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 MARCH 31, 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 88-0180496
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
970 E. MAIN STREET, SUITE 200
GRASS VALLEY, CALIFORNIA 95945
(Address of Principal Executive Offices)
(530) 477-5961
(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, $.001 par value per share: 5,511,364
outstanding as of May 12, 1998
(adjusted to reflect the one-for-ten reverse stock split
effective as of May 8, 1998)
Transitional Small Business Disclosure Format: Yes X No ____
<PAGE>
PART I - FINANCIAL INFORMATION
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
Index to Financial Information
Period Ended March 31, 1998
ITEM PAGE HEREIN
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets
as of March 31, 1998 (unaudited) and June 30, 1997. 3
Condensed Consolidated Statements of Operations (unaudited)
for the three months ended March 31, 1998 and 1997. 4
Condensed Consolidated Statements of Operations (unaudited)
for the nine months ended March 31, 1998 and 1997 and
for the period July 1, 1989 (dated of resumption of development
stage enterprise activities) through March 31, 1998. 5
Condensed Consolidated Statements of Cash Flows (unaudited)
for the nine months ended March 31, 1998 and 1997 and
for the period July 1, 1989 (dated of resumption of development
stage enterprise activities) through March 31, 1998. 6
Notes to Condensed
Consolidated Financial Statements (unaudited). 7
Item 2 - Management's Discussion and Analysis
or Plan of Operation. 9
<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 JUNE 30, 1997
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 939,105 $ 111,059
Inventory 41,865 2,750
Total current assets 980,970 113,809
Office furniture and
equipment, net 41,736 45,547
Mineral properties and mining
equipment, net 10,086,363 10,190,581
Deposits 272,095 272,095
Total assets $11,381,164 $10,622,032
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 1,657,492 $ 1,771,014
Current portion of long term debt 362,000 672,000
Other 3,700 3,700
Total current liabilities 2,023,192 2,446,714
Long-term debt,
net of current portion - 362,000
Total liabilities 2,023,192 2,808,714
Shareholder's Equity
Common Stock, $.0001 par value;
authorized 100,000,000 shares;
issued and outstanding
53,088,238 and 31,370,482 shares
as of March 31, 1998 and
June 30, 1997, respectively 51,343,925 47,092,740
Capital Contributions 1,350,000 -
Accumulated deficit (11,260,214) (11,260,214)
Accumulated deficit during
the development stage (32,075,740) (28,019,208)
Total shareholders' equity 9,357,972 7,813,318
Total liabilities and
shareholders' equity $11,381,164 $10,622,032
See notes to Condensed Consolidated Financial Statements.
<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months
ended March 31,
1998 1997
Revenues:
Sale of Joint Venture $ - $ -
Other Income - -
Interest income 2,626 3,712
Total revenues 2,626 3,712
Expenses:
General and administrative
expenses 474,115 340,386
General mining and
exploration 593,232 314,455
Loss on lease abandonments - -
Depreciation and amortization 59,581 97,927
Loss (Gain) on sale of
mining equip. - 33,649
Interest expense 4,827 28,275
Litigation settlement - 254,100
Total expenses 1,131,755 1,068,792
Loss before
extraordinary item (1,129,129) (1,065,080)
Extraordinary item -
net loss from
debt extinguishment - -
Net loss $ (1,129,129) $ (1,065,080)
Loss per common share before
extraordinary item $ (.02) $ (0.05)
Net loss per
common share $ (.02) $ (0.05)
Weighted average common shares
outstanding 48,625,043 20,692,182
See notes to Condensed Consolidated Financial Statements.
