<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1997
------------------
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
0-16740
-----------
(Commission File Number)
NORTH LILY MINING COMPANY
-----------------------------
(Exact name of registrant as specified in its charter)
UTAH 87-0159350
- ---------------------------- --------------
(State of Incorporation) (IRS Employer Identification No.)
SUITE 210, 1800 GLENARM PLACE, DENVER, COLORADO 80202
- ------------------------------------------------ ---------
(Address of principal executive offices) (ZIP Code)
(303) 294-0427
------------------
(Registrant's telephone number, including area code)
N/A
-------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
As of May 9, 1997 the Registrant had 2,992,122 shares of common stock, $0.10 par
value.
Transitional Small Business Disclosure Format (check one):
Yes No X
------- -------
<PAGE>
NORTH LILY MINING COMPANY
-------------------------
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
INDEX
-----
Part I. Financial Information:
<S> <C> <C>
Item 1. - Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996................... 3
- Condensed Consolidated Statements of Cash Flow -
Three Months Ended March 31, 1997 and 1996............. 4
- Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996............. 5
- Condensed Consolidated Statements of Shareholder's
Equity - March 31, 1997 and December 31, 1996.......... 6
- Notes to Condensed Consolidated Financial Statements... 7
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 8
Part II. Other Information:
Item 6. - Exhibits and Reports on Form 8-K....................... 10
Signature.............................................. 11
</TABLE>
2
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 76,041 $ 67,026
Marketable securities 37,973 39,655
Accounts receivable 16,192 37,985
Note receivable 108,000 108,000
------------ ------------
Total Current Assets 238,206 252,666
Plant and equipment, net 56,175 57,162
Mineral properties, net 3,129,286 3,200,401
Other assets 112,032 112,032
------------ ------------
Total Assets $ 3,535,699 $ 3,622,261
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 327,811 $ 279,928
Accrued and other liabilities 55,000 55,000
Reclamation liabilities 165,221 192,500
------------ ------------
Total Current Liabilities 548,032 527,428
Due to officers 625,000 625,000
------------ ------------
Total Liabilities 1,173,032 1,152,428
------------ ------------
Shareholders' Equity:
Common stock, $0.10 par value; authorized 30,000,000 shares;
issued and outstanding 2,992,122 shares as at
March 31, 1997 and December 31, 1996 299,212 299,212
Additional paid-in capital 51,663,759 51,663,759
Accumulated deficit (49,606,892) (49,501,408)
Marketable securities valuation adjustment 6,588 8,270
------------ ------------
Total Shareholders' Equity 2,362,667 2,469,833
------------ ------------
Total Liabilities and Shareholders' Equity $ 3,535,699 $ 3,622,261
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
MARCH 31, MARCH 31,
1997 1996
------------ ------------
<S> <C> <C>
Operating expenses:
General and administrative expenses $ 108,245 $ 232,920
Exploration and property carrying costs - 1,298
------------ ------------
Operating loss (108,245) (234,218)
Other income:
Interest income 2,761 795
Net realized gain on sale of marketable securities - 118,883
------------ ------------
Net Loss $ (105,484) $ (114,540)
============ ============
Net loss per common share: $ (0.03) $ (0.05)
============ ============
Weighted average common shares outstanding 2,992,122 2,544,713
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIODS ENDED DECEMBER 31, 1996 AND MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK MARKETABLE
----------------------- ADDITIONAL SECURITIES
PAID-IN ACCUMULATED TREASURY VALUATION
SHARES AMOUNT CAPITAL DEFICIT STOCK ADJUSTMENT TOTAL
---------- -------- ----------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 2,594,667 $259,466 $51,264,750 $(48,835,939) $(17,395) $ 197,723 $2,868,605
Net loss, year ended
December 31, 1996 - - - (662,557) - - (662,557)
Common stock issued for
services rendered 55,000 5,500 79,500 - - - 85,000
Common stock issued by
private placement 341,073 34,108 351,409 (2,912) 17,395 - 400,000
Share issue costs - - (31,762) - - - (31,762)
Marketable securities
valuation adjustment - - - - - (189,453) (189,453)
Adjustment for fractional
shares issued 1,382 138 (138) - - - -
---------- -------- ----------- ------------- -------- --------- ----------
Balance, December 31, 1996 2,992,122 299,212 51,663,759 (49,501,408) - 8,270 2,469,833
Net loss, period ended
March 31, 1997 - - - (105,484) - - (105,484)
Marketable securities
valuation adjustment - - - - - (1,682) (1,682)
---------- -------- ----------- ------------- -------- --------- ----------
Balance, March 31, 1997 2,992,122 $299,212 $51,663,759 $(49,606,892) $ - $ 6,588 $2,362,667
========== ======== =========== ============= ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED:
MARCH 31, MARCH 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(105,484) $(114,540)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Amortization and depreciation 987 987
Net realized gain on sale of marketable
securities and investments - (118,883)
Decrease in accounts receivable 21,793 23,652
Increase in accounts payable and accrued liabilities 47,883 26,958
Decrease in reclamation liabilities (27,279) (34,515)
Decrease in notes payable - (308,788)
Other - 90,000
------------- ------------
Net cash used for operating activities (62,100) (435,129)
------------- ------------
Cash flows from investing activities:
Acquisition and exploration of mineral properties,
net of option payments received 71,115 49,250
Advances to Tamarine Ventures Ltd. - (68,308)
Proceeds from sale of marketable securities and investments - 338,576
Proceeds from sale of mining and milling equipment - 5,000
------------- ------------
Net cash provided from investing activities 71,115 324,518
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock - 100,000
------------- ------------
Net increase (decrease) in cash and cash equivalents 9,015 (10,611)
Cash and cash equivalents at beginning of period 67,026 122,515
------------- ------------
Cash and cash equivalents at end of period $ 76,041 $ 111,904
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements
6
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
GOING CONCERN
During 1996, 1995, and 1994 the Company incurred net losses of $662,557,
$922,032 and $2,071,147, respectively, and at December 31, 1996 had a working
capital deficiency of $274,762. At March 31, 1997, the Company had a working
capital deficiency of $309,826.
