U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1998
Transition report under Section 13 or 15(d) of the
Exchange Act
For the transition period from to
Commission File Number 1-1761
CHIEF CONSOLIDATED MINING COMPANY
(Exact name of Small Business Issuer as Specified in Its
Charter)
Arizona 87-0122295
(State or other jurisdiction of incorporation or
organization)(I.R.S. Employer ID. No.)
500 Fifth Avenue, Suite 1021, New York, NY 10110-1099
(Address of Principal Executive Offices)
212-354-4044
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Securities and
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
6,527,209
Number of shares of Common Stock, par value $.50,
outstanding at March 31, 1998
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
CHIEF CONSOLIDATED MINING COMPANY
AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
March 31, 1998
CURRENT ASSETS:
Cash $ 216,353
U.S. treasury bills
(at cost which approximates market value 1,136,073
Accounts receivable 15,896
Other current assets 46,808
Total current assets 1,415,130
INVESTMENT IN CENTRAL STANDARD CONSOLIDATED MINES 78,101
ADVANCES TO CENTRAL STANDARD CONSOLIDATED MINES 25,150
MINING CLAIMS AND PROPERTIES, less accumulated
depletion of $819,444 8,171,870
MACHINERY AND EQUIPMENT, less accumulated
depreciation of $71,228 48,053
OTHER ASSETS 4,552
Total assets $ 9,742,856
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 45,624
Total current liabilitie 45,624
ACCRUED RECLAMATION COSTS 300,000
MINORITY INTEREST 2,543,098
SHAREHOLDERS' EQUITY:
Preferred stock-$0.50 par value; 1,500,000 shares
authorized, 5,200 shares outstanding 2,600
Common stock-$0.50 par value; 20,000,000 shares
authorized, 6,527,209 issued and outstanding 3,263,605
Additional paid-in capital 12,880,607
Deferred compensation [14,839]
Notes receivable from shareholders [87,500]
Accumulated deficit [9,190,339]
Total shareholders'equity 6,854,134
Total liabilities and shareholders' equity $ 9,742,856
The accompanying notes to condensed consolidated
financial statements are an integral part of these
statements
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31,1998 March 31, 1997
REVENUES:
Interest $11,036 $7,198
Land sales and other 16,000 9,320
Total revenues 27,036 16,518
EXPENSES:
General and
administrative 179,026 108,365
Mining properties operating
costs and exploration 52,470 108,124
Taxes other than income taxes 8,941 9,322
Total expenses 240,437 225,811
NET LOSS BEFORE MINORITY INTEREST [213,401] [209,293]
MINORITY INTEREST 40,810 -
NET LOSS $ [172,591]$ [209,293]
NET LOSS PER COMMON SHARE
(Basic and Diluted) $ [0.03] $ [0.03]
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Basic and Diluted)6,348,570 5,993,309
The accompanying notes to condensed
consolidated financial statements are
an integral part of these statements
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease)in Cash
For the three months ended
March 31, 1998 March 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss [172,591] [209,293]
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 4,550 4,450
Amortization of deferred compensation6,250 6,250
Allocation of loss to minority
interest [40,810] -
Change in assets and liabilities:
Increase in accounts receivable 12,971 [3,015]
Decrease in other assets [3,453] [20,110]
Decrease in accounts payable
and accrued liabilities [44,931] [18,971]
Net cash used in operating activities[263,956] [240,689]
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in U.S.
treasury bills, net [1,136,073] 226,350
Mining property development
and purchase of property and
equipment [126,634] [2,000]
Net cash used and provided
by investing activities [1,262,707] 224,350
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock1,397,500 -
Net cash provided by financing
activities 1,397,50 -
NET INCREASE (DECREASE) IN CASH [129,163] [16,339]
CASH AT BEGINNING OF PERIOD 345,516 52,250
CASH AT END OF PERIOD $ 216,353 $ 35,911
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial
statements included herein have been prepared by the
Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission.
Certain information and disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although
the Company believes the following disclosures are adequate
to make the information presented not misleading. In the
opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a
fair presentation have been included. Results of
operations for interim periods are not necessarily
indicative of results for a full year. These condensed
consolidated financial statements and notes thereto should
be read in conjunction with the Company's consolidated
financial statements and notes thereto, included in the
Company's Form
10-KSB for the year ended December 31, 1997.
