U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/Amended
Quarterly Report under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For the Quarter Ended June 30, 1998 Commission File No. 0-9416
WCM CAPITAL, INC.
(FORMALLY 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, 1998 3,955,173
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 _____
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ -- $ 1,078
------------ ------------
TOTAL CURRENT ASSETS -- 1,078
Note receivable, COM Inc. 353,403 --
Mining, milling and other property and equipment,
net of accumulated depreciation and depletion of
$2,022,667 and $1,959,160 4,746,428 5,424,935
Land - held for resale 345,000 345,000
Mining reclamation bonds 132,641 130,681
------------ ------------
$ 5,577,472 $ 5,901,694
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 496,558 $ 367,933
Payroll and other taxes payable 30,720 31,181
Convertible debentures 145,000 145,000
Notes payable - related party and others 250,000 167,000
Note payable - related party 1,054,622 955,756
------------ ------------
TOTAL CURRENT LIABILITIES 1,976,900 1,666,870
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share;
100,000,000 shares authorized; 3,955,173 shares
issued and outstanding 39,552 39,552
Additional paid-in capital 17,299,816 17,299,816
Deficit accumulated during the development stage (13,738,796) (13,104,544)
------------ ------------
3,600,572 4,234,824
------------ ------------
$ 5,577,472 $ 5,901,694
============ ============
</TABLE>
See notes to condensed financial statements.
(1)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1998 AND 1997
AND PERIOD FROM DECEMBER 1, 1976 (INCEPTION)
TO JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30, Cumulative
------------------------- ------------------------- from
1998 1997 1998 1997 Inception
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Sales $ -- $ -- $ -- $ -- $ 876,082
Interest income 5,363 1,952 4,383 1,000 550,138
Other income -- -- -- -- 75,000
--------- --------- --------- --------- ------------
5,363 1,952 4,383 1,000 1,501,220
--------- --------- --------- --------- ------------
EXPENSES:
Mine expenses and environmental
remediation costs 38,491 -- 26,145 -- 3,562,229
Loss/write-down of mining and milling and
other property and equipment 265,000 -- 265,000 -- 1,465,000
Depreciation and depletion 63,507 60,000 33,012 30,000 2,218,016
General and administrative expenses 215,220 245,028 113,726 159,010 5,614,005
Interest expense 57,397 58,285 30,302 20,332 686,570
Amortization of debt issuance expense -- -- -- -- 683,047
Equity in net loss and settlement of claims
of Joint Venture -- 6,541 -- 3,653 591,971
Other -- -- -- -- 419,179
--------- --------- --------- --------- ------------
639,615 369,854 468,185 212,995 15,240,017
--------- --------- --------- --------- ------------
NET LOSS $(634,252) $(367,902) $(463,802) $(211,995) $(13,738,797)
========= ========= ========= ========= ============
BASIC LOSS PER COMMON SHARE $ (.16) $ (.10) $ (.12) $ (.05)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,955,173 3,623,321 3,955,173 3,951,013
========= ========= ========= =========
</TABLE>
See notes to condensed financial statements.
(2)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
AND PERIOD FROM DECEMBER 1, 1976 (INCEPTION)
TO JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
1998 1997 Inception
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (634,252) $ (367,902) $(13,738,796)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation and depletion 63,507 60,000 2,218,016
Loss/write-down of mining, milling and other
Property and equipment 265,000 -- 1,465,000
Amortization of debt issuance expense -- -- 683,047
Value of common stock issued for:
Services and interest -- -- 1,338,714
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 granted for services -- -- 112,500
Equity in net loss of joint venture -- 6,541 123,971
Other -- -- (7,123)
Changes in operating assets and liabilities:
Prepaid expenses -- 53,990 --
Interest accrued on mining reclamation bonds and notes (5,363) (1,952) (11,044)
Accounts payable and accrued expenses 128,165 (137,350) 759,535
------------ ------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (182,943) (386,673) (6,176,280)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases and additions to mining, milling and other
property and equipment -- -- (5,120,354)
Purchases of mining reclamation bonds, net -- -- (125,000)
Deferred mine development costs and other expenses -- -- (255,319)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES -- -- (5,500,673)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances of common stock -- 50,500 8,758,257
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 -- -- 1,505,000
Proceeds of advances from joint venture partner -- 75,660 526,288
Advances to joint venture partner -- 266,438 (181,017)
Payments of debt issuance expenses -- -- (164,233)
Proceeds of other notes and loans payable 181,865 -- 1,497,139
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 181,865 392,598 11,676,953
------------ ------------ ------------
</TABLE>
(Continued)
See notes to condensed financial statements.
(3)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
AND PERIOD FROM DECEMBER 1, 1976 (INCEPTION)
TO JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
from
1998 1997 Inception
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH $ (1,078) $ 5,925 $ --
CASH - beginning of period 1,078 127 --
------------ ------------ ------------
CASH - end of period $ -- $ 6,052 $ --
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 3,889 $ -- $ 303,758
============ ============ ============
</TABLE>
See notes to condensed financial statements.
(4)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
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, 1998, its results of operations for the six and three months ended
June 30, 1998 and 1997 and cash flows for the six months ended June
30, 1998 and 1997. Information included in the condensed balance sheet
as of December 31, 1997 has been derived from the audited balance
sheet in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 (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 and three months ended June 30,
1998 are not necessarily indicative of the results of operations for
the full year ending December 31, 1998.
