<PAGE> 1
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, 1997
Commission File No. 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)
(Registrant's telephone number, including area code) 208-769-4100
---------------------------
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, no par value Vancouver Stock Exchange
OTC 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
-------- -------
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 $1,279,818 as of February 28, 1998. As of February 28, 1998,
there were 9,449,757 shares of the registrant's common stock outstanding.
<PAGE> 2
PART I
------
Item 1. Business
--------
(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 disappointing
exploration results and 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 elected not to allocate further funding to the
project. 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 offered
its interest in the Ojo Caliente exploration property to Hecla
subject to a Net Profits Interest payable to ConSil. Hecla elected
not to obtain ConSil's interest in the Ojo Caliente property, and
on April 10, 1997, ConSil, through its wholly owned subsidiary
Minera ConSil, terminated its agreement with Minera Portree. The
agreement provided that Minera ConSil return all the concessions to
Minera Portree upon such termination. All such concessions have
been returned.
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<PAGE> 3
In February, 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. 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. ConSil's 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, expired August 31, 1997 and was not
extended, due to lack of funds.
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. Pursuant to this Agreement, ConSil
was required to raise a minimum of $6 million prior to August 1,
1997. However, due to depressed silver prices and a poor market
environment for precious metals companies, ConSil was unable to
raise the required funds. Accordingly, effective August 2, 1997,
Minas La Colorada terminated ConSil's exclusive right to purchase
the assets.
Management continues to evaluate business opportunities;
however, unless the Company can secure appropriate financing, such
endeavors are unlikely in the near future.
(b) No information is presented as to Industry Segments.
(c) 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 incurred exploration expenses of
approximately $646,000 in 1996. In 1997, the Company received a
net credit to exploration expense of approximately $30,000.
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<PAGE> 4
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
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 no employees. Certain
administrative services are provided by employees of Hecla, the
majority stockholder of the Company.
(d) The Company is primarily engaged in evaluation of
business opportunities; however, unless the Company can secure
appropriate financing, such endeavors are unlikely in the near
future. For geographic information, see Note 9 of Notes to
Consolidated Financial Statements.
Item 2. Properties
----------
In 1995, 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. Minera Hecla, Hecla's wholly owned Mexican subsidiary,
was conducting the exploration under ConSil's direction.
Following exploration work in 1995 and 1996, the Company
elected not to allocate further funding to the Ojo Caliente
exploration project and determined that the Company would 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
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<PAGE> 5
the minimum work commitment obligation, the Company offered its
interest in the Ojo Caliente exploration property to Hecla subject
to a Net Profits Interest payable to ConSil. Hecla elected not to
obtain ConSil's interest in the Ojo Caliente property, and on
April 10, 1997, ConSil, through its wholly owned subsidiary Minera
ConSil, terminated its agreement with Minera Portree. The
agreement provided that Minera ConSil return all the concessions to
Minera Portree upon such termination. All such concessions have
been returned.
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.
In May 1996, the Company completed its preliminary
investigation of the Sombrerete silver mine and informed Grupo
Catorce that it intended to enter into an option to purchase the
property. The option agreement required the Company to pay Grupo
Catorce for care and maintenance of the property. During the
option period, the Company could 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 could be extended for up to five years with
the payment of additional funds. As of November 1996, the Company
had completed the initial exploration program, spending in excess
of amounts required. ConSil received extensions on all provisions
of the agreement, including suspensions on all required
expenditures and payments to Grupo Catorce. Nevertheless, ConSil's
option agreement with Grupo Catorce on the Sombrerete properties in
Zacatecas, Mexico, expired August 31, 1997 and was not further
extended, due to lack of funds.
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. Pursuant to this Agreement, ConSil
was required to raise a minimum of $6 million prior to August 1,
1997. However, due to depressed silver prices at the time and a
poor market environment for precious metals companies, ConSil was
unable to raise the required funds. Accordingly, effective August
2, 1997, Minas La Colorada terminated ConSil's exclusive right to
purchase the assets.
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<PAGE> 6
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 dated
February 14, 1997 to each of the Company's security holders
advising that the Company would hold its annual meeting on
March 17, 1997. At the meeting, Hecla Mining Company, record and
beneficial owner of 7,418,300 shares (approximately 78.503%) of the
outstanding Common Stock of the Company, voted all its shares in
favor of each of the resolutions below. No other proxies were
solicited or obtained and each of the following items were thus
approved and adopted.
1. Five (5) members were elected to the Board of Directors
to serve for one-year terms or until their respective
successors are elected and qualified. The directors so
elected were Ralph R. Noyes, Chairman, Michael B. White,
Robert Stuart Angus, William J. Weymark and Charles F.
Asher.
2. Paragraph two of Article V of the Company's Restated
Articles of Incorporation was amended to increase the
number of authorized shares of the Company's Common Stock
from 20,000,000 shares, $.10 par value, to 100,000,000
shares, no par value.
3. The Board of Directors' adoption of the Company's Stock
Option Plan and Incentive Stock Option Plan effective
January 13, 1997, was approved and confirmed.
4. Previous grants by the Company of stock options to
"insiders" of the Company, as defined under the
Securities Act (British Columbia), in accordance with the
policies of the Vancouver Stock Exchange were approved
and confirmed. Such grants, issued at the rate of $0.87
per share, expiring on January 13, 2002, are set forth as
follows: Incentive Stock Options: Ralph Noyes,
President, 175,000; Cheryl Maher, Vice President -
Finance, 100,000; and Michael White, Director, 60,000;
Stock Options to Directors: R. Stuart Angus, 60,000;
William Weymark, 60,000; and Charles Asher, 60,000.
