<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
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 $1,055,812 at December 23, 1998, the date last traded on the
Vancouver Stock Exchange as of February 26, 1999. As of February 26, 1999,
there were 9,449,707 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. 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.
Following the sale of the Company's Silver Summit mine in 1995, the Company
was actively involved in exploration and acquisition activities primarily in
Mexico. (See Note 2 of Notes to Consolidated Financial Statements.) The
Company was unsuccessful in its exploration and acquisition activities, and
since the fourth quarter of 1997, the Company has been inactive.
(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
associated with its Ojo Caliente and Sombrerete projects which were eventually
unsuccessful. In 1997, the Company received a net credit to exploration expense
of approximately $30,000 and there were no exploration expenses incurred in
1998.
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, financial condition, or cash flows.
The Company currently has no employees. Certain administrative services
are provided by employees of Hecla Mining Company (Hecla), the majority
stockholder of the Company.
(d) For geographic information, see Note 8 of Notes to Consolidated
Financial Statements.
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<PAGE> 3
Item 2. PROPERTY
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. The Silver Summit mine property is not currently producing
minerals such that the Company would be entitled to production royalties from
Sunshine Precious Metals, Inc.
Following the sale of the Company's Silver Summit mine in 1995, the Company
was actively involved in exploration and acquisition activities primarily in
Mexico. (See Note 2 of Notes to Consolidated Financial Statements.) The Company
was unsuccessful in its exploration and acquisition activities, and since the
fourth quarter of 1997, the Company has become inactive.
Item 3. LEGAL PROCEEDINGS
There are no pending legal proceedings.
Item 4. MATTERS VOTED ON BY SECURITY HOLDERS
Not applicable.
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<PAGE> 4
PART II
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 Spokane Quotation Service for the
quarterly periods indicated. The prices reported by 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
---- ---
1998
First Quarter $ .55 $ .30
Second Quarter .48 .30
Third Quarter .30 .15
Fourth Quarter .20 .15
1997
First Quarter $ 1.60 $ .75
Second Quarter 1.50 .90
Third Quarter .95 .65
Fourth Quarter .35 .30
The number of holders of record of the Company's common stock as of
December 31, 1998 was 3,270. At December 31, 1998, Hecla held 7,418,300, or
78.503%, shares of the Company's outstanding common stock.
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.
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<PAGE> 5
Item 6. SELECTED FINANCIAL DATA(1)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 11,434 $ 280 $ 3,678 $ 794,319 $ 30,808
========= ========= ========= ========= ==========
Net loss $ (79,962) $(537,017) $(913,011) $(514,731) $ (30,179)
========= ========= ========= ========= ==========
Basic and diluted loss
per common share $ (0.01) $ (0.06) $ (0.10) $ (0.06) $ - -
========= ========= ========= ========= ==========
Total assets $ 27,356 $ 114,838 $ 472,970 $ 748,438 $ 768,022
========= ========= ========= ========= ==========
Long-term debt $ - - $ - - $ - - $ - - $ - -
========= ========= ========= ========= ==========
Note and interest
payable to Hecla $ 847,250 $ 777,420 $ 517,901 $ - - $ - -
========= ========= ========= ========= ==========
Accounts payable to
Hecla $ 247,762 $ 318,865 $ 362,802 $ 279,598 $ 1,286
========= ========= ========= ========= ==========
Redeemable preferred
stock $ - - $ - - $ - - $ - - $1,250,000
========= ========= ========= ========= ==========
Cash dividends $ - - $ - - $ - - $ - - $ - -
========= ========= ========= ========= ==========
(1) 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.
</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 the Company's judgment as of the date of
this filing. The Company disclaims, however, any intent or obligation to update
these forward-looking statements.
