U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1995
Commission file number: 0-1519
LEADVILLE CORPORATION
(Name of small business issuer in its charter)
COLORADO 84-0388216
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No)
2851 S. PARKER RD., SUITE 610, AURORA, CO 80014
(Address of principal executive offices)
(303) 671-9792
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered Pursuant to Section 12(g) of the
Exchange Act:
COMMON STOCK
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form and no
disclosure will 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-KSB or any amendment to this Form 10-KSB. [ X ]
Issuers's operating revenues for its most recent fiscal year:
NONE
The aggregate market value of the Common Stock (the
Registrant's only class of voting stock) held by non-affiliates
of the Registrant on March 15, 1996, was approximately $2,583,000
based upon the reported closing sale price of such shares on the
NASDAQ Small-Cap System for that date. As of March 15, 1996,
there were 8,953,571 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Page 1 of 21 pages, including exhibits.
The exhibit index is on sequentially marked page 19.
Item 1. Description of Business
GENERAL
Leadville Corporation ("Leadville" or the "Company") is
a Colorado corporation that was organized in 1945 to acquire,
explore and develop mining properties, primarily in Lake and
Park Counties, Colorado. Leadville's Common Stock is traded
on the NASDAQ Small-Cap System, under symbol "LEAD".
Historic mining activities began in Lake and Park Counties
during the 1860's. The most productive area in the Counties
became known as the Leadville Mining District ("District") of
central Colorado. Since 1860, the District has produced over
2.5 million ounces of gold, 240 million ounces of silver, 2
billion pounds of lead, 1.4 billion pounds of zinc and 100
million pounds of copper. Leadville's properties, which are
located in the District, have produced gold, silver, lead, zinc
and copper during previous mining operations.
Leadville controls two blocks of mining properties, the
Sherman-Hilltop Consolidation ("Sherman Mine"), historically a
silver producer, and the Diamond-Resurrection Consolidation
("Diamond Mine"), primarily a gold producer, along with silver,
lead, zinc and copper. The Company's properties are located near
the town of Leadville, Colorado and are accessible year around,
although access to the mines can be interrupted at times due to
severe winter weather conditions. Access to the mineral
resources at the Diamond and Sherman Mines is gained through
underground workings.
Due to the collapse of silver prices in the 1890's, coupled
with the exhaustion of easily minable high grade surface ore, the
District was left inactive for almost 50 years. During that
period, property and mineral rights were abandoned or divided to
the point of not being manageable. Beginning in 1949 and
continuing into the 1980's one of Leadville's strategic corporate
objectives was to consolidate, under its control, promising land
positions in the District which would serve to support large,
long-term mining operations. Under the direction of its
President, Dr. Robert G. Risk, Leadville commissioned reviews of
historical mining data, conducted geo-physical studies and
researched title records for the Leadville area in an effort to
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identify land positions which held promising prospects for mining
and acquisition. After years of effort and considerable expense,
Leadville successfully consolidated ownership interests and
mining rights in the Sherman-Hilltop and Diamond-Resurrection
properties.
In the late 1960's Leadville acquired a third block of
ground, the Stringtown Mill site ("Stringtown Mill"). This
property was acquired to provide a location for construction
of a mill for processing of Sherman Mine ore.
Item 2. DESCRIPTION OF PROPERTIES
SHERMAN MINE
In 1974, Leadville leased the Sherman Mine, Diamond Mine and
Stringtown Mill properties to Day Mines, Inc. ("Day Mines") of
Wallace, Idaho. The Sherman Mine properties consist of
approximately 1,854 acres of patented mining claims and 1,760
acres of unpatented mining claims in Lake and Park Counties.
Unpatented mining claims require payment of annual assessment
fees to hold the claim.
Hecla Mining Company ("Hecla"), began to operate the Sherman
Mine in 1981, as a result of the merger of Day Mines into Hecla.
During the early 1980's, low silver prices resulted in the
suspension of mining operations at the Sherman Mine for periods
of time. In November of 1984, Leadville reached agreement, in
principle, with Hecla whereby all properties and mining rights
subject to the 1974 lease agreement would be reacquired by
Leadville. During October of 1987, Leadville reached a final
agreement with Hecla for reconveyance of the lease, in
consideration for $500,000 cash and a convertible debenture in
the amount of $381,000. In December 1993, as a result of
Leadville's efforts to re-structure its debt obligations,
Hecla agreed to cancel the $381,000 debenture, along withaccrued
interest of approximately $402,000.
Since May of 1987 and continuing into 1996, Leadville's
activities at the Sherman Mine have been limited to care,
maintenance and permit related work, due to continuing low
silver prices. During 1985, the Sherman Mine was placed in
temporary cessation due to suspension of mining activities.
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During 1995, the temporary cessation period expired and
Leadville will be required to conduct a program of study,
exploration and sampling to maintain existing regulatory
permits. In the event the required work is not performed,
the Company may be required to reclaim the Mine site. The
Company maintains a reclamation bond, in the amount of
$128,000, which relates to the Sherman and Stringtown Mill
sites.
DIAMOND MINE
Leadville acquired the initial Diamond Mine claims in 1964
and continued to add land positions into the early 1980's.
Although the Diamond Mine properties were under lease to Day
Mines, and then Hecla, as part of the 1974 lease agreement, no
mining activities occurred on the properties during the years
1974 through 1982. In 1983, Hecla released the Diamond Mine
from the lease agreement and Leadville immediately initiated a
program of study and exploration of the property.
The Diamond Mine property consists of approximately 1,180
acres and is located approximately 4.5 miles east of Leadville,
Colorado. Substantially all of the mining claims in the block
of ground are patented and owned by Leadville. The property
carries only minimal royalty obligations.
Beginning in 1983 and continuing into 1989, Leadville's
efforts focused on achieving production at the Diamond Mine.
As a result of work conducted and investment made by Leadville
during this six year period, management believes the value of
the property has been enhanced and is positioned to re-open.
During the years 1986 through 1988, Leadville constructed
a surface plant at the Diamond Mine, drove underground access
and development drifts and made significant modifications to
the Stringtown Mill facility. Sustained ore processing at
the Stringtown Mill was achieved in late 1988, after
significant delays due to equipment and circuit failures.
Once ore processing at the mill was sustainable, however,
Leadville lacked necessary financial resources to construct
mine infrastructure required to continue mining operations.