5. The Board of Directors of the Company was authorized
during the ensuing year to grant stock options, pursuant
to the rules and policies of the Vancouver Stock Exchange
and the Company's Stock Option Plan and Incentive Stock
Option Plan, to individuals who are insiders of the
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<PAGE> 7
Company as defined by the Securities Act (British Columbia) and to
make amendments to existing stock options as may be permitted under
the rules and policies of the Vancouver Stock Exchange.
6. The selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for 1997 was approved.
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<PAGE> 8
PART II
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Item 5. Market for the Registrant's Common Equity and Related
-----------------------------------------------------
Stockholder Matters
-------------------
The common stock of the Company is traded on the over-the-
counter market. Quotations are published on the OTC 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
---- ---
1997
First Quarter $ 1.60 $ .75
Second Quarter 1.50 .90
Third Quarter .95 .65
Fourth Quarter .35 .30
1996
First Quarter $ 1.13 $ .88
Second Quarter 1.00 .88
Third Quarter .94 .50
Fourth Quarter .75 .50
The approximate number of holders of record of the Company's
common stock as of February 28, 1998 was 3,301.
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
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<PAGE> 9
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
which represented the total preferred stock outstanding. The
preferred stock, formerly held by Hecla, was subsequently canceled.
At December 31, 1997, Hecla held 7,418,300, or 78.503%, shares of
the Company's outstanding common stock.
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
--------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 280 $ 3,678 $ 794,319 $ 30,808 $ 31,164
========= ========== ========== ========== ==========
Net loss $(537,017) $ (913,011) $ (514,731) $ (30,179) $ (35,167)
========= ========== ========== ========== ==========
Basic and diluted loss
per common share $ (0.06) $ (0.10) $ (0.06) $ - - $ - -
========= ========== ========== ========== ==========
Total assets $ 114,838 $ 472,970 $ 748,438 $ 768,022 $ 805,792
========= ========== ========== ========== ==========
Redeemable preferred
stock $ - - $ - - $ - - $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 development of future projects,
the impact of metals prices, changing market conditions and
regulatory environment, and other risks. Actual results may differ
materially from those projected or implied. Forward looking
statements included herein represent Management's judgement as of
the date of this filing. Management disclaims, however, any intent
or obligation to update these forward-looking statements.
On October 8, 1997, the Board of Directors appointed Mr.
George R. Johnson to replace Mr. Ralph R. Noyes as Chairman and
President of ConSil upon the resignation of the latter effective
October 1, 1997.
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<PAGE> 10
RESULTS OF OPERATIONS
- ---------------------
1997 vs. 1996
- -------------
The Company reported a net loss of $537,017 or $.06 per share,
for the year ended December 31, 1997, compared to a net loss of
$913,011, or $.10 per share, in the comparable period in 1996. The
decrease in the net loss was primarily due to a decrease in
exploration and acquisition expenditures of $540,589, most notably
for the Ojo Caliente and Sombrerete properties. This decrease was
partially offset by a tax provision in 1997 of $16,687 compared to
a $101,110 benefit in 1996 and an increase in interest expense of
$41,618 in 1997.
1996 vs. 1995
- -------------
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 was 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.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
At December 31, 1997, assets totaled $114,838 and
stockholders' deficit totaled $987,694. Working capital decreased
by $476,732 to a negative $995,694 at December 31, 1997 from a
negative $518,962 at the end of 1996. Operating activities used
$300,245 of cash during the year ended December 31, 1997. The
primary uses of cash for operating activities were for funding
operating losses associated with general and administrative
expenses and acquisition expenditures.
The Company's financing activities provided $200,000 of cash
during the year ended December 31, 1997 through borrowings under
the note payable to Hecla.
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<PAGE> 11
The Company's investing activities provided $18,296 of cash
during the year ended December 31, 1997 from proceeds from the sale
of office equipment and a vehicle.
At December 31, 1997, the Company had negative working capital
of $995,694 and a stockholders' deficit of $987,694. The Company
intends to finance planned expenditures partially through existing
cash and cash equivalents. If other sources of funds are
unavailable, Hecla has committed to fund the reasonable minimum
financial requirements of the Company through March 31, 1999.
Management is currently negotiating with Hecla to extend the due
date of the note payable to Hecla for one year or longer.
Management believes that an extension will be granted under similar
terms to the current note. Any further exploration projects,
potential acquisitions or even limited operations are subject to
ConSil being able to raise funds from external sources.
New Accounting Pronouncements
- -----------------------------
In February 1997, Statement of Financial Accounting Standards
No. 128 (SFAS 128), "Earnings per Share" was issued. SFAS 128
established standards for computing and presenting earnings per
share (EPS) and simplifies the existing standards. This standard
replaced the presentation of primary and fully diluted EPS with a
presentation of basic and diluted 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. The Company adopted the provisions of
SFAS 128 in 1997, and all prior period EPS calculations have been
restated to conform with SFAS 128. Due to the losses in 1997,
1996, and 1995, common stock equivalents were excluded from the
calculation of primary EPS as they were antidilutive. Therefore,
there was no difference in the calculation of basic and primary EPS
in 1997, 1996 and 1995, and there is no difference between basic
and diluted EPS in any of these three years.
