UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For Quarterly period ended March 31,1998
-------------
Transaction report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
-------------- --------------
Commission file number 0-1519
LEADVILLE CORPORATION
---------------------
(Exact Name or Registrant as Specified in its Charter)
COLORADO 84-0388216
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
2851 S. PARKER ROAD, SUITE 610, AURORA, COLORADO 80014
- ------------------------------------------------ -----
(Address of Principal Executive Office) (Zip Code)
(303) 671-9792
-------------------------
(Issuer's telephone number)
N/A
-------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the preceding 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 No
------- -------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
10,502,065
------------------------------------------
State the number of Shares of the issuer's
classes of common equity, as of the latest practicable date:
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
<PAGE>
LEADVILLE CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
Page
----
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
Balance sheets 3 - 4
Statements of operations 5
Statements of stockholders' equity 6
Statements of cash flows 7
Notes to financial statements 8 - 12
PLAN OF OPERATION 13 - 14
PART II - OTHER INFORMATION
Legal proceedings 15
Exhibits and reports on Form 8-K 16
-2-
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
LEADVILLE CORPORATION
Balance Sheets
March 31,1998
(Unaudited)
March 31, December 31,
1998 1997
------------ ------------
ASSETS
CURRENT ASSETS
Cash $ 114,878 $ 9,182
Prepaid expenses and other 14,671 12,089
----------- -----------
Total current assets 129,549 21,271
----------- -----------
PROPERTY AND EQUIPMENT, at cost (Note 3)
Mining properties, including assets
acquired under capital leases 7,356,979 7,356,979
Buildings and equipment:
Mine, including assets acquired
under capital leases 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 including amortization
applicable to assets acquired under
capital leases (2,887,256) (2,870,514)
----------- -----------
6,648,891 6,665,633
OTHER ASSETS:
Investments - certificates of deposit 133,000 133,000
Inventories 306,664 317,989
----------- -----------
439,664 450,989
----------- -----------
$ 7,218,104 $ 7,137,893
=========== ===========
-3-
<PAGE>
LEADVILLE CORPORATION
Balance Sheets (continued)
March 31,1998
(Unaudited)
March 31, December 31,
1998 1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Related parties: (Note 4)
Convertible debentures $ 440,000 $ 440,000
Notes payable, stockholders 1,406,037 1,265,037
Accrued interest payable 3,668,758 3,529,363
Due to officers and directors 66,491 31,522
Notes payable-other (Note 4) 49,000 49,000
Accounts payable 52,992 44,538
Accrued Expenses 195,678 177,403
------------ ------------
Total current liabilities 5,878,956 5,527,863
------------ ------------
SETTLEMENT OF LITIGATION (Note 5) 90,000 90,000
LONG-TERM DEBT:
Related parties -- --
Other -- --
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Capital stock, par value $1 per share;
authorized 15,000,000 shares; issued
and outstanding March 31, 1998 and
December 31, 1997, 10,502,065
and 10,202,065 10,502,065 10,202,065
Additional paid-in capital 8,332,482 8,407,482
------------ ------------
18,834,547 18,609,547
Accumulated deficit (17,585,399) (17,089,517)
------------ ------------
Total stockholders' equity (Note 8) 1,249,148 1,520,030
------------ ------------
$ 7,218,104 $ 7,137,893
============ ============
See Notes to Financial Statements.
-4-
<PAGE>
LEADVILLE CORPORATION
STATEMENTS OF OPERATIONS
Three months ended March 31, 1998 and 1997
(Unaudited)
Three months
ended March 31,
-------------------------------
1998 1997
------------ ------------
Operating revenue $ -- $ --
------------ ------------
Operating costs and expenses:
General and administrative 339,371 67,184
Depreciation 16,742 16,992
------------ ------------
Total operating expenses 356,113 84,106
------------ ------------
Operating loss (356,113) (84,106)
------------ ------------
Financial income and expense:
Debt settlement -- (7,470)
Interest income 2,019 1,756
Interest expense (141,788) (104,679)
------------ ------------
Total financial income
(expense) (139,769) (110,393)
------------ ------------
Net loss $ (495,882) $ (194,499)
============ ============
Net loss per capital
share $ (.05) $ (.02)
============ ============
Weighted average number of
capital shares outstanding
(total shares) 10,222,065 9,824,325
============ ============
See Notes to Financial Statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
LEADVILLE CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
Three months ended March 31, 1998
(Unaudited)
March 31, 1998 December 31, 1997
---------------------------------- ----------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Capital Stock 10,502,065 $ 10,502,065 10,202,065 $ 10,202,065
Additional
Paid-In Capital 8,332,482 8,407,482
Accumulated deficit,
December 31, 1997 (17,089,517) (17,089,517)
------------ ------------
1,745,030 $ 1,520,030
============
Net Loss,
March 31, 1998 (495,882)
------------
$ 1,249,148
============
See Notes to Financial Statements.
