<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
March 31, 1995
--------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______________
to ______________
Commission file number 0-16436
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PIEDMONT MINING COMPANY, INC.
(Exact name of small business issuer as specified in its charter)
NORTH CAROLINA 56-1378516
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4215 STUART ANDREW BOULEVARD
CHARLOTTE, NORTH CAROLINA 28217
(Address of principal executive offices)
(704) 523-6866
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
COMMON STOCK, NO PAR VALUE--15,043,869 SHARES OUTSTANDING
AS OF APRIL 30, 1995
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<PAGE> 2
INDEX
PIEDMONT MINING COMPANY, INC.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements. Page
<S> <C>
Consolidated Condensed Balance Sheets--March 31, 1995 3
(unaudited) and December 31, 1994
Consolidated Condensed Statements of Operations (unaudited)-- 5
Three months ended March 31, 1995 and March 31, 1994
Consolidated Condensed Statements of Cash Flows 6
(unaudited)--Three months ended March 31, 1995 and
March 31, 1994
Notes to Consolidated Condensed Financial Statements 7
(unaudited)--March 31, 1995
Item 2. Management's Discussion and Analysis of 12
Financial Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 16
SIGNATURES 17
</TABLE>
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<PAGE> 3
PIEDMONT MINING COMPANY, INC
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
At At
March 31, December 31,
1995 1994
----------- --------------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (including $11,000 and
$51,000 relating to the Haile Mining Venture) $ 90,000 $ 91,000
Investment in Amax Gold common stock (Notes B
and E) 2,866,000 5,250,000
Accounts receivable 28,000 28,000
Other 4,000 -0-
------------ -----------
TOTAL CURRENT ASSETS 2,988,000 5,369,000
PROPERTY AND EQUIPMENT (including $222,000
and $227,000 relating to the Haile Mining Venture) 271,000 278,000
OTHER ASSETS
Deferred costs, net of accumulated amortization
of $3,377,000 (including $1,536,000 relating to
the Haile Mining Venture) 1,754,000 1,754,000
Other 4,000 4,000
------------ -----------
TOTAL OTHER ASSETS 1,758,000 1,758,000
------------ -----------
TOTAL ASSETS $ 5,017,000 $ 7,405,000
============ ===========
</TABLE>
See notes to consolidated condensed financial statements
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<PAGE> 4
<TABLE>
<CAPTION>
At At
March 31, December 31,
1995 1994
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable (including $41,000 and $39,000
relating to Haile Mining Venture) $ 67,000 $ 90,000
Disputed cash call (Note C) 39,000 -0-
Accrued salaries and wages 10,000 17,000
Note payable (Note D) -0- 940,000
Accrued interest (Note D) -0- 28,000
Note payable to Amax Gold Inc. (Note D) -0- 1,129,000
Accrued interest to Amax Gold Inc. (Note D) -0- 100,000
------------- -------------
TOTAL CURRENT LIABILITIES 116,000 2,304,000
------------- -------------
ACCRUED RECLAMATION COSTS 125,000 125,000
------------- -------------
DEFERRED GAIN (Note B) 7,019,000 7,019,000
Less accumulated amortization (4,436,000) (4,295,000)
------------- -------------
2,583,000 2,724,000
SHAREHOLDERS' EQUITY
Common Stock 11,157,000 11,157,000
Contributed capital 317,000 317,000
Accumulated deficit (9,468,000) (9,222,000)
Unrealized gain on available-for-sale securities
(Note E) 187,000 -0-
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 2,193,000 2,252,000
Commitments and contingencies (Notes B and F)
------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 5,017,000 $ 7,405,000
============= =============
</TABLE>
See notes to consolidated condensed financial statements
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<PAGE> 5
PIEDMONT MINING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------------------
1995 1994
<S> <C> <C>
NET SALES $ -0- $ -0-
COST OF SALES:
Depreciation expense 2,000 8,000
Haile Mining Venture expenses (Notes B and C) 141,000 303,000
Amortization of deferred gain (Notes B and C) (141,000) (303,000)
------------ -----------
2,000 8,000
------------ -----------
GROSS LOSS FROM OPERATIONS (2,000) (8,000)
OTHER (INCOME) EXPENSES:
General and administrative 156,000 171,000
Stock appreciation rights and awards -0- (47,000)
Exploration 5,000 5,000
Professional fees 55,000 71,000
Interest and other, net 23,000 (69,000)
Loss on sale of stock 94,000 -0-
Brokers fees and commissions 31,000 -0-
------------ -----------
364,000 131,000
------------ -----------
LOSS BEFORE INCOME TAXES (366,000) (139,000)
Income tax benefit (provision) 120,000 -0-
------------ -----------
NET LOSS $ (246,000) $ (139,000)
============ ===========
NET LOSS PER COMMON SHARE $ (.02) $ (.01)
============ ===========
CASH DIVIDENDS PER SHARE None None
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 15,043,869 14,923,919
