<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, 1997
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.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
- ----------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
208-769-7610
- ------------------------------------------------------------------
(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 June 30, 1997
- -------------------------------------- -------------------------
Common stock, no par value 9,449,757 shares
<PAGE> 2
CONSIL CORP.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
I N D E X
---------
Page
----
PART I. - Financial Information
Item l - Consolidated Balance Sheets - June 30,
1997 and December 31, 1996 3
- Consolidated Statements of Operations and
Accumulated Deficit - Three Months and Six
Months Ended June 30, 1997 and 1996 4
- Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 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 11
Item 6 - Exhibits and Reports on Form 8-K 11
<PAGE> 3
PART I - FINANCIAL INFORMATION
CONSIL CORP.
Consolidated Balance Sheets (Unaudited)
(U.S. Dollars)
---------
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,301 $ 120,216
Accounts receivable - - 4,185
Other receivables 61,254 66,446
Income tax refund receivable 31,683 210,816
Prepaid and deferred expenses - - 3,022
---------- ----------
Total current assets 129,238 404,685
---------- ----------
Equipment,
(net of accumulated depreciation of
$4,241 and $6,241) 15,669 38,603
Deferred stock offering costs 49,410 29,682
---------- ----------
Total assets $ 194,317 $ 472,970
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - Hecla Mining Company $ 311,211 $ 362,802
Accounts payable - trade 4,197 2,683
Accrued liabilities 104,827 40,261
Accrued interest payable -
Hecla Mining Company 44,551 17,901
Note payable - Hecla Mining Company 480,301 500,000
---------- ----------
Total current liabilities 945,087 923,647
---------- ----------
Stockholders' deficit:
Preferred stock; $0.25 par value; authorized,
10,000,000 shares; issued and outstanding, none - - - -
Common stock; 1997 - no par value; 1996 - $0.10
par value; authorized: 1997 - 100,000,000 shares;
1996 - 20,000,000 shares; issued 9,455,689 shares 2,111,675 945,569
Discount on common stock - - (190,709)
Capital surplus - - 1,356,815
Accumulated deficit (2,858,984) (2,558,891)
Less: Common stock reacquired at cost;
1997 and 1996 - 5,932 shares (3,461) (3,461)
---------- ----------
Total stockholders' deficit (750,770) (450,677)
---------- ----------
Total liabilities and stockholders'
deficit $ 194,317 $ 472,970
========== ==========
</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,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Transfer fees $ - - $ - - $ - - $ 152
Interest 70 521 136 3,232
---------- ---------- ---------- ----------
70 521 136 3,384
---------- ---------- ---------- ----------
Expenses:
General and administrative 84,180 84,015 216,889 163,386
Exploration and acquisition 35,465 84,783 52,050 184,204
Depreciation 1,521 1,528 3,481 2,254
Interest 14,443 - - 26,651 - -
Loss on sale of equipment - - - - 1,158 - -
---------- ---------- ---------- ----------
135,609 170,326 300,229 349,844
---------- ---------- ---------- ----------
Loss before income tax benefit (135,539) (169,805) (300,093) (346,460)
Income tax benefit - - 31,861 - - 75,485
---------- ---------- ---------- ----------
Net loss (135,539) (137,944) (300,093) (270,975)
Accumulated deficit at
beginning of period (2,723,445) (1,778,911) (2,558,891) (1,645,880)
---------- ---------- ---------- ----------
Accumulated deficit at
end of period $(2,858,984) $(1,916,855) $(2,858,984) $(1,916,855)
========== ========== ========== ==========
Net loss per share of
common stock $ (0.01) $ (0.01) $ (0.03) $ (0.03)
========== ========== ========== ==========
Cash dividends per share $ - - $ - - $ - - $ - -
========== ========== ========== ==========
Weighted average number of
common shares outstanding 9,449,757 9,449,757 9,449,757 9,451,487
========== ========== ========== ==========
</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,
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $ (300,093) $ (270,975)
