First Quarter Report 10QSB
March 31, 1999
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _________________
Commission file number 02-69494
GLOBAL GOLD CORPORATION
-----------------------
(Name of small business issuer in its charter)
Delaware 13-3025550
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
734 Franklin Street, Suite 383, Garden City, New York 11530-4525
----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 294-7946
------------------
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|_|.
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court. Yes |_| No |_|. Not Applicable
As of March 31, 1999, there were 4,348,114 shares of the registrant's
Common Stock outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No|X|.
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statement: ..............................................3
Balance Sheet - as of March 31, 1999 and December 31, 1998 ........5
Statement of Income and (Loss) for the three month period
ended March 31, 1999 and March 31, 1998 and for the
development stage period from January 1, 1995 through
March 31, 1999.....................................................6
Statement of Changes in Stockholders Equity - for the period
January 1, 1999 through March 31, 1999 and for the development
stage period from January 1, 1995 through
March 31, 1999.....................................................7
Statement of Cash Flow - for the periods January 1, 1999
through March 31, 1999 and January 1, 1998 through March 31,
1998 and the development stage period from
January 1, 1995 through March 31, 1999.............................9
Notes to Financial Statement (unaudited) .........................11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation .........................................16
2
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Financial Statements
March 31, 1999
3
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Financial Statements
March 31, 1999
Exhibit Page
------- ----
INDEX 1
A Balance Sheets - as of March 31, 1999 and December 31, 1998 2
B Statements of Income and (Loss) - for the three
months ended March 31, 1999 and 1998 and the
development stage period January 1, 1995 through March 31,
1999 3
C Statement of Changes in Stockholders' Equity - for
the period January 1, 1999 through March 31, 1999 and
the development stage period January 1, 1995 through March
31, 1999 4a/4b
D Statement of Cash Flow - for the periods January 1, 1999
through March 31, 1999 and January 1, 1998 through March 31,
1998, and the development stage period January 1, 1995 through
March 31, 1999 5
Notes to Financial Statements 6
4
Page 2
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Balance Sheet
ASSETS
CURRENT March 31, 1999 December 31, 1998
(unaudited) (audited)
Cash $ 10,498 $ 24,623.
Refundable Deposit 24,060 33,347
----------- -----------
34,558 57,970
OTHER ASSETS
Special Warrants - First Dynasty Mines Ltd. 256,000 256,000
----------- -----------
TOTAL ASSETS $ 290,558 $ 313,970
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 180,652 $ 173,170
----------- -----------
STOCKHOLDERS' EQUITY - Exhibit C
Common stock $0.001 par, 100,000,000 shares authorized
4,348,114 shares issued and outstanding 4,348 4,348
Paid Capital-dormant period 3,236,602 3,236,602
Paid Capital-development stage 1,493,223 1,493,223
Retained earnings-dormant period (2,907,648) (2,907,648)
Retained earnings-development stage (1,716,619) (1,685,725)
----------- -----------
109,906 140,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 290,558 $ 313,970.
=========== ===========
See Notes to the Financial Statements.
5
Page 3
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Statement of Income and (Loss)
January 1, January 1, 1995
January 1, 1998 through (development stage
1999 through March 31, through
March 31, 1999 1998 March 31, 1999
-------------- ---- --------------
REVENUE $ -- $ -- $ --
----------- ----------- -----------
EXPENSES
Officers' compensation -- -- 550,834.
Legal 16003 8077 558,113.
Accounting and auditing 7250 5000 130,698.
Transfer agent and securities fees -- -- 12,446.
Proxy costs -- -- 26,555.
Rent -- 4500 54,000.
Office expense 7482 10545 130,472.
Travel -- -- 43,234.
----------- ----------- -----------
OPERATING (LOSS) (30735) (28122) (1,506,352)
OTHER INCOME (EXPENSES)
Interest and royalty income 11 279 5390
Organization costs -- -- (4,800)
Interest expense -- -- (15,422)
Provision for bad debts -- -- (325,000)
Write-off investment in Georgia mining
interests -- -- (135,723)
Gain on sale of interest in Global Gold -- -- 268,874.
Armenia -----------
INCOME/(LOSS) BEFORE INCOME TAXES (30724). (27843) (1,713,033)
Income taxes (170) (150) (3,586)
----------- ----------- -----------
NET INCOME/(LOSS) $ 30,894. $ (27,993) $(1,716,619)
=========== =========== ===========
NET INCOME/(LOSS) PER SHARE $ (.007) $ (.006)
=========== ===========
See Notes to the Financial Statements.