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE> 6
PIEDMONT MINING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------------
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (246,000) $ (139,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 7,000 14,000
Amortization of deferred gain (141,000) (303,000)
Deferred income tax (benefit) expense (120,000) -0-
(Gain) Loss on sale of assets 91,000 (84,000)
Increase (decrease) in accounts payable
and accrued expenses 9,000 (73,000)
Other (4,000) (5,000)
------------- -----------
NET CASH USED IN OPERATING ACTIVITIES (404,000) (590,000)
------------- -----------
INVESTING ACTIVITIES
Proceeds from sales of land, property and equipment 3,000 90,000
Proceeds from sales of Amax Gold Common Stock 2,597,000 -0-
------------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,600,000 90,000
------------- -----------
FINANCING ACTIVITIES
Payments on short-term debt (2,197,000) 408,000
------------- -----------
NET CASH USED IN FINANCING ACTIVITIES (2,197,000) 408,000
------------- -----------
(DECREASE) IN CASH AND CASH EQUIVALENTS (1,000) (92,000)
Cash and Cash equivalents at beginning of period 91,000 195,000
------------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 90,000 $ 103,000
============= ===========
</TABLE>
See notes to consolidated condensed financial statements.
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<PAGE> 7
PIEDMONT MINING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The consolidated condensed financial
statements include the accounts of the Registrant and its wholly-owned
subsidiaries, Kershaw Gold Company, Inc. (formerly Mineral Mining Company,
Inc.) and Piedmont Gold Company, Inc. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Certain reclassifications of prior
year amounts have been made to conform to current year projections. Current
operating results for the three month period ended March 31, 1995 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1995, as a result of the transactions described in Note B. For
further information, refer to the financial statements and footnotes thereto
included in the Registrant's audited consolidated financial statements on Form
10-KSB for the year ended December 31, 1994.
NOTE B - HAILE MINING VENTURE
On March 15, 1991, the Registrant entered into an option and earn-in agreement
with Amax Gold Exploration, Inc. (AGEI), a wholly-owned subsidiary of Amax
Gold Inc. (AGI), pursuant to which AGI acquired an option to purchase a 62.5%
interest in the Registrant's Haile Property located in South Carolina.
Pursuant to this agreement and as part of the earn-in conditions, AGEI paid the
Registrant $1,000,000 in cash; assumed the Registrant's obligations to make
payments on its notes to MMC Holding, Inc. and its sole shareholder through May
1, 1992 (a total of $1,072,000); provided financial support for a $750,000
reclamation bond increase; agreed to fund all exploration costs during the
option period and prepared at its sole cost a preliminary feasibility study for
the Haile Property which was delivered to the Registrant in December, 1991.
On May 1, 1992, AGI through its wholly-owned subsidiary, Lancaster Mining
Company, Inc., exercised its option and acquired a 62.5% undivided interest in
the Registrant's Haile Property. Upon the exercise of the option, the
Registrant received $1,750,000 in cash and 1,000,000 unregistered shares of
AGI's common stock (AGI Common Stock). The closing price of AGI Common Stock
on the New York Stock Exchange was $5.875 on March 31, 1995.
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<PAGE> 8
PIEDMONT MINING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
Pursuant to the terms of the option and earn-in agreement, Kershaw Gold
Company, Inc. and Lancaster Mining Company, Inc. formed the Haile Mining
Venture (the Venture) to further explore, evaluate and, if warranted, develop
and operate a gold mine at the Haile Property. Lancaster Mining Company, Inc.
owns a 62.5% undivided interest and Kershaw Gold Company, Inc. owns a 37.5%
undivided interest in the Venture's assets and liabilities. Costs of the
Venture have been borne by each party based on their respective interests, and
the ultimate gold production by the Venture, if any, will be taken by the
parties in kind.
In contemplation of the formation of the Venture described above, the
Registrant suspended its mining and hauling operations in August 1991. On June
30, 1992, leaching and recovery of gold ceased for the Registrant's account and
commenced for the account of the Venture.
The excess of the consideration received by the Registrant from AGI over the
carrying value of the Haile assets sold and liabilities assumed has been
recorded as a deferred gain in the accompanying consolidated balance sheet
because the Registrant intends to fund its share of the costs of the Venture at
the Haile Property.