RESULTS OF OPERATIONS
1998 vs. 1997
- -------------
The Company reported a net loss of $79,962, or $0.01 per share, for the
year ended December 31, 1998, compared to a net loss of $537,017, or $0.06 per
share, in the comparable period in 1997. The decrease in the net loss was
primarily due to decreases in general and administrative expenses of $329,182,
decreased exploration and acquisition expenses of $105,848, a decreased
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<PAGE> 6
income tax provision of $16,687, and increased interest and other revenue of
$11,154. These decreases were partly offset by an increase in interest expense
of $10,311 on the note payable to Hecla (see Note 4 of Notes to Consolidated
Financial Statements). The decrease in the net loss can be attributed
principally to the Company terminating its exploration and acquisition
activities at the end of 1997.
1997 vs. 1996
- -------------
The Company reported a net loss of $537,017 or $0.06 per share, for the
year ended December 31, 1997, compared to a net loss of $913,011, or $0.10 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.
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 1998, assets totaled $27,356 and stockholders' deficit
totaled $1,067,656. Cash and cash equivalents decreased by $27,031 to $11,236
at December 31, 1998 from $38,267 at December 31, 1997. Operating activities
used $27,031 of cash during the year ended December 31, 1998. The primary uses
of cash for operating activities were for funding general and administrative
expenses.
Working capital decreased by $71,962 during 1998, from a negative $995,694
at December 31, 1997 to a negative $1,067,656 at December 31, 1998. The
decrease in working capital was primarily the result of funding general and
administrative costs.
The Company's planned 1999 expenditures include the necessary expenditures
to maintain the current inactive status of the Company. The Company intends to
finance these planned expenditures partially through existing cash and cash
equivalents and additional borrowings under a loan agreement with Hecla. On
December 31, 1998, ConSil and Hecla entered into a sixth amendment to the loan
agreement (see Note 4 of Notes to Consolidated Financial Statements) which
extended the due date to March 31, 2000. As of December 31, 1998, $700,000 was
payable to Hecla, excluding accrued interest of $147,250, 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.
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. Included in current liabilities is a $700,000 note payable
to Hecla which is due upon demand by authorized representatives of Hecla, but in
no event later than March 31, 2000. If other sources of funds are
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<PAGE> 7
unavailable, Hecla has committed to fund the reasonable minimum financial
requirements of the Company through March 31, 2000.
YEAR 2000
The Company has completed an assessment of its Year 2000 Compliance issues,
and based upon the limited activity of the Company, the Company does not believe
Year 2000 Compliance issues will be material to the Company.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
At December 31, 1998, the Company's note payable to Hecla (refer to Note 4
of Notes to Consolidated Financial Statements) was subject to changes in market
interest rates. However, due to the short-term nature of the debt, the
Company's management does not believe it is at material risk with respect to
changes in market interest rates.
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> 8
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
ConSil Corp.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
ConSil Corp. and subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Spokane, Washington
February 8, 1999
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<PAGE> 9
CONSIL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
-----------
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,236 $ 38,267
Other receivables 120 60,571
Income tax refund receivable 16,000 8,000
----------- -----------
Total current assets 27,356 106,838
----------- -----------
Deferred income taxes - - 8,000
----------- -----------
Total assets $ 27,356 $ 114,838
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - Hecla Mining Company $ 247,762 $ 318,865
Accounts payable - trade - - 6,247
Accrued interest payable - Hecla Mining Company 147,250 77,420
Note payable - Hecla Mining Company 700,000 700,000
----------- -----------
Total current liabilities 1,095,012 1,102,532
----------- -----------
Commitments (Notes 2, 4, and 9)
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 (3,175,870) (3,095,908)
Less: Common stock reacquired at cost;
1998 and 1997 - 5,982 shares (3,461) (3,461)
----------- -----------
Total stockholders' deficit (1,067,656) (987,694)
----------- -----------
Total liabilities and stockholders' deficit $ 27,356 $ 114,838
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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<PAGE> 10