6
Page 4a
GLOBAL GOLD CORPORATION
(A Development Stage Company
Statements of Changes in Stockholders' Equity
Paid-in Retained Retained Paid-in
Issued and Capital Earnings Earnings Capital
Outstanding Common (Dormant (Dormant (Development (Development
Shares Stock Period) Period) Stage) Stage) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stockholders' equity
December 31, 1994 898,074. $ 89,807. $ 3,147,693. $(2,907,648.) $ -- $ -- $ 329,852.
Net Loss January 1 -
December 31, 1995 -- -- (361,345.) (361,345.)
Adjustment re: restatement
of par value (88,909.) 88,909. -- -- -- --
Eyre acquisition 1,000,000. 1,000. 849,000. 850,000.
Proceeds through private
offering 200,000. 200. -- -- -- 421,373. 421,573.
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stockholders' equity
December 31, 1995 2,098,074. 2,098. 3,236,602. (2,907,648.) (361,345.) 1,270,373. 1,240,080.
Net Loss January 1 -
December 31, 1996 -- -- -- -- (668,577) -- (668,577)
Warrants exercised
40. -- -- -- -- 100. 100.
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stockholders' Equity
December 31,1996 2,098,114 $ 2,098 $ 3,236,602. $(2,907,648.) $(1,029,922.) $ 1,270,473. $ 571,603.
=========== =========== =========== =========== =========== =========== ===========
See Notes to the Financial Statements.
7
Page 4b
GLOBAL GOLD CORPORATION
(A Development Stage Company
Statements of Changes in Stockholders' Equity
(Unaudited)
Paid-in Retained Retained Paid-in
Issued and Capital Earnings Earnings Capital
Outstanding Common (Dormant (Dormant (Development (Development
Shares Stock Period) Period) Stage) Stage) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Loss January 1 -
December 31, 1997 -- -- -- -- (690,747) -- (690,747.)
Issuance of Common Stock 2,250,000 2,250. -- -- -- 222,750. 225,000.
----------- ----------- ----------- ----------- ----------- ----------- -----------
Shareholders' Equity
December 31, 1997 4,348,114. $ 4,348. $ 3,236,602. $(2,907,648.) $(1,720,669.) $ 1,493,223. $ 105,856.
=========== =========== =========== =========== =========== =========== ===========
Net Income January 1 -
December 31, 1998 -- -- -- -- 34,944. -- 34,944.
----------- ----------- ----------- ----------- ----------- ----------- -----------
Stockholders' equity
December 31, 1998 4,348,114 $ 4,348. $ 3,236,602. $(2,907,648.) $(1,685,725.) $ 1,493,223. $ 140,800.
=========== =========== =========== =========== =========== =========== ===========
Net Loss January 1, 1999 -- -- -- -- $ (30894) -- $ (30894)
through March 31, 1999 ----------- ----------- ----------- ----------- ----------- ----------- -----------
Shareholders' Equity 4,348,114 $ 4,348. $ 3,236,602. $(2,907,648.) $(1,716,619.) $ 1,493,223. $ 109,906.
March 31, 1999 =========== =========== =========== =========== ============ ============ ===========
In 1997 the Company issued 2,000,000 common shares in exchange for $200,000 in
accrued salaries and other consideration. Also, 250,000 common shares were
issued as a finders fee in connection with the First Dynasty financing.
See Notes to the Financial Statements.
8
Page 5
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Statement of Cash Flow
(Unaudited)
January 1, 1995
January 1, 1999 January 1, 1998 (development
through through stage through
March 31, 1999 March 31, 1998 March 31, 1999
-------------- -------------- --------------
CASH FLOW FROM DEVELOPMENT
STAGE ACTIVITIES:
Net Income/(Loss) $ (30894) $ (27993) $(1,716,619)
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Increase (decrease) in:
Provision for bad debt included in net loss -- -- 325,000.
Write-off of mining investment in Georgia -- -- 135,723.
Organization costs -- -- (9,601)
Gain on sale of Armenia mining interests -- -- (268,874)
Accounts receivable and deposits 9287 (2135) (24,214)
Accounts payable, accrued expenses
and miscellaneous 7482 (28519) 277,255.
