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 March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-25455
INTERGOLD CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0365453
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
5000 Birch Street, West Tower, Suite 4000
Newport Beach, California 92660
(Address of Principal Executive Offices)
(949) 476-3611
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding as of May 11, 2001
Common Stock, $.00025 par value 81,140,600
Transitional Small Business Disclosure Format (check one)
Yes No X
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of Intergold Corporation (the "Company")
reflect all adjustments which are, in the opinion of management, necessary to
present a fair statement of the operating results for the interim period
presented.
INTERGOLD CORPORATION
(An Exploration Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2001
Page
----
Consolidated Balance Sheets 2
Interim Consolidated Statements of Operations 3
Interim Consolidated Statements of Cash Flows 4
Notes to Interim Consolidated Financial Statements 5
1
INTERGOLD CORPORATION
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
March 31, 2001 December 31,
2000
- - -------------------------------------------------------------------------------------------------------------- ----------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 101 $ 406
PROPERTY PLANT AND EQUIPMENT (net of accumulated depreciation) 2,814 2,962
- - -------------------------------------------------------------------------------------------------------------- ----------------
$ 2,915 $ 3,368
============================================================================================================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 484,310 $ 404,482
Advances payable (Note 3) 1,100,245 898,545
Directors fees payable 56,500 52,000
Notes payable (Note 4) 551,890 551,890
Accrued Series A warrant redemption payable 60,000 60,000
Accrued interest payable 291,007 260,523
- - -------------------------------------------------------------------------------------------------------------- ----------------
2,543,952 2,227,440
- - -------------------------------------------------------------------------------------------------------------- ----------------
CONTINGENCIES (Notes 1 & 9)
STOCKHOLDERS' EQUITY (DEFICIT) (Note 5)
Common stock $.00025 par value; 125,000,000 shares authorized
81,140,600 shares issued and outstanding 20,284 20,284
Preferred stock, $.001 par value; 75,000,000 shares authorized
Issued and outstanding
Series A - 6,200,000 shares 6,200 6,200
Series B - 2,510,000 shares 2,510 2,510
Upon liquidation, Series A shares have a $.25 per share preference over other
preferred or common stock, Series B shares have a $.50 preference over common stock
Additional paid-in capital 10,317,039 10,317,039
Deficit accumulated during the exploration stage (12,887,070) (12,570,105)
- - -------------------------------------------------------------------------------------------------------------- ----------------
(2,481,037) (2,224,072)
- - -------------------------------------------------------------------------------------------------------------- ----------------
$ 2,915 $ 3,368
============================================================================================================== ================
<FN>
The accompanying notes are an integral part of these interim consolidated financial statements
</FN>
2
INTERGOLD CORPORATION
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months Three months July 26, 1996
ended March ended March (inception) to
31, 2001 31, 2000 March 31, 2001
- - -----------------------------------------------------------------------------------------------------------------------------
REVENUE
Other income $ - $ - $ 1,699
- - -----------------------------------------------------------------------------------------------------------------------------
EXPENSES -
Property exploration expenses 1,600 15,239 5,883,678
Consulting - - 228,451
Directors fees 4,500 - 78,000
General and administrative 183,227 306,656 3,620,494
Interest expense 30,484 28,221 316,325
Loss on settlement of debt - - 1,424,213
Professional fees 97,154 - 934,562
Realized loss on sale of available for sale investment - 20,000 20,000
Travel - - 147,371
- - -----------------------------------------------------------------------------------------------------------------------------
316,965 370,116 12,593,094
- - ----------------------------------------------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (316,965) $ (370,116) $ (12,651,395)
=============================================================================================================================
BASIC NET LOSS PER SHARE $ (0.0039) $ (0.007)
=============================================================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 81,140,600 50,916,934
=============================================================================================================================
<FN>
The accompanying notes are an integral part of these interim consolidated financial statements
</FN>
3
INTERGOLD CORPORATION
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
July 26, 1996