Prior year's financial statements have been reclassified to conform to
the current year presentation.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. However, the Company has had
recurring losses and cash flow deficiencies since inception. As at
June 30, 1998, the Company has an accumulated deficit of $13,738,796,
current liabilities of $922,278, and a working capital deficiency of
$922,278. Also, the Company was in default on the payment of the
principal balance and accrued interest on certain notes and
debentures. Certain accounts payable also were past due, and the
Company has possible permit and other violations. In addition to the
payment 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 $20,000
per month plus interest during 1998. Such matters raise substantial
doubt about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that may result
from the outcome of the above uncertainty.
U.S. Mining Co. and its affiliates have pledged to provide financing
to the Company on an as needed basis until on or about July 1, 1999.
The funds received from USM and its affiliates will cover the general,
administrative and other costs approximated at $20,000 per month plus
interest. Additional funds will be needed to ready the Franklin Mining
properties for commencement of operations and to support the
extraction and milling processes once underway as well as to upgrade
the processing facilities to allow for an increase in ore processing
capacity.
There can be no assurance that the Company will have adequate funds
available to repay the funds advanced by USM and its affiliates. In
the event that the Company defaults on its obligations, USM may
foreclose on the assets secured by the POS note. Such foreclosure
actions by USM would have a material adverse effect on the future
operations of the Company and the Company's ability to explore the
Franklin Mines.
Substantially all of the $4,746,428 of mineral properties and
equipment included in the accompanying balance sheet as of June 30,
1998, is related to exploration properties. The ultimate realization
of the Company's investment in exploration properties and equipment is
dependent upon the success of future property sales, the existence of
economically recoverable reserves, the ability of the Company to
obtain financing or make other arrangements for development, and upon
future profitable production.
(5)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 3 - NOTES PAYABLE RELATED PARTY AND OTHERS
Notes payable related party and others consist of the following at
June 30, 1998:
12% unsecured demand note due to the Company's President $103,000
Secured promissory note (a) 60,000
Unsecured promissory notes (b) 87,000
--------
$250,000
(a) The outstanding principal balance of the note became payable on
July 18, 1996 and the Company is in default. The note is
guaranteed by certain officers of Gems and is collateralized
through a subordinated security interest in the Company's mining
reclamation bond. Interest on the note is payable based on the
rate of interest applicable to the mining reclamation bond.
(b) This principal amount represents four unsecured promissory notes
comprised of one $36,000 note and three $17,000 notes payable.
The Company assumed these obligations on November 25, 1997, as
part of the acquisition from USM of the remaining interest in the
Joint Venture. These notes were in default when assumed by the
Company, and remain in default as of June 30, 1998. Interest is
being accrued at rates between 8% and 17% per annum.
Accrued interest on the above notes at June 30, 1998 aggregated
approximately $34,000, including $6,443 payable to the Company's
President.
NOTE 4 - CONVERTIBLE DEBENTURES
The Company's convertible debt at June 30, 1998 consist of:
12.25% convertible debenture originally due 12/31/94 $145,000
As of June 30, 1998, the Company was in default with respect to the
payment of the $145,000 principal balance of the debenture and accrued
interest of approximately $58,000. As a result of its default, the
Company may be subject to legal proceedings by the Transfer
Agent/Trustee under the Indenture Agreement or from debenture holders
seeking immediate repayment of principal plus interest and other
costs. Management cannot assure that there will be funds available for
the required payments or what the effects will be of any actions
brought by or on behalf of the debenture holders.
NOTE 5 - NOTE PAYABLE - RELATED PARTY
The Company had outstanding a 8% promissory note balance of
$1,054,622, at June 30, 1998, which represents monies advanced to the
Company by POS Financial, Inc. ("POS"), and U.S. Mining, Inc. ("USM")
and obligations assumed in connection with the contributions of Joint
Venture interests in 1997. The note was payable on May 4, 1998, and is
secured by all the Company's mining claims and mining properties, as
well as its interests in the Hayden/Kennec Leases. The note is subject
to successive 30-day extensions throughout 1998 upon the mutual
agreement of the maker and lender for no additional consideration. On
March 5, 1998, POS assigned this note to USM. Both POS and USM are
considered related parties because they can exert significant
influence over the Company. Accrued interest at June 30, 1998 was
approximately $47,000.
(6)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 6 - STOCKHOLDERS' EQUITY
On May 26, 1998, the Company effected a twenty-five for one reverse
stock split. The accompanying financial statements give retroactive
effect to the reverse stock split.
NOTE 7 - SALE OF GOLD HILL MILL PROPERTIES
On June 5, 1998, the Company sold its Gold Hill Mill Properties for
property and equipment having a fair market value of $725,000 and a
14% note receivable of $350,000. The note is payable on demand. The
Company recognized a loss of $265,000 as a result of this transaction.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Lease Agreements
The original Hayden/Kennec Leases provided for payment by the Company
of certain liabilities relating to the leased property and a minimum
royalty payment of $2,000 per month or 5% of the Company's net smelter
royalties realized from production, whichever is greater to Mrs.
