<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 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 No. 0-4846-3
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CONSIL CORP.
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(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, B.C., Canada V6C 2T6
- ------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 604-331-0844
--------------------------
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Each Class is Registered
- --------------------------------------- -----------------------------------
Common stock, par value $0.10 per share Vancouver Stock Exchange
National Association of Securities
Dealers Automated Quotation
Bulletin Board
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the registrant's voting common stock held by
nonaffiliates was $2,661,209 as of February 28, 1997. As of February 28, 1997,
there were 9,449,757 shares of the registrant's common stock outstanding.
<PAGE> 2
PART I
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Item 1. Business
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(a) ConSil Corp., formerly Consolidated Silver Corporation
(the Company or ConSil), held mineral properties in Shoshone
County, Idaho known as the Silver Summit mine which were leased
effective August 1, 1980, to a joint venture composed of certain
substantial stockholders of the Company. This lease was terminated
by the lessees effective February 11, 1988. On November 1, 1988,
the Company entered into a new Mining Lease and Agreement and a
Participation Agreement (collectively, the Agreement) of its
properties to ASARCO Incorporated (ASARCO). Due to continued
depressed metals prices, the Agreement between the Company and
ASARCO was terminated effective August 17, 1992. From 1992 to
1994, management of the Company endeavored to interest other
companies in further exploration and development of the Company's
property without success.
On November 14, 1995, the Company's stockholders approved the
sale of its interest in the Silver Summit mine and adjacent mining
properties located in Shoshone County, Idaho to Sunshine Precious
Metals, Inc. for a cash payment of $750,000, plus a variable
production royalty tied to the price of silver.
In December 1995, the Company purchased from Hecla Mining
Company (Hecla), the majority stockholder of the Company, its
interest in the Ojo Caliente exploration project for $706,822. The
project is located near the town of Zacatecas, Mexico. The Company
also entered into an agreement with Minera Hecla, S.A. de C.V.
(Minera Hecla), a wholly owned subsidiary of Hecla, whereby Minera
Hecla would conduct exploration work on the Ojo Caliente property
and the Company would reimburse Minera Hecla for actual costs
incurred for exploration. Following exploration work in 1995 and
1996, the Company has elected not to allocate further funding to
the project. Management of the Company has determined that the
Company will not meet the minimum work commitments associated with
the Ojo Caliente property for the April 1, 1996 to March 31, 1997
period. Through December 31, 1996, the Company had spent $644,862
of the required spending of $1.0 million on exploration related
activities at the Ojo Caliente project for the period April 1, 1996
to March 31, 1997. As a result of the Company's election not to
meet the minimum work commitment obligation, the Company has
offered its interest in the Ojo Caliente exploration property to
Hecla subject to a Net Profits Interest payable to ConSil. As of
the date of this filing, no decision by Hecla has been reached with
respect to acquiring ConSil's interest in the Ojo Caliente
exploration project. Hecla has until April 4, 1997 to reach a
decision concerning the property. If Hecla elects not to obtain
ConSil's interest in the Ojo Caliente project, management of ConSil
anticipates attempting to renegotiate the agreement with Minera
Portree de Zacatecas, S.A. de C.V., a Mexican exploration company
(Minera Portree), although there can be no assurance that the
Company will be able to renegotiate the agreement with Minera
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Portree. If the Company is unable to renegotiate the agreement,
the Company's rights to the property will terminate (See Item 2.
Properties)
On February 13, 1996, the Company announced it had entered
into a letter agreement for a three-month, pre-option period to
purchase a 100% interest in the Sombrerete silver mine in the state
of Zacatecas, Mexico. The letter agreement called for the Company
to make three payments of $5,000 per month during the pre-option
period to Grupo Catorce, S.A. de C.V. (Grupo Catorce). During this
period, the Company performed an investigation of the property.
Subsequently, the Company entered into another letter agreement
with Grupo Catorce which amended the February 13, 1996 letter
agreement to postpone certain payments, extend the option date to
May 13, 1997, and provide the Company with an opportunity to
propose a revised exploration plan and terms of a definitive
agreement for the project. (See Item 2. Properties)
The Company is currently negotiating a definitive agreement to
acquire the assets of Minas La Colorada, S.A. de C.V., which
includes the Candelaria and Recompensa mines as well as several
exploration concessions, all located in the Chalchihuites mining
district of the State of Zacatecas, Mexico. There can be no
assurance that the Company will successfully negotiate an agreement
to acquire these assets. (See Item 2. Properties)
Management continues to evaluate other potential mineral
exploration projects and business opportunities with particular
emphasis on silver properties in Mexico.
(b) No information is presented as to Industry Segments.
(c) The Company holds interests in mining and mineral-bearing
exploration properties which, depending upon prices for the
products (primarily silver), vary considerably in economic
viability. The Company has no patents, licenses, franchises or
concessions which are considered by the Company to be of
importance. The business is not of a seasonal nature. Since the
potential products (primarily silver) are traded on the open
market, the Company has no control over the competitive conditions
in the industry.
The Company has spent no funds during the past three fiscal
years on mineral research activities relating to the development of
new products or services or the improvement of existing products or
services. However, the Company has incurred exploration expenses
of approximately $646,000 and $785,000 in 1996 and 1995,
respectively.
There are numerous federal, state and local laws and
regulations in the United States and Mexico related to
environmental protection which have direct application to mining
and milling activities. The more significant of these laws deal
with mined land reclamation and wastewater discharge from mines and
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milling operations. The Company does not believe that these laws
and regulations, as presently enacted, will have a direct material
adverse effect on its results of operations or financial condition.
Further, the Company believes that adequate provision has been made
for disposal of mine waste and mill tailings in a manner which
complies with current federal and state environmental requirements.
The Company currently has two employees. Certain
administrative services are provided by employees of Hecla, the
majority stockholder of the Company, for which a charge is made by
Hecla.
(d) The Company is primarily engaged in a mineral exploration
project in Mexico, held through the Company's wholly owned Mexican
subsidiary, Minera ConSil, S.A. de C.V. For geographic
information, see Note 9 of Notes to Consolidated Financial
Statements.
Item 2. Properties
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On November 14, 1995, at the annual meeting of the Company,
stockholders approved the sale of all of the Company's interest in
the Silver Summit mine, plant, equipment and all patented and
unpatented mining properties located in Shoshone County, Idaho, to
Sunshine Precious Metals, Inc. for a cash payment of $750,000 plus
a variable production royalty tied to the price of silver. A gain
on this sale of $750,000 was recognized in 1995.
On December 22, 1995, the Company acquired Hecla's right to
earn a 50 percent interest in Minera El Morro, S.A. de C.V., which
holds the Ojo Caliente silver exploration project in Zacatecas,
Mexico. The other investor in the project is Minera Portree. The
Company acquired Hecla's interest in the project by reimbursing
Hecla $706,822 for all expenditures incurred by Hecla in its
acquisition and for exploration costs related to the Ojo Caliente
project. In addition, should the Company decide to seek a partner
to assist in developing the Ojo Caliente project or putting it into
production, Hecla will have the first opportunity to provide that
assistance. Minera Hecla, Hecla's wholly owned Mexican subsidiary,
is conducting the exploration under ConSil's direction.
The Ojo Caliente project includes at least four zones of
mineralization that have never been systematically explored. The
main veins have been mapped and sampled recently by Minera Hecla.
The geology is similar to veins in the nearby Zacatecas District,
which has produced more than 600 million ounces of silver. Past
underground silver production in the Ojo Caliente area occurred in
the seventeenth century. Hecla's exploration activity during 1995
consisted of seven drill holes which tested two of the four vein
systems. Results of the 1995 drilling confirmed the presence of
the target veins at depth. One of these identified veins, Veta
Galvan, is traceable for several kilometers. The Company continued
the drilling program during 1996 to explore the previously drilled
vein systems at further depth and to explore the additional two
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vein systems. Besides Veta Galvan, several drill-ready targets
were identified through surface mapping and geochemical and
geophysical surveys.
