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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 March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-12761
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
------------------------------------------------------
(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
- ---------------------------------------- ----------
(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 13 or 15 (d) of the Exchange Act of 1934 during the past 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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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers' classes of common
equity as of the latest practicable date:
Shares of common stock outstanding as of May 13, 1997: 28,606,589
Transitional Small Business Disclosure Format
Yes No X
----- -----
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial statements
Condensed consolidated balance sheets as of March 31, 1997
(unaudited) and June 30, 1996. 3
Condensed consolidated statements of operations (unaudited) for the three
months ended March 31, 1997 and 1996. 4
Condensed consolidated statements of operations (unaudited) for the nine
months ended March 31, 1997 and 1996 and for the period July 1, 1989 (date
of resumption of development stage enterprise activities) through March 31,
1997. 5
Condensed consolidated statements of cash flows (unaudited) for the nine
months ended March 31, 1997 and 1996 and for the period July 1, 1989 (date
of resumption of development stage enterprise activities) through March 31,
1997. 6
Notes to condensed consolidated financial statements (unaudited) 7
Item 2. Management's discussion and analysis of financial condition
and results of operations. 11
PART II. OTHER INFORMATION 13
</TABLE>
2
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
-------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 70,775 $ 1,275,413
Prepaid expenses 11,159 51,290
Inventory 2,750 24,290
Accounts receivable, employees 29,750 40,462
------------ ------------
Total current assets 114,434 1,391,455
Office furniture and equipment, net 53,331 115,837
Mineral properties and mining
equipment, net 10,269,324 10,600,827
Deposits 272,147 377,147
------------ ------------
Total assets $ 10,709,236 $ 12,485,266
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 1,632,180 $ 1,440,268
Current portion of long term debt 2,160,330 2,279,861
------------ ------------
Total current liabilities 3,792,510 3,720,129
Other liabilities 3,700 3,700
------------ ------------
Total liabilities 3,796,210 3,723,829
------------ ------------
Shareholders' Equity:
Common Stock, no par value;
authorized 100,000,000 shares;
24,326,589 issued and outstanding
and 14,963,369 shares
as of March 31, 1997 and June 30,
1996, respectively 45,147,690 43,752,439
Accumulated deficit (11,260,214) (11,260,214)
Accumulated deficit during the
development stage (26,974,450) (23,730,788)
------------ ------------
Total shareholders' equity 6,913,026 8,761,437
------------ ------------
Total liabilities and shareholder's
equity $ 10,709,236 $ 12,485,266
============ ============
</TABLE>
See notes to Condensed Consolidated Financial Statements.
3
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended March 31
--------------------------------
1997 1996
------------ -----------
<S> <C> <C>
Revenues:
Interest income $ 3,712 $ 8,759
------------ -----------
Total revenues 3,712 8,759
------------ -----------
Expenses:
General and administrative expenses 340,386 579,555
General mining and exploration 314,455 700,667
Depreciation and amortization 97,927 145,484
Loss (Gain) on sale of assets 33,649 --
Interest expense 28,275 1,824
Litigation settlement 254,100 --
------------ -----------
Total expenses 1,068,792 1,427,530
------------ -----------
Net loss $ (1,065,080) $(1,418,771)
============ ===========
Loss per common share before
extraordinary item $ (0.05) $ (0.15)
============ ===========
Net loss per common share $ (0.05) $ (0.15)
============ ===========
Weighted average common shares
outstanding 20,692,182 9,724,540
============ ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
4
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Period from
Ended March 31 July 1, 1989
-------------- through
Revenues: 1997 1996 March 31, 1997
---- ---- --------------
<S> <C> <C> <C>
Sale of joint venture -- -- $ 4,232,000
Other income -- -- 156,444
Interest income $ 19,244 $ 28,145 184,757
------------ ----------- ------------
Total revenues 19,244 28,145 4,573,201
------------ ----------- ------------
Expenses:
General and administrative expenses 847,485 1,717,594 14,747,250
General mining and exploration 1,703,233 3,242,160 10,617,258
Loss on lease abandonments -- -- 392,317
Depreciation and amortization 290,548 413,028 1,353,808
Loss (Gain) on sale of mining equipment 80,502 (116) 167,412
Interest expense 87,038 2,850 462,706
Litigation settlements 254,100 2,389,668 3,951,362
