<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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: 0-23022
HANOVER GOLD COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2740461
(State or other jurisdiction (IRS Employer Identification No.)
of 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
Common Stock The Nasdaq SmallCap 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 [ ]
<PAGE>
HANOVER GOLD COMPANY, INC. QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1997
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements 1
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 1
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 4
Item 2: Changes in Securities 4
Item 3: Defaults upon Senior Securities 4
Item 4: Submission of Matters to a
Vote of Security Holders 4
Item 5: Other Information 4
Item 6: Exhibits and Reports on Form 8-K 4
SIGNATURES
[The balance of this page has been intentionally left blank.]
<PAGE> PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements of the Company for the periods
covered by this report are included elsewhere in this report,
beginning at page F/S-1.
The unaudited condensed financial statements have been prepared
by the Company in accordance with generally accepted accounting
principles for interim financial information with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the
Company's management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six months period
ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the full year ending December 31, 1997.
For further information refer to the financial statements and
footnotes thereto in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996 incorporated by reference
herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1997.
Six Months Ended June 30, 1997 Compared to Six Months Ended June
30, 1996.
During the six months ended June 30, 1997, the Company generated
no revenue. Approximately $3,500 in revenues was realized during
the six months period ended June 30, 1996 resulting from the sale
of carbon product stockpiled at the Company's inactive mine.
General and administrative expenses decreased to $436,000 for the
six months period ended June 30, 1997 as compared to $800,000 for
the six months period ended June 30, 1996. The decrease is
principally attributed to expenses incurred in 1996 related
to the Company relocating its headquarters from New York to
Idaho. For the six months ended June 30, 1997, the Company
experienced a loss of $686,000, or $0.04 per share, compared to
a loss of $764,000, or approximately $0.05 per share, during the
comparable period in the previous year. Included in the 1997
loss was a $243,000 interest charge representing amortization of
the value of options granted for a guaranty of future company
obligations.
Second Quarter 1997
During the second quarter 1997, the company's loss amounted to
$494,000; approximately half of which resulted from a charge for
depreciation of $12,611 and an interest charge of $243,000 as
noted in the above paragraph.
[The balance of this page has been intentionally left blank.]
1
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
The Company is an exploration stage mining company and for
financial reporting purposes has been categorized as a
development stage company since its inception. At June 30, 1997,
it had no recurring sources of revenue and negative working
capital. The Company has incurred losses and experienced
negative cash flows from operations in every year since its
inception. Additionally, as a consequence of Kennecott's
withdrawal from the mining venture in March of 1995, the Company
assumed full responsibility for certain landowner rental and
royalty obligations pertaining to its Alder Gulch mining claims.
At June 30, 1997, those rental and royalty obligations payable in
1997 and 1998 were approximately $1,358,000 and $1,458,000.
These conditions give rise to substantial doubt about the
company's ability to continue as a going concern. Accordingly,
the Company's independent certified public accountants modified
their March 7,1997 report accompanying the Company's December
31,1996 financial statements to include an explanatory paragraph
relative to a going concern uncertainty. Management believes the
Company will meet its 1997 obligations using existing funds and
funds to be derived from the anticipated sale, later this year,
of 2,000,000 additional shares of its common stock. These shares
are being offered on a best effort basis, however, and no
assurance can be given that any of the shares will be sold. In
addition, an affiliate of the Company, and others, have
guaranteed the Company's payments to the landowner-lessors of its
mining claims through 1997 and for the first nine months of 1998
if the Company is unable to obtain necessary funds. Nonetheless,
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 properties, it may
continue to experience a shortage of working capital.
The Company has incurred aggregate losses of $6,599,000 from
inception through June 30, 1997 because it has not yet been able
to commence commercial mining operations on its properties. Its
inability to achieve this objective is attributable to a number
of factors, including Kennecott's unexpected withdrawal from the
mining venture in 1995 and the Company's lack of success through
1995 in consolidating the various claims and interests in the
area. Although the Company has been able to conduct exploration
and limited development activities on the properties, primarily
as the result of its former arrangement with Kennecott and, to a
lesser extent, as the result of exploration and evaluation work
it performed itself in 1995 and 1996, significant additional work
must be undertaken to determine whether the properties will
support commercial mining operations. 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, but has not yet concluded
such an arrangement. Management now believes such an arrangement
may be concluded.