Following exploration work in 1995 and 1996, the Company
elected not to allocate further funding to the Ojo Caliente
exploration project and has determined that the Company will not
meet the minimum work commitments associated with the Ojo Caliente
property for the April 1, 1996 to March 31, 1997 period. Through
December 31, 1996, the Company had spent $644,862 of the required
spending of $1.0 million on exploration related activities at the
Ojo Caliente project for the period April 1, 1996 to March 31,
1997. As a result of the Company's election not to meet the
minimum work commitment obligation, the Company has offered its
interest in the Ojo Caliente exploration property to Hecla subject
to a Net Profits Interest payable to ConSil. As of the date of
this filing, no decision by Hecla has been reached with respect to
acquiring ConSil's interest in the Ojo Caliente exploration
project. Hecla has until April 4, 1997 to reach a decision
concerning the property. If Hecla elects not to obtain ConSil's
interest in the Ojo Caliente project, management of ConSil
anticipates attempting to renegotiate the agreement with Minera
Portree, although there can be no assurance that the Company will
be able to renegotiate the agreement with Minera Portree. If the
Company is unable to renegotiate the agreement, the Company's
rights to the property will terminate.
On February 9, 1996, the Company entered into a letter
agreement for a three-month, pre-option period to purchase a 100%
interest in the Sombrerete silver mine in the state of Zacatecas,
Mexico, including all related surface and underground mining
rights, all related properties, permits and authorizations, and all
surface and underground equipment, buildings, and infrastructure.
The letter agreement called for the Company to make three payments
of $5,000 per month during the pre-option period to Grupo Catorce,
and for the Company to perform an investigation of the property.
In May 1996, the Company completed its preliminary
investigation of the Sombrerete silver mine and informed Grupo
Catorce that it intends to exercise its right to enter into an
option to purchase the property. The option agreement will require
the Company to pay Grupo Catorce $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
over a three-year period with $100,000 at the end of each of the
first and second year following 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
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
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during any option extension year. Grupo Catorce will retain a 4%
NSR royalty in all of the project property, which the Company can
reduce to a 2% NSR royalty by paying $1 million to Grupo Catorce.
ConSil has the right to withdraw from the agreement at any time
after completion of a minimum $200,000 of work on the property. As
of November 1996, the Company had completed the initial exploration
program, spending in excess of the required $200,000. On November
13, 1996, by letter agreement, ConSil received a six-month
extension on all provisions of the agreement, including a six-month
suspension on all required expenditures and payments to Grupo
Catorce.
The Sombrerete project consists of exploration for a
continuation of mineralization on silver veins in the Sombrerete
mining district also in the state of Zacatecas. The property has
produced approximately 180,000,000 ounces of silver during the
period 1555 to 1991 from a single vein system. In 1996, ConSil
diamond drilled the main vein, Pabellon, to test the continuation
of a suspected ore shoot near the surface, in order to block out
easily accessible reserves. Every hole in the program intersected
the vein, but the values were well below ore grade. Potential
along strike of the Pabellon vein remains to be tested.
One of the other areas of interest on the Sombrerete
concessions is an area of intense alteration and old mercury mines,
called Huracan. This kind of alteration and mercury mineralization
typically occurs in the rocks above the epithermal silver vein
systems. Surface geologic mapping has also shown structural
patterns commonly associated with silver vein mineralization in
this silver mineral belt in Mexico.
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 Candelaria and Recompensa silver mines,
which are currently producing, as well as several former producing
silver mines located in the Chalchihuites mining district, in the
state of Zacatecas, Mexico. As of March 1, 1997, the transaction
is subject to the completion of a definitive agreement which is
currently being drafted by the parties. Consideration for the
proposed acquisition currently includes Hecla Mining Company, the
Company's majority shareholder, delivering from its holdings
4,000,000 shares of common stock of the Company to ConSil. ConSil
will then deliver 4,000,000 shares of the Company's common stock to
the shareholders of MLC. ConSil will also assume up to $3,000,000
in debt under the proposed agreement. It is currently contemplated
that in return for Hecla's delivery of 4,000,000 shares to the
Company, ConSil will grant Hecla a right of first opportunity to
participate with ConSil in any project for which ConSil may seek a
partner or acquire any project ConSil wishes to abandon in Mexico,
as long as Hecla maintains a certain ownership level of ConSil.
The proposed acquisition is also subject to the Company completing
an equity financing sufficient to complete the acquisition, expand
production at MLC's silver mines, and explore the exploration
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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.
The Candelaria and Recompensa produce an aggregate of
approximately 300 tonnes per day which is processed by a flotation
concentrator. Silver bearing lead and zinc concentrates are sold
to smelters in Mexico. As of July 1996, proven and probable
reserves consisted of 1,068,000 tonnes grading 486 grams silver, 1%
lead and 1% zinc (equivalent English system measures are 1,174,800
tons grading about 15 ounces of silver per ton). Reserves were
established by the management of MLC and have been reviewed, but
not confirmed by the management of ConSil. Other properties
subject to acquisition include eleven mineralized breccia pipes.
Past production records indicate a resource of approximately
2,000,000 tonnes of mineralized material grading 150 grams silver,
3% lead and 3% zinc (equivalent English system measures are
2,200,000 tons grading 5 ounces of silver per ton).
Item 3. Legal Proceedings
-----------------
There are no pending legal proceedings.
Item 4. Matters Voted on by Security Holders
------------------------------------
The Company sent out a notice and information circular to each
of the Company's security holders on February 14, 1997 advising
that the Company would hold its annual meeting on March 17, 1997.
No shareholder meetings were held and no shareholder votes were
taken in 1996.
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PART II
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Item 5. Market for the Registrant's Common Equity and Related
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Stockholder Matters
-------------------
The common stock of the Company has been traded in the United
States since June 28, 1991, on the over-the-counter market and
quotations are published on the National Association of Securities
Dealers Automated Quotation (NASDAQ) Bulletin Board and in the
National Quotation Bureau "pink sheets" under the symbol CSLV. The
Common Stock of the Company was listed for trading on the Vancouver
Stock Exchange in Vancouver, British Columbia, Canada, on April 2,
1996, under the symbol CS. There has not been an active market for
the common stock and the below-described quotations, when
available, do not constitute a reliable indication of the price
that a holder of the common stock could expect to receive upon sale
of any particular quantity thereof.
The following table sets forth the high and low bid prices for
the Company's common stock, as reported by the National Quotation
Bureau and the Spokane Quotation Service for the quarterly periods
indicated. The prices reported by the National Quotation Bureau
and the Spokane Quotation Service represent prices between dealers,
which do not include retail markups, markdowns or commissions and
do not necessarily represent actual transactions.
Bid
---
High Low
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1996
First Quarter $ 1.13 $ .88
Second Quarter 1.00 .88
Third Quarter .94 .50
Fourth Quarter .75 .50
1995
First Quarter $ .62 $ .45
Second Quarter .76 .55
Third Quarter 1.21 .72
Fourth Quarter 1.27 .92
The approximate number of holders of record of the Company's
common stock as of February 28, 1997 was 3,390.
There have been no dividends declared or paid since the
Company's inception in 1969 and the Company does not expect to
declare dividends in the foreseeable future.
In August 1995, Hecla, the majority stockholder of the
Company, acquired Coeur d'Alene Mines Corporation's 630,888 shares
of the Company's outstanding common stock which increased Hecla's
holdings of the Company's outstanding common stock to 6,168,300
shares or 75.171% of the outstanding common stock. In September
1995, the Company issued Hecla 1,250,000 shares of common stock in
exchange for Hecla's 12,500 shares of the Company's preferred stock
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which represented the total preferred stock outstanding. The
preferred stock, formerly held by Hecla, was subsequently canceled.
At December 31, 1996, Hecla held 7,418,300, or 78.503%, shares of
the Company's outstanding common stock.
