U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-13078
LEADVILLE MINING AND MILLING CORP.
(Name of Small business issuer in its charter)
State of Nevada 13-31805030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
76 Beaver Street
New York, New York 10005
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number: (212) 344-5158
Securities registered under Section 12(b) of the Exchange Act: none
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $.001 per
share
Check mark whether the issuer (1) has 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 [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulations S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $2,063
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average between the closing bid
($.78125) and asked ($.84375) price of the issuer's Common Stock as of November
7, 1997 was $10,073,670, based upon the average between the closing bid and
asked price ($.8125) multiplied by the 12,398,363 shares of the issuer's Common
Stock held by non-affiliates as of November 7, 1997. (In computing this number,
issuer has assumed all holders of greater than 5% of the common equity and all
directors and officers are affiliates of the issuer.)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 7, 1997: 14,380,900.
DOCUMENTS INCORPORATED BY REFERENCE See Item 13.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
LEADVILLE MINING AND MILLING CORP.
Form 10-KSB
PART I Table of Contents Page
- ------ ----------------- ----
Glossary (iii)
Item 1. Description of Business 1
Item 2. Description of Properties 2
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of 10
Security Holders
Part II
- -------
Item 5. Market for Company's Common 10
Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
Item 7. Financial Statements 14
Item 8. Changes in and Disagreement with Accountants 14
on Accounting and Financial Disclosure
Part III
- --------
Item 9. Directors, Executive Officers, Promoters 14
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain Beneficial 17
Owners and Management
Item 12. Certain Relationships and Related Transactions 18
Item 13. Exhibits and Reports on Form 8-K 19
Signatures 20
Supplemental Information 21
Financial Statements F-1
ii
<PAGE>
GLOSSARY OF TECHNICAL TERMS
---------------------------
Backfilling: Putting waste rock in an open stope.
Ball Mill: Instrument which reduces rock to powder form.
Blanket Ore: Ore which usually lies horizontal in the form of a
sedimentary bed.
Brecchia Pipe: A funnel of broken rock descending into the earth
(along a fault line) through which mineralizing
solutions may rise.
Contact Metamorphic
Type of Deposit: Where minerals result from ion exchange or replacement
between an intrusive igneous rock and a host rock.
CuSO4: Copper Sulfate.
Feeder Veins: Small veins.
Floatation Plant: Mechanical system which separates valuable minerals
from rock powder using chemical solutions.
Gravity Plant: Mechanical system which separates valuable minerals
from rock powder using the force of gravity for
separation.
Hydrometallurgical
Plant: A smelter which reduces sulfide faults converging from
different directions.
Leadville Dolomite: Name of a specific limestone bed in Leadville,
Colorado.
Leadville Silver
Gold Process: Generally similar to the Sherrit Gordon process whereby
chemicals are used to produce oxides and sulfates of
zinc.
Lode Claim: Claim on which mineral is found underground; i.e.,
vein.
Magnetic Anomaly: A variation in the earth's magnetic field.
Magnetite Skarn: The mineral magnetite (iron Oxide) in combination with
quartz emplaced in limestone.
Major
Intrusive Center: An area where large funnels exist and through which
large amounts of mineralizing fluids rose.
Massive
Polymetallic Ores: Large dense mass of sulfide minerals containing several
metals.
MNSO4: Manganese Sulfate.
iii
<PAGE>
Mineral Deposit or
Mineralized Material: A mineralized underground body which has been
intersected by sufficient closely spaced drill holes
and or underground sampling to support sufficient
tonnage and average grade of metal(s) to warrant
further exploration-development work. This deposit does
not qualify as a commercially minable ore body
(Reserves), as prescribed under Commission standards,
until a final and comprehensive economic, technical and
legal feasibility study based upon the test results is
concluded.
Open Stope: A mined area which remains as an open space.
OPT: Ounces per ton.
Patented Claim: Privately owned mineral land.
PbSO4: Lead Sulfate.
Place Claim: Claim on which minerals are found in sand and gravel -
on surface.
Positive Ore: Ore which is proven (same as proven).
Probable Ore: Inferred ore. Ore which is believed to exist, but not
fully proven.
Proven Ore: Minerals which are determined to be recoverable.
Replacement
Ore Body: Mineral ore, irregular in form, which is emplaced in
limestone.
Rhyolite An igneous rock (rhyolite) which has been fractured
Agglomerate: (crushed) and recemented.
Sherrit Hydrometallurgical method of processing (smelting) zinc
Gordon Process: concentrates into oxides and sulfates.
Shockwork Breccia: Earth's crust broken by two or more sets of parallel
faults converging from different directions.
Silica Stope: Name of a mine location in the Hopemore mine.
Square Setting: A system of timbering a tunnel or opening underground
to prevent cave-in.
Stockwork: Ore, when not in strata or in veins but in large
masses, so as to be worked in chambers or in large
blocks.
Unpatented Claim: Mineral land owned by the government and rented for an
annual fee.
ZNSO4: Zinc Sulfate.
iv
<PAGE>
PART I
------
Item 1. Description of Business
Leadville Mining and Milling Corp. (the "Company") was incorporated in the
state of Nevada in February 1982. The Company owns rights to property located in
the California Mining District, Lake County, Colorado and plans to engage in the
business of mining and milling gold and other minerals from its properties. At
present, there is no assurance that a commercially viable ore body exists in any
of the Company's properties until further systematic underground sampling or
core drilling is done, and a final feasibility study based upon the results is
concluded. The future of the Company is dependent upon the Company's properties
producing gold, silver, lead and zinc in sufficient quantities so that the
Company will be a commercially viable entity. A description of the mining claims
owned by the Company is contained in "Item 2. Description of Properties."
During the past year, the Company completed the re-building of the second
exit for the Hunter shaft, the headframe and the hoisting facility.
At this time, assuming that the Company is able to obtain adequate funding
(see "Part II, Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations- Liquidity and Capital Resources"),
management believes that the Company's Hopemore-Comstock, Hunter and Penn Groups
may be explored with positive results. If ore is discovered in sufficient
quantity it could be processed at the Company's custom mill which is prepared to
process ores at a rate of 180 tons per day; expandable to 300 tons per day as
required; or at the ASARCO Black Cloud Mill by agreement (the "ASARCO
Agreement"). Management has signed an agreement whereby milling may be performed
by ASARCO Incorporated ("ASARCO") at ASARCO's Black Cloud Unit. All activity at
the mine or mill would be performed by persons employed by the Company. Since
September 1, 1997, the ASARCO Agreement, by its terms, is terminable by either
party upon 60 day's written notice. Notwithstanding the foregoing, the Agreement
shall not be extended beyond June 30, 2000. See "Part II, Item 6. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
In the event that sufficient ore is discovered and processed, concentrates
of metallic minerals containing gold (AU), silver (AG), Lead (PB), zinc (ZN) and
copper (CU) would be processed (smeltered) at ASARCO's smelter in East Helena,
Montana or, other possible smelters in the United States or Canada.
The Mine Safety Health Administration requires that all underground mines
have at least two shafts that communicate with mine operating areas. During
fiscal 1997, the second exit of the Hunter shaft was completed. The Company
commenced exploration of potential mineral horizons on the seventh level,
including gold-bearing minerals in the "B-Zone" and other locations associated
with the #4 vein. In the Summer of 1997, long-hole drilling at the B-Zone
location resulted in the discovery of an area of mineralization. Minerals
located were discovered in the lower part of the Parting Quartzite in it's shaly
member. Management believes, based on initial long hole drilling results, that
mineralization extends both upward
1
<PAGE>
into the Dyer dolomite and downward into the Manitou dolomite. Drilling resulted
in a preliminary average grade of 1.29 oz. gold per ton in a small portion of
the mineralized zone.
In the event that ore is discovered in sufficient quantity, it is estimated
that the cost to establish a viable mining and milling operation capable of up
to 180 tons per day on a continuous and long term basis, will require
approximately $250,000 in capital. These funds would be applied towards the
continued exploration for minerals in the B-zone and other locations. There can
be no assurance that sufficient ore will be discovered, that extraction will be
economically feasible or that additional funding can be obtained, if necessary
(see "Part II, Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations).
Competition
While there is intense competition in the acquisition of viable mining
properties, the Company already has the properties that it intends to explore
and is not currently involved in further property acquisition. The Company
believes that there is no material competition in the sale of mineral
concentrates because the prices for mineral concentrates are based upon
standards established by the commodities exchange (London Metals Exchange
market).
Employees
As of July 31, 1997, the Company has 10 full time employees, consisting of
two executive officers, six mine laborers and two administrative personnel.
Item 2. Description of Properties
The Company owns the following mining claims, all of which are located in
California Mining District, Lake County, Colorado.
Patented Claims
Type Percent Of
Name Claim No. Acreage Of Claim Ownership
- ---- --------- ------- -------- ---------
Belle Placer 02778 120.860 Placer 62.5
Pueblo (et al [6]) 12718 36.534 Lode 75.0
Chicago 01295 10.020 Lode 50.0
New York 01294 10.140 Lode 50.0
Mikado 08015 9.250 Lode 100.0
Little Bertha 00504 8.380 Lode 3/8
Free America #2 01177 4.210 Lode 3/4
Emma 00756 8.270 Lode 3/8
Colman 09747 1.446 Lode 44/50
Little Galesburg 01176 6.000 Lode 1/8
Highland Chief 00429 2.097 Lode 100.0
Robert Burns 00538 9.859 Lode 100.0
Highland Mary 00539 6.600 Lode 100.0
2
<PAGE>
President 08942 6.900 Lode 1/16
J.G. Fraction 13251 1.727 Lode 31/96
Ballard 00589 3.190 Lode 23/144
Unpatented Claims
Book/ Type Percent Of
Name Page No. Acreage Of Claim Ownership
- ---- -------- ------- -------- ---------
Columbine 437/180 7.310 Lode 100.0
Judy 437/181 17.990 Lode 100.0
New Comstock #1 433/191 20.661 Lode 100.0
New Comstock #2 433/191 20.661 Lode 100.0
The Company additionally owns 20.73 acres located in the same area, namely,
the California Mining District, Lake County, Colorado on which its mill site for
processing of ore is located.
The Company owns the foregoing claims as indicated. The Company has not
formed any partnership regarding these claims, nor are there any association
whereby profits or expenses are to be shared. The claims are located
approximately 2.5 miles northeast of the town of Leadville, Colorado by County
Road. The principal acreage forms a contiguous group and is located on a
prominent topographic feature known as Breece Hill. See below.
