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, 2000.
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 (I.R.S. Employer ID. No.)
of incorporation or organization)
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
Class Outstanding at May 1, 2000
Common Stock $0.50 par value 8,024,601
- ----------------------------
Redeemable Convertible Common Stock $0.50 par value 3,500,000
- ---------------------------------------------------
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,284,312
Other current assets 50,608
---------------
Total current assets 5,334,920
INVESTMENT IN CENTRAL STANDARD 78,954
CONSOLIDATED MINES
ADVANCES TO CENTRAL STANDARD
CONSOLIDATED MINES 30,650
MINING CLAIMS AND PROPERTIES, less accumulated
depletion of $1,215,692 8,456,409
MACHINERY AND EQUIPMENT, less accumulated
depreciation of $144,599 1,584,286
OTHER ASSETS 143,240
===============
Total assets $ 15,628,459
===============
The accompanying notes to condensed consolidated financial statements are an
integral part of this condensed consolidated balance sheet.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
AS OF MARCH 31, 2000
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 246,531
Accrued liabilities 37,525
---------------
Total current liabilities 284,056
---------------
ACCRUED RECLAMATION COSTS 389,800
---------------
MINORITY INTEREST 2,502,361
---------------
REDEEMABLE CONVERTIBLE COMMON STOCK,
3,500,000 shares issued and outstanding 3,428,721
---------------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.50 par value; 1,500,000 shares authorized, 11,168 shares
outstanding with a liquidation
value of $5,584 5,584
Common stock, $0.50 par value; 20,000,000 shares authorized,
8,024,601 shares outstanding, 16,441 shares held in treasury
with a zero cost 4,012,301
Additional paid-in capital 14,682,537
Stock purchase rights 3,321,747
Deferred compensation (9,675)
Notes receivable from shareholders (78,170)
Accumulated deficit (12,910,803)
---------------
Total shareholders' equity 9,023,521
===============
Total liabilities and shareholders' equity $ 15,628,459
===============
The accompanying notes to condensed consolidated financial statements are an
integral part of this condensed consolidated balance sheet.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31, 2000 March 31, 1999
REVENUES:
Interest $ 66,663 $ 6,058
Land sales and other 6,517 1,556
--------- ---------
--------- ---------
Total revenues 73,180 7,614
--------- ---------
--------- ---------
EXPENSES:
General and administrative 406,837 219,170
Mining property operating and
exploration costs 291,023 219,457
Taxes other than income taxes 23,230 22,196
--------- ---------
--------- ---------
Total expenses 721,090 460,823
--------- ---------
--------- ---------
NET LOSS $(647,910) $(453,209)
--------- ---------
--------- ---------
REDEEMABLE CONVERTIBLE COMMON
STOCK DIVIDENDS:
Eight percent stock dividend (183,750) -
Accretion to redemption value (324,662) -
----------- ---------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ 1,156,322 $(453,209)
NET LOSS PER COMMON SHARE
(Basic and Diluted) $ (0.14) $ (0.06)
--------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 8,024,601 7,270,075
(Basic and Diluted)
--------- ---------
The accompanying notes to condensed consolidated financial statements are an
integral part of this condensed consolidated financial statement.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash
For the Three Months Ended
March 31, 2000 March 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(647,910) $(453,209)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 9,850 4,817
Amortization of deferred compensation 3,225 3,225
Change in assets and liabilities:
Decrease in accounts receivabl - 2,783
Increase in other assets (29,775) (12,170)
Decrease in accounts payable and accrued (268,094) (46,885)
liabilities
------------------ ---------
Net cash used in operating activities (932,704) (501,484)
---------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Mining property development costs and
purchase of machinery and equipment (685,518) (78,970)
Payments received on note receivable from
shareholder 1,300 -
------------ -------------
Net cash used in provided by investing
activities (684,218) (78,970)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock - 93,000
------------- ------------
Net cash provided by financing activities - 93,000
-------------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,616,922) (487,454)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,901,234 835,453
-------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,284,312 $347,999
--------------- -----------
The accompanying notes to condensed consolidated financial statements are an
integral part of this condensed consolidated balance sheet.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements have been prepared
by registrant, 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 registrant believes the following disclosures are adequate
to make the information presented not misleading. In the opinion of management,
all adjustments (consisting only 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 registrant's consolidated financial statements and notes
thereto, included in registrant's Form 10-KSB for the year ended December 31,
1999.