As has been previously reported, the Company restructured its
management in 1995 and early 1996 and took a number of
significant steps to consolidate the Alder Gulch mining
properties. In addition, it has completed a compilation of
geologic and other technical data generated from its and
Kennecott's prior exploration activities. Management believes
these activities will have a positive effect on the Company's
performance during the remainder of 1997, 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.
At June 30, 1997, Hanover had a deferred tax asset of
approximately $2,070,000. A valuation allowance equal to this
amount has been established. Management cannot determine that
this is more likely than not that the Company will realize the
benefits from these deferred tax assets.
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 to occur if it is successful in
negotiating a joint venture or other agreement with a major
mining company, inflation will result in an increase in the cost
of goods and services necessary to its mining operations.
2
<PAGE>
On March 17, 1997, Neal A. Degerstrom, who is affiliated with the
Company, guaranteed the payment of the Company's obligations to
the landowner-lessors of its mining claims through September 7,
1998, up to the aggregate amount of $2,891,210, which amount
approximates the Company's obligations to these landowner-lessors
during the period of the guaranty. As consideration for the
guaranty, the Company granted Mr. Degerstrom three-year options to
purchase up to 2,312,968 shares of the Company's common stock at
an exercise price of $1.25 per share. The fair value of these
options, as determined using the Black-Scholes option pricing
model, is approximately $1,450,000 and will be amortized to
expense over the guaranty period. Payments made by Mr.
Degerstrom pursuant to the guaranty will be credited toward the
exercise of such options. Effective April 29, 1997, Mr.
Degerstrom assigned two-thirds of these options equally to two
nonaffiliated individuals, each of whom undertook to guarantee
the payment to Mr. Degerstrom of one-third of the amount Mr.
Degerstrom is required to pay the Company during the term of his
guaranty. The guaranty was given by Mr. Degerstrom in connection
with the reorganization agreement, dated as of April 30, 1997,
between the Company and Easton-Pacific and Riverside Mining
Company.
As has been previously reported, the Company is a party to a
March 25, 1996 agreement covering the purchase from Tabor
Resources Corporation of certain mining claims and interests
located in the Alder Gulch area. This agreement is also the
subject of pending litigation, as is also disclosed elsewhere in
this report. The Company issued 525,000 shares of common stock
to Tabor in the transaction and also agreed that, if, during the
two year period commencing with the effective date of the
agreement, the average bid price of the common stock did not
exceed $2.00 per share for a consecutive 30-day period prior to
April of 1998, it would issue Tabor such number of additional
shares as was necessary to raise the aggregate market value of
the shares then owned by Tabor to $2.00. At August 1, 1997, the
closing sales price of the Company's common stock, as reported on
the Nasdaq SmallCap Market, was $0.88. Were this price to remain
constant, the Company would be obligated to issue Tabor an
additional 675,000 shares of its common stock pursuant to the
agreement. This would have the effect of reducing Hanover's per
share stockholders' equity from approximately $0.58 to
approximately $0.56, based on the company's unaudited financial
statements as at June 30, 1997, and may make it more difficult
for the Company to raise additional funds from the sale of its
common stock in the future.
Cash flows for the six months ended June 30, 1997 were as
follows: During the six months ended June 30, 1997, the Company's
cash position increased $42,000, to $138,000. During the six
months period, the Company used $444,000 in operating activities,
primarily as a result of the reported $686,000 net loss.
Investing activities used $917,000, primarily due to $890,000 in
expenditures related to the Company's mineral properties. During
the period, the Company received $1,424,000 from six individuals
as a deposit on common stock to be sold pursuant to a proposed
public offering. If the offering does not occur, these funds
will be refunded, together with accrued interest.
[The balance of this page has been intentionally left blank.]
3
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously reported, on October 4, 1996, the Company initiated
an action against Tabor Resources Corporation and Washington
Trust Bank in its capacity as escrow agent, in United States
District Court for the Eastern District of Washington (Case No.
CS-96-663 FVS) for breach of contract and injunctive relief.
