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 September 30, 2000
------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
0-16740
----------------------
(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 offices) (ZIP Code)
(303) 294-0427
(Registrant's telephone number, including area code)
N/A
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(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 30, 2000 Registrant had 14,283,871 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 NINE MONTHS ENDED SEPTEMBER 30, 2000
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. - Condensed Consolidated Balance Sheets-
September 30, 2000 and December 31, 1999 3
- Condensed Consolidated Statements of Operations -
Nine Months Ended September 30, 2000 and 1999 and three 4
months ended September 30, 2000 and 1999 5
- Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 6
- Notes to Condensed Consolidated Financial Statements 7
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. Other Information:
Item 1. - Legal Proceedings 10
Item 2. - Change in Securities 11
Item 5. - Other Information 12
Item 6. - Exhibits and Reports on Form 8-K 12
Signature 13
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<TABLE>
<CAPTION>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1999 2000
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash ........................................................................ $ 26,378 $ 9,148
Marketable securities ....................................................... 6,086 2,263
Accounts and notes receivable ............................................... 12,500 28,736
Other ....................................................................... 6,966 19,209
------------ ------------
Total Current Assets .................................................... 51,930 59,356
Property and equipment, net .................................................... 30,376 65,701
Land ........................................................................... 1,237,652 1,006,986
Reclamation bond ............................................................... 200,553 191,500
Other .......................................................................... 12,500 14,845
------------ ------------
$ 1,533,011 $ 1,792,723
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdraft ............................................................... $ 2,954 $ 151,946
Accounts payable ............................................................. 226,027 643,310
Line of credit ............................................................... -- 11,532
Notes payable ................................................................ -- 97,581
Reclamation liabilities ...................................................... 180,059 191,500
Convertible notes ............................................................ -- 205,000
------------ ------------
Total Current Liabilities ............................................. 409,040 1,300,869
Due to officers ................................................................ 136,015 116,500
Accounts payable in stock ...................................................... 261,835 113,074
------------ ------------
Total Liabilities ...................................................... 806,890 1,530,443
------------ ------------
Minority Interest in LLC ....................................................... 362,410 161,984
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Stockholders' Equity
Common stock, $0.10 par value; authorized 30,000,000 shares;
issued and outstanding - 5,002,122 (December 31, 1999) and
14,283,871 shares (September 30,2000) ........................................ 500,212 1,428,387
Addiional paid-in capital ...................................................... 52,382,692 52,664,366
Common stock subscribed ........................................................ -- (125,000)
Accumulated (deficit) .......................................................... (52,519,193) (53,867,457)
------------ ------------
Total Stockholders' Equity ............................................. 363,711 100,296
------------ ------------
$ 1,533,011 $ 1,792,723
============ ============
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For Nine Months
Ended
September 30, September 30,
1999 2000
<S> <C> <C>
Revenue
Mortgage brokerage revenues .......................................... $ -- $ 318,577
Land sales ........................................................... 50,659 56,698
------------ ------------
Total revenues ................................................... 50,659 375,275
------------ ------------
Cost of sales
Cost of mortgage brokerage ........................................... -- 218,475
Cost of land sales ................................................... 16,481 31,257
------------ ------------
16,481 249,732
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Net profit ....................................................... 34,178 125,543
Operating expenses
General and administrative expenses .................................. 229,926 1,101,871
Silver City Project .................................................. 33,208 114,411
------------ ------------
Operating (Loss) ................................................. (228,956) (1,090,739)
------------ ------------
Other income (expenses)
Interest income ...................................................... 901 6,745
Interest expense ..................................................... (597) (12,803)
Amortization of goodwill ............................................. -- (249,597)
Unrealized loss on marketable securities ............................. (4,092) (3,823)
Other, net ........................................................... 64,413 1,953
------------ ------------
60,625 (257,525)
------------ ------------
Net (loss) ..................................................... $ (168,331) $ (1,348,264)
============ ============
Net (loss) per common share-basic and diluted .......................... $ (0.03) $ (0.12)
============ ============
Weighted average common shares outstanding-
basic and diluted .................................................... 4,902,122 10,970,782
============ ============
</TABLE>
See accompanying notes to financial statements.