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Ultimately, financing necessary to continue mining
activities in early 1989 could not be secured and operations
were suspended. Management believes that significant
financing has not been available to Leadville due to
environmental litigation surrounding the Leadville, Colorado
area since the mid-1980's.
STRINGTOWN MILL SITE
The Stringtown Mill site encompasses an area of
approximately 300 acres and is located immediately south of
Leadville, Colorado. The Stringtown Mill and tailings ponds
were constructed and placed in service on the site in the late
1960's. The facility was used to mill Sherman Mine ore until
1984, when substantially all Sherman Mine activities were
suspended due to low silver prices.
During the years 1986 though 1988, significant modifications
and improvements were made to the Stringtown Mill in anticipation
of processing Diamond Mine ore. The mill operated sporadically
from mid-1988 until early 1989 processing Diamond Mine ore.
Administrative, laboratory, warehouse and residential facilities
are also located on the 300 acre site.
The Company rents office space from a corporate officer for
$125 per month. As of March 15, 1996, Leadville carried no
liability or property insurance.
As of March 15, 1996, Leadville employed one part-time
individual to monitor the properties and to perform necessary
administrative and field duties.
COMPETITION
Leadville competes with other mining companies attempting to
develop mines which produce precious and base metals. Many
competitors are larger, established mining companies with greater
financial and technical resources than Leadville. In addition,
management believes that Leadville's properties have been at a
competitive disadvantage in the industry since the late 1980's,
due to environmental litigation involving the Leadville Mining
District. (See "LEGAL PROCEEDINGS", under Item 3., hereof).
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Resumption of mining operations at Leadville's two mines is
dependent on attracting significant operating capital and on the
market prices of precious metals, primarily silver and gold. At
current silver prices, many of the industry's silver mines can
not be operated profitably, including the Sherman Mine.
Additionally, the mine requires a significant capital investment
for acquisition of equipment and mine development before it can
be made operational. Operating issues for the Sherman Mine
also include milling considerations, including location.
Independent consultants retained by Leadville conclude that
the Diamond Mine can be profitably operated at current gold
prices. The mine has operating permits in place, identified ore
reserves and plant and equipment positioned to resume mining
activities. Leadville will have to invest additional funds for
development work before the mine can be put into production.
Milling considerations must also be addressed in conjunction
with mining operations at the Diamond Mine.
In years past and continuing into 1996, the Company has been
heavily dependent on its President, Dr. Robert G. Risk, to raise
necessary financing. The loss of Dr. Risk, for any reason, may
have a material impact on the Company's ability to raise
additional funds.
GOVERNMENTAL REGULATIONS
As discussed in "LEGAL PROCEEDINGS", under Item 3, hereof,
Leadville was named as a defendant in several legal actions
initiated by the state of Colorado and the United States
involving environmental matters in the California Gulch
Superfund site. Leadville's Diamond Mine property and
Stringtown Mill site are located within the boundaries of the
Superfund site.
In an effort to limit its financial exposure and move
forward with financing efforts, Leadville ultimately reached a
settlement with the United States which was entered by the Court
in August of 1993. The settlement is in the form of a consent
decree. As a result of that settlement, Leadville will be
required to make annual cash payments to the United States in
order to maintain certain protections afforded by the consent
decree. Additionally, Leadville has agreed to advise the
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United States and certain other parties of its mining plans, if
planned activities could potentially have an adverse impact on
remedial work being performed in the Superfund site.
Under the consent decree, Leadville retains the right to use
the Stringtown Mill facility for ore processing, although use of
the existing Malta Gulch Tailing ponds for future storage of mill
tailings will require approval by the United States. Leadville's
mine and mill facilities are currently permitted by the state of
Colorado for the respective operations. However, the permit
approval process required to operate new mining facilities within
the Superfund site will probably include participation by the
United States.
The costs of defending against the environmental claims
alleged in the consolidated cases and, subsequently, negotiating
a settlement have exhausted nearly all of Leadville's financial
resources. In addition, management believes the designation of
the Leadville, Colorado area as a Superfund site will continue
to complicate efforts to raise financing for the Company's
properties.
Item 3. LEGAL PROCEEDINGS
UNITED STATES (ENVIRONMENTAL PROTECTION AGENCY)
In 1983, Leadville was named as one of several defendants in
an action (United States of America vs. Apache Energy and Mineral
Company, et al) brought by the United States in Federal District
Court in Colorado under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") in connection
with the approximately 11.5 square mile California Gulch
Superfund site in Lake County, Colorado. In 1986, Leadville was
also named as a third party defendant in a suit (State of
Colorado vs. Asarco, Inc., et al) involving the same site. The
cases were subsequently consolidated.
From 1983 through 1988, Leadville negotiated with the United
States to have its involvement in the consolidated case dismissed
or settled on a de minimis basis. That effort was ultimately
unsuccessful. During the years 1989 and continuing into 1993,
Leadville attempted to negotiate a settlement of its alleged
liability to the United States. Management believed that
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financing might be obtained by Leadville if the claims asserted
by the United States were settled and the financial exposure
limited.
During August, 1993 a consent decree was entered by the
Federal District Court in Colorado whereby the United States
agreed to settle Leadville's alleged liability, with the
exception of natural resources damages, if any, in
consideration for $3,000,000. Under the original terms of
the consent decree, a total of $250,000 was to be paid by
Leadville over 15 years, with a contingent liability of
$2,750,000 to be paid based on profitable operations or sale
of properties. Minimum cash payments are to be $10,000
for years 1-5, $15,000 for years 6-10 and $25,000 for years
11-15.
During October 1995, Leadville reached agreement, in
principle, with the United States to reduce the consent decree
obligation amount of $3,000,000 to $500,000, with minimum annual
cash payments to begin in April 1996. In effect, the contingent
liability of $2,750,000 was reduced to $250,000. In
consideration, Leadville agreed to provide to the United States
certain dirt and rock material for use by the Environmental
Protection Agency (EPA) in remedial action work at the Superfund
site. During late 1995, the EPA began to use the dirt material
and Leadville management anticipates that a final agreement
modifying the consent decree will be signed in the near future.
MINING EQUIPMENT, INC.
During December 1988, Leadville raised financing for
operations through the sale and lease back of certain mining and
milling equipment. In late 1989, due to Leadville's inability to
raise financing, scheduled payments under the agreement could not
be made and the lessor of the equipment sued in the District
Court of Lake County, Colorado to obtain financial relief and
possession of the equipment. (Mining Equipment, Inc. vs.