Hayden and Mrs. Kennec. The original Hayden/Kennec Leases expired in
November 1996, at which time the Company had the option to purchase
the leasehold rights for a purchase price of $1,250,000 less any
royalties previously paid as of the expiration date. As of November
1996, the Company had paid approximately $480,000 in royalties.
On November 19, 1996, the Company entered into an amendment to the
Hayden/Kennec Leases with Dorothy Kennec (the "Kennec Amendment").
Pursuant to the terms of the Kennec Amendment, Kennec agreed to extend
the term as it relates to her portion of the leasehold rights through
November 12, 1997. In consideration for such extension, the Company
agreed to increase the royalty payment due to Kennec under the
original Hayden/Kennec Leases from $1,000 to $2,000 per month and to
issue to Kennec 104,000 shares of the common stock of the Company
valued at $.125 per share, having an aggregate value of $13,000. All
of the payments made under the Kennec Amendment plus the values of the
shares issued thereunder are to be further applied against the buy-out
price of the property under the original Hayden/Kennec Leases. The
104,000 shares of common stock were issued on April 9, 1997.
To further secure the Company and the Joint Venture, Gems entered into
an agreement on December 21, 1995 to purchase Hayden's interest
thereto (the "Hayden Interests") for a purchase price of $75,000. Gems
made an initial payment of $5,000 to Hayden and the remainder of the
purchase price was to be paid on or prior to the expiration date of
the Hayden/Kennec Leases. Gems advised the Company that under Colorado
law, if an owner of 50% of mineral rights desired to exploit those
rights, then the remaining 50% owner could not object to the
exploitation of the rights, provided the non-participating owner
received 50% of the net profits generated from such exploitation.
Therefore, Gems informed the Company that it believed that with the
acquisition of the Hayden interest, together with the portion of the
Hayden/Kennec Leases owned by Kennec, the Company and the Joint
Venture would have adequate access to the minerals during the
remainder of the term of the Hayden/Kennec Leases on a continuing
basis.
On November 12, 1997, Gems had failed to comply with the terms of the
Hayden/Kennec-Gems Purchase Agreement. On November 13, 1997, Hayden
entered into an agreement to sell the Hayden interests to USM for a
purchase price of $75,000 (the "Hayden-USM Purchase Agreement"). The
purchase price is evidenced by a note, due on February 2, 1998.
Payment on the note has been extended until USM receives a report of
clear title. Upon the execution of the Hayden-USM Purchase Agreement,
USM agreed to extend the Hayden/Kennec Leases upon the same terms and
conditions currently in effect through March 13, 1998 (the "Extended
Expiration Date"). The Company is currently in negotiations to extend
these interests, however, there can be no assurance that an extension
will be granted or that the Company will not be subject to litigation
with respect to the Hayden Kennec Leases..
(7)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
While the Company has extended the term of the Hayden/Kennec Leases,
as amended through March 13, 1998, in the event that it shall expire
or otherwise terminate, any improvements made on the property become
the property of the lessor without any further compensation to the
Company and the lessor would have to reclaim the property in
accordance with the State of Colorado Division of Minerals and Geology
(the "DMG") requirements in effect at the time of such expiration or
termination. Thus, the likelihood that the Company would recover
fixtures and other equipment on the property may be minimal.
Environmental Matters
On January 31, 1997, the Company received approval from the DMG of its
March 6, 1996 amended application to its permit by obtaining the
$252,000 bond required by the DMG from an independent bonding company
in exchange for (i) the deposit by the Company of $125,000 in a trust
account maintained for the benefit of the bonding company, (ii)
guarantees from the Joint Venture partner and certain of its
principals and (iii) the posting of a performance bond from an
independent bonding company by one of the Joint Venture's contractors
with respect to the completion of the technical and remediation work
required by the regulatory authorities. As a result, management
believes that substantially all of the necessary environmental and
regulatory approvals have been obtained from DMG.
The amended permit required among other things the submission of a
final design for tailings disposal facilities, the installation of a
Surface Water Control Plan previously approved by the DMG, the filing
of an Environmental Protection Plan, and the completion of certain
closure plans.
As of June 30, 1998, the Company has no formal violations against it
with respect to the Franklin Mines and Franklin Mill. However, there
can be no assurance that the Company will be able to adequately comply
with the conditions set forth in its permit approval or that future
violations will not arise and that such violations will not lead to
interruptions in operations at the Franklin Mines or Franklin Mill.
Litigation
The Company is involved in various litigation as explained below:
(a) The Company 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. An
accrued liability of $35,000 that the Company estimates to be its
portion of the total claim has been recorded in the accompanying
financial statements.
(b) In September 1997, certain of the Company's 12.25% Convertible
Debenture holders instituted an action against the Company for
payment of approximately $42,500 principal amount of its 12.25%
Convertible Debentures plus accrued and unpaid interest totaling
approximately $13,000 and other costs and expenses related
thereto. The Company has answered the aforesaid complaint.
(c) In May, 1998, a broker/dealer engaged to provide investment
banking services to the Company instituted an action against the
Company for, among other things, breach of contract, fraudulent
inducement and unjust enrichment plaintiff broker/dealer is
claiming damages of not less than $600,000 plus punitive damages,
interest, costs and disbursements. The Company has answered the
complaint and has asserted counterclaims against plaintiff
claiming damages of approximately $6,000,000.
An unfavorable resolution of these matters could result in
material liabilities or charges that have not been reflected in
the accompanying financial statements.