Three months Three months (inception) to
ended March ended March 31, March 31, 2001
31, 2001 2000
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (316,965) $ (370,116) $ (12,651,395)
Adjustments to reconcile net loss to net cash from operating activities:
- Depreciation and amortization 148 148 1,486
- Loss on settlement of debt - - 1,424,213
- Loss on sale of investment - 20,000 20,000
- Changes in working capital assets and liabilities
Prepaid expenses - 5,000 -
Advances payable 180,000 - 180,000
Accounts payable 79,828 15,438 484,310
Accrued interest payable 30,484 28,221 316,318
Directors fees payable 4,500 6,000 56,500
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (22,005) (295,309) (10,168,568)
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of available-for-sale investments - - (170,000)
Equipment purchases - - (4,300)
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES - - (174,300)
- - -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common stock - - 14,831
Sale of Series A preferred stock - - 10,000
Sale of Series B preferred stock - - 2,510
Additional paid-in capital - - 8,108,427
Net advances received 21,700 313,783 1,655,311
Note payable - - 551,890
- - -------------------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 21,700 313,783 10,342,969
- - -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (305) 18,474 101
CASH, BEGINNING OF PERIOD 406 1,469 -
- - -------------------------------------------------------------------------------------------------------------------------------
CASH, END OF PERIOD $ 101 $ 19,943 $ 101
===============================================================================================================================
<FN>
The accompanying notes are an integral part of these interim consolidated financial statements
</FN>
4
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
- - --------------------------------------------------------------------------------
(Unaudited)
NOTE 1: NATURE OF CONTINUED OPERATIONS AND BASIS OF PRESENTATION
The Company is in the exploration stage of its mineral property development. To
date, the Company has not generated significant revenues from operations and has
a working capital deficit of $2,542,851 and a stockholders' deficit of
$2,481,037 at March 31, 2001. The Company's continuance of operations and
movement into an operating basis are contingent on raising additional working
capital, settling its outstanding debts and lawsuits and on the future
development of the Company's mineral claims or 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.
During the first quarter of 2000, the Company ceased exploration of the
Blackhawk claims located in the State of Idaho, pending the outcome of the
Company's ongoing litigation with regard to the transfer of technology pursuant
to the Sub-license Agreement between the Company and Geneva Resources, Inc. and
the Company's Agreement for Services with Auric Metallurgical Laboratories, LLC.
The technology to be transferred under the Sub-license Agreement may be delayed
indefinitely, or cancelled all together, depending on the outcome of the
Intergold/Geneva litigation. As the alleged assay and metallurgical recovery
technology developed by Auric is deemed essential to the further development of
the Blackhawk claims, and since further consulting conducted by independent
consultants to the Company indicate that gold is not present in economic
quantities on the claims, business operations are expected to be minimal pending
the outcome of the litigation in process. Refer to Note 9.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of Regulation
S-B. They do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
except as disclosed herein, there has been no material changes in the
information disclosed in the notes to the financial statements for the year
ended December 31, 2000 included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission. The interim unaudited
consolidated financial statements should be read in conjunction with those
financial statements included in the Form 10-KSB. In the opinion of Management,
all adjustments considered necessary for a fair presentation, consisting solely
of normal recurring adjustments, have been made. Operating results for the three
months ended March 31, 2001 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2001.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, International Gold Corporation. 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.
MINERAL PROPERTY COSTS
Mineral property acquisition, exploration and development costs are expensed as
incurred until such time as economic reserves are quantified. To date the
Company has not established any proven reserves on its mineral properties.
LOSS PER SHARE
As of March 31, 2001, there were 3,450,000 exercisable options, 8,710,000 shares
of convertible preferred stock and 2,510,000 common stock warrants that can be
converted into a total of 14,670,000 shares of common stock. As these options,
convertible preferred stock and warrants would have an antidilutive effect on
the presentation of loss per share, a diluted loss per share calculation is not
presented.
DEPRECIATION
The Company depreciates equipment over 7 years using the straight-line method.