CONSIL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998, 1997 and 1996
-------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Interest $ 6,206 $ 280 $ 3,526
Transfer fees - - - - 152
Other 5,228 - - - -
------------ ------------ ------------
11,434 280 3,678
------------ ------------ ------------
Expenses:
General and administrative 21,566 350,748 347,714
Exploration and acquisition - - 105,848 646,437
Depreciation - - 4,495 5,747
Interest expense on note payable to
Hecla Mining Company 69,830 59,519 17,901
------------ ------------ ------------
91,396 520,610 1,017,799
------------ ------------ ------------
Loss before income taxes (79,962) (520,330) (1,014,121)
Income tax provision (benefit) - - 16,687 (101,110)
------------ ------------ ------------
Net loss $ (79,962) $ (537,017) $ (913,011)
============ ============ ============
Basic and diluted loss per common share $ (0.01) $ (0.06) $ (0.10)
============ ============ ============
Weighted average number of
common shares outstanding 9,449,707 9,449,753 9,450,691
============ ============ ============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE> 11
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996
-----------------
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net loss $ (79,962) $ (537,017) $ (913,011)
Noncash elements included in net loss:
Depreciation - - 4,495 5,747
Deferred income tax provision (benefit) 8,000 (8,000) 99,000
Prepaid and deferred legal and financing
costs expensed - - 32,704 - -
Loss on sale of equipment - - 1,158 - -
Change in:
Other receivables 60,451 10,060 (69,221)
Income tax refund receivable (8,000) 202,816 (164,472)
Prepaid and deferred expenses - - - - (611)
Accounts payable (77,350) (65,980) 123,079
Accrued interest payable on note to
Hecla Mining Co. 69,830 59,519 17,901
------------ ------------ ------------
Net cash used by operating activities (27,031) (300,245) (901,588)
------------ ------------ ------------
Investing activities:
Proceeds from sale of equipment - - 18,296 - -
Acquisition of equipment - - - - (39,410)
------------ ------------ ------------
Net cash provided (used) by investing activities - - 18,296 (39,410)
------------ ------------ ------------
Financing activities:
Deferred stock offering costs - - - - (24,136)
Proceeds from note payable to Hecla Mining Co. - - 369,999 500,000
Acquisition of treasury stock - - - - (3,437)
Repayment of note payable to Hecla Mining Co. - - (169,999) - -
------------ ------------ ------------
Net cash provided by financing activities - - 200,000 472,427
------------ ------------ ------------
Net decrease in cash and cash equivalents (27,031) (81,949) (468,571)
Cash and cash equivalents at beginning
of year 38,267 120,216 588,787
------------ ------------ ------------
Cash and cash equivalents at end of year $ 11,236 $ 38,267 $ 120,216
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes $ 30 $ (178,129) $ (35,638)
============ ============ ============
For noncash financing activities see Note 6
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE> 12
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 1998, 1997 and 1996
-------------------
<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, 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)
Net loss (79,962)
------- -------- --------- ---------- --------- ----------- ----------- -------
BALANCES,
December 31, 1998 - - $ - - 9,455,689 $2,111,675 $ - - $ - - $(3,175,870) $(3,461)
======= ======== ========= ========== ========= =========== =========== =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
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<PAGE> 13
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. The
Company is currently inactive.
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, 1998, the Company had 9,449,707 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, 1998, the Company had negative working
capital of $1,067,656 and a stockholders' deficit of $1,067,656. Included in
current liabilities is a $700,000 note payable to Hecla which is due upon demand
by authorized representatives of Hecla, but in no event later than March 31,
2000. If other sources of funds are unavailable, Hecla has committed to fund
the reasonable minimum financial requirements of the Company through March 31,
2000.
EXPLORATION
Exploration costs are charged to operations as incurred.
BASIC AND DILUTED LOSS PER COMMON SHARE
Basic earnings per share (EPS) is calculated by dividing the net loss by
the weighted-average number of common shares outstanding for the year. Diluted
EPS reflects the potential dilution that could occur if potentially dilutive
securities were exercised or converted to common stock. Due to the losses in
1998, 1997, and 1996, potentially dilutive securities were excluded from the
calculation of diluted EPS as they were anti-
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<PAGE> 14
dilutive. Therefore, there was no difference in the calculation of basic and
diluted EPS in 1998, 1997, and 1996.
