<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number 0-4846-3
--------------------------------------------
CONSIL CORP.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0288840
- ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 500, 625 Howe Street
Vancouver, British Columbia, Canada V6C 2T6
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
604-331-0844
- -------------------------------------------------------------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for at least the past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding July 31, 1996
- --------------------------------------- -------------------------
Common stock, par value $0.10 per share 9,455,689 shares
<PAGE> 2
CONSIL CORP.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
I N D E X
PAGE
PART I. - Financial Information
Item 1 - Consolidated Balance Sheets - June 30,
1996 and December 31, 1995 3
- Consolidated Statements of Operations and
Accumulated Deficit - Three Months and
Six Months Ended June 30, 1996 and 1995 4
- Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. - Other Information
Item 1 - Legal Proceedings 13
Item 6 - Exhibits and Reports on Form 8-K 13
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
CONSIL CORP.
Consolidated Balance Sheets (Unaudited)
(U.S. Dollars)
------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 19,839 $ 588,787
Accounts receivable 3,616 1,410
Income tax refund receivable 80,250 46,344
Deferred income taxes 33,000 33,000
Other current assets 30,518 7,957
----------- -----------
Total current assets 167,223 677,498
----------- -----------
Property, plant and equipment:
Plant, equipment and facilities 29,094 5,434
Less - Accumulated depreciation (2,748) (494)
----------- -----------
26,346 4,940
Deferred income taxes 81,473 66,000
----------- -----------
Total assets $ 275,042 $ 748,438
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - Hecla Mining Company $ 83,662 $ 279,598
Accounts payable and accrued expenses 21 3,069
----------- -----------
Total current liabilities 83,683 282,667
----------- -----------
Stockholders' equity:
Preferred stock; 1996 and 1995 - $0.25 par value;
authorized, 10,000,000 shares; issued and
outstanding, none
Common stock; $0.10 par value; authorized,
20,000,000 shares; issued 9,455,689 shares 945,569 945,569
Discount on common stock (190,709) (190,709)
Capital surplus 1,356,815 1,356,815
Accumulated deficit (1,916,855) (1,645,880)
Less: Common stock reacquired at cost; 1996 -
5,932 shares; 1995 - 6 shares (3,461) (24)
----------- -----------
Total stockholders' equity 191,359 465,771
----------- -----------
Total liabilities and stockholders' equity $ 275,042 $ 748,438
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Operations and Accumulated Deficit (Unaudited)
(U.S. Dollars)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ ----------------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ - - $ 1,500 $ - - $ 3,000
Transfer fees - - 152 152 348
Interest 521 10,103 3,232 19,776
Miscellaneous - - (60) - - 460
------------ ------------ ------------ ------------
521 11,695 3,384 23,584
Expenses:
General and administrative expenses 84,015 34,163 163,386 56,257
Exploration 84,783 - - 184,204 - -
Depreciation 1,528 - - 2,254 - -
------------ ------------ ------------ ------------
Total expenses 170,326 34,163 349,844 56,257
------------ ------------ ------------ ------------
Loss before
income tax benefit (169,805) (22,468) (346,460) (32,673)
Income tax benefit 31,861 1,054 75,485 2,605
------------ ------------ ------------ ------------
Net loss (137,944) (21,414) (270,975) (30,068)
Accumulated deficit at
beginning of period (1,778,911) (1,139,803) (1,645,880) (1,131,149)
------------ ------------ ------------ ------------
Accumulated deficit at
end of period $ (1,916,855) $ (1,161,217) $ (1,916,855) $ (1,161,217)
============ ============ ============ ============
Net loss per share of
common stock $ (0.01) $ - - $ (0.03) $ - -
============ ============ ============ ============
Cash dividends per share $ - - $ - - $ - - $ - -
============ ============ ============ ============
Weighted average number of
common shares outstanding 9,449,757 8,205,683 9,451,487 8,205,683
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-4-
<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Cash Flows (Unaudited)
(U.S. Dollars)
<TABLE>
<CAPTION>
Six Months Ended
---------------------
June 30, June 30,
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (270,975) $ (30,068)
Noncash elements included in net loss:
Depreciation 2,254 - -
Deferred income tax benefit (15,473) - -
Change in:
Accounts receivable (2,206) - -
Income tax refund receivable (33,906) (2,635)
Other current assets (22,561) (1,847)
Accounts payable and accrued expenses (198,984) 16,226
----------- -----------
Net cash used by operating activities (541,851) (18,324)
----------- -----------
Investing activities:
Additions to property, plant and equipment (23,660) - -
----------- -----------
Net cash used by investing activities (23,660) - -
Financing activities:
Acquisition of treasury stock (3,437) - -
----------- -----------
Net cash used by financing activities (3,437) - -
Net decrease in cash and cash equivalents (568,948) (18,324)
Cash and cash equivalents at beginning of period 588,787 753,486
----------- ------------
Cash and cash equivalents at end of period $ 19,839 $ 735,162
=========== ============
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the consolidated financial statements as of
December 31, 1995, as set forth in ConSil Corp.'s (the
Company or ConSil) 1995 Annual Report on Form 10-K,
substantially apply to these interim consolidated
financial statements and are not repeated here. All
amounts are in U.S. dollars unless otherwise indicated.