5
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
- - --------------------------------------------------------------------------------
(Unaudited)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (con't)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
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.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in respect to stock options
granted to employees and officers using the intrinsic value based method in
accordance with APB 25. Stock options granted to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123. In addition, with
respect to stock options granted to employees, the Company provides pro-forma
information as required by SFAS No. 123 showing the results of applying the fair
value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment.
RECENT ACCOUNTING PRONOUNCEMENTS
On March 31, 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No.44, Accounting for Certain Transactions Involving Stock
Compensation - An Interpretation of APB Opinion No. 25 ("FIN 44"), which
provides guidance as to certain applications of APB 25. FIN 44 is generally
effective July 1, 2000 with the exception of certain events occurring after
December 15, 1998. The Company has determined that the implementation of this
standard does not have a material impact on its financial statements.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS
133"), which establishes accounting and reporting standards for derivative
instruments, including instruments embedded in other contracts, and hedging
activities. It requires that an entity recognize all derivatives; as either
assets or liabilities and measure those instruments at fair value. SFAS 133 is
effective for financial statements for fiscal years beginning after June 15,
1999. The Company determined that the implementation of this standard does not
have a material impact on its financial statements.
6
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
- - --------------------------------------------------------------------------------
(Unaudited)
NOTE 3: ADVANCES PAYABLE
Advances are comprised of the following:
Sonanini Holdings Ltd. $ 442,770
Investor Communications International, Inc. 431,975
Amerocan Marketing, Inc. 90,000
Tristar Financial Services Ltd. 135,500
-----------
$ 1,100,245
===========
The advances bear 10% simple interest and are due on demand. There is $248,235
of interest accrued on the advances as of March 31, 2001. See Note 8 - Related
Party Transactions.
NOTE 4: NOTES PAYABLE
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 was to be upon transfer of technology described in Note
7. Accrued interest on the note through March 31, 2001 totals
$15,262 $ 250,000
Geneva Resources, Inc. pursuant to the technology sub-license
agreement dated March 18, 1999, bearing interest at 3% per annum,
simple interest on the balance outstanding. Maturity was to be
upon transfer of technology described in Note 7. Accrued interest
on the note through March 31, 2001 totals $15,262 250,000
Sonanini Holdings Ltd., bearing interest at 7% per annum, simple
interest on the balance outstanding. The note is dated August 6,
1998 and has no stated maturity date. Accrued interest on the
note through March 31, 2001 totals $9,277 50,000
For the redemption of 1,889,750 shares of restricted common stock
of the Company payable at par value of $.00025. 1,890
---------
$ 551,890
=========
NOTE 5: STOCKHOLDERS' EQUITY
As of March 31, 2001, there are 6,200,000 Series A preferred shares and
6,200,000 Series A warrants outstanding. If the Company's Series A Preferred
shareholders elect to convert the remaining outstanding Series A Preferred
stock, an additional 9,226,600 shares of common stock would be issued, including
3,026,600 shares in settlement of accrued 20% cumulative undeclared dividends
totalling $756,650.
As of March 31, 2001, the Company has $497,750 of undeclared dividends on the
Series B Preferred shares. If the Company's Series B Preferred shareholders
elect to convert the remaining outstanding Series B Preferred stock, an
additional 3,505,500 shares of common stock would be issued, consisting of
2,510,000 shares for the remaining preferred stock and 995,500 shares for the
20% cumulative undeclared dividends.
NOTE 6: EMPLOYEE STOCK OPTION PLAN
During 1997, the Company authorized an Employee Stock Option Plan. The plan
authorized the issuance of 2,000,000 options that can be exercised at $.50 per
share of common stock and an additional 2,500,000 options that can be exercised
to purchase shares of common stock at $1.00 per share. All options granted
expire December 27, 2017. The options are non-cancelable once granted. Shares
which may be acquired through the plan may be authorized but unissued shares of
common stock or issued shares of common stock held in the Company's treasury.
