U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1998
[ ] 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) 344-2785
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. $ 1,377
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
($.47) and asked ($ 50) price of the issuer's Common Stock as of October 26,
1998 was $1,055,315, based upon the average between the closing bid and asked
price ($ 0.485) multiplied by the 14,547,041 shares of the issuer's Common Stock
held by non-affiliates as of October 28, 1998. (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 October 28, 1998: 17,476,796
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 10
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 12
Item 8. Changes in and Disagreement with Accountants 15
on Accounting and Financial Disclosure
Part III
Item 9. Directors, Executive Officers, Promoters 15
and Control Persons; Compliance with
Section 16(a) of the Exchange Act.
Item 10. Executive Compensation 17
Item 11. Security Ownership of Certain Beneficial 18
Owners and Management
Item 12. Certain Relationships and Related Transactions 19
Item 13. Exhibits and Reports on Form 8-K 20
Signatures 21
Supplemental Information
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.
CuSO(4): Copper Sulfate.
Feeder Veins: Small veins.
Floatation Plant: Mechanical system that separates valuable minerals
from rock powder using chemical solutions.
Gravity Plant: Mechanical system that separates valuable minerals
from rock powder using the force of gravity for
separation.
Hydrometallurgical
Plant: A smelter that 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.
MNSO(4): 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 that remains as an open space.
OPT: Ounces per ton.
Patented Claim: Privately owned mineral land.
PbSO(4): Lead Sulfate.
Place Claim: Claim on which minerals are found in sand and gravel
- on surface.
Positive Ore: Ore that is proven (same as proven).
Probable Ore: Inferred ore. Ore which is believed to exist, but not
fully proven.
Proven Ore: Minerals that are determined to be recoverable.
Replacement
Ore Body: Mineral ore, irregular in form, which is emplaced in
limestone.
Rhyolite
Agglomerate: An igneous rock (rhyolite) which has been fractured
(crushed) and recemented.
Sherrit
Gordon Process: Hydrometallurgical method of processing (smelting)
zinc 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.
ZNSO(4): 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 Hopemore to Hunter Tunnel and
commenced the connecting raise between the 7th and 5th levels.
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 ASARCO Incorporated ("ASARCO") may
perform milling 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.
1
<PAGE>
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, Hunter shaft was completed. The Company commenced
exploration of potential mineral horizons on the 7 level, including gold-bearing
minerals in the "B-Zone" and other locations associated with the #4 vein. During
the period of 1997 and 1998, long-hole drilling at the B-Zone location resulted
in the discovery of an area of mineralization. The minerals located were
discovered in the lower part of the Parting Quartzite, in its shaly member.
Management believes that based on the initial long hole drilling results,
mineralization extends upward, into the Dyer dolomite and downward into the
Manitou dolomite. Long hole drilling resulted in a preliminary average grade of
1.29 oz. gold per ton in a limited 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
$1,002,000 in capital. These funds would be applied towards mining and milling,
in addition to the continued exploration of the B-zone and other suitable
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 commodity exchange (London Metals Exchange market).
Employees
As of July 31, 1998, the Company has 10 full time employees, consisting of 2
executive officers, 7 mine laborers and 1 administrative personnel.
2
<PAGE>
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 of Percent Of
Name Claim No. Acreage Claim Ownership
- ---- --------- ------- ----- ---------
Belle Placer 02778 120.860 Placer 62.5
Pueblo 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
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 associations 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.
3
<PAGE>
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 acre mill site and has an approved tailing
disposal location. The plant has been pilot tested and is ready for production.
All necessary permits to operate have been granted and are current.
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
the 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 types of minerals mined.
The Company has employed a man with mill experience whose duties will be to
operate the Company's reduction plant. The initial mill feed will be
development-grade, gold bearing material from the B-Zone location. As the B-Zone
is further evaluated, and if results are favorable, commercial high-grade ore
from that 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 presently
in a condition whereby it can efficiently recover gold; silver and lead from
newly mined 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.
4
<PAGE>
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 7th level, partial rehabilitation of the other levels,
several raises, the 5th 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 7th 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.
Mineralized Material
Tons Au in OPT Ag in OPT %PB %ZN %Cu
- ---- --------- --------- --- --- ---
121,200 0.178 8.63 3.98 12.2 0.35
* 5,000 1.29 7.00
[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.]
