UNITED STATES
SECURTIES 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 (fee required)
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (no fee required)
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)
424 S. Sullivan Rd., Suite #300,Veradale, Washington 99037
(Address of principal executive offices)
Registrant's telephone number, including area code: (509) 891-8817
Common Stock, $.0001 par value The OTC -Bulletin Board
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 [ ]
At July 21, 2000, 11,879,296 shares of the registrant's common stock were
outstanding.
<PAGE>
HANOVER GOLD COMPANY, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2000
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 6
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 8
Item 2: Changes in Securities 8
Item 3: Defaults upon Senior Securities 8
Item 4: Submission of Matters to a Vote of Security Holders 8
Item 5: Other Information 8
Item 6: Exhibits and Reports on Form 8-K 8
SIGNATURES 9
[The balance of this page has been intentionally left blank.]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<S> <C> <C>
(Unaudited)
June 30, December 31,
2000 1999
ASSETS
Current assets:
Cash $ 5,838 $ 12,970
Prepaid expenses and other current assets 6,095 24,245
Total current assets 11,933 37,215
---------- ----------
Fixed assets:
Furniture and equipment, net of accumulated
depreciation of $93,679 and $105,038 14,031 47,672
Mineral properties, net 2,530,553 2,597,147
Other assets:
Other assets 27,000 32,000
Total assets $ 2,583,517 $ 2,714,034
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,105
Notes payable to stockholders $ 297,000 297,000
Accrued payroll and payroll taxes 64 2,141
Other accrued expenses 30,534 19,861
Total current liabilities 327,598 320,107
--------- ---------
Stockholders' equity:
Preferred stock, $0.001 par value; 2,000,000
shares authorized; no shares outstanding
Common Stock, $0.0001 par value; 48,000,000 shares
authorized; 11,879,296 and 11,621,276 shares
issued and outstanding 1,190 1,164
Additional paid-in capital 26,706,977 26,686,997
Deficit accumulated during the development stage (24,449,101) (24,291,087)
Treasury stock, at cost (19,668 shares) (3,147) (3,147)
Total stockholders' equity 2,255,919 2,393,927
--------- ---------
Total liabilities and stockholders' equity $ 2,583,517 $ 2,714,034
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Date of Inception Three Months Six Months Three Months Six Months
(May 2, 1990) Ended Ended Ended Ended
Through June 30, June 30, June 30, June 30, June 30,
2000 2000 2000 1999 1999
Revenues $ 1,151,958
Cost of goods mined 1,987,483
Gross loss (835,525)
Operating expenses:
Depreciation and amortization 193,016 $ 3,182 $ 7,391 $ 5,988 $ 12,504
Bad debt expense 779,921
General and administrative expenses 6,633,442 45,494 76,868 88,617 226,644
--------- ------ ------ ------ -------
7,606,379 48,676 84,259 94,605 239,148
--------- ------ ------ ------ -------
Operating loss (8,441,904) (48,676) (84,259) (94,605) (239,148)
Other income (expense):
Abandonment of mineral
Interests (12,017,050) (5,000) (5,000)
Properties (2,300,000)
Loss on sale of mineral properties (162,684) (54,497) (54,497)
Amortization of guaranty fee (1,457,170)
Interest expense, net (43,202) (7,043) (14,258) (9,242) (17,381)
Gain (loss) on sale
of equipment (27,091) 12,061
--------- ------ ------ ----- ------
(15,954,353) (66,540) (73,755) (9,242) (5,320)
---------- ------ ------ ----- ------
Net loss $(24,449,101) $ (115,216) $(158,014) $ (103,847) $ (244,468)
========== ====== ====== ======= =======
Net loss per share-basic Nil $ (0.01) $ (0.01) $ (0.01) $ (0.03)
===== ====== ====== ====== =====
Weighted average common
shares outstanding- basic 4,351,706 11,879,296 11,833,426 9,969,533 9,775,422
========= ========== ========== ========= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
(Unaudited)
<S> <C> <C> <C>
Date of Inception Six Months Six Months
(May 2, 1990) Ended Ended
Through June 30, June 30, June 30,
2000 2000 1999
Cash flows from operating activities:
Net loss $ (24,449,101) $ (158,014) $ (244,468)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of mineral property 162,684 54,497
Equipment transferred for consulting services 26,251 26,251
Loss (gain) on sale of equipment 27,091 (12,061)
Abandonment of mineral interests 12,017,050 5,000
Write-down of mineral properties 2,300,000
Depreciation and amortization 193,016 7,390 12,504
Common stock and options issued for services 685,776 25,000
Common stock issued for interest 29,640
Common stock issued for accounts payable 57,160
Amortization of deferred guaranty fee 1,457,170
Write-off of note receivable 779,921
Change in:
Prepaid expenses 21,491 18,150 57,366
Other assets (32,000)
Accounts payable 71,381 (1,105) (14,571)
Accrued payroll and payroll taxes (2,077) (2,077)
Other accrued expenses 117,240 10,673 29,479
------------ -------- ---------
Net cash used by operating activities (6,537,307) (39,235) (146,751)
------------ -------- ---------
Cash flows from investing activities:
Proceeds from sale of mineral property 37,097 12,097
Proceeds from sale of equipment 68,826 24,400
Advances under notes receivable (1,089,219)
Purchases of furniture and equipment (363,613)
Additions to mineral properties (10,383,585)
------------ -------- ---------
Net cash provided (used) by investing activities (11,730,494) 12,097 24,400
------------ -------- ---------
Cash flows from financing activities:
Borrowings under note payable to stockholder 73,405 (24,728)
Proceeds from sale of common stock 17,694,552 20,006 150,000
Proceeds from issuance of convertible debt 215,170
Proceeds from issuance of long-term debt 45,000
Repayment of long-term debt (172,343) (9,019)
Proceeds from related party 31,199
