Third Quarter Report 10QSB
September 30, 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 September 30, 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 September 30, 1999, there were 4,348,114 shares of the
registrant's Common Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|.
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1999
EXHIBIT PAGE
A BALANCE SHEETS - AS OF SEPTEMBER 30, 1999 1
AND DECEMBER 31, 1998
B STATEMENTS OF INCOME AND (LOSS) - FOR THE THREE-MONTH 2
AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1999
AND 1998, AND THE DEVELOPMENT STAGE PERIOD JANUARY 1,
1995 THROUGH SEPTEMBER 30, 1999
C STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - FOR THE 3A/3B
PERIOD JANUARY 1, 1999 THROUGH SEPTEMBER 30, 1999, AND THE
DEVELOPMENT STAGE PERIOD JANUARY 1, 1995 THROUGH SEPTEMBER 30,
1999
D STATEMENTS OF CASH FLOW - FOR THE PERIODS JANUARY 1, 4
1999 THROUGH SEPTEMBER 30, 1999 AND JANUARY 1,
1998 THROUGH SEPTEMBER 30, 1998, AND THE DEVELOPMENT
STAGE PERIOD JANUARY 1, 1995 THROUGH SEPTEMBER 30, 1999
NOTES TO FINANCIAL STATEMENTS 5-10
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
September 30, 1999 December 31, 1998
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash ............................ $ 1,142 $ 24,623
REFUNDABLE DEPOSIT .............. 11,735 33,347
------ -------
12,877 57,970
OTHER ASSETS
Investment in First Dynasty Mines Ltd.
COMMON SHARES AT LOWER OF COST OR MARKET 240,000 256,000
--------- ---------
TOTAL ASSETS ..................... $252,877 $313,970
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES .. $189,123 $173,170
STOCKHOLDERS' EQUITY
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 ...(1,762,771) (1,685,725)
--------- ---------
63,754 140,000
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 252,877 $ 313,970
========= =========
1
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME AND (LOSS)
(UNAUDITED)
January 1, 1995
July 1, 1999 July 1, 1998 January 1, 1999 January 1, 1998 (development stage)
through through through through through
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998 September 30, 1999
------------------ ------------------ ------------------ ------------------ ------------------
REVENUE $ - - - - $ - - - - $ - - - - $ - - - - $ - - - -
--------------- --------------- --------------- --------------- ---------------
EXPENSES
Officers' compensation - - - - 37,500. - - - - 112,500. 550,834.
Legal 3,041. 13,294. 33,402. 56,474. 575,512.
Accounting and auditing - - - - - - - - 7,250. 22,500. 130,698.
Transfer agent and
securities fees - - - - - - - - - - - - - - - - 12,446.
Proxy costs - - - - - - - - - - - - - - - - 26,555.
Office expense 3,150. 6,870. 19,919. 25,002. 142,909.
Travel - - - - - - - - - - - - 92. 43,234.
Rent - - - - - - - - - - - - - - - - 54,000.
--------------- --------------- --------------- --------------- ---------------
OPERATING (LOSS) (6,191.) (57,664.) (60,571.) (216,568.) (1,536,188.)
OTHER INCOME (EXPENSES)
Interest and royalty
income 12. 274. 35. 633. 5,414.
Organization costs - - - - - - - - - - - - - - - - - (4,800.)
Interest expense - - - - (601.) - - - - (601.) (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 Armenia
Limited - - - - 255,999. - - - - 255,999. 268,874.
Gain/(Loss) on investment
in First Dynasty Mines
Common Stock (16,000.) - - - - (16,000.) - - - - (16,000.)
--------------- --------------- --------------- --------------- ---------------
INCOME/(LOSS) BEFORE INCOME
TAXES (22,179.) 198,008. (76,536.) 39,463. (1,758,845.)
INCOME TAXES (170.) (170.) (510.) (490.) (3,926.)
--------------- --------------- --------------- --------------- ---------------
NET INCOME/(LOSS) $(22,349.) $197,838. $(77,046.) $38,973. $(1,762,771.)
========== ========= ========== ======== =============
NET INCOME/(LOSS) PER SHARE $(.005) $.1375 $(.0178) $.009
======= ====== ======== =====
2
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT 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
----------- ---------- ---------- ------------ ------------ ------------ -----------
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.)
Warrents 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.
3a
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT 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. $3,326,602. (2,907,648.) (1,685,725.) 1,493,223. 140,800.
