U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1997 Commission File No. 0-9416
FRANKLIN CONSOLIDATED MINING CO., INC.
(Exact name of registrant as specified in its charter)
Delaware #13-2879202
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
76 Beaver Street, Suite 500, New York, New York 10005
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area code (212) 344-2828
The Number of Shares Outstanding of Common Stock
$.01 Par Value, at June 30, 1997 91,083,020(1)
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 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 [_]
- ----------
1 Does not include 7,692,308 shares to be issued pursuant to note conversion
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
CONDENSED BALANCE SHEETS
(Unaudited)
June 30, December 31,
Assets 1997 1996
------ ------------ ------------
Current Assets:
Cash $ 6,052 127
Prepaid expenses 53,989 107,979
Advances to joint venture partner 266,438
------------ ------------
Total current assets 60,041 374,544
Mining, milling and other property and
equipment, net of accumulated depreciation
and depletion of $1,897,180 and $1,837,180 6,251,128 6,311,128
Investment in equity investee 150,000 150,000
Mining reclamation bonds 128,827 126,875
------------ ------------
Totals $ 6,589,996 $ 6,962,547
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
12.25% convertible debentures $ 145,000 $ 145,000
9.5% convertible note payable to
joint venture partner 600,000
Other notes payable 80,000 80,000
Accounts payable and accrued expenses 416,533 553,883
Advances from joint venture partner 75,660 -0-
------------ ------------
Total current liabilities 717,193 1,378,883
8% mortgage note payable to joint venture partner 586,419 586,419
Excess of equity in net losses of joint
venture over investment 139,761 133,220
------------ ------------
Total liabilities $ 1,443,373 $ 2,098,522
------------ ------------
Comments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share;
100,000,000 shares authorized;
91,083,020 and 90,583,020 shares issued and
outstanding 987,753 905,830
Additional paid-in capital 15,722,841 15,154,264
Deficit accumulated in the development stage (11,563,971) (11,196,069)
------------ ------------
Total Stockholders' equity 5,146,623 4,864,025
------------ ------------
Totals 6,589,996 $ 6,962,547
============ ============
See Notes to Condensed Financial Statements.
2
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
<TABLE>
<CAPTION>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Three Months
Ended June 30, Ended June 30, Cumulative
---------------------------- ---------------------------- from
1997 1996 1997 1996 Inception
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales $ 876,082
Interest income $ 1,952 476 $ 1,000 $ (114) 542,839
Other income 75,000
------------ ------------ ------------ ------------ ------------
Totals 1,952 476 1,000 (114) 1,493,921
------------ ------------ ------------ ------------ ------------
Expenses:
Mine expenses 3,360,793
Write-down of inventories 223,049
Depreciation, depletion and amortization 60,000 61,070 30,000 30,535 2,092,529
General and administrative expenses 245,028 277,540 159,010 43,555 5,275,460
Interest expense 58,285 30,758 20,332 11,317 654,123
Amortization of debt issuance expense 683,047
Equity in net loss of joint venture 6,541 2,100 3,653 1,050 139,761
Loss on settlement of claims
by joint venture partner 468,000
Loss on settlement of litigation 100,000
Loss on investment in oil and gas wells 61,130
------------ ------------ ------------ ------------ ------------
Totals 369,854 371,468 212,995 86,457 13,057,892
------------ ------------ ------------ ------------ ------------
Net loss $ (367,902) $ (370,992) $ (211,995) $ (86,571) $(11,563,971)
============ ============ ============ ============ ============
Weighted average shares outstanding 94,679,174 69,758,903 98,775,328 72,292,716
============ ============ ============ ============
Net loss per common share $ (--) $ (.01) $ (--) $ (--)
============ ============ ============ ============
</TABLE>
- ----------
See Notes to Condensed Financial Statements
3
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Cumulative
-------------- from
1997 1996 Inception
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (367,902) $ (370,992) $(11,563,971)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 60,000 61,070 2,092,529
Amortization of debt issuance expense 683,047
Value of common stock issued for:
Services and Interest 1,325,714
Settlement of litigation 100,000
Settlement of claims by joint
venture partner 468,000
Compensation resulting from stock
options granted 311,900
Value of stock options ganted for
services 112,500
Equity in net loss of joint venture 6,541 2,100 139,761
Other (7,123)
Changes in operating assets and liabilities:
Interest accrued on Mining Reclamation
Bonds (1,952) (3,827)
Other current assets 53,990 (53,989)
Accounts payable and accrued expenses (137,350) 119,137 599,006
------------ ------------ ------------
Net cash used in operating
activities (386,673) (188,685) (5,796,453)
------------ ------------ ------------
Investing activities:
Purchases and additions to mining, milling
and other property and equipment (5,120,354)
Purchases of mining reclamation bonds (80,000) (125,000)
Deferred mine development costs and other