----------- ----------- -----------
Net cash (used) by Development Stage Activities (14125) (58647) (1,281,300).
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of Armenia mining
interests (net of Note Receivable) -- -- 1,891,155.
Investment in certain mining interests
- net of financing -- -- (153,494)
Deferred costs - mining interests -- -- (878,858)
----------- ----------- -----------
Net cash provided by Investing Activities -- -- 858,803.
----------- ----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from private placement offering -- -- 421,573.
Note Payable - officer (net) -- -- --
Warrants exercised -- -- 100.
----------- ----------- -----------
Net cash provided (used) by Financing Activities -- -- 421,673.
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (14125) (58647) (854)
CASH - beginning 24623 66344 11352.
----------- ----------- -----------
CASH - end $ 10498 $ 7697 $ 10498
----------- ----------- ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 170 $ 150 $ 2,178
=========== =========== ===========
Interest Paid $ -- $ -- $ 15422
=========== =========== ===========
9
Page 6
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Statement of Cash Flow (Continued)
March 31, 1999
NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1995 the Company issued one million shares of common stock for certain mining
interests, with an estimated value of $850,000. In 1997 the Company issued
2,000,000 common shares in exchange for $200,000 in accrued salaries and other
consideration. Also, 250,000 common shares were issued as a finders fee in
connection with the First Dynasty financing.
In 1998 the Company exchanged its remaining 20% stock interest in Global Gold
Armenia Limited for 4,000,000 First Dynasty Mines Ltd. Special Warrants
exchangeable at no cost into 4,000,000 shares of common stock of First Dynasty
Mines Ltd.
See Notes to Financial Statements
10
Page 7
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 1: ORGANIZATION (AS A DEVELOPMENT STAGE COMPANY) AND ACCOUNTING
POLICIES
Global Gold Corporation (the "Company") was incorporated as Triad
Energy Corporation in the State of Delaware on February 21, 1980
and, as further described hereafter, had no operating or development
stage history from its inception until January 1, 1995. Accordingly,
the Company had been dormant until 1995. During 1995 the Company
changed its name from Triad Energy Corporation to Global Gold
Corporation to pursue mining opportunities in the former Soviet
Republics of Armenia and Georgia. As part of the plan to acquire the
mining interests and raise venture capital, the Company increased
the number of shares authorized to be issued from ten million to one
hundred million and commenced a private placement offering to raise
$500,000.
The Company had offices in New York City which it leased from
Penn-Med Consultants, Inc., which was charging rent in the amount of
$3,000 per month to the Company commencing January 1, 1996 through
December 31, 1997 for use of the premises, office equipment,
facilities, etc. The lease was terminated on December 31, 1997 and
Penn-Med canceled $18,000 in accrued rent payable. The Company
currently maintains a shared office in Garden City, New York.
During 1995 the Company formed certain wholly-owned foreign
subsidiaries. Any reference in these statements to the Company may
also include one, some or all of the subsidiaries. All intercompany
transactions were eliminated.
As a result of ownership changes, the Company will not be able to
benefit from all of its net operating loss carryforwards. (Income
Tax Matters - see Note 10.)
NOTE 2: 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 balance sheet date, and also the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
NOTE 3: DEVELOPMENT STAGE COMPANY
The Company may encounter problems, delays, expenses and
difficulties typically encountered in the development stage, many of
which may be outside of the Company's control. Management must also
be successful in securing additional investor and/or lender
financing. The Company expects to incur operating losses for the
near term and, in any event, until such time as it derives
substantial revenues from its investment in First Dynasty Mines Ltd.
or other future projects.
11
Page 8
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 4: ACQUISITION OF ARMENIAN MINING INTEREST FROM EYRE
Pursuant to the Asset Purchase Agreement dated June 1995, the
Company acquired from Eyre, an Australian corporation, all of its
potential interest in its Armenian gold mining project (Note 5) and
all of Eyre's potential interest in its Georgia gold and copper
mining project (Note 6).
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United
States District Court for the Southern District of New York, seeking
damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company and Drury J. Gallagher, Chairman, and Robert A.
Garrison, President, seeking damages in an undetermined amount
against the Company and seeking a declaratory judgment voiding the
Second Restructuring Agreement and directing Mr. Gallagher and Mr.
Garrison to return the 2,000,000 shares of the Company's Common
Stock issued to them by the Company in January, 1997.
