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 the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER 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 Small Business Issuer as Specified in its Charter)
NEVADA
(State or Other Jurisdiction of Incorporation or Organization)
88-0180496
(I.R.S. Employer Identification Number)
11117 LOWER CIRCLE DRIVE, GRASS VALLEY, CALIFORNIA 85949
(Address of Principal Executive Offices)
(503) 477-0834
(Issuer's Telephone Number, Including Area Code)
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 No
----
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date: Common, $.0001 par value per share:
5,554,179 outstanding as of November 1, 1998.
Transitional Small Business Disclosure Format: Yes X No
-------
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<PAGE>
PART I - FINANCIAL INFORMATION
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
Index to Financial Information for the Period Ended September 30, 1998
<TABLE>
<CAPTION>
ITEM Page
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<S> <C>
Item 1 - Financial Statements
- ----------------------------------------------------------------------------------
Condensed Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
and June 30, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations (Unaudited) for the three months
ended September 30, 1998 and 1997 and for the period July 1, 1989 (dated
of resumption of development stage enterprise activities) through September 30,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the three months
ended September 30, 1998 and 1997 and for the period July 1, 1989 (dated
of resumption of development stage enterprise activities) through September 30,. 5
1998
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<PAGE>
PART I - FINANCIAL INFORMATION
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1998 June 30, 1998
-------------------- ---------------
<S> <C> <C>
ASSETS
Current Assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . $ 23,972 $ 417,415
Inventory . . . . . . . . . . . . . . . . . . . . . - 39,735
Advances receivables. . . . . . . . . . . . . . . . 500 500
-------------------- ---------------
Total current assets. . . . . . . . . . . . . . . . . 24,472 457,650
Office furniture and equipment, net. . . . . . . . . 42,074 42,074
Mineral properties and mining equipment, net. . . . . 4,595,961 4,657,421
Deposits. . . . . . . . . . . . . . . . . . . . . . . 272,095 272,095
-------------------- ---------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . $ 4,934,602 $ 5,429,240
==================== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities. . . . . . . $ 1,370,152 $ 1,479,583
Current portion of long term debt . . . . . . . . . . 362,000 362,000
Other . . . . . . . . . . . . . . . . . . . . . . . . 3,700 3,700
-------------------- ---------------
Total current liabilities . . . . . . . . . . . . . . 1,735,852 1,845,283
-------------------- ---------------
Shareholder's Equity
Common Stock, $.0001 par value; authorized
100,000,000 shares; issued and outstanding
5,554,179 and 4,162,948 shares as of September 30,
1998 and June 30, 1998, respectively. . . . . . . . 53,743,325 53,643,325
Accumulated deficit . . . . . . . . . . . . . . . . (50,544,575) (50,059,368)
-------------------- ---------------
Total shareholders' equity. . . . . . . . . . . . . . 3,198,750 3,583,957
-------------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . $ 4,934,602 $ 5,429,240
==================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
--------------
Period from
July 1, 1989
through
1998 1997 September 30, 1998
----------- ------------ --------------------
<S> <C> <C> <C>
Revenues
Sale of Joint Venture. . . . . . . . . . $ - $ - $ 4,232,000
Other income . . . . . . . . . . . . . . 5,237 - 166,382
Interest income. . . . . . . . . . . . . 1,736 2,598 200,204
----------- ------------ --------------------
Total revenues . . . . . . . . . . . . . . 6,973 2,598 4,598,586
----------- ------------ --------------------
Expenses
General and administrative expense. . . 152,187 375,164 17,863,319
Impairment loss. . . . . . . . . . . . . - - 5,393,115
General mining and exploration. . . . . 278,533 519,778 13,819,805
Loss on lease abandonments . . . . . . . - - 392,317
Depreciation and amortization. . . . . . 61,460 65,875 1,748,153
Loss (gain) on sales of mining equipment - - 171,174
Interest expense . . . . . . . . . . . . - - 498,494
