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to the Previous Page 10-KSB - Annual Report Filing Date: 1999-04-14 U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ 15, ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended
December 31, 1998
/ / 15, TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________ to _________________
Commission file 02-69494
GLOBAL GOLD CORPORATION
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(Name of small business issuer in its charter)
Delaware 13-3025550
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
734 Franklin Street, Suite 383, Garden City, New York 11530-4525
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 294-7946
Securities registered under Section 12(b) of the Exchange Act:
Title of each class (Name of each exchange on which registered)
------------------- -------------------------------------------
None
------------------- -------------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
None
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(Title of Class)
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
/_/.
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to be best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ending December
31, 1998 were $-0-.
The aggregate market value of the voting stock held by non-affiliates
of the Company computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days was $123,966(1)
As of December 31, 1998 there were 4,348,114 Shares of the registrant's
Common Stock outstanding.(2)
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(1) The Company's Common Stock is not publicly traded. However, the
Board of Directors of the Company determined that fair market value of the
Common Stock was $0.10 per share.
(2) This number is computed after taking into account the 1 for 10
reverse split of the shares of Common Stock of the Company, effective as of
December 31, 1996 (the "Reverse Split").
ITEM 1. DESCRIPTION OF BUSINESS
(A) General Overview
The Company now holds only special warrants to purchase 4,000,000
shares of common stock of First Dynasty Mines, Ltd., a publicly-traded Canadian
corporation. The Company previously engaged in the development of a gold mining
project in Armenia, a member of the Commonwealth of Independent States. The
Company is currently in the pre-development stage and has not received any
revenues from mining activities as of December 31, 1998, other than such shares
of stock and cash previously paid by First Dynasty Mines, Ltd. Prior thereto,
the Company did not engage in any substantial business activities, except as
described in the section 1(D) entitled "Prior History of the Company" in the
annual reports previously filed by the Company with the Securities and Exchange
Commission ("SEC")
(B) Armenian Mining Project
(a) Armenian Joint Venture Agreement
In 1996, the Company acquired rights under a Joint Venture Agreement
with the Ministry of Industry of Armenia and Armgold, S.F., the Armenian state
enterprises, to provide capital and financing multistage financing of the
Armenian gold industry, which rights were finalized under the Second Armenian
Gold Recovery Company Joint Venture Agreement dated as of September 30, 1997.
(b) Financing of the Armenian Mining Project - First Dynasty Mines
Ltd.
Throughout 1996 and into January, 1997, the Company had discussions
with many unrelated parties in connection with arranging for the financing of
the tailings project at the Ararat processing plant (the "Tailings Project").
As of January 31, 1997, the Company and Global Gold Armenia Limited ("GGA")
reached an agreement with First Dynasty Mines Ltd. ("First Dynasty"), a
Canadian public company whose shares are traded on the Toronto Stock Exchange
and on NASDAQ. Under such preliminary agreement, First Dynasty acquired the
right, subject to certain conditions, to advance funds in stages necessary
for the implementation of the tailings project and the preparation of
engineering and business plan materials for the remaining Armenian mining
projects.
The Company, GGA and First Dynasty entered into a definitive agreement
dated May 13, 1997 reflecting the final agreement of the parties with respect to
the above projects (the "FDM Agreement"). The parties thereafter amended the FDM
Agreement on July 24, 1998.
Under the FDM Agreement, as amended, First Dynasty provided
financing of approximately $24,600,000 towards the Armenian mining projects,
and ultimately acquired 100% of the Company's stock ownership in GGA, a
Caymans Island subsidiary, which held rights to the Armenian mining joint
venture.
In connection with the First Dynasty's purchase of the Company's
remaining 20% interest in GGA, the Company received a certificate representing
special warrants to purchase 4,000,000 shares of First Dynasty common stock,
exercisable, at the Company's option, without any payment therefor. Pursuant to
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the existing terms of the FDM Agreement, First Dynasty agreed to use its best
efforts for a period of one year from August 31, 1998 to cause the shares of
First Dynasty common stock subject to such warrants to become freely tradable
shares.
Also, the delivery by First Dynasty to the Company of the certificate
for the 4,000,000 special warrants of First Dynasty fully satisfied First
Dynasty's obligations under the payment section of the FDM Agreement, subject to
First Dynasty's continuing best efforts obligations described above.