In June 1997, Statement of Financial Accounting Standards No.
130 (SFAS 130), "Comprehensive Income", was issued. SFAS 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose
financial statements. SFAS 130 is effective for fiscal years
beginning after December 15, 1997, and requires restatement of
earlier periods presented. The Company does not believe the
application of this standard will have a material effect on the
Company's presentation of its financial statements.
In June 1997, Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and
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<PAGE> 12
Related Information" was issued. SFAS 131 establishes standards
for the way that a public enterprise reports information about its
operating segments in annual financial statements and requires that
those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS
131 is effective for fiscal years beginning after December 15,
1997, and requires restatement of earlier periods presented. The
Company does not believe the application of this standard will have
a material effect on the presentation of the Company's operating
segments.
Item 7A. Quantitative and Qualitative Disclosures About Market
-----------------------------------------------------
Risk
----
Not Applicable.
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.
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<PAGE> 13
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, 1997 and 1996, and the related
consolidated statements of operations, changes in stockholders'
deficit, and cash flows for each of the three years in the period
ended December 31, 1997. 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, 1997 and
1996, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements,
the Company changed its method of accounting for the impairment of
long-lived assets in 1995.
/s/ COOPERS & LYBRAND L.L.P.
Spokane, Washington
February 13, 1998
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<PAGE> 14
CONSIL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
-----------
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,267 $ 120,216
Accounts receivable - - 4,185
Other receivables 60,571 66,446
Income tax refund receivable 8,000 210,816
Prepaid and deferred expenses - - 3,022
----------- -----------
Total current assets 106,838 404,685
----------- -----------
Equipment, net - - 38,603
Deferred income taxes 8,000 - -
Deferred stock offering costs - - 29,682
----------- -----------
Total assets $ 114,838 $ 472,970
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - Hecla Mining Company $ 318,865 $ 362,802
Accounts payable - trade 6,247 2,683
Accrued liabilities - - 40,261
Accrued interest payable - Hecla Mining Company 77,420 17,901
Note payable - Hecla Mining Company 700,000 500,000
----------- -----------
Total current liabilities 1,102,532 923,647
----------- -----------
Commitments (Notes 2, 5, and 10)
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 (3,095,908) (2,558,891)
Less: Common stock reacquired at cost;
1997 and 1996 - 5,932 shares (3,461) (3,461)
----------- -----------
Total stockholders' deficit (987,694) (450,677)
----------- -----------
Total liabilities and stockholders' deficit $ 114,838 $ 472,970
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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<PAGE> 15
CONSIL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1997, 1996 and 1995
-----------
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Interest $ 280 $ 3,526 $ 38,015
Transfer fees - - 152 844
Gain on sale of mining property - - - - 750,000
Other - - - - 5,460
----------- ----------- -----------
280 3,678 794,319
----------- ----------- -----------
Expenses:
General and administrative 350,748 347,714 419,475
Exploration and acquisition 105,848 646,437 784,956
Depreciation 4,495 5,747 494
Interest expense on note payable to
Hecla Mining Company 59,519 17,901 - -
----------- ----------- -----------
520,610 1,017,799 1,204,925
----------- ----------- -----------
Loss before income taxes (520,330) (1,014,121) (410,606)
Income tax provision (benefit) 16,687 (101,110) 104,125
----------- ----------- -----------
Net loss $ (537,017) $ (913,011) $ (514,731)
=========== =========== ===========
Basic and diluted loss per common share $ (0.06) $ (0.10) $ (0.06)
=========== =========== ===========
Weighted average number of
common shares outstanding 9,449,757 9,450,691 8,365,939
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE> 16
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net loss $ (537,017) $ (913,011) $ (514,731)
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 4,495 5,747 494
Deferred income tax provision (benefit) (8,000) 99,000 (99,000)
Prepaid and deferred legal and financing
costs expensed 32,704 - - - -
Loss on sale of equipment 1,158 - - - -
Change in:
Accounts and other receivables 10,060 (69,221) (910)
Income tax refund receivable 202,816 (164,472) (32,905)
Prepaid and deferred expenses - - (611) (1,814)
Accounts payable and accrued liabilities (65,980) 123,079 277,937
Property taxes payable - - - - (11,590)
Accrued interest payable 59,519 17,901 - -
---------- ---------- ----------
Net cash used by operating activities (300,245) (901,588) (903,719)
---------- ---------- ----------
Investing activities:
Proceeds from sale of equipment and
mining property 18,296 - - 750,000
Acquisition of equipment - - (39,410) (5,434)
---------- ---------- ----------
Net cash provided (used) by investing activities 18,296 (39,410) 744,566
---------- ---------- ----------
Financing activities:
Deferred stock offering costs - - (24,136) (5,546)
Proceeds from note payable 369,999 500,000 - -
Acquisition of treasury stock - - (3,437) - -
Repayment of note payable (169,999) - - - -
---------- ---------- ----------
Net cash provided (used) by financing activities 200,000 472,427 (5,546)
---------- ---------- ----------
Net decrease in cash and cash equivalents (81,949) (468,571) (164,699)
Cash and cash equivalents at beginning of year 120,216 588,787 753,486
---------- ---------- ----------
Cash and cash equivalents at end of year $ 38,267 $ 120,216 $ 588,787
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes $ (178,129) $ (35,638) $ 236,000
========== ========== ==========
</TABLE>
For noncash financing activities see Notes 6 and 7
The accompanying notes are an integral
part of the consolidated financial statements.