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.
INCOME TAXES
The Company records deferred tax liabilities and assets for the expected
future income tax consequences of events that have been recognized in its
financial statements. Deferred tax liabilities and assets are determined based
on the temporary differences between the financial statement carrying amounts
and the tax bases of assets and liabilities using enacted tax rates in effect in
the years in which the temporary differences are expected to reverse.
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.
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.
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.
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<PAGE> 15
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 under the direction of the management of
Minera ConSil was $27,719; expenses for 1996 were approximately $453,793.
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<PAGE> 16
3. INCOME TAXES
The components of the Company's income tax provision (benefit) for the
years ended December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
--------- --------- ---------
Current:
Federal $ - - $ - - $(173,869)
State (8,000) 24,687 (26,241)
--------- --------- ---------
(8,000) 24,687 (200,110)
--------- --------- ---------
Deferred:
Federal - - - - 80,000
State 8,000 (8,000) 19,000
--------- --------- ---------
8,000 (8,000) 99,000
--------- --------- ---------
Total $ - - $ 16,687 $(101,110)
========= ========= =========
The income tax provision (benefit) for the years ended December 31, 1998,
1997 and 1996 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>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Computed "statutory"
benefit $ (27,187) (34)% $(176,912) (34)% $(344,801) (34)%
Effect of other
expenses - - - - (1,952) (1) (4,490) - -
Change in valuation
allowance due to
uncertainty of
recovery of deferred
tax assets 27,187 34 216,244 42 255,422 25
Effect of state
income taxes - - - - (20,693) (4) (7,241) (1)
--------- --- --------- --- --------- ---
$ - - - - $ 16,687 3% $(101,110) (10)%
========= === ========= === ========= ===
</TABLE>
-16-
<PAGE> 17
At December 31, 1998 and 1997, the Company had the following deferred tax
asset:
1998 1997
--------- ---------
Net operating loss carryforwards
and capitalized exploration
costs $ 696,567 $ 677,380
Valuation allowance (696,567) (669,380)
---------- ---------
Net deferred tax asset $ - - $ 8,000
========== =========
The change in the valuation allowance during the years ended December 31,
1998, 1997 and 1996 is as follows:
1998 1997 1996
-------- --------- ---------
Balance,
beginning of year $669,380 $453,136 $197,714
Change due to
utilization/nonutilization
of net operating loss
carryforwards 27,187 216,244 255,422
-------- -------- --------
Balance, end of year $696,567 $669,380 $453,136
======== ======== ========
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, 1998, the Company had federal and state net operating loss
carryforwards of $667,000 substantially all of which will expire in the year
2012.
4. 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.
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. This loan agreement was subsequently
-17-
<PAGE> 18
amended on six separate occasions, increasing the amount available to borrow to
$725,000 and extending the repayment date until March 31, 2000 with all other
terms remaining substantially identical to the original loan agreement. At
December 31, 1998, the Company was in compliance with the restrictions under the
loan agreement. At December 31, 1998, there was $700,000 outstanding under the
loan agreement with Hecla, having an interest rate of 9.25%, and accrued
interest due to Hecla totaling $147,250. Interest expense related to this note
for the years ended December 31, 1998, 1997, and 1996 was $69,830, $59,519, and
$17,901, respectively.
5. COMMON STOCK
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.
6. RELATED PARTY TRANSACTIONS
In addition to related party transactions described in Notes 2, 4 and 5,
during the years ended December 31, 1998, 1997 and 1996, general and
administrative expenses of $279, $16,387, and $24,773, 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 net book value
($14,655), in partial settlement of amounts due to Hecla.
As of January 1, 1997, Hecla and the Company's president at the time, 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:
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.