---------- -------- ------------ ------------ ------------- ----------- ---------
Net Loss January 1, 1999
Through Septemer 30, 1999 - - - - - - - - - - - - - - - - (77,046.) - - - - (77,046.)
---------- -------- ------------ ------------ ------------- ---------- ----------
Shareeholders' Equity
September 30, 1999 4,348,114 $ 4,348. $3,236,602. $(2,907,648.) $(1,762,771.) $1,493,223. $ 63,754.
========== ========= ========= =========== ============= ========== ==========
In 1997 the Company issued 2,000,000 common shares in exchange for $200,000 in
accrued salaries and other considerations. Also, 250,000 common shares were
issued as a Finders Fee in connection with the First Dynasty financing.
3b
GLOBAL GOLD CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
(UNAUDITED)
January 1, 1995
January 1, 1999 January 1, 1998 (development stage)
through through through
September 30, 1999 September 30, 1998 September 30, 1999
------------------ ------------------ ------------------
CASH FLOW FROM DEVELOPMENT
STAGE ACTIVITIES:
Net Income/(Loss) $(77,046.) $38,973. $(1,762,771.)
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 - - - - (255,999.) (268,874.)
Accounts receivable and deposits 21,612. (50,000.) (11,889.)
Investment in First Dynasty common shares 16,000. - - - - 16,000.
Accounts payable, accrued expenses
and miscellaneous 15,953. 35,413. 285,726.
------------- ----------------- -------------
NET CASH (USED) BY DEVELOPMENT STAGE ACTIVITIES (23,481.) (231,613.) (1,290,686.)
------------- ----------------- -------------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of Armenia mining
interests (net of Note Receivable) - - - - 200,000. 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 - - - - 200,000. 858,803.
-------------- ----------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from private placement offering - - - - - - - - 421,573.
Warrents exercised - - - - - - - - 100.
-------------- ----------------- -------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES - - - - - - - - 421,673.
-------------- ----------------- -------------
NET INCREASE (DECREASE) IN CASH (23,481.) (31,613.) (10,210.)
CASH - beginning 24,623. 66,344. 11,352.
-------- -------- --------
CASH - END $ 1,142. $34,731. $ 1,142.
========= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
INCOME TAXES PAID $ 510. $ 490. $ 2,518.
========== ========= =========
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 considerations. 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. The Warrants were exchanged for shares of First Dynasty Mines Ltd.
common stock in September 1999.
4
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 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. During 1995 the
Company changed its name from Triad Energy Corporation to Global Gold
Corporation to pursue certain gold and copper mining rights 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.
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. The Company currently maintains a
shared office in Garden City, New York.
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.
5
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 4: ACQUISITION OF ARMENIAN MINING INTEREST FROM EYRE
Pursuant to the Asset Purchase Agreement dated June 1995, the Company
acquired from Eyre Resources N.L., 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, a Singapore 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.
A settlement was agreed to on October 13, 1999. In the settlement
1,000,000 common shares of First Dynasty Mines Ltd. that were
received in exchange for the investment in Global Gold Armenia
Limited were exchanged for 1,000,000 common shares of Global Gold
Corporation, 300,000 held by Eyre and 700,000 held by the Parry
Beaumont Trust.
The Company funded the litigation with $50,000 in a refundable
deposit account which had a balance of $11,735 on September 30, 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 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 Kilborn-SNC Lavalin and CMPS&F,
and submitted on June 8, 1998.
An agreement was entered into with First Dynasty Mines Ltd. on July
24, 1998 transferring the Company's interest in AGRC in exchange for
4,000,000 Special Warrants exchangeable at no cost into common shares
of First Dynasty. As of September 30, 1998 the Company recognized a
gain of $268,874 in the exchange.
6
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 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 Company has 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.
7
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
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.
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 in April 1995 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. As of September 30, 1999 accrued salary of $162,500 was due
to Mr. Gallagher.
8
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 10: NON-UNITED STATES WHOLLY-OWNED SUBSIDIARIES/INCOME TAX MATTERS
On November 29, 1995, the Company formed Global Gold Armenia Limited
and Global Gold Georgia Limited, 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 the nine-month period ended
September 30, 1999. The Company has elected to carryforward such
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: NET 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 filed its Certificate of Amendment to the Certificate of
Incorporation with respect to a 1 for 10 reverse split with the
Delaware Secretary of State on 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.
All share and per share data in this report have been restated to
reflect the reverse stock split, unless otherwise noted.
9
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 13: FIRST DYNASTY MINES LTD.
The Company, GGA and First Dynasty Mines Ltd., 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.