7
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
- - --------------------------------------------------------------------------------
(Unaudited)
NOTE 6: EMPLOYEE STOCK OPTION PLAN (con't)
During the year ended December 31, 1999, the Board of Directors of the Company
authorized the grant of stock options to certain officers, directors and
consultants. The options granted consisted of 2,000,000 options with an exercise
price of $.50 per share of common stock and 1,450,000 options with an exercise
price of $1.00 per common share. Selected information regarding the Company's
employee stock options as of March 31, 2001 are as follows:
March 31, 2001
-------------------------------
Weighted
Number of average
options exercise price
Outstanding at Beg. of Period 3,450,000 $.71/share
Outstanding at End of Period 3,450,000 $.71/share
Exercisable at End of Period 3,450,000 $.71/share
Options Granted 3,450,000 $.71/share
Options Exercised - -
Options Forfeited - -
Options Expired - -
As of March 31, 2001, outstanding options have exercise prices ranging from $.50
to $1.00 per share. The weighted average exercise price of all options
outstanding is $.71 per share of common stock and the weighted average remaining
contractual life is 16 years 97 days. There are 3,450,000 options that are
exercisable with a weighted average exercise price of $.71 per share of common
stock.
NOTE 7: TECHNOLOGY SUB-LICENSE AGREEMENT
On March 18, 1999, the Company entered into a sub-license agreement with Geneva
Resources, Inc. ("Geneva"), to utilize assay and metallurgical technology,
know-how, and rights to technological processes developed specifically for the
Blackhawk mineralization by Auric Metallurgical Laboratories, LLC. (Auric").
This sub-license 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 of March 31, 2001 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.
The Company has initiated legal proceedings related to this agreement (See Note
9).
NOTE 8: RELATED PARTY TRANSACTIONS
The Company, on January 1, 1999, entered into a management services agreement
with Investor Communications, Inc. ("ICI") to provide management of the
day-to-day operations of the Company. 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.
Two officers and directors of Intergold Corporation have been contracted by ICI
and Amerocan and are part of the management team provided to Intergold
Corporation and its subsidiary. During the period ended March 31, 2001 a total
of $180,000 was incurred to these private companies which are also significant
shareholders for managerial, administrative and investor relations services
provided to the Company and its subsidiary. During the period ended March 31,
2001 these companies paid a total of nil to these officers and directors for
services provided to the Company and its subsidiary.
8
INTERGOLD CORPORATION
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
- - --------------------------------------------------------------------------------
(Unaudited)
NOTE 8: RELATED PARTY TRANSACTIONS (con't)
During the period ended March 31, 2001 net cash advances of $1,200 was received
from ICI. Interest of $30,485 was accrued on outstanding advances.
During the period ended March 31, 2001 Company accrued $4,500 for directors'
fees. At March 31, 2001 $56,500 is owing to two directors.
NOTE 9: LEGAL PROCEEDINGS AND CONTINGENCIES
On September 27, 1999, IGC and Geneva filed an action against Auric and Dames &
Moore in the Third Judicial District court in and for Salt Lake County, State of
Utah. On October 8, 1999, IGC and Geneva filed a First Amended Complaint in the
in the Utah Lawsuit in which they added Ahmet Altinay ("Altinay") and Richard
Daniele ("Daniele") as defendants. In the First Amended Complaint, IGC and
Geneva assert causes of action for breaches of contract, specific performance,
fraud, negligent misrepresentation, failure to repay advances, breach of
fiduciary duties, and professional negligence in the license of metallurgical
technology of engineering services related thereto.
On or about November 17, 1999, Auric, Dames & Moore, Daniele, and Altinay filed
separate answers to the First Amended Complaint, along with counterclaims, and a
Third Party Complaint against IGC, Geneva, the Company, and Brent Pierce
("Pierce") for breach of contract against Geneva, breach of contract against
IGC, breach of contract against Pierce, defamation against the Company, IGC,
Geneva and Pierce, injunctions against the Company, IGC, Geneva and Pierce,
amongst other claims. In their defamation claim against the Company, the
plaintiffs seek damages and punitive damages in an amount to be determined at
trial, as well as attorney's fees and costs. In connection with their cause of
action for preliminary and permanent injunctions against the Company, Auric and
Altinay seek attorney's fees and costs.
