FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-8372
HANOVER GOLD COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23022 11-2740461
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1000 Northwest Boulevard, Suite 100
Coeur d'Alene, Idaho 83814
(Address of principal executive offices)
Registrant's telephone number, including area code: (208) 664-4653
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act:
Common Stock The Nasdaq Stock Market
Title of each class Name of each exchange on
which registered
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at May 29, 1996 was $10,917,852. The number of shares of common
stock outstanding at such date was 16,029,678.
Certain information contained in the registrant's proxy statement filed under
the Securities Act of 1933, as amended, in connection with its 1996 special
meeting of stockholders is incorporated by reference in Part IV of this report
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HANOVER GOLD COMPANY, INC.
ANNUAL REPORT ON FORM 10-K/A FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
Page
PART II
Item 6: Selected Financial Data 1
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 2
Item 8: Financial Statements and Supplementary Data F/S-1
SIGNATURES
EXPLANATORY NOTE
This amendment to the registrant's annual report on Form 10-K for the year
ended December 31, 1995 has been prepared and is being filed solely for the
purposes of correcting (i) certain non-material information contained in the
registrant's previously filed financial statements and (ii) related disclosure
in the section of the report entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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(i)
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below has been derived
from, and should be read in conjunction with the Company's consolidated
financial statements. The selected financial data for the five years ended
December 31, 1995 have been derived from the Company's consolidated financial
statements appearing elsewhere in this report, which have been audited by
Zeller Weiss & Kahn, Mountainside, New Jersey. The selected financial data
should be read in conjunction with, and is qualified by such financial
statements and the notes thereto.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
Summary of Consolidated Balance Sheets:
<S> <C> <C> <C> <C> <C>
Working capital (deficit) $ 491,382 $ 459,814 $3,294,147 $ (143,742) $ (116,326)
Current assets 850,242 917,075 3,855,227 240,850 61,202
Total assets 8,310,364 8,293,628 8,112,529 3,098,652 1,375,188
Current liabilities 358,860 457,261 505,064 364,359 177,528
Long-term obligation - 250,000 250,000 100,000 -
Total liabilities 358,860 707,261 755,064 464,359 177,528
Stockholders' equity 7,951,504 7,586,367 7,357,465 2,634,293 1,197,660
Summary of Consolidated Statements of Operations:
Sales 499,299 216,418 - - -
Net income (loss) (2,321,569) (1,247,973) (252,046) (205,263) (260,486)
Net income (loss) per share (0.20) (0.15) (0.03) (0.05) (0.07)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SUMMARY
1995 was a transitional year for the Company. It began disappointingly in
March with Kennecott's decision to withdraw from the mining venture with the
Company, Hanover Resources and Group S, a decision that forced the Company and
its affiliates to curtail their exploration and development activities on the
Alder Gulch properties due to a lack of funds. Starting in June, however, the
Company was buoyed by an infusion of new capital from an investor group lead by
Neal A. Degerstrom, and by the business and technical mining experience Mr.
Degerstrom and his associates brought to the Company. By the end of the year,
the Company had restructured its senior management team and had significantly
progressed its agenda to consolidate the mining claims in the Alder Gulch area
for possible large-scale development. As of the date of this report, the
Company does not have the cash resources necessary to explore or develop its
properties, nor a development agreement with any major mining company. The
Company has received expressions of interest from a number of North American
mining companies concerning a joint venture or other economic arrangement to
explore and develop the properties, and is presently discussing such
possibilities with representatives of these companies.
RESULTS OF OPERATIONS
1995 compared to 1994. At December 31, 1995, the Company had working
capital of $491,382, current assets of $850,242 and current liabilities of
$358,860. This compares to current assets of $917,075 and current liabilities
of $457,261 at December 31, 1994. The increase in working capital at year-end
is attributable to sales of common stock to Neal A. Degerstrom and associated
persons during the year. Current assets consisted of $723,162 of cash, $29,494
of inventory and $97,586 of prepaid expenses; the decrease in current assets
during the year is primarily attributable to adjustments to the market value of
inventory.
Total assets of the Company at December 31, 1995 were $8,310,364, compared
to $8,293,628 for the previous year. At year-end 1995, the Company's total
assets, net of current assets, consisted of $6,147,279 in resource properties
and claims, $102,819 in property and equipment, net of depreciation, and
$1,210,024 in reclamation bonds and other assets, including $880,804 in note
receivables from affiliates. This compares to $5,616,829 in resource
properties and claims, $139,114 in property and equipment, net of depreciation,
$1,620,610 in reclamation bonds and other assets, including $527,572 in note
receivables from affiliates for the prior year. The increase of $530,450 in
resource properties and claims during the year is the result of the
capitalization of rental payments made to the landowner-lessors of the claims
during the year, and the slight decreases in property and equipment, and
reclamation bonds and other assets is attributable to equipment sales. The
$764,087 reduction in notes receivable from affiliates during the year is
primarily the result of the write down of the note receivable from Geneva Mill
L.C.
During the year ended December 31, 1995, the Company generated revenues of
$499,299, of which $250,000 was attributable to a non-recurring option payment
under the Kennecott mining venture and $249,299 was attributable to sales of
refined gold during the year. Gold sales during the previous year, by
comparison, were $216,418. The increase in gold sales during the year is
attributable to increased production at the mill and higher ore grades at the
Kearsarge mine. The Company's mining operations were suspended in March of
1995 due to a lack of funds following Kennecott's withdrawal from the mining
venture; mill operations were similarly suspended in April of 1995.
The Company experienced a net loss from operations of $2,321,569, or $0.20
per share, in 1995, compared to a net loss of $1,247,973, or $0.15 per share,
for the year ended December 31, 1994. The increase in losses is primarily
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attributable to an increase of $291,031 in general and administrative expenses
(which aggregated $922,847 for the year), the $779,921 write down of the note
receivable from Geneva Mill L.C., a $32,509 loss on the sale of equipment and a
$9,814 increase in depreciation expense. The cost of goods mined increased by
$165,853, to $1,076,668, in 1995, compared to $910,815 in the previous year.
The increase in general and administrative expenses is primarily due to a
$78,281 increase in insurance costs, a $126,770 increase in public relations
expenses, a $79,545 increase in officers salary, a $53,142 increase in
professional fees and a $21,999 in consulting and engineering costs. During
the year ended December 31, 1995, auto expenses decreased by $14,924 and
meeting-related expenses, travel and entertainment expenses and office and
telephone charges decreased by $57,315. The Company earned $29,306 in interest
income during the year, compared to $106,655 for the year ended December 31,
1994. The decrease in interest income is attributable to significantly lower
levels of invested funds during the year.
During the year-ended December 31, 1995, the Company also reversed a prior
period salary accrual of $542,347 attributable to Fred R. Schmid, which
resulted in a commensurate decrease in accrued expenses. The Company also
recognized a decrease of $779,921 in the carrying value of a $1,595,200 note
received from Geneva Mill L.C. in 1994 in connection with its acquisition and
rehabilitation of a carbon-in-leach processing facility near Radersburg,
Montana, some 60 miles from the Company's Alder Gulch properties. The decision
to finance the acquisition of the mill was made prior to Kennecott's withdrawal
from the mining venture, and was based on prior management's belief that its
Alder Gulch claims could be mined underground and that the ores could be
economically transported and milled at the Geneva Mill facility. New
management has since concluded that the claims can be more economically mined
using open pit methods and that the Geneva Mill lacks the capacity for large-
scale processing. At December 31, 1995, the Company was attempting to sell the
equipment at the mill on behalf of Geneva Mill L.C. and estimated that
approximately $220,000 could ultimately be recovered. Approximately $779,921
of the amount advanced to Geneva Mill L.C was expended to acquire materials
used in operations, and to pay for power and labor at the facility. As
previously noted in this report, the Company has entered into an agreement with
Roy Moen and related interests providing for the transfer of the Geneva Mill
facility and related real properties in partial consideration for a reduction
in rental and royalty obligations payable with respect to mining claims leased
by the Company's Group S affiliate.
1994 compared to 1993. The Company had total assets of $8,293,628 at
December 31, 1994, compared to $8,112,529 at December 31, 1993. At
December 31, 1994, these assets consisted of $917,075 in current assets,
$5,616,829 in resource properties and claims, $139,114 in property and
equipment, net of depreciation, and $1,620,610 in reclamation bonds and other
assets, including $1,600,955 in notes receivable from affiliates. This
compares to $2,966,781 in current assets, $4,154,883 in resource properties and
claims, $83,019 in property and equipment, and $285,206 in reclamation bonds
and other assets at December 31, 1993. The increase in total assets at
December 31, 1994 is attributable primarily to an increase in the Company's
receivables from affiliates, the most significant of which were $981,279 in
advances to Geneva Mill L.C. during the year for plant acquisition, crushing
equipment, refurbishing, the installation of new pumps, the construction of
tailings ponds and liners, trucking equipment, end loaders and working capital,
and a $130,000 advance to Group S so that it could meet its royalty payment
obligations. As previously noted, Group S is affiliated with the Company.