The mill is a 180 ton per day flotation gravity plant. The Company has
purchased an additional ball mill of 120 tons per day capacity that is at the
mill site and ready to be installed. The plant would have total capacity of 300
tons per day when the second mill has been put into place.
The plant is situated on a 20.73 acres mill site and has an approved
tailings disposal location. The plant has been pilot tested and is ready for
production. All necessary permits to operate have been granted.
Construction of the mill began in 1987 and was completed in August of 1989.
It was the Company's intent to do fee-milling for other companies while the
federally-mandated construction of the mine second exit was in progress.
However, the recession in the mining industry, which the Company could not
predict, and the resulting lower metal prices essentially eliminated the
possibility of custom milling. The mill is on a stand-by basis and has been
since its completion. The Company has discussed custom milling with many
potential shippers of ore, but transportation costs from any mines not in the
Leadville District have proved to be prohibitive. The Company anticipates that
this mill will be able to process both sulfide and oxide minerals. The ASARCO
mill will process sulfide minerals only. (see "Part II, Item 6. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources"). The ASARCO agreement is still in
effect. Should it terminate, the Company believes that its own mill can handle
all minerals mined.
3
<PAGE>
The Company has hired a mill-man whose duties are to operate the Company's mill
plant. Initial mill feed will be low-grade gold bearing tailings and base-metal
bearing exploratory ore. As the B-Zone is further evaluated, if drilling results
are favorable, high grade ore from this location will be processed exclusively.
The mill has processed approximately 600 tons of material from old tailing piles
and recovered 20 to 30 ounces of gold, with unknown amounts of silver and lead.
The mill is now in a condition whereby it can efficiently recover gold, silver
and lead from newly mined high grade ore.
History Hopemore Mine
The Leadville mining district is located 100 miles west of Denver, Colorado
in the heart of the Rocky Mountains. The weather is harsh with long winters and
short summers.
The Company's properties are within the high gold zone of the Leadville
district which was dominated by the Ibex Mines on Breece Hill. The high gold
zone has produced approximately 3 million ounces of gold. The average grade of
ore from the Hopemore area is not known. On adjacent properties a weighted
average of siliceous precious metal ore shipments from the Garbutt Lode and
South Ibex Stockwork between 1913 and 1922 is 0.850 OPT Au, and 4.97 OPT Ag from
63,796 tons.
Historically, the Company's properties were worked as two separate mining
areas, the Hopemore shaft in the Ibex area and the Penn Group area further west;
and the ores were not concentrated by milling but were shipped directly to the
Arkansas Valley Smelter in Leadville.
Work by the Company started in 1984 with acquisition of the Comstock
Hopemore Group of claims. Retimbering of the entire Hopemore shaft followed
along with establishment of the new seventh level, partial rehabilitation of the
other levels, several raises, the fifth level connection with the Hunter shaft,
construction of a mill and the present retimbering of the Hunter escape shaft.
The Hopemore shaft was worked as part of the Ibex mines until approximately
1902. The Hopemore shaft was sunk in 1907 to reach the seventh level of the Ibex
No. 4 mine. Large replacement ore bodies in the Leadville dolomite (Blue
limestone) lie on the hanging wall side (southwest) of the Ibex No. 4 vein. The
ore is associated with a large magnetite skarn replacement body in the Leadville
dolomite. The Leadville dolomite on the footwall (east) side of the Ibex No. 4
vein was mined via the Hunter Shaft.
Ground conditions in the district generally do not allow open stopes,
therefore, square setting and backfilling with waste of low grade ore was
commonly practiced. When the large ore bodies of the Hopemore were mined zinc
sulfide ore was of no value. High zinc ore was penalized at the local lead
smelter, and it is believed that much of the backfill may be high grade (+12%)
zinc mineralization.
4
<PAGE>
Mineralized Material
Tons Au in OPT Ag in OPT %PB %ZN %Cu
- ---- --------- --------- --- --- ---
121,200 0.178 8.63 3.98 12.2 0.35
[Donald Wilson, August 14, 1989, Report on Properties of Leadville Mining &
Milling Corp. Donald Wilson, February, 1994, Ore Reserves on Properties of
Leadville Mining & Milling Corp. Mr. Wilson is the President of the Company.]
GEOLOGY
Exploration Targets
Hopemore Mine Exploration Target
The Hopemore area has been mined from the Ibex No. 7 level. The lower host
rocks of the Manitou and Dyer formations are thought to remain unexplored. The
mineralized zones are commonly controlled by steep sulfide veins. Four veins
have been identified which could feed replacement mineral bodies in these
underlying formations. The potential mineral bodies are massive sulfide and
could contain between 25,000 to 80,000 tons each of mineralized material. [Scott
Hazlitt Geological Report, Leadville Mining & Milling Properties, January 1993,
Page 7].
The Company's holdings in the Hopemore area are in a location that should
have good ground preparation for vein deposits. Vein mineralization is not
limited to specific host rocks and may form minable bodies of mineralization.
The veins in the gold belt of the Leadville district are generally low in base
metals and higher in quartz and precious metals. [Scott Hazlitt Geological
Report, Leadville Mining & Milling Properties, January 1993, Page 7]. The
expected tonnage from veins would be 5,000 to 25,000 tons of mineralized
material. [Emmons, et. al., 1927.Fig.98,99]
Penn Group Explorations Targets
The targets in the Penn Group area, west of the Hopemore, are gold rich
magnetite skarns, massive sulfide replacement deposits below or west or the
magnetite and vein deposits. The near surface gold rich magnetite skarn could be
over one million tons of mineralized material. [Scott Hazlitt Geological Report,
Leadville Mining & Milling Properties, January 1993. Emmons, et.al. (P104,
1927)] The deeper massive sulfide target could be in the range of one to +four
million tons of mineralized material. Vein type deposits, high in precious
metals are also a possibility under the magnetite deposits. The expected tonnage
from veins would be 5,000 to 25,000+ tons of mineralized material. [Thompson's
Magnetic Anomaly Map (1990), Johansing, Plate 1, Magnetic Anamoly, Emmons,
et.al. (P104, 1927)]
The Penn Group including the area to the southwest, has not been thoroughly
prospected. The Magnetic anomaly map (1990) of the Breece Hill area shows a
large zone with an
5
<PAGE>
anomalously high magnetic signature which management believes to be a large body
of magnetite skarn. Although the magnetite skarn is a contact metamorphic type
of deposit it is usually found near sulfide mineralization.
In the adjacent mine, massive sulfide replacement bodies are often found
next to bodies of rhyolite agglomerate, which is also known locally as
Fragmental Porphyry. The Fragmental Porphyry is thought to form breccia pipes
that were formed during the late stages of mineralization and were reamed out
centrally to form mineralizing conduits. In numerous cases, magnetite is found
peripheral to the massive sulfide deposits. Pyrite veins in the magnetite often
carry high gold contents. Within the Leadville Mining District northeast
trending veins are generally the best feeders for the massive sulfide blanket
deposits. The White Prince Vein which is mapped north of the Penn Group property
is northeast trending and on Johnasing's maps is correlated with the Pilot
Fault.
The target zone would be either between the magnetite skarn and the breccia
pipe or under the magnetite skarn. Magnetite skarn cappings to massive sulfide
bodies are common in the general vicinity of the Comstock shaft.
Penn Group Mines
The Penn Group lies northwest of the Hopemore and contains magnetite skarn
and underlying sulfide minerals hosted by the Leadville dolomite. Magnetite ore
was mined from shallow open cuts and was shipped as smelter flux. The ores
produced from underground workings contained a high gold and silver content. The
underground workings went to depths of 450 to 600 feet and focused on "Feeder"
veins and blanket ore in the lower Leadville formation.
Mineralization was mined along and to the east of the White Prince fault.
The area west of the White Prince fault is down thrown and was prospected but
not to sufficient depths to locate the favorable carbonate section.
Geology and Potential Reserves
The ore deposits in the Leadville district include precious and base metal
massive sulfide veins and carbonate hosted deposits, gold bearing magnetite
skarns, and gold rich veins. The major ore bodies are hosted in Paleozoic aged,
shelf carbonate rocks with a total thickness of 600 feet.
These sedimentary rocks have been intruded by a series of sills and dikes
and faulted, resulting in complex geology. The Company's properties are located
on Breece Hill which is a major intrusive center and contain both gold, silver
and base metal minerals.
Mineralized Material
Tons Au in OPT Ag in OPT %PB %ZN %Cu
- ---- --------- --------- --- --- ---
121,200 0.178 8.63 3.98 12.2 0.35
6
<PAGE>
80,000 tons of this total is based upon representations by Hopemore Mining Co.
at cessation of mining activities in 1913. Another 30,000 tons is represented by
the 640 "Zinc Stope" which is accessed by the 740 service raise and is above the
Hopemore sixth level (old Ibex 7th Level). Other quantities of unknown size are
assigned to seven other areas for which dimensions are unknown.
The B-Zone Mineral Bedded structure which is of unknown size and situated
in the Parting Quartzite, Manitou and Dyer limestones assayed 1.29 ounces of
gold and 5.00 ounces of silver per ton across a width of 35 feet. The total
thickness of the zone drilled of this bed is 17 feet. [Donald L. Wilson, Report
on the Properties of Leadville Mining & Milling Corp. August 14, 1989 P. 25.
Scott Hazlitt, Evaluation of the Properties of Leadville Mining & Milling. Mr.
Wilson is the President of the Company; and the initial results from the 1997
long hole drilling Program.]
Location Of Mineralized Material
Tons Area Au Ag Pb Zn Cu
---- ---- ---- ---- ---- ---- ----
#4 Vein 7 Level
300 N 1/2 Block 428 0.14 8.4 2.65 4.40 0.55
300 S 1/2 Block 428 0.40 16.0
600 S 1/2 Block 441 0.11 9.2 1.95 7.90 1.30
#4 Vein 6 Level
100 N 1/2 Block 428 0.78 45.90 2.40 4.10 0.70
400 N 1/2 Block 428 0.16 13.20 2.10 4.70 0.35
#4 Vein (North Split)
600 N 1/2 Block 428 0.15 15.10 2.35 3.30 0.40
200 N 1/2 Block 428 0.36 23.70 2.10 4.10 0.46
7 Level "B" Zone
3,173 Replacement
Minerals
B-Zone 1.29 5.00 0.50 0.50 0.97
6 640 Stope Area
17,325 Blocks 440,
441 0.092 5.80 3.95 16.20 0.40
7 Level
3,200 Block 475 0.11 9.70 4.25 16.00 0.35
7
<PAGE>
6 Level
500 Block 475 0.26 4.30 2.50 6.00 0.30
#4 Vein 5 Level
300 S 1/2 Block 430 and
N 1/2 Block
441 0.07 9.10 1.55 2.90 6.30
- --------------------------------------------------------------------------------
121,200 Total 0.178 8.63 3.98 12.20 0.35
[Donald L. Wilson, Report on the Properties of Leadville Mining & Milling Corp.