On or about July 19, 2000, Geneva and IGC filed a Second Amended Complaint in
which they also named Michael B. Mehrtens ("Mehrtens") and MBM Consultants Inc.
("MBM") as defendants in the Utah Lawsuit. On or about September 26, 2000,
Mehrtens and MBM filed an Answer, Counterclaim and Third-Party Complaint in
which Mehrtens asserted claims against the Company for Intentional Infliction of
Emotional Distress for actual and punitive dames in an amount to be determined
at trial; and Breach of Separation Agreement for actual damages in an amount to
be determined at trial. MBM has also asserted a cause of action for Breach of
Contract/Quantum Meruit against IGC for actual damages in an amount to be
determined at trial.
The parties to the Utah Lawsuit are currently conducting discovery regarding the
allegations and defenses raised.
The Company intends to vigorously contest the claims and allegations of Auric,
Altinay, Dames & Moore, Daniele, Mehrtens and MBM. The likelihood of an
unfavourable outcome and an estimate of the range of potential loss is not
presently determinable.
On or about June 14, 2000, Dames & Moore filed an action against the Company,
IGC, and others in the District Court of the Fifth Judicial District of the
State of Idaho, in and for the County of Lincoln. In the Idaho lawsuit, Dames &
Moore seeks foreclosure of a lien against the Company and/or IGC which
purportedly arose in favour of Dames & Moore. Dames & Moore seeks to have the
mining claims sold to compensate Dames & Moore for its services, materials, and
equipment. Dames & Moore also seeks its fees and costs incurred in enforcing its
claimed lien. IGC and the Company filed an Answer on or about August 8, 2000. No
discovery has occurred in the Idaho Lawsuit. The Company intends to vigorously
contest the claims and allegations of Dames & Moore.
The Company and Geneva entered into an assignment agreement dated May 9, 2000
that transferred and conveyed to Geneva the potential claims and causes of
action that the Company may have under the Sub-License Agreement with Geneva. If
damages are recovered in the lawsuit initiated by Geneva and IGC, on behalf of
the Company, the Company will receive a pro-rata share of such damages relating
to its claims and causes of action in relation to all other claims and causes of
action for which damages are recovered.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
As of the date of this Quarterly Report, there has been no income
realized from the business operations of the Company. During fiscal year ended
December 31, 2000, the Company's primary source of financing was proceeds
received by the Company from the conversion of Series A Warrants into shares of
the Company's Common Stock at the redemption price of $0.25 per Series A Warrant
and cash advances provided to the Company as debt. During fiscal year ended
December 31, 2000, an aggregate of 3,000,000 Series A Warrants were converted
into 3,000,000 shares of the Company's restricted Common Stock for an aggregate
consideration of $750,000. Each Series A Preferred share is also convertible
into one share of Common Stock of the Company and all then accrued and unpaid
dividends are convertible into Common Stock at the conversion price of $0.25 per
share. During fiscal year ended December 31, 2000, an aggregate of 1,100,000
Preferred Series A shares were converted into 1,100,000 shares of the Company's
Common Stock and an additional 366,700 shares of the Company's Common Stock were
issued as a dividend pursuant to such conversion.
As of the date of this Quarterly Report, 6,200,000 Series A Preferred
Stock and 6,200,000 Series A Warrants remain outstanding. If the Series A
Preferred Stock is converted by the holders thereof, an additional 9,226,600
shares of Common Stock would be issued, including 3,026,600 shares of Common
Stock as settlement of accrued 20% cumulative undeclared dividends on the Series
A Preferred Stock totaling approximately $756,650.
As of the date of this Quarterly Report, 2,510,000 shares of Series B
Preferred Stock remain outstanding and, if converted, an additional 2,510,000
shares of Common Stock would be issued, including 995,5000 shares of Common
Stock as settlement of accrued 20% cumulative undeclared dividends on the Series
B Preferred Stock totaling approximately $497,750.
RESULTS OF OPERATION
Three-Month Period Ended March 31, 2001 Compared to Three-Month Period Ended
March 31, 2000
The Company's net losses for the three-month period ended March 31,
2001 were approximately $256,965 compared to a net loss of approximately
$370,116 in the corresponding period of 2000. During the three-month period
ended March 31, 2001 and March 31, 2000, the Company recorded no income.