The Company's current assets at December 31, 1994 consisted of $646,141 in
cash and accounts receivable, $181,238 of inventory and $89,696 of prepaid
expenses, compared to $2,884,368 in cash, $835 in accounts receivable, $70,439
of inventory and $11,139 of prepaid expenses at December 31, 1993. Operating
revenues of the Company for the year ended December 31, 1994 were $216,418. No
operating revenues were received in 1993.
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Total liabilities at December 31, 1994 were $707,621, compared to total
liabilities of $755,064 at December 31, 1993. At year-end 1994, these
liabilities consisted of $411,930 in accounts payable, $45,331 in accrued
expenses and $250,000 in deposits against a purchase option. This compares to
$97,525 in accounts payable, $16,109 in accrued expenses and $250,000 in
deposits at December 31, 1993. In addition, the Company owed $13,819 to its
Hanover Resources affiliate, which was paid during 1994. The increase in
accounts payable during 1993 is primarily due to increased mine-related
activities. The Company had no sales in 1993, compared to gold sales of
$216,418 during 1994.
During the year ended December 31, 1994, the Company experienced a loss
from operations of $1,247,973, compared to a loss of $252,046 in the previous
year. The increase in losses during 1994 is due primarily to an increase in
mining costs of $910,815 during the year, an increase in depreciation of
$23,500, an increase in general and administrative costs of $362,566 and an
increase in interest income of $84,536.
The cost of goods mined increased to $910,815 in 1994, which was the
Company's first year of production. Milling, smelting and timber costs amount
to $283,049 during the year, contract mining expenses amounted to $117,177, and
haulage and direct labor amounted to $104,656 and $117,350, respectively.
General and administrative expenses were primarily due to a $55,000
increase in officers salaries, a $15,326 increase in auto expenses, a $41,492
increase in insurance costs, a $97,173 increase in deferred offering and public
relations costs, a $16,483 increase in professional fees, a $17,729 increase in
rent, a $13,121 increase in repairs, a $48,730 increase in travel expenses, a
$24,008 increase in office-related expenses, an $11,133 increase in transfer
agent's fees and a $9,365 increase in telephone expenses.
The increase in interest income during 1994 is attributable to
significantly higher levels of invested funds during the year.
LIQUIDITY AND CAPITAL RESOURCES
As a consequence of Kennecott's withdrawal from the mining venture in
March 1995, the Company assumed full responsibility for certain landowner
rental and royalty obligations on its Alder Gulch mining claims. At
December 31, 1995 the rental and royalty obligations payable in 1996 totalled
$1,255,120. Management believes the Company will meet its 1996, largely
because of financing commitments that have been made by Neal A. Degerstrom and
associated persons under the June 1995 securities purchase agreement and
amendments. Mr. Degerstrom and such persons are obligated to purchase an
additional 2,142,858 shares of common stock at various times during the seven
month period ending October 16, 1996, which will result in proceeds to the
Company of approximately $$1 million. However, unless the Company is able to
negotiate a joint venture or other agreement with a major mining company for
the continued exploration and development of the Alder Gulch claims, it may
continue to experience a shortage of working capital.
The Company has incurred aggregate losses of $4,325,299 from inception
through December 31, 1995 because it has not yet been able to place the Alder
Gulch properties into large-scale production. The Company's inability to
achieve this objective is attributable to a number of factors, including
Kennecott's unexpected withdrawal from the mining venture and the Company's
lack of success, judged at least historically, in consolidating the various
claims and interests in the area. Although the Company was able to conduct
fairly extensive exploration and limited development of the properties, largely
as the result of its former arrangement with Kennecott, significant additional
work must be performed to support further development efforts. The Company has
received expressions of interest from several North American mining companies
regarding a joint venture or other economic arrangement to explore and develop
the properties, and believes such an arrangement will be concluded during 1996.
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As discussed elsewhere in this report, the Company has recently
restructured its management and taken significant additional steps to
consolidate the Alder Gulch claims. In addition, the Company has completed a
compilation of geologic and other technical data generated from its and
Kennecott's prior exploration activities. (See the section of this report
entitled "Narrative Description of Business.") Management believes these
activities will have a positive effect on the Company's performance during
1996, and that the Company will be successful in negotiating a joint venture or
other arrangement with a major mining company to explore and, if warranted,
develop its properties.
Although the Company's operations are subject to general inflationary
pressures, these pressures have not had a significant effect on operations,
particularly since early 1995 when mining and processing operations were
suspended for lack of funds. If the Company resumes exploration and
development activities, which can be expected during 1996 if it is successful
in negotiating a joint venture or other economic arrangement with another
mining company, inflation will result in an increase in the cost of goods and
services necessary to its mining operations.
1995 compared to 1994. Cash flow from operating activities in 1995
reflected the use of $1,869,350 in cash, which is a decrease in the use of cash
during 1994 of $884,737. The increased use of cash during 1995 was
attributable to higher net operating losses during the year, which amounted to
$2,321,569, an increase of $1,073,596 over the prior year; a decrease in
accounts payable and accrued expenses during the year of $122,959, an increase
of $137,364 over the prior year; an increase of $198,867 in amounts due from
Hanover Resources during the year, an increase of $181,454 over the prior year;
and a decrease in the option payable of $250,000. In addition, cash flow
increased during 1995 by $764,087, an increase over 1994 of $1,739,859 as the
result of a decrease in notes receivable during the year of $1,739,859, a
decrease in inventory of $262,543, a decrease in prepaid expenses of $78,557
and an increase in loans payable of $$214,638.
Cash flow from investing activities during the year reflected the use of
$564,843 in cash, as compared to $1,546,855 in 1994, which was a difference of
$982,012. The decrease in cash flow from investing activities during 1995 is
primarily attributable to a decrease in the amount of mining properties and
other intangible assets purchased during the year.
Cash flows from financing activities increased during 1995 by $448,498
over 1994. Of this increase, $349,844 was attributable to proceeds received
from the sale of the Company's common stock during the year, $48,654 was
attributable to a note receivable and $50,000 was attributable to a loan from
Neal A. Degerstrom, an affiliate of the Company.
1994 compared to 1993. Cash flows from operating activities in 1993
reflected the use of $212,919, primarily as the result of a net loss of
$252,046 during the year. Cash was used during the year primarily to offset
increases in notes receivable of $97,611, inventory increases of $70,439,
increases in amounts due from affiliates of $266,079 (of which $97,884 is
attributable to Hanover Resources and $168,195 was attributable to Group S) and
a decrease in loans payable of $311,829. Sources of cash during the year were
a decrease in deferred offering expenses of $95,716, an increase in accounts
payable of $397,525, accrued expenses of $152,893 and an option payable of
$150,000.
Cash flow from investing activities reflected the use of $1,174,415 of
cash during the year, which was primarily attributable to purchases of property
and equipment aggregating $81,210 and the purchase of mining properties and
other intangible assets which aggregated $1,093,205.
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Cash flow from financing activities during the year reflected an increase
in cash of $4,127,578, which reflects proceeds received by the Company from the
sale of its common stock.
Cash flows from operating activities in 1994 reflected the use of
$2,754,087 of cash, an increase of $2,541,168 of cash used in operating
activities during 1993. The primary uses of cash during 1994 were to offset a
net loss during the year of $1,247,973 (which was an increase in net losses of
$995,927 over the prior year) and an increase in notes receivables during the
year of $975,772 (an increase of $878,161 over 1993 amounts). Cash flow
increased by $14,405 during 1994, as compared to a cash flow increase of
$550,418 during 1993, and was primarily attributable to increases in accounts
payable and accrued expenses. Cash flow increased by $14,405 during 1994 due
to an increase in accounts payable and accrued expenses as compared to 1993,
where the increase in cash flow was $550,418. Other increases in cash flow
during 1993 compared to 1994 were due to an increase in an option payable,
which was $150,000 in 1993 and zero in 1994.
Cash flow from investing activities reflected the use of $1,546,855 in
cash during 1994, an increase of $372,440 compared to 1993. The increase is
attributable to an increase in mining properties and other intangible assets
during the year.
Cash flows from financing activities in 1994 reflect an increase of
$2,062,716 in cash, which is due to the receipt during the year of proceeds
from the sale of the Company's common stock. This represents a decrease of
$2,064,862 during 1994 over 1993, when the Company received $4,127,578 from the
sale of its common stock.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Independent auditors' report F/S-2
Consolidated financial statements:
Balance sheet F/S-3
Statement of income (loss) F/S-4
Statement of stockholders' equity F/S-5
Statement of cash flows F/S-7
Notes to consolidated financial statements F/S-8
Supplementary information to consolidated financial statements:
Report of independent auditors on financial statement schedules F/S-25
Schedule II F/S-26
Schedule V F/S-27
Schedule VI F/S-28
Schedule IX F/S-29
Schedule X F/S-30
</TABLE>
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INDEPENDENT AUDITOR'S REPORT
Board of Directors
Hanover Gold Company, Inc.