Litigation settlement. . . . . . . . . . - - 4,141,032
----------- ------------ --------------------
Total expenses . . . . . . . . . . . . . . 492,180 960,187 44,027,409
----------- ------------ --------------------
Net loss before change in accounting
principal. . . . . . . . . . . . . . . . (485,207) (958,219) (39,428,823)
Extraordinary item - gain from debt. . . . - - 144,462
----------- ------------ --------------------
extinguishment net of tax
$ (485,207) $ (958,219) $ (39,284,361)
=========== ============ ====================
Net loss
Loss per common share before . . . . . . . $ (.09) $ (.28)
=========== ============
extraordinary item
$ (.09) $ (.28)
=========== ============
Net loss per common share
Weighted average common shares . . . . . . 5,529,179 34,209,371
=========== ============
outstanding
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
--------------
Period from
July 1, 1989
through
1998 1997 September 30, 1998
---------- ---------- --------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income(loss). . . . . . . . . . . . . $(485,207) $(958,219) $ (39,284,361)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Impairment of development costs . . . - - 5,393,115
Gain on debt restructuring. . . . . . - - (144,462)
Depreciation and amortization . . . . 61,460 65,875 1,748,153
Loss on lease abandonments. . . . . . - - 444,359
Loss on litigation settlement . . . . - - 4,111,032
Loss (gain) on sale of mining
equipment . . . . . . . . . . . . . - - 49,164
Other . . . . . . . . . . . . . . . . - - 43,576
Shareholder payment of services . . . - - 105,055
Stock and debt for services . . . . . - 96,875 879,652
Change in inventory . . . . . . . . . 39,735 - 2,290
Change in note receivable . . . . . . - - 47,462
Change in prepaid expenses. . . . . . - - 501,736
Change in deposits and other current
assets. . . . . . . . . . . . . . . - - (116,461)
Change in deposits. . . . . . . . . . - - (29,065)
Change in accounts payable and
accrued liabilities . . . . . . . . (109,431) 15,683 3,922,609
---------- ---------- --------------------
Net cash provided by (used in) operating
activities. . . . . . . . . . . . . . . . (493,443) (779,786) (22,326,146)
---------- ---------- --------------------
Cash flows from investing activities:
Acquisition of mineral properties,
equipment, and deferred developments. . - - (5,164,817)
Acquisition of office equipment . . . . . - - (278,987)
Proceeds from sale of equipment . . . . . - - 384,356
Proceeds from acquisition of Trans-
Russian. . . . . . . . . . . . . . . . . - - 20,060
---------- ---------- --------------------
Net cash provided by (used in) investing
activities. . . . . . . . . . . . . . . . - - (5,039,388)
---------- ---------- --------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
--------------
Period from
July 1, 1989
through
1998 1997 September 30, 1998
---------- ---------- --------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Advances from (to) affiliates. . . . . . - - 2,009,127
Payment made to affiliates . . . . . . . - - (343,798)
Proceeds from issuance of common stock . 100,000 971,000 26,436,515
Proceeds from warrant extensions . . . . - - 207,750
Proceeds from issuance of notes payable. - - 870,043
Payments on long-term debt . . . . . . . - (224,000) (2,093,979)
Proceeds from convertible debenture. . . - - 300,000
---------- ---------- --------------------
Net cash provided by financing activities. 100,000 747,000 27,385,658
---------- ---------- --------------------
Net increase (decrease) in cash. . . . . . (393,443) (32,786) 20,124
Cash at beginning of period . . . . . . . 417,415 111,059 3,848
---------- ---------- --------------------
Cash at end of period. . . . . . . . . . . $ 23,972 $ 78,273 $ 23,972
========== ========== ====================
Cash paid during the period for interest
(net of amounts capitalized). . . . . . . $ - $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1998, the condensed
consolidated statements of operations and cash flows for the three months ended
September 30, 1998 and 1997 and for the period July 1, 1989 (date of resumption
of development stage enterprise activities) through September 30, 1998, have
been prepared by the Brush Creek Mining and 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, 1998
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, 1998 Form 10-KSB. The results of
operations for the periods ended September 30, 1998 and 1997 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.