August 14, 1989. Mr. Wilson is the President of the Company.]
Weston Fault Massive Sulfide Exploration Targets
The Weston fault forms the western boundary of the down-dropped block which
contains the deposits or the Black Cloud mine south and east of the Company's
properties. The Hopemore-Hunter workings are separated from the Penn Group by
the Weston fault which, has had a complex history of movement. Early
compressional tectonics are believed to have resulted in minor over thrusting
and drag folding, possibly similar to that along the Tucson Main Fault on Iron
Hill. Later normal faulting resulted in a near vertical structure with the east
side down faulted. These two episodes of movement are believed to have produced
two strands of the Western Fault. The ground between the two strands of the
fault should have undergone good ground preparation and may contain the
favorable carbonate section for massive sulfide blanket mineralization. [Scott
Hazlitt Geological Report, Leadville Mining & Milling Properties, January 1993,
Page 8].
Weston Fault Stockwork Breccia Exploration Targets
Along the southern strike of the Weston fault zone, intersecting faults
have hosted stockwork breccia zones that contain precious metals and are low in
sulfides. The Antioch mine produced a silicious gold ore contained in a broken
and brecciated porphyry body between two fault strands. Another similar
stockwork breccia zone is known as the South Ibex stockwork or Capital stope
that contained approximately 250,000 tons of ore. There are two strands of the
Weston fault on the Company's property. The strike length controlled is from
1,400-1,600 feet. [Scott Hazlitt Geological Report, Leadville Mining & Milling
Properties, January 1993, Page 9]
Management believes that stockwork mineralization along the intersection of
the Ibex No. 4 vein and the Weston fault is a good target [Thompson's Magnetic
Anomaly Map (1990), Johansing, Page 9]. The stockwork mineralization could be
hosted by porphyries and could range in size from 50,000 to 500,000+ tons of
mineralized material. [Scott Hazlitt, Evaluation of the Properties of Leadville
Mining & Milling Corp., January 1993. Chapman and Stevens, 1929, Colorado
Mineral Survey; Leadville District and Adjoining Territory.] Several veins
8
<PAGE>
may intersect the Weston fault and more than one stockwork body on each strand
of the fault is a possibility [Scott Hazlitt Geological Report, Leadville Mining
& Milling Properties, January 1993, Page 9].
Planned Exploration
An exploration program has been underway which consists of drilling a
number of mineral targets in the B-Zone of the Hopemore area. Other planned
targets for fiscal 1998 are listed below:
A) The Hopemore-Hunter mine area exploration for massive sulfide
replacement deposits and vein deposits in near previously mined areas
or in the underlying carbonate hosts.
B) Stockwork breccia deposits near vein intersections with the Weston
Fault.
C) Massive sulfide replacement targets along the footwall or eastern side
of the Weston Fault.
D) Replacement targets along the hanging wall, or western side of the
Weston Fault.
E) The Penn Group area magnetite-gold and massive sulfide replacement and
vein targets.
F) The magnetic anomaly which extends to the west and southwest of the
Penn Group-new magnetite-gold and massive sulfide mineralization. The
area between the breccia pipe (rhyolite agglomerate) and the west side
of the magnetic anomaly- massive sulfide mineralization.
[Scott Hazlitt Geological Report, Leadville Mining & Milling Properties, January
1993, Pages 9-10; Thompson's Magnetic Anomaly Map (1990), Johansing, Pages
5-12].
Long hole and core drilling will continue on the B-Zone location on levels
5, 6, 7, 8 to determine the magnitude and shape of this mineral structure. The
Weston Fault and #4 vein juncture also will be probed by tunnel and core
drilling. The estimated cost of this exploration is $141,000 and time required,
assuming adequate funding, will be approximately 12 months. See "Part II, Item
6. Management's Discussion and Analysis of Financial Condition and Results of
Operations- Liquidity and Capital Resources."
Item 3. Legal Proceedings
The Company is not presently a party to any material litigation. In June
1996, the Company commenced an action against Franklin Consolidated Mining
Company, Inc. ("Franklin") to recover certain funds advanced by the Company to
Franklin in connection with expenses related to shares office space. The Company
and Franklin entered into a settlement agreement in July 1996, pursuant to which
the Company agreed to accept $18,000 as full payment for funds due. As of July
31, 1997, the Company had received all $18,000 under the settlement agreement.
9
<PAGE>
Item 4. Submission of Matters to a Vote of Securityholders
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of fiscal 1997.
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Marketing Information -- The principal U.S. market in which the
Company's common shares (all of which are of one class, $.0001 par value Common
Stock) are traded or will trade is in the over-the-counter market (Bulletin
Board Symbol: "LMMI"). The Company's stock is not traded or quoted on any
Automated Quotation System.
The following table sets forth the range of high and low bid quotes of the
Company's Common Stock per quarter for the past two fiscal years and the first
quarter of fiscal 1998 as reported by the OTC Bulletin Board (which reflect
inter-dealer prices without retail mark-up, mark-down or commission and may not
necessary represent actual transactions).
MARKET PRICE OF COMMON STOCK
Quarter Ending High and Low Bid
- -------------- ----------------
October 31, 1997 1.07 .75
July 31, 1997 1.1875 .75
April 11, 1997 through
April 30, 1997 1.3125 .375
February 1, 1997 through
April 10, 1997 .115 .06
January 31, 1997* .135 .08
October 31, 1996* .16 .10
July 31, 1996* .15 .10
April 30, 1996* .19 .11
January 31, 1996* .205 .075
October 31, 1995* .11 .08
- ----------
* Prior to a reverse split of the Company's Common Stock on a one-for-ten basis
effected on April 11, 1997.
(b) Holders -- The approximate number of recordholders of the Company's
Common Stock, as of November 3, 1997 amounts to 1,517 inclusive of those
brokerage firms and/or clearing houses holding the Company's common shares for
their clientele (with each such brokerage house and/or clearing house being
considered as one holder). The aggregate number of shares of Common Stock
outstanding is 14,831,680 as of November 3, 1997.
10
<PAGE>
(c) Dividends -- The Company has not paid or declared any dividends upon
its Common Stock since its inception and, by reason of its present financial
status and its contemplated financial requirements, does not contemplate or
anticipate paying any dividends upon its Common Stock in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Fiscal 1997 Compared to Fiscal 1996
Results of Operations
During the fiscal year ended July 31, 1997, the Company continued activity
at its gold/silver/base metal mining project in Colorado. The effort was mainly
concentrated on rehabilitating the second exit, Hunter shaft and installing a
new hoist. At the present time, the Company has not received revenue from its
operations although it has expended considerable sums for the development of its
proposed mining and milling operation. (See "Liquidity and Capital Resources").
Completion of the Hunter shaft was followed by exploration of the B-Zone by
long hole drilling on the Hopemore levels 5, 6, 7 and 8 and, if economic
minerals are discovered, extraction will soon follow. A cross-cut will also be
driven north from the 8th level to explore minerals believed associated with the
Weston fault #4 vein juncture where a possible, large ore body may exist. If
economic minerals eventually are discovered, core drilling will follow to
determine size, shape and grade of the discovery. These exploration projects
will require approximately 12 months (after funding) and cost approximately
$177,250.
The Company has approximately 121,000 tons of mineralized material
containing specified amounts of gold, silver, lead, zinc and copper. Possible
drill target potential as indicated by Scott Hazlett, Consulting Geologist,
ranges up to 5,000,000 tons of mineralized material. The Company to date, has
completed partial exploration of the Hopemore 7th level by cross-cut, raise,
drift, and core drill. Stopes, ore chutes, ore passes and loading facilities are
completed and operational. Assuming adequate funding, the Company is prepared to
enter into a development program and will, if sufficient mineralized material is
discovered and extraction is determined to be economically feasible, develop and
mine the property.
If sufficient ore is discovered, the Company would commence mining and
milling at a rate of up to 150 to 180 tons per day and gradually increase the
tonnage as conditions would allow. It is understood that in order to realize a
mill capacity of 300 tons per day the Company should explore and develop a two
year supply of proven ore (225,000 tons). In order to execute the exploration
project, a capital investment of approximately $192,250 would be required.
With regard to all estimates of mineral tonnage, further geologic work is
required before the Company can conclude that commercially viable ore deposits
exist.
11
<PAGE>
The Company generated no revenues from operations during the fiscal years
ended July 31, 1997 and 1996. There were de minimis non-operating revenues
during these periods of $2,063 and $960, respectively. Costs and expenses
decreased by approximately 15.6% from fiscal 1996 to fiscal 1997. Mine expenses
increased by $80,581 (approximately 33.9%) from 1996 ($237,560) to 1997
($318,141). The increase in mine expenses resulted primarily from expanded work
at the mine. Selling, General and Administrative expenses decreased by $227,327
(approximately 32.0%) from 1996 ($709,707) to 1997 ($482,380) primarily due to a
decrease in the cost of raising capital. As a result, the Company's net loss for
1997 was $805,496, which was $150,547 (approximately 15.7%) less than its 1996
loss of $956,043.
Liquidity and Capital Resources
As of July 31, 1997, the Company's current liabilities exceed its current
assets by a ratio of approximately 1.6 to 1 and the Company had a working
capital deficiency of $21,598. Therefore, the Company can only continue as a
going concern in the event that it obtains additional capital. As noted above,
management anticipates that it will need at least $972,250 to become
commercially operational on a reduced scale and begin generating revenues from
operations. To obtain such funding, management intends to raise additional
capital through the sale of its securities and/or debt financing.
Specific plans to obtain financing for a full scale mining and milling
operation will most likely include a combination of one or more of the
following:
1. Private placements of the Company's securities to institutions;
private individuals and investment groups. During fiscal 1997, the
Company raised approximately $566,231 through the sale of common
stock. These investments have enabled the Company to complete the
Hunter shaft, test the mill and do core drilling.