-16-
<PAGE> 17
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 1997, 1996 and 1995
---------------
<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, 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)
Net loss (537,017)
Change in equity accounts
due to change to no par
value common stock - - - - - - 1,166,106 190,709 (1,356,815) - - - -
-------- ----------- ---------- ---------- --------- ---------- ----------- ------
BALANCES,
December 31, 1997 - - $ - - 9,455,689 $ 2,111,675 $ - - $ - - $ (3,095,908) $(3,461)
======== =========== ========== ========== ========= ========== =========== ======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
-17-
<PAGE> 18
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 have no
operating properties. Management continues to evaluate potential
business opportunities; however, unless the company can secure
appropriate financing, such endeavors are unlikely in the near
future.
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, 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.
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, 1997, the Company has negative working capital of
$995,694 and a stockholders' deficit of $987,694. Included in
current liabilities is a $700,000 note payable to Hecla which is
due March 31, 1998. If other sources of funds are unavailable,
Hecla has committed to fund the reasonable minimum financial
requirements of the Company through March 1999.
Exploration
- -----------
Exploration costs are charged to operations as incurred. The
purchase of Hecla's interest in the Ojo Caliente exploration
-18-
<PAGE> 19
project in 1995, which principally included a reimbursement of
Hecla's exploration costs expended on the property was charged to
operations (see Note 2).
Basic and Diluted Loss Per Common Share
- ---------------------------------------
In February 1997, Statement of Financial Accounting Standards
No. 128 (SFAS 128), "Earnings per Share" was issued. SFAS 128
established standards for computing and presenting earnings per
share (EPS) and simplifies the existing standards. This standard
replaced the presentation of primary and fully diluted EPS with a
presentation of basic and diluted 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. The Company adopted the provisions of
SFAS 128 in 1997 and all prior periods have been restated to
conform with SFAS 128. Due to the losses in 1997, 1996 and 1995,
common stock equivalents are antidilutive and therefore have been
excluded from the computation. Therefore, there was no difference
in the calculation of basic and primary EPS in 1997, 1996 and 1995,
and there is no difference between basic and diluted EPS in any of
these three years.
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 federal insurance limit.
Deferred Stock Offering Costs
- -----------------------------
Deferred stock offering costs consist of costs associated with
planned equity offerings. The deferred stock offering costs were
charged to operations in 1997, as the contemplated stock offering
was 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
-19-
<PAGE> 20
effect in the years in which the temporary differences are expected
to reverse.
Equipment
- ---------
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 121) effective January 1, 1995. The adoption of the
provisions of SFAS 121 had no material effect on the results of
operations, financial condition, or cash flows of the Company.
Accounting for Stock Options
- ----------------------------
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123
establishes financial accounting and reporting standards for stock-
based employee compensation plans. SFAS 123 encourages all
entities to adopt a fair value based method of accounting, but
allows an entity to continue to measure compensation cost for those
plans using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". The Company adopted the disclosure
provisions only of SFAS 123 in 1997.
Comprehensive Income
- --------------------
In June 1997, Statement of Financial Accounting Standards No.
130 (SFAS 130), "Comprehensive Income", was issued. SFAS 130
establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose
financial statements. SFAS 130 is effective for fiscal years
beginning after December 15, 1997, and requires restatement of
earlier periods presented. The Company does not believe the
application of this standard will have a material effect on the
Company's presentation of its financial statements.
-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.
The Company had a commitment to spend minimum amounts on
exploration and development at the Ojo Caliente exploration
project. On April 10, 1997, ConSil, through its wholly owned
subsidiary Minera ConSil, terminated its agreement with Minera
Portree regarding the "Ojo Caliente" project. The agreement
provided that Minera ConSil return all the concessions to Minera
Portree upon such termination. All such concessions have been
returned.
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. In May 1996, the Company completed
its preliminary investigation of the Sombrerete silver mine and
informed Grupo Catorce that it intended to enter into an option to
purchase the property. The option agreement required the Company
to pay Grupo Catorce for care and maintenance of the property.
During the option period, the Company could 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 could be extended for up to five years with
the payment of additional funds. As of November 1996, the Company
had completed the initial exploration program, spending in excess
of required amounts. ConSil obtained extensions on all provisions
of the agreement, including suspensions on all required
expenditures and payments to Grupo Catorce. Nevertheless, ConSil's
option agreement with Grupo Catorce on the Sombrerete properties in
Zacatecas, Mexico expired August 31, 1997 and was not further
extended, due to lack of funds.
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
carried out exploration activities on the projects for which the
Company reimbursed Minera Hecla for its costs. The Company received
a credit against exploration expenses incurred in 1996 and through
the first quarter of 1997 of $57,364. Actual exploration expense
for 1997 in connection with services performed by Minera Hecla
-21-
<PAGE> 22
under the direction of the management of Minera ConSil was $27,719;
expenses for 1996 were approximately $453,793.
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
Company recognized the $750,000 as a gain on sale of the mining
property.
3. Equipment
---------
The major components of equipment at December 31, 1996 are as
follows:
Furniture and fixtures $ 29,094
Vehicle 15,750
---------
44,844
Less accumulated depreciation (6,241)
---------
$ 38,603
=========
As of December 31, 1997, all equipment has been sold.