During 1993 the Company ceased operations at its Silver City mine and suspended
mining operations at its Tuina mine. As a result the Company has no operating
cash flow to meet ongoing obligations. The Company has continually been selling
non-essential Company assets to fund ongoing operations and property commitments
over the past three years. The Company requires financing to fund its future
operations and will attempt to meet its ongoing liabilities as they fall due
through the sale of marketable securities or mineral properties or through the
issuance of its common stock. There can be no assurance that the Company will
be able to raise the necessary financing to continue in operations or meet its
liabilities as they fall due or be successful in resolving its contingent
liabilities. Should the Company be unable to realize on its assets and
discharge its liabilities in the normal course of business, the Company may not
be able to continue in operations and the net realizable value of its assets may
be materially less than the amounts recorded on the consolidated balance sheets.
DISCLOSURES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Rule 10-01 of Regulation S-
X. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The unaudited financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of results for interim
periods presented. All adjustments made in the preparation of interim period
results, for the three month period ended March 31, 1997, are of a normal
recurring nature. The operating results for the three month period ended March
31, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements for the year ended December 31, 1996.
DUE TO OFFICERS
As at March 31, 1997, the Company has recorded $625,000 as due to officers of
the Company. The officers have agreed not to demand repayment until January 3,
1998, at which time the indebtedness may be either settled with cash, if
available, or the issuance of shares of the Company. In addition, as at March
31, 1997, accounts payable includes $60,000 due to the officers of the Company.
7
<PAGE>
NORTH LILY MINING COMPANY
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
RESTRUCTURING OF TUINA OWNERSHIP
Effective April 12, 1995, the Company and Mahogany agreed to a restructuring of
the ownership interest of the Tuina Project. In settlement of the Company's
outstanding debt to Mahogany of $797,481, as at March 28, 1995, the Company
reduced its ownership interest in Compania Minera Phoenix S.A. ("Phoenix") from
50% to 41%. The Company also agreed to terms by which the Company's remaining
interest in the Tuina Project will be impacted. Subsequently, Mahogany agreed
to sell its 59% interest in Phoenix to Yuma Gold Mines Limited ("Yuma"). The
sale to Yuma was extended on several occasions and the terms subsequently
revised (the "Mahogany-Yuma Agreement").
By previous agreements entered into in 1995, on May 3, 1996 Yuma entered into a
revised agreement with the Company. In summary, the Company's remaining
interest in Phoenix will, subject to receipt of regulatory approvals and
completion of the Mahogany-Yuma Agreement, be impacted as follows:
i) Yuma will receive an additional 5% interest in Phoenix in exchange
for funded costs and the delivery of an independent bankable
feasibility study in respect of the Tuina Project;
ii) the Company would be required to sell a further 10% interest in
Phoenix to Yuma for an initial payment of $145,000, less deductions
for operating costs and the costs of securing the water rights for
the Tuina Project. In addition, Yuma is required to make two further
payments to the Company, due upon commencement of Tuina commercial
production and one year thereafter. These payments are to be
calculated in relation to the initial capital costs of the Tuina
Project, from a high of $609,000 where the initial capital costs are
less than $14,000,000 with graduating payments decreasing as capital
costs increase, and may be made, at Yuma's election, in cash or
shares of Yuma; and
iii) all participants will be responsible for contributing their share of
funding following completion and delivery of the Feasibility Study.
The failure of any participant to contribute its share of funding
will result in a dilution of that participant's interest in
accordance with a dilution formula. Once a participant's interest has
been diluted to 10%, then the ownership interest will convert to a
10% net profits interest.