(8)
<PAGE>
FRANKLIN CONSOLIDATED MINING CO., INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES (Continued)
NASDAQ Notification
In 1996, the Securities and Exchange Commission approved certain
amendments to the listing requirements for continued listing on the
NASDAQ Small-Cap Market. On February 27, 1998, subsequent to the
balance sheet date, the Company received a notification letter from
NASDAQ informing the Company that as of that date, the Company's
common stock is not in compliance with the new minimum bid price
requirement of $1.00 which became effective on February 23, 1998. The
review of the Company's common stock price was based upon the price
data covering the previous 30 consecutive trade dates. The Company has
been given 90 calendar days, expiring May 28, 1998, in order to regain
compliance. The Company would be able to regain compliance if its
common stock trades at or above the minimum requirement of $1.00 for
at least 10 consecutive trade days. In the event that the Company's
common stock does not regain compliance within the 90-day period,
NASDAQ has advised the Company that it will issue a delisting letter
that will identify the review procedures available to the Company.
On June 16, 1998, NASDAQ found the Company to be in compliance with
the bid price requirements and all requirements necessary for
continued listing on The NASDAQ Small Cap Market.
Given past trends, it is possible that Company's common stock may not
sustain a minimum bid price of $1.00 in the future. In this event, the
Company's Common Stock may be delisted and no longer trade on the
NASDAQ Small Cap Market. However, management believes that should this
occur, the Company's common stock will qualify for trading on the
Over-The-Counter/Bulletin Board ("OTC") market and the Company will
make every effort to include its common stock on the OTC in the event
of a delisting by NASDAQ.
The Company is unable to determine the effect, if any, a delisting by
NASDAQ would have on the Company's ability to obtain additional equity
or debt financing.
(9)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
The Company had no active mining or milling operations during the first quarter
of 1998, however, remediation work was substantially completed at the Franklin
Mine and Mill in preparation for the anticipated commencement of mining
operations sometime during fiscal year 1999.
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 and interest, at the rate of approximately
$20,000 per month for the remainder of 1998.
U.S. Mining Co. and its affiliates have verbally pledged to provide financing to
the Company on an as needed basis until on or about January 1, 1999. The funds
received from USM and its affiliates were used to cover general, administrative
and other costs of the Company. Additional funds will be needed to ready the
Franklin Mine and Milling properties for the commencement of operations and to
support the extraction and milling processes once underway as well as to upgrade
the processing facilities to allow for an increase in ore processing capacity.
There can be no assurance that the Company will have adequate funds available to
repay the funds advanced by USM and its affiliates. Nor can the Company assure
that USM will fulfill its commitment to fund the Company's operations through
January 1999. In the event that the Company defaults on its obligations, USM may
foreclose on the assets secured by the POS Note. Such foreclosure actions by USM
would have a material adverse effect on the future operations of the Company and
the Company's ability to explore the Franklin Mines.
In June 1998, the Company sold the Gold Hill Mill for property and equipment
having a fair market value of $725,000 and a 14% note receivable of $350,000.
While the Company incurred a $265,000 loss on the sale, management believes that
the Gold Hill Mill had little prospect of becoming a viable asset due to the
adverse regulatory climate in Boulder, Colorado. Other factors considered in the
decision to dispose of the property included, on going costs of insuring the
property, tax burdens, regulatory compliance costs and a lien on the property
for $350,000 resulting from an obligation of the prior owners which was in
default. All of these factors posed significant burdens on the Company's
resources. Thus, management believes that it was in the best interest of the
Company to dispose of the Gold Hill property and concentrate its efforts on the
Franklin properties.
Results of Operations:
June 30, 1998 and 1997
The Company had no active mining or milling operations during the six months
ended June 30, 1998 and 1997.
The Company had a net loss of $634,252 and $463,802 for the six and three months
ended June 30, 1998, respectively as compared to a net loss of $367,902 and
$212,995 during the same periods in 1997. The loss in 1997 was higher due to a
$265,000 loss on sale of the Gold Hill Mill Properties in 1998.
General and administrative expenses were $215,220 and $113,726 for the six and
three months ended June 30, 1998 compared with $245,028 and $159,010 during the
same periods in 1997. This decrease was due to cost controls implemented in
connection with corporate overhead and SEC reporting and compliance.
Interest income was $5,363 and $4,383 for the six and three months ended June
30, 1998 compared with $1,952 and $1,000 during the same periods in 1997.
Interest expense was $57,397 and $30,302 during the six and three-month periods
ended June 30, 1998 as compared to $58,285 and $20,332 during the same periods
in 1997. These changes were due to interest incurred on notes in connection with
the Gold Hill Mill and Newmineco acquisitions payable to related parties in 1997
but not during 1998 offset by an increase in notes payable to related parties
during 1998.
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Continued)
June 30, 1997 and 1996
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 approximately $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 Newmineco acquisitions.
(11)
<PAGE>
PART II
Item 1. Legal Proceedings
Convertible Debentures
On June 1, 1994, the Company advised the Transfer Agent/Trustee that the
Company was not in compliance with certain of the terms of the indenture
(the "Indenture") relating to the Company's 12-1/4% Convertible Debentures
(the "Debentures") in that it had not maintained current filings with the
Securities and Exchange Commission (the "Commission") as required.