- 6 -
</TABLE>
<PAGE>
LEADVILLE CORPORATION
STATEMENTS OF CASH FLOWS
Three months ended March 31, 1998 and 1997
1998 1997
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(495,882) $(194,499)
Adjustments to reconcile net loss
to net cash provided by (used) in
operating activities:
Depreciation 16,742 16,992
Stock issued for services 225,000 --
Change in assets and liabilities:
(Increase) decrease in:
Prepaid expenses (2,582) 2,524
Increase (decrease) in:
Accounts payable 8,454 (38,384)
Accrued expenses 18,275 (44,011)
Officer payables 34,969 (3,174)
Accrued interest 139,395 112,212
Capital lease obligations -- 13,554
--------- ---------
Net cash provided by (used
in) operating activities (44,304) (123,461)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing, related parties 150,000 --
Net cash provided by financing
activities 150,000 --
--------- ---------
Increase (decrease) in cash and
cash equivalents (105,696) (123,461)
Cash and cash equivalents:
Beginning 9,182 146,340
--------- ---------
Ending $ 114,878 $ 22,879
========= =========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Capital stock issued for
Conversion of notes payable,
interest and expenses $ -- $ 28,962
========= =========
See Notes to Financial Statements.
-7-
<PAGE>
LEADVILLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31,1998
1. 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 in Lake and Park
Counties, Colorado.
Inventories - Inventories are stated at the lower of cost (average method) or
market value. Inventories consist of operating and maintenance supplies. In
1995, the Company began amortizing the carrying value of inventory to recognize
a declining useful life and obsolescence.
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.
Accounts Receivable - The United States Environmental Protection Agency (EPA)
has acknowledged the receipt of soil and rock materials from two of Leadville's
mining properties. Based on the Company's assessment of fair market value, the
Company has invoiced the EPA for $3,880,330 for the majority of this soil and
rock. However, the EPA has not yet agreed to the fair value of the soil and rock
and, as such, the Company will not record this transaction until collectibility
is assured. The Company believes that, at a minimum, the transfer of soil and
rock materials has satisfied the minimum cash payment obligation under the
consent decree.
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.
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 period.
Convertible debt has not been included in the computation of fully diluted
earnings per share because its effect would be anti-dilutive.
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. Subsequent to 1988, interest has
been expensed due to the suspension of development activities on the Company's
properties.
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. The
Company makes significant assumptions concerning the realizability of its
investment in property and equipment, and the ultimate liabilities associated
with asserted claims. Management believes that the interim financial statements
include all adjustments necessary in order to make the financial statements not
misleading.
- 8 -
<PAGE>
2. 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 March 31, 1998, 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 March
31, 1998 has a working capital deficiency of approximately $5,750,000, which
includes approximately $5,581,000 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 March 31, 1998 or as of the date of this report. Past
litigation concerning environmental matters has made it difficult to date 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 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 without additional material impact to the
Company's financial position.
If the Company cannot successfully restructure its debt, obtain working capital,
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.
3. MINING PROPERTIES:
- --------------------
As of March 31, 1998, the Company owns two mining properties; the
Sherman-Hilltop Consolidation, consisting of approximately 3,000 acres and the
Diamond-Resurrection Consolidation, consisting of 1,180 acres. The Company also
owns the 340 acre Stringtown Mill Site which was a functioning milling facility
in 1989 and is still permitted for this use.
