SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 1-316
INDEPENDENCE LEAD MINES COMPANY
(Exact name of registrant as specified in its charter)
Arizona 82-0131980
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
510 Cedar Street
Wallace, Idaho 83873
(Address of principal executive offices)
Registrant's telephone number,
including area code: (208) 753-2525
Common Stock None
Title of each class Name of each exchange
on which registered
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
(or for such shorter period as the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of outstanding shares of the registrant's common stock
at August 10, 1999 was 4,369,993 shares.
<PAGE>
INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1999
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements 1
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 1
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 2
Item 2: Changes in Securities 3
Item 3: Defaults upon Senior Securities 3
Item 4: Submission of Matters to a Vote of Security Holders 3
Item 5: Other Information 3
Item 6: Exhibits and Reports on Form 8-K 3
SIGNATURES
[The balance of this page has been intentionally left blank.]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements of the Company for the periods
covered by this report are included elsewhere in this report,
beginning at page F/S-1.
The unaudited financial statements have been prepared by the
Company in accordance with generally accepted accounting
principles for interim financial information with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the
Company's management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the six-month period
ended June 30, 1999 are not necessarily indicative of the results
that may be expected for the full year ending December 31, 1999.
For further information refer to the financial statements and
footnotes thereto in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 incorporated by reference
herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 1999.
Six months Ended June 30, 1999 Compared to six months Ended June
30, 1998.
During the six months ended June 30, 1999, the Company generated
revenue of $86,739 from the sale of timber. There was no revenue
in the comparable period of 1998. General and administrative
expenses increased to $95,760 for the six-month period ended June
30, 1999 as compared to $8,530 for the six-month period ended
June 30, 1998. The increase is principally attributed to
expenses incurred in 1999 related to the Company's ongoing
litigation described in Item 1 (Legal Proceedings). For the
quarter ended June 30, 1999, the Company experienced a loss of
$8,814, or $0.002 per share, compared to a loss of $8,172, or
$0.002 per share, during the comparable period in the previous
year.
LIQUIDITY AND CAPITAL RESOURCES.
The Company is the owner of fifteen patented and seventeen
unpatented mining claims. This claim group ("the property") is
situated Northwest of Hecla Mining Company's Lucky Friday Mine in
the Coeur d'Alene Mining District, Shoshone County Idaho.
Adjacent is the community of Mullan and U.S. Interstate Highway
90.
<PAGE>
Pursuant to the terms of an agreement dated February 8, 1968,
among Hecla Mining Company ("Hecla"), Day Mines, Inc. ("Day"),
Abot Mining Company ("Abot"), and the Company (the "Unitization
Agreement"), the Eastern portion of the Company's Property
(approximately five-eighths of the Property) was unitized with
certain adjoining and near-by properties owned by Day and Abot
into a unitized area, consisting of 55 claims, (known as the "DIA
Area"). Under the terms of the Unitization Agreement, ores and
minerals in place are owned by the parties thereto in the
following percentages:
Day (now Hecla by merger) 47.70%
Independence 46.30%
Abot 6.00%
By a second agreement also dated February 8, 1968 (the "Lease
Agreement"), Hecla leased the DIA Area for a period of fifty (50)
years, subject to a 30-year extension, for the purpose of
conducting mineral exploration and development of the DIA Area
and mining such commercial ore as may be discovered in the DIA
Area by Hecla. Since inception of the Lease Agreement, Hecla has
performed exploration and development work on the DIA Project at
a cost of more than $32,000,000 at year end December 31, 1998. To
date exploration has revealed a resource estimated of 7,933,418
tons.
-Page 1-
The Lease Agreement provides that all costs and expenses incurred
in the exploration, development, and operation of the DIA Area
are to be paid by Hecla subject to the right of Hecla to be
reimbursed for such costs and expenses, together with all advance
royalties paid, out of any future net profits realized from the
operation of the DIA Area. After recovery of Hecla's costs and
expenses and amounts paid as advance royalties, and the
establishment of a six month working capital reserve, net profit
royalties are to be paid to the Company and the other property
owners as follows:
Day (now Hecla by merger) 19.08%
Independence 18.52%
Abot 2.40%
Under the terms of the Unitization Agreement, one-half of the
first net profit royalties received by the Company are to be paid
over to Day (now Hecla) until Day recovers the sum of $450,000.