In addition to the Company's ownership of the 4,000,000 special
warrants to purchase First Dynasty common stock, the Company still retains the
right to elect to participate in any exploration project undertaken in Armenia
by First Dynasty or any of its affiliates, including GGA, to a level of a 20%
interest in any such project, pursuant to the terms of a mutually acceptable
participation agreement with respect to any such project.
Also, First Dynasty fully satisfied its obligations to Robert A.
Garrison, the Company's President, under his consulting agreement with GGA on
August 31, 1998 by paying him $62,500 and delivering to him special warrants to
purchase 500,000 shares of First Dynasty common stock, exercisable, at his
option, without any payment therefor, subject to First Dynasty's registration
obligations to use its best efforts to make such shares freely tradable.
For a further description of the background concerning the Armenian
mining project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(C) Georgian Mining Project
As of December 31, 1997, the Company abandoned its pursuit of any
mining project in Georgia.
For a further description of the background concerning the Georgian
mining project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(D) Recent Activities
(a) Investment in Jet-Line Environmental Services, Inc.
On April 21, 1993, the Company loaned $300,000 to Jet-Line, which it
treated as worthless as of December 31, 1997.
For a further description of the Company's investment in Jet-Line and
its attempts to recover such loan, an interested person can review the quarterly
and annual reports previously filed by the Company with the SEC.
(b) Offering of Convertible Notes of the Company
Pursuant to the Confidential Private Offering Memorandum dated May 17,
1995, as amended, the Company sold the maximum of $500,000 principal amount of
its 10% Convertible Notes, which had a maturity date of September 30, 1996 (the
"Offering"). The Offering of Convertible Notes, Warrants and Common Stock was
offered pursuant to the Memorandum solely to persons who are "accredited
investors" as defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), in a transaction exempt from
registration thereunder. The final date of the closing of the Offering was
December 31, 1995.
The Company undertook the Offering in order to raise additional funds
for the Company to enable it to engage in the development and commercial
exploitation of the Armenian and Georgian mining projects, in an attempt to
generate a potential and substantial asset base and potential future
profitability for the Company as part of the Company's long-term strategy to
develop profitable mining operations abroad.
All of the $500,000 principal amount of Convertible Notes was
automatically converted pursuant to their terms into an aggregate of 2,000,000
shares of Common Stock (prior to the Reverse Split) and warrants to purchase
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4,000,000 shares of the Company's Common Stock (prior to the Reverse Split), at
an exercise price of $0.50 per share (the "Warrants"). As of December 31, 1998,
there were Warrants to purchase 400,000 shares of the Company's Common Stock
issued and outstanding. As to the Warrants, each Warrant now has an exercise
price of $.125 per share and expires on December 31, 1999 pursuant to several
amendments made thereto, including the one made in December, 1998 extending the
expiration date as shown above.
Since all of the automatic conversion conditions were satisfied in
1995, there were no Convertible Notes of the Company outstanding as of December
31, 1995 or thereafter.
(c) Reverse Split
Various prospective investment banking firms and potential investors
who expressed an interest in providing funding for the Company's projects in
1996 requested that the Company undertake a reverse split of its Common Stock to
decrease the number of shares outstanding and thereby facilitate possible future
financings. Accordingly, the Company effected a 1 for 10 reverse split of its
Common Stock effective as of December 31, 1996. Such step was taken by the
written consent of the holders of a majority of the Company's issued and
outstanding shares of Common Stock. By virtue of the Reverse Split, each
stockholder's number of shares of Common Stock became 1/10th of the number
previously held. The Company filed its Certificate of Amendment to the
Certificate of Corporation with respect to the reverse split with the Delaware
Secretary of State on December 31, 1996.
(d) Employees.
As of December 31, 1998, the Company had one employee, who was in
charge of the overall business of the Company on a part-time basis, and one
consultant who is principally involved in overseeing the Company's proposed
mining activities on a part-time basis, and one independent contractor who
provides administrative and clerical services on a part-time basis.