Note 2. The financial information given in the accompanying
unaudited interim consolidated financial statements
reflects all adjustments which are, in the opinion of
management, necessary to a fair statement of the results
for the interim periods reported. All such adjustments
are of a normal recurring nature. All financial
statements presented herein are unaudited. However, the
balance sheet as of December 31, 1995, was derived from
the audited consolidated balance sheet described in
Note 1 above. Certain consolidated financial statement
amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no effect on
the net loss or accumulated deficit as previously
reported.
Note 3. The components of the income tax benefit for the six
months ended June 30, 1996 and 1995 are as follows (in
thousands):
1996 1995
-------- --------
Current:
State income tax benefit $(17,935) $ - -
Federal income tax benefit (42,077) (2,605)
-------- --------
Total current benefit (60,012) (2,605)
Deferred benefit (15,473) - -
-------- --------
Total $(75,485) $ (2,605)
======== ========
Note 4. At June 30, 1996, the Company had 9,449,757 common shares
outstanding of which Hecla Mining Company (Hecla, the
majority shareholder of the Company) owned 7,418,300
shares or 78.5% of the outstanding shares. Pursuant to
an agreement between the Company's wholly owned
subsidiary, Minera ConSil, S.A de C.V. (Minera ConSil)
and Hecla Mining Company's wholly owned subsidiary,
Minera Hecla, S.A. de C.V. (Minera Hecla), the Company
recorded exploration expense totaling approximately
$141,687 in the first six months of 1996 in connection
with services performed by Minera Hecla under the
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
direction of the management of Minera ConSil at the Ojo
Caliente project and Sombrerete project. In addition,
the Company incurred exploration expenses charged by
Hecla Mining Company of $9,369 for the first six months
of 1996 and the Sombrerete project.
On June 28, 1996, ConSil and Hecla Mining Company
(Hecla), the majority shareholder in the Company, entered
into a loan agreement whereby Hecla agrees to make
available to ConSil a loan not to exceed $500,000. Under
the terms of the loan agreement, ConSil agrees to pay
interest on the outstanding balance at the prime interest
rate specified in the Wall Street Journal, plus one and
one-half percent per year until paid. The loan is
payable upon demand by Hecla, and is completely due by
December 31, 1996. In order to secure the loan, ConSil
has caused its wholly owned subsidiary Minera ConSil,
S.A. de C.V. to grant Hecla's wholly owned subsidiary,
Minera Hecla, S.A. de C.V. its rights under the Letter
Agreement dated February 9, 1996, by and between ConSil
Corp. and Grupo Catorce, S.A. de C.V., also known as the
Sombrerete Agreement. The loan agreement also places
certain restrictions on the Company, including
restrictions on assets, indebtedness, increases in
compensation, loans or advances to shareholders,
directors, or employees, capital stock, and hiring of new
employees. With prior approval of Hecla, these
restrictions can be lifted. At June 30, 1996, there was
no outstanding borrowing under the loan agreement with
Hecla.
In addition to the above transactions, the Company
incurred general and administrative expenses charged by
Hecla of approximately $14,131 and $7,408 for the first
six months of 1996 and 1995, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Except for the historical information contained herein,
the matters discussed that are forward-looking statements
involve risks and uncertainties, including the timely
development of future projects (such as the Ojo Caliente
and Sombrerete projects), the impact of metals prices,
changing market conditions and regulatory environment,
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
and other risks detailed from time to time in the
Company's Form 10-K and Form 10-Qs filed with the
Securities and Exchange Commission. Actual results may
differ materially from those projected. Forward-looking
statements included herein represent the Company's
judgment as of the date of this filing. The Company
disclaims, however, any intent or obligation to update
these forward-looking statements.
