FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-12761
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
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(Exact name of Registrant as specified in its charter)
NEVADA 88-0180496
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
970 EAST MAIN STREET, SUITE 200
GRASS VALLEY, CALIFORNIA 95945
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916) 477-5961
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 12, 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Shares of common stock outstanding as of November 13, 1996: 18,526,584
Transactual Small Business Disclosure Forms
Yes X No
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
INDEX
Page Number
PART I. Financial Information
Item 1. Financial statements
Condensed consolidated balance sheets as of
September 30, 1996 (unaudited) and June 30, 1996. 3
Condensed consolidated statements of operations
(unaudited) for the three months ended September
30, 1996 and 1995 and for the period July 1, 1989
(date of resumption of development stage
enterprise activities) through September 30, 1996. 4
Condensed consolidated statements of cash flows
(unaudited) for the three months ended September
30, 1996 and 1995 and for the period July 1, 1989
(date of resumption of development stage
enterprise activities) through September 30, 1996. 5
Notes to condensed consolidated financial
statements (unaudited) 6
Item 2. Management's discussion and analysis of
financial condition and results of operations. 9
PART II. Other Information 10
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<TABLE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 162,584 $ 1,275,413
Prepaid expenses 67,674 51,290
Inventory 27,705 24,290
Accounts receivable, employees 31,037 40,462
----------------- -----------------
Total current assets 289,000 1,391,455
Office furniture and equipment, net 111,119 115,837
Mineral properties and mining
equipment, net 10,481,624 10,600,827
Deposits 372,147 377,147
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Total assets $ 11,253,890 $12,485,266
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 1,313,312 $ 1,440,268
Current portion of long term debt 1,960,856 2,279,861
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Total current liabilities 3,274,168 3,720,129
Other liabilities 3,700 3,700
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Total liabilities 3,277,868 3,723,829
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Shareholders' Equity:
Common Stock, no par value;
authorized 100,000,000 shares;
issued and outstanding
14,963,369 and 16,913,680 shares
as of September 30, 1996 and June 30,
1996, respectively 44,291,190 43,752,439
Accumulated deficit (11,260,214) (11,260,214)
Accumulated deficit during the
development stage (25,054,954) (23,730,788)
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Total shareholders' equity 7,976,022 8,761,437
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Total liabilities and shareholders'
equity $ 11,253,890 $ 12,485,266
================= =================
See notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Period from
Three Months July 1, 1989
Ended September 30 through
1996 1995 September 30, 1996
--------------------------------------------- ------------------
<S> <C> <C> <C>
Revenues:
Sale of Joint Venture - - $ 4,232,000
Other income - - 156,444
Interest income $ 10,004 $ 10,997 $ 175,517
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Total revenues $ 10,004 $ 10,997 $ 4,563,961
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Expenses:
General and administrative expenses 263,807 379,114 14,163,572
General mining and exploration 895,609 1,359,176 9,809,634
Loss on lease abandonments - - 392,317
Depreciation and amortization 98,651 128,423 1,161,911
Loss (gain) on sale of mining equipment 46,853 411 133,763
Interest expense 29,250 - 404,918
Litigation settlement - - 3,697,262
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Total expenses 1,334,170 1,867,124 29,763,377
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Loss before extraordinary item (1,324,166) (1,856,127) (25,199,416)
Extraordinary item - net loss
from debt extinguishment, net of tax - - 144,462
------------------ ----------------- ------------------
Net loss $ (1,324,166) $ (1,856,127) $ (25,054,954)
================== ================= ==================
Loss per common share before
extraordinary item $ (0.08) $(0.25)
================== =================
Net loss per common share $ (0.08) $(0.25)
================== =================
Weighted average common shares
outstanding 16,146,517 7,296,532
================== =================
See notes to Condensed Consolidated Financial Statements.