Tintic Joint Venture
Tintic Utah Metals LLC ("Tintic") was formed on July 17, 1996. Registrant owns a
75% vested interest in Tintic and Korea Zinc Co. Ltd. ("Korea Zinc") owns the
remaining 25%. Registrant contributed $3,975,873 of its mining claims and
properties and machinery and equipment for its interest in Tintic. Registrant's
contribution was made at the historical bases 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.
In October 1998, an amendment to the operating agreement was signed which
granted to registrant an option to purchase Korea Zinc's 25 percent ownership
for $2,000,000. The option, which was to expire on October 15, 1999, was
extended to December 31, 2000. During the option period, Korea Zinc is not
required to make any advances to Tintic or to repay to registrant 25 percent of
the advances made by registrant to Tintic.
Central Standard Consolidated Mines
Registrant owns approximately 23 percent of the outstanding capital stock of
Central Standard Consolidated Mines. Central Standard's mining properties
consist of 320 acres located in the East Tintic Mining District contiguous to
Tintic's property.
Registrant's Application for Appropriation of Burgin Mine Water
Registrant and Tintic are awaiting a decision of the Utah State Engineer on
registrant's application for the appropriation of Burgin Mine water that was
filed on February 15, 2000. See registrant's Form 10-KSB for the year ended
December 31, 1999-"Item 1. Description of Business.-Registrant's Application for
Appropriation of Burgin Mine Water." and "Item 2. Management's Discussion and
Analysis or Plan of Operation. (a) PLAN OF OPERATION. - Burgin Mine." for
information concerning the application. Public notice of the application has
been given and registrant anticipates that a public hearing on the application
will be held by July 2000, and that a decision by the Utah State Engineer will
be issued by October 2000.
Redeemable Convertible Common Stock Dividends
The redeemable convertible common stock carries a dividend rate of 8 percent
which is payable in non-redeemable convertible common stock of the Company
(based on the number of issued redeemable convertible common shares). The
dividend shares are to be issued on an annual basis. As of March 31, 2000, the
Company has estimated the value of the stock dividend based upon the dividend
shares to be issued (70,000 shares) and the market price of its common stock at
that date ($2.625 per share). The estimated value of the dividend has been added
to the net loss in the accompanying statement of operations for the three months
ended March 31, 2000 in order to arrive at net loss attributable to common
shareholders. However, as the ultimate payment of the dividends will not result
in any change in total shareholders' equity and the dividend shares have not
been issued, no adjustment has been made to the accompanying balance sheet. The
Company will reflect the dividend shares on its balance sheet when the shares
are actually issued at the end of 2000.
Item 2. Management's Discussion and Analysis or Plan of Operation.
PLAN OF OPERATION
Registrant hereby incorporates by reference the following portions of
registrant's Annual Report dated March 29, 2000 on Form 10-KSB for the fiscal
year ended December 31, 1999: "Item 6. Management's Discussion and Analysis or
Plan of Operation - (a) PLAN OF OPERATION"; "Item 1. Description of Business."
and "Item 2.
Description of Property."
RESULTS OF OPERATION
Registrant had no revenues from mining operations during the three months ended
March 31, 2000 or during the three months ended March 31, 1999. Registrant's
consolidated revenues of $73,180 during the three months ended March 31, 2000
consisted of $6,517 from real estate sales and miscellaneous sources and $66,663
in revenues from interest. Registrant's consolidated revenues of $7,614 during
the three months ended
March 31, 1999 consisted of $1,556 from land sales and miscellaneous sources and
$6,058 in revenues from interest. Registrant's consolidated net loss during the
three months ended March 31, 2000 was $647,910 as compared to a consolidated net
loss of $453,209 for the three months ended March 31, 1999. The increase in net
loss for the three month period in 2000 as compared to the three month period in
1999 resulted from registrant's inclusion of the entire amount of the loss of
$157,906 sustained by Tintic Utah Metals LLC ("Tintic Utah Metals"), by an
increase in exploration and operating costs at registrant's Trixie Mine and by
an increase in general and administrative expenses. Registrant's full allocation
of the $157,906 loss sustained by Tintic Utah Metals for the three months ended
March 31, 2000 was in accordance with the Operating Agreement, due to certain
advances made by registrant to Tintic Utah Metals during that three month
period. The increase in net loss to common shareholders for three month period
in 2000 as compared to the three month period in 1999 resulted from the
provision for the 8% dividend on registrant's convertible common stock for the
three month period ended March 31, 2000 and accretion of the redeemable
convertible common stock towards its redemption value.