(E) Special Considerations
The following risk factors should be considered in connection with an
evaluation of the business of the Company:
No Prior Operating History; Failure to File Reports with the SEC
The Company was incorporated on February 21, 1980, and closed a public
offering of the Common Stock in January, 1981. Several months after the closing
of such offering, the Company withdrew the listing of the Common Stock for
trading on NASDAQ because of the theft of substantially all of the cash funds of
the Company derived from the proceeds of the public offering by its then
president, Samuel McNell in July, 1981. After the consummation of the public
offering, the Company failed to file any further annual or periodic reports
required under the Exchange Act. While the Company filed its Form 10-KSB for the
calendar years 1994 and 1995 and its Form 10-QSB commencing with the quarter
ended March 31, 1995 and each quarter thereafter through and including September
30, 1998 and filed audited financial statements with the Form 10-KSB for
calendar year 1994 covering calendar years 1987, 1988, 1989, 1990, 1992, 1993
and 1994, and covering calendar years 1995, 1996 and 1997 with the Form 10-KSB
filed for each such year, there can be no assurance that the SEC might not
assert claims against the Company and its present and former directors and
officers, which actions might adversely affect the future conduct of the
Company's business or prevent the future trading of the Company's stock on
public markets. Furthermore, the Company's past failure to file reports with the
SEC may have an adverse impact on the Company's ability to have the shares of
Common Stock listed for trading on NASDAQ in the event that the Company is
otherwise able to meet the NASDAQ Stock Market listing standards in the future.
Development Stage Company
Since the Company never engaged in the active conduct of a trade or
business, it has not generated any revenues to date, with the exception of
interest income on the funds recovered by the Company in the lawsuits prosecuted
by it as a result of the theft of the Company's funds and the special
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warrants to purchase 4,000,000 shares of First Dynasty common stock and cash
received from such source under the FDM Agreement, as amended. The Company may
encounter problems, delays, expenses and difficulties typically encountered in
the development stage, many of which may be outside of the Company's control.
These include, without limitation, unanticipated problems and additional cost
relating to development, production, marketing, and competition. The Company
expects to incur operating losses for the near term future and, in any event,
until such time as it derives substantial revenues from the sale of its
investments in the common stock of First Dynasty (after the special warrants to
acquire such shares are exercised) if any. There can be no assurance that the
Company will develop successful operations.
Need for Additional Cash
The Company needs additional funds if it is to conduct any operations
in the foreseeable future, none of which is contemplated at present. Moreover,
there can be no assurance that any financing for any future projects will be
available for such purposes or that such financing, if available, would be on
terms favorable or acceptable to the Company.
Holding Company Structure
The Company is a holding company which will conduct its business
through subsidiaries. As a result, the Company's cash flow and consequent
ability to make dividend payments and meet its debt obligations are primarily
dependent upon the earnings of its subsidiaries and on dividends and other
payments therefrom. Any right of the Company to participate in any distribution
of the assets of its subsidiaries upon the liquidation, reorganization or
insolvency of such subsidiaries would, with certain exceptions, be subject to
the claims of the creditors (including trade creditors) and preferred
stockholders, if any, of such subsidiaries, or may otherwise be restricted by
virtue of a stockholder agreement with respect thereto.
Competition
There is intense competition in the mining industry. If the Company
does engage in any future mining activities, it will be competing with larger
mining companies, many of which have substantially greater financial strength,
capital, marketing and personnel resources than those possessed by the Company.
Need for Key Personnel
The Company presently only has one officer intimately familiar with the
operation of mining projects or the development of such projects. While the
Company does not believe the loss of its president or any other director or
officer of the Company will materially and adversely affect its long-term
business prospects, the loss of any of the Company's senior personnel might
potentially adversely affect the Company until a suitable replacement could be
found. While the Company has an employment agreement with one of its officers,
Drury J. Gallagher, such agreement is for only a three-year term which expires
on June 30, 2000 and Mr. Gallagher's salary has been eliminated as of September
30, 1998 because the Company is no longer conducting any active business
activities. There can be no assurance that such agreement will be renewed or, if
renewed, will be on terms mutually acceptable to all parties.
Failure to Satisfy NASDAQ Listing Rules
Effective in August, 1991, the SEC approved the adoption by the NASDAQ
Stock Market of new maintenance standards for companies whose securities are
traded on NASDAQ. Under these new standards, among other things, a corporation
must have $4 million in total assets and $2 million in capital and surplus and a
minimum bid price of $3.00 per share in order to be eligible for a Nasdaq
listing. At December 31, 1998, the Company had total assets of approximately
$314,124 and stockholders' equity of $140,800. Without increases in assets and
capital surplus, the Company may not be able to be eligible to have its
securities traded on NASDAQ. Moreover, regulations issued by NASDAQ have
increased the thresholds that have to be met in order for a security to be
traded initially on the NASDAQ Small Cap and National Markets, which may
adversely affect the Company's ability to have its Common Stock traded on the
NASDAQ Small Cap or National Markets. Furthermore, the Company could experience
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difficulties in commencing the trading of its securities on NASDAQ. If the
Company is unable to have its securities traded on NASDAQ, its securities will
continue to be eligible for trading on the NASDAQ bulletin board, although the
market for shares of the Company's Common Stock may be reduced and, hence, the
liquidity of the shares of Common Stock and/or the Warrants may be reduced.