Leadville Corporation).
During October 1994, Leadville and Mining Equipment, Inc.
reached an agreement to settle the case for $678,000. The
plaintiff has obtained possession of substantially all mining and
milling equipment subject to the lease agreements, with the
exception of the Diamond Mine hoist and certain other equipment.
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The plaintiff's right to possession of the hoist is subordinate
to Leadville's debenture holders' first mortgage position.
Plaintiff intends to obtain possession of the other equipment
in 1996.
As of December 31, 1995, Leadville is obligated to Mining
Equipment, Inc. in the amount of $741,800, including accrued
interest. The plaintiff asserts that it has the right to
foreclose on Leadville's properties to satisfy the obligation.
Leadville contests such assertions and, to date, the plaintiff
has not initiated any foreclosure action.
COWIN & COMPANY, INC.
In 1990, Cowin & Company, Inc. Mining Engineers and
Contractors filed suit against Leadville in Lake County, Colorado
District Court asserting that Leadville was obligated to Cowin &
Company for approximately $45,000 for contract mining fees.
Cowin & Company, Inc. is requesting damages, equipment
possession and general relief relating to a contract mining
agreement entered into March 3, 1987.
Leadville counter-claimed for damages resulting from
improper construction of the Diamond Mine shaft and damages
resulting from an accident at the site. No action has been
taken in the case since October 1993 and the Court has ordered
a Status Report be filed on the matter by August 30, 1996.
UNITED STATES FIDELITY & GUARANTY COMPANY
During 1993, Leadville filed a lawsuit against its former
insurance carrier seeking to recover defense costs and obtain
indemnification for issues related to environmental litigation.
The insurance company counter-claimed for $65,000 in defense
costs advanced. In May 1994, the Court ruled against
Leadville's claims and awarded the insurance company the $65,000
in costs advanced. Leadville appealed the decision and lost.
During August 1995, Leadville settled the insurance company's
claim for $10,000 and recorded the residual judgment amount due
as "Extraordinary Gain" on the Company's Statements of
Operations.
Item 4. Submission of Matters to a Vote of Security Holders.
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There were no matters submitted to a vote of the Company's
security holders during the fourth quarter of 1995.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The following table sets forth the low and high bid price
quotations per share of Common Stock, as reported on the NASDAQ
Small-Cap System for the periods indicated. These quotations
reflect inter-dealer prices, without retail markup, mark down or
commission and may not necessarily represent the actual price of
transactions.
Quarter Ended
Low High
December 31, 1994 $ .50 $ .88
March 31, 1995 .25 .63
June 30, 1995 .31 .50
September 30, 1995 .19 .69
December 31, 1995 .25 .63
At March 15, 1996 the Company had approximately 2,100
holders of record of its Common Stock; management estimates
that the number of beneficial holders is significantly greater.
There can be no assurance, if the Company is successful in
raising significant investment capital, future mining operations
will be profitable. No dividends on the Common Stock have been
paid during the past several years and due to the significant
investment of cash required by planned mining activities,
management does not anticipate that any dividends will be paid in
the foreseeable future.
Item 6. Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
The Company earned no revenues from operations in 1995 and
reported a net loss of $617,000. Leadville reported $53,000 of
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Extraordinary Gain for the year which was primarily derived from
a favorable settlement of an insurance company judgment.
The most significant expenses incurred during 1995 included
$417,800 of interest, $41,700 for property taxes, $65,800 for
depreciation and $45,300 for write-down of parts inventory.
Approximately 92% of the $617,000 1995 net loss was attributable
to these expenses.
The Company has had no active mining operations since 1989
and continues to carry a significant investment in property,
equipment and parts inventory. In 1995, the Company initiated
policies to recognize a declining useful life and value of these
assets. Approximately $110,000 of such expenses were recognized
in 1995.
During 1995, Leadville continued to incur significant
interest expense relating to outstanding notes and debentures
payable. As of December 31, 1995, principal amounts due on
notes payable and debentures payable was $608,500 and $531,000,
respectively. In addition, the Company accrued interest charges
of approximately $54,000 associated with the Mining Equipment,
Inc. judgment. (See "Legal Proceeding" under Item 3, hereof).
Substantially all other expenses in 1995 were incurred to
meet general, administrative and property holding expenses.
1995 COMPARED TO 1994
The net loss for 1995 decreased approximately $67,000
compared to 1994. Interest expense for 1995 increased
approximately $85,000 over 1994, due primarily to interest
expense associated with the Mining Equipment, Inc. judgment
and interest expense associated with additional borrowing
during 1995. Depreciation expense increased approximately
$65,000 in 1995, as the Company adopted a policy to begin
providing for depreciation on mining assets maintained
on a stand-by basis. General and administrative
expenses decreased significantly in 1995 due to the
conclusion of significant litigation activities in 1994.
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Liquidity and Capital Resources
Leadville is significantly undercapitalized. As of December
31, 1995, the Company has a working capital deficit of $5,180,000
and minimal operating cash. Since 1989, substantially all of
Leadville's immediate cash needs have been met by loans from the
Company's President and by proceeds from short term notes.
Management is hopeful that cash needs for 1996 will be met from
similar sources, although continued loans from such sources can
not be assured.
In 1995, the Company used cash of approximately $115,000 to
meet minimum general, administrative and property obligations.
No accrued interest payments were made on the Company's debt
obligations during the year and no capital expenditures were
made.
The Company's certificates of deposit, in the amount of
$133,000, are held as mining reclamation bonds and classified as
long term assets.
In order for Leadville to continue as a going concern and
achieve profitable operations of its mining properties, a
significant amount of capital from sources outside the Company
will be required to meet operating expenses, service debt and
resume mining operations. Management is involved in ongoing
discussions with several mining companies that have expressed
preliminary interest in the Diamond and Sherman Mine properties.
To date, no agreements have been reached. It is management's
assessment that financing will be difficult to obtain until the
California Gulch Superfund site cleanup issues are more clearly
defined. The EPA Court action involving the Leadville Mining
District, for all practical purposes, eliminated Leadville's
ability to obtain outside financing over the past six years.
Management cannot predict if or when the litigation will be
resolved to a point where outside parties will show a serious
interest in providing financing to Leadville.