Collection of stock subscription receivable 249,360
Repurchase of common stock (39,947)
Capital contributions 177,243
----------- ------- ---------
Net cash provided by financing activities 18,273,639 20,006 116,253
----------- ------- ---------
Net change in cash 5,838 (7,132) (6,098)
Cash, beginning of period 0 12,970 28,632
----------- ------- ---------
Cash, end of period $ 5,838 $ 5,838 $ 22,534
=========== ======= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 136,111 $ 0 $ 1,968
=========== ======= =========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
<TABLE>
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS, Continued:
(Unaudited)
<S> <C> <C> <C>
Date of Inception Six Months Six Months
(May 2, 1990) Ended Ended
Through June 30, June 30, June 30,
2000 2000 1999
Supplemental schedule of non-cash investing and
financing activities
Mineral property rights acquired in exchange for:
Issuance of common stock $ 2,257,518
Issuance of long-term debt 263,946
Notes receivable 309,298
Fixed assets 66,177
Common stock issued for:
Satisfaction of long-term debt 104,630
Payment of notes payable
and accrued interest 167,456
Acquisition of Easton-Pacific
net assets 5,268,212
Payment of payables and accrued expenses 57,160
Payment for services 25,000
Cancellation of common stock issued
for mineral property rights (1,050,000)
Long-term debt issued for acquisition
of equipment 17,548
Mineral property transferred in satisfaction of
long-term debt 143,631
Equipment transferred for consulting
services 26,251 26,251
</TABLE>
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See Accompanying Notes to Financial Statements
<PAGE>
HANOVER GOLD COMPANY, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<S> <C>
1. Basis of Presentation:
The unaudited financial statements have been prepared by the Company in accordance with
generally accepted accounting principles for interim financial information, as well as
the instructions to Form 10-Q and Article 10 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 of the interim financial statements have been included. Operating results
for the six-month period ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the full year ending December 31, 2000.
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, 1999.
2. 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, as well as 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 June 30, 2000, has negative working
capital. These conditions raise substantial doubt about 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 sales of the Company's common stock, negotiating
amendments to obligations with respect to the Company's mineral properties and debts, and
decreasing expenses. The interim financial statements do not contain any adjustments
which might be necessary if the Company is unable to continue as a going concern.
3. Related Party Transactions:
On May 31, 2000, the Company's Board of Directors resolved to transfer certain equipment
to a consultant of the Company as compensation for consulting services provided to
the Company during the preceding year. Included in general and administrative expenses
during the second quarter of 2000 is $26,251 of compensation expense relating to the
transfer. The expense recorded equaled the net book value of the equipment transferred,
which also approximated the equipment's fair value at the time of transfer. During the
first quarter of 2000, the Company sold 200,000 shares of its unregisterd common stock and
400,000 common stock options execisable at $0.20 per share to existing stockholders of
the Company, for a total of $20,000. Also in the first quarter of 2000, an officer of the
Company execised options to puchase 58,020 shares of the Company's common stock at $0.0001
per share, for a total of $6. The options had been awarded to the officer as compensation
for services in previous periods.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
This report contains both historical and prospective statements concerning the Company and its
operations. Prospective statements (known as "forward-looking statements") may or may not
prove true with the passage of time because of future risks and uncertainties. The Company
cannot predict what factors might cause actual results to differ materially from those
indicated by prospective statements.
The Company is an development stage mining company and holds various mining properties in
southwestern Montana. The Company had engaged in exploration and limited development activities
on these properties, primarily in the Alder Gulch area of Montana, more or less continuously
from 1992 to 1998. In September and October 1998 the Company made the decision to terminate
its leases with three of its landowner-lessors primarily due to the passage of a Montana
initiative, I-137, banning the use of cyanide in the process of extracting gold and silver,
and the high carrying costs of the leases. As a result, the Company curtailed the majority
of its exploration and development activities, and began investigating mining opportunities
in offshore properties. To date, the Company has not established proven or probable reserves
on any of its properties, and is currently not pursuing exploration or development activities.
The Company's management has determined that until precious metal prices improve or until the
Montana initiative is repealed, their business strategy is to decrease expenses, conserve
remaining assets, and preserve the Company's form and existence. Accordingly, while management
intends to keep aware of other mining opportunities that may be more suitable for the
Company, no expenditures other than general and administrative costs are planned in the near-
term until one or more of the aforementioned conditions change or another opportunity
becomes available.