General and administrative expenses for the three months ended March 31, 2000
compared to the three months ended March 31, 1999 increased in the amount of
$187,667. This increase resulted primarily from increased general administrative
costs relating to increases in administrative salaries, liability insurance
expenses and increased administrative costs of Tintic Utah Metals LLC during the
first quarter of 2000.
Mining property operating and exploration costs for three months ended March 31,
2000 compared to the three months ended in March 31, 1999 increased in the
amount of $71,566. This increase resulted primarily from increased exploration
and development costs at the Company's Trixie Mine in Utah.
CASH NEEDS OF REGISTRANT
During the three month period ended March 31, 2000, registrant, in addition to
its corporate overhead, paid out $1,372,300 in connection with the ongoing
projects at the Tintic properties, the Trixie Mine and registrant's other
properties. Of the $1,372,300 paid out during the three month period ended March
31, 2000, $1,084,619 constituted advances to Tintic and $287,681 was for
expenses primarily at the Trixie Mine. Advances to Tintic will be reimbursed by
Tintic to registrant when and if Tintic has available funds. During the
remaining nine months of 2000, registrant anticipates that approximately
$2,500,000 will be spent in connection with these ongoing projects. Registrant
will also expend cash for its corporate overhead. Based upon the approximate
$5,264,000 in cash and equivalents on hand at May 1, 2000, registrant expects to
have sufficient cash to meet its cash needs over the nine month period ending
December 31, 2000.
RECENT DEVELOPMENT AT TRIXIE MINE
An independent assay laboratory has confirmed registrant's own laboratory assay
results covering a 30 foot gold and silver intercept contained in a surface
drillhole located on registrant's Trixie Mine property. The independent
laboratory reported that the 30 foot intercept, at a depth of between 630 and
660 feet, contained a per ton average grade of 3.2 ounces of gold and 7.1 ounces
of silver, with grades through the 30 foot mineralized area running between 1.4
and 6.3 ounces of gold and between 2.9 and 11.3 ounces of silver per ton. The
Trixie Mine is located in the East Tintic District of Utah on the property of
registrant's wholly owned subsidiary, Chief Gold Mines, Inc.
A surface drilling program at the Trixie Mine was initiated in April 2000, and
will eventually consist of 15 to 20 surface drillholes over extended areas of
Trixie Mine property. The reported drillhole is located adjacent to the gold and
silver zones that were mined some twenty years ago by Kennecott Corporation when
Kennecott was lessee of the Trixie Mine. One of the purposes of the ongoing
exploration program is to locate the geologically projected extensions of the
significant gold and silver grades contained in the "75-85" orebody mined by
Kennecott. Kennecott had reported the mining of precious metal ores containing
values as high as 30 ounces of gold and 40 ounces of silver per ton from the
"75-85" orebody.
As part of its drilling program, registrant intends to locate several drillholes
near the reported drillhole to expedite the determination as to whether or not
ore reserves can be developed in this location that can be profitably mined. The
drilling program is expected to be completed in late June 2000. No assurance as
to the existence of an economically viable gold and silver orebody can be given
at this time based on the assay result of a single drillhole.
The Trixie Mine is fully permitted and operational at this time. It is
anticipated by registrant that mining from the areas of the Trixie Mine that are
already accessible will begin later this year. Trixie Mine ores will be
processed in the newly rehabilitated gold-silver-copper concentrating mill
located on adjacent property owned by Tintic Utah Metals LLC, in which
registrant owns a 75% vested interest. It is anticipated that the concentrating
mill will become operational during June 2000.