Tintic Utah Metals LLC Joint Venture
On July 17, 1996, the Company, Akiko Gold Resources, Ltd.
("Akiko") and Korea Zinc. Co., Ltd. ("Korea Zinc") formed
Tintic Utah Metals LLC ("Tintic"). The Company contributed
$3,975,873 of its mining claims and properties and
machinery and equipment for an undivided 50 percent
interest in Tintic. Akiko and Korea Zinc were obligated to
contribute $3,000,000 in cash each for a respective,
undivided 25 percent interest in Tintic. On March 11,
1997, the Company, Akiko and Korea Zinc entered into an
amendment of the Tintic operating agreement. The amendment
provided for Akiko and Korea Zinc to vest in their
interests in Tintic as they each contributed the $3,000,000
to Tintic in accordance with an agreed-upon schedule. The
amendment also provided that if Akiko did not make timely
contributions to Tintic, Korea Zinc could make the required
contribution and increase its respective interest in
Tintic.
During 1996 and 1997, Korea Zinc contributed $2,000,000 and
$1,000,000, respectively. Akiko did not make its required
contributions in 1997, and Korea Zinc did not elect to make
any more contributions. As a result, in accordance with the
amended agreement,
effective August 15, 1997, the Company's vested interest in
Tintic increased to 75 percent while Korea Zinc's vested
interest remained at 25 percent. As a result of its
failure to contribute the required capital to Tintic, Akiko
forfeited any rights of ownership in Tintic. The Company
and Korea Zinc are required to make additional capital
contributions to fund approved programs and budgets in
proportion to their respective ownership percentages in
Tintic. The failure of a member to meet its contribution
requirement could result in the dilution of that member's
percentage ownership interest.
The Company's contribution was made at the historical basis
of the related mining properties and machinery and
equipment for financial reporting purposes. No gain
recognition or step-up in basis was recorded in the
accompanying consolidated financial statements as a result
of the transaction.
The investment in Tintic is accounted for as a majority
owned consolidated subsidiary by the Company. The Company
did not consolidate this subsidiary during the three month
period ended March 31, 1997.
Rehabilitation Costs Capitalized
Through March 31, 1998, the Company has capitalized
$381,355 related to the rehabilitation of its Chief Number
2 shaft located on the Company's property and related
buildings and equipment. All underground drilling and
related costs have been expensed as exploration costs.
Further activity commenced in the second quarter, 1998 and
continues to date.
Recent Accounting Pronouncement
"In June 1997, the Financial Accounting Standards Board
issued Statements of Financial Accounting Standard No.
131". Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). SFAS 131 establishes new
standards for public companies to report information about
their operating segments, products and services, geographic
areas and major customers. This segment will be, effective
for financial statements issued for fiscal years beginning
after December 31, 1997. The Company plans to adopt SFAS
131 in its December 31, 1998 financial statements.
Item 2. Management's Discussion and Analysis or Plan of
Operation.
PLAN OF OPERATION
Please refer to "Item 6. Management's Discussion and
Analysis or Plan of Operation - (a) Plan of Operation," and
"Item 1. - Description of Business." as contained in
registrant's Annual Report dated March 23, 1998 on Form 10-
KSB for the fiscal year ended December 31, 1997 (hereafter
"1997 Form 10-KSB.) See "Item 1. Description of Business -
Operating Agreement - Capital Contribution - Initial
Capital Contributions" of 1997 Form 10-KSB for information
concerning Korea Zinc's and Akiko's obligation to each pay
$3,000,000 to Tintic Utah Metals LLC ("Tintic") as its
initial capital contribution. Korea Zinc paid its full
$3,000,000 initial capital contribution and earned a vested
25% membership interest in Tintic. On August 15, 1997,
Akiko failed to pay its initial $1,000,000 installment due
with respect to its capital contribution obligation. As a
result of Akiko's failure to pay, Korea Zinc had a right
under the Operating Agreement, as amended on March 11,
1997, to increase its membership interest by 8-1/3% by
contributing an additional $1,000,000 to the capital of
Tintic by October 2, 1997. Korea Zinc did not make such
payment. As a result, registrant's vested membership
interest increased to 75%. Korea Zinc's membership
interest is now fixed at 25% and Akiko no longer has the
right to acquire any membership interest in Tintic.
