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 September 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 November 8, 1999
- ----- ----------------------------------
Common Stock, $.00025 par value 53,052,000
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)
September 30, 1999
TABLE OF CONTENTS
-----------------
Page
----
Balance Sheet 2
Statements of Operations 3
Statements of Cash Flows 4
Notes to Financial Statements 5 - 14
INTERGOLD CORPORATION
(A Development Stage Company)
Balance Sheet
(Unaudited)
Septmber 30,
1999
-----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 33,697
PROPERTY PLANT AND EQUIPMENT
Equipment (net of depreciation) 3,702
OTHER ASSETS
Available-for-sale investments 57,500
-----------
Total Assets $ 94,899
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ 235,126
Advances payable 651,941
Directors fees payable 39,500
Notes payable 551,890
Accrued interest payable 162,107
-----------
Total Liabilities 1,640,564
-----------
STOCKHOLDERS' EQUITY (Deficit)
Preferred stock, $.001 par value; authorized at September 30, 1999
75,000,000 shares; issued and outstanding at September 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 September 30, 1999 -
125,000,000 shares; issued and outstanding at
September 30, 1999, 53,052,000 shares 13,263
Paid - in capital 7,359,995
Accumulated unrealized gain/loss on investments (112,500)
Accumulated deficit through development stage (8,818,933)
-----------
Total Stockholders' Equity (Deficit) (1,545,665)
-----------
Total Liabilities and Stockholders' Equity (Deficit) $ 94,899
===========
See accompanying summary of accounting policies and notes to financial statements.
2
INTERGOLD CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
Inception
(July 26,
For the 3 Months Ended Sep. 30, For the 9 Months Ended Sep. 30, 1996) to
------------------------------- ------------------------------- September 30,
1999 1998 1999 1998 1999
------------ ------------ ------------ ------------ ------------
REVENUES
Other income $ -- $ -- $ -- $ $ 1,699
------------ ------------ ------------ ------------ ------------
Total Revenues -- -- -- -- 1,699
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
PROPERTY EXPLORATION EXPENSES
Assay and lab (1,031) 119,065 -- 304,879 390,994
Geological consultants (15,213) 53,011 79,944 127,979 734,847
Independent project consulting 209,838 -- 270,626 -- 270,626
Consultants - survey and mapping 9,786 20,198 21,059 70,198 21,059
Drilling and drill core management 37,556 150,859 40,882 150,859 254,125
Metallurgical (9,700) -- 651,102 -- 895,939
Research and development -- -- 2,860,000 -- 2,860,000
Claims maintenance and state fees 45,200 32,104 66,932 106,670 181,193
Staking 2,784 (14,957) 11,837 23,170 171,916
Wages and salaries -- -- 59 -- 65,140
Miscellaneous -- 137 -- 137 29,148
Depreciation 148 -- 444 -- 598
Travel -- -- -- -- 4,686
------------ ------------ ------------ ------------ ------------
Total Property Exploration Expenses 279,368 360,417 4,002,885 783,892 5,880,271
------------ ------------ ------------ ------------ ------------
ADMINISTRATIVE EXPENSES
Overhead and Administration 316,505 125,000 898,905 360,000 1,989,905
Reports/information/subscripitions/promotion 7,257 2,160 23,405 28,895 133,757
Legal and accounting 24,016 2,336 68,576 13,660 313,868
Consultants 25,000 2,000 81,500 2,000 143,500
Travel 36,575 915 73,031 22,212 149,776
Directors Fees 6,000 4,500 18,000 15,000 47,500
Advertising 1 14,000 7,368 14,000 7,368
Auto 5,204 3,475 12,910 3,475 33,091
Courier and postage 1,242 1,481 6,657 3,407 20,326
Internet design and access 362 -- 2,670 3,060 11,067
Insurance -- 2,194 80 2,194 80
Office rent -- 241 1,244 862 14,582
Office supplies 213 84 17,840 2,472 22,057
Transfer agent 150 180 695 943 3,211
Bank charges 140 293 800 695 3,074
Security -- 867 -- 867 867
Telephone and fax 206 -- 407 -- 3,913
Share issue transactions -- -- -- -- 10,500
Miscellaneous (15,321) 9,998 (15,199) 11,104 (6,563)
Wages and salaries -- -- -- -- 11,944
Utilities -- -- -- -- 34,431
------------ ------------ ------------ ------------ ------------
Total Administrative Expenses 407,550 169,724 1,198,889 484,846 2,948,254
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 686,918 530,141 5,201,774 1,268,738 8,828,525
------------ ------------ ------------ ------------ ------------
Operating Income (Loss) (686,918) (530,141) (5,201,774) (1,268,738) (8,826,826)
OTHER INCOME (EXPENSE)