The Venture agreement between Kershaw Gold Company, Inc. and Lancaster Mining
Company, Inc. provided that the Venture participants jointly will decide
whether to commence production at the Haile Property. Until a production
decision is made, the Registrant is charging to expense all of its share of the
Venture's costs and expenses.
The 1994 program and budget called for total Venture expenditures of
approximately $6,300,000, including $1,900,000 for additional drilling and
$150,000 for completion of a bankable feasibility study. However, no further
drilling was conducted in 1994, the bankable feasibility study has not yet been
produced, and actual Venture expenditures for 1994 were approximately
$2,415,000. In September 1994, the Registrant was advised by AGI that AGI had
decided to pursue the sale of its interest in the Venture.
AGI did not submit a proposed 1995 program and budget to the Registrant until
March 1995. The budget submitted by AGI calls for total project expenditures of
only about $2,000,000 for 1995. The Registrant expects to have adequate funds
to meet its 37.5% share of the expenditures in 1995, but believes that
additional financing will be required in the future.
On March 29, 1995, the Registrant filed a lawsuit in South Carolina against AGI
and certain of its affiliates, claiming, among other things, that AGI's failure
to implement the 1994 program and budget was in breach of its obligations under
the Venture Agreement and Management Agreement for the Venture, and seeking
damages. As of May 12, 1995, AGI had not responded to the lawsuit. The
Registrant intends to vigorously pursue its claims.
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<PAGE> 9
PIEDMONT MINING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
The failure of AGI to implement the 1994 work plan and budget, the decision by
AGI to pursue the sale of its interest in the Venture, and the pending
litigation between the Registrant and AGI are expected to further delay a
decision whether to commence production at the Haile property. Preliminary
estimates of the total costs of developing and commencing operations, based
upon the Preliminary Feasibility Study prepared pursuant to the Option and
Earn-In Agreement in December 1991, ranged up to approximately $80,000,000, of
which the Registrant's 37.5% share would be approximately $30,000,000.
Subsequent internal studies have also suggested that the capital costs could
equal or exceed this amount.
The Registrant is amortizing the deferred gain to income in amounts equal to
the sum of the Registrant's share of the Venture's costs and expenses and the
Registrant's other direct costs of participation in the Venture. The
amortization recorded was approximately $141,000 relating to costs incurred
during the three month period ended March 31, 1995. However, as discussed in
Note C, the March cash call was not paid by the Registrant.
NOTE C - DISPUTED CASH CALL
In February 1995, the Registrant advised AGI of its position that AGI was in
breach of the Haile Mining Venture Agreement and Management Agreement. In
March 1995, the Registrant further advised AGI of its position that it was not
obligated to continue to pay the monthly cash calls for the Venture.
Subsequent to the filing of the lawsuit against AGI described in Note B, the
Registrant, through its counsel, again advised AGI of its position that it is
not required to and does not intend to pay any further cash calls until the
litigation is resolved.
The cash call for March 1995 is reflected as a disputed cash call on the
Registrant's balance sheet at March 31, 1995 and is included in the Haile
Mining Venture expenses and the corresponding amortization of deferred gain in
the Registrant's statement of operations for the three months ended March 31,
1995. However, the Registrant has not paid such cash call and maintains its
position that it is not obligated to make such payment.
NOTE D - BORROWINGS
The Registrant had a loan commitment of up to $2,000,000 from AGI through May
1, 1994. Borrowings under this agreement bore interest at prime plus 2%. The
agreement required the Registrant to secure the loan balance with sufficient
AGI common shares having a market value equal to 200% of the outstanding
principal balance. On February 27, 1995 this loan was paid in full.
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<PAGE> 10
PIEDMONT MINING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
The Registrant also has a credit arrangement with a broker that is secured by
the Registrant's shares of AGI stock. Borrowings may be obtained under this
arrangement based on the number of shares subject to pledge and the market
value of such shares, among other factors. There was no principal outstanding
under this agreement at March 31, 1995.
NOTE E - CHANGE IN ACCOUNTING PRINCIPLE
The Registrant was required to adopt the provisions of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, ("FAS 115"), effective January 1, 1994. FAS 115 addresses
the accounting and reporting for investments in equity securities that have
readily determinable fair values and supersedes Statement of Accounting
Standards No. 12, Accounting for Certain Marketable Securities ("FAS 12").
FAS 115 requires securities that are classified as available-for-sale to be
reported at fair value, with unrealized gains and losses reported in a separate
component of shareholders' equity. FAS 12 generally required that investments
in marketable securities be recorded at the lower of cost or market value.