Roslyn, New York
We have audited the accompanying consolidated balance sheet of Hanover
Gold Company, Inc. and Subsidiary as of December 31, 1995 and December 31,
1994, and the related consolidated statements of income (loss) and
stockholders' equity and cash flows for the years ended December 31, 1995, 1994
and 1993 and for the period May 2, 1990 (inception) to December 31, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements present fairly the
financial position of Hanover Gold Company, Inc., and Subsidiary, as of
December 31, 1995 and 1994 and the consolidated statements of income (loss),
stockholders' equity and cash flow for the years ended December 31, 1995, 1994
and 1993 and May 2, 1990 (inception) to December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 12, the Company has been in the development stage
since May 2, 1990.
Zeller Weiss & Kahn
March 29, 1996, except for
Note 24 as to which the
date is May 28, 1996
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PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS (Restated)
(Note 18)
December 31, December 31,
1994 1995
---- ----
<S> <C> <C>
Current assets:
Cash $ 646,141 $ 723,162
Inventory (Note 7) 181,238 29,494
Prepaid expenses 89,696 97,586
--------- ----------
Total current assets 917,075 850,242
--------- ----------
Resource properties and claims:
Exploration, engineering and site development
(Note 8) 2,228,118 2,225,106
Mining properties (Notes 9 & 11) 3,388,621 3,922,083
Option (Note 10) 90 90
--------- ----------
Total resource properties and claims 5,616,829 6,147,279
--------- ----------
Property and equipment, at cost (Note 3) 167,319 150,494
Less accumulated depreciation 28,205 47,675
--------- ----------
Net property plant and equipment 139,114 102,819
--------- ----------
Other assets:
Reclamation bonds (Note 15) 19,655 19,924
Note receivable (Note 5) 1,073,383 309,296
Due from Group S, Ltd. (Note 13) 300,695 474,895
Due from Hanover Group, Inc. (Note 13) 19,835 0
Due from Hanover Resources, Inc. (Note 13) 207,042 405,909
--------- ----------
Total resource properties and claims 1,620,610 1,210,024
--------- ----------
Total assets $8,293,628 $ 8,310,364
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 0 $ 48,654
Loans payable - shareholder (Note 13) 50,000
Accounts payable 411,930 221,756
Accrued expenses 45,331 38,450
--------- ----------
Total current liabilities 457,261 358,860
--------- ----------
Other liabilities:
Option deposit 250,000 0
--------- ----------
Stockholders' equity:
Common stock, $.0001 par value, authorized
25,000,000 shares issued and outstanding
8,845,857 and 13,649,678 shares respectively 885 1,365
Additional paid in capital 9,838,572 12,275,438
Deficit accumulated during the development
stage (2,003,730) (4,325,299)
Less: Subscription receivable (Note 6) ( 249,360) 0
--------- ----------
7,586,367 7,951,504
--------- ----------
Total liabilities and stockholders' equity $8,293,628 $ 8,310,364
========= ==========
See notes to consolidated financial statements.
</TABLE>
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HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF INCOME (LOSS)
<TABLE>
<CAPTION>
(Restated) (Restated) May 02, 1990
(Note 18) (Note 18) (Inception)
Year Ended Year Ended Year Ended to
December 31, December 31, December 31, December 31,
1993 1994 1995 1995
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Sales $ 0 $ 216,418 $ 499,299 $ 715,717
-------- -------- --------- --------
Expenses:
Cost of goods mined 0 910,815 1,076,668 1,987,483
Depreciation, depletion
and amortization 4,915 28,415 38,229 71,559
General and
administrative 269,250 631,816 922,847 2,547,297
Provision for bad debt 779,921 779,921
-------- --------- -------- --------
Total cost and
expenses 274,165 1,571,046 2,817,665 5,168,204
-------- --------- --------- ---------
Gross profit (loss)
operations ( 274,165) (1,354,628) (2,318,366) (4,452,487)
Other income and expenses:
Interest income 22,119 106,655 29,306 159,697
Loss on sale of
equipment ( 32,509) ( 32,509)
--------- --------- -------- ---------
Total other income
and expenses 22,119 106,655 ( 3,203) 127,188
--------- --------- --------- ---------
Net loss ($ 252,046) ($1,247,973) ($2,321,569) ($4,325,299)
========= ========== ========= ==========
Earnings per common
share:
Primary ($ 0.03) ($ 0.15) ($ 0.20)
Weighted average common
shares outstanding 7,498,786 8,314,859 11,728,882
========= ========= ==========
</TABLE>
See notes to consolidated financial statements.
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HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Deficit)
Accumulated
Additional During the
Common Common Paid In Development
Shares Shares Capital Stage
------ ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance, May 2, 1990 700,000 $ 70 $ 264,311
Issuance of common stock,
Sept. 24, 1990 ($0.07/share) 86,250 9 6,009
Issuance of common stock for
modification, Dec. 31, 1990
($.0001/share) 1,500,000 150
Issuance of common stock for
additional claims, Dec. 31
1990 ($.0001/share) 900,000 90
Payments by Hanover Resources, Inc.:
Deferred offering expense 12,636
Exploration, engineering
and site development 26,280
Deposit, Kearsarge Lode Claim 100,000
Cash infusion 5,000
Net loss ( 37,962)
-------- ------- -------- ---------
Balance, December 31, 1990 3,186,250 319 414,236 ( 37,962)
Payment by Hanover Resources, Inc.:
Deposit purchase of claim 325,000
Issuance of common stock to
directors ($.0001/share) 200,000 20
Issuance of common stock for
claims and engineering costs
($2.50/share) 229,007 23 572,496
Exercise 74,400 A&B Warrants
($.60/share) 74,400 7 44,633
Exercise 111,500 C Warrants
($1.25/share) 111,500 11 139,363
Net loss ( 260,486)
-------- ------- -------- --------
Balance, Dec. 31, 1991 3,801,157 380 1,495,728 ( 298,448)
Issuance of common stock
($2.00 per share) 712,500 71 1,424,918
Payment by Hanover Resources, Inc.:
Deposit purchase of claim 93,659
Deposit, purchase of Kearsarge Claim 62,500
Deferred offering expense 3,144
Exploration, engineering and site
development 5,603
Exercise 41,600 Class C Warrants
($1.25/share) 41,600 5 51,996
Net loss ( 205,263)
-------- ------- -------- --------
Balance, December 31, 1992 4,555,257 456 3,137,548 ( 503,711)
Write off on deferred offering expense (148,507)
Purchase of Apex Claim at $1.50
per share 150,000 15 224,985
Exercise 3,061,703 Class C Warrants
($1.60/share) 3,061,703 306 4,898,419
Net loss ( 252,046)
--------- ------- -------- ---------
Balance, December 31, 1993 7,766,960 777 8,112,445 ( 755,757)
Exercise 1,328,897 Class C Warrants
($1.60 per share) 1,328,897 133 2,126,102
Cancellation of previously issued
shares ($1.60/share) (250,000) (25) ( 399,975)
Net loss (1,247,973)
-------- ------- -------- ---------
Balance, December 31, 1994 8,845,857 885 9,838,572 (2,003,730)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Deficit)
Accumulated
During the
Development
Additional Stage
Common Common Paid In (Restated
Shares Shares Capital Note 18)
------ ------ ---------- -----------
<C> <C> <C> <C>
Balance, December 31, 1994 8,845,857 $ 885 $9,838,572 $(2,003,730)
Issuance of 250,000 shares of common
stock to Hanover Resources, Inc. as
per Modification Agreement dated
12/31/90 ($1.60/share) 250,000 25
Issuance of 2,142,856 shares of common
stock to N.A. Degerstrom as per
Securities Purchase Agreement dated
06/01/95 ($.35/share) 2,142,856 214 749,786
Issuance of 714,286 shares of common
stock to N.A. Degerstrom as per
Securities Purchase Agreement dated
06/01/95 ($.35/share) 714,286 71 249,929
Issuance of 200,000 shares of restricted
common stock pursuant to a private
placement (1.00/share) 200,000 20 199,980
Issuance remaining 250,000 shares of
common stock to Hanover Resources, Inc.