-18-
<PAGE> 19
7. 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:
December 31,
--------------------------------------
1998 1997
------------------ ------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
-------- -------- -------- --------
Financial assets:
Cash and cash equivalents $ 11,236 $ 11,236 $ 38,267 $ 38,267
Accounts and other
receivables 120 120 60,571 60,571
Income tax refund
receivable 16,000 16,000 8,000 8,000
Financial liabilities:
Current liabilities 395,012 395,012 402,532 402,532
Note payable 700,000 700,000 700,000 700,000
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.
-19-
<PAGE> 20
8. GEOGRAPHIC SEGMENTS
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 tables below present information
about the Company's single industry segment as of and for the years ended
December 31:
1998 1997 1996
----------- ----------- ----------
Net income (loss)
United States $ (86,603) $(428,319) $(362,585)
Mexico 6,871 (105,848) (442,976)
Canada (230) (2,850) (107,450)
--------- --------- ---------
$ (79,962) $(537,017) $(913,011)
========= ========= =========
Identifiable assets(1)
Equipment:
United States $ - - $ - - $ 18,710
Mexico - - - - - -
Canada - - - - 19,893
--------- --------- ---------
$ - - $ - - $ 38,603
========= ========= =========
General corporate assets(1)
United States $ 25,033 $ 48,010 $ 327,838
Mexico 453 60,265 66,446
Canada 1,870 6,563 40,083
--------- --------- ---------
$ 27,356 $ 114,838 $ 434,367
========= ========= =========
(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.
9. 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 1998,
1997, and 1996, the Company incurred rent expense of $0, $2,409, and $22,751,
respectively.
-20-
<PAGE> 21
10. 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, 1998 and 1997 and the net loss for the
years ended December 31, 1998, 1997, and 1996 are as follows:
1998 1997
----------- ---------
Total stockholders' deficit at
December 31, per U.S. generally
accepted accounting principles $(1,067,656) $(987,694)
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 $(1,067,656) $(995,694)
=========== =========
1998 1997 1996
----------- ---------- ----------
Net loss for the year ended
December 31, per U.S. generally
accepted accounting principles $ (79,962) $ (537,017) $ (913,011)
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax (provision)
benefit 8,000 (8,000) 99,000
---------- ---------- ----------
Net loss for the year ended
December 31, per Canadian
generally accepted accounting
principles $ (71,962) $ (545,017) $ (814,011)
========== ========== ==========
-21-
<PAGE> 22
11. 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,
1998, 1997 and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------------------------------
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 $ (79,962) $ (537,017) $ (913,011)
Basic loss $ (79,962) 9,449,707 $ (0.01) $ (537,017) 9,449,753 $ (0.06) $ (913,011) 9,450,691 $ (0.10)
========= ========= ======= ========== ========= ======= ========== ========= =======
Effect of dilutive
securities(1)
Diluted loss $ (79,962) 9,449,707 $ (0.01) $ (537,017) 9,449,753 $ (0.06) $ (913,011) 9,450,691 $ (0.10)
========= ========= ======= ========== ========= ======= ========== ========= =======
(1) Dilutive Securities
As of December 31, 1998, and 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.
</TABLE>
12. STOCK OPTION PLANS
At December 31, 1998, 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 1998 or 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, 1998, and 1997, would have been increased to the pro forma amounts
indicated below:
1998 1997
---- ----
Loss applicable to common shareholders:
As reported $79,962 $537,017
Pro forma $79,962 $565,027
Loss applicable to common shareholders
per share:
As reported $ 0.01 $ 0.06
Pro forma $ 0.01 $ 0.06
-22-
<PAGE> 23
There were no options granted in 1998. The fair market value of each
option granted in 1997 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
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 1998, there were no options granted under either plan. 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, 1998, 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 and 1998 180,000 $0.87
========
All of the options outstanding as of December 31, 1998 are fully
exercisable and have a remaining life of 3.0 years. There were no amounts
charged to operations related to the plans in 1998 and 1997.
