<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
OR
Commission file number 0-4846-3
-------------------------------------
CONSIL CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0288840
- ---------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
208-769-4100
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for at least the
past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding April 30, 1998
- ------------------------------------- --------------------------
Common stock, no par value 9,449,757 shares
<PAGE> 2
CONSIL CORP.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
I N D E X *
-----------
Page
----
PART I. - Financial Information
Item l - Consolidated Balance Sheets - March 31,
1998 and December 31, 1997 3
- Consolidated Statements of Operations -
Three Months Ended March 31, 1998 and 1997 4
- Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. - Other Information
Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K 11
* Items omitted are not applicable
<PAGE> 3
PART I - FINANCIAL INFORMATION
CONSIL CORP.
Consolidated Balance Sheets (Unaudited)
(U.S. Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,580 $ 38,267
Accounts receivable 247 - -
Other receivables - - 60,571
Income tax refund receivable 8,000 8,000
---------- ----------
Total current assets 31,827 106,838
---------- ----------
Deferred Income Taxes 8,000 8,000
---------- ----------
Total assets $ 39,827 $ 114,838
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - Hecla Mining Company $ 250,647 $ 318,865
Accounts payable - trade - - 6,247
Accrued interest payable -
Hecla Mining Company 94,920 77,420
Note payable - Hecla Mining Company 700,000 700,000
---------- ----------
Total current liabilities 1,045,567 1,102,532
---------- ----------
Stockholders' deficit:
Preferred stock; $0.25 par value; authorized,
10,000,000 shares; issued and outstanding, none - - - -
Common stock - no par value; authorized: 100,000,000
shares; issued 9,455,689 shares 2,111,675 2,111,675
Accumulated deficit (3,113,954) (3,095,908)
Less: Common stock reacquired at cost - 5,932 shares (3,461) (3,461)
---------- ----------
Total stockholders' deficit (1,005,740) (987,694)
---------- ----------
Total liabilities and stockholders'
deficit $ 39,827 $ 114,838
========== ==========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Operations
(Unaudited) (U.S. Dollars)
Three Months Ended
-----------------------------
March 31, March 31,
1998 1997
------------ ------------
Revenue:
Miscellaneous Income $ 5,228 $ - -
Interest 5,988 66
------------ ------------
11,216 66
------------ ------------
Expenses:
General and administrative 10,135 132,055
Exploration and acquisition - - 16,585
Depreciation - - 1,960
Interest 17,500 12,208
Loss on sale of equipment - - 1,158
Foreign exchange loss 1,627 654
------------ ------------
29,262 164,620
------------ ------------
Loss before income tax benefit (18,046) (164,554)
Income tax benefit - - - -
------------ ------------
Net loss $ (18,046) $ (164,554)
============ ============
Net loss per share of common stock $ nil $ (0.02)
============ ============
Cash dividends per share $ - - $ - -
============ ============
Weighted average number of
common shares outstanding 9,449,757 9,449,757
============ ============
The accompanying notes are an integral part
of the consolidated financial statements.
-4-
<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Cash Flows (Unaudited)
(U.S. Dollars)
Three Months Ended
-----------------------
March 31, March 31,
1998 1997
---------- ----------
Operating activities:
Net loss $ (18,046) $ (164,554)
Noncash elements included in net loss:
Depreciation - - 1,960
Loss on sale of equipment - - 1,158
Change in:
Accounts and other receivables 60,324 9,944
Income tax refund receivable - - 9,434
Prepaid and deferred expenses - - 1,591
Accounts payable and accrued
liabilities (74,465) 20,245
Accrued interest payable 17,500 12,208
---------- ----------
Net cash used by operating activities (14,687) (108,014)
---------- ----------
Investing activities:
Proceeds from sale of equipment - - 18,296
---------- ----------
Net cash provided
by investing activities - - 18,296
---------- ----------
Net decrease in cash
and cash equivalents (14,687) (89,718)
Cash and cash equivalents at
beginning of period 38,267 120,216
---------- ----------
Cash and cash equivalents at
end of period $ 23,580 $ 30,498
========== ==========
The accompanying notes are an integral part of
the consolidated financial statements.
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the consolidated financial statements as of
December 31, 1997, as set forth in ConSil Corp.'s (the
Company or ConSil) 1997 Annual Report on Form 10-K,
substantially apply to these interim consolidated
financial statements and are not repeated here. All
amounts are in U.S. dollars unless otherwise indicated.
Note 2. The financial information given in the accompanying
unaudited interim financial statements reflects all
adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the
interim periods reported. All such adjustments are of a
normal recurring nature. All financial statements
presented herein are unaudited. However, the balance
sheet as of December 31, 1997, was derived from the
audited consolidated balance sheet described in Note 1
above. Certain consolidated financial statement amounts
have been reclassified to conform to the 1998
presentation. These reclassifications have no effect on
the net loss or accumulated deficit as previously
reported.