as per Modification Agreement dated
12/31/90 ($.0001/share) 250,000 25
Issuance of 69,679 shares of common
stock in satisfaction of vendor
obligations ($1.06/share) 69,679 7 74,089
Issuance of 200,000 shares of common
stock in satisfaction of vendor
obligations ($1.00/shares) 200,000 20 199,980
Issuance of 1,000,000 shares of common
stock to N.A. Degerstrom per amendment
to Securities Purchase Agreement dated
06/01/95 ($1.00/share) 1,000,000 100 999,900
Redemption of previously issued shares
($1.60/share) (23,000) (2) (36,798)
Net loss (2,321,569)
--------- ------ -------- ---------
Balance, December 31, 1995 13,649,678 $ 1,365 $12,275,438 $(4,325,299)
========== ===== ========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
May 2, 1990
(Inception)
Year Ended Year Ended Year Ended to
Dec. 31, 1993 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (252,046) $ (1,247,943) $(2,321,569) $(4,325,299)
Adjustments to reconcile net cash
and equivalents provided by operating
activities:
Loss on sale of equipment 32,509 32,509
Amortization 225
Depreciation 4,915 21,885 30,529 58,734
Depletion 6,530 7,700 14,230
Common stock issued for
public relations fees 200,000 200,000
Changes in operating assets &
liabilities:
(Increase) decrease in accounts
receivable 175 835
(Increase) decrease in deferred
offering expense 95,716 (7,890) 21,574
(Increase) decrease in notes
receivable (97,611) (975,772) 764,087 (309,296)
(Increase) decrease in inventory (70,439) (110,799) 151,744 (29,494)
(Increase) decrease in prepaid
expenses (11,139) (78,557) (97,586)
(Increase) decrease in
accounts payable 397,525 14,405 (116,078) 221,756
Increase (decrease) in
accrued expenses 152,893 (6,881) 38,450
Increase (decrease) in loan
payable, stockholder (311,829) (214,638)
Changes of other assets and liabilities:
(Increase) decrease in reclama-
tion bond (5,000) (255) (269) (19,924)
(Increase) decrease in due to
Group S, Ltd. (168,195) (132,500) (174,200) (474,895)
(Increase) decrease in due from
Hanover Group, Inc. (19,835) 19,835
(Increase) decrease in due to
Hanover Resources, Inc. (97,884) (17,413) (198,867) (369,110)
Increase in option payable 150,000 (250,000)
Organizational cost (202)
-------- -------- ------- --------
Net cash used in operating
activities (212,919) (2,754,087) (1,869,350 (5,038,328)
------- --------- --------- ---------
Investing activities:
Proceeds from sale of equipment 13,871 13,871
Purchase of subsidiary (6,018)
Purchase of property and
equipment (81,210) (77,980) (40,614) (207,933)
Increase in exploration, engineering
and site development (855,705) (908,475) (1,765,335)
Increase in deposit, purchase of
claims (112,500) (162,500)
Increase in mining
properties (125,000) (560,400) (538,100) (1,358,382)
------- ------- ------- ---------
Net cash used in
investing activities (1,174,415) (1,546,855) (564,843) (3,486,297)
--------- --------- ------- ---------
Financing activities:
Increase in notes receivable 48,654 48,654
Increase in loans from N.A.
Degerstrom 50,000 50,000
Proceeds from sale of
common stock 4,127,578 2,062,716 2,412,560 9,149,032
--------- --------- --------- ---------
Net cash provided by financing
activities 4,127,578 2,062,716 2,511,214 9,247,686
--------- --------- --------- ---------
Net increase in 2,740,244 (2,238,226) 77,021 723,061
Cash, beginning of year 144,124 2,884,368 646,141 101
--------- --------- -------- --------
Cash, end of year $2,884,368 $ 646,142 $723,162 $723,162
========== ========= ========= ========
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 864 $ 864
======== ======
Supplemental schedule on non-cash
investing and financing activities
(Note 23)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
1. Nature of business:
The objectives of the Company are to invest in precious metal claims,
namely gold and silver deposits having economic potential for develop-
ment and mining and related activities in the precious metals and
mining industries.
2. Organization:
Hanover Gold Company, Inc. was incorporated in Delaware on December 6,
1984 and on September 24, 1990 exchanged 14,000,000 shares of its $.0001
par value common stock for 100 % of the outstanding stock of Hanover
International Limited. On July 31, 1990 the Company acquired the
Kearsarge Lode Claim, south of Virginia City, Montana entering into a
Sublease and Purchase Option Agreement with Hanover Resources, Inc.
As of December 1990 the Company reverse split the stock 1 for 20.
3. Summary of significant accounting policies:
Principles of consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and the Company's wholly owned subsidiary,
Hanover International Limited, Inter-Company transactions and
balances have been eliminated in consolidation.
Principles of organization:
The acquisition of the Company's subsidiary on September 24, 1990 has
been accounted for as a reverse purchase of the assets and
liabilities of the Company by Hanover International Limited.
Accordingly, the consolidated financial statements represents assets,
liabilities, and operations of only Hanover International Limited
prior to September 24, 1990 and the combined assets, liabilities and
operations for the ensuing period. The financial statements reflect
the purchase of the stock of Venture Enterprises, Inc., the former
name of Hanover Gold Company, Inc., by Hanover International Limited,
for the value of the historical cost of the assets acquired. All
significant intercompany profits and losses from transactions have
been eliminated.
Hanover International Limited was incorporated May 2, 1990 in the
State of New York for the purpose of acquiring economic interests in
precious metal deposits, namely gold and silver claims. On July 31,
1990 the Company acquired the Kearsarge Lode Claim, south of Virginia
City, Montana by entering into a Sublease and Purchase Option
Agreement with Hanover Resources, Inc.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
3. Summary of significant accounting policies (continued):
Principles of consolidation (continued):
The Company, after giving effect to a 20 for 1 reverse split of its stock,
issued 700,000 shares of its authorized 25,000,000 shares of $.0001 par
value stock to Hanover Resources, Inc., which owned 100% of Hanover
International Limited. As part of the reverse acquisition of Hanover Gold
Company, Inc. by Hanover International Limited the 700,000 shares
represented 89.0% of all the outstanding stock of Hanover Gold Company,
Inc. which was exchanged for $898,203 of actual costs incurred by Hanover
Resources, Inc., the 100% owner of Hanover International Limited. The
$898,203 consisted of the original capitalization of $264,381 plus
additional paid in capital contribution of $633,822 of which $581,159 was
for purchase deposits of the Kearsarge Claim, $15,780 was for deferred
offering costs, $31,883 was for exploration, engineering and site
development and the site development and the balance of $5,000 was for
working capital.
Inventories:
Inventory consists of costs for extracting and hauling ore to various
stockpiles at the mine and mill. Market value is determined by assay
samples and milling costs to convert the ore into concentrates.
Inventories are stated at the lower of cost or market.
Property and equipment:
Property and equipment are carried at cost. The Company computes
depreciation substantially by the straight-line method over the
estimated useful lives of the related assets.
Revenue recognition:
The Company maintains its books and records on the accrual basis of
accounting, recognizing revenue when goods are shipped and expenses
when they are incurred.
Depletion:
The Company depletes the cost of resource properties by an estimate
of the amount of natural resources to be extracted in tons of
material, which is the estimated recoverable units, divided into the
total cost to arrive at the rate per unit. The rate is multiplied by
the number of units extracted to determine the annual depletion
expense.
Resource properties and claims:
The Company accounts for resource properties and claims at the actual
cost incurred for exploration, engineering and site development and
for the purchases of mining properties and the options to purchase
additional claims.
The Company capitalizes lease payments which are to be allocated to the
acquisition cost of the mining claims upon completion of the term of the
lease. The provisions of the lease call for termination of the lease for
any default in payments and allow for the acquisition of the claims at the
end of the lease for the total rental payments made.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
3. Summary of significant accounting policies (continued):
Resource properties and claims (continued):
The Company amortizes the acquisition costs of mining claims as the
claims are put in service based on the allocated cost of the claim
divided by the estimated recoverable units of ore multiplied by the
units of ore extracted.
The Company writes off to operating expense the unamortized cost
of resource property when it determines that the carrying amount
of the property may not be recoverable and the asset value is
impaired.
Effect of Recently Issued Accounting Standards:
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of." SFAS No. 21 requires that Long-Lived Assets
and certain identifiable intangibles to be held and used by the
Company be reviewed for impairment whenever events indicated
that the carrying amount of an asset may not be recoverable. The
Company reviews the cost of Mining Properties for impairment when
events indicate that the carrying value of the asset may not be
recoverable.
Additionally, The Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock Based Compensation." The effective date of SFAS No. 123 is for
fiscal years beginning after December 15, 1995, and establishes a
method of accounting for stock compensation plans based on fair
value. The Company does not believe the SFAS No. 123 will have an
impact on its financial statements.
Earnings per share:
Earnings per share has been computed based on the weighted average
number of shares of common stock outstanding during each period.
There would have been no material diluting effect on net loss per
share for any outstanding stock warrants.