Management is continuing its efforts to obtain financing for
the Company's properties through joint-venture, cash investment
or a secondary offering of Leadville's stock. No assurance can
be given that Leadville will be successful in securing financing.
In order to improve the financing prospects for Leadville,
management is continuing its efforts to lessen the financial and
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operating burdens of the consent decree with the United States.
During the years 1983 through 1988, substantially all of
Leadville's financing needs were met by significant loans from
Leadville's President and through the private placement of
convertible debt and equity securities.
As of December 31, 1995 Leadville is obligated to unsecured
promissory note holders in the face amount of $608,500, plus
accrued interest of $896,000. Outstanding convertible debentures
at December 31, 1995, in the face amount of $531,000, plus
accrued interest of $2,017,000, are secured by all of Leadville's
real property.
Leadville's note and debenture payable obligations,
including accrued interest, are convertible into Common Stock at
a price of $.80 to $1.00 per share. The demand note obligations
due to Dr. Risk in the amount of $100,500, plus accrued
interest, have no stock conversion features. Management is
optimistic that a substantial amount of the debt will be
converted to stock, if Leadville can secure significant
financing for its properties.
Item 7. Financial Statements.
See "Index to Financial Statements" on page F-1 hereof.
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
None
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act.
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The following table sets forth information regarding the
officers and directors of the Company.
Name Age Positions Held Officer/Director since
Robert G. Risk 86 Chairman; President 1949
Lloyd L. Morain 78 Director 1967
James C. Tiffany 65 Director 1990
Daniel F. Nibler 39 Vice-President
Secretary/Treasurer
Chief Accounting Officer 1986
Mr. Tiffany is the nephew of Robert G. Risk. There is no
other family relationship between or among any of the above
listed officers and directors.
Robert G. Risk has been the President and a Director of Leadville
since January, 1949. He has been a practicing dentist in
Indianapolis, Indiana for many years.
Lloyd L. Morain has been a director of Leadville since 1967. He
is currently a personal business advisor and Chairman of the
Board of the Illinois Gas Company, an Illinois corporation
which he has been associated with for many years. Mr. Morain
holds office with several other utility companies.
James C. Tiffany has spent his entire business career in various
aspects of the mining business; most recently serving with
Reynolds Metal Company since 1964. Reynolds is engaged in the
manufacture of aluminum and aluminum products and in gold mining.
He received his Engineer of Mines degree from the Colorado
School of Mines in 1951. Mr. Tiffany was employed by Leadville
in the position of operations manager during the years 1953
through 1959.
Daniel F. Nibler is a practicing certified public accountant in
Colorado and has been engaged in public accounting since
graduating from Washington State University in 1980.
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Item 10. Executive Compensation
The only officer of Leadville who received compensation
during 1995 was Mr. Nibler, whose accounting firm charged
approximately $34,000 for its accounting, administrative and
advisory services. As of December 31, 1995, Mr. Nibler's firm
was owed approximately $80,000, plus accrued interest, including
$79,000 in the form of convertible promissory notes. During
1995, Mr. Nibler's firm converted $69,000 in accounting fees and
expenses into a promissory note, convertible into Leadville's
Common Stock at $1.00 per share, bearing interest at 10% per
annum.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
As of March 15, 1996, a total of 8,953,571 shares of the
Company's Common Stock were outstanding. The table below sets
forth the ownership by management and principal stockholders of
the Company as of December 31, 1995:
Share
Ownership
Name Title Direct Percent
Robert G. Risk President 2,576,179 (b) (d) 28.8%
Lloyd L. Morain Director 459,408 (b) 5.6%
James C. Tiffany Director 9,754 (b) .1%
Daniel F. Nibler Vice-President
Sec/Treasurer 36,013 (b) .4%
All officers and directors as
a group 3,081,354 34.9%
Jack C./Katherine
Robinson Stockholders 338,762 (c) 3.8%
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All officers, directors and
principal shareholders 3,420,116 38.7%
__________________
(a) The address of each management person is 2851 S. Parker
Road, Suite 610, Aurora, Colorado 80014.
(b) Members of the Board of Directors and officers hold debt
instruments of the Company which can be converted into Common
Stock at prices ranging from $.80 to $1.00 per share. If such
debt instruments were converted to stock as of December 31, 1995,
officers and directors would hold the following number of shares
and percentages of outstanding stock: Robert G. Risk 3,325,179
shares, (33.8%); Lloyd L. Morain 509,097 shares, (5.2%); James
C. Tiffany 15,391 shares, (.02%); Daniel F. Nibler 119,181
shares, (1.2%).
(c) Stockholders hold debt instruments convertible into the
Company's Common Stock at prices of $.80 to $1.00 per share. If
stockholders exercised their conversion rights, approximately
133,000 shares would be issued. Total outstanding shares held
would be 471,684 shares, representing 5.19% of total shares
outstanding.
If holders of all convertible debt instruments of the
Company had exercised their option to convert the obligations to
Common Stock as of December 31, 1995 approximately 3,186,582
shares would have been issued and total shares outstanding
shares would have been 12,140,153. Officers and directors, as
a group, would own 3,968,816 shares representing 32.7% of the
outstanding Common Stock.
Item 12. Certain Relationships and Related Transactions.
Substantially all of Leadville's financing since 1983 has
been provided by loans from the Company's President and from
proceeds from the private placement equity and debt instruments.
Other officers and directors of the Company have continued to
provide financing during the year 1995. The following table
sets forth amounts due to officers and directors of the Company
as of December 31, 1995:
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Name Obligation Principal Interest Total
Robert G. Risk Debenture payable $ -0- $748,968 $748,968
Robert G. Risk Demand notes 100,500 784,319 884,819
Lloyd L. Morain Note payable 45,000 4,689 49,689
James C. Tiffany Note payable 5,000 637 5,637
Daniel F. Nibler Note payable 79,000 4,168 83,168
The debenture payable, notes payable and related accrued
interest amounts are convertible into the Company's Common Stock
at $.80 and $1.00 per share. The demand notes and accrued
interest due to Dr. Risk have no stock conversion features.
During the years 1993 through 1995, Dr. Risk has advanced
the Company $25,000, $45,000 and $30,500, respectively. During
early 1996, Dr. Risk has continued to advance funds to the
Company. The advances bear interest at 10% and are due on
demand. In earlier years, Dr. Risk agreed to convert a
substantial amount of principal on the demand notes into Common
Stock.