RESULTS OF OPERATIONS
FIRST SIX MONTHS 1996 COMPARED TO FIRST SIX MONTHS 1995
The Company reported a net loss of $270,975 or $0.03 per
share, in the first six months of 1996 compared to a net
loss of $30,068 in the same period in 1995. The increase
in net loss is primarily due to an increase in expenses
of $293,587, consisting of (1) increased exploration
expenditures totaling $184,204, most notably for the Ojo
Caliente and Sombrerete exploration projects, (2)
increased general and administrative expenses of $107,129
due to management salaries and costs associated with the
Vancouver office in the 1996 period, which were both
partly offset by a $72,880 increase in the income tax
benefit.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS
ENDED JUNE 30, 1995
The Company reported a net loss of $137,944, or $0.01 per
share, in the second quarter of 1996 compared to a net
loss of $21,414 in the same period in 1995. The increase
in net loss is primarily due to an increase in expenses
of $136,163, consisting of (1) increased exploration
expenditures totaling $84,783, most notably for the Ojo
Caliente and Sombrerete exploration projects, (2)
increased general and administrative expenses of $49,852
due to management salaries and costs associated with the
Vancouver office in the 1996 period, which were both
partly offset by a $30,807 increase in the income tax
benefit.
-8-
<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1996, assets totaled $275,042 and
shareholders' equity totaled $191,359. Cash and cash
equivalents decreased by $568,948 to $19,839 at June 30,
1996 from $588,787 at the end of 1995. Operating
activities used $541,851 of cash during the first six
months of 1996. The primary uses of cash were for
exploration expenditures on the Ojo Caliente and
Sombrerete exploration projects, and general and
administrative expenses.
The Company's investing activities used $23,660 of cash
during the first six months of 1996 for acquisition of
property, plant and equipment. The Company's financing
activities included the acquisition of treasury stock
totaling $3,437.
Working capital decreased $311,291 during the first six
months of 1996, from $394,831 at December 31, 1995 to
$83,540 at June 30, 1996. The decrease in working
capital is primarily the result of funding operating
losses associated with the exploration of the Company's
properties.
On June 28, 1996, ConSil and Hecla Mining Company
(Hecla), the majority shareholder in the Company, entered
into a loan agreement whereby Hecla agrees to make
available to ConSil a loan not to exceed $500,000. Under
the terms of the loan agreement, ConSil agrees to pay
interest on the outstanding balance at the prime interest
rate specified in the Wall Street Journal, plus one and
one-half percent per year until paid. The loan is
payable upon demand by Hecla, and is completely due by
December 31, 1996. In order to secure the loan, ConSil
has caused its wholly owned subsidiary Minera ConSil,
S.A. de C.V. to grant Hecla's wholly owned subsidiary,
Minera Hecla, S.A. de C.V. it's rights under the Letter
Agreement dated February 9, 1996, by and between ConSil
Corp. and Grupo Catorce, S.A. de C.V., also known as the
Sombrerete Agreement. The loan agreement also places
certain restrictions on the Company, including
restrictions on assets, indebtedness, increases in
compensation, loans or advances to shareholders,
directors, or employees, capital stock, and hiring of new
employees. With prior approval of Hecla, these
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
restrictions can be lifted. At June 30, 1996, there was
zero outstanding under the loan with Hecla.
On July 22, 1996, the Company announced that it signed a
Letter of Intent with Minas La Colorada, S.A.de C.V.
(MLC) for the acquisition of a 100% interest in MLC's
silver mining operations and a number of exploration
projects in the Chalchihuites mining district, state of
Zacatecas, Mexico. MLC's primary asset included in the
proposed acquisition is a producing silver mine located
90 kilometers northwest of Fresnillo. It is expected to
produce approximately 600,000 equivalent ounces of silver
during 1996, at a cash cost of approximately $2.50 per
ounce. The ore is contained in a combination of high
grade veins and a lower grade breccia pipe. The mining
rate is currently 300 tonnes per day. It is ConSil's
objective to increase mill capacity to 450 tonnes per day
and to expand the underground workings such that the mill
is fed from the high grade veins. With the proposed
expansion which is expected to take one to two years at a
capital cost of approximately $3,000,000, annual output
is expected to be approximately two million ounces per
year. No assurance can be made that an expansion will
occur. Proven and probable vein reserves, as determined
by MLC are 1,250,000 tonnes grading 404 grams per tonne
of silver, 0.2 grams per tonne of gold, 1.6% lead, and
1.3% zinc. Breccia pipe reserves have been calculated by
MLC at 12 million tonnes grading 83 grams per tonne
silver, 2.7% lead, and 2.7% zinc. A 1,000 ton per day
mining operation has been proposed for these breccia
pipes. ConSil plans to undertake a $1,000,000
feasibility study to determine the viability of the
breccia pipes project, although no assurance can be made
that a feasibility study will be undertaken.