Sale of Future Profit Sharing Interest -- -- 170,000 170,000
Interest Expense (8,115) (26,003) (26,385) (59,664) (162,107)
------------ ------------ ------------ ------------ ------------
Net (Loss) $ (695,033) $ (556,144) $ (5,228,159) $ (1,158,402) $ (8,818,933)
============ ============ ============ ============ ============
Income (Loss) per Share $ (0.013) $ (0.012) $ (0.102) $ (0.024) $ (0.252)
============ ============ ============ ============ ============
Weighted Average Number of
Common Shares Outstanding 52,673,739 47,943,000 51,353,042 47,943,000 35,029,965
============ ============ ============ ============ ============
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 9 Months Ended (July 26,
Sep. 30, Sep. 30, 1996) to
-------------------------- -------------------------- September 30,
1999 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (695,033) $ (556,144) $(5,228,159) $(1,158,402) $(8,818,933)
Adjustments to reconcile net (loss) to cash
Depreciation and Amortization 148 -- 444 -- 598
Changes in Assets and Liabilities
Accounts payable 81,275 -- 116,505 -- 235,126
Director fees payable 6,000 4,500 18,000 15,000 39,500
Accrued interest payable 8,114 26,003 26,385 59,664 162,107
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Operating Activities (599,496) (525,641) (5,066,825) (1,083,738) (8,381,602)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs -- -- 1,771 -- --
Acquisition of available-for-sale investments -- -- (170,000) (170,000)
Equipment purchases -- (41,601) -- (44,265) (4,300)
----------- ----------- ----------- ----------- -----------
Net Cash Flows Used for Investing Activities -- (41,601) 1,771 (214,265) (174,300)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock 150 -- 1,257 -- 13,263
Sale of preferred stock Series A -- 3,800 -- 3,800 10,000
Sale of preferred stock Series B -- -- 2,510 -- 2,510
Additional paid-in capital 149,851 946,200 3,876,233 946,200 7,359,995
Advances - net of payments 476,005 (207,608) 469,901 401,905 651,941
Note payable advances -- 50,000 500,000 50,000 551,890
----------- ----------- ----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 626,006 792,392 4,849,901 1,401,905 8,589,599
----------- ----------- ----------- ----------- -----------
Net increase in cash 26,510 225,150 (215,153) 103,902 33,697
Cash and cash equivalents - Beginning of period 7,187 13,169 248,850 134,417 --
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents - End of period $ 33,697 $ 238,319 $ 33,697 $ 238,319 $ 33,697
=========== =========== =========== =========== ===========
During 1998, the Company accrued $135,722 of interest on outstanding notes and advances payable.
During 1999, the Company has accrued $26,385 of interest onoutstanding 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
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 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
September 30, 1999 and September 30, 1998 and for the nine months
ended September 30, 1999 and September 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
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 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
--------
================================================================
September
30, 1999
----------------------------------------------------------------
Investor Communications Int'l, Inc. $ 15,376
Tri Star Financial Services, Inc. 26,567
Alexander Cox 50,500
Sonanini Holdings 417,500
Amero-can Marketing, Inc. 141,998
--------
$651,941
================================================================
The advances all bear 10% simple interest and are due on demand. There
is $150,056 of interest accrued on the advances as of September 30,
1999.
6
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 2: ADVANCES AND NOTES PAYABLE (continued)
Notes Payable
-------------
======================================================================
For the redemption of 1,889,750 shares of $ 1,890
restricted common stock of the Company payable at
par value of $.00025.
To Sonanini Holdings, bearing interest at 7% per 50,000
annum, simple interest on the balance outstanding.
The note is dated August 6, 1998 and has no stated
maturity date. Accrued interest on the note
through September 30, 1999 totals $4,027.
To Auric Metallurgical Laboratories, LLC, pursuant 250,000
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 September 30, 1999
totals $4,012.