Activity at the Diamond-Resurrection property, primarily a gold property along
with other metals including silver, copper, lead and zinc in recoverable
quantities, has been suspended since 1989 due to insufficient cash resources to
finance further exploration and development work. The Company maintains a $5,000
reclamation bond for the site.
Since May of 1987 and continuing into 1998, Leadville's activities at the
Sherman Mine, primarily a silver property with other metals including gold,
copper, lead and zinc, 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 Sherman Mine site. The Company maintains a
reclamation bond, in the amount of $128,000, which relates to the Sherman and
Stringtown Mill sites. Although the Sherman Mine is not included as part of the
California Gulch Superfund Site, the EPA is using rock materials located on the
property for use on Superfund designated properties. Pending final earthwork by
the EPA at the Sherman Mine, Leadville has taken no action at the Sherman Mine.
Discussions are underway with the state of Colorado and EPA in an effort to
reduce the bonding requirements based on the EPA's restoration efforts at the
site.
-9-
<PAGE>
4. NOTES PAYABLE AND CONVERTIBLE DEBENTURES:
- --------------------------------------------
The notes payable are summarized as follows:
March 31, December 31,
1998 1997
--------- ------------
Notes payable, at 18%, to stockholder,
due December 1998, collateralized
by mining properties $ 867,037 $ 867,037
--------- ---------
Notes payable, at 10% and 15%, to
stockholders and/or officers/
directors, due dates range to
December 31, 1998 $ 539,000 $ 389,000
========= ==========
Notes payable-other, at 10% due
dates ranging to
December 31, 1998. $ 9,000 $ 49,000
========= ==========
The above notes payable are convertible to the Company's capital stock at the
option of note holders at conversion prices of $.80 to $1.00 per share during
the term of the notes.
The convertible debentures are summarized as follows:
March 31, December 31,
1998 1997
-------- ------------
10% convertible debentures,
interest and principal due December 1998,
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. $440,000 $440,000
======== ========
Of the $440,000, $340,000 is due to stockholders. During 1996 and early 1997,
the Company secured extended due dates for the debentures to December 31, 1998.
5. COMMITMENTS AND CONTINGENCIES:
- ---------------------------------
Environmental Litigation - The Company was 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, alleged that the
defendants were liable under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA) in connection with mining and
property ownership positions in the California Gulch Superfund Site near
Leadville, Colorado.
-10-
<PAGE>
While the Company and litigation counsel believed they had substantial and
meritorious defenses to the claims being made. in an effort to expedite a
conclusion and to minimize legal costs, the Company agreed to a settlement of
the cases. 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. The Company's management is
continuing efforts to ultimately have its properties severed from Superfund Site
designation. As noted in Note 1 above, as of March 31, 1998, the Company has not
reached an agreement with the EPA as to the value of compensation for
Leadville's soil and rock materials used by the EPA to date. As a result, the
Company has conservatively estimated its potential current liability to the
United States under the consent decree, including interest, at $90,000.
Recent discussions with the EPA relative to de-listing some or all of
Leadville's properties from Superfund designation have been very favorable, as
the EPA has designated no work associated with the Diamond-Resurrection property
and work planned for the Stringtown Mill site is minimal.
Contract Mining Litigation - During March 1990, a subcontractor of the Company
filed an action in Lake County District Court for non-payment of approximately
$35,000 for mining services, plus associated costs. Leadville has filed a
counter-claim against the plaintiff for approximately $185,000 relating to the
same contract. No action has occurred in the case since 1993 and the Court
ordered a status report on the issues by August 1996. Since August of 1996, no
further action has occurred in this case.
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 March 31, 1998.
6. RELATED PARTY TRANSACTIONS:
- ------------------------------
Certain officers, directors and stockholders have provided significant loans and
advanced expenses to the Company in recent years. The aggregate indebtedness,
including accrued interest and other payables, amounted to approximately
$5,879,000 at March 31, 1998. Substantially all of that indebtedness is
convertible in the Company's Capital Stock at a price of $1.00 per share.
As of March 31, 1998, the Company owes its President accrued compensation of
approximately $48,000 for compensation, including an office, equipment and
management allowance of approximately $2,000 per month. In addition, the Company
owes its CEO accrued compensation of approximately $18,625 for compensation,
including an office, equipment and management allowance of approximately $2,000
per month.