Note 3. At March 31, 1998, 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.
On June 28, 1996, ConSil and Hecla entered into a loan
agreement whereby Hecla agreed to make available to
ConSil a loan not to exceed $500,000, due in its entirety
on or before December 31, 1996. This loan agreement was
subsequently amended on four separate occasions,
increasing the amount of the loan to $700,000 and
extending the repayment date until March 31, 1998. On
March 30, 1998, ConSil and Hecla entered into a fifth
amendment to the loan agreement which increased the
amount available to borrow to $725,000 and extended the
due date to March 31, 1999. As of March 31, 1998,
$700,000 was payable to Hecla under the loan agreement.
Note 4. The Company prepares its consolidated financial
statements in accordance with generally accepted
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
accounting principles ("GAAP") in the United States. The
Company also has regulatory reporting requirements in
Canada. There are no differences between U.S. GAAP and
Canadian GAAP with respect to stockholders' deficit or
net loss at March 31, 1998 or 1997 and the three months
then ended.
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
INTRODUCTION
------------
Except for the historical information contained herein,
the matters discussed that are forward-looking statements
involve risks and uncertainties, including the timely
development of future projects, the impact of metals
prices, changing market conditions and regulatory
environment, and other risks detailed from time to time
in the Company's Form 10-K and Form 10-Qs filed with the
United States Securities and Exchange Commission. Actual
results may differ materially from those projected or
implied. Forward-looking statements included herein
represent the Company's judgment as of the date of this
filing. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.
Following the sale of the Company's Silver Summit Mine in
1995, the Company was actively involved in exploration
and acquisition activities. The Company was unsuccessful
in its exploration and acquisition activities, and since
the fourth quarter of 1997, the Company has become
inactive.
RESULTS OF OPERATIONS
---------------------
FIRST THREE MONTHS 1998 COMPARED TO FIRST THREE MONTHS
------------------------------------------------------
1997
----
The Company reported a net loss of $18,046 or nil per
share, for the quarter ended March 31, 1998 compared to a
net loss of $164,554 ($0.02 per share) in the same period
in 1997. The decrease in the net loss is due primarily
to decreases in general and administrative costs of
$121,920, and exploration and acquisition costs of
$16,585, as well as increases in interest income of
$5,922 and miscellaneous income of $5,228. These
decreases are principally due to the Company terminating
its exploration and acquisition activities at the end of
1997. Partially offsetting the favorable items above is
the increase in interest expense of $5,292 on the note
-8-
<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
payable to Hecla (see Note 3 of Notes to Consolidated
Financial Statements).
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
At March 31, 1998, assets totaled $39,827 and
stockholders' deficit totaled $1,005,740. Cash and cash
equivalents decreased by $14,687 to $23,580 at March 31,
1998 from $38,267 at December 31, 1997. Operating
activities used $14,687 of cash during the first three
months of 1998. The primary uses of cash for operating
activities were for payment of accounts payable and
funding of operating losses. The primary source of cash
was from the collection of accounts receivable.
Working capital decreased $18,046 during the first three
months of 1998, from a negative $995,694 at December 31,
1997 to a negative $1,013,740 at March 31, 1998. The
decrease in working capital is primarily the result of
funding operating losses, consisting principally of
general and administrative and interest costs.
The Company's planned expenditures include the necessary
expenditures to maintain the current inactive status of
the Company. The Company intends to finance planned
expenditures partially through existing cash and cash
equivalents and additional borrowings under a loan
agreement with Hecla. On March 30, 1998, ConSil and
Hecla entered into a fifth amendment to the loan
agreement (see note 3 to Notes to Consolidated Financial
Statements) which increased the amount available to
borrow to $725,000 and extended the due date to March 31,
1999. As of March 31, 1998, $700,000 was payable to
Hecla under the loan agreement. Any further exploration
projects, potential acquisitions or even limited
operations are subject to ConSil being able to raise
funds from external sources.
NEW ACCOUNTING PRONOUNCEMENT
----------------------------
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
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
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
has applied this standard effective January 1, 1998.
-10-
<PAGE> 11
PART II - OTHER INFORMATION
CONSIL CORP.
Item 1. Legal Proceedings
- ------ -----------------
There are no pending legal proceedings.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
27 - Financial Data Schedule
10.1(5) - Loan Agreement - Fifth Amendment
(b) Reports on Form 8-K
None.
Items 2, 3, 4 and 5 of Part II are omitted from this report as
inapplicable.
-11-
<PAGE> 12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CONSIL CORP.