* By exploratory drilling, 1977, 1988
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. Steep
sulfide veins commonly control the mineralized zones. 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].
5
<PAGE>
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 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.
6
<PAGE>
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
5,000 1.290 7.00
- -------
126,200
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 6th level (old Ibex 7th level). 5,000 tons are assigned to the B-Zone.
Other quantities of unknown size are assigned to seven other areas for which
dimensions are unknown.
The B-Zone bedded structure which, is of unknown size and situated in the shale
member of the Parting Quartzite and believed to exist in the Manitou and Dyer
limestones assayed, 1.29 ounces of gold and 7.00 ounces of silver per ton over a
length of 35 feet. The thickness of the shale bed measured 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
7
<PAGE>
#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
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
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
Gold Based Minerals - B-Zone, 7 level
5,000 NW 1/4 Block 429
Total 1.29 5.00 .50% .50% .79%
- ---------------------------------------------------------------------------
126,200 Tons Total
[Donald L. Wilson, Report on the Properties of Leadville Mining & Milling Corp.
August 14, 1989. Mr. Wilson is the President of the Company.]
8
<PAGE>
Weston Fault Massive Sulfide Exploration Targets
The Weston fault forms the western boundary of the down-dropped block that
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 that 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 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
During fiscal 1999 the Company plans exploratory drilling in the NE 1/4 Block
427, 7th level and in the S 1/2, Block 995, 6th level. Block 427 represents an
area of new potential; whereas, Block 995 would explore an upward and westward
extension of the B-Zone. During 1998, exploration continued on the B-Zone
location with encouraging results. Exploration of the D-Zone, Block 452, 7th
level, resulted in the discovery of high-grade base-metal mineralization.
9
<PAGE>
In addition to the exploration targets above, management is aware of additional
targets of ore potential, some of which are listed below:
A) The Hopemore-Hunter mine area exploration for massive sulfide
replacement deposits and vein deposits 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 drilling will continue on the B-Zone upward extension, level 6 Block
995 to determine size and shape of the mineral structure. The Weston Fault and
#4 (Block 427, level 7) vein juncture also will be tested by tunnel or long hole
drilling. The cost of the program is estimated to be $148,000 and, assuming
adequate funding, will require approximately 12 months. The Company also plans
to commence an exploratory tunnel from the Hopemore or Hunter shaft location to
the New President shaft, located at the Penn Group of claims. This project will
be long-term and require substantially more than one year. It is estimated that
during fiscal 1999, its cost will be $150,000. 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
NONE
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 1998.
10
<PAGE>
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 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
- -------------- ----------------
July 31, 1998 .5936 .4375
April 30, 1998 .65625 .4375
January 31, 1998 .8125 .7500
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
- -------------------------------
* 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 October 26, 1998 amounts to 1564 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 17,476,796 as of October 26, 1998.
(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.
11
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Cautionary Statement on Forward-Looking Statements
Except for the historical information contained herein, certain of the matters
discussed in this annual report are "forward-looking statements," as defined in
Section 21E of the Securities Exchange Act of 1934, which involve certain risks
and uncertainties, which could cause actual results to differ materially from
those discussed herein including, but not limited to, risks relating to changing
economic conditions, changes in the prices of minerals and the results of
testing and actual mining.
The Company cautions readers that any such forward-looking statements are
based on management's current expectations and beliefs but are not guarantees of
future performance. Actual results could differ materially from those expressed
or implied in the forward-looking statements.
Fiscal 1998 Compared to Fiscal 1997
Results of Operations
During the fiscal year ended July 31, 1998, the Company continued exploration
and development activity at its gold/silver/base metal mining project in
Colorado. The effort was mainly concentrated on driving an escape tunnel towards
the Hunter shaft and commencing a vertical raise to connect the 5th and 7th
levels. During this time, the Company did not receive revenue from its
operations although it expended considerable sums for the development of its
proposed mining and milling operation. (See "Liquidity and Capital Resources").
Exploration of the B-Zone by long hole drilling during 1998 continued on the
Hopemore mine level #7 with encouraging results. Horizontal drilling indicated a
continuation of high-grade gold mineralization both in a northerly and westerly
direction. Core drilling of the D-Zone, Block 452, 7TH level resulted in
discovery of a new base metal sulfide zone of mineralization. The exploration
program for fiscal 1999 as currently projected consists of long hole drilling of
NE 1/4 Block 427, 7th level and S 1/2 Block 995, 6th level. This project will
require approximately 12 months (after funding) and cost an estimated $148,000.
