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 June 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
0-16740
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(Commission File Number)
NORTH LILY MINING COMPANY
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(Exact name of registrant as specified in its charter)
Utah 87-0159350
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(State of Incorporation) (IRS Employer Identification No.)
Suite 210, 1800 Glenarm Place, Denver, Colorado 80202
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(Address of principal executive officer, Zip Code included)
(303) 294-0427
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(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 September 8, 2000 Registrant had 14,088,355 shares of common stock,
$0.10 par value.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
NORTH LILY MINING COMPANY
FORM 10-QSB
FOR THE SIX MONTHS ENDED JUNE 30, 2000
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. - Condensed Consolidated Balance Sheets-
June 30, 2000 and December 31, 1999 3
- Condensed Consolidated Statements of Operations -
Six Months Ended June 30, 2000 and 1999 and three
months ended June 30, 2000 and 1999 4
- Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999 5
- 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>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
DEC. 31, 1999 JUNE 30, 2000
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 26,378 $ 15,235
Marketable Securities 6,086 4,084
Accounts and note receivable 12,500 27,836
Other 6,966 22,084
------------- -------------
Total Current Assets 51,930 69,239
Property and equipment, net 30,376 69,460
Land 1,237,652 1,037,226
Reclamation bond 200,553 204,853
Goodwill - 530,135
Other 12,500 28,720
------------- -------------
Total Assets $ 1,533,011 $ 1,939,633
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Overdraft-bank 2,954 177,110
Accounts payable 226,027 396,205
Line of credit - 11,532
Notes payable - 88,042
Reclamation liabilities 180,059 180,059
Convertible notes - 245,000
------------- -------------
Total Current Liabilities 409,040 1,097,948
Due to officers 136,015 62,500
Accounts payable in stock 261,835 -
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Total Liabilities 806,890 1,160,448
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Minority Interest in LLC 362,410 161,984
Stockholders' Equity
Common stock, $0.10 par value;
authorized 30,000,000 shares;
issued and outstanding;
5,002,122 (December 31, 1999)
12,931,271 shares (June 30, 2000) 500,212 1,408,387
Additional paid-in capital 52,382,692 52,644,366
Common stock subscribed - (125,000)
Accumulated deficit (52,519,193) (53,310,552)
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Total Liabilities and Equity 363,711 617,201
------------- -------------
$ 1,533,011 $ 1,939,633
============= =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For Six Months Ended
June 30, 1999 June 30, 2000
<S> <C> <C>
Revenue
Mortagae brokerage revenues $ - $ 135,886
Land sales 22,659 -
--------------- -------------
Total revenues 22,659 135,886
Cost of sales
Cost of mortgage brokerage - 91,887
Cost of land sales 6,890 -
--------------- -------------
Net Profit 15,769 43,999
Operating Expenses
General and administrative expenses 128,440 597,822
Silver City Project 17,380 62,943
--------------- -------------
Operating (Loss) (130,051) (616,766)
--------------- -------------
Other income (expense)
Interest income 901 6,253
Interest expense - (5,950)
Amortization of goodwill - (173,847)
Unrealized loss on marketable securities (4,092) (2,002)
Other, net 64,413 953
---------------- -------------
61,222 (174,593)
---------------- -------------
Net (loss) $ (68,829) $ (791,359)
================ =============
Net (loss) per common share-basic and
diluted $ (0.01) $ (0.08)
================ =============
Weighted average common shares
outstanding-basic and diluted 4,902,122 9,380,904
================ =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For Three Months Ended
June 30, 1999 June 30, 2000
<S> <C> <C>
Revenue
Mortagae brokerage revenues $ - $ 135,886
Land sales 22,659 -
--------------- -------------
Total revenues 22,659 135,886
Cost of sales
Cost of mortgage brokerage - 91,887
Cost of land sales 6,890 -
--------------- -------------
Net Profit 15,769 43,999
Operating Expenses
General and administrative expenses 54,126 491,510
Silver City Project 941 24,818
--------------- -------------
Operating (Loss) (39,298) (472,329)
--------------- -------------
Other income (expense)
Interest income - 4,153
Interest expense - (5,950)
Amortization of goodwill - (173,847)
Unrealized loss on marketable securities (1,662) (2,002)
---------------- -------------
(1,662) (177,646)
---------------- -------------
Net (loss) $ (40,960) $ (649,975)
================ =============
Net (loss) per common share-basic and
diluted $ (0.01) $ (0.05)
================ =============
Weighted average common shares
outstanding-basic and diluted 4,902,122 12,648,538
================ =============
</TABLE>
See accompanying notes to financial statements.