Mr. Morain continues to provide loans to the Company in the
form of unsecured promissory notes, bearing interest at 10% per
annum and convertible into Leadville's Common Stock at prices of
$.80 to $1.00 per share. During the years 1993, 1994 and 1995,
Mr. Morain has loaned the Company $5,000, $15,000 and $25,000,
respectively. Mr. Morain has provided significant financing to
Leadville in years prior to 1992 and he has converted
substantially all such loans and accrued interest into restricted
Common Stock.
In 1993, Mr. Morain agreed to convert 1992 and 1993 loan
advances into Leadville Common Stock. Loan principal of $37,000
and accrued interest of $4,972 was converted to restricted Common
Stock. The Company issued 40,504 shares in this transaction.
Mr. Tiffany continues to provide services to the Company and
has agreed in years past to accept convertible promissory notes
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for amounts he has advanced to the Company. During 1994, Mr.
Tiffany loaned the Company $5,000. In years past, Mr. Tiffany
has agreed to convert Leadville's obligations to him into
restricted Common Stock.
During the years 1992 through 1994, Leadville was successful
in securing conversion of certain debt obligations into Common
Stock. During these and prior years, officers and directors of
the Company have also exercised Common Stock conversion rights
for obligations they held.
During September of 1995, Mr. Nibler agreed to convert
$69,000 of accrued fees and expenses into a note payable. The
note bears interest a 10% per annum and is convertible into
Common Stock at a price of $1.00 per share. In 1993, Mr. Nibler
also agreed to convert $10,000 of accrued fees and expenses
into restricted Common Stock.
The Company believes that the terms of the transactions
discussed above are comparable to those which have been
attainable from non-affiliated sources.
-18-
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits Filed Herewith or Incorporated by Reference to
Previous Filings with the Securities and Exchange Commission.
Exhibit
Number Description
(2) Plan of Acquisition, reorganization, arrangement,
liquidation or succession
(3) Articles of Incorporation and By-laws
(4) Instruments defining the rights of security
holders, including indentures
(9) Voting Trust Agreement
(10) Material Contracts
(11) Statement Regarding Computation of Earning Per
Share is not required since the information is
ascertainable from Leadville's financial
statements filed herewith.
(13) Annual Report to security holders, Form 10-Q or
quarterly report to security holders
(16) Letter re: change in accounting principles
(19) Documents not previously filed
(21) Subsidiaries of the Registrant
(22) Published report regarding matters submitted to
vote of security holders
(23) Consents of experts and counsel
(24) Power of Attorney
(27) Financial Data Schedule
(28) Information from reports furnished to state
insurance authorities
-19-
(29) Additional Exhibits
___________________
(3) The Articles of Incorporation of Leadville were filed with
its Form 10-K on May 6, 1965; the By-laws of Leadville
were filed with its Report on Form 10-K for the year
ended December 31, 1980.
(4) Filed with Form 10-K for year ended December 31, 1987.
(28) Consent Decree, State of Colorado vs. Asarco, Inc., et al,
Defendants and Third Party Plaintiffs vs.
Leadville Corporation, et al, Third Party
Defendants;
United States of America vs.
Apache Energy and Minerals Company,
et al.
Submitted on Form 8-K, dated February 11, 1993.
(b) Reports on Form 8-K Filed During the Registrant's Fourth
Fiscal Quarter:
None
-20-
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report . . . . . . . . . . . . . . . . . .
. . . . . . 2
Balance Sheets - December 31, 1995 and 1994. . . . . . . . . . .
. . . . . . 3
Statements of Operations - For the Years Ended December 31, 1995,
1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 4
Statement of Stockholders' Equity - From January 1, 1993 through
December 31, 1995. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 5
Statements of Cash Flows - For the Years Ended December 31, 1995,
1994, and 1993 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . . . .
. . . . . . 7
F-1
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Leadville Corporation
Aurora, Colorado
We have audited the accompanying balance sheets of Leadville
Corporation as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31,
1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Leadville Corporation as of December 31, 1995 and
1994, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 2 to the financial statements, the Company has suffered
recurring losses from operations and has a working capital
deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to
these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Hein + Associates llp
Denver, Colorado
March 11, 1996
F-2<PAGE>
LEADVILLE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 2,780 $ -
Prepaid expenses and other 7,640 7,558
Total current assets 10,420 7,558
Property and Equipment, at cost:
Mining properties 7,356,979 7,356,979
Buildings and equipment:
Mine 1,219,564 1,219,564
Mill 829,032 829,032
Other 108,143 108,143
Land 22,429 22,429
9,536,147 9,536,147
Less accumulated depreciation
and depletion (2,736,074) (2,670,255)
6,800,073 6,865,892
Other Assets:
Investments - certificates of deposits 133,000 133,000
Inventories 408,589 453,889
Total other assets 541,589 586,889
Total Assets $7,352,082 $7,460,339
<CAPTION>
See accompanying notes to these financial statements.
</TABLE>
F-3
LEADVILLE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Related parties:
Convertible debentures $ 531,000 $ 531,000
Notes payable, stockholders 508,500 326,500
Accrued interest payable 2,848,489 2,519,026
Due to officers/director/stockholders 6,351 52,040
Notes payable - other 100,000 95,000
Accounts payable 307,324 308,629
Accrued expenses 146,871 169,741
Settlement of capital lease obligations 741,824 687,611
Total current liabilities 5,190,359 4,689,547
Settlement of Litigation 100,000 92,000
Commitments and Contingencies
(Notes 2 and 5)
Stockholders' Equity:
Capital stock, par value $1 per
share; 15,000,000 shares authorized;
8,953,571 shares issued and
outstanding at December 31, 1995
and 1994, respectively 8,953,571 8,953,571
Additional paid-in capital 8,457,949 8,457,949
Accumulated deficit (15,349,797) (14,732,728)
Total stockholders' equity 2,061,723 2,678,792
Total Liabilities and
Stockholders' Equity $7,352,082 $7,460,339
<CAPTION>
See accompanying notes to these financial statements.