The relationship of the parties to the Agreement may, under
certain circumstances, be converted to a joint venture at the
option of the property owners, where after the property owners
would become participating, non-operating working interest owners
who would share profits and expenses in connection with the DIA
Area in the same ratio as exists pursuant to lease arrangement
with Hecla described above.
Until Hecla commences to pay net profit royalties and during such
period as the Lease Agreement is in effect, Hecla is obligated to
<PAGE>
pay an advance royalty to the Company of $750 per month subject
to increase to $1,500 if production for the DIA Area exceeds
2,000 tons per month. The Company currently receives an advance
royalty of $1,500 per month, whish is recorded in the financial
statements as deferred income.
Pursuant to the terms of the February 8, 1968, agreements, Hecla
will be obligate to pay a royalty of 18.52 percent of defined net
profits after Hecla has recouped its costs to explore and develop
this property from the new discovery to Independence Lead Mines
Company.
The current officers and directors of the Company serve without
compensation and are not considered by the Company to be
employees.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
H.F. Magnuson & Company, the accounting firm, which, prior to May
22, 1997 provided accounting, bookkeeping, geological,and other
professional services to Independence Lead Mines Company. H.F.
Magnuson & Company has filed suit in Shoshone County, Idaho in
case #CV98-34222 to enforce two promissory notes. One note in the
amount of $47,800.00 executed by former directors, R.M. MacPhee
and Dale B. Lavigne, in favor of H.F. Magnuson & Company was
executed on September 10,1996 and states interest at nine percent
(9%) per annum. The other note is in the principal amount of
$38,300.00 and was executed by former directors R.M. MacPhee and
Dale B. Lavigne in favor of H.F. Magnuson & Company on May 13,
1997 and states interest at the rate of nine percent (9%) per
annum. H.F. Magnuson & Company also seeks an award of its
attorney fees and costs in that action. Independence Lead Mines
Company has denied any liability under these notes. Independence
Lead Mines Company has also filed a counterclaim against H.F.
Magnuson & Company. Management believes that the promissory notes
will be invalidated by the court and believes that Independence
Lead Mines Company will prevail on its counterclaims.
H.F. Magnuson & Company and former directors, R.M. MacPhee, Dale
B. Lavigne and Wray Featherstone have filed suit in Shoshone
County, Idaho case #CV98-34225 against Independence Lead Mines
Company, Bernard Lannen, Fordon Berkhaug, Forrest Godde, and
Robert Bunde, to validate 60,000 shares of Indepence stock issued
to them prior to May 22, 1997 for alleged past advances of
expenses, services, and as directors fees. The Plaintiffs also
seek monetary damages from the Defendants in excess of $10,000
plus attorney fees and costs for the actions for the Defendants.
Independence Lead Mines Company, Bernard Lannen, Gordon Berkhaug,
Forrest Godde, and Robert Bunde have denied the validity of those
60,000 shares and have denied any liability for monetary damages.
Independence Lead Mines Company and the other named Defendants
have made counterclaims against the Plaintiffs. Management
believes the 60,000 shares of stock claimed by the plaintiffs
will be invalidated by the court, the Plaintiffs will recover
<PAGE>
nothing from any of the Defendants. It is management's belief
that Independence Lead Mines Company will prevail on its
counterclaim.
The hearing date for both proceedings has been set for May, 2000.
Dale Lavigne, a director of the Company at the time the lawsuits
were filed, was a party to the lawsuits against the Company and
its directors. As a consequence, the remaining directors asked
for and received Mr. Lavigne's resignation from the board in
1998.
-Page 2-
ITEM 2. CHANGES IN SECURITIES.