Accordingly, the Transfer Agent/Trustee was instructed not to convert any
of the Debentures into Common Stock of the Company until such time as the
Company notified the Transfer Agent. The Company failed to make required
sinking fund payments in 1994 and was unable to pay the principal balance
of the Debentures due on December 31, 1994 resulting in a default under the
terms of the Indenture.
Although the Company was in default, it agreed to continue to make
quarterly interest payments to the Debenture Holders during fiscal year
1995 until such time as the principal amount of the Debentures could be
paid in full. It was anticipated that the Company would have the funds
available to make such payments by December 31, 1995. The Company made the
first quarterly interest payment due on the Debentures in 1995 but has
failed to make any additional payments with respect to such interest as of
the date hereof.
In December 1995, the Company sent notices to the debenture holders
requesting their consent to extend the maturity date of the Debentures to
December 31, 1996. It was also contemplated that the conversion rights of
such holders would also be extended at its current rate of $.50 per share.
The Company also agreed that it would bring current all interest payments
due and owing to such holders through December 31, 1995, prepay interest
which will become due and owing at the end of the first quarter of 1996 and
set up a fund with the Transfer Agent/Trustee to secure the timely payment
of the principal amount of the Debentures on December 31, 1996. The Company
set February 15, 1996 as the date upon which all Debenture Holders had to
submit their consent forms to the Company indicating whether they agreed to
extend the maturity date as to their bonds or reject such proposal. Any
holder who failed to return a consent form within the prescribed time was
to be treated as having consented to the extension. As of the February 15,
1996, the Company received a negative response from one holder owning
$1,000 principal amount of Debentures.
While the Company intended to comply with the terms of its agreements with
the holders of the Debentures, a series of unforeseen circumstances
relating to the Company's permits and reclamation bond caused a cash flow
shortage. As a result the Company has been unable to make the payments
described above. Management is hopeful that the Company's limited cash flow
will improve in the near future and at such time intends to comply with the
terms of its December 1995 agreements. As of June 30, 1998, the accrued and
unpaid interest on the Debentures is approximately $53,000.
On January 17, 1997, the Company received a letter from counsel to James E.
Hopis, Revocable Trust, a holder of $5000 of Debentures of the Company
demanding payment of such bond immediately or legal action will be taken
against the Company to collect on such Debenture. In September, 1997,
certain of the Company's 12-1/4% Convertible Debenture holders, including
the Hopis Trust (the "Plaintiff Debenture holders") instituted an action in
the Supreme Court of the State of New York against the Company for payment
on approximately $42,500 principal amount of Debentures plus accrued and
unpaid interest totaling approximately $13,000 and other costs and expenses
related thereto. The Company has answered the aforesaid complaint.
Thereafter, the Plaintiff Debenture holders moved for summary judgment
against the Company. The Company chose not to oppose the motion and a
default judgment was entered against the Company in the amount of $42,500
plus interest, costs and disbursements (the "Judgment"). Moreover, the
issue of attorney's fees was severed from the case and all to be set down
for an inquest.
(12)
<PAGE>
Item 1. Legal Proceedings (Continued)
In February, 1998, USM entered into an agreement with the Plaintiff
Debenture holders agreeing to pay the Judgement plus certain additional
costs in the event that the Company fails to pay the Judgment and USM
consummates the Transaction with the Company. In the event that USM does
not consummate the Transaction by July 12, 1998, USM agreed to pay the
Plaintiff Debenture holders $5,100 for their agreement not to enter the
Judgment against the Company or pursue the inquest. Plaintiff Debenture
holders have agreed not to enter the Judgment against the Company until
July 12, 1998 or until USM notifies them that it will not pursue the
Transaction. The termination date of the USM Agreement has been further
extended to year-end 1998.
As of the date hereof, the Company is not aware of any termination or
modification of the Agreement and believes it is in full force and effect.
However, there can be no assurance that USM will not terminate this
Agreement or that the Agreement will expire; the result of which will be
the entering of the Judgement against the Company and a possible inquest as
to the Company's liability regarding attorney's fees.
The continued default and failure to comply with the 1994 and December 1995
agreements may result in Company being subject to additional legal
proceedings by the Transfer Agent/Trustee under the Indenture or from other
holders seeking immediate payment of the $102,500 plus related interest and
penalties. While the Company hopes to cure the default or, in the
alternative, reach an acceptable settlement arrangement with the holders,
there can be no assurance that the funds will be available in the future to
meet all of the Company's obligations. Management remains hopeful that
payment or, in the alternative, commencement of settlement negotiations,
will delay the commencement of any legal action until the Company can make
the appropriate arrangements to repay the Debenture holders.
Golder Litigation On or about February 5, 1996, Bradley, Campbell, Carney &
Madsen, P.C., Colorado counsel to the Company, Gems, Zeus and Newmineco
("BCCM") entered into a contract with Golder Associates, Inc. ("Golder"),
pursuant to which Golder agreed to perform certain services at the Mogul
Mine pertaining to environmental issues, including, but not limited to, (a)
reviewing surface and groundwater quality and compliance standards, (b)
reviewing 110 permitting requirements, applications and responses, (c)
reviewing certain environmental plans relating to the Mogul Mine and (d)
assessing water discharge requirements and dispensing advice with respect
to water discharge and surface spring outflow management and mitigation of
poor drainage quality (the "Mogul Tunnel Contract"). At the time of the
Mogul Tunnel Contract, BCCM allegedly entered into said contract as an
agent of Durango, the lessee of the Mogul Mine at that time.