</TABLE>
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<TABLE>
BRUSH CREEK MINING AND DEVELOPMENT CO.,INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Period from
Three Months July 1, 1989
Ended September 30 through
1996 1995 September 30, 1996
---- ---- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,324,166) $ (1,856,127) $ (25,054,954)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain on debt restructuring - - (144,462)
Depreciation and amortization 98,651 128,423 1,161,911
Loss on lease abandonments - - 444,359
Loss on litigation settlement - - 3,667,262
Loss (gain) on sale of mining equipment 46,853 - 11,753
Other - - 43,576
Shareholder payment of services - - 105,055
Stock and debt for services - - 703,068
Change in stock purchase price adjustment
receivable - 284,749 -
Change in inventory (3,415) 40,257 (25,415)
Change in note receivable - - 7,000
Change in prepaid expenses (16,384) (41,089) 434,062
Change in deposits and other current assets 14,425 (104,755) (235,653)
Change in accounts payable
and accrued liabilities (126,956) (353) 3,865,769
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Total adjustment 13,174 307,232 10,038,285
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Net cash provided by (used in)
operating activities (1,310,992) (1,548,895) (15,016,669)
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Cash flows from investing activities:
Acquisition of mineral properties, equipment,
and deferred developments (13,358) (452,387) (5,023,417)
Acquisition of office equipment (8,225) (35,482) (268,326)
Proceeds from sale of equipment - - 294,356
Proceeds from sale of joint venture - 20,060
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Net cash used in investing activities (21,583) (487,869) (4,977,327)
-------------- -------------- --------------
Cash flows from financing activities:
Advances from (to) affiliates - - 2,009,127
Payments made to affiliates - - (343,798)
Proceeds from issuance of common stock 238,751 2,758,595 18,364,963
Proceeds from warrant extensions - - 207,750
Proceeds from issuance of notes payable - - 870,043
Payments on long-term debt (19,005) (14,489) (1,255,353)
Proceeds from convertible debenture - - 300,000
-------------- -------------- --------------
Net cash provided by financing activities 219,746 2,744,106 20,152,732
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Net increase (decrease) in cash (1,112,829) 707,342 158,736
Cash at beginning of period 1,275,413 684,153 3,848
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Cash at end of period $ 162,584 $ 1,391,495 $ 162,584
============== ============== ==============
Cash paid during the period for interest
(net of amounts capitalized) $ - $ 105
============== ==============
See notes to Condensed Consolidated Financial Statements.
</TABLE>
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Condensed Consolidated Financial Statements
The condensed consolidated balance sheet as of September 30, 1996, the
condensed consolidated statements of operations and cash flows for the three
months ended September 30, 1996 and 1995 and for the period July 1, 1989 (date
of resumption of development stage enterprise activities) through September 30,
1996, have been prepared by the Brush Creek Mining & Development Co., Inc. (the
"Company") without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at September 30, 1996
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
statements be read in conjunction with the financial statements and notes
thereto included in the Company's June 30, 1996 Form 10-KSB/A. The results of
operations for the periods ended September 30, 1996 and 1995 are not necessarily
indicative of the operating results for the full year.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, B. Creek Acquisition Corp. and Alpha Hardware
Corp.
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 2 - Basis of Presentation
The Company was incorporated in 1982 and operated as a mining and mineral
development company until April 17, 1989, at which time its mining operations
conducted through the Brush Creek Joint Venture (BCJV) (40% owned) were
terminated. Shortly thereafter, the Company became actively engaged in acquiring
additional mineral properties, raising capital, and preparing properties for
resumed production. The Company did not have any significant operations or
activities from April 17, 1989 through June 30, 1989. Accordingly, the Company
is deemed to have reentered the development stage effective July 1, 1989.
In February 1992, the Company began limited production at the Ruby mine from the
Lawry and Ruby placer channels. In 1995, the Company paved 1.3 miles of road in
an effort to make production a year-round effort. The Company has conducted
limited production during certain periods from 1992 to 1995, and in fiscal year
1996 began limited production in the Wolf vein at the Ruby mine. However, the
Company has not commenced economic production and is still considered in the
development stage.
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of the mineral properties and
other assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred losses of $36,315,168 from inception to
September 30, 1996 and had a working capital deficit of $2,985,168 at September
30, 1996. These factors may raise doubt about the Company's ability to continue
as a going concern. There is no assurance that the Company will be successful in
establishing proven ore reserves or determining if the mineral properties can be
mined economically. These consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Management of the Company on a quarterly basis reviews the recoverability of the
capitalized mineral properties and mining equipment. Management takes into
consideration various information including, but not limited to, historical
production records from previous mine operations, results of exploration
activities conducted to date, estimated future metal prices, and reports and
opinions of outside geologists, mine engineers and consultants. Accordingly, in
management's opinion, based on such information, the capitalized costs in
mineral properties and mining equipment do not exceed their estimated net
realizable value.
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 - Stockholders' Equity
During the three months ended September 30, 1996, the Company received a net
amount of $238,751 from the sale of 757,576 shares of its common stock through a
Regulation S offering. The shares were sold at a 50% discount of the Company's
closing bid price on the day before the sale.
In July 1996, the Company issued 439,560 shares of its common stock per a two
year, $450,000, 7% convertible debenture where the subscriber had the option of
converting the principal to shares at 70% of the average share price for the
five days preceding conversion.
Also in July 1996, the Company issued 57,523 additional shares of the Company's
common stock per a Regulation S stock agreement with a purchase price adjustment
clause, which required the Company to issue additional shares if, during a
45-day valuation period, the average share price fell below the original
purchase price.
Also in July 1996, the Company placed 695,652 shares of its common stock in
escrow per a Regulation S stock purchase agreement. The agreement contained a
purchase price adjustment clause that required the Company to issue such shares
if the Company's low bid price fell below one dollar during the specified
valuation period. The valuation period ended on September 27, 1996, and the
purchaser requested that the Company issue 661,569 shares of common stock
pursuant to the terms of the agreement. The Company is currently disputing the
purchaser's claim. There can be no assurance that the dispute will be resolved
in the Company's favor.
