Third Quarter Report 10QSB
September 30, 2003
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UNITED STATES
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, 2003
[ ] 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
-----------------------
(Exact name of small business issuer in its charter)
DELAWARE 13-3025550
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
104 Field Point Road, Greenwich, CT 06830
-----------------------------------------
(Address of principal executive offices)
(203) 422-2300
--------------------------
(Issuer's telephone number)
Not applicable
----------------------------------------------------------------------------
(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 [ ].
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 a court. Yes [ ] No [ ]. Not applicable.
As of November 19, 2003, there were 9,068,134 shares of the issuer's Common
Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X].
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Condensed consolidated financial Statements (Unaudited)
Condensed consolidated Balance Sheet - as of September 30, 2003 ....................................3
Condensed consolidated statements of Operations for the three
months periods and nine months periods ended September 30,
2003 and September 30, 2002 and for the development stage
period from
January 1, 1995 through September 30,2003 ..........................................................4
Condensed consolidated statements of Cash Flows for the nine
months ended September 30, 2003 and September 30, 2002 and for
the development stage period from January 1, 1995 through
September 30, 2003 .................................................................................5
Notes to Condensed consolidated financial Statements (Unaudited) ...................................6
Item 2. Management's Discussion and Analysis or Plan of Operation ........................................14-16
Item 3. Controls and Procedures .............................................................................16
PART II OTHER INFORMATION
Item 1. Legal Proceedings ...................................................................................16
Item 2. Changes in Securities................................................................................16
Item 3 Defaults Upon Senior Securities .....................................................................17
Item 4 Submission of Matters to a Vote of Security Holders .................................................17
Item 5 Other Information ...................................................................................17
Item 6. Exhibits and Reports on Form 8-K ....................................................................18
SIGNATURES ..........................................................................................................19
CERTIFICATIONS ......................................................................................................20
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Unaudited Condensed Consolidated Balance Sheet
September 30, 2003
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents ..............................................................................$187,711
Investment in securities available for sale ..............................................................47,400
-------
TOTAL CURRENT ASSETS ..................................................................235,111
Mine acquisition costs ..................................................................................432,620
-------
$667,731
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses .........................................................$253,314
Due to related parties ..........................................................................89,795
-------
TOTAL CURRENT LIABILITIES .............................................................343,109
-------
STOCKHOLDERS' EQUITY
Common stock $0.001 par, 100,000,000 shares authorized,
8,968,134 shares issued and outstanding..................................................8,968
Common stock subscribed, 100,000 shares.............................................................100
Additional paid-in-capital ...................................................................5,972,755
Unearned compensation..........................................................................(562,869)
Accumulated deficit..........................................................................(2,907,648)
Deficit accumulated during the development stage ............................................(2,207,954)
Accumulated other comprehensive income ..........................................................21,270
-------
TOTAL STOCKHOLDERS' EQUITY ...........................................................$324,622
-------
667,731
=======
See accompanying notes to condensed consolidated financial statements.
3
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Unaudited Condensed Consolidated Statements Of Operations
Cumulative amount
from
January 1, 1995
Three Months Ended September 30, Nine Months Ended September 30, through
2003 2002 2003 2002 Sept. 30, 2003
---- ---- ---- ---- -----------------
REVENUES $ -0- $ -0- $ -0- $ -0- $ -0-
----------- ----------- ----------- ---------- ----------
EXPENSES:
Selling general and administrative 191,570 7,789 291,904 11,112 1,654,701
Legal fees 8,997 4,631 53,613 16,337 709,866
Write-off investment in Georgia
mining interests -- -- -- -- 135,723
Gain on sale of interest in Global
Gold Armenia -- -- -- -- (268,874)
(Gain) loss on sale of interest in
Sterlite Gold Ltd. (10,492) -- (37,400) (1,207) (42,019)
Miscellaneous other -- -- -- 100 18,557
----------- ----------- ----------- ----------- ----------