expenses (255,319)
------------ ------------ ------------
Net cash used in investing activities - 0 - (80,000) (5,500,673)
------------ ------------ ------------
</TABLE>
4
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30, Cumulative
-------------- from
1997 1996 Inception
------------ ------------ ------------
<S> <C> <C> <C>
Financing activities:
Issuances of common stock $ 50,500 $ 202,600 $ 8,808,757
Issuance of Underwriter's
stock warrants 100
Commissions on sales of common stock (381,860)
Purchases of treasury stock (12,500)
Payments of deferred underwriting costs (63,814)
Proceeds from exercise of stock options 306,300
Issuance of convertible debentures and
notes 200,000 1,505,000
Proceeds of loans from joint venture
partner 75,660 60,100 601,948
Repayments of loans from (to)
joint venture partner 266,438 (311,824) 48,187
Payments of debt issuance expenses (164,233)
Proceeds of other notes and loans payable 768,000
Repayments of other notes and loans payable (120,000)
Proceeds of loans from affiliate 55,954
Repayments of loans from affiliate (48,661)
------------ ------------ ------------
Net cash provided by
financing activities $ 392,598 150,876 11,303,178
------------ ------------ ------------
Increase (decrease) in cash 5,925 (117,809) 6,052
Cash, beginning of period 127 118,176 -0-
------------ ------------ ------------
Cash, end of period $ 6,052 $ 367 $ 6,052
============ ============ ============
Supplemental disclosure of cash flow data:
Interest paid $ -- $ -- $ 298,868
============ ============ ============
</TABLE>
See notes to Condensed Financial Statements
5
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 - Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position of
Franklin Consolidated Mining Co., Inc. (the "Company") as of June 30, 1997,
and its results of operations and cash flows for the six months and three
months ended June 30, 1997 and 1996. Information included in the condensed
balance sheet as of December 31, 1996 has been derived from the audited
balance sheet in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1996 (the "10-KSB") filed with the Securities and
Exchange Commission. Certain terms used herein are defined in the 10-KSB.
Accordingly, these unaudited condensed financial statements should be read
in conjunction with the financial statements, notes to financial statements
and the other information in the 10-KSB.
The results of operations for the six months ended June 30, 1997 are not
necessarily indicative of the results of operations for the full year
ending December 31, 1997.
Note 2 - Basis of presentation:
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company is a
development stage enterprise whose operations have generated recurring
losses and cash flow deficiencies from its inception. As of June 30, 1997,
the Company had a cash balance of $6,052, an accumulated deficit of
approximately $11,564,000, current liabilities of $717,000 and a working
capital deficiency of $657,000, and, as explained in Notes 6 and 7 of the
notes to financial statements in the 10-KSB, the Company was in default
with respect to the payment of the principal balance and accrued interest
on its outstanding secured promissory note and 12.25% convertible
debentures. Certain accounts payable were also past due. In addition to the
payment
6
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 2 - Basis of presentation (continued):
of its current liabilities, management estimates that the Company will
incur general, administrative and other costs and expenditures, exclusive
of any costs and expenditures related to any mining and milling operations,
at the rate of approximately $25,000 per month during 1997. Although the
Company is entitled to distributions of 17.5% of any net profits generated
from the operations of the Franklin Mines by the Zeus Joint Venture, any
net profits generated by the Gold Hill Mill and the first $500,000 of any
profits generated through the operations of the Mogul Mines by Newmineco
plus 20% of any profits thereafter, all such operations are in the
development stage and have been generating losses and negative cash flows
and management cannot assure that those operations will generate any
positive cash flows during the remainder of 1997. Such matters raise
substantial doubt about the Company's ability to continue as a going
concern.
Gems, the Company's Joint Venture partner, will be responsible for
providing the remaining capital resources that will be needed for the
commencement of operations at the Franklin Mine and the Mogul Mines, and
the Company will be responsible for obtaining the remaining capital
resources that will be needed for the commencement of operations at the
Gold Hill Mill. In the absence of liquid resources, cash flows from
operations and any other commitments for debt or equity financing,
management believes that the ability of the Company to continue its
operations as a going concern will be dependent upon the provision of
financing by Gems, which Gems is required to provide pursuant to the Joint
Venture Agreement, the continued forbearance of the holders of its secured
promissory note and convertible debentures and, ultimately, the ability of
the Joint Venture, the Gold Hill Mill and Newmineco to conduct profitable
mining and milling operations on a sustained basis.