On or about February 5, 1996, BCCM entered into a second contract with
Golder, pursuant to which Golder agreed to perform certain services at the
Franklin Mines and Franklin Mill pertaining to environmental issues,
including, but not limited to, (a) phase 1 site assessment, (b) preliminary
regulatory and permit review, (c) engineering site inspections, (d) designs
for surface water management at the ore handling facility, (e) technical
memorandum on alternatives for the extension of #5 tailings pond, (f)
assistance in negotiation with the DMG and (g) recommendations for bulk ore
sampling and mineralogical testing at the Franklin Mines (the "Franklin
Mine Contract"). At the time of the Franklin Mines Contract, BCCM allegedly
entered into said contract as an agent of the Zeus Joint Venture.
On or about August 23, 1996, Gems executed a note to Golder in the
aggregate principal amount of $268,683.75 and a note to BCCM in the
aggregate principal amount of $109,785.35 to secure legal and engineering
fees outstanding as of such date. Each note was due and payable on or
before December 23, 1996 and bears interest at a rate of 6% per annum. In
the event that the payments of principal and interest under the notes were
not paid when due, all principal and interest will accrue additional
interest at a rate of 10% per annum. The notes were secured by a pledge of
approximately 3,600,000 shares of Common Stock of the Company owned by
Gems, pursuant to a Security Agreement, dated August 23, 1996. Any default
under the notes constituted an event of default under the Security
Agreement. Gems failed to make the required payments as of December 23,
1996.
(13)
<PAGE>
Item 1. Legal Proceedings (Continued)
On or about January 28, 1997, Golder commenced an action against BCCM,
Zeus, the Company, Gems, Island, and Durango in the United States District
Court of the District of Colorado to recover sums due and owing from the
Defendants for breach of contract, breach of implied warranty,
misrepresentation, negligent misrepresentation, default under the Golder
note and quantum merit arising out of each of the Mogul Tunnel Contract and
the Franklin Mine Contract. The Company is a named defendant to this
litigation by virtue of its general partnership interest in Zeus, it being
joint and severally liable with Gems and Nuco as general partners in the
Joint Venture.
The aggregate amount of the Golder claims are approximately $281,670.99
plus prejudgment and post judgment interest, costs and expenses (including
attorney's fees) and any additional relief granted by the court,
$124,159.87, exclusive of interest and other costs and expenses, of which
is attributable to the Mogul Tunnel Contract and $157,511.12, exclusive of
interest and other costs and expenses, of which is attributable to the
Franklin Mines Contract.
On or about March 12, 1997, BCCM filed a motion to dismiss counts III, IV,
and V of the Complaint relating to the breach of warranty,
misrepresentation and negligent misrepresentation arguing that these claims
were pled in the alternative and only become viable in the event other
defendants in the case deny BCCM authority to enter into the subject
contracts. Also on March 12, 1996, Zeus, the Company, Island and Gems moved
to dismiss or stay proceedings pending arbitration arguing that arbitration
clauses in the subject contract require the captioned action to be
submitted to arbitration. However, Durango filed a separate answer to the
Complaint denying that BCCM had any authority to enter into any contract on
behalf of Durango and denying that Durango ratified any exercise of such
authority. Therefore, on or about March 27, 1997, Golder moved to file an
amended complaint to clarify its position that the claims against Durango
are also asserted against the Franklin Defendants. The Company has not
received a copy of such complaint to date. Notwithstanding, the parties, on
April 4, 1997, executed a stipulation agreeing to arbitration on all issues
concerning the subject contracts but excluding issues relating to the note
and security agreement.
The Company is currently engaged in settlement negotiations with the
parties in hopes of resolving this dispute and has an agreement in
principal with all of the parties. However, there can be no assurance that
final settlement agreements will be executed or that the Company will be
successful should this matter proceed to arbitration. The Company estimates
that its portion of the liability in this matter is approximately $35,000
in the event that the settlement should be consummated.
Environmental Matters
As of the date hereof, the Company has no violations against it with
respect to the Franklin Mines and Franklin Mill. While there are no
outstanding violations against the Company at this time, there can be no
assurance that the Company will be able to adequately comply with the
conditions set forth in its permit approval or that future violations will
not arise and that such violations will not lead to interruptions in
operations at the Franklin Mines or Franklin Mill. .
Durango Litigation
On or about February 1, 1996, Newmineco, Island, Gems and Zeus entered into
a series of Transactions with Durango, Thames Hartley, the president of
Durango ("Hartley") and J. Wayne Tatman ("Tatman"), an agent of Durango and
Hartley and president of Consolidated Milling, Inc. ("Consolidated
Milling") to develop certain mining properties, including the Mogul Mines.
On or about March 1996, Island acquired the Rugg/Mogul Lease through a
Novation Agreement. The Rugg/Mogul Lease was then renegotiated and assigned
to Newmineco. Thereafter, Island and Gems notified the Company that Tatman,
Hartley and Durango and certain other parties to the Newmineco venture
breached their agreements and as a result, Island terminated certain
venture agreements involving these persons. Island thereafter assigned its
interest in Newmineco to Gems.