During the three-month period ended March 31, 2001, the Company
recorded operating expenses of $256,965 compared to $370,116 of operating
expenses recorded in the same period for 2000. Property exploration expenses
decreased by approximately $13,639 during the three-month period ended March 31,
2001 from $15,239 incurred during the three-month period ended March 31, 2000
compared to $1,600 incurred during the three-month period ended March 31, 2001.
This decrease in property exploration expenses resulted from suspension of any
further exploration of the Blackhawk Property and the cessation of work orders
for research, development and metallurgical services compared to the significant
property exploration expenses incurred in the same period for 2000 relating to
amounts paid by the Company for research, development and metallurgical services
performed associated with contractual agreements between the Company and AuRIC
Metallurgical Laboratories LLC ("AuRIC"), Dames & Moore ("Dames & Moore") and
Geneva Resources, Inc. ("Geneva"), respectively.
10
General and administrative expenses also decreased by approximately
$123,429 during the three-month period ended March 31, 2001 from $306,656
incurred during the three-month period ended March 31, 2000 compared to $183,227
incurred during the three-month period ended March 31, 2001. This decrease in
administrative expenses was due primarily to a decrease in overhead and
administrative expenses resulting from the decreasing scale and scope of overall
corporate activity pertaining to exploration and administration of the Blackhawk
Property. Of the $183,227 incurred as administrative expenses during the
three-month period ended March 31, 2001, $180,000 was incurred payable to
Investor Communications International, Inc. ("ICI") and Amerocan Marketing, Inc.
("Amerocan") for services rendered by ICI and Amerocan including, but not
limited to, financial, administrative and metals exploration management. During
the three-month period ended March 31, 2001, the Company paid $-0- to ICI and
Amerocan towards the amount due and owing. Two of the Company's
officers/directors are contracted by ICI and Amerocan and are part of the
management team provided by ICI and Amerocan to the Company.
During the three-month period ended March 31, 2001, the Company
recorded a loss of $256,965. As discussed above, the decrease in net loss during
the three-month period ended March 31, 2001 as compared to the three-month
period ended March 31, 2000 is attributable primarily to the substantial
decrease in general and administrative expenses. The Company's net earnings
(losses) during the three-month period ended March 31, 2001 were approximately
($256,965) or ($0.0032) per share compared to a net loss of approximately
($370,116) or ($0.007) per share during the three-month period ended March 31,
2000. The weighted average number of shares outstanding were 81,140,600 for the
three-month period ended March 31, 2001 compared to 50,916,934 for the
three-month period ended March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared assuming that it
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should the Company be unable to continue in
operation.
As of the three-month period ended March 31, 2001, the Company's total
assets were $2,915 compared to total assets of $3,368 for fiscal year ended
December 31, 2000. This decrease in total assets from fiscal year ended 2000 was
due primarily to a decrease in cash and cash equivalents.
As of the three-month period ended March 31, 2001, the Company's total
liabilities were $2,483,952 compared to total liabilities of $2,227,440 for
fiscal year ended December 31, 2000. This increase in liabilities from from
fiscal year ended December 31, 2000 was due primarily to an increase in advances
due and owing by the Company to significant shareholders and debt holders in the
amount of $201,700 and an increase in accrued interest payable in the amount
of $30,484.
Stockholders' deficit increased from ($2,224,072) for fiscal year
ended December 31, 2000 to ($2,481,037) for the three-month period ended March
31, 2001.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 27, 1999, Geneva and INGC, on behalf of the Company,
initiated legal proceedings against AuRIC and Dames & Moore by filing its
complaint in the District Court of the Third Judicial District for Salt Lake
City, State of Utah.