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Royalties $ - - $ - - $ - - $ - - $ 7,516
Other 3,678 794,319 30,808 31,164 158,603
--------- ---------- ---------- ---------- ----------
$ 3,678 $ 794,319 $ 30,808 $ 31,164 $ 166,119
========= ========== ========== ========== ==========
Net income (loss) $(913,011) $ (514,731) $ (30,179) $ (35,167) $ 81,440
========= ========== ========== ========== ==========
Net income (loss)
per common share $ (0.10) $ (0.06) $ - - $ - - $ 0.01
========= ========== ========== ========== ==========
Total assets $ 472,970 $ 748,438 $ 768,022 $ 805,792 $ 820,694
========= ========== ========== ========== ==========
Working capital $(518,962) $ 389,285 $ 751,702 $ 781,881 $ 817,048
========= ========== ========== ========== ==========
Redeemable preferred
stock $ - - $ - - $1,250,000 $1,250,000 $1,250,000
========= ========== ========== ========== ==========
Cash dividends $ - - $ - - $ - - $ - - $ - -
========= ========== ========== ========== ==========
</TABLE>
Item 7. 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 Sombrerete and MLC projects), the impact of
metals prices, changing market conditions and regulatory
environment, and other risks detailed in this Form 10-K. Actual
results may differ materially from those projected or implied.
Forward looking statements included herein represent the Company's
judgement as of the date of this filing. The Company disclaims,
however, any intent or obligation to update these forward-looking
statements.
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RESULTS OF OPERATIONS
1996 vs. 1995
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The Company reported a net loss of $913,011 or $0.10 per
share, for the year ended December 31, 1996 compared to a net loss
of $514,731, or $0.06 per share, in the comparable period in 1995.
The increase in the net loss is primarily due to (1) a decrease in
revenue of $790,641, primarily the result of the nonrecurring 1995
gain on sale of the Silver Summit mine of $750,000 and a decrease
in interest income of $34,489; (2) increased interest expense of
$17,901 related to the new note payable outstanding in 1996; and
(3) increased depreciation expense of $5,253. These factors were
partially offset by (1) an income tax benefit of $101,110 in 1996
compared to a $104,125 provision in 1995, the impact of which is a
positive $205,235; and (2) decreased exploration and acquisition
expenditures of $138,519, most notably for the Ojo Caliente
exploration project; and (3) decreased general and administrative
costs of $71,761 resulting from the 1995 compensation expense of
$228,800 relating to stock options, offset by higher labor and
office expenses in 1996.
1995 vs. 1994
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The Company reported a net loss of $514,731, or $0.06 per
share for the year ended December 31, 1995, compared to a net loss
of $30,179, or $0.00 per share, in the comparable 1994 period. The
increase in the net loss was due primarily to (1) an increase in
exploration expenditures totaling $784,956, primarily the result of
the purchase of the Company's interest in the Ojo Caliente
exploration project for $706,822; (2) increased general and
administrative expenses of $344,542, due to noncash compensation
expense totaling $228,800 related to common stock options granted
by Hecla for the Company's common stock owned by Hecla, and a
$115,742 increase in general and administrative expenses other than
noncash compensation related to stock options; and (3) a $104,125
income tax provision primarily due to the sale of the Silver Summit
mine and adjacent mining properties. These factors were partially
offset by a $750,000 gain from the sale of the Silver Summit mine
and related properties.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
At December 31, 1996, assets totaled $472,970 and
shareholders' deficit totaled $450,677. Cash and cash equivalents
decreased by $468,571 to $120,216 at December 31, 1996 from
$588,787 at the end of 1995. Operating activities used $901,588 of
cash during the year ended December 31, 1996. The primary uses of
cash for operating activities were for exploration and acquisition
expenditures on the Ojo Caliente and Sombrerete exploration
projects, and general and administrative expenses.
The Company's financing activities provided $472,427 of cash
during the year ended December 31, 1996. Cash was provided by
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borrowings under the note from Hecla of $500,000 partially offset
by payments for deferred stock offering costs of $24,136 and
acquisition of treasury stock totaling $3,437.
The Company's investing activities used $39,410 of cash during
the year ended December 31, 1996 for acquisition of office
equipment and an automobile.
Working capital decreased $908,247 during the year, from
$389,285 at December 31, 1995 to a negative $518,962 at December
31, 1996. The decrease in working capital is primarily the result
of funding exploration of the Company's properties and general and
administrative expenses. Management is currently taking steps to
raise additional equity via a common or preferred stock offering to
remedy the negative working capital situation. Management plans to
complete an equity offering in 1997, although there can be no
assurance that the Company will be successful in completing an
equity offering.
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. Under the terms of the loan agreement,
ConSil agreed 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 was payable
upon demand by Hecla, and was due in its entirety on or before
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 that certain 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. These restrictions can be altered with the prior
consent of Hecla. On February 19, 1997, the Company and Hecla
entered into an amendment to the loan agreement. Under the terms
of the amended loan agreement, the amount available under the loan
was increased to $700,000, and the due date of the loan was
extended to April 30, 1997. All other terms under the amended loan
agreement are substantially identical to the terms in the original
loan agreement. At December 31, 1996, there was $500,000
outstanding under the loan agreement with Hecla, and accrued
interest due to Hecla totaling $17,901.
On February 9, 1996, the Company entered into a letter
agreement for a three-month, pre-option period to purchase a 100%
interest in the Sombrerete silver mine in the state of Zacatecas,
Mexico, including all related surface and underground mining
rights, all related properties, permits and authorizations, and all
surface and underground equipment, buildings, and infrastructure.
The letter agreement called for the Company to make three payments
of $5,000 per month during the pre-option period to Grupo Catorce,
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<PAGE> 12
and for the Company to perform an investigation of the property. In
May 1996, the Company completed its preliminary investigation of
the Sombrerete silver mine and informed Grupo Catorce that it
intends to exercise its right to enter into an option to purchase
the property. The option agreement will require the Company to pay
Grupo Catorce $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 over a three-year
period with $100,000 at the end of each of the first and second
year following 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 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 royalty in all of the project
property, which the Company can reduce to a 2% NSR royalty by
paying $1 million to Grupo Catorce. ConSil has the right to
withdraw from the agreement at any time after completion of a
minimum $200,000 of work on the property. As of November 1996, the
Company had completed the initial exploration program, spending in
excess of the required $200,000. On November 13, 1996, by letter
agreement, ConSil has a six-month extension on all provisions of
the agreement, including a six-month suspension on all required
expenditures and payments to Grupo Catorce.
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 Candelaria and Recompensa silver mines,
which are currently producing, as well as several former producing
silver mines located in the Chalchihuites mining district, in the
state of Zacatecas, Mexico. As of March 1, 1997, the transaction
is subject to the completion of a definitive agreement which is
currently being drafted by the parties. Consideration for the
proposed acquisition currently includes Hecla Mining Company, the
Company's majority shareholder, delivering from its holdings
4,000,000 shares of common stock of the Company to ConSil. ConSil
will then deliver 4,000,000 shares of the Company's common stock to
the shareholders of MLC. ConSil will also assume up to $3,000,000
in debt under the proposed agreement. It is currently contemplated
that in return for Hecla's delivery of 4,000,000 shares to the
Company, ConSil will grant Hecla a right of first opportunity to
participate with ConSil in any project for which ConSil may seek a
partner or acquire any project ConSil wishes to abandon in Mexico,
as long as Hecla maintains a certain ownership level of ConSil.
The proposed acquisition is also subject to the Company completing
an equity financing sufficient to complete the acquisition, expand
production at MLC's silver mines, and explore the exploration
projects obtained in the proposed acquisition. Due to a number of
-12-
<PAGE> 13
uncertainties associated with the proposed acquisition, no
assurance can be made that the acquisition will be completed.
At the Ojo Caliente exploration project, following exploration
work in 1995 and 1996, the Company elected not to allocate further
funding for exploration activities. Management has determined that
the Company will not meet the minimum work commitments associated
with the Ojo Caliente property for the April 1, 1996 to March 31,
1997 period. Through December 31, 1996, the Company had expended
$644,862 of the required spending of $1.0 million on exploration
related activities at the Ojo Caliente project for the period
April 1, 1996 to March 31, 1997. As a result of the Company's
election not to meet the minimum work commitment obligation, the
Company has offered its interest in the Ojo Caliente exploration
property to Hecla subject to a Net Profits Interest payable to
ConSil. As of the date of this filing, no decision by Hecla has
been reached with respect to acquiring ConSil's interest in the Ojo
Caliente exploration project. Hecla has until April 4, 1997 to
reach a decision concerning the property. If Hecla elects not to
obtain ConSil's interest in the Ojo Caliente project, management of
ConSil anticipates attempting to renegotiate the agreement with
Minera Portree, although there can be no assurance that the Company
will be able to renegotiate the agreement with Minera Portree. If
the Company is unable to renegotiate the agreement, the Company's
rights to the property will terminate.
