulated unrealized loss on the
investment as of June 30, 1999 is $105,000. During the three month period
ended June 30, 1999, the Company has recorded an unrealized loss of
$25,000. The discounted value of the investment as of June 30, 1999 was
$65,000.
NOTE 6: TECHNOLOGY SUB-LICENSE AGREEMENT
On March 18, 1999, the Company entered into a definitive 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 is 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 has
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 are 3% interest bearing notes and are
payable upon the transfer of the technology.
10
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 6: TECHNOLOGY SUB-LICENSE AGREEMENT (continued)
As the shares issued pursuant to the definitive sub-license agreement with
Geneva Resources, Inc. dated March 18, 1999 may not be marketed for a
period of twelve months from issuance, the Company has valued the
investment in the technology sub-license agreement at 50% of the trading
value of the Company's stock at March 18, 1999 plus the $500,000 in notes
payable issued pursuant to the agreement. Pursuant to this methodology,
this investment was recorded at the discounted fair value as of the date of
stock and notes issuance, $2,860,000.
As of June 30, 1999 the promissory notes and common stock have been issued
to the various parties, however, the related technology has not been
transferred. These promissory notes become due and payable upon the
transfer of the technology. Transfer of the technology will occur after
completion of pilot scale testing. The technology is scheduled for transfer
during 1999. The Company has expensed the amounts paid pursuant to the
agreement as research and development expense.
NOTE 7: 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. Options granted under the plan will
not be in lieu of salary of other compensation for services.
As of December 31, 1998, no options had been granted, exercised or
forfeited, and no options had expired. During the three month period ending
March 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 options as of
June 30, 1999 and 1998 are as follows:
11
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 7: EMPLOYEE STOCK OPTION PLAN (continued)
June 30, 1999 June 30, 1998
--------------------- -----------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding at Beg. of Period -0- -0- -0- -0-
Outstanding at End of Period 3,450,000 $.71/share -0- -0-
Exercisable at End of Period 3,450,000 $.71/share -0- -0-
Options Granted 3,450,000 $.71/share -0- -0-
Options Exercised -0- -0- -0- -0-
Options Forfeited -0- -0- -0- -0-
Options Expired -0- -0- -0- -0-
As of June 30, 1999, 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 18 years 266 days. There are 3,450,000
options that are exercisable with a weighted average exercise price of $.71
per share of common stock.
NOTE 8: SERVICES AGREEMENT
The Company signed an agreement on March 18, 1999 that covers services
provided by Auric Metallurgical Laboratories, LLC which include specific
ore assay, analytical procedures development, and specific metallurgical
recovery and ore extraction procedures development on an ever increasing
scale. Through the agreement, Auric will provide up to $1,500,000 of
services during the period October 1998 through the Fall of 1999. As of
June, 1999, $625,000 in services related to this agreement have been paid.
The services performed under this agreement are recorded as research and
development expenses.
NOTE 9: INCOME TAXES
The Company incurred operating losses for the year ended December 31, 1998
of $1,738,196. The Company has adopted FASB No. 109 for reporting purposes.
As of December 31, 1998, the Company had net operating loss carry forwards
of $3,456,454, which expire between the years 2006 - 2013. The deferred tax
assets resulting from these carry forwards were as follows:
1998
----
Deferred tax assets $ 1,175,188
Less valuation of net assets (1,175,188)
-----------
$ --
===========
12
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 10: GOING CONCERN AND CONTINUED OPERATIONS
At June 30, 1999, the Company has not generated significant revenues from
operations. The Company's successful financial operations and movement into
an operating basis are contingent on the development of the lode mining
claims and the continuing ability of generating capital financing. The
Company intends to finance operations for the next twelve months through
the December 15, 1998 private placement discussed in Note 3. This offering
would generate approximately $2,500,000 in total. The Company also believes
that the shareholders will exercise the conversion privileges of the
warrants issued with the Preferred A and B shares discussed in Note 3 as
needed.
NOTE 11: MANAGEMENT SERVICES AGREEMENT
The Company, on January 1, 1999, entered into a management services
agreement with Investor Communications, Inc. ("Investor Communications") to
provide management of the day-to-day operations of the Company. 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.
The individuals comprising the management teams provided by Investor
Communications and Amerocan are the same individuals managing the
operations of Goldstate Corporation. One of the three directors of
Intergold Corporation has been employed by Investor Communications and
Amerocan and is part of the management teams provided to Intergold
Corporation, its subsidiary, and Goldstate Corporation.
NOTE 12: CONTINGENCIES
The Company is subject to a claim for unpaid consulting fees amounting to
$45,502. The consulting fees are for assay and metallurgical services
provided to International Gold Company during 1998. The Company has
substantial defenses and offsets to the claim. The maximum potential
liability due to this claim is $45,502. No provision for this claim has
been recorded in the financial statements.