To Geneva Resources, Inc. pursuant to the 250,000
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 September 30, 1999 totals $4,012.
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
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 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.
On August 27, 1999, the Company received $150,000 for the exercise of
600,000 Series A warrants to purchase 600,000 restricted shares of
common stock at $0.25/share pursuant to the Preferred Series A private
placement memorandum dated August 10, 1998.
At September 30, 1999 there were 53,052,000 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
8
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 3: STOCKHOLDERS' EQUTY (continued)
accrued and unpaid dividends are convertible into restricted common
stock at the conversion price of $.25 per share.
Through September 30, 1999, the Company has issued 10,000,000 Series A
preferred shares. The issuance generated $2,500,000. As of September
30, 1999, there are 10,000,000 Series A preferred shares and 9,600,000
Series A warrants outstanding.
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 September 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 September 10, 1999. As of September 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
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 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
September 30, 1999 is $112,500. During the three month period ended
September 30, 1999, the Company has recorded an unrealized loss of
$7,500. The discounted value of the investment as of September 30,
1999 was $57,500.
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.
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 September 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
10
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 6: TECHNOLOGY SUB-LICENSE AGREEMENT (continued)
technology is scheduled for transfer during 1999. The Company has
expensed the amounts paid pursuant to the agreement as research and
development expense.
The Company has initiated legal proceedings related to this agreement
(See Note 12).
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 September 30, 1999 and 1998
are as follows:
September 30, 1999 September 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-
11
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 7: EMPLOYEE STOCK OPTION PLAN (continued)
As of September 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 174 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 September, 1999, $644,800 in services related to this
agreement have been paid. The services performed under this agreement
are recorded as research and development expenses.
The Company has initiated legal proceedings related to this agreement
(See Note 12).
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
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 10: GOING CONCERN AND CONTINUED OPERATIONS
At September 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, with $1,255,000 being generated
through September 30, 1999. 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. The Company also expects to utilize additional advances to
fund operations.
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.
13
INTERGOLD CORPORATION
(A Development Stage Company)
Notes to Unaudited Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
NOTE 12: CONTINGENCIES (continued)
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.
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.
On October 8, 1999, the Company's wholly owned subsidiary,
International Gold Corporation ("IGC") joined a legal complaint
initiated by Geneva Resources, Inc., against AuRIC Metallurgical
Laboratories, LLC ("AuRIC"), Dames & Moore, Ahmet Altinay, General
Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames &
Moore. The damages sought by IGC/Geneva are to be determined in court.
The damages incurred stem from reliance on assays and representations
made by AuRIC and upon actions and engineering reports produced by
Dames & Moore. IGC/Geneva also alleges there were breaches of contract
by AuRIC and Dames and Moore, as well as other causes of action.
14
Item 2. Management's Discussion and Analysis or Plan of Operation
General
- -------
To date, there have been no income realized from the business operations of
the Company. The Company's primary source of cash has been the conversion of
Series A Warrants into shares of the Company's restricted Common Stock at the
redemption price of $0.25 per Series A Warrant. Pursuant to a letter from the
Company which provided notice to the holders of Preferred Shares that the
Company intended to redeem in whole the outstanding Warrants, 1,000,000 Series A
Warrants have been converted into 1,000,000 shares of the Company's restricted
Common Stock for an aggregate consideration of $250,000.00.
Results of Operation
- --------------------
Quarter Ended September 30, 1999 compared to September 30, 1998
- ---------------------------------------------------------------
For the three-month period ended September 30, 1999, the Company recorded a
net loss of $695,033 compared to a net loss of $556,144 in the corresponding
period of 1998. During the three-month period ended September 30, 1999 and
September 30, 1998, the Company recorded no income.
During the three-month period ended September 30, 1999, the Company
recorded operating expenses of $686,918 as compared to $530,141 of operating
expenses recorded in the same period for 1998. Property exploration expenses
decreased slightly in the approximate amount of $81,049 in the three-month
period during 1999 primarily because of the breach of the agreement for services
dated March 18, 1999 between International Gold Corporation, the Company's
subsidiary, and AuRIC Metallurgical Laboratories (the "Service Agreement"), and
the resulting lack of work orders for research and development and metallurgical
services. However, administrative expenses increased by approximately $237,826
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 associated costs and corporate activity
pertaining to litigation initiated by the Company against AuRIC Metallurgical
Laboratories.