The respective parties have served notices to take the deposition of
the other parties in the action and made requests for the production
of documents.
The Company intends to prosecute the litigation to completion and
believes that its claims against the plaintiffs will be successfully
contested and that the defendants' claims asserted against the
Company and Messrs. Gallagher and Garrison are without merit,
although there can be no assurance as to the outcome thereof.
The Company funded the litigation with $50,000 in a refundable
deposit account which had a balance of $24,060 on March 31, 1999.
NOTE 5: THE ARMENIAN JOINT VENTURE AGREEMENT
On February 2, 1996, the Company and Armgold, a division of the
Ministry of Industry of the Government of the Republic of Armenia,
initialed a Joint Venture Agreement (the "Venture") entitled the
Armenian Gold Recovery Company ("AGRC"). The Venture was modified on
May 1, 1996. On June 29, 1996, the Republic of Armenia issued a
parliamentary decree authorizing Armgold's joint venture with the
Company.
On October 7, 1996, the Armenian government issued a license for a
five-year period of implementation of the development plan,
effective after the registration of the Venture with the appropriate
Armenian governmental authorities, in accordance with the applicable
Armenian law. The registration of the Venture occurred on November
8, 1996.
The first stage of the project for extraction of gold from Tailings
began operations at an official dedication ceremony on February 25,
1998.
An agreement to contribute the Zod and Meghradzor mines to the
Venture was signed on September 30, 1997, and approved by the
Armenian government on June 25, 1998 based on a feasibility study
prepared by a joint venture between engineering companies
Kilborn-SNC Lavalin and CMPS&F, and submitted on June 8, 1998.
12
Page 9
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 6: THE GEORGIAN AGREEMENT
The Company also acquired from Eyre rights under a Foundation
Agreement dated April 22, 1995 (including a Charter for a joint
venture company) with R.C.P.A. Madneuli, a Georgian state
enterprise, in connection with carrying out certain mining of the
Madneuli deposit. The Company was subsequently advised that the
application for the license required to be filed with the Georgian
government had not been filed, and it had no definitive agreement
granting it fixed rights to mining production or processing in
Georgia.
The Company thereafter learned that the Georgian government was
planning to privatize the development of the Madneuli mine through a
public bidding process which was slated to end on April 15, 1997.
Since the structure of the Madneuli mining project under the public
tender differed markedly from that contemplated under the Asset
Purchase Agreement between the Company and Eyre dated as of June 30,
1995, the Company decided not to submit a bid for the development of
the Madneuli mining project. As of December 31, 1997, the Company
wrote-off its investment in the Georgian mining property resulting
in a loss of $135,723.
NOTE 7: NOTES RECEIVABLE
The Company holds a note receivable from Jet-Line Environmental
Services Inc. for $300,000 bearing interest at prime plus 2.0%.
Jet-Line had defaulted on prior balloon payment obligations and was
in default of its current interest requirements. The Note was
understood to be secured by U.C.C.'s on certain equipment; however,
there were no filings located.
The Company had been notified by the Business Loan Center who made a
U.S. Small Business Administration guaranteed loan to Jet-Line of
$550,000 in 1994, that it would liquidate the Jet-Line assets, as to
which it held a senior security interest. The Company thereafter
unsuccessfully disputed the Business Loan Center's position as a
senior secured creditor in late 1997. After determining that, among
other things, the value of the assets held by it as collateral was
negligible, the Company decided to write off the Jet-Line loan as
worthless as of December 31, 1997.
NOTE 8: CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Pursuant to a Private Placement Offering (the "Offering") dated May
17, 1995, as amended, the Company issued $500,000 of 10% Convertible
Notes due December 31, 1996. Expenses in connection with the
Offering were $78,427.
Each $1,000 Convertible Note entitled the holder to 400 shares of
common stock and warrants to purchase 800 shares of common stock at
an adjusted exercise price of $.50 per share at any time before
December 31, 1998. The exercise price was subsequently reduced to
$.125 per share to reflect the current market valuation as
determined by management and the exercise date was extended to
December 31, 1999.
In accordance with the Offering, interest was not payable on the
Convertible Notes so long as they were converted to equity within a
specified time frame. After the December 1, 1995 Eyre closing, the
entire $500,000 of Convertible Notes were exchanged for 200,000
shares of common stock.
13
Page 10
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 9: OFFICERS' COMPENSATION, INCENTIVE STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS
Management presently consists of Mr. Drury J. Gallagher and Mr.