However, recent regulations adopted for the trading of securities may adversely
affect the eligibility of the Company's Common Stock for trading on the NASDAQ
electronic bulletin board.
Restrictions on Transfer
Pursuant to the Stockholders Agreement, the then current five principal
holders of the Company's Common Stock, Messrs. Gallagher, Hayman, Hayman, and
Ryan and the Seitz Family Limited Partnership agreed not to sell the shares of
Common Stock owned by them for a period of 24 months following the date of the
final closing of the Offering (i.e., until December 31, 1997), except they each
have the right to pledge a portion of their shares and to make transfers within
their family or to certain family-controlled entities. In addition, Eyre and the
Parry-Beaumont Trust also agreed not to sell, pursuant to the Stockholders
Agreements, the 600,000 and 400,000 shares of the Company's Common Stock owned
by them (after implementation of the Initial Restructuring Agreement) for a
period of 24 months from the date of the final closing of the Offering (i.e.,
until December 31, 1997), except that they each have the right to sell 150,000
shares to non-United States persons (as defined under the Act) (all of which
numbers have been computed after the Reverse Split). Moreover, each purchaser of
Convertible Notes pursuant to the Offering also agreed not to sell the Common
Stock issuable upon the conversion of the Convertible Notes or upon the exercise
of the Warrants issued pursuant to such conversion for a period of 24 months
from the date of the final closing of the Offering (i.e., until December 31,
1997). Upon the expiration of such agreements, which occurred, up to 367,048
shares of Common Stock held by the five major existing shareholders, 600,000
shares of Common Stock held by the purchasers of the Convertible Notes (assuming
all the Warrants issued upon the prior automatic conversion thereof are
exercised in full) and 1,000,000 shares issued to Eyre and the Parry-Beaumont
Trust or a total of 1,967,048 (all computed after the Reverse Split), may
potentially be available for sale under Rule 144, subject in some cases to a
certain volume limitation. No prediction can be made as to the effect, if any,
that future sales of Common Stock or the availability of such shares for sale
will have on the market price of the Common Stock or the Warrants prevailing
from time to time. Sales of substantial shares of the Common Stock or the
Warrants, or the perception that such sales might occur, could adversely affect
the prevailing market price of the Common Stock or the Warrants.
No Dividends
The Company currently anticipates that it will retain all of its future
earnings, if any, for use in its operations and does not anticipate paying any
cash dividends in the near term future. There can be no assurance that the
Company will pay cash dividends at any time, or that the failure to pay
dividends for periods of time will not adversely affect the market price for the
Company's Common Stock.
Control of the Company
Drury J. Gallagher, the Chairman and Chief Executive Officer, and
Robert A. Garrison, the President and Chief Operating Officer, currently own
1,108,451 and 1,000,000 shares, respectively, or a total of 2,108,451 shares of
the Company's Common Stock issued and outstanding as of December 31, 1998. In
addition, Eyre and the Parry-Beaumont Trust own 600,000 and 400,000 shares of
Common Stock, respectively, as of such date. If Messrs. Gallagher and Garrison
act in concert they only control 49% of the issued and outstanding Common Stock
of the Company. However, if they act in concert together with the owner or
owners holding slightly more than 1% in total of the Company's Common Stock
issued and outstanding, they will be able to effectively determine the vote on
any matter being voted on by the Company's stockholders, including the election
of directors and any merger, sale of assets or other change in control of the
Company. In such case, such group would own more than 2,174,057 of the 4,348,114
shares of Common Stock outstanding as of December 31, 1998, or more than 50% of
the issued and outstanding shares of the Company's Common Stock. The same result
would follow if Messrs. Gallagher and Garrison acted in concert with
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Eyre and the Parry-Beaumont Trust.
Disagreement Among Significant Shareholders - Litigation
In February, March and April, 1997, Eyre and the Parry-Beaumont Trust
questioned the validity of the issuance by the Company of 1,000,000 shares of
its Common Stock to each of Messrs. Drury J. Gallagher and Robert A. Garrison.