<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Period from
Nine Months July 1, 1989
Ended March 31 through
1998 1997 March 31, 1998
Revenues:
Sale of joint venture - - $ 4,232,000
Other income - - 156,444
Interest income $ 8,392 $ 19,244 196,171
Total revenues 8,392 19,244 4,584,615
Expenses:
General and administrative
expenses 1,553,668 847,485 16,612,589
General mining and
exploration 1,740,292 1,703,233 12,794,545
Loss on lease abandonments - - 392,317
Depreciation and
amortization 191,331 290,548 1,625,233
Loss (Gain) on sale of mining
equipment - 80,502 171,174
Interest expense 5,674 87,038 497,968
Litigation settlements 573,959 254,100 4,710,991
Total expenses 4,064,924 3,262,906 36,804,817
Loss before extraordinary
item (4,056,532) (3,243,662) (32,220,202)
Extraordinary item - net loss from
debt extinguishment - - 144,462
Net loss $(4,056,532) $(3,243,662) $(32,075,740)
Loss per common share before
extraordinary item $ (.10) $ (0.18)
Net loss per common share $ (.10) $ (0.18)
Weighted average common shares
outstanding 40,541,669 18,480,512
See notes to Condensed Consolidated Financial Statements.
<PAGE>
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Period from July 1,
Ended March 31 1989 through
1998 1997 March 31, 1998
Cash flows from
operating activities:
Net income (loss) 4,056,532) $(3,243,622) $32,075,740)
Adjustments to reconcile
net income (loss)
to net cash provided by
(used in) operating activities:
Gain on debt restructuring - - (144,462)
Depreciation and amortization 191,331 290,548 1,625,233
Loss on lease abandonments - - 444,359
Loss on litigation settlement 573,959 254,100 4,680,991
Loss (Gain) on sale of
mining equipment - 80,502 49,164
Other - - 43,576
Shareholder payment of services - - 105,055
Stock and debt for services 423,573 - 1,126,641
Change in inventory (39,115) 21,540 (39,526)
Change in note receivable - - 47,462
Change in prepaid expenses - 40,131 501,736
Change in deposits and
other current assets - 115,712 (115,961)
Change in deposits - - (29,065)
Change in accounts payable
and accrued liabilities (63,005) 191,912 4,260,467
Total adjustment 1,086,743 994,445 12,555,670
Net cash provided by (used in)
operating activities (2,969,789) (2,249,217) (19,520,070)
Cash flows from
investing activities:
Acquisition of mineral
properties, equipment,
and deferred developments (64,217) (9,189) (5,138,646)
Acquisition of office equipment (18,548) (57,852) (278,649)
Proceeds from sale of equipment - 90,000 384,356
Proceeds from acquisition
of Trans-Russian - - 20,060
Net cash used in
investing activities (82,765) 22,959 (5,012,879)
Cash flows from
financing activities:
Advances from (to) affiliates 1,350,000 - 3,359,127
Payments made to affiliates - - (343,798)
Proceeds from issuance
of common stock 3,202,600 1,095,251 23,469,113
Proceeds from
warrant extensions - - 207,750
Proceeds from
issuance of notes payable - - 870,043
Payments on long-term debt (672,000) (73,631) (2,094,029)
Proceeds from
convertible debenture - - 300,000
Payments on
convertible debenture - - (300,000)
Net cash provided
by financing activities 3,880,600 1,021,620 25,468,206
Net increase (decrease)
in cash 828,046 (1,204,638) 935,257
Cash at beginning of period 111,059 1,275,413 3,848
Cash at end of period $ 939,105 $ 70,775 $ 939,105
Cash paid during
the period for interest
(net of
amounts capitalized) $ 5,674 $ $ 343,276
See notes to Condensed Consolidated Financial Statements.
<PAGE>
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, 1998, the Condensed
Consolidated Statements of Operations for the three months ended March 31, 1998
and 1997, the Condensed Consolidated Statements of Operations and Cash Flows
for the nine months ended March 31, 1998 and 1997 and for the period July 1,
1989 (date of resumption of development stage enterprise activities) through
March 31, 1998, have been prepared by the Brush Creek Mining & Development Co.,
Inc. (the Company) without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position, results of
operations and cash flows at March 31, 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, 1997 Form 10-KSB. The result of
operations for the period ended March 31, 1998 is not necessarily indicative of
the operating results for the full year.