------------ ----------- ------------
Total expenses 3,262,906 7,765,184 31,692,113
------------ ----------- ------------
Loss before extraordinary item (3,243,662) (7,737,039) (27,118,912)
Extraordinary item - net gain from
debt extinguishment, net of tax -- -- 144,462
------------ ----------- ------------
Net loss $ (3,243,662) $(7,737,039) $(26,974,450)
============ =========== ============
Net income (loss) per common share before
extraordinary item $ (0.18) $ (0.93)
============ ===========
Net income (loss) per common share $ (0.18) $ (0.93)
============ ===========
Weighted average common shares
outstanding 18,480,512 8,325,772
============ ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
5
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BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Period from
Ended March 31 July 1, 1989
------------------------ through
1997 1996 March 31, 1997
---- ---- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,243,662) $(7,737,039) $(26,974,450)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain on debt restructuring -- -- (144,462)
Depreciation and amortization 290,548 413,028 1,353,808
Loss on lease abandonments -- -- 444,359
Loss on litigation settlement 254,100 2,304,668 3,921,362
Loss (Gain) on sale of mining equipment 80,502 (116) 45,402
Other -- -- 43,576
Shareholder payment of services -- -- 105,055
Stock and debt for services -- -- 703,068
Change in stock purchase price adjusted
Receivable -- 284,749 --
Change in not receivable -- -- 7,000
Change in inventory 21,540 59,231 (460)
Change in prepaid expenses 40,131 41,582 490,577
Change in deposits and other current assets 115,712 (100,023) (134,366)
Change in accounts payable
and accrued liabilities 191,912 691,447 4,184,637
----------- ----------- ------------
Total adjustment 994,445 3,694,566 11,019,556
----------- ----------- ------------
Net cash provided by (used in)
operating activities (2,249,217) (4,042,473) (15,954,894)
----------- ----------- ------------
Cash flows from investing activities:
Acquisition of mineral properties, equipment,
and deferred developments (9,189) (600,035) (5,019,248)
Acquisition of office equipment (57,852) (34,092) (317,953)
Proceeds from sale of equipment 90,000 -- 384,356
Proceeds from sale of joint venture -- -- 20,060
----------- ----------- ------------
Net cash used in investing activities 22,959 (634,127) (4,932,785)
----------- ----------- ------------
Cash flows from financing activities:
Advances from (to) affiliates -- -- 2,009,127
Payments made to affiliates -- -- (343,798)
Proceeds from issuance of common stock 1,095,251 4,107,195 19,221,463
Proceeds from warrant extensions -- -- 207,750
Proceeds from issuance of notes payable -- -- 870,043
Payments on long-term debt (73,631) (34,080) (1,309,979)
Proceeds from convertible debenture -- -- 300,000
----------- ----------- ------------
Net cash provided by financing activities 1,021,620 4,073,115 20,954,606
----------- ----------- ------------
Net increase (decrease) in cash (1,204,638) (603,485) 66,927
Cash at beginning of period 1,275,413 684,153 3,848
----------- ----------- ------------
Cash at end of period $ 70,775 $ 80,668 $ 70,775
=========== =========== ============
Cash paid during the period for interest
(net of amounts capitalized) $ $ 2,850
=========== ===========
</TABLE>
See notes to Condensed Consolidated Financial Statements.
6
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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 March 31, 1997, the condensed
consolidated statements of operations and cash flows for the three months and
nine months ended March 31, 1997 and 1996 and for the period July 1, 1989 (date
of resumption of development stage enterprise activities) through March 31,
1997, 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 March 31, 1997 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 March 31, 1997 and 1996 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 subsidiary, Alpha Hardware.
7
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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. The Company has
not commenced economic production and is still considered in the development
stage. In October 1996, the Company ceased mining activity at the Ruby Mine and
engaged an investment banker to assist in pursuing a joint venture partner. In
January 1997, the Company began rehabilitation at the Brush Creek Mine, and
plans to begin limited production from the Brush Creek Mine beginning on or
about May 31, 1997.
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 $38,234,664 from inception to March
31, 1997, and it has a working capital deficit of $3,678,076 at March 31, 1997.
These factors may raise doubt about the Company's ability to continue as a going
concern. The Company defaulted on December 13, 1996 on a settlement agreement
entered into with the Royal Bank of Scotland on December 13, 1995. (See note 4).