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INGC and AuRIC entered into an Agreement for Services whereby AuRIC
agreed to perform certain services, including the development of proprietary
technology and know-how relating to fire and chemical assay analysis techniques
and metallurgical ore extraction procedures developed specifically for the
Blackhawk Property (the "Proprietary Technology"). Dames & Moore verified the
fire and chemical assay techniques and procedures developed by AuRIC and their
repeatability. The Company subsequently entered into multiple work orders with
Dames & Moore relating to a variety of services. Gevena and AuRIC entered into a
License Agreement whereby AuRIC agreed to (i) supply the Proprietary Technology
to Geneva, (ii) grant to Geneva a license to use the Proprietary Technology on
claims located adjacent to the Blackhawk Property and the right to sub-license
the Proprietary Technology to the Company for use on the Blackhawk Property. The
Company and Geneva simultaneously entered into the Sub-License Agreement whereby
the Company acquired from Geneva a sub-license to utilize AuRIC's Proprietary
Technology and related precious metals recovery processes on the Blackhawk
Property.
On September 27, 1999, Geneva and INGC, on behalf of the Company,
initiated legal proceedings against AuRIC for: (i) multiple breaches of contract
relating to the Agreement for Services and the License Agreement, respectively,
including, but not limited to, establishment and facilitation of the Proprietary
Technology and fire assay procedures developed by AuRIC at an independent assay
lab and failure to deliver the Proprietary Technology and procedures to the
Company, Geneva and Dames & Moore; (ii) breach of the implied covenant of good
faith and fair dealing; (iii) negligent misrepresentation; (iv) specific
performance, (v) non-disclosure injunction; (vi) failure by AuRIC to repay
advances, and (vii) quantum meruit/unjust enrichment. INGC, on behalf of the
Company, also named Dames & Moore in the legal proceeding in a declaratory
relief cause of action. Dames & Moore is currently a division of URS Corporation
pursuant to a merger.
On October 8, 1999, Geneva and INGC, on behalf of the Company, amended
its complaint by naming as defendants AuRIC, Dames & Moore, Ahmet Altinay
General Manager of AuRIC, and Richard Daniele, Chief Metallurgist for Dames &
Moore and specifying damages in excess of $10,000,000. The damages sought by
Geneva and INGC, on behalf of the Company, are based on the general claims and
causes of action set forth in the amended complaint relating to reliance on the
assays and representations made by AuRIC, the actions and engineering reports
produced by Dames & Moore and, specifically, the negligent misrepresentations
and inaccuracies contained within some or all of those Dames & Moore reports and
breaches of contract by AuRIC and Dames & Moore.
On or about November 17, 1999, AuRIC, Dames & Moore, Richard Daniele
and Ahmet Altinay filed separate answers to the amended complaint, along with
counterclaims and a third party complaint against Geneva, INCG, the Company and
Brent Pierce for breach of contract against Geneva, breach of contract against
INCG, breach of contract against Pierce, defamation against the Company, INCG,
Geneva and Pierce, injunctions against the Company, INCG, Geneva and Pierce,
amongst other claims. In their defamation claim against the Company, the
plaintiffs seek damages and punitive damages in an amount to be determined at
trial, as well as attorney's fees and costs. In connection with the cause of
action for preliminary and permanent injunctions against the Company, AuRIC and
Ahmet Altinay seek attorney's fees and costs.
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On June 21, 2000, Geneva and INGC, on behalf of the Company, filed a
second amended complaint in the District Court of the Third Judicial District
for Salt Lake City, State of Utah. The second amended complaint increased detail
regarding the alleged breaches of contract and increased causes of action
against other parties involved by adding two new defendants, MBM Consulting,
Inc. and Dr. Michael B. Merhtens, who provided consulting services to INGC. The
second amended complaint also added certain claims of other entities involved
through Geneva against the defendants. The Proprietary Technology forms the
basis of claims made by Geneva and INGC, on behalf of the Company, in the
complaints as filed with the District Court. Geneva and INGC, on behalf of the
Company, allege that the Proprietary Technology does not exist and that Geneva
and INGC were fraudulently, recklessly and/or negligently deceived by AuRIC,
Dames & Moore, and other parties to the lawsuit.