Robert A. Garrison. Mr. Gallagher had been President of the Company
and a stockholder since 1981; he is currently Chairman of the
Company. Mr. Garrison was subsequently hired to oversee mining and
related financing activities, and is currently President. Messrs.
Gallagher and Garrison entered into employment agreements with the
Company effective July 1, 1995.
On January 3, 1997, the Board of Directors of the Company approved
the issuance of 1,000,000 shares of its common stock to each of
Messrs. Gallagher and Garrison in exchange for $100,000 in accrued
salary each plus cancellations of 'stock options and stock
appreciation rights (the "SARs") and personal guarantees up to
$500,000. In 1997, Eyre questioned the validity of the issuance by
the Company of 1,000,000 shares of its common stock to each of
Messrs. Gallagher and Garrison and asserted a counterclaim against
Messrs. Gallagher and Garrison individually, directing Mr. Gallagher
and Mr. Garrison to return the 2,000,000 shares of the Company's
common stock. As of March 31, 1999, accrued salary of $162,500 was
due to Mr. Gallagher.
NOTE 10: NON-UNITED STATES WHOLLY-OWNED SUBSIDIARIES / INCOME TAX MATTERS
On November 29, 1995, the Company formed Global Gold Armenia Limited
("GGA") and Global Gold Georgia Limited ("GGG"), which were
respectively assigned the Armenian and Georgian mining rights from
Eyre at the closing on December 1, 1995 (Note 5). The two
subsidiaries are Cayman Island entities which were granted a
twenty-year tax exemption from any law of that jurisdiction which
hereafter imposes any tax to be levied on profits, income, gains or
appreciation, commencing December 19, 1995.
The Company experienced net operating losses for each of the years
ended December 31, 1996 and 1997 and a net profit for 1998. The
Company elected to carryforward losses for federal income tax
purposes and offset future taxable earnings. However, since the
Company is a development stage company and its ability to obtain
future earnings is uncertain, no deferred tax asset has been
recorded.
NOTE 11: INCOME/(LOSS) PER SHARE
Net income/(loss) per share is computed using the weighted average
number of shares outstanding during the period. Common stock
equivalents have not been included since the effect would be
antidilutive.
NOTE 12: REVERSE STOCK SPLIT
The Company effected a 1 for 10 reverse split of its common stock
effective as of December 31, 1996. Such step was taken by the
written consent of the holders of a majority of the Company's issued
and outstanding shares of common stock. By virtue of the reverse
split, each stockholder's number of shares of common stock became
one-tenth of the number previously held. The Company filed its
Certificate of Amendment to the Certificate of Incorporation with
respect to the reverse split with the Delaware Secretary of State on
December 31,1996.
14
Page 11
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
March 31, 1999
NOTE 13: FIRST DYNASTY MINES LTD.
The Company, GGA and First Dynasty, a Canadian public company,
entered into a preliminary agreement dated January 27, 1997, whereby
First Dynasty agreed to advance funds in stages necessary for the
development of the Armenian mining projects.
The Company and First Dynasty entered into a definitive agreement
dated May 13, 1997, reflecting the final agreement of the parties
with respect to the Armenian mining projects (the "FDM Agreement").
The Company and GGA, in conjunction with First Dynasty, negotiated
for AGRC to develop the Zod and Meghradzor mines and concluded the
amended Armenian Joint Venture Agreement on September 30, 1997. The
Armenian government passed a governmental decree on June 25, 1998.
On July 24, 1998 First Dynasty and the Company entered into an
agreement to accelerate the issuance of 4,000,000 special warrants
exchangeable into an equal amount of First Dynasty common shares.
The warrants were issued in exchange for the Company's remaining 20%
stock interest in GGA. The warrants were distributed on August 31,
1998. The 4,000,000 special warrants are exchangeable into 4,000,000
common shares of First Dynasty Mines Ltd. at no cost and become
freely tradable within one year or with the public offering of
common shares, whichever comes first. The common shares were valued
at 13/64 on the Toronto Stock Exchange or US$.128 on August 31,
1998. For reporting purposes, the shares were discounted 50% for
absence of a market for the warrants, presence of Canadian
securities law restrictions on resale thereof, lack of trading
volume and future dilution. As of March 31, 1999, there was no
market for the special warrants. The common shares were valued at
C$.1875 per share on the Toronto Stock Exchange and US$.125 on the
NASDAQ Bulletin Board. It is anticipated that the special warrants
will be exchanged for common shares and the common shares will have
a market value, although there can be no assurance of such result.