The Company has deposed the principal witnesses in this matter
and expects soon to file motions seeking summary judgement in its
favor on its breach of contract claims against Tabor, and
specific performance of Tabor's obligations, and dismissal of
Tabor's counterclaims. The Company believes the terms and
conditions of its asset purchase agreement with Tabor are clear
and unambiguous, and that the federal district court in which the
action is now pending will not accept the argument that a consent
requirement contained in the parties' escrow agreement changed
the substantive terms of the transaction to grant Tabor the right
in its discretion to rescind the transaction prior to termination
of the escrow. The Company also believes that Tabor cannot
establish any securities law claim where it was provided access
to all material information concerning the Company and
acknowledged such access in closing the transaction, particularly
since its complaints about nondisclosure concern matters unknown
at the time of the transaction, or which were immaterial, or
which were not information of a sort that a registration
statement would provide. The Company finally believes that Tabor
can not demonstrate that its alleged damages are causally related
to any acts or omissions of the Company or its agents.
ITEM 2. CHANGES IN SECURITIES.
Neither the constituent instruments defining the rights of the
registrant's securities holders nor the rights evidenced by the
registrant's outstanding common stock have been modified, limited
or qualified.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The registrant has no outstanding senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the registrant's security
holders during the period covered by this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits. The following exhibit is filed as part of this report:
Exhibit 27.0 Financial Data Schedule
Reports on Form 8-K. None.
4
<PAGE>
HANOVER GOLD COMPANY, INC.
TABLE OF CONTENTS
PAGE
Condensed Balance Sheets as of June 30, 1997
and December 31, 1996 F/S-2
Condensed Statements of Operations for the Six Months
Ended June 30, 1997 and 1996, and for the period from
inception (May 2, 1990) to June 30, 1997 F/S-3
Condensed Statements of Changes in Stockholders' Equity
for the period from inception (May 2, 1990) to June 30, 1997 F/S-4
Condensed Statements of Cash Flow for the Six
Months Ended June 30, 1997 and for the period
from inception (May 2, 1990) to June 30, 1997 F/S-6
Notes to Condensed Interim Financial Statements F/S-8
[The balance of this page has been intentionally left blank.]
F/S-1
<PAGE> HANOVER GOLD COMPANY, INC.
CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION> June 30, 1997 December
31, 1996
(Unaudited) (Audited)
----------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 138,524 $ 96,353
Supplies Inventory 10,000 10,000
Prepaid expenses and other
current assets 52,325 97,369
---------- ----------
Total current assets 200,849 203,722
---------- ----------
Resource properties and claims:
Exploration, engineering and site
development 2,375,745 2,288,508
Mining properties 9,004,859 8,202,314
----------- -----------
Total resource properties
and claims 11,380,604 10,490,822
----------- -----------
Property and equipment, at cost 204,952 151,258
Less accumulated depreciation 102,725 63,076
---------- ----------
Net property and plant and equipment 102,227 88,182
---------- ----------
Other assets 23,424 23,424
---------- ----------
Total assets $11,707,104 $ 10,806,150
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 241 $ 70,136
Note payable-shareholder 73,405 73,405
Accrued expenses 43,989 85,859
Current Portion of long-term debt 29,929 23,653
---------- ----------
Total current liabilities 147,564 253,053
Long-term debt, less current portion 178,703 194,065
----------- -----------
Total liabilities $ 326,267 $ 447,118
----------- -----------
Stockholders' equity:
Preferred stock, $0.001 par value; shares
authorized 2,000,000, no shares outstanding -
- -
Common Stock, $0.0001 par value, authorized
48,000,000 shares; issued and outstanding
19,886,443 and 19,843,022 shares
respectively 1,989 1,984
Additional paid-in capital 16,554,253 16,270,146
Deposits on Common Stock 1,423,750 -
Deficit accumulated during the
development stage ( 6,599,155) ( 5,913,098)
------------- -------------
Total Stockholders equity 11,380,837 10,359,032
------------- -------------
Total liabilities and
stockholders' equity $11,707,104 $ 10,806,150
============= ============
</TABLE>
F/S-2
<PAGE>
HANOVER GOLD COMPANY, INC.