4. Nature of operations, risks and uncertainties:
The Company has had no significant operating history and must be
considered a development stage enterprise. As such, the Company is
subject to all of the risks inherent in a new mining operation and
business enterprise, including the absence of an operating history,
established banking relations and community and industry recognition. Due
to the lack of sufficient capital to commence sustainable mining
operations the Company is focusing its efforts on plotting and mapping its
data base, logging its core samples taken over the previous six months,
exploring selected claims and discussing possible joint venture
arrangements with major mining companies for the purpose of putting its
claims into commercially feasible production. There can be no guarantees
that the Company will be successful negotiating a joint venture with a
major mining company.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
4. Nature of operations, risks and uncertainties (continued):
The Company maintains cash balances at several financial institutions
located in Montana, Idaho and New York. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1995, the Company had a $600,000 uninsured
cash balance at one institution and at December 31, 1994 there were no
uninsured cash balances.
5. Note receivable:
In February, March and April 1993, the Company made total loans of
$100,000 to Moen Builders, Inc. and M&W Milling and Refining, Inc.,
(collectively referred to as "M&W") for M&W to acquire certain equipment
to complete its custom mill facility. M&W is not affiliated with the
Company. The Company has secured this loan with a fully executed and
recorded UCC Financing Statement covering certain equipment. M&W is
obligated to repay the notes from cash flow proceeds at the rate of $3.33
per ton of the Company's ore processed by M&W at the mill and at the rate
of $2.00 per ton for third party ore processed by M&W at the mill.
Instead of investing directly in machinery and equipment to develop its
own mill at that time, the Company determined that it was advantageous and
cost effective to lend M&W these funds, which represent a fraction of the
total mill cost, in order that M&W could complete the mill. As noted
previously, the Company will recoup its loan as a credit from ore
processed at the mill. As of December 31, 1994 M&W has paid back $7,897,
leaving a balance due from M&W of $92,103. As of December 31, 1995 M&W
paid back $2,806, leaving a balance due of $89,297.
During 1994, the Company acquired the exclusive use of the gravity and
carbon-in-leach mill processing facility known as Geneva Mill, L.C. at
Toston, Montana. This step was considered advisable by management
following the cancellation of the agreement with M&W Milling & Refining,
Inc. due to numerous problems encountered in processing the Company's ore,
and in not achieving satisfactory gold recoveries. The Company entered
into an agreement with Geneva Mill, L.C. on June 15th, 1994 and provided
the necessary funds for Geneva Mill, L.C. to acquire and refurbish the
facility. The facility was permitted as a custom mill to handle the
Company's ore. If the Company had decided to construct a facility it
could possibly have taken up to 24 months, provided the State granted the
Company a construction permit. If the Company acquired ownership of the
mill, the mill would have lost its grandfathered permit and the Company
would have had to refile for a new permit with no guarantees that it would
have been successful in obtaining one. In addition to the note receivable
to M&W, the Company had made loan advances in 1994 to Geneva Mill, L.C. in
the amount of $1,221,922 and an additional amount in 1995 of $373,278, for
plant acquisition, crushing equipment, refurbishing used mill equipment,
installation of new pumps, construction of tailings ponds and liners,
transportation trucking equipment, and loaders and working capital. The
terms of the repayment of the loans are based on the tons of ore processed
at the mill at the rate of $45 per ton plus a $5 credit per ton as a
payment toward
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
5. Note receivable (continued):
the advance. For 1994 and 1995 Geneva Mill, L.C. repaid from processing
$240,642 and $266,137 respectively, and made cash payments of $88,500 in
1995. In 1995 all operations between Geneva Mill, L.C. and Hanover Gold
have ceased. The balance due to the Company prior to the write off of
the uncollectible amounts due was $999,921. Management has determined to
write off $779,921 as an uncollectible bad debt for 1995 due to the
prosect that the mill will no longer be utilized and the inability of
Geneva Mill, L.C. to repay the loan. The balance of $220,000 is secured
by tangible assets and a security interest. Management has considered
this value to be unimpaired and recoverable.
6. Subscription receivable:
During the year ended December 31, 1994 the Company had outstanding a
subscription receivable for the sale of 405,850 Class C Warrants at $1.60
per share for a total of $649,360. Subsequent to the year ending December
31, 1994, 250,000 shares were withdrawn from the subscription for a total
of $400,000. The balance at December 31, 1994 was reduced to $249,360.
As of December 31, 1995 the Company has received payments of $249,360 for
the remaining 155,850 shares.
7. Inventories:
Raw materials consists of costs associated with extracting and
transporting the ore to the stockpiles. Work in process consists of costs
associated with transporting ore to the mill and processing it at the
mill. Yard and supplies consist of mine materials and repair and
maintenance items.
Inventories consist of:
<TABLE>
<CAPTION>
December 31 December 31
1994 1995
<S> <C> <C>
Raw materials $ 83,825 $ 29,494
Work in process 71,984 0
Yard & supplies 25,429 0
------- -------
Total inventory $181,238 $ 29,494
======= =======
</TABLE>
8. Exploration, engineering and site development:
The Company has capitalized the amounts that have been paid by the
Company, and by Hanover Resources, Inc. for services rendered in the
exploration, drilling, sampling, engineering and other related technical,
managerial and professional services toward the evaluation and development
of the Kearsarge Group of Claims. The Company continues to capitalize
these charges until production begins. The total unamortized cost
capitalized at 1995 and 1994 are $2,225,106 and $2,228,118 respectively.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
9. Patented (deeded claims):
The Company has acquired the mining rights to the Kearsarge Lode Claim, a
precious metals tract, from Hanover Resources, Inc. (the "Sub lessor"),
pursuant to a Mineral Sublease and Purchase Option Agreement dated July
31, 1990. Under the original agreement, the Company has the right to
purchase the Kearsarge Claim for $6,075,000. During the first nine years
of the agreement, all paid rental payments shall be applied as a credit
toward the purchase price.
On December 3, 1990 and which became effective after December 31, 1990,
the Company entered into a Modification Agreement and renegotiated the
terms of the purchase option. The Company's option to purchase the
Kearsarge Lode Claim was converted to $3,300,000 in cash, upon the same
terms and conditions as the original cash purchase price, and the issuance
of 1,500,000 shares of the Company's common stock. This Modification
Agreement further provided that the shares were accepted in full payment
of the stated reduction in the purchase price of $3,000,000, but that
should the fair market price for the share not attain a price of $2.00 per
share on or before December 1, 1991, then an additional number of shares
would be issued based upon the then current market price for the shares so
that the market price of the shares on that date would equal $3,000,000.
Should the market price of the Company's shares on December 1, 1991 be
$2.00 or more, then there would be no adjustment of the number of shares
issued. As of December 1, 1991 the market value of the stock was $1.50
per share, therefore as of December 31, 1995 the Company issued an
additional 500,000 shares of its common stock pursuant to this Agreement.
The Agreement permits the Company to develop, mine and extract the
minerals contained in the Kearsarge Lode Claim for a period of nine years
commencing September 1, 1990, or to exhaustion of the minerals by
exercising the purchase option, and calls for the payment of a minimum
monthly payment of $10,000 to Hanover Resources, Inc. beginning October 1,
1990 and on the first day of each month thereafter, unless terminated as
provided for in the agreement. In addition, the agreement provides for
the annual rentals as follows:
December 31, 1995
December 1, 1991 $ 50,000
January 1, 1992 25,000
February 1, 1992 25,000
March 1, 1992 25,000
April 1, 1992 25,000
May 1, 1992 12,500
September 1, 1992 50,000
June 1, 1993 200,000
June 1, 1994 130,000
June 1, 1995 400,000
June 1, 1996 400,000
June 1, 1997 400,000
June 1, 1998 400,000
June 1, 1999 400,000
June 1, 2000 757,500
--------
$3,300,000
=========
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
9. Patented (deeded claims) (continued):
It should be noted that the Company has only purchased the rights to mine
the property and can purchase the property for $3,300,000 under the
December 31, 1990 modification to the Purchase Option Agreement.
As a condition of the pending merger with Hanover Resources, Inc. the
minimum monthly payment of $10,000 was terminated and the Company has
agreed to pay directly to the underlying landowner of an additional group
of claims, in lieu of the $10,000 monthly payments, which shall resume if
the pending merger does not take effect, rental payments of $8,760 per
month through March 1999 with a final payment in April 1999 of $4,925.
The total remaining rental payments amount to $346,565, at December 31,
1995 and will be applied toward the purchase of the claims at the
termination of the lease. In addition to the $8,760 monthly landowner
rental payment, the Company shall pay an overriding production royalty of
five percent (5%) of the net smelter return from the Kearsarge Group of
claims to the same landowner.
As of December 31, 1995 and 1994, the Company has made payments toward the
Kearsarge Group of Claims of $3,922,083 and $3,388,621 respectively. The
amounts represent payments to the landowners as rental payments applied to
the purchase of the claims.
10. Option:
In December 1990, the Company entered into an Option Agreement to purchase
five additional mining claims which are contiguous to the Kearsarge Mining
Claim, from Hanover Resources, Inc. which expires December 31, 1997.