Additional, Federally mandated requirements must be met during fiscal 1999.
Before mining is permitted under the Federal safety laws, the #5 to #7 level
raises must be completed. The estimated cost of this project is $78,000. 000.
The Company has, at present, approximately 126,200 tons of mineralized material
containing varied amounts of gold, silver, lead, zinc and copper. Please refer
to pages 7 and 8 "Location of Mineralized Material" The possible mineral
potential of all the Company's properties, as indicated by Scott Hazlett,
Consulting Geologist, ranges up to 5,000,000. The Company to date has completed
only limited exploration of the Hopemore 7th level (by crosscut, raise, drift,
and drill). Stopes, chutes, ore passes and handling facilities are in
operational condition. Assuming that adequate funding is available, the Company
is prepared
12
<PAGE>
to enter into a limited mining and milling schedule should sufficient
mineralized material be discovered and extraction be determined to be
economically profitable.
If sufficient ore is discovered during fiscal 1999, the Company would commence
mining and milling at an initial pilot rate of 35-50 tons per day and, gradually
increase tonnage as ore availability allows. To operate the mine and mill on a
four-month pilot basis would cost an estimated $350,000. Cash flow is
anticipated (but cannot be assured) during the fifth month after commencement of
mining and milling.
Management believes that, in order to reach a mine/mill capacity of 300 tons per
day, the Company would attempt to discover and develop, a one year supply of ore
(120,000 tons). To fund the program an investment of approximately $120,000
would be required. The project would consist of the initial 480' segment of the
1700' tunnel planned to connect with the Penn Group claims. The tunnel will pass
through carbonate host rocks (Blue Lime or White Lime) where potentially,
large-scale mineralization may be encounted.
With Regards, to all estimates of mineral tonnage, additional geologic work is
needed before a conclusion can be made that it is commercial material or, that
ore exists.
The Company generated no revenues from operations during the fiscal years ended
July 31, 1998 and 1997. There were de minimis non-operating revenues during
these periods of $1,377 and $2,063, respectively. Over all, costs and expenses
remained the same from fiscal 1997 to fiscal 1998. However, mine expenses
increased by $97,495 (approximately 30.7%) from 1997 ($318,141) to 1998
($415,636). The increase in mine expenses resulted primarily from expanded work
at the mine. Selling, General and administrative expenses decreased by $96,148
(approximately 19.9%) from 1997 ($482,380) to 1998 ($386,232) primarily due to a
decrease in the cost of raising capital. As a result, the Company's net loss for
1998 was $807,181, which was $1,685 more than its 1997 loss of $805,496.
Liquidity and Capital Resources
As of July 31, 1998, the Company's current liabilities exceed its current assets
by a ratio of approximately 3 to 1 and the Company had a working capital
deficiency of $40,348. 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 $1,002,000 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 $657,597 through the sale of common
stock. These investments have enabled the Company to complete the
Hunter shaft, test the mill and do long-hole drilling and core
drilling.
13
<PAGE>
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 and remains in
force. 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.
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) Complete level #7 to $ 78,000 4 Months
level #5 raise
(b) Exploration by tunnel
to Penn Group minerals. Prove up
120,000 tons of ore $150,000 6 Months (beginning of 1700"
tunnel)
(c) Continuation of long hole and core
drilling on B-Zone; level 6 and
Block 427, level 7 to Weston Fault $148,000 10 Months
(d) Operate Mine & Mill $350,000 4 Months (prior to revenue)
</TABLE>
Aside from the above planned activities, the Company's basic administrative
capital needs (e.g. rent, salaries, utilities, etc.) are approximately $23,000
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, 1998, the Company obtained approximately
$657,597 from the private sale of Common Stock.
During the fiscal year the Company needs to raise $1,002,000 in order to
complete the planned projects.
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
14
<PAGE>
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. In 1997, 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") regarding the Company's proposed
procedures and past activities in November 1990. To the Company's knowledge, the
EPA has initiated no further comments or questions.
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 tailing 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.
Year 2000 Computer Issue
At the present, and for the foreseeable future, management does not believe that
computers will play a material role in the company's operations. At present, the
Company only uses computers for simple tasks such as work processing.