The information reflected in these consolidated statements, including the
notes, does not take into account the one-for-ten reverse stock split (the
"Reverse Stock Split") of the Company's authorized, issued and outstanding
Common Stock which was effected as of May 8, 1998. As a result thereof, each
ten shares of Common Stock, par value $.0001 per share, of the Company issued
and outstanding immediately prior to the Reverse Stock Split now represents one
share of Common Stock, par value $.001 per share.
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 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. The Company has incurred losses of $43,335,954 from
inception to March 31, 1998 and had a working capital deficit of $(1,042,222)
at March 31, 1998. These factors 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 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.
The Company has recently received comments from the staff of the Securities and
Exchange Commission wherein the staff has indicated that it has reconsidered
existing accounting practices for mineral expenditures by United States junior
mining companies. The staff has indicated that accounting policy for junior
mining companies permits capitalization of acquisition, exploration and
development costs only after persuasive engineering evidence is obtained to
support recoverability of these costs. The staff has suggested that there is
no evidence in the Company's filings to support proven/probable reserves and
has therefore indicated that capitalized acquisition and development costs
should be expensed. The Company has recently submitted information to the
staff in support of the Company's position that it has sufficient persuasive
engineering (and geological) evidence to support recoverability of capitalized
costs for certain of its mining properties. No assurance can be given that the
Commission will accept the Company's position in which event the Company will
have to revise its financial statements and accounting policy notes thereto.
NOTE 3 - STOCKHOLDERS' EQUITY
In January 1998, the Company sold 50,000 shares of its common stock pursuant to
a private placement at a price of $.50 per share. The shares were sold pursuant
to Regulation D and Section 4(2). The Company received a net amount of $25,000
from the sale.
In February 1998, the Company sold 1,987,500 shares of its Common Stock
pursuant to a private placement at a price of $.184 per share. The shares were
sold pursuant to Regulation D and Section 4(2). The Company received a net
amount of $365,700 from the sale.
In March 1998 the Company sold 412,500 shares of its common stock pursuant to a
private placement at a price of $.184 per share. The shares were sold pursuant
to Regulation D and Section 4(2). The Company received a net amount of $75,900
for the sale.
Also in March, 1998 the Company sold 3,333,334 shares of its common stock
pursuant to a private placement at a price of $.30 per share. The shares were
sold pursuant to Regulation S. The Company received a net amount of $1,000,000
for the sale.
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.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had a working capital deficit of $(1,042,222)
which represents a decrease in working capital deficit of $1,249,400 as
compared to a working capital deficit of $(2,291,622) at December 31, 1997.
This change in working capital is primarily due to an increase in cash
available to meet operating expenses and payment of one of two remaining
scheduled payments due to the Royal Bank of Scotland for a litigation
settlement.
The mining industry is capital intensive. During the fiscal year ended June 30,
1997, the Company raised $2.1 million from the sale of shares of Common Stock.
During the first nine months of fiscal 1998, the Company obtained additional
equity financings. In addition, the Company entered into an operating agreement
with Sterling Mining, LLC on November 20, 1997. This agreement provides an
initial contribution of $9,000,000.
In February 1998, Sterling Mining exercised its option to acquire an additional
interest (the "Additional Interest") by increasing the Initial Contribution to
$15,000,000. Sterling has met its obligations to date by contributing $700,000
in January, 1998 and $300,000 in March, 1988 per the agreed payment schedule.
The Company estimates its mining development and operating costs to be
approximately $5 million for the fiscal year ending June 30, 1998. The joint
venture funds will be used for operations in the lower Brush Creek mine and
Ruby mill.