Nine Months Ended September 30, 1999 compared to September 30, 1998
- -------------------------------------------------------------------
For the nine-month period ended September 30, 1999, the Company recorded a
net loss of $5,228,159 compared to a net loss of $1,158,402 in the corresponding
period of 1998. During the nine-month period ended September 30, 1999 and
September 30, 1998, the Company recorded no income.
During the nine-month period ended September 30, 1999, the Company recorded
operating expenses of $5,201,774 as compared to $1,268,738 of operating expenses
recorded in the same period for 1998. Property exploration expenses increased
significantly in the approximate amount of $3,218,993 in the nine-month period
during 1999 primarily due to the amounts paid by the Company as research and
development expenses associated with the Service Agreement and the technology
sub-license agreement dated March 19, 1999 between the Company and Geneva
Resources, Inc. (the "Sub-License Agreement"), and work orders for metallurgical
services. Administrative expenses increased approximately $714,043 in the
six-month period during 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 nine-month period ended September 30, 1999, the Company's total
assets were $94,889. This decrease from fiscal year ended December 31, 1998 was
due primarily to a decrease in cash and cash equivalents. As of the nine-month
period ended September 30, 1999, the Company's total liabilities were
$1,640,564. 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, the advances
made to the Company, and the accrued interest on such advances.
Stockholders' Equity (deficit) decreased from $(180,006) for fiscal year
ended December 31, 1998 to $(1,545,665) for the nine-month period ended
September 30, 1999.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
On September 27, 1999, International Gold Corporation, the Company's
subsidiary, and Geneva Resources, Inc., a Nevada corporation ("Geneva")
initiated legal proceedings against AuRIC Metallurgical Laboratories, LLC, a
Utah limited liability company ("AuRIC") and Dames & Moore, a Delaware
corporation ("Dames & Moore"), by filing its complaint in the District Court of
the Third Judicial District for Salt Lake City, State of Utah.
International Gold Corporation, on behalf of the Company, and AuRIC had
previously entered into the Service Agreement whereby AuRIC agreed to perform
certain services, including the development of proprietary technology and
know-how relating to fire and chemical assay analysis techniques and
metallurgical ore extraction procedures developed specifically for the Blackhawk
Property. Geneva and AuRIC also entered into a technology License Agreement
dated March 17, 1999 (the :License Agreement") whereby AuRIC agreed to supply
the proprietary technology to Geneva and grant to Geneva a license to use such
technology on claims located on the Blackhawk Property, and AuRIC also grant
Geneva the right to sub-license the proprietary technology to the Company for
use on the Blackhawk Property. Dames & Moore subsequently verified the fire and
chemical assay techniques and procedures developed by AuRIC and their
repeatability. The Company subsequently entered into multiple work orders with
Dames & Moore relating to a variety of services, such as professional and
independent project management, project cost control, geological mapping and
studies, permitting and land use, chain of custody drill sample collection,
environmental assessment reports, survey mapping petrographic studies, data
management and data entry, chain of custody assay database, geographic
information systems, development geology, project control, scheduling, geology
support, chain of custody protocols, laboratory evaluations, public involvement,
and field mobilizations.
International Gold Corporation and Geneva initiated legal proceedings
against AuRIC for (i) multiple breaches of contract relating to the Agreement
for Services and the License Agreement, respectively, including, but not limited
to, establishment and facilitation of the proprietary technology and fire assay
procedures developed by AuRIC at an independent assay lab and failure to deliver
the proprietary technology and procedures to the Company, Geneva and Dames &
Moore; (ii) breach of the implied covenant of good faith and fair dealing; (iii)
negligent misrepresentation; (iv) specific performance; (v) non-disclosure
injunction; (vi) failure by AuRIC to repay advances; and (vii) quantum
meruit/unjust enrichment. The Company also named Dames & Moore in the legal
proceeding in a declaratory relief cause of action.
The Company is reviewing further legal remedies against AuRIC and Dames &
Moore and intends to aggressively pursue any and all such actions.
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.
On behalf of the Company an 8-K was filed on October 4, 1999.
16
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: November 8, 1999 By: /s/ Gary Powers
------------------------------
Gary Powers, President
Dated: November 8, 1999 By: /s/ Grant Atkins
------------------------------
Grant Atkins, Secretary
17