PART II. OTHER INFORMATION
Item 6. Exhibits And Reports On Form 8-K
(a) Description of Exhibits required to be filed by Item 601 of
Regulation S-B.
(The numbers shown below next to each exhibit are keyed to Exhibit
Table of Item 601 of Regulation S-B.)
"(2)" Not applicable.
"(3)" Articles of Incorporation and By-Laws:
Registrant hereby incorporates by reference (i) registrant's Restated
Articles of Incorporation that was annexed as Exhibit A to
registrant's Proxy Statement For The Special Meeting In Lieu Of Annual
Meeting Of Shareholders held December 29, 1999 (Restated Articles
approved at meeting); and (ii) registrant's By-Laws previously filed
with the Securities and Exchange Commission.
"(4)" Not applicable.
"(10)" Material Contracts.
A. Operating Agreement of Tintic Utah Metals LLC dated as of July
17, 1996 by and among registrant, Akiko Resources (Utah) Inc. and
K Z Utah, Inc., a copy of which was filed with the Securities and
Exchange Commission by registrant as a part of its 1996 Form
10-KSB report.
B. First Amendment to Operating Agreement dated as of March 11, 1997
by and among registrant, Akiko Resources (Utah) Inc. and KZ Utah,
Inc., a copy of which was filed with the Securities and Exchange
Commission by registrant as a part of its 1997 Form 10-KSB
report.
C. Second Amendment to Operating Agreement dated as of November 10,
1997 by and between registrant and KZ Utah, Inc., a copy of which
was filed with the Securities and Exchange Commission by
registrant as a part of its 1997 Form 10-KSB report.
D. Third Amendment to Operating Agreement dated as of October 1,
1998 by and between registrant and KZ Utah, Inc., a copy of which
was filed with the Securities and Exchange Commission by
registrant as part of its 1998 Form 10-KSB report.
E. Fourth Amendment to Operating Agreement dated as of September 9,
1999 by and between registrant and KZ Utah, Inc., a copy of which
was filed by registrant with the Securities and Exchange
Commission by registrant as part of its 1999 Form 10-KSB report.
F. Articles of Organization of Tintic Utah Metals LLC, copy of which
was filed with the Securities and Exchange Commission by
registrant as a part of its 1996 Form 10-KSB Report.
G. Stock Purchase Agreement ("Stock Purchase Agreement") dated as of
November 19, 1999 between registrant and Dimeling, Schreiber &
Park, a copy of which was filed with the Securities and Exchange
Commission by registrant as part of its Form 8-K report filed on
December 1, 1999.
H. Registration Rights Agreement dated as of November 19, 1999
between registrant and Dimeling, Schreiber & Park, constituting
Exhibit A to the Stock Purchase Agreement, a copy of which was
filed with the Securities and Exchange Commission by registrant
as part of its Form 8-K report filed on December 1, 1999.
I. Form of Warrant issued to Dimeling, Schreiber & Park by
registrant dated as of November 19, 1999, constituting Exhibit B
to the Stock Purchase Agreement, a copy of which was filed with
the Securities and Exchange Commission by registrant as part of
its Form 8-K report filed on December 1, 1999.
"(11)" Not applicable.
"(15)" Not applicable.
"(18)" Not applicable.
"(19)" Not applicable.
"(22)" Not applicable.
"(23)" Not applicable.
"(24)" Not applicable.
"(27)" Financial Data Schedule, filed with this report and marked
as Exhibit "A".
"(99)" Not applicable.
(b) Reports on Form 8-K.
Form 8-K report dated January 5, 2000 was filed by registrant with the
Securities and Exchange Commission of January 5, 2000 reporting that
shareholders of registrant, at the meeting of shareholders held December 29,
1999, approved amendments to the Articles of Incorporation of registrant and a
Stock Purchase Agreement, Warrant Agreement and Registration Rights Agreement
with Dimeling, Schreiber & Park. Said Form 8-K also reported that registrant
received cash proceeds paid by Dimeling, Schreiber & Park as the purchase price
under the Stock Purchase Agreement for 3,500,000 shares of registrant's new
issue of convertible common stock.