Management is actively seeking a joint venture partner as a source of capital to
fund current and future operations. However, there can be no assurance that a
joint venture partner will be obtained. 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 periodically 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 internal and external 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.
NOTE 3 - STOCKHOLDERS' EQUITY
In March 1997, The Board of Directors approved a Private Placement to raise a
maximum of $500,000 from the sale of 7,142,857 of the Company's common stock at
$0.07 per share pursuant to Regulation D and Section 4 (2). The Board also
approved a 10% commission for finders fees, payable in shares of the Company's
common stock or by a cash payment, in connection with the Private Placement. As
of March 31, 1997, the Company has raised a net amount of $154,000 from the sale
of 2.2 million shares.
In January 1997, the Board approved a Private Placement to sell 3.2 million
shares of the Company's common stock at a price of $0.0625 per share under
Regulation D and Section 4 (2). The Board also approved a 10% commission for
finders fees, payable in shares of the Company's common stock or by a cash
payment, in connection with the Private Placement. The offering raised a net
amount of $225,000 from the sale of 3.6 million shares.
8
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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 - CONTINUED
The Board of Directors purchased shares in the January and March 1997 Private
Placements in the aggregate of 1,550,000 shares for a total of $99,500. Also in
March 1997, the Board of Directors canceled all outstanding options issued to
the Board in the aggregate of 960,000 shares, and approved options in the
aggregate 960,000 shares at $0.225, the closing bid price of the Company's
common stock on March 7, 1997.
In October 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. 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.
In September 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 the 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 specific
valuation period. The valuation period ended on September 27, 1996, and the
purchaser requested that the Company issued 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 - ROYAL BANK OF SCOTLAND
The Company entered into a settlement agreement with the Royal Bank of Scotland
(the Plaintiffs) on December 13, 1995. Pursuant to the agreement, the Company
was required to make a final payment on December 13, 1996 of $600,000. The
Company defaulted on the payment and on January 20, 1997 entered into a
Forbearance Agreement with the Plaintiffs. The agreement required the Company to
make a payment of $629,100 on or before March 20, 1997 and a payment of $175,000
on or before July 1, 1997. Pursuant to the Forbearance Agreement, the Company
reimbursed the Plaintiffs for their attorney fees and costs in the amount of
$35,181.
The Company defaulted on the payment due on March 20, 1997 of $629,100, and on
March 20, 1997 entered into an amended Forbearance Agreement. The agreement
extended the $629,100 payment to on or before May 15, 1997. Pursuant to the
amended Forbearance Agreement, the Company is required to make a second payment
of $225,000 on or before July 1, 1997. The Company may elect to postpone the
second payment until no later than December 15, 1997 by delivering written
notice of its election no later than June 25, 1997 in which event the amount of
the second payment will be increased to $300,000. If the payments are not made
the Plaintiffs' obligation to forbear will terminate and they will become
entitled to exercise their rights and remedies with respect to a stipulated
judgment in the amount of $3.25 million.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to March 31, 1997, the Company sold 3.4 million shares of the
Company's common stock, and received a net amount of $236,600 pursuant to the
Private Placement under Regulation Dand Section 4 (2) approved by the Company's
Board of Directors in March 1997. The Company paid in cash a 10% commission of
$1,400 for a finders fee in connection with the Private Placement.
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NOTE 5 - SUBSEQUENT EVENTS - CONTINUED
Also subsequent to March 31, the Company filed an S-8 with the Securities &
Exchange Commission registering a total of 880,000 shares of its common stock in
exchange for certain consulting services. The shares are valued at $0.25 per
share, the average of the bid and asked price for the Company's common stock on
April 9, 1997.
NOTE 6 - SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING ACTIVITIES
Noncash investing and financing activities for the six months ended December 31,
1996 are as follows:
Company stock issued for:
Current portion of long term debt
Conversion of Convertible Debenture $300,000
10
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ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had a working capital deficit of $3,678,076
compared to a $2,328,674 working capital deficit June 30, 1996.