At December 31, 1996, the Company has negative working capital
of approximately $519,000 and a stockholders' deficit of
approximately $451,000. The Company intends to finance planned
expenditures partially through existing cash and cash equivalents
and additional borrowings under the note with Hecla. Existing cash
and cash equivalents and borrowings from Hecla are not sufficient
to fully fund planned expenditures. Management is investigating
raising additional capital via a common or preferred stock
offering. Management anticipates an equity offering in 1997,
although there can be no assurance that a timely equity offering
can be achieved. Further exploration work, as well as the proposed
acquisition of MLC are contingent upon the Company's ability to
obtain appropriate 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.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
See Item 14 for index of Financial Statements and Supplemental
Data filed herewith.
Item 9. Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosures
------------------------------------
None.
-13-
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors
and Stockholders
ConSil Corp.
We have audited the accompanying consolidated balance sheets of
ConSil Corp. and subsidiary (formerly Consolidated Silver
Corporation) as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted au-
diting standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial po-
sition of ConSil Corp. and subsidiary as of December 31, 1996 and
1995, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements,
the Company changed its method of accounting for long-lived assets
in 1995.
/s/ COOPERS & LYBRAND L.L.P.
Spokane, Washington
March 22, 1997
-14-
<PAGE> 15
CONSIL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
-------------
<TABLE>
<CAPTION>
ASSETS
1996 1995
----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 120,216 $ 588,787
Accounts receivable 4,185 1,410
Other receivables 66,446 - -
Income tax refund receivable 210,816 46,344
Deferred income taxes - - 33,000
Prepaid and deferred expenses 3,022 2,411
----------- ----------
Total current assets 404,685 671,952
----------- ----------
Equipment, net 38,603 4,940
Deferred income taxes - - 66,000
Deferred stock offering costs 29,682 5,546
----------- ----------
Total assets $ 472,970 $ 748,438
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - Hecla Mining Company $ 362,802 $ 279,598
Accounts payable - trade 2,683 3,069
Accrued liabilities 40,261 - -
Accrued interest payable - Hecla Mining Company 17,901 - -
Note payable - Hecla Mining Company 500,000 - -
----------- ----------
Total current liabilities 923,647 282,667
----------- ----------
Commitments (Notes 2, 5, and 10)
Stockholders' equity (deficit):
Preferred stock; $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 (2,558,891) (1,645,880)
Less: Common stock reacquired at cost
(1996 - 5,932 shares; 1995 - 6 shares) (3,461) (24)
----------- ----------
Total stockholders' equity (deficit) (450,677) 465,771
----------- ----------
Total liabilities and stockholders' equity (deficit) $ 472,970 $ 748,438
=========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-15-
<PAGE> 16
CONSIL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1996, 1995 and 1994
---------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- -----------
<S> <C> <C> <C>
Revenue:
Interest $ 3,526 $ 38,015 $ 28,452
Transfer fees 152 844 356
Gain on sale of mining property - - 750,000 - -
Other - - 5,460 2,000
----------- ----------- -----------
3,678 794,319 30,808
----------- ----------- -----------
Expenses:
General and administrative 347,714 419,475 74,933
Exploration and acquisition 646,437 784,956 - -
Depreciation 5,747 494 - -
Interest 17,901 - - - -
----------- ----------- -----------
1,017,799 1,204,925 74,933
----------- ----------- -----------
Loss before income taxes (1,014,121) (410,606) (44,125)
Income tax provision (benefit) (101,110) 104,125 (13,946)
----------- ----------- -----------
Net loss $ (913,011) $ (514,731) $ (30,179)
=========== =========== ===========
Net loss per share of common stock $ (0.10) $ (0.06) $ - -
=========== =========== ===========
Weighted average number of
common shares outstanding 9,450,691 8,365,939 8,205,683
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
-16-
<PAGE> 17
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1996, 1995 and 1994
-----------
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net loss $ (913,011) $ (514,731) $ (30,179)
Adjustments to reconcile net loss
to net cash used by operations:
Gain on sale of mining property - - (750,000) - -
Compensation expense associated with
stock options - - 228,800 - -
Depreciation 5,747 494 - -
Deferred income tax provision (benefit) 99,000 (99,000) - -
Change in:
Accounts and other receivables (69,221) (910) (500)
Income tax refund receivable (164,472) (32,905) 6,366
Prepaid and deferred expenses (611) (1,814) (597)
Accounts payable and accrued liabilities 123,079 277,937 (5,460)
Property taxes payable - - (11,590) (2,131)
Accrued interest payable 17,901 - - - -
---------- ---------- ----------
Net cash used by operating activities (901,588) (903,719) (32,501)
---------- ---------- ----------
Investing activities:
Proceeds from sale of mining property - - 750,000 - -
Acquisition of equipment (39,410) (5,434) - -
---------- ---------- ----------
Net cash provided (used) by investing activities (39,410) 744,566 - -
---------- ---------- ----------
Financing activities:
Deferred stock offering costs (24,136) (5,546) - -
Proceeds from note payable 500,000 - - - -
Acquisition of treasury stock (3,437) - - - -
---------- ---------- ----------
Net cash provided (used) by financing activities 472,427 (5,546) - -
---------- ---------- ----------
Net decrease in cash and cash equivalents (468,571) (164,699) (32,501)
Cash and cash equivalents at beginning
of year 588,787 753,486 785,987
---------- ---------- ----------
Cash and cash equivalents at end of year $ 120,216 $ 588,787 $ 753,486
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes $ (35,638) $ 236,000 $ - -
========== ========== ==========
For noncash financing activities see Notes 6 and 7
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
-17-
<PAGE> 18
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1996, 1995 and 1994
--------------------
<TABLE>
<CAPTION>
Discount
Preferred Stock Common Stock on
------------------- --------------------- Common Capital Accumulated Treasury
Shares Amount Shares Amount Stock Surplus Deficit Stock
------- ----------- --------- --------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 12,500 $ 1,250,000 8,205,689 $ 820,569 $(190,709) $ 3,015 $(1,100,970) $ (24)
Net loss (30,179)
------- ----------- --------- --------- --------- ---------- ----------- -------
Balances, December 31, 1994 12,500 1,250,000 8,205,689 820,569 (190,709) 3,015 (1,131,149) (24)
Net loss (514,731)
Deemed capital contributions
relating to common stock
options granted by Hecla
Mining Company 228,800
Common stock issued to
Hecla Mining Company in
exchange for preferred
stock (12,500) (1,250,000) 1,250,000 125,000 1,125,000
------- ----------- --------- --------- --------- ---------- ----------- -------
Balances, December 31, 1995 - - - - 9,455,689 945,569 (190,709) 1,356,815 (1,645,880) (24)
Net loss (913,011)
Acquisition of treasury stock (3,437)
------- ----------- --------- --------- --------- ---------- ----------- -------
Balances, December 31, 1996 - - $ - - 9,455,689 $ 945,569 $(190,709) $1,356,815 $(2,558,891) $(3,461)
======= =========== ========= ========= ========= ========== =========== =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
-18-
<PAGE> 19
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
ConSil Corp. (the Company or ConSil), formerly Consolidated
Silver Corporation, and its wholly owned subsidiary Minera ConSil,
S.A. de C.V. (formed on December 20, 1995) currently hold interests
in mining and mineral-bearing properties in Mexico. Although the
Company has no operating properties, its management continues to
evaluate potential mineral exploration projects and business
opportunities with particular emphasis on silver properties in
Mexico.