Under this Option Agreement, the Company has agreed to pay $90,000 per
claim for a total of $450,000 as an exercise option fee, which payment is
contingent upon the results of further exploratory testing of these
properties and subject to the necessary due diligence. In addition to the
exercise fee, the Company has agreed to pay a minimum royalty of $2,500
per month and a 5% net smelter return, for each claim that the Company
retains following the exercise of its option. The Company has the option
of acquiring less than all of the claims at the sole discretion of
management.
In addition, the Company has the right to purchase each of the five claims
for a payment of $600,000 per claim during the first seven years of the
Agreement with all rental payments and option exercise fees being applied
toward the purchase price on a claim by claim basis. In consideration of
granting this Option Agreement, the Company has issued 900,000 shares of
its common stock at par value of $90 to Hanover Resources, Inc.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
11. Agreements:
On February 13, 1992, The Hanover Group, Inc. entered into an agreement
with Bearcat for Bearcat's 30% working interest in the 34 claims known as
the Kearsarge Group of Claims. Hanover Group then assigned the agreement
to the Company without consideration and thereafter, the Company acquired
the working interest for a consideration of 600,000 shares of restricted
common stock issued by the Company to Bearcat. The negotiated value of
the stock between the Company and Bearcat on the closing date was $2.00
per share or a total of $1,200,000 for the working interest. In addition,
Bearcat was granted two future stock options by the Company. One at $3.00
per share for 171,000 shares of legended common stock which expired May
14, 1995, and another at $10.00 per share for 500,000 shares of legended
common stock which expires May 14, 1997.
On February 20, 1992, the Company entered into an Assignment and Mineral
Sublease Agreement with Hanover Resources, Inc. Under the agreement,
Hanover Resources, Inc. assigned 70% interest in the remaining 28 claims
of the original 34 claims held by Hanover Resources, Inc. and to five
claims held under the Option Agreement to the Company.
The Assignment and Mineral Sublease Agreement permits the Company to mine,
extract, process, concentrate, refine or otherwise treat, sell and dispose
of such minerals (the "Products") contained in the 28 claims through April
15, 1999, or if any claim is in production all of the claims can be mined
until exhaustion. This agreement also obligates the Company to pay
Hanover Resources, Inc. $15,000 per month commencing January 1, 1996
through December 31, 1997 and thereafter $20,000 per month until the
agreement is terminated or upon the commencement of commercial production
on the claims which ever comes first. The commencement of the management
fee payment of $15,000 had been deferred until January 1, 1997, as a
result of the proposed merger with the Company, which is subject to
shareholder approval.
Hanover Resources, Inc. is entitled to receive 70% of the products mined
from the claims in kind multiplied by the Company's participating interest
in the claims, subject to the provision of any joint venture mining
agreement the Company may enter into. The Company shall receive 30% of
the products mined from the claims in kind multiplied by its participating
interest in the claims subject to the provisions of any joint venture
mining agreement that the Company may enter into. Hanover Resources has
an option to assign to the Company the monetary value of its share of any
independently appraised Products contained in the claims in exchange for
additional shares in the Company at 75% of the then public market price of
the stock.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
11. Agreements (continued):
The Agreement provides for the Company to pay the underlying landowner
rental payment obligations as follows:
December 31, 1995
June 1, 1992 $150,000
September 1, 1992 50,000
June 1, 1993 112,500
June 1, 1994 85,000
June 1, 1995 200,000
June 1, 1996 200,000
June 1, 1997 200,000
June 1, 1998 200,000
June 1, 1999 200,000
June 1, 2000 $1,377,500
---------
$2,775,000
=========
Under the Agreement, the Company has the right to purchase the claims from
the landowner for $2,775,000. If this right is exercised, all rental
payments paid to the landowner shall be applied as credit toward the
purchase price.
From January 1992, to May, 1992 the Company had been negotiating an
agreement, known as the Mining Venture Agreement, with Kennecott
Exploration Company ("Kennecott"), a major mining company capable of
undertaking the development of the Alder Gulch properties under a joint
venture (the "mining venture"). In order to accommodate Kennecott, the
Company consolidated its interests with Group S, Ltd., and Hanover
Resources, Inc., affiliated entities, and on May 1, 1992, formed "Hanover
JV". Each of these three entities contributed their claim interests to
the Hanover JV for a total of 250 claims in the Alder Gulch region.
Although each entity contributed their claim interests to the Hanover JV,
each entity retained their respective rights and obligations to their
respective claims.
To further clarify the Mining Venture Agreement and Hanover JV, the
arrangement refers to separate entities which are involved in the mining
venture. The participants are Group S, Ltd, and Hanover Resources, Inc.
which are separate entities from the Company, and the Company (under the
Hanover JV), and Kennecott. Each entity is separate and apart from each
other, as are the claims controlled by each participant. The claims of
Group S, Ltd. are not commingled with the claims of the Company and each
participant is responsible for their portion of the operating expenses as
it pertains to their individual group of claims.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
11. Agreements (continued):
As of December 31, 1994, the mining venture had no assets or liabilities
and had not conducted business. There had been no accounting for the
mining venture since Kennecott was required to complete the initial
exploration phase in order for the mining venture to commence. On March
16, 1995, Kennecott notified the Company that it was unilaterally
terminating the Mining Venture Agreement.
On August 31, 1993, the Company entered into a Mineral Sublease Agreement
with Group S, Ltd. and acquired 80% of the Apex Claim, a patented (deeded)
property adjacent to the Kearsarge Claim for a payment of $125,000 and
150,000 restricted shares of Hanover Gold Company, Inc. common stock at a
value of $1.50 per share. Under the Agreement, Group S, Ltd. also
retains a 20% net profit interest payable quarterly in cash or in kind.
Pursuant to Kennecott's instructions, the Company entered into an
Assignment of Lease and Option to Purchase Agreement with a third party
landowner on November 15, 1993, for the acquisition of two precious metals
claims, known as the JTC Lode and the Randolph Lode claims, and for the
20% of the Apex Lode Claim that it did not already control.
The responsibility for the landowner royalty payments under this Agreement
were Kennecott's by virtue of the Mining Venture Agreement which assigns
landowner rental payments to Kennecott for any claims in the Hanover JV.
The first payment of $120,000 was paid by Kennecott. In 1994, the
landowner was due a royalty payment of $130,000 on April 15, which
Kennecott informed Hanover JV it would not make. Since, Hanover Gold's
management felt that it was advisable to retain this claim group as it
mined the Apex Lode claim and prospected on the JTC Lode and Randolph Lode
claims, it made the second payment of $130,000.
Under the Agreement, the Company has the right to purchase this claim
package for $1,650,000, less the amount previously paid of $250,000. This
is pursuant to the underlying landowner rental payment obligations as
follows:
December 31, 1995
-----------------
April 15, 1995 $150,000
April 15, 1996 200,000
April 15, 1997 250,000
April 15, 1998 300,000
April 15, 1999 $500,000
-------
$1,400,000
=========
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
11. Agreements (continued):
Included in the April 15, 1999 payment is a purchase buy out required to
effectuate the purchase of the claim group.
On April 18, 1995, the Company's Board of Directors approved the merger of
Hanover Resources, Inc. and Group S Ltd. with the Company, for the purpose
of consolidating the precious metals claims of all three companies in the
Alder Gulch, Virginia City, Montana. Under the terms of the merger, the
Company will issue a total of 5,895,486 shares of its Common Stock upon
the conversion of, and in exchange for, the outstanding capital stock of
Hanover Resources, Inc. and Group S Ltd. Pursuant to the merger, the
Company will acquire the 3,625,000 shares of its Common Stock presently
held by Hanover Resources, Inc. and such shares will be extinguished. The
Company will replace these acquired shares with 3,625,000 shares of
registered stock. Therefore, the net additional number of shares to be
outstanding after giving effect to the replacement of the 3,625,000 shares
of the Company to be acquired from Hanover Resources, Inc. will be
2,270,486 shares of the Company's Common Stock.
12. Development stage company:
The Company's operations have been centered around its organization,
evaluation of the mining industry, start-up financing of its operations,
including acquisition of the Kearsarge Mine, evaluation of engineering
data, obtaining necessary mining permits and formulation and
implementation of its business plan. From May 2, 1990 through the period
ending December 31, 1995, the Company has secured required financing from
its public warrant offering, and Hanover Resources, Inc., its principal
shareholder, in the total aggregate amount of $11,076,514 which financing
has been in the form of cash contributions of $10,178,311 and advance
payments for exploration, engineering, site development and rental
payments for the Kearsarge Claim in the amount of $898,203. The Company
has incurred losses in connection with its operations during this same
period of $4,325,299.