7
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 2 - Basis of presentation (continued):
Management believes, but cannot assure, that such financing and the
financing needed to commence operations at the Franklin Mine and the Mogul
Mines will be provided by Gems during the remainder of 1997, and that the
Company will remain dependent on its Joint Venture partner as its primary
source of financing for its operations until such time, if any, as the
Company begins to receive cash flows from its investments. During the first
six months of 1997, Gems repaid advances from the Company and made advances
to the Company totaling approximately $342,000. The management of the
Company believes that Gems will continue to fulfill its commitment and make
such advances until such time, if any, as the Company begins to receive
cash flows from its investments.
In addition to funds committed by Gems, management is considering raising
capital by mortgaging the Gold Hill property. The management of the Company
believes that, based on the fair value of the Gold Hill property, it can
raise a minimum of $1,000,000 using conventional mortgage financing, with
guarantees from Gems and its principals. Such funds would be used to supply
the working capital initially needed to commence operations at the Gold
Hill Mill and as an alternative means of financing operations at the
Franklin Mine and Mill and the Mogul Mines.
Management also believes that, at a minimum, the Company will be able to
obtain sufficient financing from Gems and/or mortgage loans on the Gold
Hill property to enable the Company to meet its working capital
requirements through at least June 30, 1998.
8
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 3 - Commitments and Contingencies:
Environmental Matters:
As further explained in Note 8 of the notes to financial statements in
the 10-KSB on January 31, 1997, the Company received approval from the
DMG of its March 6, 1996 amended application to its permit. As a
result, management believes that substantially all of the necessary
environmental and regulatory approvals have been obtained that are
needed to enable the Company to commence mining and milling operations
at the Franklin Mine and/or the Mogul Mines during 1997.
Litigation:
The Company is involved in various litigation as explained below:
a) The Company, the Joint Venture, Gems, Island and others are
defendants in the action related to a dispute over fees for
engineering consulting services supplied in the amount of
approximately $268,000. The Court has remanded the case to
arbitration. The defendants plan to vigorously defend their
position asserting that the work was never completed.
b) The Company, Island, Newmineco and others are defendants in
litigation involving title to the mining claims at the Mogul
Mines. This action was instituted by the former owners of
such claims. The Company intends to vigorously contest the
action. In the opinion of legal counsel, the defendants have
valid defenses to all claims.
c) In April 1997, the Company was notified by the Superior
Court of New Jersey that it had received a copy of a
complaint by the holder of the $60,000 secured note, which
was due and payable in July 1996. The complaint demanded,
among other things, payment of all principal and interest
due. As of July 18, 1997, the
9
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A Development Stage Enterprise)
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 3 - Commitments and contingencies (continued):
Litigation:
Company had not received service of such complaint.
d) In April 1997, the Company paid $45,000 in full settlement of a
case involving a fee dispute with a former legal counsel to the
Company. As part of the settlement, the plaintiff, among other
things, returned warrants to purchase 500,000 shares of the
Company's common stock which had been issued to him in prior
years.
Management believes that, to the extent that any of the claims are
finally determined to have merit, the Company will have made adequate
provision for any amounts that may be due. However, management also
believes that it is too early in the process to evaluate the possible
outcome of these claims or estimate the amount or range of any
additional loss or the likelihood of such loss occurring. An
unfavorable resolution of these matters could result in material
liabilities and/or charges which have not been reflected in the
accompanying financial statements.
Note 4- Stockholders' equity:
Common stock reserved for issuance:
At June 30, 1997, there were 290,000 shares of common stock reserved for
issuance upon the exercise of the principal portion of the 12.25%
convertible debentures. (A) The 7,692,308 shares received for issuance in
connection with the conversion of the 9.5% note payable that was exercised
on February 10, 1997 have not been issued as of June 30, 1997.
***
10
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company had no active mining or milling operations during the second
quarter of 1997, however, remediation work was substantially completed at the
Franklin Mine and Mill in preparation for the anticipated commencement of mining
operations sometime during the third quarter of this year. However, due to a
cease and desist order issued by the DMG for failure to complete certain
projects (more fully described in Part II of this document) mining operations
will not commence until the fourth quarter of 1997.
During the quarter ended, June 30, 1997, Gems & Minerals Corp., the
Company's joint venture partner, repaid approximately $165,000 of the advances
made by the Company in 1996. These monies, along with additional advances by
Gems during the second quarter were used, among other things, to pay legal and
accounting fees in connection the Company's public filings, to satisfy
obligations arising under a settlement of certain litigation and to pay
delinquent real estate taxes.