TOTAL EXPENSES 190,075 12,420 308,117 26,342 2,207,954
NET LOSS (190,075) (12,420) (308,117) (26,342) $(2,207,954)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE-BASIC AND DILUTED
$ (0.02) $ (0.00) $ (0.04) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
9,190,940 4,368,114 7,517,932 4,368,114
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
4
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Unaudited Condensed Consolidated Statements Of Cash Flows
Cumulative Amount
from
January 1, 1995
Nine Month Ended September 30, through
2003 2002 September 30, 2003
------------ --------------- ------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (308,117) $ (26,342) $(2,207,954)
Adjustments to reconcile net loss
to net cash used in operating activities:
Provision for bad debts -- -- 325,000
Amortization of unearned compensation 112,132 -- 112,132
Gain on sale of Armenia mining
interests -- -- (268,874)
Write-off of mining investment in
Georgia -- -- 135,723
(Gain) loss on sale of investment
in common stock of Sterlite Gold Ltd (37,400) (1,207) (42,019)
Non-cash expenses related to issuance of
common stock -- -- 174,500
Changes in assets and liabilities:
Organization costs -- -- (9,601)
Accounts receivable and deposits -- -- (154)
Accounts payable and accrued expenses 101,525 (27,885) 326,130
--------- ----------- -----------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (131,860) (55,434) (1,455,117)
--------- ----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of Armenia mining
interests -- -- 1,891,155
Proceeds from sale of investment in
common stock of Sterlite Gold Ltd. 161,537 43,672 211,888
Investment in certain mining interests
- net of financing -- -- (153,494)
Mine acquisition costs (245,613) -- (1,177,973)
--------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (84,076) 43,672 771,576
--------- ----------- -----------
NET CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement
offering 395,000 -- 816,573
Repurchase of common stock (25,000) (25,000)
Due to related parties 25,863 -- 67,577
Sale of warrants -- -- 650
Warrants exercised -- -- 100
--------- ----------- -----------
NET CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES 395,863 -- 859,900
--------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 179,927 (11,762) 176,359
CASH AND CASH EQUIVALENTS - beginning of
period 7,784 13,880 11,352
--------- ----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 187,711 $ 2,118 $ 187,711
--------- ----------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Income taxes paid $ -- $ -- $ 2,683
========= =========== ===========
Interest paid $ -- $ -- $ 15,422
========= =========== ===========
Noncash Transactions:
---------------------
Stock issued for unearned compensation $ 675,000 $ -- $ 675,000
========= =========== ===========
Stock issued in exchange for accounts
payable $ 25,000 $ -- $ 25,000
========= =========== ===========
Mine acquisition costs in accounts payables $ 133,505 $ -- $ 133,505
========= =========== ===========
See accompanying notes to condensed consolidated financial statements.
5
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2003
1. ORGANIZATION AND BUSINESS
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.
The accompanying financial statements present the development stage activities
of the Company from January 1, 1995, the period commencing the Company's
operations as Global Gold Corporation, through September 30, 2003.
The accompanying condensed consolidated financial statements are unaudited. In
the opinion of management, all necessary adjustments (which include only normal
recurring adjustments) have been made to present fairly the financial position,
results of operations and cash flows for the periods presented. Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. However, the Company
believes that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the December 31, 2002 annual
report on Form 10-KSB. The results of operations for the nine-month period
ending September 30, 2003 are not necessarily indicative of the operating
results to be expected for the full year ending December 31, 2003.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation - These financial condensed consolidated statements
have been prepared assuming that the Company will continue as a going concern.
Since its inception, the Company, a development stage enterprise, has yet to
generate revenues (other than interest income, proceeds from the sale of an
interest in an Armenian mining venture, and the sale of marketable securities
(consisting of common stock) received as consideration therewith) while
incurring costs in excess of $2,200,000. Management is currently pursuing
additional investors and lending institutions interested in financing the
Company's projects. However, there is no assurance that the Company will obtain
the financing that it requires or achieve profitable operations. The Company
expects to incur additional losses for the near term until such time as it
derives substantial revenues from the Chilean mining interest acquired by it or
other future projects or from its investment in marketable securities. The
accompanying financial statements do not include any adjustments that might be
necessary should there be substantial doubt about the Company's ability to
continue as a going concern.
b. Mine Costs and Depletion - Costs incurred to purchase, lease, or otherwise
acquire a property (whether unproved or proved) are capitalized when incurred.
These include the
6
costs of lease bonuses and options to purchase or lease properties, the portion
of costs applicable to minerals when land including mineral rights is purchased
in fee, brokers' fees, recording fees, legal costs, and other costs incurred in
acquiring properties.