The Company leases office space on a month-to-month basis from a former officer
for $125 per month. This former officer is a principal in an accounting firm
which performs bookkeeping, accounting and other administrative services for the
Company. As of March 31, 1998, the Company owed the firm approximately $2,000
for accrued fees and expenses.
7. INCOME TAXES:
- ----------------
At December 31, 1997, the Company has available tax net operating loss
carryforwards of approximately $8,640,000, 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 1998 through 2012.
-11-
<PAGE>
8. STOCKHOLDERS' EQUITY:
- ------------------------
During the quarter ended March 31, 1998, no notes payable or accrued interest
were converted to restricted capital stock. During the quarter ended March 31,
1998, the Company issued certain officers for compensation 300,000 shares of
restricted common stock valued at $225,000.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
- ---------------------------------------
The estimated fair values for financial instruments are determined at discreet
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 approximates fair value because of the short-term
maturity of those instruments. The carrying amount of the settlement of
litigation liability approximates fair value as a result of the Company
discounting this liability at the Company's effective borrowing rate.
10. 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 risks (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.
- 12 -
<PAGE>
ITEM 2. PLAN OF OPERATION
- -------------------------
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere herein.
The Company's results may be affected by various trends and factors which are
beyond the Company's control. These include factors discussed elsewhere herein.
With the exception of historical information, the matters discussed below under
the headings "Plan of Operations" may include forward-looking statements that
involve risks and uncertainties. The Company cautions the reader that a number
of important factors discussed herein, and in other reports filed with the
Securities and Exchange Commission, could affect the Company's actual results
and cause actual results to differ materially from those discussed in
forward-looking statements.
In February 1998, the Company expanded its management team with the appointment
of Scot B. Hutchins, Esq. as CEO. Mr. Hutchins is an attorney specializing in
antitrust law and economics in the area of mergers, acquisitions and joint
ventures. For the past eleven years, Mr. Hutchins has been associated with
Skadden, Arps, Slate, Meagher & Flom, LLP, a large international law firm
representing Fortune 500 companies. Mr. Hutchins has also served three years
with the U.S. Department of Justice. The majority of Mr. Hutchins' compensation
from the Company is in the form of restricted common stock and stock options,
and a significant portion of his compensation is based on performance. In March
1998, Mr. Hutchins provided the Company with a loan of $100,000 in return for a
note convertible into the Company's Common Stock.
The Company earned no operating revenues during 1996 and 1997 and incurred net
losses in those years of $633,057 and $1,106,663, respectively. Management does
not anticipate that any operating revenues will be generated during the year
1998. The Company's most viable prospect for generating income from operations
is by achieving production at the Diamond-Resurrection property. The property
should be primarily a gold producer, with significant quantities of silver,
copper lead and zinc all present in the ores. In order to achieve production
from the Diamond property, the Company must secure significant financing for
debt reduction, further mine development and re-establishing milling
capabilities.
Leadville is severely undercapitalized. As of March 31, 1998, the Company has a
working capital deficit of $5,879,000 and minimal operating cash. With the
exception of the $500,000 in proceeds received in 1996 from issuance of stock,
substantially all of Leadville's cash needs have been met by loans from the
Company's officers and directors and by proceeds from short term notes.
Management is hopeful that cash needs for 1998 will be met from existing cash
resources and short-term borrowings until significant financing can be secured.
In 1997 and in the first three months of 1998, the Company used cash to meet
general, administrative and property obligations. In addition, certain long
standing past due obligations were settled on terms favorable to Leadville. No
capital expenditures were made during the first three months of 1998.
The Company's certificates of deposit, in the amount of $133,000, are held as
mining reclamation bonds and classified as long term assets. The Company has
received notice that the State of Colorado is considering lowering the Company's
bond amounts. Discussions with the State relative to these issues are ongoing.