13. Related party transactions:
As of December 31, 1995 and 1994 the Company was due from affiliated
companies the following amounts:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Due from Group S, Ltd. $300,695 $474,895
Due from Hanover Group, Inc. 19,835 0
Due from Hanover Resources, Inc. 207,042 405,909
</TABLE>
Certain of the officers and directors of the Company are also officers and
directors of the affiliated companies. The principal shareholders of the
affiliated companies are also shareholders in the Company. Hanover
Resources, Inc. is a major stockholder in the Company and owns 3,625,000
shares. The Company has advanced landowner rental payments to Group S,
Ltd. Hanover Resources, Inc. was paid advances to cover expenses and
salary advances to Fred R. Schmid. As a result of the proposal merger
these balances will be eliminated.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
13. Related party transactions (continued):
On June 1, 1995 the Company entered into a Securities Purchase Agreement
with N.A. Degerstrom, acting on his own behalf and for others, giving him
the right to purchase 2,857,142 shares of common stock at $.35 per share
and granting him an option to purchase an additional 2,142,858 shares at
$.50 per share. Effective October 31, 1995 the Company and
N.A. Degerstrom executed Amendment Number One to the Securities Purchase
Agreement, in which, the Company agreed to sell, and N.A. Degerstrom
agreed to purchase, an additional 300,000 shares of the Company's common
stock at the price of $1.00 per share. On December 1, 1995, Amendment
Number Two to the Securities Purchase Agreement was executed between the
parties noted previously, in which the Company agreed to sell to
N.A. Degerstrom an additional 700,000 shares of the Company's common stock
at the price of $1.00 per share. As of December 31, 1995 the Company
issued 3,857,142 shares for a total amount of $2,000,000 to
N.A. Degerstrom and his associates. In addition, N.A. Degerstrom had
advanced $50,000 in loans to the Company at 9% interest which was repaid
January 4, 1996.
On March 3, 1996, the Company and N.A. Degerstrom executed Amendment
Number Three to the Securities Purchase Agreement, which rescinded the
option that N.A. Degerstrom held for the purchase of an additional
2,142,858 shares at $.50 per share, and instead obligates N.A. Degerstrom
to purchase the 2,142,858 shares according to the following schedule:
<TABLE>
<CAPTION>
Total @ $.50
On or before Shares per share
------------ ------ -------------
<S> <C> <C>
April 15, 1996 400,000 $ 200,000
June 1, 1996 1,200,000 600,000
October 16, 1996 542,858 271,429
--------- ---------
Total 2,142,858 $1,071,429
========= =========
</TABLE>
14. Subsequent events:
On February 26, 1996 the Company executed a letter of Intent with Easton-
Pacific & Riverside Mining Company for the purpose of merging the two
entities into the Company, and consolidating their respective mineral
resources in the Virginia City Mining District, in Madison County,
Montana. The letter of intent provides for a 90 day due diligence period,
which may be extended for an additional sixty days, during which each
company will investigate each others mining claims, technical data,
mineral resources and any environmental or litigation risks to which
either may be subject. Depending on the results of these investigations,
the letter of intent contemplates the merger of Easton-Pacific and
Riverside Mining into the Company in exchange for 14,368,713 shares of the
Company's common stock, subject to the companies entering into a
definitive merger agreement, consummation of which will be dependent upon
receiving the approvals of the Board of Directors and stockholders of each
company, the delivery of a fairness opinion by an independent financial
advisor and the preparation and effectiveness of a registration statement
under federal and state securities law. As of the date of this report,
management of the Company cannot predict whether these due diligence
investigations will culminate in a definitive merger agreement with
Easton-Pacific or whether such agreement will be approved by the Company's
Board of Directors and stockholders.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
14. Subsequent events (continued):
On January 18, 1996 the Company filed a registration statement/proxy
statement with Securities and Exchange Commission seeking shareholder
approval to:
1. Approve the merger of Hanover Resources, Inc. and Group S, Ltd.,
affiliated companies, into the Company pursuant to which the Company
will issue to the shareholders of such companies 2,270,486 shares of
the Company's common stock, in addition to the 3,625,000 shares of
the Company held by Hanover Resources, Inc. which will, in effect,
be distributed to the stockholders of Hanover Resources, Inc.
2. Amend the Company's Certificate of Incorporation to increase the
total number of all shares of capital stock which the Company is
authorized to issue from 25,000,000 to 50,000,000 consisting of (a)
48,000,000 shares of common stock, each of which have a par value of
$.0001 (the "Common Stock") and (b) 2,000,000 shares of preferred
stock, each of which have a par value of $.001 (the "Preferred
Stock").
3. Consider and approve the Company's 1995 Stock Option Plan.
4. Elect seven members of the Board of Directors to hold office until
the next annual meeting of shareholders or until their respective
successors are elected to have qualified.
5. Authorize the appointment of independent public accountants for the
fiscal year.
6. Consider and vote upon such other matters as may properly come
before the meeting or any adjustment(s) thereof.
The registration statement is currently under review by the Securities and
Exchange Commission and has not been effective as of March 29, 1996.
Effective March 25, 1996, the Company entered into an asset purchase
agreement with an unaffiliated landowner for the purchase of 10 patented
and 120 unpatented mining claims and one mining lease covering properties
located in the Alder Gulch near the Company's landholdings. The lease
agreement calls for the issuance of 400,000 shares of the Company's common
stock and three year options exercisable at the price of $2.00 per share
for the purchase of an additional 300,000 shares of the Company's common
stock. Additionally, the lease states that if, during the two year period
commencing with the effective date of the agreement, the average bid price
of the Company's common stock during any period of thirty consecutive
trading days does not exceed $2.00 per share it will issue the landowner
such number of additional shares sufficient to raise the aggregate market
value of the shares then owned by the landowner to $2.00.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
14. Subsequent events (continued):
Effective March 26, 1996, the Company became obligated for the issuance of
250,000 shares of its common stock; the granting of a three year option
for the issuance of an additional 200,000 shares of its common stock at an
exercise price of $2.00 per share; the transfer of two mining trucks that
it owns free and clear of encumbrances and that have a book value of
approximately $43,000; the forgiveness of a note receivable in the amount
of $89,297 due from M&W, and release of the UCC filing the Company holds
as security for that note; and the elimination of a note receivable in the
amount of $220,000 due from Geneva Mill, L.C. in exchange for a $3,000,000
reduction in the landowner rental obligations that are owed to M&W by
Group S, Ltd. which, upon approval of the pending merger of Group S, Ltd.
and the Company, would become the Company's obligation to pay M&W. M&W
also takes title to all of the assets owned by Geneva Mill, L.C. as part
of the consideration for the reduction in rental payments to be received
by M&W.
15. Reclamation bonds:
At December 31, 1995 and 1994, reclamation bonds were outstanding and are
secured by certificates of deposit.
16. Income tax:
The Company has adopted SFAS No. 109 "Accounting for Income Taxes", as of
December 31, 1992. FASB Statement No. 109 is required for all fiscal
years beginning after December 15, 1992. This statement requires that
deferred taxes be established for all temporary differences between book
and tax basis of assets and liabilities. There was no cumulative effect
of adoption or current effect on continuing operations mainly because the
Company has been in a development stage since inception, May 2, 1990, and
has sustained net operating losses during this period. The Company has
made no provision for a deferred tax asset due to the net operating loss
carryforward because a valuation allowance has been provided which is
equal to the deferred tax asset. It cannot be determined at this time
that a deferred tax asset is more likely than not to be realized.
The Company has a loss carryforward of $4,283,477 that may be offset
against future taxable income. The carryforward losses expire at the end
of the years 2005 through 2020.
The Company has established a valuation allowance equal to the tax
benefit.
17. Lease agreements:
The Company has entered into a two year lease for office space, from which
it conducts its financial and accounting operations and its engineering
analysis. The lease expires in November 1997. The Company has prepaid
six months worth of rental payments for a total of $9,000 and paid an
additional $700 for a security deposit. During the first year the monthly
rental payment is $1,500 and during the second year the monthly rental
payment is $1,700. In addition to the monthly rental payments, the
Company is obligated for all utility charges.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
17. Lease agreements (continued):
The Company maintains additional office space under a lese which expires
in July 1996, from which it conducts administrative duties. The monthly
cost is approximately $1,400.
During November 1995, the Company entered into a 20 year lease with a
landowner which granted the Company the right to mine and extract
materials from the landowners property. The Company must pay $2,500 per
year to maintain its right to mine, plus 3% of the revenue received by the
Company from the sale of minerals extracted from the property that is the
subject of this lease. As of December 31, 1995 no material has been
extracted.
18. Restated financial statements:
In 1995 the Company reversed accrued salary payable to Fred R. Schmid for
the period ended December 31, 1991, 1992, 1993 and 1994. The total
accrued salary at December 31, 1994 amounted to $542,347. The reversal of
the accrued salary came as a result of a correction of salary incorrectly
accrued by the principal officer.
1992 and prior $ 137,823
1993 270,895
1994 133,629
--------
$ 542,347
========
In 1995 the Company also reversed the accrued salary payable to Stephen
Schmid for the period ended December 31, 1992 and 1993. The total accrued
salary at December 31, 1994 amounted to $56,165. The reversal of the
accrued salary came as a result of a correction of salary incorrectly
accrued by Stephen Schmid.