2. A working arrangement with a mining company pursuant to which the
Company would mine and the other company would mill, smelt and market
the products. Under these conditions, the Company's cost would be
concentrated on the mining effort only. The Company currently has such
an agreement with ASARCO. The ASARCO agreement ran for an initial
two-year term and, since September 1, 1997, the Agreement is
cancelable by either party on 60 day's written notice. Notwithstanding
the foregoing, the Agreement would not extend beyond June 30, 2000.
Pursuant to the Agreement, the Company would deliver metallic minerals
to the ASARCO mill site six miles southeast of Leadville, Colorado.
The price for the material would be based upon the London Metals
Exchange market price, less certain deductions for treatment and
impurities. In the event the ASARCO Agreement is canceled, the Company
believes that its mill has flotation capacity to process sulfide ores.
12
<PAGE>
Assuming that the Company is able to obtain funds from one or more of the
above sources, planned activities over the next year, in order of priority, are
as follows:
<TABLE>
<CAPTION>
Estimated Time Required
to Complete (or Operating
Time - Production),
Activity Estimated Cost Assuming Funding
-------- -------------- ----------------
<S> <C> <C>
(a) Develop B-zone mineral structure
in preparation for mining and
tunnel to Hunter Shaft $144,000 12 Months
(b) Drive tunnel to Weston fault
mineral structure - develop. $33,250 6 Months
(c) Develop B-Zone minerals $15,000 1 Month
(d) Operate Mine & Mill $600,000 6 Months
</TABLE>
Aside from the above planned activities, the Company's basic administrative
capital needs (e.g. rent, salaries, utilities, etc.) are approximately $15,000
per month. Management has been funding these basic requirements and hopes to
continue to fund these requirements through the private sale of its Common
Stock. During the year ended July 31, 1997, the Company obtained approximately
$566,231 from the private sale of Common Stock.
There is no assurance whatsoever that any of the Company's proposed plans
to raise capital and otherwise fund operations will prove successful. The
Company's inability to obtain sufficient funding will delay the Company's
planned operations or, possibly, force the Company to go out of business.
Environmental Issues
Management does not expect that environmental issues will have an adverse
material effect on the Company's liquidity or earnings. Before any mining
development or mining exploration or construction of milling facilities could
begin, it was necessary to meet all environmental requirements and to satisfy
the regulatory agencies in Colorado that the Company's proposed procedures fell
within the boundaries of sound environmental practice. The Company is bonded to
insure procedures and reclamation of any areas disturbed by the Company's
activities. Recently, the Mined Land Reclamation Board reviewed the Company's
permit and bond and determined that an increase in the bond was necessary. At
that time, the Company placed an additional $6,000 in escrow against any future
indemnity.
Part of the Leadville Mining District was declared a Superfund site.
Several mining companies and one individual were declared defendants in a
possible lawsuit. The Company was not named a defendant or Possible Responsible
Party. The Company did respond in full detail to a lengthy questionnaire
prepared by the Environmental Protection Agency ("EPA")
13
<PAGE>
regarding the Company's proposed procedures and past activities in November
1990. No further comments or questions have been initiated by the EPA.
The Company does include in all its internal revenue and cost projections a
certain amount for environmental and reclamation costs on an ongoing basis. This
amount is determined at a fixed amount of $1.50 per ton of material to be milled
on a continual, ongoing basis to provide for further tailings disposal sites and
to reclaim the tailings disposal sites in use. At this time, there does not
appear to be any environmental costs to be incurred by the Company beyond those
already addressed above. No assurance can be given that environmental
regulations will not be changed in a manner that would adversely affect the
Company's planned operations.
Item 7. Financial Statements.
For the Financial Statements required by Item 7 see the Financial
Statements included elsewhere in this Form 10-KSB.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
There have been no changes in or disagreements with accountants with
respect to accounting and/or financial disclosure.
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO FINANCIAL STATEMENTS
FILED WITH THE ANNUAL REPORT OF THE
COMPANY ON FORM 10-KSB
FOR THE YEAR ENDED JULY 31, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEET AS OF JULY 31, 1997, LEADVILLE MINING AND MILLING CORP.
STATEMENT OF OPERATIONS FOR THE YEARS ENDED JULY 31, 1997 AND JULY 31, 1996, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997, LEADVILLE MINING
AND MILLING CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD SEPTEMBER 17, 1982
(INCEPTION) TO JULY 31, 1997, LEADVILLE MINING AND MILLING CORP.
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1997 AND JULY 31, 1996, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997, LEADVILLE MINING
AND MILLING CORP.
NOTES TO FINANCIAL STATEMENTS
------------------------------
Other schedules not submitted are omitted, because the information is included
elsewhere in the financial statements or the notes thereto, or the conditions
requiring the filing of these schedules are not applicable.
As to certain matters, the financial statements herein differ in presentation
from, and include data which are not contained in, the Company's published
financial statements to stockholders. Such presentation and additional data are
submitted solely for the purpose of complying with the applicable accounting
requirements of Form 10-KSB and Regulation S-X.
<PAGE>
WG Wolinetz, Gottlieb & Lafazan, P.C. 5 North Village Avenue
&L ---------------------------------- Rockville Centre
Certified Public Accountants New York 11570
(516) 536-0770
Fax: (516) 536-5753
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- ----------------------------------------
To The Board of Directors & Shareholders of
Leadville Mining and Milling Corp.
We have audited the accompanying balance sheet of Leadville Mining and Milling
Corp. (A Development Stage Enterprise) as of July 31, 1997, and the related
statements of operations, changes in stockholders' equity and cash flows for
each of the two years in the period ended July 31, 1997 and for the period
September 17, 1982 (Inception) to July 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Leadville Mining and Milling
Corp. (A Development Stage Enterprise) as of July 31, 1997 and the results of
its operations and its cash flows for each of the two years in the period ended
July 31, 1997 and for the period September 17, 1982 (Inception) to July 31, 1997
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred recurring losses through July 31,
1997 and has a working capital deficiency of $21,598 at July 31, 1997 that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 10. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
WOLINETZ, GOTTLIEB & LAFAZAN, P.C.
Rockville Centre, New York
October 16, 1997
F-1
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JULY 31, 1997
ASSETS
Current Assets:
Cash $ 27,510
Loans Receivable 5,826
Other Current Assets 976
-----------
Total Current Assets 34,312
Property and Equipment (Net of
Accumulated Depreciation of $344,832) 1,360,819
-----------
Other Assets:
Mining Reclamation Bonds 11,000
Security Deposit 3,667
-----------
Total Other Assets 14,667
-----------
Total Assets $ 1,409,798
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accrued Expenses and Taxes $ 55,910
-----------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, Par Value $.001 Per Share;
Authorized 150,000,000 shares; Issued and
Outstanding 14,380,900 Shares 14,381
Capital Paid In Excess of Par Value 6,847,723
Deficit Accumulated in the Development Stage (5,508,216)
-----------
Total Stockholders' Equity 1,353,888
-----------
Total Liabilities and Stockholders' Equity $ 1,409,798
===========
The accompany notes are an integral part of the financial statements.
F-2
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
For The Period
For The Year Ended September 17, 1982
July 31, (Inception)
-------------------------- To
1997 1996 July 31, 1997
----------- ----------- -------------
Revenues:
Interest Income $ 840 $ 960 $ 708,234
Miscellaneous 1,223 -- 24,706
----------- ----------- -----------
Total Revenues 2,063 960 732,940
----------- ----------- -----------
Costs and Expenses:
Mine Expenses 318,141 237,560 1,723,713
Selling, General and
Administrative Expenses 482,380 709,707 4,036,245
Depreciation 6,350 8,344 344,832
Loss on Write-Off of
Investment -- -- 10,000
Loss on Joint Venture -- -- 101,700
----------- ----------- -----------
Total Costs and
Expenses 806,871 955,611 6,216,490
----------- ----------- -----------
Loss Before Provision
For Income Taxes (804,808) (954,651) (5,483,550)
Provision For Income
Taxes 688 1,392 24,666
----------- ----------- -----------
Net Loss $ (805,496) $ (956,043) $(5,508,216)
=========== =========== ===========
Net Loss Per Share $ (.06) $ (.08)
=========== ===========
Average Common Shares Outstanding 13,535,361 11,858,172
=========== ===========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
--------------------------- In Excess of Development
Shares Amount Par Value Stage Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance
September 17, 1982
(Inception) -0- $ -0- $ -0- $ -0- $ -0-
Initial Cash
Officers - At $.001 Per Share 1,575,000 1,575 -- -- 1,575
Other Investors -
At $.001 Per Share 1,045,000 1,045 -- -- 1,045
Initial - Mining Claims --
Officer - At $.002 Per Share 875,000 875 759 -- 1,634
Common Stock Issued For:
Cash At $.50 Per Share 300,000 300 149,700 -- 150,000
Net Loss -- -- -- (8,486) (8,486)
---------- ---------- ---------- ---------- ----------
Balance - July 31, 1983 3,795,000 3,795 150,459 (8,486) 145,768
Common Stock Issued For:
Cash Pursuant to Initial Offering
At $1.50 Per Share, Net of
Offering Costs of $408,763 1,754,741 1,755 2,221,594 -- 2,223,349
Net Income -- -- -- 48,890 48,890
---------- ---------- ---------- ---------- ----------
Balance - July 31, 1984 5,549,741 5,550 2,372,053 40,404 2,418,007
Net Income -- -- -- 18,486 18,486
---------- ---------- ---------- ---------- ----------
Balance - July 31, 1985 5,549,741 5,550 2,372,053 58,890 2,436,493
Common Stock Issued For:
Mineral Lease At $1.00 Per Share 100 -- 100 -- 100