Geneva and INGC subsequently obtained an order from the District Court
granting its Motion to Compel. The Order requires that AuRIC and Dames & Moore
produce the Proprietary Technology that was allegedly developed by AuRIC and
confirmed by multiple engineering reports by Dames & Moore for Geneva's and
INGC's restricted use by its legal counsel and industry experts. Geneva and
INGC, on behalf of the Company, have obtained an expert opinion as to the
ineffectiveness of the Proprietary Technology.
On November 10, 2000, Geneva and INGC filed motions for partial summary
judgment against Dames & Moore and AuRIC. Subsequently, on March 19, 2001, the
motions for partial summary judgment were denied. The court, however, provided a
ninety-day period during which both parties were required to prepare for trial,
and after such period the court would set a date for trial.
As of the date of this Quarterly Report, various depositions have been
taken by various parties to the lawsuit. Discovery and document production have
been conducted by both sides to the dispute. Geneva and INGC, on behalf of the
Company, continue to pursue all such legal actions and review further legal
remedies against AuRIC and Dames & Moore, and have hired an expert witness in
this regard.
On approximately June 14, 2000, Dames & Moore filed an action against
the Company, INGC and others in the District Court of the Fifth Judicial
District of the State of Idaho, in and for the County of Lincoln (the "Idaho
Lawsuit"). In the Idaho Lawsuit, Dames & Moore seeks foreclosure of a lien
against the Company and/or INGC which purportedly arose in favor of Dames &
Moore. Dames & Moore seeks to have the mining claims sold to compensate Dames &
Moore for its services, materials and equipment. Dames & Moore also seeks its
fees and costs incurred in enforcing its claimed lien. The Company and INGC
filed an answer on or about August 8, 2000. No discovery has occurred in the
Idaho Lawsuit. The Company intends to vigorously contest the claims and
allegations of Dames & Moore.
Due to the Company's knowledge that the Blackhawk Property's unpatented
lode mining claims do not contain commercial quantities of gold or silver, IGCO
has ceased to maintain and pay annual fees relating to most of the Blackhawk
Property claimed areas, except for certain claims relating to the litigation.
Moreover, management deems the proprietary technology purported to be developed
by AuRIC and verified by Dames & Moore is crucial with respect to successful
exploration of the Blackhawk Property. Management has suspended exploration of
the Blackhawk Property and works exclusively towards resolution of the legal
proceedings. Management believes that the legal proceedings will prove that the
alleged proprietary technology is invalid.
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If the Proprietary Technology is proven to be invalid and not
transferable, and INGC/Geneva are not successful in the outcome of the
litigation and damages are not awarded, the Company may not be able to recover
its potential losses and expenses incurred due to the breach of the Sub-License
Agreement by Geneva. However, if the Proprietary Technology is proven to be
invalid and not transferable, and INGC/Geneva are successful in the outcome of
the litigation, INGC/Geneva may then receive damages from AuRIC, Dames & Moore,
and other parties to the lawsuit. Geneva's damages result primarily from its
inability to transfer the Proprietary Technology to the Company in accordance
with the provisions of the Sub-License Agreement.
The Company and Geneva entered into an assignment agreement dated May
9, 2000 (the "Assignment Agreement") that transferred and conveyed to Geneva the
potential claims and causes of action that the Company may have under the
Sub-License Agreement with Geneva. If damages are recovered in the lawsuit
initiated by Geneva and INGC, on behalf of the Company, the Company will receive
a pro rata share of such damages relating to its claims and causes of action in
relation to all other claims and causes of action for which damages are
recovered. Thus, Geneva will receive any such pro rata share of the damages
recovered pursuant to the terms and provisions of the Assignment Agreement.
Management believes that the Company will, under these circumstances, be
entitled to receive a pro-rata portion of the awarded damages for potential
losses incurred due to the breach of the Sub-License Agreement by Geneva.
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 Form 8-Ks have been filed.
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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: May 14, 2001 By:/s/ GARY POWERS
---------------------------
Gary Powers, President
Dated: May 14, 2001 By:/s/GRANT ATKINS
----------------------------
Grant Atkins, Secretary
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