---------------------------------------
(Registrant)
Date: May 13, 1998 By: /s/ George R. Johnson
-------------------------------------
George R. Johnson
President, Chairman of the Board
and Director
Date: May 13, 1998 By: /s/ David F. Wolfe
-------------------------------------
David F. Wolfe
Treasurer (principal accounting
and financial officer)
-12-
<PAGE> 13
CONSIL CORP.
Form 10Q - Period Ending March 31, 1998
EXHIBIT LIST
Exhibit No. Description
----------- ---------------------------
27 Financial Data Schedule
10.1(5) Loan Agreement - Fifth Amendment
-13-
<PAGE> 1
EXHIBIT 10.1(5)
LOAN AGREEMENT - FIFTH AMENDMENT
This Loan Agreement - Fifth Amendment (hereinafter referred
to as "Fifth Amendment") is made and effective as of the 30th day
of March, 1998, by and between Hecla Mining Company, a Delaware
corporation, whose address is 6500 Mineral Drive, Coeur d'Alene,
Idaho 83815-8788 (hereinafter referred to as "Hecla"), and ConSil
Corp., an Idaho corporation, which has an address at 6500 Mineral
Drive, Coeur d'Alene, Idaho 83815-8788 (hereinafter referred to as
"ConSil").
RECITALS AND DEFINITIONS
WHEREAS, Hecla and ConSil entered into that certain Loan
Agreement dated June 28, 1996, as amended February 19, 1997, April
16, 1997, August 1, 1997 and October 1, 1997 (hereinafter referred
to, as amended, 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 again to amend the Agreement
with this Fifth 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 TWENTY
FIVE THOUSAND DOLLARS ($725,000) (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 March 31, 1999.
Page 1 of 4
<PAGE> 2
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 Fifth 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 Fourth Amendment.
3. ENTIRE AGREEMENT. This Fifth 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 Fifth Amendment shall not be binding on either
party except to the extent incorporated in this Fifth Amendment
and the Agreement.
4. CONSIDERATION. The consideration for this Fifth
Amendment shall be deemed to be the extension of additional credit
and additional time for repayment, all as specified in Section 1
of this Fourth 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 Fifth 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
executed this Fifth Amendment on the date first above written.
CONSIL CORP. HECLA MINING COMPANY
By /s/ Michael B. White By /s/ John P. Stilwell
------------------------- ----------------------------
Name: Michael B. White John P. Stilwell
Title: Vice President Vice President
Chief Financial Officer
ATTEST:
/s/ Nathaniel K. Adams
------------------------------
Nathaniel K. Adams
Assistant Secretary
Page 2 of 4
<PAGE> 3
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this thirtieth day of March, in the year of 1998, before
me, the undersigned, a Notary Public in and for the State of
Idaho, personally appeared John P. Stilwell and Nathaniel K.
Adams, known or identified to me to be the Vice President and the
Assistant 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/ Tami D. Hansen
------------------------------------
Notary Public
Residing at Newman Lake, Washington
My Commission Expires: 9/12/2003
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this thirtieth day of March in the year of 1998, before
me, the undersigned, a Notary Public in and for the State of
Idaho, personally appeared Michael B. White, known or identified
to me to be the Vice President of ConSil Corp., the officer 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/ Tami D. Hansen
------------------------------------
Notary Public
Residing at Newman Lake, Washington
My Commission Expires: 9/12/2003
Page 3 of 4
<PAGE> 4
EXHIBIT A
PROMISSORY NOTE
---------------
March 30, 1998 City of Coeur d'Alene
$725,000 State of Idaho
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 83815-8788, at its offices, the principal
amount of seven hundred twenty five thousand dollars ($725,000),
or such other amount as may be outstanding pursuant to that
certain Loan Agreement dated June 28, 1996, as amended by the
certain Loan Agreement Amendment dated February 19, 1997 and
further amended by that certain Loan Agreement - Second Amendment
dated April 16, 1997, and again further amended by that certain
Loan Agreement - Third Amendment dated August 1, 1997, and further
amended by that certain Loan Agreement - Fourth Amendment dated
October 1, 1997, and again further amended by that certain Loan
Agreement - Fifth 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, which amounts shall be repaid on demand by
authorized representatives of Hecla, but in no event later than
March 31, 1999.
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
--------------------------------
Name: Michael B. White
Title: Vice President
Attest:
------------------------------------
Nigel Cave
Secretary
Page 4 of 4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 23,580
<SECURITIES> 0
<RECEIVABLES> 247
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,827
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 39,827
<CURRENT-LIABILITIES> 1,045,567
<BONDS> 0
0
0
<COMMON> 2,111,675
<OTHER-SE> (3,117,415)
<TOTAL-LIABILITY-AND-EQUITY> 39,827
<SALES> 0
<TOTAL-REVENUES> 11,216
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,500
<INCOME-PRETAX> (18,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,046)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