Net Income -- -- -- 4,597 4,597
---------- ---------- ---------- ---------- ----------
Balance - July 31, 1986 5,549,841 5,550 2,372,153 63,487 2,441,190
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
----------------------------- In Excess of Development
Shares Amount Par Value Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Loss -- $ -- $ -- $ (187,773) $ (187,773)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1987 5,549,841 5,550 2,372,153 (124,286) 2,253,417
Common Stock Issued For:
Services Rendered At
$1.00 Per Share 92,000 92 91,908 -- 92,000
Net Loss -- -- -- (328,842) (328,842)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1988 5,641,841 5,642 2,464,061 (453,128) 2,016,575
Net Loss -- -- -- (379,852) (379,852)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1989 5,641,841 5,642 2,464,061 (832,980) 1,636,723
Common Stock Issued For:
Cash:
At $.70 Per Share 269,060 269 194,219 -- 194,488
At $.50 Per Share 387,033 387 199,443 -- 199,830
Services:
At $.50 Per Share 68,282 68 34,073 -- 34,141
Commissions:
At $.70 Per Share 15,000 15 (15) -- --
Commissions Paid -- -- (2,100) -- (2,100)
Net Loss -- -- -- (529,676) (529,676)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1990 6,381,216 6,381 2,889,681 (1,362,656) 1,533,406
Common Stock Issued For:
Cash At $.60 Per Share 318,400 319 180,954 -- 181,273
Net Loss -- -- -- (356,874) (356,874)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1991 6,699,616 6,700 3,070,635 (1,719,530) 1,357,805
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
----------------------------- In Excess of Development
Shares Amount Par Value Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common Stock Issued For:
Cash:
At $.30 Per Share 114,917 $ 115 $ 34,303 $ -- $ 34,418
At $.50 Per Share 2,000 2 998 -- 1,000
At $.60 Per Share 22,867 23 13,698 -- 13,721
At $.70 Per Share 10,000 10 6,990 -- 7,000
At $.80 Per Share 6,250 6 4,994 -- 5,000
At $.90 Per Share 5,444 5 4,895 -- 4,900
Services:
At $.32 Per Share 39,360 39 12,561 -- 12,600
At $.50 Per Share 92,353 93 46,084 -- 46,177
Exercise of Options:
At $.50 Per Share By
Related Party 100,000 100 49,900 -- 50,000
Net Loss -- -- -- (307,477) (307,477)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1992 7,092,807 7,093 3,245,058 (2,027,007) 1,225,144
Common Stock Issued For:
Cash:
At $.30 Per Share 176,057 $ 176 $ 51,503 $ -- $ 51,679
At $.50 Per Share 140,000 140 69,964 -- 70,104
At $.60 Per Share 10,000 10 5,990 -- 6,000
At $.70 Per Share 17,000 17 11,983 -- 12,000
At $1.00 Per Share 50,000 50 49,950 -- 50,000
Services:
At $.50 Per Share 495,556 496 272,504 -- 273,000
Commissions:
At $.50 Per Share 20,220 20 (20) -- --
Commissions Paid -- -- (1,500) -- (1,500)
Net Loss -- -- -- (626,958) (626,958)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1993 8,001,640 8,002 3,705,432 (2,653,965) 1,059,469
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
----------------------------- In Excess of Development
Shares Amount Par Value Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common Stock Issued For:
Cash:
At $.30 Per Share 149,330 $ 150 $ 43,489 $ -- $ 43,639
At $.50 Per Share 377,205 377 189,894 -- 190,271
Services:
At $.30 Per Share 500,000 500 149,500 -- 150,000
At $.50 Per Share 130,000 130 71,287 -- 71,417
At $.50 Per Share
By Related Party 56,000 156 77,844 -- 78,000
At $.70 Per Share 4,743 4 3,316 -- 3,320
Exercise of Options For Services:
At $.50 Per Share 35,000 35 17,465 -- 17,500
At $.50 Per Share
By Related Party 150,000 150 74,850 -- 75,000
Net Loss -- -- -- (665,909) (665,909)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1994 9,503,918 9,504 4,333,077 (3,319,874) 1,022,707
Common Stock Issued For:
Cash:
At $.30 Per Share 150,000 $ 150 $ 49,856 $ -- $ 50,006
At $.40 Per Share 288,200 288 115,215 -- 115,503
At $.50 Per Share 269,611 270 132,831 -- 133,101
At $.60 Per Share 120,834 121 72,379 -- 72,500
At $.70 Per Share 23,000 23 16,077 -- 16,100
Services:
At $.40 Per Share 145,000 145 60,755 -- 60,900
At $.50 Per Share 75,000 75 34,925 -- 35,000
Exercise of Options For:
Cash:
At $.50 Per Share
By Related Party 350,000 350 174,650 -- 175,000
Services:
At $.50 Per Share 35,000 35 17,465 -- 17,500
Commissions Paid -- -- (1,650) -- (1,650)
Net Loss -- -- -- (426,803) (426,803)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1995 10,960,563 $ 10,961 $ 5,005,580 $(3,746,677) $ 1,269,864
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
---------------------------- In Excess of Development
Shares Amount Par Value Stage Total
---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common Stock Issued For:
Cash:
At $.40 Per Share 75,972 $ 76 $ 30,274 $ -- $ 30,350
At $.50 Per Share 550,423 550 270,074 -- 270,624
At $.60 Per Share 146,773 147 87,853 88,000
At $.70 Per Share 55,722 56 38,949 39,005
At $.80 Per Share 110,100 110 87,890 88,000
Services:
At $.40 Per Share 104,150 104 38,296 -- 38,400
At $.50 Per Share 42,010 42 20,963 -- 21,005
At $.60 Per Share 4,600 5 2,755 2,760
At $.70 Per Share 154,393 155 107,920 108,075
Commissions:
At $.35 Per Share 23,428 23 (23)
At $.50 Per Share 50,545 50 (50)
At $.60 Per Share 2,000 2 (2)
At $.70 Per Share 12,036 12 (12)
Exercise of Options:
Cash:
At $.35 Per Share
By Related Party 19,571 20 6,830 6,850
Services:
At $.35 Per Share
By Related Party 200,429 200 69,950 -- 70,150
At $.50 Per Share 95,000 95 47,405 -- 47,500
Compensation Portion of
Options Exercised -- -- 261,500 -- 261,500
Net Loss -- -- -- (956,043) (956,043)
---------- ----------- ----------- ----------- -----------
Balance - July 31, 1996 12,607,715 12,608 6,076,152 (4,702,720) 1,386,040
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital Paid In The
----------------------------- In Excess of Development
Shares Amount Par Value Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Common Stock Issued For:
Cash:
At $.35 Per Share 50,000 $ 50 $ 17,450 $ -- $ 17,500
At $.40 Per Share 323,983 324 128,471 -- 128,795
At $.50 Per Share 763,881 762 381,174 -- 381,936
At $.60 Per Share 16,667 17 9,983 -- 10,000
At $.70 Per Share 7,143 7 4,993 -- 5,000
At $.80 Per Share 28,750 29 22,971 -- 23,000
Services:
At $.50 Per Share 295,884 296 147,646 -- 147,942
Commissions:
At $.35 Per Share 44,614 45 (45)
At $.40 Per Share 41,993 42 (42)
At $.50 Per Share 37,936 38 (38)
Expense:
At $.35 Per Share 8,888 9 3,099 3,108
At $.40 Per Share 9,645 10 3,848 3,858
Property and Equipment
At $.60 Per Share 7,500 8 4,492 4,500
Exercise of Options
Services:
At $.35 Per Share
By Related Party 136,301 136 47,569 47,705
Net Loss -- -- -- (805,496) (805,496)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1997 14,380,900 $ 14,381 $ 6,847,723 $(5,508,216) $ 1,353,888
=========== =========== =========== =========== ===========
</TABLE>
F-9
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For The Period
For The Year Ended September 17, 1982
July 31, (Inception)
-------------------------------- To
1997 1996 July 31, 1997
---- ---- ------------
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net Loss $ (805,496) $ (956,043) $(5,508,216)
Adjustments to Reconcile Net Loss to
Net Cash Used By Operating Activities:
Depreciation 6,350 8,344 344,832
Loss on Write-Off of Investment -- -- 10,000
Loss From Joint Venture -- -- 101,700
Value of Common Stock Issued For Services 207,113 287,890 1,461,558
Compensation Portion of Options Exercised -- 261,500 261,500
Changes in Operating Assets and Liabilities:
Decrease in Prepaid Expenses 51,408 164 --
(Increase) in Other Current Assets (769) (207) (976)
Increase in Security Deposit -- -- (3,667)
Increase (Decrease) in Accrued Expenses
and Taxes (13,896) (79,352) 55,910
----------- ----------- -----------
Net Cash Used By Operating Activities (555,290) (477,704) (3,277,359)
----------- ----------- -----------
Cash Flow From Investing Activities:
Purchase of Property and Equipment (10,697) (15,636) (1,705,650)
Investment in Joint Venture -- -- (101,700)
Investment in Privately Held Company -- -- (10,000)
----------- ----------- -----------
Net Cash Used By Investing Activities (10,697) (15,636) (1,817,350)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-10
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
For The Period
For The Year Ended September 17, 1982
July 31, (Inception)
-------------------------------- To
1997 1996 July 31, 1997
---- ---- ------------
<S> <C> <C> <C>
Cash Flow From Financing Activities:
(Increase) Decrease in Loans Receivable $ 2,082 $ 1,101 $ (5,826)
Increase in Loans Payable - Officers -- -- 18,673
Repayment of Loans Payable - Officers (9,673) (7,000) (18,673)
Proceeds From Sale of Common Stock 566,231 522,828 5,553,058
Commissions on Sale of Common Stock -- -- (5,250)
Expenses of Initial Public Offering -- -- (408,763)
Purchase of Certificate of Deposit - Restricted -- -- (5,000)
Purchase of Mining Reclamation Bond -- -- (6,000)
----------- ----------- -----------
Net Cash Provided By Financing Activities 558,640 516,929 5,122,219
----------- ----------- -----------
Increase In Cash and Cash Equivalents (7,347) 23,589 27,510
Cash and Cash Equivalents - Beginning 34,857 11,268 --
----------- ----------- -----------
Cash and Cash Equivalents - Ending $ 27,510 $ 34,857 $ 27,510
=========== =========== ===========
Supplemental Cash Flow Information:
Cash Paid For Interest $ -- $ -- --
=========== =========== ===========
Cash Paid For Income Taxes $ 688 $ 1,392 $ 24,115
=========== =========== ===========
Non-Cash Financing Activities:
Issuances of Common Stock as Commissions
on Sales of Common Stock $ 39,912 $ 43,125 $ 109,697
=========== =========== ===========
Issuance of Common Stock as Payment for Expenses $ 6,966 $ -- $ 6,966
=========== =========== ===========
Issuance of Common Stock as Payment for Property
and Equipment $ 4,500 $ -- $ 4,500
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 1 - Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, the Company has incurred
recurring losses through July 31, 1997 aggregating $5,508,216, and has a working
capital deficiency at July 31, 1997 of 21,598 that raises substantial doubt
about its ability to continue as a going concern. As indicated in Note 10, the
Company is in the process of raising additional capital and financing.
Continuation of the Company is dependent on (1) consummation of the contemplated
financings, (2) achieving sufficiently profitable operations and (3)
subsequently maintaining adequate financing arrangements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Property and Equipment
Property and equipment is reported at cost. It is the Company's policy to
capitalize costs incurred to improve and develop the mining and milling
property. General and administrative expenses are expensed as incurred.