During the nine-month period ended March 31, 1997, the Company raised $1,095,251
from the sale of 8,610,040 shares of common stock. The Company estimates its
mining development and operating costs to be approximately $1 million for the
remainder of the fiscal year ending June 30, 1997 and additional financing will
be required in order for the Company to cover such costs. The majority of funds
are needed for rehabilitation, mining and milling at the Brush Creek Mine. The
Company anticipates raising the needed funds from the sale of common stock or
joint ventures. No assurance can be provided that the Company will be able to
raise funds to continue and expand its operations. If the Company is unable to
raise the funds needed for the Company's operations, the Company may have to
scale back its development plans which could adversely affect the Company's
business objectives. The Company sold equipment in order to meet some of its
obligations. In addition, the Company could close some of its properties for
failure to make lease payments. On March 23, 1997, the Company's lease on the
Kate Hardy mine expired. However, the Company paid $10,000 to the Kate Hardy
lessor to extend the lease agreement on the Kate Hardy mine for an additional
three months. The Company also negotiated a modification agreement with Ruby
Development Co., Inc. to pay, in cash, one lease payment in arrears for the Ruby
mine, to pay in cash, one month lease payment in arrears for the Rising Sun,
increase the amount of equipment held as collateral pursuant to the Ruby mine
lease agreement by filing a UCC-1 financing statement listing the additional
equipment, all right, title and interest of certain "ore specimens" for which
Ruby Development Co., Inc. will credit the value against past due minimum
royalty payments, and grant Ruby Development Co., Inc., an option to purchase up
to 50,000 shares of the Company's common stock at a price of $025 per share
until July 1, 1999. In the event the Company is unable to obtain additional
financing the Company may be required to seek protection under the bankruptcy
laws.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
The Company incurred a net loss of $1,065,080 for the quarter ended March 31,
1997, compared to a net loss of $1,418,771 during the same quarter in 1997.
General and administrative expenses decreased by $239,169 from the same quarter
in the prior year primarily due to a reduction in litigation expenses. Also, the
Board of Directors approved the withdrawal and payment of $100,000 to James S.
Chapin, CEO and Chairman of the Board. The $100,000 was held in trust by the
Company per an employment agreement with Mr. Chapin. The Company incurred a loss
of $254,100 in the litigation settlement with the Royal Bank of Scotland
settlement. (See Note 4). General mining costs decreased by $386,212 due to
discontinuation of mining at the Ruby mine.
The Company incurred interest expense of $28,275 under a promissory note issued
in connection with the settlement of the action brought against the Company by
Zuri Invest A. G. and others.
The Company recognized a loss of $33,649 from the sale and disposal of mining
equipment..
NINE MONTHS ENDED MARCH 31, 1997
The Company incurred a net loss of $3,243,662 for the nine months ended March
31, 1997 compared to a $7,737,039 net loss for the same period in 1996. General
and Administrative expenses decreased by $870,109 from the prior year due to a
decrease in litigation fees and expenses. Also, the Board of Directors approved
the withdrawal and payment of $100,000 to James S. Chapin, CEO and Chairman of
the Board. The $100,000 was held in trust by the Company per an employment
agreement with Mr. Chapin. The Company incurred a loss of $254,100 in the
litigation settlement with the Royal Bank of Scotland settlement in 1997. (See
Note 4). Whereas the Company incurred a loss from litigation settlement of
$2,389,668 in the prior year. General mining costs decreased by $1,538,927 from
the prior year due to discontinuation of mining activity at the Ruby mine.
The Company recognized a loss of $80,502 from the sale and disposal of mining
equipment. The Company incurred interest expense in the amount of $87,038 under
a promissory note issued in connection with the settlement of the action brought
against the Company by Zuri Invest A. G. and others.
11
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RESULTS OF OPERATIONS - CONTINUED
Management expects losses to continue until mining operations are sufficient to
process at least 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. A downward trend
in the price of gold could have a material adverse effect on the Company's
revenues from its mining operations.
12
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PART 11 - 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, Brush Creek Mining & Development Co., Inc. filed an amended
Complaint against: F. James Anderson, Simone Anderson, Edward M. Lawson,
Consolidated Sierra Gold Mines, Inc., Independent Sierra Gold Mines, Inc.,
Bartel, Eng, Miller & Torngren, attorneys, Robert Sibthorpe and Yorkton
Securities as defendants in an action to recover damages. Causes of action
against some, but not all of the defendants, include claims for Violations of
Section 16(b) and Section 10b of the Securities Exchange Act of 1934, Violation
of California Corporations Code 25400(d) and 25401, attorney Malpractice, Breach
of Fiduciary Duty, Intentional Misrepresentation, Negligent Misrepresentation,
Negligence, Resission and Restitution. The suit was filed in the United States
District Court for the Northern District of California as Case Number C94-3487.