</TABLE>
F-4
LEADVILLE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1995 1994 1993
Operating Revenues $ - $ - $ -
Operating Costs and Expenses:
General and administrative 195,879 285,739 225,117
Depreciation 65,819 849 852
Total operating costs & expense 261,698 286,588 225,969
Operating Loss (261,698) (286,588) (225,969)
Other Income and Expense:
Interest expense (417,755) (333,237) (385,667)
Other 9,176 (64,396) 7,231
Total other income and expense (408,579) (397,633) (378,436)
Loss Before Extraordinary Gain (670,277) (684,221) (604,405)
Extraordinary Gain from
Settlement of Debt 53,208 - 782,948
Net Income (Loss) $(617,069)$(684,221)$ 178,543
Net Income (Loss) Per Share:
Before extraordinary item $ (.08)$ (.08)$ (. 07)
Extraordinary item .01 - .09
Net Income (Loss) Per Share $ (.07)$ (.08)$ (.02)
Weighted Average Number
of Capital Shares Outstanding 8,953,571 8,894,637 8,790,390
<CAPTION>
See accompanying notes to these financial statements.
F-5<PAGE>
LEADVILLE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FROM JANUARY 1, 1993 THROUGH DECEMBER 31, 1995
<CAPTION>
Total
Capital Stock Paid-in
Accumulated Stockholder's
Shares Amount Capital
Deficit Equity
<S> <C> <C> <C>
<C> <C>
Balances, 1/1/93 8,659,408 $8,659,408 $8,350,204
$(14,227,050) $2,782,562
Conversion of notes
payable, accounts
payable, and accrued
interest for capital
stock 233,213 233,213 71,762
- 304,975
Net income - - -
178,543 178,543
Balances, 12/31/93 8,892,621 8,892,621 8,421,966
(14,048,507) 3,266,080
Conversion of notes
payable, accounts
payable, and accrued
interest for capital
stock 60,950 60,950 35,983
- 96,933
Net loss - - -
(684,221) (684,221)
Balances, 12/31/94 8,953,571 8,953,571 8,457,949
(14,732,728) 2,678,792
Net loss - - -
(617,069) (617,069)
Balances, 12/31/95 8,953,571$8,953,571 $8,457,949
$(15,349,797) $2,061,723
<CAPTION>
See accompanying notes to these financial
statements.
</TABLE>
F-5<PAGE>
LEADVILLE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income (loss) $(617,069) $(684,221) $178,543
Adjustments to reconcile net
income (loss) to net cash
from operating activities:
Gain on debt restructuring (53,208) - (782,948)
Depreciation 65,819 849 852
Provision for inventory
obsolescence 45,300 - -
Changes in assets and
liabilities:
(Increase) decrease in -
Prepaid expenses and other (82) 326 (7,006)
Increase (decrease) in:
Accrued interest to
related parties 329,463 339,092 137,608
Officer payables 23,311 43,304 (1,648)
Accounts payable (13,305) 91,116 17,394
Accrued expenses 104,551 59,731 249,638
Net cash used in
operating activities (115,220) (149,803) (207,567)
Cash Flows from Financing
Activities:
Proceeds from borrowings
from related parties 118,000 125,000 198,050
Increase (Decrease) in Cash 2,780 (24,803) (9,517)
Cash, beginning - 24,803 34,320
Cash, ending $ 2,780 $ - $ 24,803
Supplemental Disclosures of Non-cash
Investing and Financing Activities:
Capital stock issued for forgiveness
of notes payable, convertible
debentures and other liabilities to
stockholders and/or officers $ - $ 96,933 $304,975
Conversion of accounts payable
-related to notes payable $ 69,000 $ - $ -
<CAPTION>
See accompanying notes to these financial statements.
</TABLE>
F-6
LEADVILLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
i. Nature of Business and Significant Accounting
Policies:
Nature of Business - Leadville Corporation (the Company)
is engaged in the development and mining of hard rock mineral
properties.
Inventories - Inventories are stated at the lower of
cost (average method) or market value. Inventories consist of
operating and maintenance supplies.
Property and Equipment - Mining properties consist
primarily of patented and unpatented mining claims. Mining
properties include the cost of acquisition and accumulated
exploration and development expenditures incurred in the pre-
production stage.
In the event such mining properties are developed into
producing properties, depletion of these related costs will be
computed on the unit-of-production method, based on estimated
tons of recoverable ore reserves. If the properties
are determined to be incapable of producing commercial
quantities of ore, the costs will be charged to operations in the
period in which the determination is made.
The Company provides for depreciation of buildings and
equipment on the straight-line method, to apportion costs over
the estimated useful lives of the assets which range principally
from five to twenty years.
Income Taxes - The Company accounts for income taxes
under the liability method, whereby deferred tax assets and
liabilities are recorded for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this method,
deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.
F-7
Net Income (Loss) Per Capital Share - The net income
(loss) per capital share is based on the weighted average number
of shares outstanding during the year. Convertible debt has not
been included in the computation of fully diluted earnings per
share because its effect would be antidilutive.
Capitalization of Interest - The Company capitalizes
interest expense as part of the historical cost of acquiring
certain assets which require an extended period of time to
prepare them for their intended use (see Note 3). Subsequent
to 1988, interest has been expensed due to the suspension of
development activities.
Use of Estimates - The preparation of the Company's
consolidated financial statements in conformity with generally
accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes.
Actual results could differ from those estimates. The Company
makes significant assumptions concerning the realizability of its
investment in property and equipment, and the ultimate
liabilities associated with asserted claims (see Note 5). Due to
the uncertainties inherent in the estimation process and the
significance of these costs, it is at least reasonably
possible that its estimates in connection with these items could
be further materially revised within the next year.
Impact of Recently Issued Accounting Standards - In
March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived
Assets." This new standard is effective for years
beginning after December 15, 1995 and would change the
Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the
impact of this new standard on the Company's financial
statements, the Company currently does not believe that
adoption of the new standard will have a material effect on the
financial statements based on current estimates of future
production of its properties. However, if future events,
including changes in relevant commodity prices, would change the
Company's estimates regarding the underlying recoverability of
these assets, the application of FASB 121 could have a material
impact to the financial statements.
F-8
ii. Continuing Operations:
The accompanying financial statements have been prepared
on a going concern basis which contemplates the realization
of assets and liquidation of liabilities in the ordinary
course of business. At December 31, 1995, the Company has a
significant investment in non-producing mining properties,
recovery of which is dependent upon the production of
ore reserves in commercial quantities or sale of these
properties at an amount equal to or in excess of cost. In
addition, the Company has suffered recurring losses from
operations and at December 31, 1995 has a working capital
deficiency of approximately $5,179,939 which includes
approximately $3,894,340 due to related parties. The Company
also has significant inventories, which the Company intends to
utilize in the start up and operation of its mining properties.