In order for Leadville to continue as a going concern and re-start its mining
operations, a significant amount of capital from sources outside the Company
will be required. Management is seeking to resume discussions with several
mining companies that previously expressed interest in the Diamond-Resurrection
or Sherman-Hilltop Mine properties. It is management's assessment that financing
will be difficult to obtain until the California Gulch Superfund site cleanup
issues are more clearly defined. While the EPA Court action involving the
Leadville Mining District, for all practical purposes, eliminated Leadville's
-13-
<PAGE>
ability to obtain significant outside financing over the past several years,
management believes that the litigation has been resolved to a point where it
should no longer significantly impede the ability of the Company to secure
financing from outside parties.
During 1998, management will continue its efforts to develop business and
operational plans and obtain financing for the Company's properties through
joint-venture or cash investment. No assurance can be given that Leadville will
be successful in securing financing.
The Company continues to incur significant interest charges associated with the
outstanding notes and debentures payable. Management believes that a substantial
amount of the note, debenture and associated accrued interest obligations will
ultimately be converted to Capital Stock by the holders. The holders of these
instruments have the right to convert principal and accrued interest to Capital
Stock at prices of $.80 to $1.00 per share. Substantially all holders of the
notes and debentures payable are stockholders of the Company.
Leadville intends to use the proceeds from significant financing to settle
existing obligations, to finance a development program and to begin production
from the Diamond-Resurrection Mine. The objective of the development program is
to restart mining operations and to fund an exploration program from mining
revenues in order to identify reserves in addition to the 700,000 tons already
identified at the Diamond-Resurrection Mine. In anticipation of settling the
environmental litigation, Leadville completed four studies of the
Diamond-Resurrection Mine property during 1992, 1993, 1996 and 1997. The studies
included verification of known mineralization, evaluation of mine development,
and surface geo-physics intended to indicate potential exploration targets.
Conclusions of these studies are very encouraging and provide additional
evidence that the Diamond-Resurrection property may hold significant deposits of
gold, silver and base metals.
Full production at the Diamond-Resurrection Mine will require a significant
capital expenditure to acquire surface plant and underground equipment.
Realizing operating revenues from the Diamond-Resurrection Mine production will
require that the Company re-establish milling capabilities at the Stringtown
Mill site, construct a new milling facility or make other milling arrangements.
No significant capital expenditures are anticipated to be made until such time
as the Company secures significant financing or participation on the
Diamond-Resurrection Mine properties. Management does not anticipate that there
will be any significant change in the number of Company employees, until such
time as significant financing can be obtained. The Company's Board of Directors
added an additional member and is in the process of expanding its number of
members beyond four.
-14-
<PAGE>
PART II
ITEM 1. 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 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. Leadville has made no payments to the
United States pending negotiations with the EPA concerning the EPA's use of and
compensation for soil and rock materials from Leadville's properties.
Leadville's management is continuing efforts to sever the Company's properties
from Superfund site designation. In August 1997, Leadville submitted a report to
the EPA which focuses on controlling water quality in the Yak drainage tunnel.
The report, which was required by the EPA to begin the de-listing process, is
currently under review.
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, Inc. for approximately $45,000 for
contract mining fees and costs. 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 Cowin & Company activities at
the site. Since no action had been taken in the case since October 1993, the
Court ordered a Status Report be filed on the matter by August 30, 1996. The
status report was filed with the Court, however, no action has occurred since
then.
-15-
<PAGE>
ITEM 6. 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
(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.
(b) Reports on Form 8-K filed during the Registrant's first quarter of 1998.
NONE
----
- 16 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
LEADVILLE CORPORATION
(Registrant)
/s/ JOHN H. GASPER
- -------------------------
John H. Gasper, President
Dated: May 15, 1998
--------------
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 114,878
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 306,664
<CURRENT-ASSETS> 129,549
<PP&E> 9,536,147
<DEPRECIATION> 2,887,256
<TOTAL-ASSETS> 7,218,104
<CURRENT-LIABILITIES> 5,878,956
<BONDS> 0
0
0
<COMMON> 10,502,065
<OTHER-SE> 8,332,482
<TOTAL-LIABILITY-AND-EQUITY> 7,218,104
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 356,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,788
<INCOME-PRETAX> (495,882)
<INCOME-TAX> 0
<INCOME-CONTINUING> (495,882)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (495,882)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