As to the progress of the case to date, an initial round of discovery has been
completed. On November 15, 1996, the court granted defendants Yorkton Securities
and Robert Sibthorpe's Motion for Summary Judgment. Subsequent to entry of
summary judgment in their favor, Yorkton Securities filed a cost bill for the
sum of $15,752.85 and Mr. Sibthorpe filed a cost bill for $3,842.83. These costs
are not payable until the conclusion of the litigation against all other
parties. The insurer for Bartel, Eng, Miller & Torngren is in liquidation
proceedings under the control of the California Department of Insurance. Brush
Creek will file a claim in that liquidation proceeding when claim forms are
issued, which is expected to occur in June. 1997. It is not anticipated that any
claims will be paid until 1998. On November 15, 1996, the court also set a trial
date for the remaining parties of November 24, 1997.
On June 18, 1996, Hinton & Alfert substituted in as counsel for Brush Creek in
the case Royal Bank of Scotland et al. v. Brush Creek Mining & Development, et
al. in the United States District Court for the Eastern District, case number
CV-S-94-0962 GEB GGH. Hinton & Alfert represents Brush Creek in its
cross-complaint against attorneys Bartel, Eng, Miller & Torngren for
Professional Negligence and against Simone Anderson for Contractual Indemnity.
ITEM 2 - CHANGES IN SECURITIES
During January 1997, the Board of Directors approved a Private Placement to sell
a total of 3.2 million restricted shares of the Company's common stock at $.0625
per share. Pursuant to the Private Placement the Company sold a total of
3,600,000 restricted shares of the Company's common stock and received a net
amount of $225,000. Also, in March 1997, the Board of Directors approved a
Private Placement to sell a total of 7,142,857 restricted shares of the
Company's common stock at $.07 per share. Pursuant to the March 1997 Private
Placement the Company has sold 2,200,000 restricted shares of the Company's
common stock and received a net amount of $154,000. All shares were sold under
Regulation D and Section 4(2). Investors who participated in the Private
Placements were required to be accredited. The Company will pay a 10% commission
for finders fees, payable in shares of the Company's common stock or by a cash
payment. The Company has agreed to register the shares pursuant to a
registration statement to be filed with the Securities and Exchange Commission.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 - SUBMISSION OF MATTERS TO VOTE FOR SECURITY HOLDERS - NONE
ITEM 5 - OTHER INFORMATION
13
<PAGE> 14
PART 11 - OTHER INFORMATION - CONTINUED
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibit 11.1 Computation of (Loss) Income Per Share
(B) Reports on Form 8-K filed for the quarter for which this report is filed:
Items Reported Financial Statements Filed Date of Report
Other Events - Nasdaq None January 14, 1997
Other Events - Royal Bank None January 28, 1997
Other Events - Royal Bank None March 24, 1997
14
<PAGE> 15
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 persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Capacity Date
/s/ James S. Chapin Chief Executive Officer
- ----------------------- and Chief Financial Officer May 15, 1997
James S. Chapin
15
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF EARNING PER SHARE
<TABLE>
<CAPTION>
Three months
Ended March 31
--------------
1997 1996
---- ----
<S> <C> <C>
Net income (Loss) $ (1,065,080) $(1,418,771)
------------ -----------
Weighted Average
Common Shares
Outstanding 20,692,182 9,724,540
------------ -----------
Net Income
(Loss) per
Common Share $ (0.05) $ (0.15)
============ ===========
</TABLE>
<TABLE>
<CAPTION>
Nine months
Ended March 31
--------------
1997 1996
---- ----
<S> <C> <C>
Net income (Loss) $ (3,243,662) $(7,737,039)
------------ -----------
Weighted Average
Common Shares
Outstanding 18,480,512 8,325,772
------------ -----------
Net Income
(Loss) per
Common Share $ (0.18) $ (0.93)
============ ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 70,775
<SECURITIES> 0
<RECEIVABLES> 29,750
<ALLOWANCES> 0
<INVENTORY> 2,750
<CURRENT-ASSETS> 114,434
<PP&E> 11,147,886
<DEPRECIATION> 878,563
<TOTAL-ASSETS> 10,709,236
<CURRENT-LIABILITIES> 3,792,510
<BONDS> 0
0
0
<COMMON> 45,147,690
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,709,236
<SALES> 0
<TOTAL-REVENUES> 19,244
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,262,906
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,243,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,243,662)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