In addition, in February, March and April, 1997, Eyre and the Parry-Beaumont
Trust questioned the validity of the Second Restructuring Agreement (as defined
in Item 12(B)), including, without limitation, the waiver of their Acquisition
Warrants to purchase 400,000 shares of the Company's Common Stock (computed
after the Reverse Split). For a further description of the Second Restructuring
Agreement and such transfers, see Item 12(B) hereof.
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United States
District Court for the Southern District of New York, bearing Docket No. 98 Civ.
0009, seeking damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company seeking damages in an undetermined amount against the Company and
seeking a declaratory judgment voiding the Second Restructuring Agreement (as
defined herein in Section 12(A)). In addition, Eyre and the Parry-Beaumont Trust
brought a third-party complaint against Drury J. Gallagher and Robert A.,
Garrison, individually, seeking, among other things, damages in excess of
$75,000 and directing Messrs. Gallagher and Garrison to return the 2,000,000
shares of the Company's Common Stock issued to them by the Company in January,
1997.
The Company believes that the Company properly issued the shares of its
Common Stock to Messrs. Gallagher and Garrison in exchange for valuable
consideration and that the claim of invalidity of such action has no merit.
Furthermore, the Company believes that the Second Restructuring Agreement is
valid, that Eyre and the Parry-Beaumont Trust waived their rights covered
thereby and that any claim of invalidity with respect thereto has no merit. The
Company intends to prosecute such litigation to completion. However, while the
Company believes it will be successful in the assertion of its claims and
Messrs. Gallagher and Garrison will be successful in the defense of the claims
made against them in such litigation, there can be no assurance as to the
outcome of the above litigation between the parties.
Ownership of Special Warrants to Purchase First Dynasty Common Stock
The Company's principal asset at present consists of special warrants
to purchase 4,000,000 shares of common stock of First Dynasty, the common stock
of which is traded on the Toronto Stock Exchange and NASDAQ. The closing price
of a share of such common stock on March 18, 1999 was U.S. $0.13. However, the
special warrants and the 4,000,000 shares of First Dynasty into which they are
exercisable are an illiquid investment, and are subject to Canadian securities
laws restrictions, and, hence, not freely tradable. Moreover, as of December 31,
1998, First Dynasty had 112,403,797 share of common stock issued and
outstanding, and warrants, options and convertible notes to purchase 36,100,000
shares of common stock outstanding on such date. Since there are outstanding
special warrants to purchase 31,600,000 shares of First Dynasty at prices
ranging from $0.29 to $0.42 over the period ending January 31, 2002, the shares
purchasable thereunder will, in the Company's view, pose an overhang on the
trading market and adversely affect any upward price movement in the shares of
common stock of First Dynasty.
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United States Income Tax Consequences Arising Out of the Asset Purchase
Agreement with Eyre.
The Company neither received a tax opinion nor sought a private letter
ruling from the Internal Revenue Service (the "Service") regarding the United
States income tax consequences arising out of the closing under the Asset
Purchase Agreement between the Company and Eyre on December 1, 1995 (see Item
12(B)). It is possible that the Service may contend that the Company and/or its
subsidiaries recognized substantial gain in such transaction, and there can be
no assurance of the outcome of such challenge. If the Service successfully
asserted such result, the amount due could have a material adverse impact on the
Company's business, assets and financial position.
While the Company had a net operating loss carry forward as of December
31, 1994 of approximately $2,500,000 which expired in 1996, the closing of the
transaction under the Agreement and the Offering eliminated almost the entire
amount thereof as of December 31, 1995. Thus, if a substantial amount of gain
arose upon the closing under the Agreement, the Company's net operating loss
carry forward would not be available, in all likelihood, to offset such gain in
a material way.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company formerly leased office space of approximately 1,000 square
feet, in New York, on premises owned by Penn-Med Consultants, Inc., whose sole
stockholders are the three largest stockholders of the Company, other than Eyre,
the Parry-Beaumont Trust and Robert A. Garrison. The Company accrued rental
payments of $3,000 a month, commencing as of January 1, 1996, for lease of space
at the premises and the provision of various administrative services, including
telephone, fax and xerox. There is no written agreement covering such
arrangement. The lease was terminated on December 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United States
District Court for the Southern District of New York, bearing Docket No. 98 Civ.