Accordingly, management does not believe that the potential year 2000 computer
problem will materially affect the Company's current or planned operations. If
and when the Company commences mining and milling operations, it will interact
with outside entities such as suppliers, smelters, refiners and government
agencies The Company is unable to predict whether the potential year 2000
computer problem will adversely affect these entities. It is conceivable, that
if one or more of these entities is adversely affected by the potential year
2000 computer problem, the Company's operations might be adversely affected
also.
Item 7. Financial Statements.
For the Financial Statements required by Item 7 see the Financial Statements
included elsewhere in this Form 10-KSB.
15
<PAGE>
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.
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 70 9/22/82 President & Director
Gifford A. Dieterle 67 9/22/82 Executive Vice President,
Secretary, Treasurer
& Chairman of the Board
Robert Roningen 66 9/14/93 Vice President- Operations
& Director
Horst Scherp 70 1/25/95 Director
Jack V. Everett 77 1/25/95 Director
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. Officers of the corporation are elected by the
directors at meetings called by the directors for its purpose.
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, M.S.T.
Company - Rio Blanco Oil Shale Corporation, employed him as a project engineer.
From 1977 to 1979, United Nuclear-Homestake Partnership, Inc., Grants, and New
Mexico employed him as a superintendent of shaft sinking operation.
16
<PAGE>
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.
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 July 30, 1998, except that Gifford A. Dieterle, 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 $100,000.
17
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------------------
Annual Compensation Awards Payouts
--------------------------------- --------------------- --------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ------------------ ------- ------- ------- --------- --------- -------- --------- --------
Other Restrict- All Other
Annual ed Stock LTIP Compensa
Name and Principal Compen- Award Options Payouts -tion
Position Year Salary ($) sation($) ($) SARs ($) (i)
- ------------------ ------- ------- ------- --------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald W. Wilson 1998 63,320 -0- -0- -0- 150,000 -0- -0-
Chief Executive 1997 54,586 -0- -0- -0- 350,000 -0- -0-
Officer 1996 54,023 -0- -0- -0- 200,000 -0- -0-
</TABLE>
The following table sets forth information with respect to the Company's
Executive Officers concerning the grants of options and Stock Appreciation
Rights ("SAR") during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------------------
Percent of Total
Options/SARs
Options/ Granted to
SARs Employed in Exercise or Base Expiration
Name Granted Fiscal Year Price ($/SH) Date
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald W. Wilson 150,000 24.6% $.22 June 5, 2001
Gifford Dieterle 150,000 24.6% $.22 June 5, 2001
Robert Roningen 150,000 24.6% $.22 June 5, 2001
Jack Everett 150,000 24.6% $.22 June 5, 2001
Horst Scherp 10,000 1.6% $.22 June 5, 2001
</TABLE>
The following table sets forth information with respect to the Company's
Executive Officers concerning exercise of options during the last fiscal year
and unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
- ---------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Option/SARs
Shares at FY-End(#) at FY-End(#)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Donald W. Wilson -0- -0- 700,000 --
Gifford Dieterle -0- -0- 553,270 --
Robert Roningen -0- -0- 500,000 --
Jack Everett -0- -0- 225,000 --
Horst Scherp -0- -0- 20,000 10,000
</TABLE>
18
<PAGE>
The following table sets forth information with respect to the Executive
Officers concerning awards under long term incentive plans during the last
fiscal year:
<TABLE>
<CAPTION>
Estimated Future Payouts under Non-Stock
Price Based Plans
(a) (b) (c) (d) (e) (f)
Performance --------------------------------------------
Number of or Other
Shares, Units Period Until
or Other Maturation or Threshold Target Maximum
Name Rights(#) Payout ($ 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 October
28, 1998.
(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 October 28, 1998, is set forth on the
charts below.
<TABLE>
<CAPTION>
Name of Amount & Nature
Beneficial of Beneficial Approximate
Title of Class Owner Ownership 10/28/98 Percentage(1)(2)
- -------------- ----- ------------------ ----------------
<S> <C> <C> <C>
Common Stock Donald W. Wilson 1,440,019(2) 7.9%
Common Stock Gifford A. Dieterle 1,543,157(2)(3) 8.6%
Common Stock Jack Everett 225,000(2) 1.3%
Common Stock Robert Roningen 800,000(2)(4) 4.5%
Common Stock Horst Scherp 25,000(2) *
Common Stock Richard Shevchenko 894,849(5) 5.1%
All Officers and
Directors as a
Group (5) 4,033,1766(2)(3)(4) 20.7%
</TABLE>
- ---------
19
<PAGE>
* Less than one percent.