The Company is subject to a claim for unpaid consulting fees amounting to
$8,757 plus interest of $657 plus legal costs of $2,900 for a total of
$12,314. The consulting fees are for claim staking services provided to
International Gold Company during 1998. The Company has substantial
defenses, has incurred mitigating charges relating to the claim, and has
filed an offsetting counter-claim in the approximate amount of $21,000. The
maximum potential liability due to this claim is $12,314. No provision for
this claim has been recorded in the financial statements.
13
INTERGOLD CORPORATION
Notes to Unaudited Financial Statements
June 30, 1999
NOTE 12: CONTINGENCIES (continued)
Due to the nature of the Company's operations, the Technology Sub-License
(license) that the Company will receive pursuant to the discussion in Note
6 may have a significantly impaired value once it is transferred. While the
Company feels that the license is necessary to develop the Blackhawk claims
to their potential, the speculative nature of the claims and the desire to
present the Company's assets conservatively require the Company to value
the license at the discounted value of potential future cash flows that
will be generated by the claims. As the claims are still in an exploration
stage, it is anticipated that any potential future cash flows would be
deeply discounted. The Company expects that due to this conservative
approach a significant portion of the license value will be shown as an
impairment loss in future periods. The Company has not determined the
discounted future cash flow value at this time.
14
Item 2. Management's Discussion and Analysis or Plan of Operation
- -----------------------------------------------------------------
Results of Operation
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Quarter Ended June 30, 1999 compared to June 30, 1998
- -----------------------------------------------------
For the three-month period ended June 30, 1999, the Company recorded a net
loss of $1,016,251 compared to a net loss of $449,470 in the corresponding
period of 1998. During the three-month period ended June 30, 1999 and June 30,
1998, the Company recorded no income.
During the three-month period ended June 30, 1999, the Company recorded
operating expenses of $1,005,177 compared to $428,750 of operating expenses
recorded in the same period for 1998. Property exploration expenses increased
approximately $370,152 in the three-month period in 1999 primarily relating to
work orders for research and development and metallurgical services.
Administrative expenses increased approximately $206,275 in the three-month
period in 1999 compared to 1998. This increase was due primarily to an increase
in overhead and administrative expenses resulting from the increasing scale and
scope of the overall corporate activity.
Six Months Ended June 30, 1999 compared to June 30, 1998
- --------------------------------------------------------
For the six-month period ended June 30, 1999, the Company recorded a net
loss of $4,533,126 compared to a net loss of $602,258 in the corresponding
period of 1998. During the six-month period ended June 30, 1999 and June 30,
1998, the Company recorded no income.
During the six-month period ended June 30, 1999, the Company recorded
operating expenses of $4,514,856 compared to $738,597 of operating expenses
recorded in the same period for 1998. Property exploration expenses increased
significantly in the approximate amount of $3,300,042 in the six-month period in
1999 primarily due to the amounts paid by the Company as research and
development expenses associated with the technology sub-license agreement dated
March 18, 1999 between the Company and Geneva Resources, Inc. (the "Sub-License
Agreement"), and work orders for metallurgical services. Administrative expenses
increased approximately $476,217 in the six-month period in 1999 compared to
1998. This increase was due primarily to an increase in overhead and
administrative expenses resulting from the increasing scale and scope of the
overall corporate activity.
Liquidity and Capital Resources
- -------------------------------
As of the six-month period ended June 30, 1999, the Company's total assets
were $76,037. This decrease from fiscal year ended December 31, 1998 was due
primarily to a decrease in cash and cash equivalents. As of the six-month period
ended June 30, 1999, the Company's total liabilities were $1,069,169. This
overall increase from fiscal year ended December 31, 1998 was due primarily to
the promissory notes issued by the Company to Geneva Resources, Inc. and AuRIC
Metallurgical Laboratories, LLC. in the amount of $250,000 each, pursuant to the
terms and conditions of the Sub-License Agreement, and the accrued interest on
certain advances.
Stockholders' Equity (deficit) decreased from $(45,686) for fiscal year
ended December 31, 1998 to $(993,132) for the six-month period ended June 30,
1999.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
On October 23, 1998, the Company filed a complaint against a previous geological
consultant for the Company in the District Court, Fourth Judicial District, in
the State of Idaho, County of Ada. The complaint seeks damages in the
approximate amount of $40,000 plus legal fees for business interruption losses
claimed by the Company against the geological consultant. The consultant filed
an answer on July 13, 1999 without providing counterclaims.
Item 2. Changes in Securities and Use of Proceeds
- -------------------------------------------------
No report required.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
No report required.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
No report required.
Item 5. Other Information
- -------------------------
No report required.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) No exhibits required.
(b) No reports required.
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 13, 1999 By: /s/ Gary Powers
- ---------------------- -------------------
Gary Powers, President
Dated: August 13, 1999 By: /s/ Grant Atkins
- ---------------------- --------------------
Grant Atkins, Secretary
16