<TABLE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For Six Months Ended
June 30, 1999 June 30, 2000
<S> <C> <C>
Cash flows from operating activities
Net (loss) $ (68,829) $ (791,359)
Adjustments to reconcile net loss to
net cash provided from (used for)
operating activities:
Depreciation and amortization 1,409 179,255
Unrealized loss on marketable
securities 4,092 2,002
Minority Interest 10,463 -
Changes in assets and liabilities
(Increase) in notes and advances
receivable - (15,336)
(Increase) in prepaid assets (5,000) -
Increase in accounts payable and
accrued liabilities 19,410 276,439
Increase in due to officers 1,123 62,500
(Decrease) in reclamation liabilities,
net (14,953) (4,300)
Net assets of subsidiaries acquired - (62,954)
Other items 81,089 2,197
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Net cash provided (used) in
operating activities 28,804 (261,556)
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Cash flows from investing activities
Proceeds from sale of land 4,001 -
Investment in Loanming.com - (53,207)
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Net Cash (used) in Investing
Activities 4,001 (53,207)
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Cash flows from financing activities
Proceeds from short-term borrowings 99,047 26,620
Proceeds from sale of common stock - 40,000
Proceeds from sale of convertible notes - 245,000
Deferred financing costs - (8,000)
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Net cash provided by financing
Activities 99,047 303,620
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Net increase (decrease) in cash 131,852 (11,143)
Cash, beginning of periods 23,495 26,378
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Cash and cash equivalents, end of period $ 155,347 15,235
============= ============
</TABLE>
See accompanying notes to financial statements.
NORTH LILY MINING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Going Concern
During 1999 the Company incurred a net loss of $187,176 and at December 31, 1999
had a working capital deficiency of $357,110. Effective April 7, 2000, the
Company acquired and commenced to consolidate results of operations of
Loanmining.com, Inc. ("LMC"); see discussion below.
The Company has experienced substantial losses and has continually sold non-
essential company assets to fund ongoing operations and property commitments.
Management, in its efforts to ensure maximum fund availability, had reduced
Company operating costs and deferred payment of fees for their services. The
Company believes it held properties with the greatest value. The Company's
current focus on the business related to its recent acquisition of LMC has
contributed to increased G&A expenses, and requires additional financing for
website development and advertising. There is no assurance that the Company
will timely receive adequate financing to compete in the highly competitive
mortgage and related Internet arenas.
The Company requires funds for its future operations. Funding is traditionally
provided to corporations by way of funds from ongoing company operations, funds
from the issuance of company debt instruments, funds from company equity
issues, and funds from the sale of company assets.
Dropping the Tuina mine, and continuing reclamation work at the Silver City
Tintic Project, the Company does not have ongoing operations from which funds
are being accumulated. With the Company's present asset base, the Company is
not able to generate funds from operations within the next two years at the
minimum, except to the extent that a new project and financing may be acquired
with Company stock or the sale of its Tintic, Utah land holdings, or
profitability from its recently acquired LMC operations.
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 Item 310(b)
of Regulation S-B. 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 preparation of interim period results, for the
six-month period ended June 30, 2000 of a normal recurring nature. The
operating results for the six-month period ended June 30, 2000 include the
acquisition effective April 7, 2000 of Loanmining.Com, Inc ("LMC") and are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. For further information, refer to the operating loss
and expenses discussed below and the consolidated financial statements for the
year ended December 31, 1999.
Due to Officers
---------------
During 2000, the Company accrued officers' salaries of $10,000 per month for
each of its two officers. Through the date hereof, one officer received year
2000 advances pursuant to the Company's employment agreement with the officer,
aggregating $41,500, which were deducted from his year 2000 salary accruals.
The other officer received advances in 1999 aggregating $68,641, which advances
were secured by 137,282 shares of the Company's common stock, owned by the
officer. Those 1999 advances were deducted from that officer's year 2000 salary
accruals. Through the date hereof, that officer also received year 2000
advances pursuant to the Company's employment agreement with the officer
aggregating $46,700, resulting in that officer owing the Company a net amount
of $25,341, which is to be repaid in cash or by forfeiture of two company shares
per dollar owed by the officer at year end.