RESULTS OF OPERATIONS
The Company had total revenues of $8,392 (from interest only) during the nine
months ended March 31, 1998 compared to total revenues of $19,244 (from
interest only) during the nine months ended March 31, 1997. Gold sales for the
nine months ended March 31, 1998 was $100,559 and was used to offset operating
expenses. The Company had a ($4,056,532) net loss for the nine months ended
March 31, 1998 compared to a net loss of ($3,243,662) for the comparable fiscal
1997 period. This change in net loss is primarily due to an increase in general
mining and exploration costs, general and administrative expenses, and
litigation settlements. General and administrative expenses increased $706,183
from the same period in the prior fiscal year primarily due to an increase in
administrative payroll and professional fees.
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 $300.50 per ounce at March 31, 1998. Instability in
the price of gold may affect the profitability of the Company's operations if
and when the Company realizes economic production.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Reference is made to the Company's Form 10-KSB for fiscal year ended June 30,
1997 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 March 31, 1998.
Item 2. CHANGES IN SECURITIES.
During the quarter ended March 31, 1998, the Company sold the following equity
securities that were not registered under the Securities Act of 1933: 50,000
restricted shares of Common Stock at $.50 per share wherein the Company
received net proceeds of $25,000 in January 1998; 1,987,500 restricted shares
of Common Stock at $.184 per share wherein the Company received net proceeds of
$365,700 in February 1998; 412,500 restricted shares of Common Stock at $.184
per share wherein the Company received net proceeds of $75,900 in March 1998.
All shares were sold under Regulation D and Section 4 (2). Investors who
acquired such shares were required to be accredited investors. The Company has
agreed to register all the foregoing shares pursuant to a Registration
Statement.
In addition, during the quarter ended March 31, 1998, the Company issued
3,333,334 restricted shares pursuant to Regulation S and received net proceeds
of $1,000,000.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On January 8, 1998, an annual meeting of shareholders was held
for the following purposes: (1) to elect four directors to serve as the Board
of Directors of the Company until the next annual meeting of shareholders and
until their successors shall be elected and shall qualify; and (2) to ratify
the selection of Brown Armstrong Randall & Reyes as the Company's auditors for
the fiscal year ending June 30, 1998. At such meeting James S. Chapin, Howard
I. Kalodner, Albert E. Miller and Kenneth S. Friedman, each an incumbent
director, were duly elected as directors of the Company. Mr. Chapin received
23,296,497 affirmative votes, 10,399 votes withheld authority and 102,366 votes
abstained; Mr. Kalodner received 23,301,383 affirmative votes, 5,513 votes
withheld authority and 102,366 votes abstained; and each of Mr. Miller and Mr.
Friedman received 23,301,433 affirmative votes, 5,463 votes withheld authority
and 102,366 votes abstained. Proposal 2 was duly approved with 23,349,715
affirmative votes, 33,888 negative votes and 25,659 abstentions.
Item 5. OTHER INFORMATION.
None.
Item 6. 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 March 31, 1998.
Items Reported Financial Statements Filed Date of Report
Sale of equity securities None March 25, 1998
Pursuant to Regulation S
<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)
Dated: May 14, 1998 By:/s/ James S. Chapin
James S. Chapin,
Chief Executive Officer
Dated: May 14, 1998 By:/s/ James S. Chapin
James S. Chapin,
Principal Financial Officer
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BRUSH CREEK MINING AND DEVELOPMENT CO., INC.'S QUARTERLY
REPORT FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
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<SECURITIES> 0
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<ALLOWANCES> 0
<INVENTORY> 41,865
<CURRENT-ASSETS> 980,970
<PP&E> 10,086,363
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,381,164
<CURRENT-LIABILITIES> 2,023,192
<BONDS> 0
<COMMON> 51,343,925
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,381,164
<SALES> 0
<TOTAL-REVENUES> 8,392
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,064,924
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,056,532)
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<INCOME-CONTINUING> (4,056,532)
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<NET-INCOME> (4,056,532)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