Capitalized acquisition costs of proved properties shall be amortized (depleted)
by the unit-of-production method so that each unit produced is assigned a pro
rata portion of the unamortized acquisition costs.
c. New Accounting Standards
- In April 2003, the FASB issued SFAS No. 149,"Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." The statement amends and
clarifies accounting for derivative instruments, including certain derivatives
instruments embedded in other contracts and for hedging activities under SFAS
133. This Statement is effective for contracts entered into or modified after
June 30, 2003, except as stated below and for hedging relationships designated
after June 30, 2003 the guidance should be applied prospectively. The provisions
of this Statement that relate to SFAS 133 Implementation Issues that have been
effective for fiscal quarters that began prior to June 15, 2003, should continue
to be applied in accordance with respective effective dates. In addition,
certain provisions relating to forward purchases or sales of when-issued
securities or other securities that do not yet exist, should be applied to
existing contracts as well as new contracts entered into after June 30, 2003.
The adoption of SFAS No. 149, which became effective for contracts entered into
or modified after June 30, 2003, did not have any impact on the Company's
financial position, results of operations or cash flows.
- In May 2003, the FASB issued SFAS No. 150,"Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS 150 became effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise became effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 did not have any impact
on the Company's consolidated results of operations, financial position or cash
flows.
d. Stock Options and Awards
The Company adopted the 1995 Stock Option Plan under which a maximum of 500,000
shares of Common Stock may be issued (subject to adjustment for stock splits,
dividends and the like). In July 2002, the Company granted options to buy
150,000 shares of common stock, at $0.11 per share, to each of the Chairman and
President of the Company. Of these options issued, 75,000 vest on the first
anniversary of the date of issuance, and the remaining 75,000 vest on the second
anniversary of the date of issuance. A total of 200,000 shares remain to be
issued under the 1995 Stock Option Plan as of September 30, 2003.
7
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
September 30, 2003
The following is additional information with respect to the Company's options
and warrants as of September 30, 2003:
WARRANTS OUTSTANDING WARRANTS EXERCISABLE
---------------------------------------------------------- -----------------------------------------------------
Number of Weighted Average Number of
Outstanding Shares Remaining Weighted Exercisable Shares Weighted
Underlying Warrants Contractual Life Average Underlying Warrants Average
Exercise Price Exercise Price Exercise Price
---------------------------------------------------------- -----------------------------------------------------
$0.25 330,000 2.08 years $0.25 330,000 $0.25
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- -----------------------------------------------------
Number of Weighted Average Number of
Outstanding Shares Remaining Weighted Exercisable Shares Weighted
Underlying Options Contractual Life Average Underlying Options Average
Exercise Price Exercise Price Exercise Price
---------------------------------------------------------- -----------------------------------------------------
$0.11 300,000 3.75 years $0.11 - $ -
At September 30, 2003, the Company had two stock-based employee compensation
plans. As permitted under SFAS No. 148, "Accounting for Stock-Based
Compensation--Transition and Disclosure", which amended SFAS No. 123 ("SFAS
123"), "Accounting for Stock-Based Compensation", the Company has elected to
continue to follow the intrinsic value method in accounting for its stock-based
employee compensation arrangements as defined by Accounting Principles Board
Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees", and related
interpretations including Financial Accounting Standards Board Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation", an
interpretation of APB No. 25. No stock-based employee compensation cost is
reflected in net loss, as all options granted under those plans had an exercise
price equal to the market value, as determined by the Board of Directors, of the
underlying common stock on the date of grant. The following table illustrates
the effect on net loss and loss per share as if the Company had applied the fair
value recognition provisions of SFAS 123 to stock-based employee compensation:
8
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
September 30, 2003
Three Months Ended Nine Months Ended
September 30 September 30,
------------------ ----------------
2003 2002 2003 2002
---- ---- ---- ----
Net loss as Reported $(190,075) $ (12,420) $(308,117) $ (26,342)
Deduct: Total stock-based compensation
expense determined under fair value-based
method for all awards, net of related tax
effect
1,636 818 4,908 818
--------- --------- --------- ----------
$(191,711) $ (13,238) $(313,025) $ (27,160)
Pro Forma Net Loss ============ =========== ========== ===========
Basic and Diluted Net Loss Per Share as $ (0.02) $ 0.00 $ (0.04) $ (0.01)
--------- --------- --------- ----------
Net Loss Per Share $ (0.02) $ 0.00 $ (0.04) $ (0.01)
--------- --------- --------- ----------
The fair value of options at date of grant was estimated using the Black-Scholes
fair value based method with the following weighted average assumptions:
2003 2002
------- -------
Expected Life (Years)......................... 3 2.5
Interest Rate................................. 5.70% 5.70%
Annual Rate of Dividends...................... 0% 0%
Volatility.................................... 100% 100%
3. MINE ACQUISITION COSTS
The Company has incurred fees in connection with its acquisition of mining
properties. Costs incurred to purchase, lease, or otherwise acquire a property
(whether unproved or proved) are capitalized when incurred. These include the
costs of lease bonuses and options to purchase or lease properties, the portion
of costs applicable to minerals when land including mineral rights is purchased
in fee, brokers' fees, recording fees, legal costs, and other costs incurred in
acquiring properties.
4. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Officers
The Company entered into Amended and Restated Employment Agreements with Messrs.
Gallagher and Garrison and an initial Employment Agreement with Van Krikorian
dated as of February 1, 2003 for a term through June 30, 2006.
The Employment Agreements provide for base compensation of $100,000 for each
twelve-month period (subject to payment as cash flow permits), and the granting
of 900,000 shares as a
9
restricted stock award subject to a substantial risk of forfeiture if any
employee terminates his employment with the Company (other than by death or
disability) over the term of the agreement, and which is to be earned, and vest
ratably, during such period.
The Company issued the 900,000 shares on February 21, 2003 to Messrs. Gallagher
and Garrison and on June 1, 2003 to Mr. Krikorian at the fair market value of
$0.25 per share as determined by the Board of Directors. Such amounts have been
reflected as unearned compensation and are being amortized into compensation
expense on a straight-line basis over the term of the agreements. Compensation
expense for the nine-months ended September 30, 2003 is $83,333.
The amount of total unearned compensation amortized for the nine-months ended
September 30, 2003 is $112,132.
5. INVESTMENTS IN SECURITIES AVAILABLE FOR SALE:
At September 30, 2003, investment in securities consisted of 400,000 shares of
common stock of Sterlite Gold Ltd. classified as available for sale and stated
at a quoted fair value of $47,400. The cost of the securities was $26,130. The
cumulative unrealized gain as of September 30, 2003 was $21,270, which is shown
as a separate component of stockholders' equity.
During the nine months ended September 30, 2003, the Company sold 1,900,000
shares of common stock of Sterlite Gold Ltd. for net proceeds of $161,537
resulting in a gain on the sale of $37,410.
During the nine months ended September 30, 2002, the Company had sold 650,000
shares for net proceeds of $43,672 resulting in a gain of $1,207.
6. EQUITY TRANSACTIONS
a. In January 2003, the Company issued 500,000 shares of
its commons stock to Linda Sam (100,000 shares), from
EM&P Investments (200,000 shares) and Bank SAT Oppenheim
Jr. & CIE (200,000 shares), through Sukhmohan Athwal as
nominee, at $0.25 per share (fair market value). The
value of the shares includes the total cash price of
$25,000 plus performance obligations by Sukhmohan Athwal
valued at $100,000, pursuant to a special incentive
financing arrangement (which has not yet been
consummated as of the date hereof).
b. In January 2003, the Company issued 350,000 shares of
its common stock to various Investors, at $0.25 per
share (fair market value) for a total purchase price of
$87,500. This transaction was a part of Private
Placement Memorandum ("PPM"). No additional shares are
to be issued under the PPM.
c. On April 1, 2003 the Company agreed to issue 100,000
shares of its common stock to Stephen R. Field at $0.25
per share (fair market value) in payment of $25,000 of
previously invoiced legal expenses. The shares were
transferred on May 28, 2003.
d. On April 3, 2003 the Company transferred 250,000 shares
of its common stock to Sukhmohan Athwal at $0.25 per
share (fair market value). The shares were issued
pursuant to a special incentive financing arrangement
(which had not yet been consummated as of June 30,
2003.)
e. On June 1, 2003, the Company transferred 900,000 shares
of its common stock at $0.25 per share (fair market
value) to Van Z. Krikorian as a stock award subject to a
substantial risk of forfeiture if her terminates his
employment with the Company (other than by death or
disability) over the 37-month term of his Employment
Agreement and which is to be earned and vest ratably
during the 37-month period ending June 30, 2006.