Consideration for the proposed acquisition is 9,000,000
shares of ConSil common stock and the assumption of
$2,500,000 in debt by ConSil. The acquisition is subject
to due diligence, ConSil shareholder approval, approval
by regulatory authorities and execution of a definitive
agreement. The acquisition is also subject to the
Company completing an equity financing sufficient to
complete the acquisition, expand production, and explore
the exploration projects obtained in the proposed
acquisition. Due to a number of uncertainties associated
with the proposed acquisition, no assurance can be made
that the acquisition will be completed.
-10-
<PAGE> 11
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
On May 16, 1996, the Company announced that it had
completed its due diligence on the Sombrerete property,
Mexico, and had given notice to the property owners,
Grupo Catorce, S.A. de C.V., that it would enter into the
option agreement to purchase the property. The option
agreement will require the Company, on the signing of the
agreement, to pay Grupo Catorce, S.A. de C.V. $4,000 per
month for care and maintenance of the property. During
the option period, the Company can exercise its option to
purchase the property for $1 million payable over a
three-year period with $100,000 at the end of each of the
first and second years following the commencement of the
option period and $800,000 on the exercise of the option.
The option can be extended for up to five years with the
payment of an additional $150,000 preproduction royalty
for each year the option is extended, which preproduction
royalties are recoupable from the Net Smelter Returns
(NSR) Royalty discussed below. ConSil's cumulative
minimum work commitments are $200,000 for the first six
months following commencement of the option period,
$500,000 within 12 months and $1,500,000 within 24
months, plus $200,000 in exploration work during any
option extension year. Grupo Catorce will retain a 4%
NSR in all of the project property, which the Company can
reduce to a 2% NSR by paying $1 million to Grupo Catorce.
The purchase would include certain plant and equipment
encompassing a 400 tonnes per day flotation mill, two
operating shafts and related mining equipment and
infrastructure. If the property proves economically
viable, management intends to put the mine back into
production. However, there can be no assurances this
will occur or that the Company will be able to obtain
sufficient funding to meet its work commitments or
acquire the property.
The Company's exploration strategy is to focus its
efforts on the Ojo Caliente and Sombrerete projects in
Mexico. Exploration expenditures for the balance of 1996
are estimated to be approximately $0.5 million to $0.8
million.
The Company intends to partially finance planned
expenditures through a combination of (1) existing cash
and cash equivalents and (2) loan proceeds from the
$500,000 loan available from Hecla Mining Company.
Existing cash and cash equivalents are not sufficient to
fully fund planned expenditures. Management is also
<PAGE> 12
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
currently investigating raising additional capital via a
common or preferred stock offering. Management
anticipates an equity offering late in 1996, although
there can be no assurance that the timing of an equity
offering, or the ability to complete such an equity
offering will be achieved.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No.
123). SFAS No. 123 establishes financial accounting and
reporting standards for stock-based employee compensation
plans. SFAS No. 123 encourages all entities to adopt a
fair value based method of accounting, but allows an
entity to continue to measure compensation cost for those
plans using the intrinsic value method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees." The Company will comply with the
provisions of SFAS No. 123 on January 1, 1996, by
presenting the pro-forma disclosure requirements of SFAS
No. 123 in its 1996 annual financial statements.
-12-
<PAGE> 13
PART II - OTHER INFORMATION
CONSIL CORP.
ITEM 1. LEGAL PROCEEDINGS
There are no pending legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated April 2, 1996, related to
the announcement of the Company's common stock
trading on the Vancouver Stock Exchange.
Report on Form 8-K dated June 28, 1996, related to
the loan agreement between Hecla Mining Company and
ConSil Corp. dated June 28, 1996.
Items 2, 3, 4 and 5 of Part II are omitted from this report as
inapplicable.
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.
CONSIL CORP.
------------------------------------
(Registrant)
Date: August 14, 1996 By /s/ Gerald G. Carlson
---------------------------------
Gerald G. Carlson, President
Date: August 14, 1996 By /s/ Stanley E. Hilbert
---------------------------------
Stanley E. Hilbert, Principal
Accounting Officer
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 19,839
<SECURITIES> 0
<RECEIVABLES> 83,866
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167,223
<PP&E> 29,094
<DEPRECIATION> (2,748)
<TOTAL-ASSETS> 275,042
<CURRENT-LIABILITIES> 83,683
<BONDS> 0
0
0
<COMMON> 945,569
<OTHER-SE> (754,210)
<TOTAL-LIABILITY-AND-EQUITY> 275,042
<SALES> 0
<TOTAL-REVENUES> 3,384
<CGS> 0
<TOTAL-COSTS> 349,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (346,460)
<INCOME-TAX> 75,485
<INCOME-CONTINUING> (270,975)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,975)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0.00
</TABLE>