(14)
<PAGE>
Item 1. Legal Proceedings (Continued)
In June, 1996, Durango and/or Hartley served a series of Notices of Intent
to Lien properties owned or leased by each of Gems, Island and the Company,
including the Gold Hill Mill. Thereafter, on or about October 15, 1996,
James A. Wood and David C. Sutton, each the owner of claims located on the
properties comprising the Mogul Mines (the "Delaware Claims" and the
"Bonanza Claims", respectively) and Durango, as the proported lessee of
such claims, commenced an action in District Court, Boulder County,
Colorado, against the Ruggs, Island, Newmineco, the Company and any other
unknown parties of interest to quiet title to each of the Delaware Claim
and Bonanza Claims (hereinafter the "Disputed Claims"). The complaint
further alleges that the defendants have removed ore mined from the
Disputed Claims and that, as a result of trespass and conversion of certain
equipment of Plaintiff Durango, plaintiffs have been further damaged in the
amount of approximately $800,000. In addition to the actions for quiet
title and for the adjudication of the ownership of the disputed Claims,
Plaintiffs requisite damages for conversion of Plaintiff Durango's
equipment, seeks a full accounting of the ore removed from the premises and
request all other damages, costs and expenses, including attorney's fees
incurred with respect to this dispute.
The Company, as well as its co-defendants, retained local Colorado counsel
and intend to rigorously defend this action while there are motions pending
regarding the sufficiency of the defendant's pleadings, no decision has
been made regarding such motions and no trial has yet been scheduled. In
addition, on or about October 30, 1996, each of Com, Inc., the previous
owner of the Gold Hill Mill, Gems, Island, the Company, Hayden and Kennec
commenced an action against each of Durango, Hartley, Consolidated Milling
and Tatman in District Court, Boulder Country, Colorado relating to the
Company's properties in Boulder County claiming, among other things, that
(i) all liens be removed from the public record, (ii) damages were incurred
for the filing of excessive liens, together with costs and expenses,
including reasonable attorney's fees incurred in connection therewith,
(iii) breach of contract with respect to the Newmineco venture agreement,
(iv) damages incurred for loss of business opportunities and interference
with plaintiff's contractual relationships and (v) defendants slandered
plaintiffs title to property causing them damages. A similar complaint was
also filed in Clear Creek County with respect to liens filed against the
Company's properties in Clear Creek County. No counterclaims have been
asserted against any of the Plaintiffs. As a result of recent motions filed
on behalf of the Company in the Boulder County action, an order was entered
by the Court in 1997, to discharge all liens filed against the Company's
properties. The Company has been advised that the Court is expected to
enter this order shortly and such order will thereafter be recorded to
remove the subject liens. The Clear Creek County Court has executed an
order removing the liens against the Company's Clear Creek County
properties and the Company has been advised by local counsel that such
order is being filed with the Clear Creek County to remove the liens from
the record. Issues concerning damages suffered and defendants liability
with respect thereto in each of the actions are to litigated. No trial
dates have been set at this time.
NASDAQ Delisting
In 1996, the Commission approved certain amendments to the requirements for
continued listing on the NASDAQ Small-Cap Market. On February 27, 1998, the
Company received a notification letter from NASDAQ informing the Company
that the Company's Common Stock was not in compliance with the new minimum
bid price requirement of $1.00, which became effective on February 23,
1998. On June 5, 1998, after effectuating a reverse split of the Company's
common stock, NASDAQ found the Company to be in compliance with the bid
price requirement and all other requirements necessary for continued
listing on NASDAQ.
(15)
<PAGE>
Item 1. Legal Proceedings (Continued)
Management believes that it is possible, given past trends, that the
Company's Common Stock may not sustain trading at minimum bid price of
$1.00 or more in the future. In that event, Company's Common Stock will be
delisted and will no longer be traded on the NASDAQ Small Cap Market.
However, Management is hopeful that in the event of delisting, the
Company's Common Stock will qualify for trading on the
Over-The-Counter/Bulletin Board ("OTC") market and the Company will make
every effort to include its Common Stock on the OTC in the likely event of
a delisting by NASDAQ.
In the event that the Company's Common Stock is traded on the OTC, it may
become subject to the "penny stock" trading rules. The penny stock trading
rules impose additional duties and responsibilities upon broker-dealers
recommends the purchase of a penny stock (by a purchaser that is not an
accredited investor as defined by Rule 501(a) promulgated by the Commission
under the Securities Act) or the sale of a penny stock. Among such duties
and responsibilities, with respect to a purchaser who has not previously
had an established account with the broker-dealer, the broker-dealer is
required to (i) obtain information concerning the purchaser's financial
situation, investment experience, and investment objectives, (ii) make a
reasonable determination that transactions in the penny stock are suitable
for the purchaser and the purchaser (or his independent adviser in such
transactions) has sufficient knowledge and experience in financial matters
and may be reasonably capable of evaluating the risks of such transactions,
followed by receipt of a manually signed written statement which sets forth
the basis for such determination and which informs the purchaser that its
unlawful to effectuate a transaction in the penny stock without first
obtaining a written agreement to the transaction. Furthermore, until the
purchaser becomes an established customer (i.e., having had an account with
the dealer for at least one year or, the dealer had effected three sales or
more of penny stocks on three or more different days involving three or
more different issuers), the broker-dealer must obtain from the purchaser a
written agreement to purchase the penny stock which sets forth the identity
and number of shares of units of the security to be purchased prior to
confirmation of the purchase. A dealer is obligated to provide certain
information disclosures to the purchaser of penny stock, including (i) a
generic risk disclosure document which is required to be delivered to the
purchaser before the initial transaction in a penny stock, (ii) a
transaction-related disclosure prior to effecting a transaction in the
penny stock (i.e., confirmation of the transaction) containing bid and
asked information related to the penny stock and the dealer's and
salesperson's compensation (i.e., commissions, commission equivalents,
markups and markdowns) connection with the transaction, and (iii) the
purchaser-customer must be furnished account statements, generally on a
monthly basis, which include prescribed information relating to market and
price information concerning the penny stocks held in the customer's
account. The penny stock trading rules do not apply to those transactions
in which the broker-dealer or salesperson does not make any purchase or
sale recommendation to the purchaser or seller of the penny stock.