10
f. On July 25, 2003, the Company sold 1,000,000 shares of
its common stock to NJA Investments for $0.25 per share
(fair market value) for a total purchase price of
$250,000. A commission of $17,500 was paid to Analytix
Capital, which provided advisory services.
g. On July 31, 2003, 100,000 shares of the Company's common
stock were subscribed by Global Gestion for $.50 per
share (fair market value) for a total purchase price of
$50,000. This transaction was a part of Private
Placement Memorandum ("PPM") dated July 25, 2003. . The
Company is currently seeking to raise a minimum of
$750,000 and a maximum of $2,000,000 upon the sales of
shares of its common stock at a purchase price of $0.50
per share pursuant to its Confidential Private Placement
Memorandum dated July 25, 2003, although there can be no
assurance of the outcome thereof.
h. On September 29, 2003, the Company received and
cancelled 500,000 shares of its common stock previously
issued in January 2003 from Linda Sam (100,000 shares),
from EM&P Investments (200,000 shares) and from Bank SAT
Oppenheim Jr. & CIE (200,000 shares), which were issued
pursuant to a special incentive financing arrangement
that was cancelled. An advance of $25,000 was returned
to the participants.
7. COMPREHENSIVE LOSS
The following table summarizes the computations reconciling net loss to
comprehensive loss for the three-month and nine-month periods ended
September 30, 2003 and 2002:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------
2003 2002 2003 2002
---- ---- ---- ----
Net loss................................... $(190,075) $(12,420) $(308,117) $(26,342)
Other comprehensive income:
Unrealized gain (loss) on
available-for-sale of
securities.............................. (2,240) (224,219) (105,136) 161,039
----------- -------- --------- --------
$(192,315) $(236,639) $(413,253) $134,697
=========== ======== ========= ========
8. AGREEMENTS
a. On January 15, 2003, the Company entered into an option/purchase/lease
agreement with Alfred Soto Torino and Adrian Soto Torino for the purchase
of copper and gold properties in Chile for a total purchase price of U.S.
$400,000, payable over four years at U.S. $25,000 per quarter, commencing
on March 31, 2003. In addition to the purchase price, a royalty of U.S. $1
per ounce is to be paid quarterly on all ounces of gold produced in excess
of 500,000 ounces up to 1,000,000; provided that the average price of gold
per quarter exceeds U.S. $310 per ounce as measured by the London Metal
Exchange. Under such agreement, the Company has the right to develop the
property under the lease thereof. Upon expiration of four years from the
date of such agreement, or sooner at the Company's option, the Company can
exercise its option to acquire the title to the property, subject to the
above royalty obligation.
The Chilean properties consist of approximately 1100 acres in total,
including the Candelaria 1 to 3, Santa Candelaria 1 to 8 and the Torino I
mining claims 1 to 7 and the Torino II mining claims 1 to 11. The Company
has not yet developed a feasibility report for the development of these
properties, and has not yet ascertained the amount of the proven or
probably reserves of gold, copper and other
11
minerals on the property, if any. The Company refers to these properties
collectively as the Santa Candelaria mine.
Due to the fact that the lease terms are cancelable at the sole option of
the Company, the Company is recording payments as they come due. In 2003,
the Company recorded $69,000 in mine acquisition costs through September
30, 2003.
b. On March 17, 2003, the Company entered into an agreement with SHA,LLC,
an Armenian limited liability company, for the acquisition of the Hankavan
mine, a gold and copper mine located in Armenia, for a total purchase price
of U.S. $150,000 (or U.S. $175,000 if an additional mining property is also
transferred) payable in installments. Under such agreement, the Company has
the option to acquire either (i) the exclusive license, permits and all
rights related to such mine, or (ii) all of the ownership shares of SHA and
any other entity which may hold rights to such mine.
The Hankavan mine deposit is located in central Armenia between Vanadzor
and Meghradzor north of the Marmarik River. The Company has not yet
developed a feasibility report for the development of the properties, and
has not yet determined the amount of proven or probable reserves of gold,
copper and other minerals on the property, if any.