4. Income Taxes
------------
The components of the Company's income tax provision (benefit)
for the years ended December 31, 1997, 1996 and 1995 are as
follows:
-22-
<PAGE> 23
1997 1996 1995
--------- --------- ---------
Current:
Federal $ - - $(173,869) $ 164,112
State 24,687 (26,241) 39,013
--------- --------- ---------
24,687 (200,110) 203,125
--------- --------- ---------
Deferred:
Federal - - 80,000 (80,000)
State (8,000) 19,000 (19,000)
--------- --------- ---------
(8,000) 99,000 (99,000)
--------- --------- ---------
Total $ 16,687 $(101,110) $ 104,125
========= ========= =========
The income tax provision (benefit) for the years ended
December 31, 1997, 1996 and 1995 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>
1997 1996 1995
-------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Computed "statutory" $(176,912) (34)% $ (344,801) (34)% $(139,606) (34)%
benefit
Effect of other
expenses (1,952) (1) (4,490) - - 77,792 19
Change in valuation
allowance due to
uncertainty of
recovery of deferred
tax assets 216,244 42 255,422 25 197,714 48
Effect of state
income taxes (20,693) (4) (7,241) (1) (31,775) (8)
--------- --- --------- -- --------- --
$ 16,687 3% $ (101,110) (10)% $ 104,125 25%
========= === ========= === ========= ==
At December 31, 1997 and 1996, the Company had the following
deferred tax asset:
1997 1996
--------- ---------
Capitalized exploration costs $ 677,380 $ 453,136
Valuation allowance (669,380) (453,136)
--------- ---------
Net deferred tax asset $ 8,000 $ - -
========= =========
The change in the valuation allowance during the years ended
December 31, 1997 and 1996 is as follows:
-23-
<PAGE> 24
1997 1996 1995
--------- --------- ---------
Balance,
beginning of year $ 453,136 $ 197,714 $ - -
Change due to
utilization/nonutilization
of net operating loss
carryforwards 216,244 255,422 197,714
--------- --------- ---------
Balance, end of year $ 669,380 $ 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.
At December 31, 1997, the Company had federal and state net
operating loss carryforwards of $567,250, substantially all of
which will expire in the year 2012.
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. The
loan agreement 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. On April 16, 1997, the Loan Agreement - Second
Amendment extended the date of repayment to August 1, 1997. A
third amendment dated August 1, 1997 extended the due date to
September 30, 1997. A fourth amendment dated October 1, 1997
extended the due date to March 31, 1998. All other terms under the
amended loan agreement are substantially identical to the terms in
the original loan agreement. At December 31, 1997, the Company was
-24-
<PAGE> 25
in compliance with the restrictions under the loan agreement. At
December 31, 1997, there was $700,000 outstanding under the loan
agreement with Hecla, and accrued interest due to Hecla totaling
$77,420. Interest expense related to this note for the years ended
December 31, 1997 and December 31, 1996 was $59,519 and $17,901,
respectively.
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 canceled. The rights of the authorized preferred
stock will be determined by the Board of Directors, if and when any
preferred stock is issued.
At the Company's annual meeting on March 17, 1997, Hecla,
beneficial owner of 78.503% of the outstanding common stock, voted
all of its shares in favor of amending the Articles of
Incorporation to increase the number of authorized shares of the
Company's Common Stock from 20,000,000 shares, $.10 par value, to
100,000,000 shares, no par value.
7. Related Party Transactions
--------------------------
In addition to related party transactions described in Notes
2, 5 and 6, during the years ended December 31, 1997, 1996 and
1995, general and administrative expenses of $16,387, $24,773, and
$88,172, respectively, were charged to the Company by Hecla. Also,
during the year ended December 31, 1997, the Company sold its
remaining fixed assets to Hecla at book value ($14,655), in partial
settlement of amounts due to Hecla.
As of January 1, 1997, Hecla and the Company's President, Mr.
Ralph R. Noyes, entered into a Stock Option Agreement which revised
a prior agreement dated November 14, 1995, whereby Hecla granted
Mr. Noyes the following options to purchase the Company's common
stock which is currently owned by Hecla:
-25-
<PAGE> 26
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.
However, these options expired unexercised upon the
resignation of the President, effective October 1, 1997.
In conjunction with the November 1995 agreement, Hecla had
also granted options to the Company's former President, Mr.
Carlson. Due to Mr. Carlson's resignation in 1996, these options
expired unexercised.
The estimated fair value of the Company's common stock in
November 1995, 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.
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:
-26-
<PAGE> 27
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1997 1996
---------------------- ----------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 38,267 $ 38,267 $ 120,216 $ 120,216
Accounts and other
receivables 60,571 60,571 70,631 70,631
Income tax refund
receivable 8,000 8,000 210,816 210,816
Financial liabilities:
Current liabilities 402,532 402,532 423,647 423,647
Note payable 700,000 700,000 500,000 500,000
</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.
9. Geographic Segments
-------------------
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss)
United States $ (428,319) $ (362,585) $ 270,719
Mexico (105,848) (442,976) (784,956)
Canada (2,850) (107,450) (494)
---------- ---------- ----------
$ (537,017) $ (913,011) $ (514,731)
========== ========== ==========
Identifiable assets(1)
Equipment:
United States $ - - $ 18,710 $ - -
Mexico - - - - - -
Canada - - 19,893 4,940
---------- ---------- ----------
$ - - $ 38,603 $ 4,940
========== ========== ==========
General corporate assets
United States $ 48,010 $ 327,838 $ 743,498
Mexico 60,265 66,446 - -
Canada 6,563 40,083 - -
---------- ---------- ----------
$ 114,838 $ 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 and miscellaneous and income
tax refund receivables.