Note 4 - Subsequent Events
On October 18, 1996, the Company issued 1,612,904 shares of its common stock for
a net amount of $477,500 per a Regulation S stock agreement to non-U.S. persons.
Denison Capital Group acted as the placement agent in that transaction. The
shares were sold at a 50% discount of the Company's closing bid price on the day
prior to the sale.
Note 5 - Supplemental Schedule of Non cash investing activities
Noncash investing and financing activities for the three months ended September
30, 1996 are as follows:
Company stock issued for:
Current portion of long term debt
Conversion of Convertible Debenture $300,000
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Item 2- Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had a working capital deficit of $2,983,168
compared to a $2,328,674 working capital deficit at June 30, 1996.
The Company estimates its mining development and operating costs to be
approximately $4 million for the fiscal year ending June 30, 1997. The majority
of the funds will be used for operations in the Wolf and Irene veins and the
Lawry channel at the Ruby mine. Additional financing will be required to perform
the intended work at the Ruby mine. There can be no assurance that the Company
will be able to obtain such financing or that financing will be obtained on
terms favorable to the Company. In the event the Company is unable to obtain
additional financing, the Company may scale back its operations or sell assets
which could adversely affect production and the Company's business objectives.
RESULTS OF OPERATIONS
Three Months ended September 30, 1996
The Company incurred a net loss of $1,324,166 for the quarter ended September
30, 1996, compared to a net loss of $1,856,127 during the same quarter in 1995.
General and administrative expenses decreased by $115,307 from the same quarter
in the prior year due to a reduction in litigation expenses. General mining
costs decreased by $463,567 due to discontinuing development activity at the
Peavine, Kate Hardy and Rising Sun mines, and the completion, last year, of a
major road repair project.
Also, during the quarter, the Company sold two Wagner dump trucks and recognized
a loss of $46,583. The Company incurred interest expense in the amount of
$29,250 under a promissory note issued in connection with the settlement of the
action brought against the Company by Zuri Invest A.G. and others.
Management expects losses to continue at least until mining operations are
sufficient to process not less than 35 ounces of gold per day. If mining
operations reach that level, the ability of the Company to achieve net income is
dependent on the grade of ore and on the price of gold. Historically, the price
of gold has been volatile; since the end of 1987 the price of gold has declined
from a high of approximately $500 per ounce to approximately $350 per ounce.
Over the last twelve months gold prices have been more positive, and have
recently closed at the highest level in more than three years. Management
believes this positive trend is likely to continue. However, a downward trend in
the price of gold will have an adverse effect on the Company's revenues when it
begins mining operations.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Litigation
On October 24, 1994, the Company filed an amended complaint against F. James
Anderson, Simone Anderson, Edward M. Lawson, Consolidated Sierra Gold Mines,
Inc. ("CSGM"), Independent Sierra Gold Mines, Inc., ("ISGM"), Bartel, Eng,
Miller & Torngren, attorneys, Robert Sibthorpe, Coopers & Lybrand and Yorkton
Securities as defendants in an action to recover damages. The suit was filed in
the United States District Court for the Northern District of California as Case
No. C94-3487 ("the Federal Action"). On April 28, 1995, the Company filed a
third amended complaint which seeks to recover damages against James and Simone
Anderson for breach of fiduciary duty, for violations of Rule 10b-5 and 16(b),
for violations of the California Corporations Code Section 25400(d) and Section
25401. The lawsuit seeks to recover damages against Edward M. Lawson, Robert
Sibthorpe and Yorkton Securities, Inc. for breach of fiduciary duty. The lawsuit
seeks to recover damages against James and Simone Anderson, ISGM, CSGM, Robert
Sibthorpe, and Yorkton Securities, Inc. for intentional and negligent
misrepresentation. The lawsuit seeks to recover damages against the firm of
Bartel, Eng, Miller & Torngren based upon breach of fiduciary duty and
negligence claims. The law firm of Bartel, Eng, Linn & Schroder has (as
successor in interest to Bartel, Eng, Miller & Torngren) filed a counterclaim in
this litigation seeking recovery from Brush Creek of legal fees totaling
approximately $95,000. The accounting firm of Coopers & Lybrand has been
dismissed as a defendant from the litigation without prejudice.
An initial round of discovery has been completed. On August 12, 1996, defendants
Yorkton Securities and Robert Sibthorpe filed a joint Motion for Summary
Judgment. The hearing on that motion set for October 11, 1996 was continued and
is currently set for November 15, 1996. There has been no trial date set.
The Company is a party to other various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse effect on
the business or financial position of the Company.
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PART II - OTHER INFORMATION (Continued)
Item 2 - Changes in Securities - None
Item 3 - Defaults Upon Senior Securities - None
Item 4 - Submission of Matters to a Vote of Security Holders - None
Item 5 - Other Information - None
Item 6 - Exhibits and Reports on Form 8-K - None
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SIGNATURES
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Registrant and in
the capacity and on the date indicated.
Signature Capacity Date
/s/ James S. Chapin Chief Executive Officer November 14, 1996
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James S. Chapin
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