Neither the constituent instruments defining the rights of the
registrant's securities holders nor the rights evidenced by the
registrant's outstanding common stock have been modified, limited
or qualified.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The registrant has no outstanding senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the registrant's security
holders during the period covered by this report.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS. The following exhibit is filed as part of this report:
Exhibit 27.0 Financial Data Schedule
REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the
registrant during the period covered by this
report.
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-Page 3-
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
TABLE OF CONTENTS
Page
Balance Sheets as of June 30, 1999
and December 31, 1998 F/S-2
Statements of Operations for the six Months
Ended June 30, 1999 and 1998 F/S-3
Statements of Cash Flow for the six
Months Ended June 30, 1999 and 1998 F/S-4
Notes to Interim Financial Statements F/S-5
Signatures F/S-6
[The balance of this page has been intentionally left blank.]
F/S - 1
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
BALANCE SHEET - UNAUDITED
<TABLE>
<CAPTION>
ASSETS June 30, 1999 December 31, 1998
------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 57,851 $ 55,678
Royalties Receivable 1,500 1,500
Investments 2,908 2,908
-------- --------
Total current assets 62,259 60,086
-------- --------
PROPERTY AND EQUIPMENT, at cost:
Equipment 0 0
Less accumulated depreciation 0 0
-------- --------
0 0
Mining property 3,048,407 3,048,407
--------- ---------
Total property and equipment 3,048,407 3,048,407
OTHER ASSETS:
Unrecovered exploration costs 187,920 187,920
---------- ----------
Total assets $3,298,586 $ 3,296,413
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 26,468 $ 6,333
Advances payable 86,100 86,100
Interest payable 16,475 12,632
Loans from Shareholders 0 0
--------- ---------
Total current liabilities 129,043 105,065
--------- ---------
DEFERRED INCOME: 310,250 301,250
--------- ---------
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par value,
Authorized 5,000,000 shares;
issued and outstanding
4,369,993 shares 4,369,993 4,369,993
Additional Paid-In
Capital (Deficit) (119,873) (119,873)
4,250,120 4,250,120
Less deficit accumulated
during the
exploration stage (1,390,827) (1,360,022)
----------- -----------
Total Stockholders equity 2,859,293 2,890,098
----------- -----------
Total liabilities and
stockholders' equity $3,298,586 $3,296,413
=========== ===========
- -------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
F/S - 2
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
(An Exploratory Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE EXPLORATION STAGE - UNAUDITED
<TABLE>
<CAPTION>
Quarter Six Months Quarter Six Months
Ended Ended Ended Ended
June 30, 99 June 30, 99 June 30, 98 June 30, 98
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 86,739 $ 86,739 $ 0 $ 0
---------- ---------- --------- --------
EXPENSES
Licenses and fees 0 30 426 726
Office expense 17 17 164 1,808
Office services 0 200 214 214
Shareholder Relations 385 1,141 1,176 2,199
Interest 1,932 3,843 1,932 3,904
Transportation 0 0 0 288
Accounting 0 0 220 220
Legal 93,426 113,023 4,398 9,424
-------- -------- ------ -------
95,760 118,254 8,530 18,783
LOSS FROM OPERATIONS (9,021) (31,515) (8,530) (18,783)
INTEREST AND INCOME 207 709 358 358
--------- --------- -------- ---------
NET LOSS $(8,814) $(30,806) $(8,172) $(18,425)
======== ======== ======= ========
Loss per share ($0.002) ($0.007) ($0.002) ($0.004)
Weighted average common
shares outstanding 4,369,993 4,369,993 4,371,437 4,347,475
- --------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F/ S - 3
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF CASH FLOW - UNAUDITED
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Operating Activities:
Net loss $ (30,806) $ (18,425)
Adjustments to reconcile net loss to net cash
used in operating activities: 0 0
Changes in operating assets and liabilities:
(Increase) decrease in supplies inventory 0 0
(Increase) decrease in accounts receivable 0 (1,500)
Increase (decrease) in accounts payable 20,136 (301)
Increase (decrease) in deferred income 9,000 9,000
Increase (decrease) in interest payable 3,843 3,546
- -------------------------------------------- ------- -------
Net cash used in operating activities 2,172 (7,680)
- -------------------------------------------- ------- -------
Investing activities:
Purchase of investments 0 (2,733)
----------------------- ------- -------
Net cash used in investing activities 0 (2,733)
- -------------------------------------------- ------- -------
Financing activities:
Proceeds from sale of common stock 0 75,000
Repurchase and retirement of common stock 0 (9,593)
Repayment of long-term debt 0 (10,000)
----------------------------------------- ------- --------
Net cash provided by financing activities 0 55,407
- -------------------------------------------- ------- --------
Net increase (decrease) in cash 2,172 44,994
Cash and cash equivalent, beginning of period 55,678 8,883
- --------------------------------------------- ------- --------
Cash and cash equivalent, end of period $ 57,850 $ 53,877
============================================= ======== ========
Disclosure of accounting policy
For the six months ended June 30, 1999 and June 30, 1998, the Company
had no cash equivalents.