Depletion of mine and mill improvements is computed at cost using the units
of production method. The Company has made no provision for depletion as the
mine and mill is not in the production stage. Provision is made for the
depreciation of office furniture and fixtures, machinery and equipment, and
building. Depreciation is computed using both straight-line and accelerate
methods over the estimated useful lives of the related assets.
F-12
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 1 - Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company accounts for income taxes under the asset and liability method.
The objective of the asset and liability method is to establish deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities at
enacted tax rates expected to be in effect when such amounts are realized or
settled.
NOTE 2 - Mining Reclamation Bonds
This represents certificates of deposit that have been deposited as
security for a Mining Reclamation Bond.
NOTE 3 - Loans Receivable
Included in loans receivable are unsecured short-term revolving loans of
$5,052 paid by the Company to Franklin Consolidated Mining Co., Inc., a publicly
traded corporation. These are non-interest bearing and due on demand.
F-13
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 4 - Property and Equipment
Property and equipment consists of the following:
Land $ 24,364
Building 22,655
Machinery and Equipment 358,230
Mining Claims and
Leasehold Improvements 106,786
Mill and Mining Improvements 1,192,658
Office Furniture, Fixtures
and Equipment 958
----------
1,705,651
Less: Accumulated Depreciation 344,832
----------
$1,360,819
==========
NOTE 5 - Accrued Expenses and Taxes
Included in accrued expenses and taxes are amounts aggregating $11,923 owed
to certain officers and stockholders of the Company for unpaid salaries.
NOTE 6 - Stockholders' Equity
At various stages in the Company's development, shares of stock have been
issued in exchange for the fair market value, as determined by the Board of
Directors, of services received with a corresponding charge to operations,
property and equipment or capital paid in excess of par value depending on the
nature of the services provided.
F-14
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 6 - Stockholders' Equity (Continued)
Common Stock Reserved For Issuance
The following is a table with respect to common stock reserved for options
as of July 31, 1997:
Options Outstanding
--------------------------
Number of Price Range
Shares Per Share
-------- ---------
Balance - July 1, 1991 -0- $ --
Options Granted:
Services 400,000 .10 - .50
Services - Related Parties 225,000 .50
Options Exercised - Related Parties (100,000) .50
-------- ---------
Outstanding - July 31, 1992 525,000 .10 - .50
Options Granted:
Services 200,000 .50
-------- ---------
Outstanding - July 31, 1993 725,000 .10 - .50
Options Granted:
Services 310,000 .50
Services - Related Parties 350,000 .50
Exercised:
Services (35,000) .50
Services - Related Parties (150,000) .50
Expired: (525,000) .10 - .50
-------- ---------
Outstanding - July 31, 1994 675,000 .50
Exercised:
Services (35,000) .50
Services - Related Parties (350,000) .50
-------- ---------
Outstanding - July 31, 1995 290,000 .50
F-15
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 6 - Stockholders' Equity (Continued)
Common Stock Reserved For Issuance
The following is a table with respect to common stock reserved for options
as of July 31, 1997:
Options Outstanding
-----------------------------
Number of Price Range
Shares Per Share
---------- ---------
Options Granted:
Services - Related Parties 600,000 .35
Exercised:
Cash - Related Parties (17,500) .40
Services (95,000) .50
Services -Related Parties (202,500) .35
Expired: (165,000) .50
---------- ---------
Outstanding - July 31, 1996 410,000 .35 - .50
Options Granted
Services - Related Party 1,545,000 .35
Services 10,000 .35
Exercised
Service - Related Party (101,730) .35
Expired (30,000) .35
---------- ---------
Outstanding July 31, 1997 1,833,270 $ .35
========== =========
Authorized Common Stock
In September 1993 the Company's shareholders approved an increase in the
unauthorized common stock from 100,000,000 shares to 150,000,000 shares.
Effective April 11, 1997 the Company underwent a 1 for 10 reverse split
with all fractions being rounded up into new common stock.
All reference to common stock is restated to reflect the 1 for 10 reverse
split.
F-16
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 7 - Income Taxes
For income tax purposes, the Company has a net operating loss carryforward
at July 31, 1997 of approximately $4,300,000 beginning to expire at July 31,
2001 if not offset against future federal taxable income.
Pursuant to FASB 109, the Company has elected to take a 100% reserve on the
deferred tax asset arising from the net operating loss $1,462,000 and
accordingly there is no cumulative effect adjustment or current year tax benefit
recorded.
NOTE 8 - Commitments and Contingencies
Litigation
In June 1996, the Company commenced an action against Franklin Consolidated
Mining Company, Inc. ("Franklin") in District Court, Clear Creek County Colorado
with respect to certain monies advanced by the Company to Franklin in connection
with expenses attributable to common office space. On July 10, 1996, the Company
entered into a Settlement Agreement with Franklin Consolidated Mining
Corporation pursuant to which it was agreed that the Company would settle all
claims involved for $18,000 and the Company will as soon as possible, (I)
discontinue the action against Franklin as well as withdraw any motions filed
with respect thereto, (ii) remove any liens or other encumbrances which may have
been filed against the assets of Franklin and (iii) execute releases with
respect to such claims. As of July 31, 1997 Franklin has paid the Company
$18,000 of the $18,000 owed under the Settlement Agreement.
F-17
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 9 - Refining Contract
The Company has entered into an agreement with ASARCO Incorporated for the
sale and refining of lead concentrates produced from the Company's mine in
Colorado. The Agreement provides that the Company may ship metallic materials in
lots of 200 - 300 tons to ASARCO's smelter in East Helena, Montana. ASARCO will
take delivery of the material, perform the smelting operations and pay for the
metals based on the London Metals Exchange less certain deductions for expenses
of smelting and adjustment for excess impurities, including water. The period of
the agreement commenced on September 1, 1995 through and including August 31,
1997 and continues thereafter subject to cancellation on sixty (60) days'
written notice by either party; however, the agreement shall not extend beyond
June 30, 2000.
NOTE 10 - Liquidity and Going Concern Uncertainty
The Company has incurred recurring losses amounting to $5,508,216 and has a
working capital deficiency of $21,598 at July 31, 1997. These events raise
substantial doubt about the Company's ability to continue as a going concern.
Specific plans to obtain financing for a full scale mining and mill
operation may include a combination of one or more of the following:
a. Private placements of the Company's securities to institutions,
private individuals, mining companies, and/or investment groups. During the
fiscal year ended July 31, 1997 the Company raised approximately $566,231
through the sales of common stock to investors, which enabled the Company
to complete the Hunter Shaft.
F-18
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1997
NOTE 10 - Liquidity and Going Concern Uncertainty (Continued)
b. A working arrangement with a mining company pursuant to which the
Company would mine and the other company would mill, smelt and market the
products. Under these conditions, the Company's cost would be concentrated
on the mining effort only. The Company has negotiated such an agreement.
The agreement ran for an initial two year term. Since September 1, 1997,
the agreement is terminable by either party on sixty (60) days' notice.
Notwithstanding the foregoing, the agreement would not extend beyond June
30, 2000. The Company would deliver metallic minerals to the mining
company's mill site six miles southeast of Leadville, Colorado. The price
for the material would be based upon the London Metals Exchange market
price less certain deductions for treatment and impurities on the date of
delivery.
Assuming that the Company is able to obtain funds from one or more of the
above sources, planned activities over the next twelve months should include
development of B-Zone mineral structure in preparation of mining and tunnel to
Hunter Shaft, drive tunnel to Weston fault mineral structure and develop,
develop B-Zone minerals, operate mine and mill.
There is no assurance whatsoever that any of the Company's proposed plans
to raise capital and otherwise fund operations will prove successful. The
Company's ability to continue as a going concern is dependent upon its ability
to obtain sufficient funding as discussed above and its inability to do so will
delay or cease the Company's planned operations as discussed above.
F-19
<PAGE>
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The following table sets forth certain information concerning the directors
and executive officers of the Company:
First
Became
Name Age Director Position
- ---- --- -------- --------
Donald W. Wilson 69 9/22/82 President & Director
Gifford A. Dieterle 66 9/22/82 Executive Vice President,
Secretary, Treasurer
& Chairman of the Board
Robert Roningen 65 9/14/93 Vice President- Operations
& Director
Horst Scherp 69 1/25/95 Director
Jack V. Everett 76 1/25/95 Director
14
<PAGE>
Directors are elected at the meeting of shareholders called for that
purpose and hold office until the next shareholders meeting called for that
purpose or until their resignation or death. Directors can also be elected by
the Board of Directors and hold service until their resignation or death.
Officers of the corporation are elected by the directors at meetings called by
the directors for its purpose. Robert L. Elder and Richard Asbury resigned as
officers and/or directors in December 1994.
DONALD W. WILSON, President and Director. His highest educational degree is
a High School diploma obtained from Leadville High School in Leadville, Colorado
in 1949. He additionally attended the Colorado School of Mines in 1969 on a
non-matriculating basis, where he took courses in geology, surveying, mapping
and mathematics. He did not graduate and therefore did not obtain a degree. His
employment history since 1977 consists of the following: From May 1983 until the
present, he has been President of the Company. From January 1981 to May 1983, he
was mine and mill manager of the Franklin Mine, a gold mine in Colorado which is
owned by Franklin Consolidated Mining Company. From 1979 to 1980, he was
employed by M.S.T. Company - Rio Blanco Oil Shale Corporation as a project
engineer. From 1977 to 1979, he was employed by United Nuclear-Homestake
Partnership, Inc., Grants, New Mexico as a superintendent of shaft sinking
operation.
GIFFORD A. DIETERLE, Executive Vice-President, Treasurer and Chairman of
the Board of Directors of the Company. His highest educational degree is a M.S.
in Geology obtained from New York University. From 1977 until July 1993, he was
Chairman, Treasurer and Executive Vice-President of Franklin Consolidated Mining
Company. From 1965 to 1987, he was lecturer in geology at the City University of
N.Y. (Hunter Division). Since 1962, he has been a consulting geologist engaged
in the geological evaluation of oil and mineral properties. From 1978 until the
present, he has been a registered representative with Datek Securities.
ROBERT RONINGEN, Vice President-Operations and a director, has, for more
than the past five years, been engaged in the practice of law as a sole
practitioner and is a self-employed consultant geophysicist in Duluth,
Minnesota. From 1988 to August 1993, he was an officer and director of Franklin
Consolidated Mining Company, Inc. He graduated from the University of Minnesota
in 1957 with a B.A. in geology and in 1962 with a degree in Law.