Noncash elements included in net loss:
Depreciation 3,481 2,254
Deferred income tax benefit - - (15,473)
Loss on sale of equipment 1,158 - -
Change in:
Accounts and other receivables 9,376 (2,206)
Income tax refund receivable 179,133 (33,906)
Prepaid and deferred expenses 3,022 - -
Accounts payable and accrued
liabilities 14,489 (198,984)
Accrued interest payable 26,650 - -
Other current assets - - (22,561)
---------- ----------
Net cash used by operating activities (62,784) (541,851)
---------- ----------
Investing activities:
Proceeds from sale of equipment 18,296 - -
Purchase of property,
plant and equipment - - (23,660)
---------- ----------
Net cash provided (used)
by investing activities 18,296 (23,660)
---------- ----------
Financing activities:
Borrowing on Hecla Note Payable 150,000 - -
Repayments on Hecla Note Payable (169,699) - -
Deferred stock offering costs (19,728) - -
Acquisition of treasury stock - - (3,437)
---------- ----------
Net cash used by financing activities (39,427) (3,437)
---------- ----------
Net decrease in cash
and cash equivalents (83,915) (568,948)
Cash and cash equivalents at
beginning of period 120,216 588,787
---------- ----------
Cash and cash equivalents at
end of period $ 36,301 $ 19,839
========== ==========
</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, 1996, as set forth in ConSil Corp.'s (the Company
or ConSil) 1996 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 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, 1996, 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 1997 presentation. These
reclassifications have 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, 1997 and 1996 are as follows (in thousands):
1997 1996
-------- --------
Current:
State income tax benefit $ - - $
(17,935)
Federal income tax benefit - - (42,077)
-------- --------
Total current benefit - - (60,012)
Deferred benefit - - (15,473)
-------- --------
Total $ - - $
(75,485)
======== ========
Note 4. At June 30, 1997, the Company had 9,449,757 common shares
outstanding of which Hecla Mining Company (Hecla, the majority
stockholder of the Company) owned 7,418,300 shares or 78.503%
of the outstanding shares.
Pursuant to an agreement between the Company's wholly owned
Mexican subsidiary, Minera ConSil, S.A de C.V. (Minera ConSil)
and Hecla Mining Company's wholly owned Mexican subsidiary,
Minera Hecla, S.A. de C.V. (Minera Hecla), the Company
received a credit against exploration expenses incurred in
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
1996 and through the first quarter of 1997 of $57,364. Actual
exploration expense for the first six months of 1997 in
connection with services performed by Minera Hecla under the
direction of the management of Minera ConSil was $13,767;
expenses for the first six months of 1996 were $141,687.
Certain general and administrative expenses are incurred by
Hecla and reimbursed by the Company. These expenses totaled
$9,750 for the first six months of 1997 compared to $14,131
for the first six months of 1996. In addition, the Company
reimbursed Hecla for $9,369 of exploration expenses in the
first six months of 1996.
On June 28, 1996, ConSil and Hecla entered into a loan
agreement whereby Hecla agreed to make available to ConSil a
loan not to exceed $500,000, due in its entirety on or before
December 31, 1996. On February 19, 1997 the Company and Hecla
amended the Loan Agreement to increase the amount available to
$700,000 with a due date of April 30, 1997. On April 16,
1997, the Loan Agreement - Second Amendment extended the date
of repayment to no later than August 1, 1997. As of
July 25, 1997, $580,301 was payable to Hecla under the Loan
Agreement.
Note 5. The Company prepares its consolidated financial statements in
accordance with generally accepted accounting principles
("GAAP") in the United States. The Company also has
regulatory reporting requirements in Canada. There are no
differences between U.S. GAAP and Canadian GAAP with respect
to stockholders' deficit or net loss at June 30, 1997 and the
six months then ended. For the six months ended
June 30, 1996, income would be reduced by $15,473 and
stockholders' deficit by $114,473 under Canadian GAAP.