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 0 $ 359
Income taxes 30 30
- -------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F/S - 4
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS - UNAUDITED
Financing information presented in the Company's quarterly
reports follow the policies set forth in its Annual Report on
Form 10-K filed with the Securities and Exchange Commission. In
accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q, and
Rule 10-01 of Regulation S-X, these quarterly reports do not
include all of the information and footnotes.
In the opinion of the Company's management, all adjustments
(consisting of only normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six-month period ended June 30, 1999 are not
necessarily indicative of the results that may be expected for
the full year ending December 31, 1999.
1. Nature of business:
Independence Lead Mines Company ("the Company") is a corporation
organized under the laws of the State of Arizona on September
16,1929. The Company is the owner of fifteen patented and
fourteen unpatented mining claims. This claim group (the
"property") is situated Northwest of Hecla Mining Company's Lucky
Friday Mine in the Coeur d'Alene Mining District, Shoshone County
Idaho. The Company's property is part of the "DIA Area" which is
currently being developed and mined by Hecla Mining Company. The
Company has been in the development stage since its inception.
The Company's only recurring source of funds is a monthly advance
royalty from Hecla Mining Company of $1,500. The Company has
incurred operating losses since inception. The financial
statements do not contain any adjustments which might be
necessary if the Company is unable to continue as a going
concern.
2. Common stock:
In September 1997 the capitalyzation of the Company was
increased from 4,000,000 shares to 5,000,000 shares.
During 1998, the Company conducted a voluntary share buyback
program for shareholders with no more than 200 shares, in
order to relieve those shareholders of the inconvenience and
cost of brokerage commission. As a result of the buyback
program, the Company purchased a total of 6,793 shares at a
price of $1.70 per share. The program was terminated in
October 1998.
[The balance of this page has been intentionally left blank.]
F/S - 5
<PAGE>
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.
INDEPENDENCE LEAD MINES COMPANY
By: /s/ Bernard C. Lannen
--------------------------
Bernard C. Lannen, its
President
Date: August 13, 1999
By: /s/ Wayne Schoonmaker
-------------------------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: August 13, 1999
F/S-6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000050073
<NAME> INDEPENDENCE LEAD MINES COMPANY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 57,851
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,259
<PP&E> 3,048,407<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,298,586
<CURRENT-LIABILITIES> 129,043
<BONDS> 0
0
0
<COMMON> 4,369,993
<OTHER-SE> (1,510,700)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 3,298,586
<SALES> 0
<TOTAL-REVENUES> 87,448<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 114,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,843
<INCOME-PRETAX> (30,806)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30,806)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,806)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
<FN>
<F1>Consists of $3,048,407 in resource properties and claims.
<F2>Consists of $119,873 in additional paid-in capital (deficit), plus a deficit of
$1,390,827 accumulated during development stage.
<F3>Consists of $709 in interest income and proceeds of $86,739 from the sale of
timber.
</FN>
</TABLE>