-24-
<PAGE> 24
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 1998 or 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners as of March 1, 1999:
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
(b) Security ownership of management as of March 1, 1999:
<TABLE>
<CAPTION>
Common Shares
Year First Owned Beneficially,
Elected As Directly or Indirectly, Percent
Name Age A Director as of March 1, 1999 of Class (5)
---- --- ---------- ----------------------- ------------
<S> <C> <C> <C> <C>
Charles F. Asher (1) 77 1992 60,000 *
Director since 1992, Mr. Asher is
President of Plainview Mining
Company and has served as a
director of Merger Mines
Corporation and Verna Mae Mining
since 1987.
Nigel P.H. Cave 31 1997 -0- *
Secretary since 1997. Attorney at
Law, Ladner Downs since 1993.
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
Common Shares
Year First Owned Beneficially,
Elected As Directly or Indirectly, Percent
Name Age A Director as of March 1, 1999 of Class (5)
---- --- ---------- ----------------------- ------------
<S> <C> <C> <C> <C>
George R. Johnson (2) 50 1997 -0- *
Chairman and President since
October 1997. Mr. Johnson has
served as Vice President - Metal
Mining of Hecla Mining Company
since 1996 and Manager of
Operations - Metal Mining of Hecla
from 1990 to 1996.
William J. Weymark (1) 45 1995 60,000 *
Director since 1995. President of
Vancouver Wharves since 1996.
Prior to that, he was Vice
President of Operations of
Vancouver Wharves from 1991 to
1996. President of Canadian
Stevedoring Company Ltd. since
1999. He serves on the boards of
other public Canadian resource
companies.
Michael B. White (3) 48 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.
David F. Wolfe (4) 55 1993 -0- *
Treasurer since 1993. Mr.
Wolfe is also Treasurer of
Hecla Mining Company.
All Officers and Directors as a Group (6 Individuals) 181,000 1.9%
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) 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.
(2) Additionally, Mr. Johnson is the beneficial owner of 45,100 shares of
common stock of Hecla Mining Company, the majority shareholder of the Company,
including 44,600 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.
</TABLE>
-25-
<PAGE> 26
(3) 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 54,518 shares of common
stock of Hecla Mining Company, the majority shareholder of the Company,
including 53,900 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.
(4) Additionally, Mr. Wolfe is the beneficial owner of 12,050 shares of common
stock of Hecla Mining Company, the majority shareholder of the Company,
including 12,000 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.
(5) In addition to the 9,449,707 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
Not Applicable.
-26-
<PAGE> 27
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 8
Consolidated Balance Sheets at December 31, 1998
and 1997 9
Consolidated Statements of Operations for the
Years Ended December 31, 1998, 1997 and 1996 10
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and 1996 11
Consolidated Statements of Changes in Stockholders'
Deficit for the Years Ended December 31, 1998,
1997 and 1996 12
Notes to Consolidated Financial Statements 13
(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
------ -----------------------
27 Financial Data Schedule
-27-
<PAGE> 28
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 25,
1999.
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 3/25/99 /s/ Michael B. White 3/25/99
- ------------------------------- ------------------------------
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 3/25/99 /s/ Charles F. Asher 3/25/99
- ------------------------------- ------------------------------
David F. Wolfe Date Charles F. Asher Date
Treasurer (principal accounting Director
and financial officer)
/s/ William J. Weymark 3/25/99
- -------------------------------
William J. Weymark Date
Director
-28-
<PAGE> 29
LIST OF EXHIBITS TO BE FILED WITH THIS 10-K
Number Description of Exhibits
------ -----------------------
27 Financial Data Schedule
-29-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,236
<SECURITIES> 0
<RECEIVABLES> 16,120
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,356
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,356
<CURRENT-LIABILITIES> 1,095,012
<BONDS> 0
0
0
<COMMON> 2,111,675
<OTHER-SE> (3,179,331)
<TOTAL-LIABILITY-AND-EQUITY> (1,067,656)
<SALES> 0
<TOTAL-REVENUES> 11,434
<CGS> 0
<TOTAL-COSTS> 21,566
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,830
<INCOME-PRETAX> (79,962)
<INCOME-TAX> 0
<INCOME-CONTINUING> (79,962)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,962)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