Due to the fact that the purchase terms are cancelable at the sole option
of the Company, the Company is recording payments as they come due.
c. On May 1, 2003, the Company entered into a consulting agreement with
Analytix Capital to provide advisory services and assist the Company in its
corporate and project finance. The agreement provides for a compensation of
7% of the net total dollar amount of financing obtained from any entity or
individual introduced by Analytix to the Company. In addition to the 7%
payment, the Company will issue a warrant to purchase shares of the
Company's common stock at a price of $0.10 each for a period of two years,
with 30,000 shares subject to a warrant to be provided for every $1,000,000
of clear funds in financing received, up to a maximum of 300,000 shares
subject to such warrants. If the price of shares of the Company's common
stock does not exceed $1.00 at any time during the period commencing from
the date of issuance of any warrant and ending two years later, then
Analytix shall have the right to require the Company to purchase the shares
subject to the warrants for $1.00. On July 25, 2003, the Company sold
1,000,000 shares of its common stock to NJA Investments at $0.25 per share
for a total purchase price of $250,000. A commission of $17,500 was paid to
Analytix Capital.
d. On May 15, 2003, the Company entered into a month-to-month lease with
Analytix Capital to sublet office space for $1,500 per month and registered
to conduct business in the State of Connecticut.
e. On May 28, 2003, the Company entered into an agreement with GeoExplo
Ltda. of Santiago, Chile to provide local administration services for a fee
of $1,500 per month and manage a project of geological mapping and
metallurgical testing at the Santa Candelaria project for a contract cost
of U.S. $28,355. The work was completed on July 25, 2003.
f. On June 27, 2003, the Company entered into a contract with Roscoe Postle
Associates
12
Inc., a Canadian corporation, to provide for an independent technical
review of the Company's Armenian mining properties. A second stage will
provide for a review of the Santa Candelaria project in Chile. The value of
the total contract is U.S. $82,000. Billings through September 30, 2003 are
U.S. $37,000.
g. On August 1, 2003, the Company entered into an agreement with Ashot
Boghossian of ARAX Co. Ltd. to represent Global Gold Corporation in
Armenia.
Mr. Boghossian will be appointed Director of Global Gold Mining LLC, a
newly formed Delaware limited liability company that will own the Armenian
mining properties. Global Gold Mining LLC is wholly owned by Global Gold
Armenia LLC, a Delaware limited liability corporation that is wholly owned
by Global Gold Corporation.
The agreement provides for a monthly fee of $3,000 plus expenses for a term
of 3 years and the granting of 90,000 common shares as a restricted stock
award subject to a substantial risk of forfeiture if the individual
terminates his employment with the Company (other than by death or
disability) over the term of the agreement and which is to be earned and
vest ratably during such period.
h. On July 24, 2003, the Company entered into an Agreement on Cooperation,
on Confidentiality and to Negotiate with Vardani Zartonke LLC, an Armenian
company, to study a potential acquisition of the Arevik mine located in the
Syunik region of southern Armenia. The term of the agreement is for six
months.
i. On July 24, 2003, the Company entered into an Agreement on Cooperation,
on Confidentiality and to Negotiate with Khan Tengry Goldberg CJ, a
Kazakhstan company, to study a potential acquisition of the Baynkol Valley
River Gold Field Deposit in southeastern Kazakhstan. The term of the
agreement is for sixty days and is renewable.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
When used in this discussion, the words "expect(s)", "feel(s)", "believe(s)",
"will", "may", "anticipate(s)" and similar expressions are intended to identify
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements, and are urged to carefully review and consider the
various disclosures elsewhere in this Form 10-QSB.
1. RESULTS OF OPERATIONS
THREE-MONTHS ENDED SEPTEMBER 30, 2003 AND THREE-MONTHS ENDED SEPTEMBER 30, 2002
During the three-month period ended September 30, 2003, the Company's
administrative and other expenses were $200,567, which represented an increase
from $12,420 in the same period last year. The expense increase was primarily
attributable to higher compensation expense of $126,171, accounting fees of
$30,745 and higher travel expenses of $13,251 due to increased activity
resulting from project development in Armenia and Chile.