The Company will retain the right until December 31, 2009 to elect
to participate at a level of up to twenty percent with First Dynasty
or any of its affiliates in any exploration project undertaken in
Armenia.
In connection with the First Dynasty financing, the Company paid a
finders fee of 125,000 shares of its common stock to each of Walker
Investments Ltd. and Alpine Holdings Ltd. at $.10 per share which
approximated fair market value as determined by management.
15
Page 12
GLOBAL GOLD CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1999
(A) General Overview
The Company now holds only special warrants to purchase 4,000,000 shares
of common stock of First Dynasty Mines, Ltd., a publicly-traded Canadian
corporation. The Company previously engaged in the development of a gold mining
project in Armenia, a member of the Commonwealth of Independent States. The
Company is currently in the pre-development stage and has not received any
revenues from mining activities as of March 31, 1999, other than such shares of
stock and cash previously paid by First Dynasty Mines, Ltd. Prior thereto, the
Company did not engage in any substantial business activities, except as
described in the section 1(D) entitled "Prior History of the Company" in the
annual reports previously filed by the Company with the Securities and Exchange
Commission ("SEC")
(B) Armenian Mining Project
(a) Armenian Joint Venture Agreement
In 1996, the Company acquired rights under a Joint Venture Agreement with
the Ministry of Industry of Armenia and Armgold, S.F., the Armenian gold mining
state enterprise, to provide capital and financing multistage financing of the
Armenian gold industry, which rights were finalized under the Second Armenian
Gold Recovery Company Joint Venture Agreement dated as of September 30, 1997.
As of January 31, 1997, the Company and Global Gold Armenia Limited, the
Company's wholly-owned Cayman Islands subsidiary ("GGA") reached an agreement
with First Dynasty Mines Ltd. ("First Dynasty"), a Canadian public company whose
shares are traded on the Toronto Stock Exchange and on NASDAQ. Under such
preliminary agreement, First Dynasty acquired the right, subject to certain
conditions, to advance funds in stages necessary for the implementation of the
tailings project and the preparation of engineering and business plan materials
for the remaining Armenian mining projects.
The Company, GGA and First Dynasty entered into a definitive agreement
dated May 13, 1997 reflecting the final agreement of the parties with respect to
the above projects (the "FDM Agreement"). The parties thereafter amended the FDM
Agreement on July 24, 1998.
In connection with First Dynasty's purchase of the Company's remaining 20%
interest in GGA, the Company received a certificate representing special
warrants to purchase 4,000,000 shares of First Dynasty common stock.
For a further description of the background concerning the Armenian mining
project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(C) Georgian Mining Project
16
Page 13
As of December 31, 1997, the Company abandoned its pursuit of any mining
project in Georgia.
For a further description of the background concerning the Georgian mining
project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(D) Recent Activities
The Company's principal activity at present consists of holding special
warrants exchangeable for 4,000,000 shares of common stock of First Dynasty, the
common stock of which is traded on the Toronto Stock Exchange and NASDAQ. The
closing price of a share of such common stock on March 31, 1999 was U.S. $0.125.
However, the special warrants are an illiquid investment, and are subject to
Canadian securities laws restrictions, and, hence, not freely tradable.
Moreover, as of March 31, 1999, First Dynasty had 112,403,797 share of common
stock issued and outstanding, and warrants, options and convertible notes to
purchase 36,100,000 shares of common stock outstanding on such date. Since there
are outstanding special warrants to purchase 31.6 million shares of First
Dynasty at prices ranging from $0.29 to $0.42 over the period ending January 31,
2002, the shares purchasable thereunder will, in the Company's view, pose an
overhang on the trading market and adversely affect any upward price movement in
the shares of common stock of First Dynasty.
REVENUES: During the three-month period ended March 31, 1999, the Company's
interest and royalty income was $0 which was the same amount for the same period
last year.
ADMINISTRATIVE AND OTHER EXPENSES:
The Company's administrative and other expenses for the three-month period
ended March 31, 1999 were $30,905, which represented an increase from the amount
paid or accrued of $28,272 in the same period last year. Expense increases were
attributable to an increase in legal fees of $7,926 related to the Eyre
litigation and an increase of $2,250 in accounting fees partially offset by a
decrease of $4,500 in rent and $3,063 in office expense.