-27-
<PAGE> 28
In June 1997, Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures about Segments of an Enterprise and
Related Information" was issued. SFAS 131 establishes standards
for the way that a public enterprise reports information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. SFAS
131 is effective for fiscal years beginning after December 15,
1997, and requires restatement of earlier periods presented. The
Company does not believe the application of this standard will have
a material effect on the Company's presentation of its operating
segments.
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 1997 and 1996, the
Company incurred rent expense of $2,409 and $22,751, respectively.
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 the effects on stockholders' deficit at
December 31, 1997 and 1996 and the net loss for the years ended
December 31, 1997, 1996 and 1995 are as follows:
-28-
<PAGE> 29
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C> <C>
Total stockholders' deficit at
December 31, per U.S. generally
accepted accounting principles $ (987,694) $ (450,677)
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax assets (8,000) - -
---------- ----------
Total stockholders' deficit at
December 31, per Canadian
generally accepted accounting
principles $ (995,694) $ (450,677)
========== ==========
1997 1996 1995
---------- ---------- ---------
Net loss for the year ended
December 31, per U.S. generally
accepted accounting principles $ (537,017) $ (913,011) $(514,731)
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax provision
(benefit) (8,000) 99,000 (99,000)
---------- ---------- ---------
Net loss for the year ended
December 31, per Canadian
generally accepted accounting
principles $ (545,017) $ (814,011) $(613,731)
========== ========== =========
</TABLE>
12. Basic and Diluted Loss Per Common Share
---------------------------------------
In accordance with SFAS 128, the following table presents a
reconciliation of the numerators (net loss) and denominators
(shares) used in the basic and diluted loss per common share
computations for the years ended December 31, 1997, 1996 and 1995.
-29-
<PAGE> 30
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------------------------------
Per Share Per Share Per Share
Net Loss Shares Amount Net Loss Shares Amount Net Loss Shares Amount
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net loss $ (537,017) $ (913,011) $ (514,731)
Basic loss $ (537,017) 9,449,757 $ (0.06) $ (913,011) 9,450,691 $ (0.10) $ (514,731) 8,365,939 $ (0.06)
========= ========= ======== ========= ========= ======== ========= ========= =======
Effect of dilutive
securities (1)
Diluted loss $ (537,017) 9,449,757 $ (0.06) $ (913,011) 9,450,691 $ (0.10) $ (514,731) 8,365,939 $ (0.06)
========= ========= ======== ========= ========= ======= ========= ========= =======
</TABLE>
(1) Dilutive Securities
-------------------
As of December 31, 1997, there were 180,000 shares available for issue
under granted stock options. These options were not included in the computation
of diluted loss per common share as a loss was incurred in each of these years,
and their inclusion would be antidilutive.
13. Stock Option Plans
------------------
At December 31, 1997, officers, key employees and directors
had been granted options to purchase common shares under stock
option plans described below. The Company has adopted the
disclosure-only provisions of SFAS 123. No compensation expense
was recognized under these plans in 1997 for options granted under
the stock option plans. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the
grant date for awards consistent with the provisions of SFAS 123,
the Company's loss and per share loss applicable to common
shareholders for the year ended December 31, 1997 would have been
increased to the pro forma amounts indicated below:
Loss applicable to common shareholders:
As reported $537,017
Pro forma $565,027
Loss applicable to common shareholders
per share:
As reported $ (0.06)
Pro forma $ (0.06)
The fair market value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
Expected dividend yield 0.00%
Expected stock price volatility 93.23%
Risk-free interest rate 6.42%
Expected life of options 5.0 years
-30-
<PAGE> 31
The grant date fair value of options granted in 1997 was $0.65.
In 1997, the shareholders of the Company approved two stock
option plans. The ConSil Stock Option Plan provides for stock-
based grants to selected officers, directors and other key
employees. The ConSil Corp. Incentive Stock Option Plan provides
for stock-based grants to participating employees. The option
price of stock options issued under the Incentive Stock Option Plan
may not be less than the fair market value on the date of grant.
The terms of the options under either plan shall be no longer than
five years from the date of grant. During 1997, 180,000 options to
acquire shares were granted to the Company's directors under the
ConSil Corp. Stock Option Plan. Of the options granted, 60,000
expired due to the resignation of a director. Under the ConSil
Corp. Incentive Stock Option Plan 335,000 options to acquire shares
were granted to the Company's officers. Resignations of officers
caused 275,000 of these options to expire. At December 31, 1997,
there were 765,000 shares available for grant under the plans.
Transactions concerning stock options pursuant to both of the
above described plans are summarized as follows:
Exercise
Shares Price
-------- --------
Outstanding, December 31, 1996 - - - -
Granted 515,000 $0.87
Exercised - - - -
Expired (335,000) $0.87
--------
Outstanding, December 31, 1997 180,000 $0.87
========
All of the options outstanding as of December 31, 1997 are
fully exercisable and have a remaining life of 4.0 years. There
were no amounts charged to operations related to the plans in 1997.
-31-
<PAGE> 32
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 1997.
Charges of $16,387, $24,773 and $88,172 were made to the
Company by Hecla in 1997, 1996 and 1995, 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:
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Ownership Class
---------- ---------------------- ---------------------- ---------
Common Stock Hecla Mining Company
Coeur d'Alene, Idaho 7,418,300 shares 78.503
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%.