0009, seeking damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company seeking damages in an underdetermined amount against the Company and
seeking a declaratory judgment voiding the Second Restructuring Agreement (as
defined herein in Section 12(A)). In addition, Eyre and the Parry-Beaumont Trust
brought a third-party complaint against Drury J. Gallagher and Robert A.,
Garrison, individually, seeking, among other things, damages in excess of
$75,000 and directing Mr. Gallagher and Mr. Garrison to return the 2,000,000
shares of the Company's common stock issued to them by the Company in January,
1997.
The respective parties have served notices to take the deposition of
the other parties in the action and made requests for the production of
documents. The parties have scheduled the taking of depositions commencing on
May 17, 1999.
The Company intends to prosecute the litigation to completion and
believes that it claims against the plaintiffs will be successfully contested
and that the defendants' claims asserted against the Company and Messrs.
Gallagher and Garrison are without merit, although there can be no assurance as
to the outcome thereof.
The Company has also received requests from Panquest Lte. and from Eyre
relating to amounts alleged to be due to Panquest Lte. relating to the Company's
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acquisition of rights from Eyre relating to the Armenian and Georgian projects.
No evidence has yet been supplied to the Company in this regard.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTER
(a) The Company's Common Stock is not publicly traded on any market.
(b) As of December 31, 1998, there were approximately 1,100 holders of
record of the Company's Common Stock.
(c) The Company did not pay or declare any cash dividends on its Common
Stock during its last two fiscal years ended December 31, 1997 and December 31,
1998.
(d) As of December 31, 1998, the Company was not prohibited from paying
any dividends on its Common Stock.
(e) The Company's transfer agent is American Registrar and Transfer
Company, with offices at 10 Exchange Place, Salt Lake City, Utah 84111.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As at December 31, 1998, the Company had net assets of $314,124, of
which $58,124 consisted of cash or cash equivalents, and had current liabilities
of $173,324. Thus, the Company's current liabilities exceeded its current
liabilities as of such date.
The Company's plan of operation for calendar year 1999 is:
(a) to exercise the special warrants to purchase 4,000,000 shares of
First Dynasty common stock, at no cost, and hold such stock for investment
purposes thereafter; and
(b) to prosecute the litigation against Mr. Parry, Eyre and the
Parry-Beaumont Trust to completion.
The Company needs financing to meet its anticipated monthly
administrative expenses of $5,000 (exclusive of accrued officers' compensation),
plus additional amounts for legal and accounting costs. Prior to the
commencement of the litigation described in Item 3 hereof, the Company
anticipated that it might obtain additional financing in 1999 from the holders
of its Warrants. Pursuant to the Offering of $500,000 principal amount of the
Convertible Notes of the Company, the Company issued Warrants to purchase
4,000,000 shares of its Common Stock at an exercise price of $0.50 per share. By
virtue of the Reverse Split, the Warrants were converted into Warrants to
purchase 400,000 shares of the Company's Common Stock at an exercise price of $5
per share. On January 23, 1997, the Company amended the Warrants to reduce the
exercise price to $1 per share and to extend the expiration date until December
31, 1997. Again, on December 1, 1997, the Company amended the Warrants to reduce
the exercise price to $0.125 per share and to extend the expiration date until
December 31, 1998, and recently extended the expiration date until December 31,
1999. If the Warrants were exercised in full, the Company would receive $50,000
in gross proceeds. However, the Company does not believe that the Warrants will
be exercised under existing circumstances, and thus does not anticipate that any
amount thereof will be exercised, although there can be no assurance of such
result.
In the event that no contemplated financing is obtained through the
exercise of the Warrants (which the Company considers highly remote), the
Company does not have sufficient financial resources to meet its obligations as
of June 30, 1999.
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Accordingly, based on the Company's needs for additional financing of
its operations, Messrs. Gallagher and Garrison agreed to continue to advance
funds to the Company for such purpose through December 31, 1999 if the Company
also agreed not to encumber the special warrants to purchase First Dynasty
common stock (and the shares issuable thereunder once received), which the
Company agreed to do.
The Company does not intend to engage in any project research and
development during 1999 and does not expect to purchase or sell any plant or
significant equipment.
The Company does not expect to hire any additional full-time employees
in 1999.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements, notes thereto and reports of
independent certified public accountants thereon for the fiscal years of the
Company ended December 31, 1998 and December 31, 1997 (by Marks Shron & Company,
LLP) are attached hereto as part of, and at the end of, this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable. |