Registrant will continue to work with Tintic Utah Metals
LLC on the exploration and development of the silver
fissure area and other sections of the Burgin Mine that are
above the water table and accessible.
Registrant anticipates that during the remainder of 1998,
it will continue its efforts to further the development of
the Trixie Mine on its own or by seeking a joint venture
partner.
Registrant will also continue its underground drilling and
other work on its Main Tintic District mining properties.
These current activities will be funded by utilizing its
cash and US treasury bills on hand.
Registrant, based on increasing interest in its buildable
real estate holdings in Utah, will continue to pursue the
possibility of real estate sales or joint venture
development of its real estate in areas that are suitable
for residential or commercial building.
RESULTS OF OPERATION AND LIQUIDITY AND CAPITAL RESOURCES:
Registrant had no revenues from mining operations during
the year 1997 or during the first three months of 1998.
Registrant had revenue from sales of surface real estate of
$16,000 during the first three months of 1998, as compared
to revenue from sales of surface real estate of $9,320
during the first three months of 1997.
Registrant's net loss from operations for the three months
ended March 31, 1998, as compared to registrant's net loss
from operations for the three months ended March 31, 1997,
decreased in the amount of $36,702. The decrease in net
loss for the period resulted primarily from the completion
of the initial drilling program on registrant's Main Tintic
District properties after the first quarter of 1997.
Interest income for the first three months ended March 31,
1998, as compared to the first three months ended March 31,
1997, increased in the amount of $3,838. This increase
resulted primarily from an increase in US treasury bill
holdings, increasing the interest received. Mining property
operating costs and exploration expenses for the first
three months of 1998, as compared to the first three
months of 1997, decreased in the amount of $55,654. This
decrease resulted primarily as the result of the completion
of the initial drilling program on registrant's Main
Tintic District properties after the first quarter of 1997.
General and administrative expenses for the first three
months of 1998, as compared to the first three months of
1997 increased in the amount of $70,661. This increase
resulted primarily as a result of the consolidation of
registrant's 75% owned subsidiary, Tintic Utah Metals LLC
and the inclusion of its general and administrative
expenses in the first three months of 1998. Tintic Utah
Metals LLC which was not consolidated in the first three
months of 1997. The general and administrative expenses
applicable to Tintic Utah Metals LLC, in the amount of
$40,810, are deducted on the operating statement as
minority interest since they are fully chargeable to KZ
Utah Inc.
Registrant expects to continue funding its operating
overhead for the balance of 1998 and the first three months
of 1999 by utilizing cash from sales of surface real estate
and other sources, in addition to its cash and U.S.
treasury bills on hand. If required, the Company will seek
additional funding through the private placement of its
common shares, however, this can be of no assurance that
such sales of common shares will be achieved.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
In February 1998, registrant sold a total of 430,000 shares
of common stock to accredited investors in a private
placement. The sale of the shares was exempt from
registration under Securities and Exchange Commission
Regulation D. Registrant received a total of $ 1,397,500
as proceeds from the sale of the shares. The restricted
shares were sold at $3.25 per share. In addition, 21,500
shares were issued as a finders fee in connection with the
private placement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
This report contains forward-looking information and
therefore it necessarily involves risks and uncertainties.
Factors that could cause actual events to differ materially
from these forward-looking statements include, but are not
limited to, the following: Tintic Utah Metal's ability to
obtain approval of the permitting application for the
Burgin Mine by the Utah Division of Water Quality;
obtaining of an acceptable feasibility study; and Tintic
Utah Metal's ability to obtain financing to fund a mining
operation at the Burgin Mine. These and other risks are
described in the Company's filings with the Securities and
Exchange Commission, including the registrant's Annual
Report on Form 10-KSB for the year ended December 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant had duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CHIEF CONSOLIDATED MINING COMPANY
(Registrant)
May 14, 1998 /s/LEONARD WEITZ
(Signature and Title)
Leonard Weitz
President, Chairman of the Board of
Directors, and Principal Executive Officer
May 14, 1998 /s/EDWARD R. SCHWARTZ
(Signature and Title)
Edward R. Schwartz
Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