Since April 13, 1995, Yuma has assumed all indebtedness of Phoenix, provided
funding for the preparation of the feasibility study, the costs of securing the
water rights for the Tuina Project and the ongoing costs of Phoenix. These
costs are partially recoverable by Yuma (the "Yuma Payments") from the Company
from the proceeds to be received from the sale of the 10% interest in Phoenix,
as noted in item (ii) above. The water rights have now been secured and Yuma
now has to either elect to close the Mahogany - Yuma Agreement, subject to
regulatory approval, or terminate the agreement. If Yuma elects to terminate
the agreement, the Company would not owe Yuma any funds for the Yuma Payments.
8
<PAGE>
The Company and Mahogany have an agreement in principle to conduct the
activities of the Tuina Project on a joint venture basis. The Company expects
to enter into a definitive joint venture and operating agreement with Yuma after
closing of the Mahogany-Yuma Agreement.
BOLIVIA - SAN SIMON GOLD PROJECT
The Company and Akiko Gold Resources Ltd. have acquired properties in the San
Simon gold project in northeastern Bolivia totalling 5,300 hectares on a 50/50
basis. The companies are actively seeking a joint venture partner to help
exploit the San Simon property. Several companies are reviewing the data. In
addition, the companies plan to do further field work this summer which will
include stream concentrate sampling and geochem and rock sampling and mapping to
delineate drill targets.
RESULTS OF OPERATIONS
The Company incurred a loss of $105,484 for the three month period ended March
31, 1997, compared to a loss of $114,540 for the same period in 1996. There was
no revenue, no depreciation and amortization charges and no costs of sales for
the three month period ending March 31, 1997. The Company does not anticipate
any revenue over the next year from current properties.
During the three month period ended March 31, 1997, the Company incurred
$108,245 in general and administration expenses, compared to $232,920 for the
comparable period in 1996. The decrease in general and administration in 1997
occurred mainly as a result of reduced Company personnel and reduced legal and
consulting fees. For the three month period ended March 31, 1997, the Company
did not incur exploration and property carrying costs and for the same period in
1996, incurred costs of $1,298. Project costs incurred by the Tuina project
since April 1995 have been funded by Yuma.
At March 31, 1997 the Company had a working capital deficiency of $309,826, a
decrease of $32,822 from its working capital deficiency of $342,648 at December
31, 1996.
During the three month period ended March 31, 1997, the Company was provided
cash of $71,115 from investing activities, comprising $75,000 advance royalty
payment received from Centurion Mines Corporation on the Tintic properties and
$3,885 incurred by the Company on the San Simon gold project.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On June 23, 1993, Jack M. Scanlon and Carolyn M. Scanlon; Dr. Richard
Urwiller and Roberta Urwiller, Dr. William Inkret, Jr., M.D.,
individually and Dr. William Inkret, Jr., M.D., P.C., a corporation and
profit sharing trust; Dr. Richard Granberg and Mary Granberg, on behalf
of themselves and all other person similarly situated, filed an action
in the United States District Court for the District of Montana, Butte
Division, against Magellan Resources Inc., a corporation; Mahogany
International Inc. (sic), a corporation, former subsidiaries of North
Lily Mining Company, a corporation, their former parent corporation;
Ruen Drilling, a corporation, Longyear Company, a corporation; and
other unknown John Doe persons and corporations. The plaintiffs allege,
that, as a result of exploration activity in the Southern Cross area of
Montana,
9
<PAGE>
local ground water supplies have been contaminated and reduced. No
specific stated claim for damages have been made at this time. Despite
studies prepared privately and by the Department of State Lands
(Montana) in 1992 which found no evidence of earlier claims, the
Plaintiffs continue to seek alternative legal approaches against the
defendants. Initial discovery proceedings have been completed. The
Company believes the claims are without merit and have instructed its
legal counsel to file for a summary judgment for dismissal. The Company
and other third parties filed a Summary Judgement for the dismissal of
this lawsuit and has received favorable disposition thereof, awaiting
execution by the federal court.
ITEM 5. OTHER INFORMATION
-----------------
The registrant incorporates by reference the information contained in
the news release, a copy of which is filed as an exhibit to this
report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) The following exhibits are filed with this report.
Regulation
S-K Number Exhibit
---------- -------
27.1 Financial Data Schedule
(b) Reports on Form 8-K: none
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH LILY MINING COMPANY
By: /s/ Nick DeMare
----------------------------------------------------
Nick DeMare May 9, 1997
Chief Financial Officer and Chief Accounting Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 76,041
<SECURITIES> 37,973
<RECEIVABLES> 124,192
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 238,206
<PP&E> 5,689,282
<DEPRECIATION> 2,503,821
<TOTAL-ASSETS> 3,535,699
<CURRENT-LIABILITIES> 548,032
<BONDS> 625,000
0
0
<COMMON> 299,212
<OTHER-SE> 51,663,759
<TOTAL-LIABILITY-AND-EQUITY> 3,535,699
<SALES> 0
<TOTAL-REVENUES> 2,761
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 108,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (105,484)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105,484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,484)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