1992 $20,382
1993 35,783
------
$56,164
======
19. Options and warrants:
Stock option plan:
On June 2, 1995 the Board of Directors granted options to the
following officers, key employees, directors and advisors of the
Company, subject to shareholder approval of the Plan. The exercise
price of the stock option was established at $1.60 per share.
<TABLE>
<CAPTION>
Officer or Director Options Granted Expiration Date
<S> <C> <C>
Pierre Gousseland 100,000 June 1, 2000
Fred R. Schmid 250,000 June 1, 2000
Stephen J. Schmid 175,000 June 1, 2000
Laurence Steinbaum 125,000 June 1, 2000
Nicholas S. Young 150,000 June 1, 2000
</TABLE>
Warrants:
All warrants outstanding have expired as of December 31, 1994.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
20. Employee contracts:
On March 14, 1995 the Company amended the employment agreement retroactive
to August 27, 1994 employing Fred R. Schmid as its President and Chief
Executive Officer until August 31, 1997. The agreement calls for a base
salary of:
First year $ 125,000
Second year 137,000
Third year 150,000
The agreement provides for cost of living increases and a bonus equal to
3% of the Company's pre-tax net revenues and a severance package equal to
the greater of $2,500,000 or 10% of the Company's net worth. If Mr.
Schmid terminated the agreement for good reason he will receive an amount
equal to 300% of the base compensation.
On September 5, 1995 the Company entered into an agreement with Stephen J.
Schmid, the Company's Vice President, Treasurer and Corporate Secretary,
to become effective only if there is a "change in control" of the Company.
If a change occurs the Company agrees to continue Mr. Schmid's employment
for a period of 24 months.
In January 1996 all employment contacts were terminated and both Fred
Schmid and Stephen Schmid agreed to remain as consultants to the Company
under consultant agreements, in the case of Fred Schmid for a monthly fee
of $7,500 until December 31, 1996, and in the case of Stephen Schmid,
$5,500 until September 30, 1996.
21. Calculation of earnings per share:
<TABLE>
<CAPTION>
December 31,
1993 1994 1995
<S> <C> <C> <C>
Number of shares:
Weighted average shares
outstanding 6,136,089 8,306,409 10,012,215
Incremental shares for
outstanding stock warrants 1,362,697 8,450
Incremental shares for
outstanding stock options
and purchase commitments 1,716,667
---------- ---------- ----------
7,498,786 8,314,859 11,728,882
========= ========= ==========
</TABLE>
Primary earnings per share amounts are computed based on the weighted
average number of shares actually outstanding and shares that would be
outstanding assuming exercise of dilutive stock options and warrants. All
of which are considered to be common stock equivalents. Fully diluted
earnings per share are the same as primary earnings per share for December
31, 1993, 1994 and 1995.
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE PERIOD
MAY 2, 1990 (INCEPTION) TO DECEMBER 31, 1995
22. Private placements:
On October 19, 1995, in a private placement, the Company sold 200,000
shares of restricted common stock to one investor at a price of $1 per
share for a total of $200,000.
23. Supplemental disclosures of cash flow information:
Supplemental schedule of non cash investing and financing activities:
<TABLE>
<CAPTION>
December 31,
1993 1994 1995
<S> <C> <C> <C>
On August 31, 1993 the Company
issued cash of $125,000 and
150,000 shares of restricted
common stock valued at $1.50
for a total consideration of
$350,000 for the purpose of
subleasing an 80 percent
(80%) interest in the Apex Claim.
(see Note 8) $225,000
Issuance of 500,000 shares of common
stock for modification agreement
of Hanover Resources, Inc. (See
Note 8) $ 50
Issuance of 269,679 shares of common
stock to vendors in settlement of
invoices due 274,096
------- ------- -------
$225,000 0 $274,146
======= ======= =======
</TABLE>
24. Significant changes in the fourth quarter:
The Company recognized a $250,000 non-recurring option payment under the
Kennecott mining venture agreement. Under the agreement, if Kennecott
withdrew from the joint venture the option payable would be recognized as
income.
During the fourth quarter 1995 it became clear to the Company that the
note receivable from Geneva Mill L.C. would not be collectible.
Kennecott's withdrawal from the joint venture, the inability of Geneva
Mill L.C. to attract any new business and the decision to curtail mining
operation by the Company caused Geneva Mill L.C.'s facilities to cease
operations. As a result, an allowance for bad debt of $779,921 was set up
in the fourth quarter.
In addition, in the fourth quarter a write down of inventory in the amount
of $69,339 occurred to lower inventory to the lower of cost or market.
Finally, in the fourth quarter a loss on sale of assets of $32,509
occurred when the Company began liquidating unused assets.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
Hanover Gold Company, Inc. and Subsidiary
Roslyn, New York
We have audited the consolidated financial statements of Hanover Gold
Company, Inc. and Subsidiary as of December 31, 1995, our report thereon dated
March 29, 1996. In connection with our audit of these financial statements, we
audited the financial statement schedules.
In our opinion, these financial statements schedules present fairly, in
all material respects, the information stated therein, when considered in
relation to the consolidated financial statements taken as a whole.
Zeller Weiss & Kahn
March 29, 1996
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
SCHEDULE II
<TABLE>
<CAPTION>
Balance at
Name of beginning Amounts
Debtor of period Additions Collected Current
<S> <C> <C> <C> <C>
Group S, Ltd. $300,695 $174,200 $474,895
Hanover Group, Inc. 19,835 $19,835
Hanover Resources, Inc. 207,042 198,867 405,909
</TABLE>
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
PROPERTY, PLANT AND EQUIPMENT
SCHEDULE V
<TABLE>
Balance at Other Changes
beginning Additions -add(deduct) Balance at
period at cost -describe end of period
---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Equipment $132,696 $34,754 $(57,439) $110,011
Building
improvements 17,566 17,566
Office equipment 15,557 2,260 17,817
Vehicle 1,500 3,600 5,100
</TABLE>
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
SCHEDULE VI
<TABLE>
Additions
Balance at Charged to
beginning Costs & Balance at
period Expenses Retirements end of period
---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Equipment $19,448 $23,430 $11,059 $31,819
Building
improvements 3,177 2,503 5,680
Office equipment 5,130 3,636 8,766
Vehicle 450 960 1,410
</TABLE>
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
SHORT-TERM BORROWINGS
SCHEDULE IX
<TABLE>
<CAPTION>
Maximum
Weighted Amount Weighted
Category of average outstanding Avg. amount Avg. interest
appropriate Balance at interest during outstanding rate during the
short-term borrowing end of period rate the period during the period period
- -------------------- ------------- -------- ---------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Note payable $48,654 8.44% $65,260 $57,273 8.44%
Loan payable
- shareholder 50,000 9.00% 50,000 50,000 9.00%
</TABLE>
<PAGE>
<PAGE>
HANOVER GOLD COMPANY, INC. AND SUBSIDIARY
(A Development Stage Company)
SUPPLEMENTARY INCOME STATEMENT INFORMATION
SCHEDULE X
<TABLE>
<CAPTION>
Item Charged to costs and expenses
<S> <C> <C>
1. Maintenance and repairs $ 4,629
2. Depreciation and amortization of intangible assets,
preoperating costs and similar deferral 38,229
3. Taxes, other than payroll and income taxes 16,364
4. Royalties 120,000
5. Advertising costs 223,943
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HANOVER GOLD COMPANY, INC.
By: /s/ Wayne Schoonmaker
-----------------------------------
Its Principal Accounting
Officer
Date: May 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM the
Company's consolidated financial statements for the year ended December 31,
1995, as audited by Zeller Weiss & Kahn, Mountainside, New Jersey, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 820,748<F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 29,494
<CURRENT-ASSETS> 850,242
<PP&E> 6,297,773<F2>
<DEPRECIATION> 47,675
<TOTAL-ASSETS> 8,310,364
<CURRENT-LIABILITIES> 358,860
<BONDS> 0
0
0
<COMMON> 1,365
<OTHER-SE> 7,951,504<F3>
<TOTAL-LIABILITY-AND-EQUITY> 8,310,364
<SALES> 499,299
<TOTAL-REVENUES> 499,299
<CGS> 1,076,668
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 961,076<F4>
<LOSS-PROVISION> 779,921
<INTEREST-EXPENSE> (3,203)<F5>
<INCOME-PRETAX> (2,321,569)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,321,569)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,321,569)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
<FN>
<F1>Includes $97,586 of prepaid expenses.
<F2>Consists of $6,147,279 in resource properties and claims, and $150,494 in
property and equipment.
<F3>Consists of $12,275,438 of additional paid in capital, less deficit of
$4,325,299 accumulated during development stage.
<F4>Consists of $38,229 in depreciation, depletion and amortization; and
$922,847 in general and administrative expense.
<F5>Consists of interest income of $29,306, less a $32,509 loss on the sale of
equipment.
</FN>
</TABLE>