Under such agreement, First dynasty acquired the right to acquire all
of the stock of GGA, subject to certain conditions, by advancing
funds in stages necessary for the implementation of the mining
development plan and delivering 4,000,000 special warrants
convertible into First Dynasty Common Stock. On July 24, 1998 First
Dynasty and the Company entered into an agreement to accelerate the
issuance of the 4,000,000 special warrants. The 4,000,000
special warrants are exchangeable into 4,000,000 common shares of
First Dynasty Mines Ltd. at no cost 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, lack of
trading volume and future dilution. In September 1999 the warrants
were exchanged for 4,000,000 shares of First Dynasty Mines Ltd.
common stock. As of September 30, 1999 the common shares were valued
at C$.0825 per share on the Toronto Stock Exchange and $U.S. .06 on
the NASDAQ Bulletin Board. 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 at the
time.
10
GLOBAL GOLD CORPORATION
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1999
(A) GENERAL OVERVIEW
The Company now holds only 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 September 30, 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 Commissions
("SEC").
(B) ARMENIAN MINING PROJECT
In 1996, the Company acquired rights under a Joint Venture Agreement with
the Ministry of Industry of Armenia and Armgold, S.F., the Armenian state
enterprises, to provide capital and 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 whoe
shares are traded on the Toronto Stock Exchange and on NASDAQ. Under such
agreement, First Dynasty acquired the right to acquire all of the stock of GGA,
subject to certain conditions, by advancing funds in stages necessary for the
implementation of the tailing 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. In
September 1999 the warrants were exchanged for 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
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.
11
(D) RECENT ACTIVITIES
The Company's principal activity at present consists of holding 4,000,000
shares of common stock of First Dynasty, which is traded on the Toronto Stock
Exchange and NASDAQ. The closing price of a share of such common stock on
September 30, 1999 was U.S.$0.06. As of September 30, 1999, First Dynasty had
118,605,429 shares of common stock issued and outstanding, and warrants, options
and convertible notes to purchase 41,740,000 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 purchaseable 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 nine-month period ended September 30, 1999, the Company's
interest and royalty income was $35 which was less than the $633 for the same
period last year.
During the three-month period ended September 30, 1999, the Company's
interest and royalty income was $12 which was less than the $274 for the same
period last year.
ADMINISTRATIVE AND OTHER EXPENSES:
The Company's administrative and other expenses for the nine-month period
ended September 30, 1999 were $77,011, which represented a decrease from the
amount paid or accrued of $217,659 in the same period last year. The expense
decreases were attributable to the elimination of officer compensation accrual
of $112,500, lower legal fees of $23,072, reduced accounting expenses of $15,250
and lower office expenses of $5,175, all attributable to reduced activity.
The Company's administrative and other expenses for the three-month period
ended September 30, 1999 were $6,361 compared to expenses of $58,435 for the
three-month period ended September 30, 1998. The expense decrease was
attributable to the elimination of the officer compensation accrual of $37,500,
lower legal fees by $10,253, and lower office expenses of $3,720. All decreases
are attributable to reduced activity.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1999, the Company's total assets were $252,877, of
which $12,877 consisted of cash or cash equivalents.
The Company's plan of operation for calendar year 1999 is:
(a) To hold the 4,000,000 shares of First Dynasty common stock for
investment purposes thereafter; and
(b) investigate other investment opportunities in the mineral development
and production areas.
The Company needs financing to meet its anticipated monthly administrative
expenses of $3,000 (exclusive of accrued officers' compensation), plus
additional amounts for legal and accounting costs. Prior to the commencement of
the litigation described in Part II, Item I 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. 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 $.125 per share and the expiration date extended until December 31,
1997. On December 31, 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
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the Warrants will be exercised under existing circumstances and has not decided
whether to further extend the expiration date. Thus, it 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 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 Messrs. Gallagher and
Garrison to return the 2,000,000 shares of the Company's Common Stock issued to
them by the Company in January 1997.
A settlement was agreed to on October 13, 1999. In the settlement 300,000
common shares of First Dynasty Mines Ltd. were exchanged for 300,000 common
shares of Global Gold Corporation held by Eyre and 700,000 common shares of
First Dynasty Mines Ltd. were exchanged for 700,000 shares of Global Gold
Corporation held by the Parry- Beaumont Trust.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
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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 September 30, 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 and
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: FEBRUARY 4, 2000 BY:
------------------------------------
Drury J. Gallagher, Chairman, Chief
Executive Officer and Treasurer