CONDENSED STATEMENTS OF INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Date of Inception Quarter Six Months Six Months
(May 2, 1990) Ended Ended Ended
through June 30, 1997 June 30,1996 June 30,1997 June 30,1996 June 30,1996
------------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Revenue $ 1,151,958 $ 0 $ 0 $ 3,511
Cost of goods mined 1,987,483 0 0 0
------------ ---------- ---------- ---------
Gross profit (loss) (835,525) 0 0 3,511
Depreciation and
amortization 110,892 7,842 12,611 13,549
Provision for bad debt 779,921 0 0 0
General and administrative
expenses 4,650,106 242,629 423,312 786,401
------------ ---------- ---------- ----------
Loss from operations (6,376,444) (250,471) (435,923) (796,439)
Interest (expense) and
other income (Note 2) (178,975) (239,427) (237,686) 32,518
Loss on write-down of assets (43,736) (4,193) (12,448) 0
------------ ---------- ---------- ----------
Net loss ($6,599,155) (494,091) ($686,057) ($763,921)
============ ========= ========== =========
Net loss per share ($0.02) ($0.04) (0.05)
Weighted average common
shares outstanding (1) 19,886,443 19,874,208 16,744,340
</TABLE>____________________
(1) As of June 30, 1997, 19,886,443 shares of common stock were
outstanding and an additional 3,317,968 shares were deemed outstanding
pursuant to presently outstanding options.
[The balance of this page has been intentionally left blank.]
F/S-3
<PAGE> HANOVER GOLD COMPANY, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (MAY 2, 1990) THROUGH JUNE 30, 1997
<TABLE>
<CAPTION> Deficit
Accumulated
Common Stock Additional During the
----------------- Paid in SubscrDevelopment
Shares Amount Capital Receivable Stage Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
cash ($0.53 per share) 752,562 $ 75 $402,425 $ - $ - $402,500
Issuance of common stock for
cash ($0.07 per share) 86,250 9 6,009 - - 6,018
Cash contributed to capital - - 5,000 - - 5,000
Net loss - - - - (141,114) (141,114)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31, 1990 838,812 84 413,434 - (141,114) 272,404
Issuance of common stock to
directors ($0.0001/share) 200,000 20 - - - 20
Issuance of common stock for
claims and Engineering costs
($2.50 per share) 229,007 23 572,496 - - 572,519
Issuance of common stock for
cash ($0.06 per share) 2,957,506 296 166,374 - - 166,670
Issuance of common stock for
cash ($0.42 per share) 268,586 27 113,723 - - 113,750
Exercise of stock purchase
warrants ($0.60 per share) 74,400 7 44,633 - - 44,640
Exercise of stock purchase
warrants ($1.25 per share) 111,500 11 139,363 - - 139,374
Cash contributed to capital - - 73,850 - - 73,850
Net loss - - - - (179,866) (179,866)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31, 1991 4,679,811 468 1,523,873 - (320,980) 1,203,361
Issuance of common stock for
cash ($2.00 per share) 712,500 71 1,424,929 - - 1,425,000
Issuance of common stock for
cash ($0.18 per share) 218,537 22 39,978 - - 40,000
Exercise of stock purchase
warrants ($1.25 per share) 41,600 4 51,996 - - 52,000
Net loss - - - - (314,878) (314,878)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31, 1992 5,652,448 565 3,040,776 - (635,858) 2,405,483
Issuance of common stock for
interest in mineral Property
($1.50 per share) 150,000 15 224,985 - - 225,000
Issuance of common stock to
officer ($0.01 per share) 127,165 13 737 - - 750
Exercise of stock purchase
warrants ($1.60 per share) 3,061,703 306 4,749,912 (649,360) - 4,100,858
Net loss - - - - (256,769) (256,769)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31, 1993 8,991,316 899 8,016,410 (649,360) (892,627) 6,475,322
Exercise of stock purchase
warrants ($1.60/share) 1,328,897 133 2,126,102 - - 2,126,235
Cancellation of subscribed
shares ($1.60 per share) (250,000) (25) (399,975) 400,000 - -
Cash contributed to capital - - 98,393 - - 98,393
Net loss - - - - (1,362,954)(1,362,954)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31,
1994 (Restated) 10,070,213 $1,007 $9,840,930 $(249,360) $(2,255,581) $7,336,996
Issuance of common stock for
cash ($0.35 per share) 2,142,856 214 749,786 - - 750,000
Issuance of common stock for
cash ($0.35 per share) 714,286 71 249,929 - - 250,000
Issuance of common stock for
cash ($1.00 per share) 200,000 20 199,980 - - 200,000
Issuance of common stock in
Satisfaction of vendor
obligations ($1.06 per share) 69,679 7 74,089 - - 74,096
Issuance of common stock in
Satisfaction of vendor
obligations ($1.00 per share) 200,000 20 199,980 - - 200,000
Issuance of common stock for
cash ($1.00 per share) 1,000,000 100 999,900 - - 1,000,000
Issuance of common stock to
officer 197,835 20 - - - 20