As the ultimate realization of the mining properties and
related inventories depends on circumstances which cannot
currently be evaluated, it is not possible to determine whether
any loss will ultimately be realized from their disposition.
All real properties are collateral for convertible debentures.
The Company has no property or liability insurance coverage at
December 31, 1995 or as of the date of this report. The
litigation concerning the environmental matters and certain
mining equipment (Note 5) has made it difficult for the Company
to obtain working capital through additional equity or financing.
Annual fees are required to maintain possessory titles to
unpatented mining claims, however, without additional
working capital, the Company may be unable to pay the required
fees. Working capital must be obtained to allow for future
operations. The Company is currently negotiating with the
EPA to reduce the $3,000,000 environmental liability and
payment of past due amounts.
The Company believes a substantial portion of the convertible
debentures, notes payable, accrued interest and certain other
obligations may at some future time be converted into capital
shares. Management is continuing to investigate alternatives
to raise additional working capital which will be required to
meet current and future obligations and is vigorously
attempting to settle outstanding litigation matters without
additional material impact to the Company's financial position.
F-9
If the Company cannot successfully restructure its debt,
satisfactorily resolve its current litigation, obtain working
capital, satisfactorily renegotiate the $3,000,000 EPA liability
and past due EPA payments and ultimately achieve profitable
operations, there is substantial doubt about the ability of the
Company to continue as a going concern. The financial
statements do not include any adjustments which might result from
the outcome of these uncertainties.
iii. Mining Properties:
At December 31, 1995, the Company owns two mining properties, the
Sherman Hilltop Consolidation and the Diamond-Resurrection
Consolidation.
In February 1986, the Company gained access to old mine
workings by way of the Diamond shaft located on the Company's
Diamond-Resurrection Consolidation property. At that time, the
Company began activities, including mineralization sampling and
the design of a production facility, necessary to place this
property in a revenue producing stage. During 1987, the
Company reacquired all mining, milling and other properties and
rights held by Hecla Mining Company (HMC) under a lease
agreement.
Since May of 1987 and continuing into 1996, Leadville's
activities at the Sherman Mine have been limited to care,
maintenance and permit related work, due to continuing low
silver prices. During 1985, the Sherman Mine was placed
in temporary cessation due to suspension of mining
activities. During 1995, the Temporary cessation period
expired and Leadville will be required to conduct a program of
study, exploration and sampling to maintain existing
regulatory permits. In the event the required work is not
performed, the Company may be required to reclaim the Mine site.
The Company maintains a reclamation bond, in the amount of
$128,000, which related to the Sherman and Stringtown Mill sites.
F-10
Presented below is a summary of mining property costs as
of December 31, 1995:
<TABLE>
<CAPTION>
Diamond- Sherman
Resurrection Hilltop
Consolidation Consolidation Total
<S> <C> <C> <C>
Mining claims $ 221,445 $ 78,110 $ 299,555
Exploration and
development costs 4,445,428 1,784,979 6,230,407
Interest 795,741 31,276 827,017
Total 5,462,614 1,894,365 7,356,979
Accumulated depletion - (1,821,078) (1,821,078)
$5,462,614 $ 73,287 $5,535,901
<CAPTION>
iv. Long-Term Debt, Notes Payable, and Convertible Debentures:
The notes payable are summarized as follows:
December 31,
1995 1994
Notes payable, at 10%, to stockholders
and/or officers/directors, due dates
range from January 1996 through
December 1996. $508,500 $326,500
Notes payable, at 10%, due dates
range from January 1, 1996 through
December 31, 1996. $100,000 $95,000
Notes payable and related accrued interest (totaling $619,568)
are convertible to the Company's capital stock at the option of
noteholders at a conversion price of primarily $.80 to $1.00 per
share during the term of notes.
During 1994 and 1993, two officers, a director and several
stockholders exchanged notes payable plus interest for 8,000
F-11
and 233,213 shares of stock, respectively, at $.80 to $1.38
per share (see Note 8).
Convertible debentures are summarized as follows:
December 31,
1995 1994
10% convertible debentures, interest
and principal due December 1996,
convertible to the Company's
capital stock at the option of the
debenture holders at a conversion
price of $1 per share, collateralized
by mining properties. $ 531,000 $531,000
As of December 31, 1993, HMC forgave a $381,276 convertible
debenture and related accrued interest of $401,671.
Accordingly, the Company recorded an extraordinary gain
from the settlement of debt of $782,948 during 1993.
v. Commitments and Contingencies:
Lease Commitment Litigation - In December 1988, the
Company sold and leased back certain equipment from an
unrelated entity. Proceeds of $415,000 were recorded as a
capital lease obligation. In addition, the Company leases
several other pieces of mining equipment which are
classified as capital leases. The Company was delinquent
on certain of its lease obligation payments, and the lessor has
asserted that the Company was in default. In January 1991, the
lessor won a summary judgment in the amount of approximately
$642,000, which represents all unpaid past and future
capital lease obligations (including interest). During 1994, in
an appeal, the judgment amount of $642,000 was upheld, and
additional attorneys fees and interest of approximately $46,000
were awarded the lessor. During 1995, the Company accrued an
additional $54,213 of interest expense on this obligation.
During 1992, the lessor also won a summary judgment for
possession of leased equipment with a net book value of $525,000
and for interest and penalty charges on the unpaid summary
F-12
judgments. The lessor has also asserted that it has a lien on
all the real property of the Company and that this lien
should be foreclosed. The lessor has repossessed approximately
$402,000 of the leased equipment. Approximately $123,000 of
equipment the lessor has not repossessed remains recorded as an
asset of the Company.
Environmental Litigation - The Company has been named as
one of several defendants in certain legal actions involving
environmental matters. The plaintiffs in these actions, the
State of Colorado and the Federal Government, have
alleged that the defendants are liable under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(CERCLA) in connection with mining and related activities in the
California Gulch Superfund Site near Leadville, Colorado. The
actions have been consolidated and are being prosecuted in three
phases.
Phase I of the litigation relates to the clean-up of the
Yak Tunnel Operable Unit. The Company maintains that it should
not be liable for any portion of the clean-up costs since it has
never owned or operated the Yak Tunnel and because the water that
naturally drains from the Company's property into the tunnel
meets appropriate water standards.
Phase II relates to surface drainage issues. Management
believes that this issue will be resolved without significant
liability to the Company within the structure of the settlement
discussed below.