HORST SCHERP, a director, has been an Associate Professor of Geology at
Hunter College of the City of New York since 1963. From 1980 to 1987, he was a
Director and geologist for Jeger Oil Corp. Mr. Scherp received a Ph.D in geology
from the University of Gottingen, Germany, in 1959.
JACK V. EVERETT, a director, has been a consulting mining geologist for 25
years, with expertise in all phases of exploration for base and precious metals.
Following his 1947 graduation from Michigan State University, he was District
Geologist for Pickands Mather & Company on the Cuyuna Iron Range, Minnesota.
From 1951 to 1970, he was Chief Geologist and Exploration Manager for W.S. Moore
Company, Duluth, Minnesota, an iron mining company with gold and base metal
sulfide holdings in the U.S. and Canada.
15
<PAGE>
Compliance With Section 16(a) of The Securities Exchange Act of 1934
To the Company's knowledge, based solely on a review of such materials as
are required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended September 30, 1996, except that Gifford A. Dieterle failed to file two
reports concerning two transactions; and Donald W. Wilson, Robert Roningen,
Horst Scherp and Jack V. Everett each failed to file one report concerning one
transaction.
The following table shows all the cash compensation paid or to be paid by
the Company or any of its subsidiaries, as well as certain other compensation
paid or accrued, during the fiscal years indicated, to the Chief Executive
Officer for such period in all capacities in which he served. No other Executive
Officer received total annual salary and bonus in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------- --------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------ ----- ----- ----- ----- ----- ----- ----- -----
Other Restrict- All Other
Annual ed Stock LTIP Compensa
Name and Principal Compen- Award Options Payouts -tion
Position Year Salary ($) sation($) ($) SARs ($) (i)
- ------------------ ----- ------ ----- --------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald W. Wilson 1997 54,586 -0- -0- -0- 200,000 -0- -0-
Chief Executive 1996 54,023 -0- -0- -0- 200,000 -0- -0-
Officer 1995 53,472 -0- -0- -0- -0- -0- -0-
</TABLE>
The following table sets forth information with respect to the Company's
Executive Officers concerning the grants of options and Stock Appreciation
Rights ("SAR") during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- -------------------------------------------------------------------------------------------------------------------
Percent of Total
Options/SARs
Options/ Granted to
SARs Employed in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/SH) Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald W. Wilson 350,000 31.5% $.35 April 2, 1998
Gifford Dieterle 350,000 31.5% $.35 April 2, 1998
Robert Roningen 350,000 31.5% $.35 April 2, 1998
Jack Everett 50,000 4.5% $.35 April 2, 1998
Horst Scherp 10,000 1.0% $.35 April 2, 1998
</TABLE>
16
<PAGE>
The following table sets forth information with respect to the Company's
Executive Officers concerning exercise of options during the last fiscal year
and unexercised options and SARs held as of the end of the fiscal year:
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Option/SARs
Shares at FY-End(#) at FY-End(#)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- ---- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C>
Donald W. Wilson -0- -0- 550,000 --
Gifford Dieterle 96,730 $ 9,673 403,270 --
Robert Roningen -0- -0- 350,000 --
Jack Everett -0- -0- 50,000 --
Horst Scherp 50,000 17,500 10,000 --
</TABLE>
The following table sets forth information with respect to the Executive
Officers concerning awards under long term incentive plans during the last
fiscal year:
<TABLE>
<CAPTION>
Estimated Future Payouts under Non-Stock
Price Based Plans
(a) (b) (c) (d) (e) (f)
------------------------------------------------
Performance
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold Target Maximum
Name Rights(#) Payout ($ or #) ($ or #) ($ or #)
- ---- ------------ ------------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Donald W. Wilson -0-
Gifford Dieterle -0-
Robert Roningen -0-
Jack Everett -0-
Horst Scherp -0-
</TABLE>
Directors are not compensated for acting in their capacity as Directors.
Directors are reimbursed for their accountable expenses incurred in attending
meetings and conducting their duties.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners -- The persons set forth on
the charts below are known to the Company to be the beneficial owners of
more than 5% of the Company's outstanding voting Common Stock as of July
31, 1997.
(b) Security Ownership of Management -- Information concerning the number and
percentage of shares of voting Common Stock of the Company owned of record
and beneficially by management as of November 7, 1997, is set forth on the
charts below.
17
<PAGE>
<TABLE>
<CAPTION>
Name of Amount & Nature
Beneficial of Beneficial Approximate
Title of Class Owner Ownership 11/7/97(1) Percentage(2)(3)
- -------------- ----- -------------------- ----------------
<S> <C> <C> <C>
Common Stock Donald W. Wilson 1,335,100(3) 8.9%
Common Stock Gifford A. Dieterle 1,421,105(3)(4) 9.6%
Common Stock Jack Everett 325,000(3) 2.2%
Common Stock Robert Roningen 666,688(3)(5) 4.5%
Common Stock Horst Scherp 15,000(3) *
All Officers and
Directors as a
Group (5) 3,762,893(3)(4)(5) 23.9%
</TABLE>
- ----------
* Less than one percent.
(1) Supplied by the persons set forth above.
(2) Based upon 14,380,900 shares issued and outstanding as of November 7, 1997.
(3) For Messrs. Wilson, Dieterle, Everett, Roningen and Scherp includes,
respectively, 550,000 shares, 403,270 shares, 75,000 shares, 350,000 shares
and 10,00 shares issuable upon exercise of options and/or warrants.
(4) Includes shares owned by Mr. Dieterle's wife.
(5) Includes shares owned by Mr. Roningen's wife and children.
Item 12. Certain Relationships and Related Transactions.
Effective April 11, 1997, the Company reverse split its outstanding shares
of Common Stock on a one-for-ten basis and adjusted the terms of all outstanding
options and warrants accordingly. Unless the context specifically indicates
otherwise, all references herein to Shares, options and warrants have been
adjusted to take into account the reverse split.
18
<PAGE>
Between September 1, 1991 and July 31, 1995, the Company and Franklin
Consolidated Mining & Milling Company lent to one another on short term basis,
small amounts of money for current operations. The Company currently is a
creditor of Franklin Consolidated Mining Company in the amount of approximately
$5,826.
On April 2, 1997, the Company issued the following options to certain
officers and directors. Donald Wilson - option to purchase 350,000 shares;
Gifford Dieterle - option to purchase 350,000 shares; Robert Roningen option to
purchase 350,000 shares; Jack Everett -option to purchase 50,000 shares; Horst
Scherp - option to purchase 10,000 shares. All options granted on that date
expire on April 2, 2002 and are exercisable at $.35 per share.
On January 5, 1996, the Company issued the following options to certain
officers and directors. Donald Wilson - option to purchase 200,000 shares;
Gifford Dieterle - option to purchase 220,000 shares; Robert Roningen - option
to purchase 150,000 shares; Jack Everett - option to purchase 25,000 shares;
Horst Scherp - option to purchase 5,000 shares. All options granted on that date
expire on January 5, 1998 and are exercisable at $.35 per share.
During fiscal 1993 and 1994, Gifford A. Dieterle an officer and director of
the Company, loaned the Company $18,873, which funds were used for operating
expenses. There were no specific repayment terms and the loans were interest
free. As of July 31, 1997, these loans had been paid in full.
Item 13. Exhibits and Reports on Form 8-K.
Exhibits
3.a Certificate of Incorporation of Company(1)
3.b Amendments to Certificate of Incorporation of Company(1)
3.c By-Laws of Company(1)
10.a Mining Claims(1)
10.b ASARCO Agreement
- ----------
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form S-18 (SEC File No. 2-86160-NY) filed on or about November 10,
1983, and incorporated herein by this reference.
Reports of Form 8-K
The Company has filed the following Reports of Form 8-K during the year
ended July 31, 1997 with the principal office of the Securities and Exchange
Commission in Washington, D.C.:
None.
19
<PAGE>
AGREEMENT NO. L95035
LEADVILLE MINING & MILLING CORPORATION
AND
ASARCO Incorporated
ORE
DATED: SEPTEMBER 1, 1995
<PAGE>
AGREEMENT NO. L95035
--------------------
LEADVILLE MINING & MILLING CORPORATION, 700 Carr Street, Lakewood, Colorado
80215, hereinafter called "SHIPPER" agrees to deliver...........................
AND
ASARCO Incorporated, 180 Maiden Lane, New York, NY 10038, hereinafter called
"ASARCO" agrees to receive and process..........................................
1. PRODUCT
Ore as produced from the properties of Leadville Mining & Milling
Corporation.
2. ANALYSIS
The product shall substantially assay:
Pb: >2.0% Zn: >4.5%
Ag: >4.0 opst Cu: 0- 1.0%
Au: >0.1 opst
3. QUANTITY
As available in lots of at least 200 - 300 tons.
4. DURATION
The period of this agreement shall commence with product delivered on or
after September 1, 1995 through and including August 31, 1997 and shall
continue thereafter on a sixty (60) day written notice of cancellation by
either party, provided, however, the agreement shall not extend beyond June
30, 2000.
5. DELIVERY
Freight prepaid F.O.B. truck at ASARCO's Leadville, Black Cloud Mine in
Colorado (hereinafter called "LEADVILLE"). The delivery is to be scheduled
by appointment, details of which will be mutually arranged. Truck receiving
hours are presently from 8:00 a.m. to 2:00 p.m., Monday through Friday,
major holidays excepted.
6. DATE OF DELIVERY
The date of delivery Of product is the date of arrival of the last railcar
or truck of each smelter lot at LEADVILLE.
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
7. TITLE & RISK
Title and all risks of loss shall pass to ASARCO upon delivery of product.
8. PRICE
The purchase price of the product is the sum of the payments less the sum
of the deductions specified below.
PAYMENTS
--------
9. GOLD
Deduct 0.02 troy ounce per ton of product from the gold assay and pay for
75% of the remaining gold content at the daily London Final gold quotation,
as published in Metals Week, averaged for the quotational period, less a
deduction of $5.00 per troy ounce of payable gold.
10. SILVER
Deduct 1.5 troy ounce per ton of product from the silver assay and pay for
70% of the remaining silver content, at the Handy and Harman New York
quotation for refined silver, as published in Metals Week, averaged for the
quotational period, less a deduction of $0.25 per troy ounce of payable
silver.
11. LEAD
Pay for 65% of the remaining lead content at the average of the four LME
quotations for refined lead, as officially quoted by the London Metal
Exchange morning session and published in Metals Week (currently LME CASH
and LME THR-MO), averaged for the quotational period, less a deduction of
$0.05 per payable pound of lead.