NINE-MONTHS ENDED SEPTEMBER 30, 2003 AND NINE-MONTHS ENDED SEPTEMBER 30, 2002
During the nine-month period ended September 30, 2003, the Company's
administrative and other expenses were $345,517, which represented an increase
from $27,549 in the same period last year. The expense increase was primarily
attributable to higher compensation expense of $195,465, accounting fees of
$35,460, legal expenses of $37,276 and travel expenses of $22,550 due to the
development of projects in Armenia and Chile.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2003, the Company's total assets were $667,731, of which
$187,711 consisted of cash or cash equivalents.
The Company's plan of operation for the balance of calendar year 2003 is:
(a) To continue activities with regard to the Chilean mining properties acquired
in January 2003;
(b) To pursue and consummate the acquisition of the Armenia mining properties
and to possibly acquire additional mineral bearing properties; and
(c) To sell the 400,000 shares of Sterlite common stock, and use the sales
proceeds for working capital purposes.
The Company retains the right until December 31, 2009 to elect to participate at
a level of up to twenty percent with Sterlite Gold Ltd. or any of its affiliates
in any exploration project undertaken in Armenia.
The Company needs financing to meet its anticipated monthly administrative
expenses of about $10,000 (exclusive of accrued officers' compensation), plus
additional amounts for legal and accounting costs. The Company anticipates that
it might obtain additional financing from the holders of its Warrants to
purchase 330,000 shares of Common Stock of the Company at an exercise price of
$0.25 per share, which expire on October 31, 2005. If the Warrants were
exercised in full, the Company would receive $82,500 in gross proceeds. However,
the Company does not believe that the Warrants will be exercised under existing
circumstances, and thus it does not anticipate that any amount thereof will be
exercised. In the event that no contemplated financing is
14
obtained through the exercise of the Warrants (which the Company considers
highly remote) or through its current financing plans, 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
2003 and does not expect to purchase or sell any plant or significant equipment.
The Company hired one additional full-time employee on June 1, 2003.
GOING CONCERN CONSIDERATION
We have continued losses in each of our years of operation, negative cash flow
and liquidity problems. These conditions raise substantial doubt about our
ability to continue as a going concern. The accompanying condensed financial
statements do not include any adjustments relating to the recoverability of
reported assets or liabilities should we be unable to continue as a going
concern.
We have been able to continue based upon our receipt of funds from the issuance
of equity securities and shareholder loans, and by acquiring assets or paying
expenses by issuing stock. Our continued existence is dependent upon our
continued ability to raise funds through the issuance of our securities or
borrowings, and our ability to acquire assets or satisfy liabilities by the
issuance of stock. Management's plans in this regard are to obtain other debt
and equity financing until profitable operation and positive cash flow are
achieved and maintained. Although management believes that it will be able to
secure suitable additional financing for the Company's operations, there can be
no guarantee that such financing will continue to be available on reasonable
terms, or at all.
Item 3. Controls and Procedures.
As of the end of the period covered by this report, an evaluation was carried
out under the supervision and with the participation of the Company's Chief
Executive Officer and Chief Financial Officer of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under
the Securities Exchange Act of 1934). Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. Subsequent to the date of their evaluation, there were no
significant changes in the Company internal controls or in other factors that
could significantly affect the disclosure controls, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
a. On July 25, 2003, the Company sold 1,000,000 shares of its common stock
to NJA Investments for $0.25 per share (fair market value) for a total
purchase price of $250,000. A commission of $17,500 was paid to Analytix
Capital, which provided advisory services.
b. On July 31, 2003, the Company sold (Awarded) 100,000 shares of its
common stock to Global Gestion for $0.50 per share (fair market value)
for a total purchase price of $50,000.
15
c. On September 29, 2003, the Company received and cancelled 500,000 shares
of its common stock previously issued in January 2003 from Linda Sam
(100,000 shares), from EM&P Investments (200,000 shares) and from Bank
SAT Oppenheim Jr. & CIE (200,000 shares) which were issued pursuant to a
special incentive financing arrangement which was cancelled. An advance
of $25,000 was returned to the participants.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
a. On August 1, 2003, the Company entered into an agreement with Ashot
Boghossian of ARAX Co. Ltd. to represent Global Gold Corporation in
Armenia.
