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 September 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 SEPTEMBER 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
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<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 nine-month period ended September 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 SEPTEMBER 30, 1999.
Nine months Ended September 30, 1999 Compared to nine months Ended
September 30, 1998.
During the nine months ended September 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
$157,238 for the nine-month period ended September 30, 1999 as compared to
$24,834 for the nine-month period ended September 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 September 30, 1999, the Company experienced a loss of
$38,715, or $0.009 per share, compared to a loss of $5,467, or $0.001 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.
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.
-1-
<PAGE>
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 nine 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 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
obligated 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. In July
1999 the Company executed a line of credit agreement with a director /
shareholder to meet the legal expenses of the ongoing litigation described
in part II item I. As of September 30, 1999 no advances had been made
against the line of credit.
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
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.
-2-
<PAGE>
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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-3-
<PAGE>
INDEPENDENCE LEAD MINES COMPANY
TABLE OF CONTENTS
Page
Balance Sheets as of September 30, 1999
and December 31, 1998 F/S-2
Statements of Operations for the nine Months
Ended September 30, 1999 and 1998 F/S-3
Statements of Cash Flow for the nine
Months Ended September 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
Sept. 30, 1999 Dec. 31, 1998
-------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 35,996 $ 55,678
Royalties Receivable 1,500 1,500
Investments 2,908 2,908
------- -------
Total current assets 40,404 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 $3,276,731 $3,296,413
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 39,987 $ 6,333
Advances payable 86,100 86,100
Interest payable 18,428 12,632
Loans from Shareholders 0 0
-------- --------
Total current liabilities 144,515 105,065
-------- --------
DEFERRED INCOME: 314,750 301,250
-------- --------
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par value, authorized
5,000,000 shares; issued and outstanding
4,369,993 shares 4,369,793 4,369,993
Treasury Stock (5,936 shares) (2,992)
Additional Paid-In Capital (Deficit) (119,873) (119,873)
--------- ---------
4,247,008 4,250,120
Less deficit accumulated during the
exploration stage (1,429,542) (1,360,022)
----------- -----------
Total Stockholders equity 2,817,466 2,890,098
----------- -----------
Total liabilities and stockholders' equity $3,276,731 $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 Nine Months Quarter Nine Months
Ended Ended Ended Ended
Sept. 30, 99 Sept. 30, 99 Sept. 30, 98 Sept. 30, 98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 0 $ 86,739 $ 0 $ 0
-------- -------- ------ ------
Expenses
Licenses and fees 249 279 601 1,327
Office expense 0 17 77 1,885
Office services 150 350 284 497
Bank Fees 150 150 0 0
Shareholder Relations 100 1,241 136 2,335
Interest 1,953 5,795 1,953 5,857
Transportation 0 0 0 288
Accounting 0 0 0 220
Legal 36,383 149,406 3,002 12,425
-------- -------- ------- --------
38,985 157,238 6,053 24,834
Loss from Operations (38,985) (70,499) (6,053) (24,834)
Interest and Other Income 270 979 586 943
------- ------- ------- -------
NET LOSS $(38,715) $(69,520) $(5,467) $(23,891)
========= ========= ======== =========
Loss per share ($0.009) ($0.016) ($0.001) ($0.006)
Weighted average common
shares outstanding 4,367,025 4,368,014 4,370,318 4,354,981
____________________
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>
Nine Months Nine Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Operating Activities:
Net loss $ (69,520) $ (23,891)
Adjustments to reconcile net loss to net cash
used in operating activities: 0 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 0 (1,500)
Increase (decrease) in accounts payable 33,654 (301)
Increase (decrease) in deferred income 13,500 13,500
Increase (decrease) in interest payable 5,796 5,499
- ----------------------------------------- --------- -------
Net cash used in operating activities (16,570) (6,693)
- ----------------------------------------- --------- -------
Investing activities:
Additions to mining properties 0 (1,105)
Purchase of investments 0 (2,793)
- ----------------------------------------- -------- -------
Net cash used in investing activities 0 (3,898)
- ----------------------------------------- -------- -------
Financing activities:
Proceeds from sale of common stock 0 75,000
Repurchase and retirement of common stock (120) (11,208)
Purchase of treasury stock (2,992) 0
Repayment of long-term debt 0 (10,000)
- ------------------------------------------ --------- ---------
Net cash provided by financing activities (3,112) 53,792
- ------------------------------------------ --------- ---------
Net increase (decrease) in cash (19,682) 43,201
Cash and cash equivalent, beginning of period 55,678 8,883
--------- --------
Cash and cash equivalent, end of period $ 35,996 $ 52,084
========================================= ========= =========
Disclosure of accounting policy
For the nine months ended September 30, 1999 and September 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 nine-month
period ended September 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 capitalization 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 and an additional 200 shares at a
price of $0.60 per share. The program was terminated in October 1998. In
the third quarter of 1999 the company purchased 5,936 shares of
Independence stock on the open market at an average price of $0.50 per
share.
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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: November 12, 1999
By: /s/ Wayne Schoonmaker
----------------------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: November 12, 1999
F/S-6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000050073
<NAME> INDEPENDENCE LEAD MINES COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 35,996
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,404
<PP&E> 3,048,407<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,276,731
<CURRENT-LIABILITIES> 144,515
<BONDS> 0
0
0
<COMMON> 4,366,801
<OTHER-SE> (1,549,335)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 3,276,731
<SALES> 0
<TOTAL-REVENUES> 87,718<F3>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 151,443
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,795
<INCOME-PRETAX> (69,520)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69,520)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,520)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>Consists of $3,048,407 in resource properties and claims.
<F2>Consists of $119,793 in additionalpaid-in capital (deficit), plus a deficit of
$1,429,542 accumulated during development stage.
<F3>Consists of $979 in interest income and proceeds of $86,739 from the sale of
timber.
</FN>
</TABLE>