(1) Based upon 17,476,796 shares issued and outstanding as of October 26, 1998.
(2) For Messrs. Wilson, Dieterle, Everett, Roningen and Scherp includes,
respectively, 700,000 shares, 553,270 shares, 225,000 shares, 500,000
shares and 20,00 shares issuable upon exercise of options and/or warrants.
(3) Includes shares owned by Mr. Dieterle's wife.
(4) Includes shares owned by Mr. Roningen's wife and children.
(5) Includes shares owned by Mr. Shevchenko'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.
On June 5, 1998, the Company issued the following options to certain officers
and directors. Donald Wilson - option to purchase 150,000 shares; Gifford
Dieterle - option to purchase 150,000 shares; Robert Roningen option to purchase
150,000 shares; Jack Everett -option to purchase 150,000 shares; Horst Scherp -
option to purchase 10,000 shares. All options granted on that date expire on
June 5, 2001 and are exercisable at $.22 per share.
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, 2001 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.
20
<PAGE>
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, 1998 with the principal office of the Securities and Exchange
Commission in Washington, D.C.:
None
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.
21
<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: Oct. 30, 1998 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 Oct. 30, 1998
Donald W. Wilson Executive Officer and
a Director
/s/ Gifford A. Dieterle
- --------------------------- Treasurer and Oct. 30, 1998
Gifford A. Dieterle Principal Financial
and Accounting
Officer and Chairman
of the Board of Directors
/s/ Jack Everett
- --------------------------- Director Oct. 30, 1998
Jack Everett
/s/ Robert Roningen
- --------------------------- Director Oct. 30, 1998
Robert Roningen
/s/ Horst Scherp
- --------------------------- Director Oct. 30, 1998
Horst Scherp
22
<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.
23
<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, 1998
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEET AS OF JULY 31, 1998, LEADVILLE MINING AND MILLING CORP.
STATEMENT OF OPERATIONS FOR THE YEARS ENDED JULY 31, 1998 AND JULY 31, 1997, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998, LEADVILLE MINING
AND MILLING CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD SEPTEMBER 17, 1982
(INCEPTION) TO JULY 31, 1998, LEADVILLE MINING AND MILLING CORP.
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1998 AND JULY 31, 1997, AND
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998, 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>
[Letterhead of Wolinetz, Gottlieb & Lafazan, P.C.]
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, 1998, 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, 1998 and for the period
September 17, 1982 (Inception) to July 31, 1998. 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, 1998 and the results of
its operations and its cash flows for each of the two years in the period ended
July 31, 1998 and for the period September 17, 1982 (Inception) to July 31, 1998
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,
1998 of $6,315,397 and has a working capital deficiency of $40,348 at July 31,
1998 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 12, 1998
F-1
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JULY 31, 1998
ASSETS
Current Assets:
Cash $ 11,574
Loans Receivable 8,490
Other Current Assets 184
-----------
Total Current Assets 20,248
-----------
Property and Equipment (Net of
Accumulated Depreciation of $350,154) 1,355,497
-----------
Other Assets:
Mining Reclamation Bonds 11,000
Security Deposit 3,667
-----------
Total Other Assets 14,667
-----------
Total Assets $ 1,390,412
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accrued Expenses and Taxes $ 60,596
-----------
Commitments and Contingencies
Stockholders' Equity:
Common Stock, Par Value $.001 Per Share;
Authorized 150,000,000 shares; Issued and
Outstanding 16,841,142 Shares 16,841
Capital Paid In Excess of Par Value 7,628,372
Deficit Accumulated in the Development Stage (6,315,397)
-----------
Total Stockholders' Equity 1,329,816
-----------
Total Liabilities and Stockholders' Equity $ 1,390,412
===========
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
September 17,
For The Year Ended 1982
July 31, (Inception)
---------------------------- To
1998 1997 July 31, 199
------------ ------------ ------------
Revenues:
Interest Income $ 877 $ 840 $ 709,111
Miscellaneous 500 1,223 25,206
------------ ------------ ------------
Total Revenues 1,377 2,063 734,317
------------ ------------ ------------