Safe Harbor Statement under the Private Securities Reform Act of 1995:
This Form 10-QSB report contains and incorporates by reference statements which
are not historical facts, such as anticipated production, exploration and
drilling results and costs and therefore are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, and involve
a number of risks and uncertainties that could cause actual results to differ
materially from those projected, anticipated, expected or implied. These risks
and uncertainties include, but are not limited to, the following: registrant's
cash is not sufficient to complete the intended work and projects; even if the
amount of cash available is sufficient to complete the work and projects,
registrant is unable to initiate profitable mining activities at the Trixie Mine
and/or mining from the Homansville area is not commercially feasible;
registrant's application for appropriation of water from the Burgin Mine is
rejected by the Utah State Engineer, necessitating registrant to seek
alternative methods for dewatering the of the Burgin Mine; even if the water
appropriation application is approved, if a water treatment facility is not
built or if built, mining from the Burgin Mine is not commercially feasible;
registrant is unable to obtain long term financing to fund the Burgin mining
project if registrant's application for appropriation of water from the Burgin
Mine is approved; recent drilling results at the Trixie Mine do not result in an
orebody that is commercially feasible to mine; Dimeling, Schreiber & Park does
not exercise its right to purchase the additional 5,000,000 shares of
convertible common stock by December 31, 2002 and, as a result, registrant is
unable to continue any mining operations and development work at the Trixie Mine
or continue to seek development of the Burgin Mine and the Homansville area;
registrant is unable to sell any of its real estate for residential or
commercial use. Refer to registrant's Form 10-KSB for the year ended December
31, 2000 and its Proxy Statement dated November 30, 1999 for the Special Meeting
In Lieu of Annual Meeting of Shareholders of registrant held December 29, 1999
filed with the Securities and Exchange Commission.
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.
CHIEF CONSOLIDATED MINING COMPANY
(Registrant)
May 19, 2000 /s/LEONARD WEITZ
(Signature and Title)
Leonard Weitz
President, Chairman of the Board of Directors,
and Principal Executive Officer
May 19, 2000 /s/EDWARD R. SCHWARTZ
---------------------
(Signature and Title)
Edward R. Schwartz
Secretary Treasurer,
Principal Financial Officer and
Principal Accounting Officer
EXHIBIT A
Chief Consolidated Mining Company
Financial Data Schedule
March 31, 2000
March 31, 2000
5-02 (1) Cash and cash items 5,284,312
5-02 (2) Marketable securities -
5-02 (3) (a) (1) Notes and accounts receivable - trade -
5-02 (4) Allowances for doubtful accounts -
5-02 (6) Inventory -
5-02 (9) Total current assets 5,334,920
5-02 (13) Property, plant and equipment 10,040,695
5-02 (14) Accumulated depreciation 1,360,291
5-02 (18) Total assets 15,628,459
5-02 (21) Total current liabilities 284,056
5-02 (22) Bonds, mortgages and similar debt -
5-02 (28) Preferred stock - mandatory redemption
-
5-02 (29) Preferred stock - no mandatory
redemption 5,584
5-02 (30) Common stock 4,012,301
5-02 (31) Other stockholders' equity 5,330,298
5-02 (32) Total liabilities and stockholders' 15,628,459
equity
Three Months Ended
March 31, 2000
5-03 (b) 1 (a) Net sales of tangible products -
5-03 (b) 1 Total revenues 73,180
5-03 (b) 2 (a) Cost of tangible goods sold - 5-03 (b) 2 Total costs and
expenses applicable to sales and revenues
5-03 (b) 3 Other costs and expenses 721,090
5-03 (b) 5 Provision for doubtful accounts and -
notes
5-03 (b) (8) Interest and amortization of debt -
discount
5-03 (b) (10) Income before taxes and other items (647,910)
5-03 (b) (11) Income tax expense -
5-03 (b) (14) Income/loss continuing operations (647,910)
5-03 (b) (15) Discontinued operations -
5-03 (b) (17) Extraordinary items -
5-03 (b) (18) Cumulative effect-changes in -
accounting principles
5-03 (b) (19) Net income or loss (647,910)
5-03 (b) (20) EPS - primary (0.14)
5-03 (b) (20) EPS - fully diluted (0.14)