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company incurred a loss of $791,359 for the six-month period ended June 30,
2000, compared to a loss of $68,829 for the same period in 1999. There was
$135,886 of revenue and $91,887 cost of sales for the six-month period ending
June 30, 2000, compared to $22,659 of revenue and $6,890 of cost of land sales
in the same period in 1999. The increased income and substantial increased
losses were both due to the acquisition of LMC and to its unsuccessful expanison
program in the quarter ended June 30, 2000. That program has been reversed and
is being replaced with a more cost efficient approach. The Company
anticipates revenue over the next year only from the sale of Utah properties
and the prospective operations of LMC (which was acquired April 7, 2000).
During the next year, the cost of operations could exceed revenues.
During the six-month period ended June 30, 2000, the Company incurred $597,822
in general and administration expenses, compared to $128,440 for the
comparable period in 1999 due to reductions in officers' salaries in 1999 and
due to substantial G&A expenses associated with the expansion program at LMC
in the second quarter of 2000.
For the two-month period ended June 30, 2000, the Company lost $649,975 and
incurred G & A of $491,510, compared to a loss of $40,960 and G & A expense
of $54,126, due to the substantial expenses associated with LMC expansion
operations in the second quarter of 2000.
At June 30, 2000, the Company had a working capital defiency of $1,028,709, an
increase of $671,599 from its working capital deficiency of $357,110 at December
31, 1999 due to the acquistion of LMC. The costly LMC expansion is being re-
organized in conjunction with anticipated financial and technical support from
the Captain's Management transaction discussed below.
On April 7, 2000, the Company completed performance of closing requirements for
its acquisition of privately held Loanmining.com ("LCM") by issuing 5.83 million
shares (the "Shares") of the Company's restricted common stock. The Shares are
restricted securities pursuant to Rule 144, and the resale of the Shares is to
be included in a Registration Statement by the Company after it updates its
audits and reports to the Securities and Exchange Commission, subject to monthly
sale restrictions for holdings by individual selling shareholders in excess
of 200,000 shares. The recipients of the Shares were the stockholders of LMC,
including its majority stockholder (Regina Mitchell), who received over 4
million of the Shares.
In consideration for the Shares, the Company acquired rights to the names
Loanmining.com and HomeLoan.com; rights to a team of mortgage brokers, website,
telemarketers, processing and closing staff represented to be capable of
equaling and then increasing the $1.4 million annual revenue rate produced at
LMC in 1999 prior to establishing a preliminary Internet presence; and the
business model implementation plan for LMC as both a traditional "brick and
mortar" operation as well as a highly automated Internet mortgage banker focused
on the sub-prime mortgage niche. Substantial funding will be required to
compete for mortgage lending business on the Internet, which already is
populated by competitors of several types, some of whom already have substantial
financing and market penetration. Substantial financing was arranged but not
actually consumated for LMC during the second quarter and resulted in
substantially increased G&A, with much less than corresponding increase in
revenue to date.
In conjunction with this acquisition, the Company closed on private placement
financing of $245,000 in exchange for 7% Convertible Notes and Warrants. All
but $25,000 of these financing proceeds was received in the first quarter of
2000. The Notes are due in periods of six to nine months from the date of
issuance and are repayable or convertible into Common Stock of the Company at
$0.20 per share (except for $25,000 at $0.50 per share). Warrants for the
purchase of an aggregate 1,400,000 shares were issued as part of the sale of
the Notes and are exercisable at $5 and $7.50 during years one and two,
respectively, and expire at various dates from February 2002 to April 2002.
The Company utilized $63,000 of the proceeds to finance stock redemption and
releases from dissident stockholders of LMC. The balance of the funding was
utilized for existing obligations, and to commence development of LMC's
operations in anticipation of further funding, which has not yet transpired.
(See Item 2. Changes in Securities below for conversion of Notes.)
In April 2000, the Company acquired ownership of Mortgage Partners Home Funding
for LMC in consideration of 170,000 Company shares and $25,000 in promissory
notes. The notes are past due, and the Company has agreed to conversion of the
notes into common stock. On May 1, 2000, the Company did a private placement of
130,000 common shares of the Company's stock for $40,000. The shares are
restricted Securities pursuant to Rule 144 and are to be included in a
Registration Statement by the Company. In June 2000, the Company issued one
million shares of stock in consideration for a joint venture providing
commercial lending business and facilitation arrangements for LMC and $125,000
in capital; the transaction was not consummated and the Company is seeking
return of the shares (and has accordingly reflected them in the financial
statements).