Required compliance with the penny stock trading rules affect or will
affect the ability to resell the Common Stock by a holder principally
because of the additional duties and responsibilities imposed upon the
broker-dealers and salespersons recommending and effecting sale and
purchase transactions in such securities. In addition, many broker-dealers
will not effect transactions in penny stocks, except on an unsolicited
basis, in order to avoid compliance with the penny stock trading rules. The
penny stock trading rules consequently may materially limit or restrict the
liquidity typically associated with other publicly traded equity
securities. In this connection, the holder of Common Stock may be unable to
obtain on resale the quoted bid price because a dealer or group of dealers
may control the market in such securities and may set prices that are not
based on competitive forces. Furthermore, at times there may be a lack of
bid quotes which may mean that the market among dealers is not active, in
which case a holder of Common Stock may be unable to sell such securities.
Because market quotations in the over-the-counter market are often
subjected to negotiation among dealers and often differ from the price at
which transactions in securities are effected, the bid and asked quotations
of the Common Stock may not be reliable.
Redstone Litigation
On or about May 14, 1998, Redstone Securities Inc. ("Redstone") commenced
an action against the Company in the Supreme Court of the State of New
York, County of Nassau, Index No. 98-013668, claiming , among other things,
breach of contract, fraudulent inducement and unjust enrichment in
connection with an Investment Banking Agreement, dated August 28, 1996,
between Redstone and the Company. The complaint requests relief in the
amounts of not less than $600,000 plus punitive damages, costs, interest
and other expenses. On or about July 31, 1998, the Company answered the
complaint and filed a cross complaint against Redstone alleging, among
other things, abuse of process, fraud, breach of fiduciary duty, breach of
contract and interference with prospective financial advantage. The Company
believes that it sustained damages of approximately $6,000,000 plus costs
and expenses. The Company intends to vigorously defend this suit and
aggressively pursue its claims against Redstone.
(16)
<PAGE>
Item 2. Changes in Securities
On May 5, 1998, the Company withdrew Registration Statement on From SB-2, File
No.333-29101, which was originally filed June 10, 1997. The Company took this
action as all selling shareholders became eligible to sell their shares pursuant
to Rule 144. In addition, the Company effected a twenty-five for one reverse
stock split of its Common Stock on June 1998.
Item 3. Defaults Upon Senior Securities
As of June 30, 1998, 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,
1998 in the amount of approximately $58,000.
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. 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 required under the December 1995 Agreements 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
On May 21, 1998, the Company held a special meeting of stockholders to consider
a proposal to amend the Company's Certificate of Incorporation to reverse split
the Company's outstanding shares of Common Stock in a one-for-twenty-five basis.
The measure was approved by a vote of the majority of shareholders represented
at the meeting in person or by proxy.
Item 5. Other Information
On or about August 3, 1998, the Company entered into agreements with each of USM
(the "USM Agreement") and William Martucci (the "POS Agreement"). Pursuant to
the USM Agreement, USM agreed to forgive the indebtedness of the Company
evidenced by the POS Note; release the security interests in the collateral of
the Company securing the POS Note and assign its rights to the Hayden-USM
Purchase Agreement in exchange for 11,197,413 shares of 42.5% of the issued and
outstanding shares of the Company.
Under the terms of the POS Agreement, Martucci agreed to sell to the Company
100% of the outstanding shares of POS in exchange for 11,197,413 shares or 42.5%
of the issued and outstanding shares of the Company. The primary business of POS
is the ownership and operation of free standing ATM Kiosks located in a broad
base of retail outlets. The Company intends to seek stockholder's approval of
these transactions at its Annual Meeting of Stockholders to be held this fall.
In the event that the stockholders shall approve the transactions contemplated
by each of the USM Agreement and POS Agreement, Martucci and/or entities owned
and/or controlled by Martucci will beneficially own 85% of the issued and
outstanding shares of the Company.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits (the following exhibits were filed in original filing)
Stock Purchase Agreement dated August 3, 1998, by and between US and
the Company Stock Purchase Agreement dated August 3, 1998 by and among
POS, William Martucci and Company
B. Reports on Form 8-K (filed in original filing)
(a) Report on Form 8-K dated April 8, 1998 under file 0-9416.
(17)
<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.
/s/ Robert Walligunda
Date: November 13, 1998 ----------------------------------------
Robert Walligunda, President/Treasurer
(18)