Note 6. The Company received a notice letter dated June 26, 1997 from
the United States and the Coeur d'Alene Indian Tribe notifying
the Company that it may be added as a defendant in the
Coeur d'Alene River Basin natural resource damage litigation
pending under the Superfund law in Federal District Court in
Idaho. Management believes that any claim which might be made
against ConSil will not have a material adverse effect on the
operations and financial condition of ConSil. (Filed on Form
8-K dated July 4, 1997.)
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
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, the impact of metals prices, changing market
conditions and regulatory environment, and other risks
detailed from time to time in the Company's Form 10-K and Form
10-Qs filed with the United States Securities and Exchange
Commission. Actual results may differ materially from those
projected or implied. 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 OF 1997 COMPARED TO FIRST SIX MONTHS OF 1996
------------------------------------------------------------
The Company reported a net loss of $300,093 or $0.03 per
share, for the first six months of 1997 compared to a net loss
of $270,975 ($0.03 per share) in the same period in 1996. The
increase in the net loss is due primarily to an increase in
general and administrative expenses of $53,503, interest
expense of $26,651, and a decrease in the income tax benefit
of $75,485. The increase in general and administrative
expenses is primarily due to increases in legal fees and
investor relations expenses associated with the Company's
reporting requirements to securities regulators and
stockholders. Acquisition expenses relating to the Minas La
Colorada purchase were $78,647 for the first six months of
1997, and none in the same period of 1996. Interest expense
in the 1997 period relates to the note payable to Hecla which
was not outstanding during the 1996 period. Partially
offsetting these increases is the reduction in exploration
expenses of $210,800, due to a non-recurring credit received
from Minera Hecla in 1997 (see Note 4 of Notes to Consolidated
Financial Statements), and general reduction in exploration
activities in order to complete the Minas La Colorada
acquisition.
-8-
<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS
---------------------------------------------------------
ENDED JUNE 30, 1996
-------------------
The Company reported a net loss of $135,539 or $0.01 per share
in the second quarter of 1997, comparable to the net loss of
$137,944 ($0.01 per share) in the second quarter of 1996. The
components of each year's net loss are primarily general and
administrative expenses with a reduction of exploration and
acquisition expense in 1997 of $49,318 offset by an increase
in interest expense ($14,443) and the lack of income tax
benefits ($31,861 in 1996).
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
At June 30, 1997, assets totaled $194,317 and stockholders'
deficit totaled $750,770. Cash and cash equivalents decreased
by $83,915 to $36,301 at June 30, 1997 from $120,216 at
December 31, 1996. Operating activities used $62,784 of cash
during the first six months of 1997. The primary uses of cash
for operating activities were for administrative expenses and
acquisition expenses.
Working capital decreased $296,887 during the first six months
of 1997, from a negative $518,962 at December 31, 1996 to a
negative $815,849 at June 30, 1997. The decrease in working
capital is primarily the result of funding operating losses
associated with general and administrative expenses and
acquisition expenses.
On July 22, 1996, the Company entered into a Letter of Intent
with Minas La Colorada, S.A. de C.V. (MLC) which was replaced
by a Heads of Agreement dated December 19, 1996 for the
acquisition of a 100% interest in the assets of MLC. The
final Master Agreement was signed effective June 2, 1997
(Exhibit P10.5.) Consideration for the proposed acquisition
currently includes Hecla Mining Company, the Company's
majority stockholder, delivering from its holdings 4,000,000
shares of common stock of the Company to ConSil who will then
deliver 4,000,000 shares of its common stock to the
stockholders of MLC. ConSil will also assume debt of up to
$3,000,000 under the proposed agreement. The proposed
acquisition is also contingent upon ConSil completing an
equity financing sufficient to complete the acquisition,
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
expand production at MLC's mines, and fund exploration of the
MLC properties.
ConSil renegotiated an extension on all provisions of the
agreement with Grupo Catorce on the Sombrerete properties in
Zacatecas, Mexico, including a suspension of all required
expenditures and payments to Grupo Catorce. The current
extension expires August 31, 1997.