Notwithstanding the foregoing, the maximum quotation for lead payment above
shall be the London Metal Exchange Settlement quotation, as published in
Metals Week (currently LME SETTLEMENT), averaged for the quotational
period.
12. ZINC
Deduct 1.0 percent from the zinc assay and pay for 60% of the remaining
zinc content, at the LME Settlement price as published in Metals Week,
averaged for the quotational period, less a deduction of $0.25 per pound of
payable zinc.
-2-
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
13. QUOTATIONAL PERIOD
The quotational period for gold, silver, lead and zinc shall be the average
of the fourth (4th) calendar month following date of delivery of product.
No payment will be made for any metal or content except as above specified. From
the total of the above, make the following:
DEDUCTIONS
----------
14) TREATMENT DEDUCTION
The base treatment deduction shall be $15.00 per dry short ton of product.
15) ADDITIONAL DEDUCTIONS
The deductions specified above are for product free of deleterious
impurities. Product delivered containing such impurities shall be subject
to additional deductions in accordance with the schedule below.
A) Arsenic: Deduct $20.00 per ton for each 1 unit that the arsenic assay
exceeds 0.5%, fractions in proportion.
B) Antimony: Deduct $20.00 per ton for each 1 unit that the antimony
assay exceeds 0.8%, fractions in proportion.
C) Copper: Deduct $15.00 per ton for each 1 unit that the copper assay
exceeds 0.15%, fractions in proportion.
If product should contain any other deleterious impurities which, in
ASARCO's sole judgment, preclude economic treatment of product, then ASARCO
may terminate this contract on ninety (90) days notice, unless mutual
agreement is reached as to appropriate deduction for such impurities.
16. SETTLEMENT
ASARCO shall make a one hundred percent (100%) provisional payment when all
necessary information is available. Final settlement to be made on the
tenth (l0th) business day of the month following the quotational period.
-3-
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
17. WEIGHING, SAMPLING & ASSAYING
Weighing and sampling (at which SHIPPER or SHIPPER's representative may be
present) as done by ASARCO according to ASARCO's standard practice at the
receiving plant promptly after receipt of product, will be accepted as
final. The absence of SHIPPER or SHIPPER's representative shall be deemed a
waiver of this right in each instance. After sampling, the product may be
placed in process, commingled, or otherwise disposed of by ASARCO. The
sample of each lot to be used for determination of metal content shall be
divided into not less than four equal parts; one to be retained by ASARCO,
one to be forwarded to SHIPPER, one to be retained for umpire purposes and
one for reserve. Each party shall assay its part and the assay results
shall be exchanged. Umpires, when required, shall be so instructed by
ASARCO. When the difference between the assays of ASARCO and SHIPPER is
within the splitting limits designated below, the exact mean of the assays
shall be the settlement assay. When the difference between the assays of
ASARCO and SHIPPER is greater than the splitting limits specified, an
umpire shall be selected in rotation from the list designated below, whose
assay shall be the settlement assay if within the limits of the assays of
the two parties; and, if not, the assay of the party nearer to the umpire
shall be the settlement assay. The cost of the umpire shall be borne by the
party whose assay is further from the umpire assay; and, in the event the
umpire assay is the exact mean of the assays of the parties, then the cost
shall be borne equally by both parties. In case of SHIPPER's failure to
submit assays within sixty (60) days from the date samples are available to
SHIPPER, ASARCO's assays shall govern. The splitting limits and the umpire
assayers shown below shall be subject to change by mutual agreement. Gold
and silver assays are to be determined by commercial fire assay method.
Splitting Limits
----------------
Au: 0.02 troy oz./ton As: 0.5%
Ag: 0.5 troy oz./ton Sb: 0.5%
Pb: 0.5% Cu: 0.1%
Zn: 0.5%
Umpire Assayers
---------------
Assay Laboratories A. H. Knight Laboratories
2155 Last Chance Road P. O. Box 3504
Elko, NV 89801 130 Tredd Street
Telephone: (702) 738-3614 Sparatanberg, SC 29304
-4-
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
18. TAXES
The terms of this agreement are based on the taxes and other governmental
charges to which ASARCO is subject as of July 1, 1995. Any increase
subsequent to said date in the amount paid by ASARCO for taxes or other
governmental charges national, state, local or municipal imposed in
respect to or measured by the product covered hereunder, or the production
extraction, smelting, refining, sale, transportation, proceeds or value
thereof, or of the contents there of, including, without limitation any
such payment based on pollutant emissions but excluding income taxes
levied upon ASARCO, shall be for the account of SHIPPER and may be invoiced
at time of settlement or billed separately at such later time as the
amount due can be determined.
19. FORCE MAJEURE
Performance of this agreement is subject to any delays caused by strikes or
other disabling causes beyond the control of either party.
20. DEFINITIONS
A "ton" means a dry short ton or 2,000 dry avoirdupois pounds.
A "unit" means 1% or 20 pounds per ton.
A "calendar month" means a named month in the calendar.
A "business day" means a named day in the calendar, Saturdays, Sundays, and
major holidays excluded.
A "dollar ($) or cent" means lawful currency of the United States.
21. DIVERSION
ASARCO may at its sole option sell or divert the product to another person
and plant and, subject to the other provisions of this clause, any increase
or decrease in freight as against delivery as provided herein shall be for
ASARCO's account. SHIPPER shall have the obligation to comply with ASARCO's
diversion instructions including but not limited to shipping instructions
in accordance with applicable freight tariffs governing such diversion. Any
additional costs incurred by reason of SHIPPER's failure to comply with
said instructions and freight tariffs shall be for SHIPPER's account. In
case of such diversion, weighing and sampling shall be performed at the
receiving plant and date of delivery of product shall be the date of
arrival of the last car of each lot at the receiving plant. All other
provisions of the agreement shall apply in all other respects as if no
diversion had occurred. Notwithstanding the foregoing, ASARCO shall in no
case, including an event of force majeure at plant designated to receive
product, be under any obligation to divert the product.
-5-
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
22. SUSPENSION OF QUOTATIONS
In the pricing of product or any metal contained therein, if one or more
suspensions of quotations occur for any cause resulting in the absence of
the quotation for more than three (3) days during the quotational period
specified in this agreement, then the beginning of said period (or the
balance thereof if suspension begins during the period) shall be deferred a
number of quotational days equal to the number of quotational days
occurring during the entire time of suspension, whether before, during or
after said quotational period. When the normal number of quotations for the
period specified in this agreement have been thus obtained, such quotations
shall be averaged for pricing. One or more suspensions of quotations
aggregating three (3) days or less during a quotational period shall be
disregarded and the remaining quotations shall be averaged for pricing.
In case any firm or publication whose quotations are the basis for pricing
any metal under this agreement shall go out of business, cease
publication, or discontinue the making of quotations, then the quotations
by such other firm or publication, as the parties shall agree upon shall
be used.
23. NOTICES
All notices, requests and other communications hereunder shall be in
writing and shall be deemed to have been duly given or made when sent by
first-class mail postage prepaid, addressed:
If to ASARCO: ASARCO Incorporated
180 Maiden Lane
New York NY 10038
Attention: Director, Ore Department
Telephone: (212) 510-2000
Telecopy: (212) 510-2054
Copy to Omaha: ASARCO Incorporated
Black Cloud Mine
Leadville Unit
P.O. Box 936
Leadville, Colorado 80461
Attention: Plant Manager
Telecopy: (719) 486-3874
-6-
<PAGE>
LEADVILLE MINING & MILLING CORPORATION AGREEMENT NO. L95035
23. NOTICES (Continued)
and if to SHIPPER: Leadville Mining & Milling Corporation
700 Carr Street
Lakewood, Colorado 80215
Attention: Mr. Donald Wilson
Telephone: (303) 328-3398
or, in each case, at other such address as may be hereafter or has been
designated most recently in writing by the addressee to the addresser.
Any notice given hereunder may be given by telegraph or telex and
confirmed by mail in due course in which case such notice shall be deemed
given or served when sent in telegraphic form.
24. SUCCESSION
This agreement shall bind and inure to the benefit of the parties hereto,
their legal representatives, successors and assigns. This agreement shall
not be assignable by either party hereto without the written consent of
the other. Such consent shall not be unreasonably withheld.
25. WAIVER
Waiver of any breach of any provision hereof shall not be deemed to be a
waiver of any other provision hereof or of any subsequent breach of such
provision.
This agreement shall take effect as a contract made in accordance with and be
governed by the laws of the State of New York and shall come into full force and
effect as of July 1, 1995, when signed by both parties.
LEADVILLE MINING & MILLING ASARCO Incorporated
CORPORATION
By /s/ [legible] By /s/ [illegible]
- -------------------------------- ----------------------------
Director, Ore Department
GFA:lmd
7/25/95
-7-
<PAGE>
Statements contained in this Form 10-KSB as to the contents of any
agreement or other document referred to are not complete, and where such
agreement or other document is an exhibit to this Report or is included in any
forms indicated above, each such statement is deemed to be qualified and
amplified in all respects by such provisions.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LEADVILLE MINING AND MILLING CORP.
Dated: November 13, 1997 By: /s/ Donald W. Wilson
----------------------------------
Donald W. Wilson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Donald W. Wilson
- ----------------------- President, Principal November 13, 1997
Donald W. Wilson Executive Officer and
a Director
/s/ Gifford A. Dieterle
- ----------------------- Treasurer and November 13, 1997
Gifford A. Dieterle Principal Financial
and Accounting
Officer and Chairman
of the Board of Directors
/s/ Jack Everett
- ----------------------- Director November 13, 1997
Jack Everett
/s/ Robert Roningen
- ----------------------- Director November 13, 1997
Robert Roningen
/s/ Horst Scherp
- ----------------------- Director November 13, 1997
Horst Scherp
-9-
<PAGE>
SUPPLEMENTAL INFORMATION
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
NOT APPLICABLE
22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 27510
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34312
<PP&E> 1705651
<DEPRECIATION> 344832
<TOTAL-ASSETS> 1409798
<CURRENT-LIABILITIES> 55910
<BONDS> 0
0
0
<COMMON> 14381
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1409798
<SALES> 0
<TOTAL-REVENUES> 2063
<CGS> 0
<TOTAL-COSTS> 318141
<OTHER-EXPENSES> 488730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (804808)
<INCOME-TAX> 688
<INCOME-CONTINUING> (805496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (805496)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