Issuance of common stock pursuant
to Convertible debt 1,348,295 135 281,313 - - 281,448
Cash received for subscribed shares - - - 249,360 - 249,360
Repurchase of previously issued
shares ($1.60 per share) (23,000) (2) (36,798) - - (36,800)
Net loss - - - - (2,329,190)(2,329,190)
- ---------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 15,920,164 $1,592 $12,559,109 $ - $(4,584,771) $7,975,930
</TABLE>
F/S-4
<PAGE> HANOVER GOLD COMPANY, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (MAY 2, 1990) THROUGH JUNE 30, 1997
(CONTINUED)
<TABLE>
<CAPTION> Deficit
Accumulated
Common Stock Additional During the
----------------- Paid in SubscriDevelopment
Shares Amount Capital Receivable Stage Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 15,920,164 $1,592 $12,559,109 $ - $(4,584,771) $7,975,930
Issuance of common stock for
mineral property rights
($4.00 per share) 5,000 1 19,999 - - 20,000
Issuance of common stock for
mineral property rights
($2.00 per share) 525,000 52 1,049,948 - - 1,050,000
Issuance of common stock for
mineral property rights
($1.56 per share) 250,000 25 389,975 - - 390,000
Issuance of common stock for
cash ($0.50 per share) 2,142,858 214 1,071,215 - - 1,071,429
Issuance of common stock for
cash net of issuance costs
of $70,000
($1.25 per share) 1,000,000 100 1,179,900 - - 1,180,000
Net loss - - - - (1,328,327)(1,328,327)
- ----------------------------------------------------------------------------------------------------
BALANCE, December 31, 1996 19,843,022 1,984 16,270,164 - (5,913,098) 10,359,032
Issuance of common stock for
services rendered
($0.95 per share) 43,421 5 41,245 - - 41,250
Grant of option to director as
compensation for loan
guaranty (Note 2) 1,457,170 - - 1,457,170
Deferred guaranty Fee, subject to
grant exercise (Note 2) - - (1,214,308) - -(1,214,308)
Deposits received on Common Stock - - - 1,423,750 - 1,423,750
Net loss - - - - (686,057) (686,057)
- ----------------------------------------------------------------------------------------------------
BALANCE, June 30, 1997 $19,886,443 $1,989 $16,554,253 $1,423,750 $(6,599,155)$11,380,837
</TABLE>
[The balance of this page has been intentionally left blank.]
F/S-5
<PAGE> HANOVER GOLD COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION> Date of Inception Six Months Six Months
(May 2, 1990) Ended Ended
through June 30, 1997 June 30, 1997 June 30, 1996
--------------------- ------------- -------------
<S> <C> <C> <C>
Operating activities:
Net loss ($ 6,599,155) ($ 686,057) ($ 763,921)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation, depletion, + amortization 353,704 255,473 13,549
Issuance of common stock for services 41,250 41,250 -
Loss on disposition of assets 44,957 12,448 -
Common stock issued for public
relations fees 200,000 - -
Common stock issued to officers
and directors 40 - -
Write-off of note receivable 779,921 - -
Changes in operating assets and
liabilities:
(Increase) decrease in supplies
inventory (10,000) - -
(Increase) decrease in prepaid expenses(52,325) 45,044 109,605
Increase (decrease) in accounts payable 74,337 (69,895) 26,632
Increase (decrease) in accrued expenses 110,267 (41,870) 328,438
(Increase) decrease in other assets (23,424) - -
----------- ---------- ---------
Net cash used in operating activities (5,080,428) (443,607) (285,697)
----------- ---------- ----------
Investing activities:
Proceeds from sale of equipment 15,626 300 -
Repayment (Advances) under
notes receivable (1,089,219) - -
Purchase of furniture and equipment (314,093) (27,898) (33,945)
Additions to mining properties (8,497,895) (889,782) (2,444,148)
------------ ---------- -----------
Net cash used in investing activities (9,885,581) (917,380) (2,478,093)
------------ ---------- -----------
Financing activities:
Repurchase and retirement of
common stock (36,800) - -
Proceeds from issuance of
convertible debt 215,170 - -
Capital contributions 177,243 - -
Deposits on common stock 1,423,750 1,423,750 -
Borrowings under note payable to
shareholder 73,405 - -
Collection of subscription receivable 249,360 - -
Proceeds from sale of common stock 13,069,225 - 2,145,500
Repayment of Long -Term debt (66,820) (20,592) -
----------- ---------- ----------
Net cash provided by financing
activities 15,104,533 1,403,158 2,145,500
----------- ---------- ----------
Net increase (decrease) in cash 138,524 42,171 (618,290)
Cash, beginning of period - 96,353 734,983
----------- ---------- ----------
Cash, end of period $138,524 $138,524 $116,693
=========== ========== ==========
</TABLE>
F/S-6