The accompanying consolidated financial statements include the
accounts of ConSil and its wholly owned subsidiary. All
significant intercompany transactions and accounts are eliminated
in consolidation. The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates.
At December 31, 1996, 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.
The financial statements have been prepared on a going concern
basis which assumes realization of assets and liquidation of
liabilities in the normal course of business. At December 31,
1996, the Company has negative working capital of approximately
$519,000 and a stockholders' deficit of approximately $451,000.
Included in current liabilities is a $500,000 note payable to Hecla
which is due in April 1997. Management of the Company anticipates
improving the Company's financial condition through an equity
offering in 1997; although there can be no assurance that the
Company will be successful in raising additional capital. If other
sources of funds are unavailable, Hecla has committed to fund the
reasonable minimum financial requirements of the Company through
March 1998.
-19-
<PAGE> 20
Exploration
- -----------
Exploration costs are charged to operations as incurred. The
purchase of Hecla's interest in the Ojo Caliente exploration
project in 1995, which principally included a reimbursement of
Hecla's exploration costs expended on the property was charged to
operations (see Note 2).
Net Loss Per Share
- ------------------
Net loss per share of common stock is based on the weighted
average number of common shares outstanding during each period.
Cash Equivalents
- ----------------
The Company considers cash equivalents to be highly liquid
investments purchased with a remaining maturity of three months or
less. The Company's financial instruments that are exposed to
concentrations of credit risk consist primarily of cash and cash
equivalents. The Company places its cash and temporary cash
investments with institutions of high credit-worthiness. At times,
such investments may be in excess of the FDIC insurance limit.
Deferred Stock Offering Costs
- -----------------------------
Deferred stock offering costs consist of costs associated with
planned equity offerings. The deferred stock offering costs will
be offset against the gross proceeds from the issuance of equity
securities, if the stock offering is successful, or will be charged
to operations, if the stock offering is not successful.
Income Taxes
- ------------
The Company records deferred tax liabilities and assets for
the expected future income tax consequences of events that have
been recognized in its financial statements. Deferred tax
liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and
the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the temporary differences are expected
to reverse.
Reclassifications
- -----------------
Certain 1995 and 1994 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.
-20-
<PAGE> 21
2. Mineral Rights
--------------
In December 1995, the Company purchased from Hecla its
interest in the Ojo Caliente exploration project located near the
town of Zacatecas in the state of Zacatecas, Mexico, for $706,822.
In conjunction with the Ojo Caliente and Sombrerete projects,
the Company's wholly owned Mexican subsidiary, Minera ConSil,
entered into an agreement with Minera Hecla, S.A. de C.V. (Minera
Hecla), a wholly owned subsidiary of Hecla, whereby Minera Hecla
would carry out exploration activities on the projects for which
the Company would reimburse Minera Hecla for its costs. During the
years ended December 31, 1996 and 1995, the Company incurred
$453,793 and $78,134, respectively, of exploration expense under
this agreement. At December 31, 1996 and 1995, $278,894 and
$70,469, respectively, of these exploration services are included
in accounts payable.
The Company has a commitment to spend the following minimum
amounts on exploration and development at the Ojo Caliente
exploration project (any amounts spent in excess of any one year's
commitment can be applied to the minimum expenditures of the
following year):
Period Covered Minimum Spending
------------------------ ----------------
April 1995 to March 1996 $ 265,000
April 1996 to March 1997 1,000,000
April 1997 to March 1998 1,200,000
-----------
$ 2,465,000
===========
The commitment for April 1995 to March 1996 was satisfied as
of September 30, 1995 by Hecla, prior to the Company's purchase
from Hecla. The Company carried over $394,563 from 1995 to 1996
and expended an additional $250,299 through December 31, 1996 for a
total of $644,862, as of December 31, 1996. Following exploration
work in 1995 and 1996, the Company elected not to allocate further
funding to the project. Management of the Company has determined
that the Company will not meet the remaining obligation to spend an
additional $355,138 on exploration activities at the Ojo Caliente
project prior to March 31, 1997. As a result of the Company's
election not to meet the minimum work commitment obligation, the
Company has offered its interest in the Ojo Caliente exploration
property to Hecla subject to a Net Profits Interest payable to
ConSil. No decision by Hecla has been reached with respect to
acquiring ConSil's interest in the Ojo Caliente exploration
project. Hecla has until April 4, 1997 to reach a decision
concerning the property. If Hecla elects not to obtain ConSil's
interest in the Ojo Caliente project, management of ConSil
anticipates attempting to renegotiate the agreement with Minera
Portree, although there can be no assurance that the Company will
be able to renegotiate the agreement with Minera Portree. If the
-21-
<PAGE> 22
Company is unable to renegotiate the agreement, the Company's
rights to the property will terminate.
On February 9, 1996, the Company entered into a letter
agreement (Sombrerete Agreement) for a three-month, pre-option
period to purchase a 100% interest in the Sombrerete silver mine in
the state of Zacatecas, Mexico, including all related surface and
underground mining rights, all related properties, permits and
authorizations, and all surface and underground equipment,
buildings, and infrastructure. The letter agreement called for the
Company to make three payments of $5,000 per month during the pre-
option period to Grupo Catorce, and for the Company to perform an
investigation of the property. In May 1996, the Company completed
its preliminary investigation of the Sombrerete silver mine and
informed Grupo Catorce that it intends to exercise its right to
enter into an option to purchase the property. The option
agreement will require the Company to pay Grupo Catorce $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 over a three-year period with $100,000 at
the end of each of the first and second year following 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 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 royalty in all of the project property, which
the Company can reduce to a 2% NSR royalty by paying $1 million to
Grupo Catorce. ConSil has the right to withdraw from the agreement
at any time after completion of a minimum $200,000 of work on the
property. As of November 1996, the Company had completed the
initial exploration program, spending in excess of the required
$200,000. On November 13, 1996, by letter agreement, ConSil has a
six-month extension on all provisions of the agreement, including a
six-month suspension on all required expenditures and payments to
Grupo Catorce.
In November 1995, the Company completed the sale of the Silver
Summit mine property located in Shoshone County, Idaho, to Sunshine
Precious Metals, Inc. (Sunshine). The sales agreement conveyed all
of the Company's subsurface mineral rights and the mill site in
exchange for a cash payment of $750,000 to the Company. The
Company also transferred all on-site reclamation and environmental
liabilities to Sunshine. All off-site reclamation and
environmental liabilities, if any, related to the Silver Summit
mine property were retained by the Company. In addition, Sunshine
shall pay the Company a variable production royalty, based on the
price of silver, ranging from 2.0% to 4.0% of the net smelter
returns. The assets sold had no net book value; therefore, the
-22-
<PAGE> 23
Company recognized the $750,000 as a gain on sale of the mining
property.
3. Equipment
---------
The major components of equipment are as follows:
December 31,
1996 1995
-------- --------
Furniture and fixtures $ 29,094 $ 5,434
Vehicle 15,750 - -
-------- --------
44,844 5,434
Less accumulated depreciation
(6,241) (494)
-------- --------
$ 38,603 $ 4,940
======== ========
Equipment is stated at the lower of cost or estimated net
realizable value. Maintenance, repairs and renewals are charged to
operations. Betterments of a major nature are capitalized. When
assets are retired or sold, the costs and related allowances for
depreciation and amortization are eliminated from the accounts and
any resulting gain or loss is reflected in operations.
Depreciation is based on the estimated useful lives of assets and
is computed using the straight-line method.
The Company adopted the provisions of Statement of Financial
Accounting Standards, No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(SFAS No. 121) effective January 1, 1995. The adoption of the
provisions of SFAS No. 121 had no material effect on the results of
operations, financial condition, or cash flows of the Company.