Further exploration work, as well as the proposed acquisition
of Minas La Colorada, are contingent upon the Company's
ability to obtain financing. If other sources of funds are
unavailable, Hecla has committed to fund the reasonable
minimum financial requirements of the Company through March
31, 1998. Existing cash and cash equivalents are not
sufficient to fully fund planned expenditures. Management is
currently investigating raising additional capital via a
common or preferred stock offering. On April 21, 1997 the
Company retained IBK Capital Corp. of Toronto to act as its
advisor in the planned equity offering. Work is currently
underway on obtaining financing through an equity offering.
There can be no assurance, however, that the planned equity
offering will be successful.
NEW ACCOUNTING PRONOUNCEMENT
----------------------------
In February 1997, Statement of Financial Accounting Standards
No. 128 (SFAS 128), "Earnings per Share" was issued. SFAS 128
establishes standards for computing and presenting earnings
per share (EPS) and simplifies the existing standards. This
standard replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires the dual
presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is
effective for financial statements issued for periods ending
after December 15, 1997, including interim periods and
requires restatement of all prior-period EPS data presented.
The Company does not believe the application of this standard
will have a material effect on the presentation of its earning
per share disclosures.
-10-
<PAGE> 11
PART II - OTHER INFORMATION
CONSIL CORP.
Item 1. Legal Proceedings
- ------ -----------------
There are no pending legal proceedings; however, ConSil
received a notice letter dated June 26 from the United States
and the Coeur d'Alene Indian Tribe notifying ConSil of the
intent to add conSil, along with other companies, as a
defendant in the Coeur d'Alene River Basin natural resource
damage litigation pending under the Superfund law in Federal
District Court in Idaho. It is ConSil's understanding that
the letters were issued to many companies in response to a
court-imposed deadline and before factual review has been
completed to support any claim. Notices are not lawsuits and
ConSil may or may not be added to the case. ConSil, which was
formed in 1968, never conducted operations on its
Coeur d'Alene River Basin properties itself but leased its
properties to other companies. Those lessees' activities
consisted primarily of exploration work and were undertaken at
a time when various environmental regulations were in place.
In addition, these activities involved no discharge of mill
tailings into the Coeur d'Alene River system which is a key
concern of the government and Tribe in the lawsuit. Based on
those and other factors, it is management's opinion that any
claim which might be made against ConSil will not have a
material adverse effect on the operations and financial
conditions of ConSil.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
27 - Financial Data Schedule
P10.5 - Master Agreement
(b) Reports on Form 8-K
None.
Items 2, 3, 4 and 5 of Part II are omitted from this report as
inapplicable.
-11-
<PAGE> 12
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: July 29, 1997 By: /s/ Ralph R. Noyes
-------------------------------------
Ralph R. Noyes
President, Chairman of the Board
and Director
Date: July 29, 1997 By: /s/ Cheryl Maher
-------------------------------------
Cheryl Maher
Vice President - Finance and
Controller (principal accounting
and financial officer)
-12-
<PAGE> 13
CONSIL CORP.
Form 10Q - Period Ending June 30, 1997
EXHIBIT LIST
Exhibit No. Description
----------- ------------------------------
27 Financial Data Schedule
P10.5 Master Agreement (Filed manually
pursuant to Form SE 7/29/97)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 36,301
<SECURITIES> 0
<RECEIVABLES> 92,937
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 129,238
<PP&E> 19,910
<DEPRECIATION> (4,241)
<TOTAL-ASSETS> 194,317
<CURRENT-LIABILITIES> 945,087
<BONDS> 0
0
0
<COMMON> 2,111,675
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 194,317
<SALES> 0
<TOTAL-REVENUES> 136
<CGS> 0
<TOTAL-COSTS> 273,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,651
<INCOME-PRETAX> (300,093)
<INCOME-TAX> 0
<INCOME-CONTINUING> (300,093)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,093)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