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<TABLE>
<CAPTION>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For Three Months
Ended
September 30, September 30,
1999 2000
<S> <C> <C>
Revenue
Mortgage brokerage revenues ......................................... $ -- $ 144,854
Land sales .......................................................... 28,000 56,698
------------ ------------
Total revenues ................................................ 28,000 201,552
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Cost of sales
Cost of mortgage brokerage .......................................... -- 121,118
Cost of land sales .................................................. 9,591 31,257
------------ ------------
9,591 152,375
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Net profit ..................................................... 18,409 49,177
Operating expenses
General and administrative expenses ................................. 101,486 470,682
Silver City Project ................................................. 15,828 51,468
------------ ------------
Operating (Loss) ............................................... (98,905) (472,973)
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Other income (expenses)
Interest income ..................................................... -- 492
Interest expense .................................................... (597) (6,853)
Amortization of goodwill ............................................ -- (75,750)
Unrealized loss on marketable securities ............................ -- (1,821)
------------ ------------
(597) (83,932)
------------ ------------
Net (loss) ................................................. $ (99,502) $ (556,905)
============ ============
Net (loss) per common share-basic and diluted ......................... $ (0.02) $ (0.05)
============ ============
Weighted average common shares outstanding-
basic and diluted ................................................... 4,902,122 13,983,871
============ ============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
<TABLE>
<CAPTION>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For Nine Months
Ended
September 30, September 30,
1999 2000
<S> <C> <C>
Cash flows from operating activities
Net (loss) .............................................................. $ (168,331) $(1,348,264)
Adjustments to reconcile net loss to net cash provided
from (used for) operating activities
Depreciation and amortization ......................................... 2,113 259,759
Unrealized loss on marketable securities .............................. 4,092 3,823
Stock issued for services ............................................. -- 90,000
Minority Interest ..................................................... 1,517 --
Changes in assets and liabilities
(Increase) in notes and advances receivable ........................... -- (16,236)
(Increase) in prepaid assets .......................................... (5,000) 6,521
Increase in accounts payable and accrued liabilities .................. 5,265 611,454
Increase in due to officers ........................................... -- 116,500
(Decrease) in reclamation liabilities, net ............................ (14,953) 20,494
Net assets of subsidiaries acquired ..................................... -- (62,954)
Other items ............................................................. 18,361 42,666
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Net cash provided (used) in operating activities ..................... (156,s36) (276,237)
----------- -----------
Cash flows from investing activities
Proceeds from sale of land .............................................. 24,827 --
Purchase of equipment ................................................... -- (945)
Investment in Loanmining.com ............................................ -- (53,207)
----------- -----------
Net cash provided (used) in investing activities ..................... 24,827 (54,152)
----------- -----------
Cash flows from financing activities
Proceeds from short-term borrowings, net ................................ 243,467 36,159
Proceeds from sale of common stock ...................................... -- 40,000
Proceeds from sale of convertible notes ................................. -- 245,000
Deferred financing costs ................................................ -- (8,000)
----------- -----------
Net cash provided by financing activities ........................... 243,467 313,159
----------- -----------
Net increase (decrease) in cash .......................................... 111,358 (17,230)
Cash, beginning of periods ................................................ 23,495 26,378
----------- -----------
Cash, end of periods ...................................................... $ 134,853 $ 9,148
=========== ===========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
NORTH LILY MINING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Going Concern
During 1999 the Company incurred a net loss of $180,176 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"), which to date has increased the Company's losses;
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. The Company's letter of intent and
subsequent acquisition agreement as currently being amended with Captain's
Management Corporation provides for such web development, advertising and
certain funding, which have not yet been performed (see below). 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, 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.
Should the Company be unable to realize on its business and assets and discharge
its liabilities in the normal course of business, the Company may be unable to
continue in operations, and the net realizable value of its assets may be
materially less than 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 Item 310(b) 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 nine-month period ended September
30, 2000 of a normal recurring nature. The operating results for the nine-month
period ended September 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.
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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 $52,700,
resulting in that officer owing the Company a net amount of $31,341, which is to
be repaid in cash or by forfeiture of two company shares per dollar owed by the
officer at year end.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company incurred a loss of $1,348,264 for the nine-month period ended
September 30, 2000, compared to a loss of $168,331 for the same period in 1999.
There was $375,275 of revenue and $249,732 cost of sales for the nine-month
period ending September 30, 2000, compared to $50,659 of revenue and $16,481 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 expansion program. 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 nine-month period ended September 30, 2000, the Company incurred
$1,101,871 in general and administration expenses, compared to $229,926 for the
comparable period in 1999 due to reductions in officers' salaries in 1999 and
due to substantial G&A expenses associated with LMC in 2000.