(b) Security ownership of management as of March 1, 1998:
-32-
<PAGE> 33
<TABLE>
<CAPTION>
Common Shares
Year First Owned Beneficially,
Elected As Directly or Indirectly, Percent
Name Age A Director as of March 1, 1998 of Class (3)
---- --- ---------- ------------------- ------------
<S> <C> <C> <C> <C>
Michael B. White (1) 47 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.
Charles F. Asher (2) 76 1992 60,000 *
President of Plainview Mining
Company. He has served as a
director of Merger Mines
Corporation and Verna Mae
Mining since 1987.
George R. Johnson 49 1997 -0- *
Chairman and President since
October, 1997. Mr. Johnson is
Vice President - Metal Mining
of Hecla Mining Company.
William J. Weymark (2) 45 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 (4 Individuals) 181,000 1.9%
</TABLE>
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 60,000 shares subject to options granted under the
Company's Stock Option Plan issued at the rate of $0.87,
expiring on January 13, 2002. Additionally, Mr. White is the
beneficial owner of 31,518 shares of common stock of Hecla
Mining Company, the majority shareholder of the Company,
including 30,900 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.
(2) Consists solely of shares subject to options granted under the
Company's Stock Option Plan issued at the rate of $0.87,
expiring January 13, 2002.
-33-
<PAGE> 34
(3) In addition to the 9,449,757 shares of common stock currently
outstanding, the 180,000 shares subject to options granted
under the Company's Stock Option Plan were deemed to be
outstanding for the purpose of computing the percentage of
outstanding securities of the common stock owned by such
persons.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The following executive officers and directors have been
granted options in 1997 pursuant to the Company's Stock Option
Plans.
<TABLE>
<CAPTION>
No. of Shares Exercise Price Expiration
Name of Optionee Under Option Per Share (U.S.$) Date
---------------- ------------ ----------------- ----
<S> <C> <C> <C>
Incentive Stock Options:
Michael White 60,000 0.87 January 13, 2002
Stock Options:
William Weymark 60,000 0.87 January 13, 2002
Charles Asher 60,000 0.87 January 13, 2002
</TABLE>
See Notes 2, 5, 6 and 7 to the Consolidated Financial
Statements for description of certain additional business relations
required to be reported under this Item.
-34-
<PAGE> 35
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 13
Consolidated Balance Sheets at December 31, 1997
and 1996 14
Consolidated Statements of Operations for the
Years Ended December 31, 1997, 1996 and 1995 15
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1997, 1996 and 1995 16
Consolidated Statements of Changes in Stockholders'
Equity (Deficit) for the Years Ended
December 31, 1997, 1996 and 1995 17
Notes to Consolidated Financial Statements 18
(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) Restated Articles of Incorporation
as Amended 3/17/97
3(ii) Bylaws of Registrant **
10.1(c) Loan Agreement - Second Amendment **
10.2 Debt Settlement Agreement **
10.3 Stock Option Plan(1) **
-35-
<PAGE> 36
10.4 Incentive Stock Option Plan(1) **
10.5 Master Agreement **
10.6 Loan Agreement - Third Amendment **
10.7 Loan Agreement - Fourth Amendment **
27 Financial Data Schedule
- -----------
1. Indicates a management contract or compensatory plan or
arrangement.
** 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(ii) (3.2) (1995 10-K)
10.1(c) Form 10Q - Period Ending 3/31/97
10.2 Form 10Q - Period Ending 3/31/97
10.3 Form 10Q - Period Ending 3/31/97
10.4 Form 10Q - Period Ending 3/31/97
10.5 Form 10Q - Period Ending 6/30/97
10.6 Form 10Q - Period Ending 9/30/97
10.7 Form 10Q - Period Ending 9/30/97
-36-
<PAGE> 37
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 24, 1998.
CONSIL CORP.
By /s/ George R. Johnson
---------------------------------
George R. Johnson, 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/ George R. Johnson 3/24/98 /s/ Michael B. White 3/24/98
- ------------------------------ --------------------------------
George R. Johnson Date Michael B. White Date
President, Chairman of the Vice President
Board and Director Director
(principal executive officer)
/s/ David F. Wolfe 3/24/98 /s/ Charles F. Asher 3/24/98
- ------------------------------ --------------------------------
David F. Wolfe Date Charles F. Asher Date
Treasurer (principal accounting Director
and Financial Officer)
/s/ William J. Weymark 3/24/98
- ------------------------------
William J. Weymark Date
Director
-37-
<PAGE> 38
LIST OF EXHIBITS TO BE FILED WITH THIS 10-K
Number Description of Exhibits
------ -----------------------
3.1 Restated Articles of Incorporation
as amended 3/17/97
27 Financial Data Schedule
-38-
<PAGE> 1
EXHIBIT 3.1
-----------
RESTATED
ARTICLES OF INCORPORATION
OF
CONSIL CORP.
March 17, 1997
KNOW ALL MEN BY THESE PRESENTS that the undersigned,
being officers of the corporation, citizens of the United
States of America and over the age of eighteen years, do
hereby make, sign, acknowledge, and file these Restated
Articles of Incorporation on behalf of ConSil Corp.
ARTICLE I.
Name
The name of the corporation is and shall be ConSil Corp.
ARTICLE II.
Registered Office
The location and post office address of the corporation's
registered office in the State of Idaho shall be 6500 Mineral
Drive, Coeur d'Alene, Idaho 83815-8788.