In August 2000, the Company's land holding company, Xeres Tintic, LLC, sold a
parcel (approximately 250 acres) of land in Juab County, Utah for $56,000 which
netted the Company $48,144.
On October 16, 2000 the Company and Captain's Management Corporation, Inc.
announced completion of agreement for Captain's acquisition of the Company
(including LMC) for ten shares of Captains for every 14.5 shares of the
Company. The Captain's shares are to become registered with the SEC and
trading on a stock exchange. The Company is to keep its shares publicly
trading until Captain's Management completes registration and listing for
trading of Captain's shares. Captains also agreed to provide a minimum of
$360,000 of funding to the Company and LMC. The Company agreed to pledge a
portion of its Utah properties to secure related financing to be obtained by
Captain's. In addition, Captain's is to provide website development and
marketing for LMC at Captain's expense. Captain's is engaged in developing
vertical market applications, virtual inventory systems, and a public
interactive dynamic display network (in airports, music stores, movie
theatres, shopping centers, and other high public traffic locations) with its
affiliate Touchvision for building and managing interactive systems.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In March 2000, the Utah division of Oil, Gas and mining (DOGM) and Department
of Water Quality (DWQ) each sent Notices to the Company addressing similar
issues. The Notices alleged failure to timely comply with Utah environmental
laws and regulations, violations of notices and orders thereunder, and violation
of the Company's Groundwater Discharge Permit all in relation to the Company's
reclamation/closure obligations for it's small former heapleach tailing recovery
project in Silver City, Utah (the Tintic Project). The Company timely
responded, contested the allegations, submitted requested submissions, undertook
certain reclamation actions, and requested a hearing. By Stipulation and
Consent Order dated July 25, 2000 DOGM dismissed their charges against the
Company, and the Company agreed to perform ongoing reclamation/closure
activities. DWQ concurred with the reclamation/closure schedule and terms in
the Stipulation, but has not finally resolved its Notice (including its right
to seek substantial daily civil penalties for violations). The Company's
reclamation bond for the Tintic Project was recently increased by agreement with
DOGM and concurrence by DWQ to over $190,000. The Company is confident that the
bond (if forfeited as a result of non-performance under the Stipulation) would
cover the remaining reclamation and closure costs (including civil penalty if
any) of the Tintic Project.
In late 1998, a complaint was filed against the Company in the Fourth District
Court, Juab County, State of Utah, alleging breach of a special warranty deed,
breach of a terminated mining lease, and most recently attacking validity of the
Company's royalty and land development interests retained in properties acquired
by plaintiffs. The Company eliminated the primary basis for the alleged breach
of warranty during 1999, and believes the plaintiffs are not entitled to
assert claims under the deed and mining lease to which they are not parties.
The Company and its counsel believe the claims are without merit, will continue
to defend vigorously, and do not believe there is any likelihood of a material
loss.
Item 2. Changes in Securities
During the quarter ended March 31, 2000, the Company's two officers became
entitled to 1,111,149 shares of common stock of the Company in lieu of cash
compensation pursuant to employment agreements. The shares were issued in
June 2000. During the quarter ended June 30, 2000, the Company agreed to
issue an aggregate of 441,577 shares to employees and an outside director in
lieu of cash compensation, fees and expenses. During the second quarter, the
Company entered into a three year (terminable) consulting agreement in exchange
for one million shares (of which 300,000 were issued during the quarter) for
strategic business planning, M&A and financial analysis, and market
communications. Since August 2000, $150,000 of the Company's convertible Notes
were converted by an investor for 750,000 shares of the Company's common stock
pursuant to the $0.20 per share conversion rights in the Notes described above.
Item 5. Other Information
On December 31, 1998 the Company transferred Tintic, Utah properties to its land
holding company, Xeres Tintic LLC. Effective January 31, 2000, the Company
increased its ownership in the LLC to 91.55. The Company manages the LLC and
is entitled to a total of 95 to 96.6% of LLC proceeds.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report
Regulation
S-K Number Exhibit
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27.1 Financial Data Sheet
(b) Reports on Form 8-K: none
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/ ________________
W. Gene Webb, Executive Vice President
October ____, 2000