<PAGE> HANOVER GOLD COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOW
(Unaudited)
(continued)
<TABLE>
<CAPTION> Date of Inception Six Months Six Months
(May 2, 1990) Ended Ended
through June 30, 1997 June 30, 1997 June 30, 1996
--------------------- ------------- --------------
<S> <C> <C> <C>
Supplemental disclosures
of cash flow information:
Cash paid during the year for:
Interest $35,756 $8,088 $3,623
Income taxes - - -
Supplemental schedule of non-cash
investing and Financing activities
Mineral property rights acquired
in exchange for:
Issuance of common stock 1,685,000 - 1,460,000
Issuance of long-term debt - - -
Notes receivables 309,298 - 309,298
Fixed assets 66,177 - 35,453
Issuance of shares of common
stock in Satisfaction of
vendor obligations 74,096 - -
Conversion of notes payable and
accrued interest to Common stock $281,448 $ - $ -
</TABLE>
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F/S-7
<PAGE> HANOVER GOLD COMPANY, INC.
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
Financing information presented in the Company's quarterly
reports follow the policies set forth in its Annual Report to
Stockholders and its Annual Report on Form 10-K filed with the
Securities and Exchange Commission. In accordance with generally
accepted accounting principles for interim financial information,
the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X,
these quarterly reports do not include all of the information and
footnotes.
In the opinion of the Company's management, all adjustments
(consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six months period ended June 30, 1997 are not
necessarily indicative of the results that may be expected for
the full year ending December 31, 1997.
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 development and mining and related activities in the precious
metals and mining industries.
The Company has been in the development stage since its
inception. The Company has no recurring source of revenue, has
incurred operating losses since inception and, at December 31,
1996, has negative working capital. These conditions raise
substantial doubt as to the Company's ability to continue as a
going concern. Management of the Company has undertaken certain
actions to address these conditions. These actions include
proposed public and private offerings of the Company's common
stock, negotiating amendments to obligations on the Company's
mineral properties, and an active search for a joint venture
partner to provide the funding necessary to bring the mineral
properties into production. The financial statements do not
contain any adjustments which might be necessary if the Company
is unable to continue as a going concern.
2. Common stock:
In March 1997, the Company issued a three year option to purchase
2,312,968 shares of the Company's common stock at $1.25 per share
to a shareholder in exchange for the shareholder's guaranty of
the Company's obligations for an eighteen months period ending in
September 1998. The fair value of these options, as determined
using the Black-Scholes option pricing model, is $1,450,000 and
will be amortized to expense over the guaranty period.
The amount of expense recorded in the first six months of 1997
totaled $242,862.
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F/S-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
HANOVER GOLD COMPANY,INC.
By: /s/ James A. Fish
------------------
James A. Fish, its
President
Date: August 8, 1997
By: /s/ Wayne Schoonmaker
---------------------
Wayne Schoonmaker,its
Principal Accounting
Officer
Date: August 8, 1997
F/S-9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 138,524
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 10,000
<CURRENT-ASSETS> 200,849
<PP&E> 11,585,556<F1>
<DEPRECIATION> 102,725
<TOTAL-ASSETS> 11,707,104
<CURRENT-LIABILITIES> 147,564
<BONDS> 0
0
0
<COMMON> 1,989
<OTHER-SE> 11,378,848<F2>
<TOTAL-LIABILITY-AND-EQUITY> 11,707,104
<SALES> 0
<TOTAL-REVENUES> 5,176<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 448,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 242,862
<INCOME-PRETAX> (686,057)
<INCOME-TAX> 0
<INCOME-CONTINUING> (686,057)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (686,057)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
<FN>
<F1>Consists of $11,380,604 in resource properties and claims, and $204,952 in
property and equipment, at cost.
<F2>Consists of $16,554,253 in additional paid-in capital and $1,423,750 indeposits
on common stock, less a deficit of $6,599,155 accumulated during the
development stage.
<F3>Consists of $5,176 in interest income.
</FN>
</TABLE>