For the three-month period ended September 30, 2000, the Company lost $556,905
and incurred G&A expenses of $470,682 compared to a loss of $99,502 and G & A
expense of $101,486, for the comparable period in 1999 due to the substantial
expenses associated with LMC operations in 2000.
At September 30, 2000, the Company had a working capital deficiency of
$1,241,513, an increase of $884,403 from its working capital deficiency of
$357,110 at December 31, 1999 due to the acquisition 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,
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
consummated for LMC during the second and third quarters and resulted in
substantially increased G&A, with much less than corresponding increase in
revenue to date.
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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). Since August 2000, $150,000 of these
Notes were converted ($40,000 during the 3rd Quarter) by an investor for 750,000
(200,000 during the 3rd Quarter) shares of the Company's common stock. 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 sold a parcel (approximately 250 acres) of land in
Juab County, Utah for $56,000 which netted the Company $48,144. In October 2000,
the Company's land holding Company, Xeres Tintic, LLC, sold a parcel
(approximately 300 acres) of land in Utah County, Utah for $38,300.
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 has now also agreed to provide a minimum of $440,000 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 has not yet performed those undertakings, but advises the
Company that it is currently arranging so to do. 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) 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
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<PAGE>
reclamation/closure obligations for its 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 has undertaken requisite reclamation work and 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. A hearing
is scheduled this month concerning certain pending motions. 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
Recent Sales Of Unregistered Securities
In the second quarter of 2000, the Company issued 1,111,149 shares of restricted
common stock to two employees, officers and directors of the Company in lieu of
cash compensation pursuant to their employment agreements. These shares were
issued pursuant to exemption from registration in accordance with Sections 3(b)
and/or 4(2) of the Securities Act.
Also during the quarter ended June 30, 2000, the Company entered into a
consulting agreement providing for the issuance of shares of common stock as
compensation for the services performed. Pursuant to this agreement, in June
2000, the Company issued 300,000 shares of restricted common stock to the
consultant pursuant to an exemption from registration under Section 4(2) of the
Securities Act.
During the quarter ended September 30, 2000, the Company agreed to issue an
aggregate 266,577 shares of restricted common stock to employees of the
Company's Loanmining.com subsidiary and 100,000 shares of restricted common
stock to a non-employee director in lieu of cash compensation, fees and
repayment of advances. The exemptions relied upon for the issuance of these
shares were Sections 3(b) and/or 4(2) of the Securities Act.
In April 2000, the Company issued 5,832,600 shares of restricted common stock to
the nine former shareholders of Loanmining.com in consideration of all the
outstanding shares of Loanmining.com. In connection with this transaction, the
Company completed a private placement of 7% Convertible Promissory Notes and
Common Stock Purchase Warrants to a limited number of purchasers for total
consideration of $245,000. The terms of the Notes and Warrants are described
above under "Part I. Financial Information-Item 2. Management's Discussion And
Analysis Of Financial Condition And Results Of Operations". These securities
were issued pursuant to one or more exemptions from registration in accordance
with Rules 505 and/or 506 and/or Sections 3(b) and 4(2) of the Securities Act.
Since August 2000, one investor has converted $150,000 of Notes into 750.000
shares of common stock.
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Also in April 2000, the Company agreed to acquire Mortgage Partners Home Funding
for 170,000 shares of restricted common stock and promissory notes in the
principal amount of $25,000. The notes are past due and the Company has agreed
to convert the Notes into a total of 75,000 shares of common stock at the rate
of $.33 per share. The exemption relied upon for the issuance of these
securities was Section 4(2) of the Securities Act
In June 2000, the Company completed a private placement of 130,000 shares of
restricted common stock to one purchaser for $40,000 pursuant to an exemption
from registration under Section 4(2) of the Securities Act.
In June 2000, the Company issued 1,000,000 shares of restricted common stock to
an entity in consideration for a joint venture providing commercial lending
business and facilitation arrangements for Loanmining.com and $125,000 in
capital. These shares were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act. The transaction was not completed and
the Company is seeking the return of the 1,000,000 shares.
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 percent. 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
---------- -------
27.1 Financial Data Sheet
(b) Reports on Form 8-K: none
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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
--------------------------------------
W. Gene Webb, Executive Vice President
December 4, 2000
13