With respect to Phase III, the Stringtown Millsite issue,
the Company has defended its position that all or substantially
all of the damage occurred before the Company acquired its
interest in the millsite property. Management believes, however,
that it would be more expedient to settle its alleged
liability for Phase III, along with Phases I and II rather
than incur additional costly and protracted litigation expenses.
The Company has answered the complaints and has vigorously
defended the consolidated action. Further, the Company and
litigation counsel believe they have substantial and meritorious
defenses to the claims being made. However, in an effort to
expedite a conclusion and to minimize legal costs, the Company
agreed to a settlement of the cases.
F-13
During August 1993, a consent decree was entered by the
Federal District Court in Colorado whereby the United States
agreed to settle the Company's alleged liability, with the
exception of natural resources damages, if any, in
consideration for $3,000,000. Under the original terms of
the consent decree, a total of $250,000 was to be paid by the
Company over 15 years, with a contingent liability of
$2,750,000 to be paid based on profitable operations
or sale of properties. Minimum cash payments are to be
$10,000 for years 1-5, $15,000 for years 6-10, and $25,000 for
years 11-15.
During October 1995, the Company reached agreement, in
principle, with the United States to reduce the consent decree
obligation amount of $3,000,000 to $500,000, with minimum annual
cash payments to begin in April 1996. In effect, the contingent
liability of $2,750,000 was reduced to $250,000. In
consideration, the Company agreed to provide to the United
States certain dirt and rock material for use by the
Environmental Protection agency (EPA) in remedial action work at
the Superfund site. During late 1995, the EPA began
to use the dirt material and the Company's management
anticipates that a final agreement modifying the consent decree
will be signed in the near future. If the Company is
unsuccessful in signing a new definitive agreement with the
United States, the United States has the right to
accelerate the $3,000,000 obligation under the August 1993
consent decree, as the Company is currently behind on $20,000 in
payments. The Company has accrued a $110,000 environmental
settlement liability, which was the present value of the future
minimum payments payable using an effective interest rate of 10%.
During 1993, the Company initiated a suit against its
insurance company, seeking defense costs of $400,000 and
indemnification of the Company's exposure under the EPA
agreement associated with the environmental litigation described
above. The insurance company counterclaimed for its
previously advanced $65,000 and defense costs. On May 31, 1994,
the court ruled against the Company, and ordered the Company to
repay the $65,000 advanced defense costs. During 1995, the
Company and the insurance Company settled the obligation for
$10,000 and as a result, the Company recorded an
extraordinary gain from settlement of debt of $53,208.
F-14
Certificates of Deposit - The Company is required by the
Mined Lands Reclamation Board to maintain certificates of deposit
for future reclamation costs. No future reclamation costs have
been accrued as of December 31, 1995.
vi. Related Party Transactions:
As discussed in Note 4, certain officers, directors and
stockholders have provided significant loans to the Company. The
aggregate indebtedness, including accrued interest, and other
payables, amounted to approximately $3,894,340 at December 31,
1995. Total interest expense to these officers, directors and
stockholders was $342,501, $319,042, and $287,832, for the years
ended December 31, 1995, 1994, and 1993, respectively.
The Company leases office space on a month-to-month basis
from an officer for $125 per month. This officer is a partner
in an accounting firm which performs bookkeeping, accounting and
other administrative services for the Company. Fees for such
rent and services totaled $33,820, $63,328, and $51,945 for the
years ended December 31, 1995, 1994, and 1993, respectively. As
of December 31, 1995 and 1994, the Company owed the firm
approximately $884 and $52,039, respectively, which is included
in amounts due to officers/directors/stockholders. The officer
received 8,400 shares of restricted capital stock in 1993 for
accrued accounting fees at $1.00 per share (see Note 8). The
officer converted $69,000 of accrued accounting and
administrative fees to a convertible note payable in 1995.
See Note 8 for additional related party transactions.
vii. Income Taxes:
The following items give rise to a long-term deferred tax
asset, which has been fully reserved:
</TABLE>
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Inventory reserve for obsolescence $ 17,000 $ -
Adjusted basis differential
- depletable properties 810,000 805,000
EPA settlement liability 41,000 41,000
Net operating loss carryforward 3,000,000 2,714,000
Deferred tax asset 3,868,000 3,560,000
Less allowance (3,868,000) (3,560,000)
Net deferred tax asset $ - $ -
</TABLE>
At December 31, 1995, the Company has available tax net
operating loss carryforwards of approximately $8,030,000, which
can be utilized to offset future taxable income. Utilization of
these loss carryforwards may be limited due to changes in
ownership of the Company, and expire from 1997 through 2010.
viii. Stockholders' Equity:
During the year ended December 31, 1994 and 1993 certain
officers/directors/stockholders of the Company agreed to convert
principal amounts of notes payable, accounts payable, and accrued
interest totaling $96,933 and $304,975, respectively to
restricted capital stock at a price of $.80 to 2.00 per share.
ix. Fair Value of Financial Instruments:
The estimated fair values for financial instruments are
determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be
determined with precision. The carrying amounts of cash,
certificates of deposit, accounts payable, accrued liabilities,
notes payable, convertible debentures, and payables in
connection with settlement of capital lease obligation and
litigation approximates fair value because of the
short-term maturity of those instruments or because the
interest rates approximate the Company's effective borrowing
rate.
F-15
x. Concentrations of Credit Risk:
Credit risk represents the accounting loss that would be
recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit
risk (whether on or off balance sheet) that arise from
financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics
that would cause their ability to meet contractual obligations
to be similarly effected by changes in economic or other
conditions.
Financial instruments that subject the Company to credit
risk consist of certificates of deposit which are $33,000 in
excess of Federally insured amounts.
F-16<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
LEADVILLE CORPORATION
Dated: March 18 , 1996 By Robert G. Risk
Dr. Robert G. Risk, President
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 date indicated.
Dated: March 18 , 1996 Robert G. Risk
Dr. Robert G. Risk, President
and Director (Chief Executive
Officer)
Dated: March , 1996
Lloyd L. Morain, Director
Dated: March 14 , 1996 James Tiffany
James Tiffany, Director
Dated: March 25 , 1996 Daniel F. Nibler
Daniel F. Nibler, Vice President,
Secretary/Treasurer
(Principal Financial and
Accounting Officer)
-21-
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