LIQUIDITY AND CAPITAL RESOURCES: As of March 31, 1999, the Company's total
assets were $290,558, of which $34,558 consisted of cash or cash equivalents.
The Company's plan of operation for calendar year 1999 is:
(a) to exercise the special warrants to purchase 4,000,000 shares of First
Dynasty common stock, at no cost, and hold such stock for investment purposes
thereafter; and
(b) to prosecute the litigation against Mr. Parry, Eyre and the
Parry-Beaumont Trust to completion.
The Company needs financing to meet its anticipated monthly administrative
expenses of $5,000 (exclusive of accrued officers' compensation), plus
additional amounts for legal and accounting costs. Prior to the commencement of
the litigation described in Item 3 hereof, the Company anticipated that it might
obtain additional financing in 1999 from the holders of its Warrants. Pursuant
to the Offering of $500,000 principal amount of the Convertible Notes of the
Company, the Company issued Warrants to purchase 4,000,000 shares of its Common
Stock at an exercise price of $0.50 per share. By virtue of the Reverse Split,
the Warrants were converted into Warrants to purchase 400,000 shares of the
Company's Common Stock at an exercise price of $5 per share. On January 23,
1997, the Company amended the Warrants to reduce the exercise price to $1 per
share and to extend the expiration date until December 31, 1997. Again, on
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December 1, 1997, the Company amended the Warrants to reduce the exercise price
to $0.125 per share and to extend the expiration date until December 31, 1998,
and recently extended the expiration date until December 31, 1999. If the
Warrants were exercised in full, the Company would receive $50,000 in gross
proceeds. However, the Company does not believe that the Warrants will be
exercised under existing circumstances, and thus does not anticipate that any
amount thereof will be exercised, although there can be no assurance of such
result.
In the event that no contemplated financing is obtained through the
exercise of the Warrants (which the Company considers highly remote), the
Company does not have sufficient financial resources to meet its obligations.
The Company does not intend to engage in any project research and
development during 1999 and does not expect to purchase or sell any plant or
significant equipment.
The Company does not expect to hire any additional full-time employees in
1999.
Part II
ITEM 1. LEGAL PROCEEDINGS
Except as noted below, there is no material pending legal proceeding to
which the Company is a party or to which any of its properties is subject.
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United States
District Court for the Southern District of New York, seeking damages in excess
of $81,000,000 arising out of the alleged fraud committed by the defendants.
The defendants denied such claims and asserted counterclaims against the
Company seeking damages in an undetermined amount against the Company and
seeking a declaratory judgment voiding the Second Restructuring Agreement. In
addition, Eyre and the Parry-Beaumont Trust brought a third-party complaint
against Drury J. Gallagher and Robert A., Garrison, individually, seeking, among
other things, damages in excess of $75,000 and directing Mr. Gallagher and Mr.
Garrison to return the 2,000,000 shares of the Company's Common Stock issued to
them by the Company in January, 1997.
The respective parties have served notices to take the deposition of the
other parties in the action and made requests for the production of documents.
The parties had scheduled the taking of depositions commencing on May 17, 1999
but such date has been postponed, and no new date has been fixed as of the date
hereof.
The Company intends to prosecute the litigation to completion and believes
that its claims against the plaintiffs will be successfully contested and that
the defendants' claims asserted against the Company and Messrs. Gallagher and
Garrison are without merit, although there can be no assurance as to the outcome
thereof.
The Company has also received requests from Panquest Lte., a Singapore
Company, and from Eyre relating to amounts alleged to be due to Panquest Lte.
relating to the Company's acquisition of rights from Eyre relating to the
Armenian and Georgian projects. No evidence has yet been supplied to the Company
in this regard.
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ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
1. (a) The following documents are filed as part of this report:
Financial Statements of the Company (unaudited), including Balance Sheet,
Statement of Income and Loss, Statement of Changes in Stockholders' Equity,
Statement of Cash Flow and Notes to Financial Statements as at and for the
period ended March 31, 1999.
(b) The Exhibits which are listed on the Exhibit Index attached
hereto: Not applicable.
2. No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
GLOBAL GOLD CORPORATION
(Registrant)
Dated: May 20, 1999 By: /s/ Drury J. Gallagher
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Drury J. Gallagher, Chairman, Chief
Executive Officer and Treasurer
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