-23-
<PAGE> 24
4. Income Taxes
------------
The components of the Company's income tax provision (benefit)
for the years ended December 31, 1996, 1995 and 1994 are as
follows:
1996 1995 1994
--------- --------- ---------
Current
Federal $(173,869) $ 164,112 $ (11,630)
State (26,241) 39,013 (2,316)
--------- --------- ---------
(200,110) 203,125 (13,946)
--------- --------- ---------
Deferred:
Federal 80,000 (80,000) - -
State 19,000 (19,000) - -
--------- --------- ---------
99,000 (99,000) - -
--------- --------- ---------
Total $(101,110) $ 104,125 $ (13,946)
========= ========= =========
The income tax provision (benefit) for the years ended
December 31, 1996, 1995 and 1994 differs from the amounts which
would be provided by applying the statutory federal income tax rate
to the loss before income taxes. The reasons for the differences
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Computed "statutory" $(344,801) (34)% $ (139,606) (34)% $ (15,003) (34)%
benefit
Effect of surtax
exemption - - - - - - - - 3,373 7
Effect of other
expenses (4,490) - - 77,792 19 - - - -
Valuation allowance
due to uncertainty
of recovery of
deferred tax assets 255,422 25 197,714 48 - - - -
Effect of state
income taxes (7,241) (1) (31,775) (8) (2,316) (5)
--------- --- ---------- --- --------- ---
$(101,110) (10)% $ 104,125 25% $ (13,946) (32)%
========= === ========== === ========= ===
</TABLE>
-24-
<PAGE> 25
At December 31, 1996 and 1995, the Company had the following
deferred tax asset:
1996 1995
--------- ---------
Capitalized exploration costs $ 453,136 $ 296,714
Valuation allowance (453,136) (197,714)
--------- ---------
Net deferred tax asset $ - - $ 99,000
========= =========
The change in the valuation allowance during the years ended
December 31, 1996 and 1995 is as follows:
1996 1995
-------- --------
Balance,
beginning of year $ 197,714 $ - -
Increase due to
nonutilization of
net operating loss
carryforwards 255,422 197,714
--------- ---------
Balance, end of year $ 453,136 $ 197,714
========= =========
The Company has recorded the above valuation allowance to
reflect the estimated amount of the deferred tax asset which may
not be realized principally due to limitation of the refunds
available during the carryback period and the uncertainty regarding
the generation of future taxable income to utilize reversing
deductible items. The realization of the Company's future
deductible items that are not recoverable through the refund of
prior income taxes is dependent upon the Company's ability to
generate future taxable income. If it becomes more likely than not
that the Company will generate future taxable income, the valuation
allowance could be adjusted in the near term.
5. Note Payable
------------
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. Under the terms of the loan agreement,
ConSil agreed to pay interest on the outstanding balance at the
prime interest rate plus one and one-half percent, which was 9.75%
at December 31, 1996. The loan was payable upon demand by Hecla,
and was due in its entirety on or before December 31, 1996. In
order to collateralize 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
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. These restrictions can be altered with the prior
consent of Hecla. At December 31, 1996, the Company was in
compliance with these restrictions. On February 19, 1997, the
-25-
<PAGE> 26
Company and Hecla entered into an amendment to the loan agreement.
Under the terms of the amended loan agreement, the amount available
under the loan was increased to $700,000, and the due date of the
loan was extended to April 30, 1997. All other terms under the
amended loan agreement are substantially identical to the terms in
the original loan agreement. At December 31, 1996, there was
$500,000 outstanding under the loan agreement with Hecla, and
accrued interest due to Hecla totaling $17,901. Interest expense
related to this note for the year ended December 31, 1996 was
$17,901.
6. Common and Preferred Stock
--------------------------
In September 1995, the Company issued 1,250,000 shares of
common stock to Hecla in exchange for 12,500 shares of preferred
stock held by Hecla which represented the total outstanding shares
of preferred stock. The preferred shares previously held by Hecla
were subsequently cancelled. The rights of the authorized
preferred stock will be determined by the Board of Directors, if
and when any preferred stock is issued.
7. Related Party Transactions
--------------------------
In addition to related party transactions described in Notes
2, 5 and 6, during the years ended December 31, 1996, 1995 and
1994, general and administrative expenses of $24,773, $88,172, and
$26,885, respectively, were charged to the Company by Hecla. Also,
during the year ended December 31, 1996, the Company purchased a
vehicle from Hecla for $15,750.
As of January 1, 1997, Hecla and the Company's President
entered into a Stock Option Agreement which revised a prior
agreement dated November 14, 1995, whereby Hecla granted the
President the following options to purchase the Company's common
stock which is currently owned by Hecla:
Option
Price Shares
----------- ---------
$0.10 200,000
0.50 225,000(1)
1.00 225,000(2)
----------- ---------
$0.10-$1.00 650,000
=========
(1) Contingent upon obtaining financing, as defined.
(2) Contingent upon the closing of certain transactions.
The non-contingent options are fully vested and expire
December 31, 1998.
In conjunction with the November 1995 agreement, Hecla had
also granted options to the Company's former President. Due to the
-26-
<PAGE> 27
former President's resignation in 1996, these options expired
unexercised.
The estimated fair value of the Company's common stock at the
date of grant of the non-contingent options exceeded the $0.10
option price. Accordingly, during the year ended December 31,
1995, the Company recorded $228,800 of compensation expense and a
related capital contribution from Hecla relating to these options.
Additional compensation expense may be recorded on the contingent
option grants upon the removal of the contingency and based upon
the fair value of the Company's common stock at that time.
8. Fair Value of Financial Instruments
-----------------------------------
The following estimated fair value amounts have been
determined using available market information and appropriate
valuation methodologies. However, considerable judgment is
required to interpret market data and to develop the estimates of
fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in
a current market exchange.
The estimated fair values of financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
---------------------- -----------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 120,216 $ 120,216 $ 588,787 $ 588,787
Accounts and other
receivables 70,631 70,631 1,410 1,410
Income tax refund
receivable 210,816 210,816 46,344 46,344
Financial liabilities:
Current liabilities 423,647 423,647 282,667 282,667
Note payable 500,000 500,000 - - - -
</TABLE>
Due to the nature of cash and cash equivalents, receivables,
and current liabilities, the fair value approximates their carrying
amounts. The fair value of the note payable approximates its
carrying value due to the term and variable interest rate
associated with the note.
-27-
<PAGE> 28
9. Geographic Segments
-------------------
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Net income (loss)
United States $ (362,585) $ 270,719
Mexico (442,976) (784,956)
Canada (107,450) (494)
----------- -----------
$ (913,011) $ (514,731)
=========== ===========
Depreciation
United States $ 1,200 $ - -
Canada 4,547 494
----------- -----------
$ 5,747 $ 494
=========== ===========
Identifiable assets(1)
Equipment:
United States $ 18,710 $ - -
Mexico - - - -
Canada 19,893 4,940
----------- -----------
$ 38,603 $ 4,940
=========== ===========
General corporate assets
United States $ 327,838 $ 743,498
Mexico 66,446 - -
Canada 40,083 - -
----------- -----------
$ 434,367 $ 743,498
=========== ===========
</TABLE>
(1) Identifiable assets of each country are those that are directly
identified with those operations. General corporate assets consist
primarily of cash and cash equivalents, receivables and income
taxes.
As of and for the year ended December 31, 1994 there were no
operations or assets outside of the United States.
10. Lease Commitment
----------------
In 1996, the Company entered into leases for office space and
equipment. All leases are operating leases with maturity dates
between May 1999, and January 2000. In January 1997, all leases
were assumed by an assignee and the Company has no further
obligations under the lease agreements. During 1996, the Company
incurred rent expense of $22,751.
-28-
<PAGE> 29
11. Reconciliation of U.S. Generally Accepted Accounting
----------------------------------------------------
Principles (GAAP) to Canadian GAAP
----------------------------------
The Company prepares its consolidated financial statements in
accordance with generally accepted accounting principles as
practiced in the United States. The differences between U.S. GAAP
and Canadian GAAP and effects on stockholders' equity (deficit) at
December 31, 1996 and 1995 and the net loss for the years ended
December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C> <C>
Total stockholders' equity (deficit)
at December 31, per U.S. generally
accepted accounting principles $ (450,677) $ 465,171
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax assets - - (99,000)
----------- -----------
Total stockholders' equity (deficit)
at December 31, per Canadian
generally accepted accounting
principles $ (450,677) $ 366,171
=========== ===========
1996 1995 1994
----------- ----------- ---------
Net loss for the year ended
December 31, per U.S. generally
accepted accounting principles $ (913,011) $ (514,731) $ (30,179)
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax (provision)
benefit (99,000) 99,000 - -
---------- ---------- ---------
Net loss for the year ended
December 31, per Canadian
generally accepted accounting
principles $(1,012,011) $ (415,731) $ (30,179)
=========== =========== =========
</TABLE>
-29-
<PAGE> 30
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information required by this item is incorporated herein
by reference to Item 12 of this report.