Costs and Expenses:
Mine Expenses 415,636 318,141 2,139,349
Selling, General and
Administrative Expenses 386,232 482,380 4,422,477
Depreciation 5,322 6,350 350,154
Loss on Write-Off of
Investment -- -- 10,000
Loss on Joint Venture -- -- 101,700
------------ ------------ ------------
Total Costs and
Expenses 807,190 806,871 7,023,680
------------ ------------ ------------
Loss Before Provision
For Income Taxes (805,813) (804,808) (6,289,363)
Provision For Income
Taxes 1,368 688 26,034
------------ ------------ ------------
Net Loss $ (807,181) $ (805,496) $ (6,315,397)
============ ============ ============
Net Loss Per Share $ (.05) $ (.06)
============ ============
Average Common Shares Outstanding 15,620,231 13,535,361
============ ============
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, 1998
<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, 1998
<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, 1998
<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, 1998
<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, 1998
<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, 1998
<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 CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 1998
<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 $.20 Per Share 10,000 $ 10 $ 1,990 $ -- $ 2,000
At $.25 Per Share 100,000 100 24,900 -- 25,000
At $.27 Per Share 45,516 46 12,244 -- 12,290
At $.28 Per Share 150,910 151 41,349 -- 41,500
At $.30 Per Share 60,333 60 18,040 -- 18,100
At $.31 Per Share 9,677 10 2,990 -- 3,000
At $.32 Per Share 86,750 87 27,673 -- 27,760
At $.33 Per Share 125,364 125 41,245 -- 41,370
At $.35 Per Share 75,144 75 26,225 -- 26,300
At $.38 Per Share 49,048 49 18,311 -- 18,360
At $.40 Per Share 267,500 268 106,732 -- 107,000
At $.45 Per Share 65,333 65 29,335 -- 29,400
At $.50 Per Share 611,184 610 304,907 -- 305,517
Services:
At $.23 Per Share 48,609 49 11,131 -- 11,180
Exercise of Options:
Services:
At $.22 Per Share 82,436 82 18,054 -- 18,136
At $.35 Per Share 183,846 184 64,162 -- 64,346
Compensation:
At $.22 Per Share 105,000 105 22,995 -- 23,100
At $.35 Per Share 25,000 25 8,725 -- 8,750
Commissions:
At $.22 Per Share 67,564 68 (68) --
At $.35 Per Share 291,028 291 (291) --
Net Loss -- -- -- (807,181) (807,181)
----------- ----------- ----------- ----------- -----------
Balance - July 31, 1998 16,841,142 $ 16,841 $ 7,628,372 $(6,315,397) $ 1,329,816
=========== =========== =========== =========== ===========
</TABLE>
F-10
<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
1998 1997 July 31, 1998
----------- ----------- ------------------
<S> <C> <C> <C>
Cash Flow From Operating Activities:
Net Loss $ (807,181) $ (805,496) $(6,315,397)
Adjustments to Reconcile Net Loss to
Net Cash Used By Operating Activities:
Depreciation 5,322 6,350 350,154
Loss on Write-Off of Investment -- -- 10,000
Loss From Joint Venture -- -- 101,700
Value of Common Stock Issued For Services 125,512 207,113 1,587,070
Compensation Portion of Options Exercised -- -- 261,500
Changes in Operating Assets and Liabilities:
Decrease in Prepaid Expenses -- 51,408 --
(Increase) Decrease in Other Current Assets 792 (769) (184)
Increase in Security Deposit -- -- (3,667)
Increase (Decrease) in Accrued Expenses
and Taxes 4,686 (13,896) 60,596
----------- ----------- -----------
Net Cash Used By Operating Activities (670,869) (555,290) (3,948,228)
----------- ----------- -----------
Cash Flow From Investing Activities:
Purchase of Property and Equipment -- (10,697) (1,705,650)
Investment in Joint Venture -- -- (101,700)
Investment in Privately Held Company -- -- (10,000)
----------- ----------- -----------
Net Cash Used By Investing Activities -- (10,697) (1,817,350)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-11
<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
1998 1997 July 31, 1998
----------- ----------- ------------------
<S> <C> <C> <C>
Cash Flow From Financing Activities:
(Increase) Decrease in Loans Receivable $ (2,664) $ 2,082 $ (8,490)
Increase in Loans Payable - Officers -- -- 18,673
Repayment of Loans Payable - Officers -- (9,673) (18,673)
Proceeds From Sale of Common Stock 657,597 566,231 6,210,655
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 654,933 558,640 5,777,152
----------- ----------- -----------
Increase In Cash and Cash Equivalents (15,936) (7,347) 11,574
Cash and Cash Equivalents - Beginning 27,510 34,857 --
----------- ----------- -----------
Cash and Cash Equivalents - Ending $ 11,574 $ 27,510 $ 11,574
=========== =========== ===========
Supplemental Cash Flow Information:
Cash Paid For Interest $ -- $ -- --