NOTE 2 - OPERATIONS AND 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,
all of which had been 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
and suspended all mining operations and reduced its activities to a care and
maintenance level. 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 under a
permit that limited mill capacity to 225 tons per day. Production was
terminated due to adverse weather conditions in December 1992. The Company
resumed limited production at the Ruby Mine in July 1993 and gradually increased
production until October 1996 when production was suspended. In early 1997, the
Company began preparing the lower Brush Creek Mine for limited production. In
June 1997, the Company received interim approval from the United States Forest
Service to transport thirty tons of ore per day from the lower Brush Creek Mine
to the Ruby mill site. The Company has not commenced economic production and is
therefore still considered to be in the development stage.
The Company's consolidated 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. There is no assurance that the Company will be successful in
establishing probable or 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.
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<PAGE>
NOTE 2 - OPERATIONS AND BASIS OF PRESENTATION (Continued)
During 1997, the Securities and Exchange Commission (SEC) staff reconsidered
existing accounting practices for mineral expenditures by United States junior
mining companies. They now interpret generally accepted accounting policy for
junior mining companies to permit capitalization of acquisition, exploration and
development costs only after persuasive engineering evidence is obtained to
support recoverability of these costs (ideally upon determination of proven
and/or probable reserves based upon dense drilling samples and feasibility
studies by a recognized independent engineer). Although the Company has
performed drilling samples, and an independent engineer has deemed the gold
properties contain profitable reserves in excess of property and equipment costs
incurred through June 30, 1997, management has chosen to follow the more
conservative method of accounting by expending the previously capitalized gold
mineral costs, for which there is no feasibility study, as a cumulative effect
of a change in accounting principle in the consolidated statement of operations.
NOTE 3 - STOCKHOLDERS' EQUITY
In July 1997, the Company issued 150,000 shares of its Common Stock for certain
consulting services. The shares were registered with the Securities and Exchange
Commission on Form S-8. The shares are valued at $0.375, the average of the bid
and asked price for the Company's Common Stock on July 8, 1997.
Also in July 1997, the Company sold 600,000 shares of its Common Stock pursuant
to a Private Placement at a price of $0.125 per share. The shares were sold
pursuant to Regulation D and Section 4(2). The Company received a net amount of
$75,000 from the sale.
Also in July 1997, the Company sold 1,933,332 shares of its Common Stock
pursuant to a Private Placement at a price of $0.15 per share. The shares were
sold pursuant to Regulation D and Section 4(2). The Company received a net
amount of $290,000 from the sale. The Company also approved a 10% commission for
a finder's fee in connection with the Private Placement.
In August and September 1997, the Company sold 3,050,000 shares of its Common
Stock pursuant to a Private Placement at a price of $0.10 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a net
amount of $305,000 from the sale. The Company also approved a 10% commission for
a finder's fee in connection with the Private Placement.
Also in August 1997, the Company issued 125,668 shares to pay for certain
consulting fees. The shares were registered with the Securities and Exchange
Commission on Form S-8. The shares are valued at $0.40625, the average of the
bid and asked price for the Company's Common Stock on August 25, 1997.
In September 1997, the Company sold 4,300,000 shares of its Common Stock
pursuant to a Private Placement at a price of $0.07 per share. The shares were
sold pursuant to Regulation D and Section 4(2). The Company received a net
amount of $301,000 from the sale.
Also in September 1997, the Company issued 100,000 shares to pay for certain
consulting fees. The shares were registered with the Securities and Exchange
Commission on Form S-8. The shares are valued at $0.313, the average of the bid
and asked price for the Company's Common Stock on September 26, 1997.