Item 11. Executive Compensation
----------------------
Reference is made to the information set forth under the
caption "Remuneration and Other Compensation of Management" in the
Information Statement filed pursuant to Regulation 14C, which
information is incorporated herein by reference.
The Company's policy during 1996 was to compensate the
Company's Board of Directors with an annual retainer of $750 and a
meeting fee of $200 per meeting attended in person. No directors
were compensated pursuant to this policy during 1996.
Charges of $24,773, $88,172 and $26,885 were made to the
Company by Hecla in 1996, 1995 and 1994, respectively, for
accounting and other administrative services rendered by employees
of Hecla.
Item 12. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management
----------
(a) Security ownership of certain beneficial owners as of
March 1, 1997:
<TABLE>
<CAPTION>
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Ownership Class
- --------------- ------------------------ -------------------- -------
<S> <C> <C> <C>
Common stock Hecla Mining Company
Coeur d'Alene, Idaho 7,418,300 shares 78.503
</TABLE>
In 1996, the Company purchased 5,926 shares from dissenting
stockholders which increased the balance of treasury shares from 6
shares to 5,932 shares and thereby reduced overall outstanding
shares and increased Hecla's percentage ownership of the Company's
outstanding common stock from 78.453% to 78.503%.
-30-
<PAGE> 31
(b) Security ownership of management as of March 1, 1997:
<TABLE>
<CAPTION>
Common Shares
Year First Owned Beneficially,
Elected As Directly or Indirectly, Percent
Name Age A Director as of March 1, 1997 of Class (4)
---- --- ---------- ----------------------- ------------
<S> <C> <C> <C> <C>
Ralph R. Noyes (1) 49 1991 380,000 3.81%
Chairman of the Company since
1995 and President since
December 1, 1996. Mr. Noyes
previously served as President
from 1991 to 1994. He was Vice
President of Metal Mining and
Exploration for Hecla Mining
Company from 1988 to 1995.
Michael B. White (2) 46 1989 61,000 *
Vice President since 1992 and
Secretary from 1982 to 1995.
Mr. White is Vice President-
General Counsel and Secretary
of Hecla Mining Company.
Cheryl Maher (3) 46 ---- 100,000 1.00%
Vice President of Finance and
Controller since January 1,
1997. Ms. Maher, a certified
public accountant, has
practiced public accounting
since 1993. Prior to that, she
was employed as the Financial
Operations specialist for Hecla
Mining Company.
Charles F. Asher (3) 75 1992 60,000 *
President of Plainview Mining
Company. He has served as a
director of Merger Mines
Corporation and Verna Mae
Mining since 1987.
Robert Stuart Angus (3) 47 1995 60,000 *
Mr. Angus is a partner with the
Canadian law firm of Stikeman
Elliot in Vancouver, British
Columbia. He serves on the
boards of several public
Canadian mineral resource
companies.
William J. Weymark (3) 44 1995 60,000 *
President of Vancouver Wharves
since 1996. Prior to that, he
was Vice President of
Operations of Vancouver Wharves
from 1991 to 1996. He serves
on the boards of several public
Canadian resource companies.
All Officers and Directors as a Group (6 Individuals) 721,000 7.24%
</TABLE>
-31-
<PAGE> 32
There are no family relationships between any of the executive
officers and directors.
* Less than one percent (1%) of the total issued and outstanding
shares of Common Stock.
(1) Includes 200,000 shares subject to options exercisable within
60 days granted by Hecla Mining Company (See Note 7 to the
Consolidated Financial Statements.) and 175,000 shares subject
to options granted under the Company's Stock Option Plan that
are exercisable within 60 days.
(2) Includes 60,000 shares subject to options granted under the
Company's Stock Option Plan that are exercisable within 60
days. Additionally, Mr. White is the beneficial owner of
24,018 shares of common stock of Hecla Mining Company, the
majority shareholder of the Company, including 4,200 options
exercisable within 60 days. The exercise price of these
options is currently greater than the market price of Hecla
Mining Company's common stock.
(3) Consists solely of shares subject to options granted under the
Company's Stock Option Plan that are exercisable within 60
days.
(4) In addition to the 9,449,757 shares of common stock currently
outstanding, the 515,000 shares subject to options granted
under the Company's Stock Option Plan were deemed to be
outstanding for the purpose of computing the percentage of
outstanding securities of the common stock owned by such
persons.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The following executive officers and directors have been
granted options in 1997 pursuant to the Company's Stock Option
Plans.
<TABLE>
<CAPTION>
No. of Shares Exercise Price Expiration
Name of Optionee Under Option Per Share (U.S.$) Date
---------------- ------------ ----------------- ----
<S> <C> <C> <C>
Incentive Stock Options:
Ralph Noyes 175,000 $0.87 January 13, 2002
Cheryl Maher 100,000 0.87 January 13, 2002
Michael White 60,000 0.87 January 13, 2002
Stock Options:
R. Stuart Angus 60,000 0.87 January 13, 2002
William Weymark 60,000 0.87 January 13, 2002
Charles Asher 60,000 0.87 January 13, 2002
</TABLE>
Stuart Angus, a director of the Company, is a partner in the
Canadian law firm of Stikeman Elliot in Vancouver, British
Columbia. The Company has retained Stikeman Elliot in 1997 to
perform certain legal services in conjunction with the Company's
proposed operations.
-32-
<PAGE> 33
See Notes 2, 5, and 7 to the Consolidated Financial Statements
for description of certain additional business relations required
to be reported under this Item.
-33-
<PAGE> 34
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on
-------------------------------------------------------
Form 8-K
--------
(a) (1) Index to Consolidated Financial Statements:
Page
----
Report of Independent Accountants 14
Consolidated Balance Sheets at December 31, 1996
and 1995 15
Consolidated Statements of Operations for the
Years Ended December 31, 1996, 1995 and 1994 16
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1996, 1995 and 1994 17
Consolidated Statements of Changes in Stockholders'
Equity (Deficit) for the Years Ended
December 31, 1996, 1995 and 1994 18
Notes to Consolidated Financial Statements 19
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibit numbers in the following list correspond to
the numbers assigned to such Exhibits in Item 601 of
Regulation S-K.
Number Description of Exhibits
------ -----------------------
3(i) Articles of Incorporation of Registrant **
3(ii) Bylaws of Registrant **
10.1(a) Loan Agreement dated June 14, 1996, among the
Company and Hecla Mining Company **
10.1(b) Amendment to Loan Agreement dated February 19,
1997, among the Company and Hecla Mining
Company (attached)
22 Registrant's Notice of Annual Meeting and
Information Statement dated February 11, 1997
**
27 Financial Data Schedule
-34-
<PAGE> 35
** These exhibits were filed in SEC File #0-4846-3 as
indicated below and are incorporated herein by this
reference thereto:
Corresponding Exhibit in Annual Report on
Exhibit in Form 10-K or Quarterly Report on Form 10-Q,
this Report or other filing, as indicated
----------- -------------------------------------------
3(i) (3.1) (1995 10-K)
3(ii) (3.2) (1995 10-K)
10.1(a) (A) (Current Report on Form 8-K dated
July 15, 1996)
22 Registrant's Notice of Annual Meeting and
Information Statement dated February 11, 1997
-35-
<PAGE> 36
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 28, 1997.
CONSIL CORP.