=========== =========== ===========
Cash Paid For Income Taxes $ 1,368 $ 688 $ 25,483
=========== =========== ===========
Non-Cash Financing Activities:
Issuances of Common Stock as Commissions
on Sales of Common Stock $ 116,724 $ 39,912 $ 226,421
=========== =========== ===========
Issuance of Common Stock as Payment for Expenses $ 93,662 $ 6,966 $ 100,628
=========== =========== ===========
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-12
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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, 1998 aggregating $6,315,397, and has a working
capital deficiency at July 31, 1998 of $40,348 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-13
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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
$5,650 and $2,840 paid by the Company respectively to Franklin Consolidated
Mining Co., Inc., a publicly traded corporation and South American Minerals,
Inc. a publicly traded corporation. These are non-interest bearing and due on
demand.
F-14
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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 350,154
----------
$1,355,497
==========
NOTE 5 - Accrued Expenses and Taxes
Included in accrued expenses and taxes as of July 31, 1997 were amounts
aggregating $11,923 owed to certain officers and stockholders of the Company for
unpaid salaries. As of July 31, 1998 unpaid salaries were paid in full.
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, for 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-15
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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, 1998:
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-16
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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, 1998:
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
Options Granted:
Services - Related Parties 610,000 .22
Services 755,000 .22-.40
Exercised:
Services (720,000) .22-.35
---------- --------
Outstanding - July 31, 1998 2,478,270 $.10-.40
========== ========
F-17
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
NOTE 6 - Stockholders' Equity (Continued)
Authorized Common Stock
In September 1993 the Company's shareholders approved an increase in the
authorized 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 references to common stock is restated to reflect the 1 for 10 reverse
split.
NOTE 7 - Income Taxes
For income tax purposes, the Company has a net operating loss carryforward
at July 31, 1998 of approximately $5,100,000 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 $1,734,000 and
accordingly there is no cumulative effect adjustment or current year tax benefit
recorded.
NOTE 8 - Commitments and Contingencies
From time to time, the Company may be named in legal actions which are
incidential to the industry in which the Company operates. Currently, the
Company is not a party to any legal proceedings.
F-18
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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 $6,315,397 and has a
working capital deficiency of $40,348 at July 31, 1998. 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, 1998 the Company raised approximately $657,597 through the sales
of common stock to investors, which enabled the Company to complete the Hunter
Shaft, test the mill and do long-hole drilling and core drilling.
F-19
<PAGE>
LEADVILLE MINING AND MILLING CORP.
(A DEVELOPMENT STAGE ENTERPRISE
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
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
completing raise to connect levels 5 and 7, commence exploration tunnel to Penn
Group of minerals, continue long-hole drilling on B-Zone, level 6 and, Block
427, level 7, and to mine and mill. During the fiscal 1999, the Company needs to
raise additional capital in order to complete these projects.
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-20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 11,574
<SECURITIES> 0
<RECEIVABLES> 8,674
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,248
<PP&E> 1,705,651
<DEPRECIATION> 350,154
<TOTAL-ASSETS> 1,390,412
<CURRENT-LIABILITIES> 60,596
<BONDS> 0
0
0
<COMMON> 16,841
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,390,412
<SALES> 0
<TOTAL-REVENUES> 1,377
<CGS> 0
<TOTAL-COSTS> 415,636
<OTHER-EXPENSES> 391,554
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (805,813)
<INCOME-TAX> 1,368
<INCOME-CONTINUING> (807,181)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,181)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> 0
</TABLE>