In addition to funds committed by Gems in accordance with the joint venture
agreement, management is considering raising capital by mortgaging the Gold Hill
Mill property. The management of the Company believes that, based on the fair
value of the property, it can raise approximately $1,000,000 using conventional
mortgage financing, with guarantees from Gems and its principals. Such funds
would be used to supply the working capital initially needed to commence
operations at the Gold Hill Mill and as an alternative means of financing
operations at the Franklin and Mogul mines.
Management estimates that the Company will incur general, administrative
and other costs and expenditures, exclusive of any costs and expenditures
related to any mining and milling operations, at the rate of approximately
$25,000 per month for the remainder of 1997.
11
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
Management' Discussion and Analysis
Results of Operations
The Company had a net loss of $211,995 for the three months ended June 30,
1997 as compared to a net loss of $86,571 during the same period in 1996. This
increase was primarily attributable to an increase in general and administrative
expenses approximating $115,000.
General and administrative expenses were $159,010 for the quarter ended
June 30, 1997 compared with $43,555 during the same period in 1996. Interest
expense was $20,332 during the 1997 second quarter as compared to $11,317 in the
same 1996 quarter. The increase on general and administrative expenses was due
to an increase in professional fees and investment banking fees.
The Company had a net loss of $367,902 for the six months ended June 30,
1997 as compared to a net loss of $370,992 during the same period in 1996. This
net decrease was primarily attributable to an increase in interest expense of
approximately $28,000 and a decrease in general and administrative expenses
approximating $32,000.
General and administrative expenses were $245,028 for the six months ended
June 30, 1997 compared with $277,540 during the same period in 1996. Interest
expense was $58,285 during the six months ended June 30, 1997 as compared to
$30,758 during the same period in 1996. Interest expense increased due to
interest incurred on notes in connection with the Gold Hill mill and Newmineco
acquisitions.
12
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
Part II
Item 1. Legal Proceedings
On or about June 28, 1995, the Company issued a promissory note for $90,000
(the "Friedman Note") and a share warrant exercisable for up to 500,000 shares
of the Company (the "Friedman Warrant") to Charles J. Friedman, P.C.
("Friedman"), a former corporate counsel of the Company, as payment of legal
fees. On or about February 14, 1996, Friedman commenced an action against the
Company in the District Court for Clear Creek County, Colorado claiming an
alleged default by the Company of its obligations pursuant to the Friedman Note.
On March 5, 1997, the Court entered a judgment against the Company for
$90,000 in favor of Friedman after the dismissal with prejudice on January 10,
1997 of all the Company's counterclaims (the "Friedman Judgment"). Pursuant to
the Friedman Judgment, the parties stipulated to a stay of execution of such
judgment for forty-five (45) days to provide the Company with time to pay
Friedman $45,000 in full and complete satisfaction of the Friedman Judgment.
On April 21, 1997, the Company paid to Friedman $45,000 in full
satisfaction of the Friedman Judgment and is awaiting receipt of, among other
things, a satisfaction of Judgment entered by the Court.
Item 2. Changes in Securities
On September 26, 1996, the Company acquired a 20% interest in Newmineco,
LLC, a Colorado limited liability company ("Newmineco"), from its joint venture
partner, Gems & Minerals Corp. ("Gems") for the purchase price of $600,000
payable by an interest only note bearing interest at 9.5% per annum (the
"Newmineco Note"). Gems subsequently assigned all of its right, title and
interest in and to the Newmineco Note to certain third parties, including a
consultant to the Zeus Joint Venture. On February 10, 1997, the Company made its
election pursuant to the terms of the Newmineco Note to convert all of the
principal thereon into common stock of the Company at a conversion price of
$.078 per share (the "Conversion Shares"). As of June 30, 1997, the Conversion
Shares have not been issued to the holders of the Newmineco Note; however, the
Company is obligated to issue to such holders an aggregate of 7,692,308 shares
of the Company in full satisfaction of the Newmineco Note.
13
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
Item 3. Defaults Upon Senior Securities
As of June 30,1997, the Company continues to be in default with respect to
the payment of $145,000 principal amount of its 12 1/4 Convertible Debentures
(the "Debentures"), which have accrued and unpaid interest thereon as of June
30, 1997 in the amount of $39,966.