Mr. Boghossian will be appointed Director of Global Gold Mining LLC, a
newly formed Armenian company that will own the Armenian mining
properties. Global Gold Mining LLC is wholly owned by Global Gold
Armenia LLC, a Delaware limited liability company that is wholly owned
by Global Gold Corporation.
The Agreement provides for a monthly fee of $3,000 plus expenses for a
term of 3 years and the granting of 90,000 common shares as a restricted
stock award subject to a substantial risk of forfeiture if the
individual terminates his employment with the Company (other than by
death or disability) over the term of the Agreement and which is to be
earned and vest ratably during such period.
b. On August 12, 2003, the report on the exploration at the Candelaria gold
property prepared by Geo Explo LTDA. was delivered to the Company.
Exploration work was carried out which included geological mapping,
geochemical rock sampling, outcrop observations and magnetic surveying.
All samples collected were sent to Acme Analytical Laboratories S.A.
Santiago, Chile for fire assay analysis.
The sampling performed and assay results were considered of mining
interest with the gold mineralization, having well defined structural,
lithological, and stratigraphic controls.
The Candelaria gold property is owned by Minera Global Chile LTDA.,
owned 50% by Global Oro LLC and 50% by Global Plata LLC which are both
wholly owned subsidiaries of Global Gold Corporation.
Item 6. Exhibits and Reports on Form 8-K.
a. The following documents are filed as part of this report:
o Unaudited Condensed Financial Statements of the Company,
including Balance Sheet as of September 30, 2003;
o Statements of Operations and Statements of Cash Flows for the
three-months ended September 30, 2003 and September 30, 2002,
and for the nine-months ended September 30, 2003 and September
30, 2002 and for the development stage period from January 1,
1995 through September 30, 2003 and the Exhibits which are
listed on the Exhibit Index.
16
EXHIBIT NO. DESCRIPTION OF EXHIBIT
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K filed during the quarter ended September 30, 2003
Current Report on Form 8-K, filed with the Securities and Exchange Commission on
September 23, 2003, under Item 4 of Form 8-K.
17
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.
GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
November 14, 2003 -----------------------------
------------------------
Drury J. Gallagher, Chairman,
Chief Executive Officer and
Treasurer
18
Exhibit 31.1
CERTIFICATIONS
--------------
I, Drury J. Gallagher, certify that:
1) I have reviewed this Quarterly Report on Form 10-QSB of Global Gold
Corporation for the period ended September 30, 2003;
2) Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3) Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this Quarterly Report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this Quarterly Report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this Quarterly
Report based on such evaluation; and
c) Disclosed in this Quarterly Report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2003 /s/ Drury J. Gallagher
-------------------------
Drury J. Gallagher
Chairman, Chief Executive
Officer and Treasurer
Exhibit 31.2
CERTIFICATIONS
--------------
I, Robert A. Garrison, certify that:
1) I have reviewed this Quarterly Report on Form 10-QSB of Global Gold
Corporation for the quarter ended September 30, 2003;
2) Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this Quarterly Report;
3) Based on my knowledge, the financial statements, and other financial
information included in this Quarterly Report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this Quarterly Report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this Quarterly Report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this Quarterly Report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this Quarterly
Report based on such evaluation; and
c) Disclosed in this Quarterly Report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5) The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: November 14, 2003 /s/ Robert A. Garrison
---------------------------
Robert A. Garrison
President, Chief Financial
Officer and Chief Operating
Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Global Gold
Corporation (the "Company") on Form 10-QSB for the period ending September 30,
2003 as filed with the Securities and Exchange Commission (the "Report"), I,
Drury J. Gallagher, the Chairman, Chief Executive Officer and Treasurer of the
Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Company.
Dated: November 14, 2003
/s/ Drury J. Gallagher
---------------------------------
Drury J. Gallagher
Chairman, Chief Executive Officer
and Treasurer
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Global Gold
Corporation (the "Company") on Form 10-QSB for the period ending September 30,
2003 as filed with the Securities and Exchange Commission (the "Report"), I,
Robert A. Garrison, the President, Chief Financial Officer and Chief Operating
Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)______The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)______The information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: November 14, 2003
/s/ Robert A. Garrison
----------------------------------
Robert A. Garrison
President, Chief Operating Officer
and Chief Financial Officer