Results of Operations
For the six-month period ended June 30, 2000
compared to the six-month period ended June 30,1999
For the six months ended June 30, 2000, the Company experienced a net loss of $158,014 for $0.01
per share compared to a net loss of $244,468 or $0.03 per share, during the comparable period
in the previous year. The decrease in net loss from 1999 to 2000 was due to managment's decison
to curtail its mining property development and exploration activities until more favorable
conditions exist.
During the six-month periods ended June 30, 2000 and 1999, the Company generated no revenue.
Depreciation and amortization decreased from $12,504 during the six-month period ended June 30,
1999 to $7,391 during the comparable period of 2000. The decrease in depreciation and
amortization related to a corresponding decrease in depreciable assets, and depreciable assets
nearing the end of their useful lives.
General and administrative expenses decreased to $76,868 for the six-month period ended June
30, 2000, as compared to $226,644 for the six-month period ended June 30, 1999. The decrease
in general and administrative expenses for the six-month period ended June 30, 2000 is
primarily attributable to reduced salaries, rent, and accounting expenses.
In May 2000, the Company abandoned its interest in a lease with an option to purchase 20
mining claims located in Region III of Atacarna, Chile. In connection with the abandonment,
the Company wrote off its deposit of $5,000 securing the leasehold interest. No similar
abandonments or write-offs took place during the six-month period ended June 30, 1999.
Net interest expense during the six-month period ended June 30, 2000, was $14,258 compared
to $17,381 during the comparable period in 1999. The decrease in net interest expense was
due to a corresponding decrease in debt obligations accruing interest from 1999 to 2000.
In April 2000, the Company sold an undivided interest in certain mining properties (claims)
in Montana. In connection with the sale the Company realized a net loss of $54,497. During
the six-month period ended June 30, 1999, the Company realized a gain of $12,061 from the
sale of mining equipment. In both periods, proceeds from the sale of these assets were used
to fund the Company's operating costs.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Continued:
Results of Operations, Continued:
For the three-month period ended June 30, 2000
compared to the three-month period ended June 30, 1999
For the three months ended June 30, 2000, the Company experienced a loss of $115,216 compared
to a net loss of $103,847 during the comparable period in 1999. The decrease in the second
quarter loss in 2000 as compared to the same quarter of 1999 is due to the corresponding decrease
in depreciation and amortization, general and administrative expenses and net interest expense.
Depreciation and amortization decreased from $5,988 during the second quarter of 1999 to $3,182
during the comparable quarter of 2000. The decrease in depreciation and amortization related to
a corresponding decrease in depreciable assets, and depreciable assets nearing the end of their
useful lives.
General and administrative expenses decreased from $88,617 during the second quarter of 1999 to
$45,494 during the comparable quarter of 2000. The decrease was primarily due to decreased
salaries, rent, and accounting expenses during the second quarter of 2000 compared to the
similar quarter of 1999. Included in general and administrative expenses during the second
quarter of 2000 is $26,251 of compensation expense relating to the transfer of equipment to a
consultant.
Net interest expense decreased from $9,242 during the second quarter of 1999 to $7,043 during
the same quarter of 2000. The decrease in net interest expense was due to a corresponding
decrease in debt obligations accruing interest in the second quarter of 2000 compared to 1999.
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 on May 2, 1990. At June 30,
2000, it had no recurring sources of revenue and negative working capital. The Company has
incurred losses and experienced negative cash flows from operations every year since its
inception.
During the six-month period ended June 30, 2000, the Company used $39,235 of cash in operating
activities. During the six months ended June 30, 2000 the sale of mining properties generated
cash of $12,097, and sales of common stock and options to existing stockholders provided $20,006
of cash.
Due to the Company's lack of revenues and negative working capital, the Company's independent
accountants included a paragraph in the Company's 1999 financial statements relating to a going
concern uncertainty. To continue as a going concern the Company must continue to acquire
additional capital resources through the sale of its assets or its securities. Although the
Company expects to meet its 2000 obligations using funds from the sale of shares of common
stock and assets, due to the currently depressed price of the Company's stock there can be
no assurance that it will be able to finance its obligations in subsequent periods.
</TABLE>
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<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
Neither the constituent instruments defining the rights of the registrant's
securities filers nor the rights evidenced by the registrant's outstanding
common stock have been modified,limited or qualified. The Company sold
200,000 shares of its common stock for $0.01 per share in February 2000
pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933 as amended.
Item 3. DEFAULTS UPON SENIOR SECURITIES
The registrant has no outstanding senior securities.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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. The registrant filed no reports on Form 8-K
during the period covered by this report.
[The balance of this page has been intentionally left blank.]
<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/ Hobart Teneff
Hobart Teneff, its
President
Date: August 9, 2000
By: /s/ Wayne Schoonmaker
Wayne Schoonmaker, its
Principal Accounting Officer
Date: August 9, 2000
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