While it remains the intention of the Company to pay its outstanding
obligations with respect to the Debentures, the Company has been unable to meet
its obligations to such holders as a result of unforeseen liquidity and cash
flow shortages. On June 27, 1997, the Company received a notice from legal
counsel to approximately 25% of the outstanding debentures demanding payment of
all monies outstanding to such holders on or before July 2, 1997. Failure to pay
such amounts would result in the commencement of legal proceedings against the
Company, although formal proceedings have not been brought against the Company
as of July 31, 1997. As a result of its continued default, the Company may be
subject to legal proceedings by or on behalf of debenture holders seeking
payment of principal and all interest as well as any penalties and other legal
remedies the holders may claim they are entitled to receive under the law. There
can be no assurance that the Company will have adequate funds available to make
the payments to the debenture holders or that the commencement of legal
proceedings will not have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holder
None during the quarter.
Item 5. Other Information
On January 31, 1997, the Company received approval from the Colorado Mined
Land Reclamation Board, Division of Minerals and Geology (the "DMG") of its
March 6, 1996 application of amendment to its M-83-083 Mining Permit (the
"Franklin Permit"). The approval brought the Company into compliance with
current environmental and regulatory standards. However, The DMG set forth
certain conditions to its approval which included (1) submission of final design
for tailings disposal facilities in the form of a technical revision to the
Franklin Permit prior to the operation of the Franklin Mill, (2) completion of
the installation of the Company's Surface Water Control Plan not later than
April 15, 1997, and (3) completion of closure plans for certain of the Company's
tailings ponds by spring run off but not later than April 15, 1997.
14
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
During the spring and early summer, the Company continued its work to
comply with the above conditions. Management was advised by its technical
consultant that so long as there exists no environmental violations and no
further permit violations during the spring run off period, the DMG verbally
agreed to grant the Company latitude with respect to the completion of these
projects in the event that the Company was unable to comply with the conditions
on or before April 15, 1997.
In recent months, the region in which the Franklin mining properties are
located have been subject to severe weather patterns which has caused flood
conditions in the area. As a result, the Company was unable to complete its work
at the Franklin Mines within the prescribed time frame. Given the agreement by
the DMG to grant the Company latitude with respect to the completion of its
projects, the Company failed to make any formal application to the DMG for an
extension of time to complete the Surface Water Control Plan and closure plans
for the tailings ponds. As a result of this oversight, the Company received a
formal Notice of Violation and Cease and Desist Order from the DMG for failure
to fully complete these projects as prescribed by the DMG in its January 31,
1997 approval (the "Notice").
Specifically, the DMG has ordered that the Company refrain from conducting
all mining and milling activities, except for those activities relating to
compliance with the Notice and any reclamation work, until the Surface Water
Control Plan is installed and the tailings ponds have been closed. This work
must also include any other reclamation work relating to the tailings ponds
which are subject to closure. The Company was also ordered to pay a minimal
civil penalty in the amount of $1,500.00 on or before August 23, 1997.
Installation of the Surface Water Control Plan and closure of the tailings
ponds are to be completed no later than August 22, 1997 and the remaining
reclamation with respect to the tailings ponds must be completed no later than
October 30, 1997 to avoid further penalties and/or future DMG action against the
Company. Management has been advised by its technical consultant that
approximately 90% of the work required has been completed and the remaining
corrective action will be completed in the time frame prescribed. Once the work
has been completed and the fine has been paid, the Cease and Desist will be
automatically lifted without further action by the Company or administrative
proceedings by the DMG.
15
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
On or about June 12, 1997, the Company filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form SB-2
(the "Registration Statement") on behalf of certain shareholders of the Company
for the purpose of registering an aggregate of 15,951,885 shares. The Company
was obligated to file the Registration Statement on behalf of these shareholders
pursuant to certain contractual agreements granting such persons demand and/or
piggyback registration rights. As of the date hereof, the Registration Statement
has not been declared effective. However, the Company was notified subsequent to
the filing that the Commission is conducting a full review of the Registration
Statement. The Company is currently responding to the comments of the Commission
and expects to file an amendment to the Registration Statement once it has
addressed the Commission's concerns.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
None during the quarter
B. Reports on Form 8-K
None during the quarter
16
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<PAGE>
SIGNATURE
In accordance with the requirements of the Securities and Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FRANKLIN CONSOLIDATED MINING CO, INC.
Date: August 12, 1997 ------------------------------------
Robert J. Levin
Vice President-Finance
Principal Financial Officer
17
Franklin Consolidated Mining Co., Inc.
Form 10-QSB for Quarter
Ended June 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,052
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,041
<PP&E> 8,148,308
<DEPRECIATION> 1,897,180
<TOTAL-ASSETS> 6,589,996
<CURRENT-LIABILITIES> 717,193
<BONDS> 145,000
0
0
<COMMON> 987,753
<OTHER-SE> 4,158,870
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</TABLE>