ARTICLE III.
Duration
The corporate existence of this corporation shall be
perpetual.
ARTICLE IV.
Purpose
The purpose of this corporation shall be to transact any
and all lawful business for which corporations may be
incorporated under the Idaho Business Corporation Act, in
general, to have and exercise all the powers conferred by the
laws of the state of Idaho upon corporations formed under the
Idaho Business Corporation Act, and to do any and all things
herein set forth to the same extent as natural persons might
or could do.
-1-
<PAGE> 2
ARTICLE V.
Shares
The authorized capital stock of the corporation shall
consist of two classes of stock, designated as "Common Stock"
and "Preferred Stock."
The total number of shares of Common Stock that the
corporation will have authority to issue is One Hundred
Million (100,000,000), no par value. All of the Common Stock
authorized herein shall have equal voting rights and powers
without restrictions in preference.
The total number of shares of Preferred Stock that the
corporation will have authority to issue is Ten Million
(10,000,000). The Preferred Stock shall have a part value of
$.25 per share. The Preferred Stock shall be entitled to
preference over the Common Stock with respect to the
distribution of assets of the corporation in the event of
liquidation dissolution or winding-up of the corporation,
whether voluntarily or involuntarily, or in the event of any
other distribution of assets of the corporation among its
shareholders for the purpose of winding-up its affairs. The
authorized but unissued shares of Preferred Stock may be
divided into and issued in designated series from time to time
by one or more resolutions adopted by the Board of Directors.
The Directors in their sole discretion shall have the power to
determine the relative powers, preferences, and rights of each
series of Preferred Stock issued by the corporation.
ARTICLE VI.
Directors
The number of directors of this corporation, who need not
be Shareholders, shall be not less than three, but in no event
shall the number of directors exceed nine. The number,
qualifications, terms of office, manner of elections, time and
place of meeting and the powers and duties of the directors
shall be such as are prescribed by the By-Laws of this
corporation.
ARTICLE VII.
A director or officer of the corporation shall not, in
the absence of actual fraud, be disqualified by his office
from dealing or contracting with the corporation, either as
-2-
<PAGE> 3
vendor, purchaser, or otherwise; and in the absence of
actualfraud, no transaction or contract of the corporation
shall be void or voidable by reason of the fact that any
directors orofficer, or firm of which any director or officer
is a member, or any other corporation of which any director or
officer is a shareholder, officer or director, is in any way
interested in such transaction or contract; provided that such
transaction or contract is or shall be, authorized, ratified,
or approved (1) by a vote of a majority of a quorum of the
Board of Directors, or the Executive Committee, if any,
counting for the purpose of determining the existence of such
majority or quorum, any Director, when present, who is so
interested; or (2) at a stockholders' meeting by a vote of a
majority of the outstanding shares of stock of the corporation
represented at such meeting and then entitled to vote, or by
writing or writings signed by a majority of such holders of
stock which shall have the same force and effect as through
such authorization, ratification, or approval were made by the
stockholders' and no director of officer shall be liable to
account to the corporation for any profits realized by him
through any transaction or contract of the corporation
authorized, ratified, or approved, as aforesaid, by reason of
the fact that he may be, or any firm of which he is a member,
or any corporation of which he is a shareholder, officer, or
director, was interested in such transaction.
Nothing in this paragraph contained shall create any
liability in said events above mentioned, or prevent the
authorization, ratification, or approval of such contracts or
transactions in any other manner than permitted by law, or
invalidate or make voidable any contract or transaction which
would be valid without reference to the provisions of this
paragraph.
ARTICLE VIII.
Indemnification and Liability of Directors
A Director of the Company shall not be personally liable
to the Company or its Shareholders for monetary damages as a
Director except for liability as specifically set forth in the
Idaho Business Corporations Act. Further, the Company is
authorized to indemnify, agree to indemnify, or obligate
itself to advance or reimburse expenses incurred by its
Directors, Officers, employees, or agents to the full extent
of the laws of the state of Idaho as may now or hereafter
exist.
-3-
<PAGE> 4
ARTICLE IX.
By-Laws
The Board of Directors shall have the power to modify and
alter existing By-Laws or adopt new By-Laws subject to
ratification by the Shareholders at the next Annual or Special
Meeting.
ARTICLE X.
Voting
The holders of any of the Corporation's capital stock
shall possession voting power for the election of Directors
and for all other purposes, subject to such limitations as may
be imposed by law and by any provision of the Articles of
Incorporation in the exercise of their voting power. The
holders of capital stock shall be entitled to one vote for
each share held. Cumulative voting for the election of
Directors is hereby expressly prohibited.
ARTICLE XI.
Resolution Approving Restated Articles
The Amended Restated Articles of Incorporation herein
were approved, ratified and adopted by the Unanimous Consent
of the Board of Directors effective March 17, 1997.
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 38,267
<SECURITIES> 0
<RECEIVABLES> 68,571
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 106,838
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 114,838
<CURRENT-LIABILITIES> 1,102,532
<BONDS> 0
0
0
<COMMON> 2,111,675
<OTHER-SE> (3,099,369)
<TOTAL-LIABILITY-AND-EQUITY> 114,838
<SALES> 0
<TOTAL-REVENUES> 280
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 461,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,519
<INCOME-PRETAX> (520,330)
<INCOME-TAX> (16,687)
<INCOME-CONTINUING> (537,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (537,017)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