By /s/ Ralph R. Noyes
----------------------------------
Ralph R. Noyes, President,
Chairman of the Board,
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
/s/Ralph R. Noyes 3/28/97 /s/Cheryl Maher 3/28/97
- ------------------------------ --------------------------------
Ralph R. Noyes Date Cheryl Maher Date
President, Chairman of the Vice President - Finance and
Board and Director Controller (principal accounting
(principal executive officer) and financial officer)
/s/Robert Stuart Angus 3/28/97 /s/Charles F. Asher 3/28/97
- ------------------------------ --------------------------------
Robert Stuart Angus Date Charles F. Asher Date
Director Director
/s/William J. Weymark 3/28/97 /s/Michael B. White 3/28/97
- ------------------------------ --------------------------------
William J. Weymark Date Michael B. White Date
Director Director
-36-
<PAGE> 37
CONSIL CORP.
Form 10-K - December 31, 1996
INDEX TO EXHIBITS
Number Description of Exhibits
------ -----------------------
10.1(b) Amendment to Loan Agreement dated February 19,
1997, among the Company and Hecla Mining
Company
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1(b)
LOAN AGREEMENT AMENDMENT
This Loan Agreement Amendment (hereinafter referred to as "Amendment") is
made and effective this 19th day of February, 1997, by and between Hecla Mining
Company, a Delaware corporation, whose address is 6500 Mineral Drive, Coeur
d'Alene, Idaho 83814-8788 (hereinafter referred to as "Hecla"), and ConSil
Corp., an Idaho corporation, which has an address at 500-625 Howe Street,
Vancouver, British Columbia, V6C 2T6 (hereinafter referred to as "ConSil").
RECITALS AND DEFINITIONS
WHEREAS, Hecla and ConSil entered into that certain Loan Agreement dated
June 28, 1996 (hereinafter referred to as the "Agreement") pursuant to which
ConSil borrowed certain funds from Hecla, and Hecla loaned certain funds to
ConSil, all on the terms and conditions contained in the Agreement;
WHEREAS, Hecla and ConSil wish to amend the Agreement with this Amendment,
on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the foregoing and the following mutual
promises, covenants, considerations and conditions, the parties, intending to be
legally bound, do hereby agree as follows:
AGREEMENT
1. AMENDMENT OF PRINCIPAL AMOUNT OF LOAN; INTEREST AND TERM: Section 1
of the Agreement shall be deemed to read in its entirety as follows:
Until further notice, and on the condition that ConSil not be in
default with respect to any of the terms of this Loan Agreement, or with
respect to any outstanding note evidencing any advance made hereunder,
Hecla shall make available to ConSil a loan not to exceed SEVEN HUNDRED
THOUSAND DOLLARS ($700,000) (hereinafter referred to as the "Principal
Sum"), on which Principal Sum ConSil shall pay interest thereon from the
date of advancement of such funds, at the prime rate of interest specified
in the Wall Street Journal, plus one and one-half percent (1.5%) per year
until paid, (hereinafter referred to as the "Loan"), which Loan shall be
repaid on demand by Hecla, but in no event later than April 30, 1997.
2. EXECUTION OF REPLACEMENT NOTE, ASSIGNMENTS AND OTHER CERTIFICATES.
ConSil shall execute a replacement note substantially in the form attached
hereto as Exhibit A, together with a certificate of its corporate Secretary
certifying that:
(i) the individuals executing this Amendment and all documents delivered
in accordance herewith were the duly appointed officers of ConSil,
authorized to execute and deliver the same; and
(ii) all representations, warranties and conditions precedent set forth
in the Agreement are and remain true, accurate, correct and
fulfilled as of the date of the delivery of this Amendment.
<PAGE> 2
3. ENTIRE AGREEMENT. This Amendment and the Agreement shall constitute
the entire agreement between the parties with respect to the transactions
contemplated herein and therein, and any prior understanding or representation
of any kind preceding the date of this Amendment shall not be binding on either
party except to the extent incorporated in this Amendment and the Agreement.
4. CONSIDERATION. The consideration for this Amendment shall be deemed
to be the extension of additional credit and additional time for repayment, all
as specified in Section 1 of this Amendment, the receipt and adequacy of which
ConSil and Hecla hereby expressly acknowledge.
5. LOAN AGREEMENT EFFECTIVE AND OTHERWISE UNAFFECTED. Hecla and ConSil
expressly acknowledge and agree that the Agreement is in full force and effect,
no default has occurred and except as expressly amended by this Amendment, the
Agreement shall govern the terms and conditions of the transactions contemplated
herein and in the Agreement.
IN WITNESS WHEREOF duly authorized officers of the parties have executed
this Amendment on the date first above written.
CONSIL CORP. HECLA MINING COMPANY
By /s/ Ralph R. Noyes By /s/ John P. Stilwell
------------------------ ----------------------------
Ralph R. Noyes John P. Stilwell
Chairman Vice President
ATTEST: ATTEST:
/s/ Nathaniel K. Adams /s/ Michael B. White
- --------------------------- -------------------------------
Nathaniel K. Adams Michael B. White
Secretary Secretary
<PAGE> 3
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this 19th day of February in the year of 1997, before me, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared
John P. Stilwell and Michael B. White, known or identified to me to be the Vice
President and the Secretary, respectively, of HECLA MINING COMPANY, the officers
who executed the instrument on behalf of said corporation, and acknowledged to
me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written.
/s/ Narda Lee Anthony
--------------------------------------------
Notary Public
Residing at Rathdrum, Idaho
My Commission Expires 8/5/2000
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this 19th day of February in the year of 1997, before me, the
undersigned, a Notary Public in and for the State of Idaho, personally appeared
Ralph R. Noyes and Nathaniel K. Adams, known or identified to me to be the
Chairman and the Secretary, respectively, of ConSil Corp., the officers who
executed the instrument on behalf of said corporation, and acknowledged to me
that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written.
/s/ Narda Lee Anthony
--------------------------------------------
Notary Public
Residing at Rathdrum, Idaho
My Commission Expires 8/5/2000
<PAGE> 4
EXHIBIT A
PROMISSORY NOTE
---------------
$700,000 City of Coeur d'Alene
State of Idaho
On February 19, 1997, for value received, ConSil Corp., a corporation duly
organized and existing under the laws of the State of Idaho, promises to pay to
Hecla Mining Company, of 6500 Mineral Drive, Coeur d'Alene, Idaho 83814-8788,
at its offices, the principal amount of seven hundred thousand dollars
($700,000), or such other amount as may be outstanding pursuant to that certain
Loan Agreement dated June 28, 1996, as amended by that certain Loan Agreement
Amendment of even date herewith between ConSil Corp. and Hecla Mining Company,
as calculated and determined by Hecla Mining Company, with interest thereon from
the date of advancement of such funds, at the prime rate of interest specified
in the Wall Street Journal, plus one and one-half percent (1.5%) per year until
paid, payable upon the demand of authorized representatives of Hecla Mining
Company.
If default is made in the payment upon demand, then the entire amount of
principal, interest and any and all costs of collection shall become immediately
due and payable at the option of the holder of this note, without notice.
This note shall be governed by and construed in accordance with the laws
of the State of Idaho.
IN WITNESS WHEREOF, ConSil Corp. has caused this note to be executed by
its duly authorized officers as of the date first mentioned above.
ConSil Corp.
By /s/ Ralph R. Noyes
------------------------------------------
Ralph R. Noyes
Chairman
Attest:
/s/ Nathaniel K. Adams
--------------------------------------------
Nathaniel K. Adams
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 120,216
<SECURITIES> 0
<RECEIVABLES> 281,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 404,685
<PP&E> 44,844
<DEPRECIATION> (6,241)
<TOTAL-ASSETS> 472,970
<CURRENT-LIABILITIES> 923,647
<BONDS> 0
0
0
<COMMON> 945,569
<OTHER-SE> (1,396,246)
<TOTAL-LIABILITY-AND-EQUITY> 472,970
<SALES> 0
<TOTAL-REVENUES> 3,678
<CGS> 0
<TOTAL-COSTS> 999,898
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,901
<INCOME-PRETAX> (1,014,121)
<INCOME-TAX> (101,110)
<INCOME-CONTINUING> (913,011)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (913,011)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> 0
</TABLE>