-8-
<PAGE>
NOTE 4 - SUBSEQUENT EVENTS
------------------
Change in Management
- ----------------------
On November 16, 1998, Brush Creek Mining and Development Inc. received the
resignation of its president and chief executive officer (C.E.O.), James Chapin.
Brush Creek has accepted the proposal submitted by Mr. Larry Stockett, President
of U.S. Cement Company and the Board appointed him as the new President and
C.E.O. Mr. Stockett has accepted these positions without compensation until the
company reaches its first quarterly after tax profit. Upon resolution of Brush
Creek's current legal and financial problems, Mr. Stockett has agreed to
transfer his 51% ownership in U.S. Cement Company to Brush Creek. In return,
Mr. Stockett will receive restricted shares of stock of Brush Creek at a price
of $5 per share for the audited book value of U.S. Cement. In addition, Mr.
Stockett will receive one million shares of Brush Creek restricted stock if the
BCMDE shares achieve a $5 per share closing price for 10 consecutive days.
NOTE 5 - YEAR 2000
----------
The Company has reviewed its current computer software and hardware systems and
is currently working to resolve the potential problems associated with the Year
2000 and the processing of date sensitive information by such systems. Based on
preliminary information, the Company believes that it will be able to implement
successfully the systems and programming changes necessary to address the Year
2000 issues, and does not expect the cost of such changes to have a material
impact of the Company's financial position, results of operations or cash f lows
in future projects.
-9-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
INTRODUCTION
The following discussion should be read in conjunction with the Financial
Information and Notes thereto included in this report and is qualified in its
entirety by the foregoing.
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs and assumptions made by the
Company's management as well as information currently available to the
management. When used in this document, the words "anticipate", "believe",
"estimate", and "expect"and similar expressions, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company has no obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect anticipated or unanticipated events or circumstances
occurring after the date of such statements.
RESULTS OF OPERATIONS
The Company had total revenues of $6,973 during the three months ended September
30, 1998 compared to total revenues of $2,598 (from interest only) during the
three months ended September 30, 1997. The Company had a $485,207 net loss for
the three months ended September 30, 1998 compared to a net loss of $958,219 for
the comparable fiscal 1997 period. This change in net loss is primarily due to a
reduction in general mining and exploration costs, a decrease in general and
administrative expenses. General and administrative expenses decreased $222,977
from the same period in the prior fiscal year.
The price of gold has a material effect on the Company's financial operations.
Following deregulation, the market price for 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 $290 per ounce at September 30, 1998. Instability in the
price of gold may affect the profitability of the Company's operations if and
when the Company realizes economic production.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the Company's Form 10-KSB for fiscal year ended June 30,
1998 and the financial statements included therein and in particular to Part I,
Item 3 and Note 13 to the consolidated financial statements, the full contents
of which are incorporated by reference herein in accordance with Rule 12b-23 of
the General Rules and Regulations under the Securities Exchange Act of 1934.
There has been no material changes in legal proceedings during the quarter ended
September 30, 1998.
Item 2. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
Item 4. OTHER INFORMATION.
None.
Item 5. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
There are no exhibits applicable to this Form 10-QSB.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the fiscal
quarter ended September 30, 1998.
None.
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
(Registrant)
By: /s/ James Chapin
James Chapin
Chief Executive Officer
Dated: November 24, 1998
By: /s/ James Chapin
James Chapin
Principal Financial Officer
and Principal Accounting Officer
Dated: November 24,1 998
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 23972
<SECURITIES> 0
<RECEIVABLES> 500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24472
<PP&E> 4638035
<DEPRECIATION> 0
<TOTAL-ASSETS> 4934602
<CURRENT-LIABILITIES> 1735852
<BONDS> 0
0
0
<COMMON> 53743325
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4934602
<SALES> 0
<TOTAL-REVENUES> 6973
<CGS> 278533
<TOTAL-COSTS> 492180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (485207)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