In October 1993, the Registrant commenced borrowing from AGI against its
1,000,000 shares of AGI Common Stock and as of December 31, 1994 it had
borrowed $1,129,000 against these shares. In January 1995, the Registrant
began selling shares of the AGI Common Stock on the open market. On February
27, 1995 the Registrant paid AGI $1,247,772, representing the entire loan
balance plus accrued interest, from the proceeds of the sale of a portion of
the shares of AGI Common Stock held by the Registrant. At March 31, 1995, the
Registrant held 487,400 remaining shares of the AGI Common Stock. The closing
price of AGI's Common Stock on the New York Stock Exchange on March 31, 1995
was $5.875 per share.
The Registrant has substantial deferred tax assets relating principally to net
operating loss carryforwards which are available to offset taxable income
generated upon the future disposition of the AGI shares. Prior to the adoption
of FAS 115, the Registrant has maintained a valuation allowance which reduces
its deferred tax assets to an amount equal to the sum of offsetting deferred
tax liabilities. As of March 31, 1995, a deferred income tax liability
relating to the unrealized gain on securities available-for-sale, in the
amount of approximately $120,000, has been recorded as a reduction in the
unrealized gain. Under Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("FAS 109"), the recording of this deferred income
tax liability resulted in a corresponding $120,000 reduction of the Registrant's
valuation allowance against deferred tax assets. In accordance with FAS 109,
the tax benefit relating to the reduction of the valuation allowance was
allocated to the statement of operations to the extent of income tax benefits
generated by 1995 operating losses and the balance was included in the
unrealized gain on securities available-for-sale. In the event that the
unrealized gain on
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<PAGE> 11
PIEDMONT MINING COMPANY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
investment securities which gave rise to this tax benefit decreases
significantly in the future, the Registrant may be required to restore the
valuation allowance through a provision for income taxes.
NOTE F - CONTINGENCIES
Pursuant to the Option and Earn-In Agreement, the Venture Agreement and certain
related agreements, the Registrant has agreed to indemnify AGI for all
environmental and other liabilities arising from matters occurring or existing
on the Haile Property prior to March 15, 1991, or arising from acts, omissions
and operations on the Haile Property from March 15, 1991 to July 1, 1992 (the
date the Venture was formed). AGI has identified approximately $1,784,000 of
Venture expenditures ($290,000 for the second half of 1992, $681,000 for 1993,
$674,000 in 1994 and $139,000 through March 31, 1995) that it now claims are
subject to such indemnification provisions and should be reallocated 100% to
the Registrant.
Invoices have been received by the Registrant totalling $1,104,000 representing
the amount of such costs not previously funded by the Registrant as part of its
37.5% share of Venture expenses. A substantial part of such costs relate to
ongoing water treatment and property maintenance at the Haile Property, as well
as certain reclamation costs. AGI has also taken the position that the
Registrant will be responsible for 100% of similar ongoing expenses.
The Registrant has disputed the cost reallocation asserted by AGI. Such
dispute remains unresolved. At this time the Registrant is unable to estimate
the amount, if any, which it might be required to pay or provide upon
resolution of this matter. The amount and duration of any future or continuing
costs that AGI claims would be the responsibility of the Registrant will also
depend on whether and when mining operations are commenced at the Haile
Property and the specific mining and reclamation plans adopted at that time.
Any such amount that ultimately becomes payable by the Registrant will be
charged against any remaining amount of the deferred gain resulting from the
sale of the 62.5% interest in the Haile Property to AGI in connection with the
formation of the Venture in 1992.
See Note C for discussion of the disputed cash call which the Registrant has
accrued but claims it is not required to pay.
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<PAGE> 12
PIEDMONT MINING COMPANY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Registrant's principal operations prior to mid-1992, other than
its exploration activities, were mining and production of gold at the Haile
Property, which accounted for most of the Registrant's revenues to date. On
March 15, 1991, the Registrant entered into an Option and Earn-In Agreement
with Amax Gold Inc. (AGI) pursuant to which AGI was granted an option to
acquire a 62.5% undivided interest in the Haile Property. In connection with
its entering into the Option and Earn-In Agreement and AGI's exploration
activities at the Haile Property during the option period thereunder, the
Registrant began to phase out its shallow, open-pit mining operations at the
Haile Property in March 1991 and suspended mining and hauling in August 1991.
AGI exercised its option on May 1, 1992, and the Registrant and AGI formed the
Venture on July 1, 1992 to further explore, evaluate, and, if warranted,
develop and operate a large-scale mining operation at the Haile Property. The
Registrant has an undivided 37.5% interest in the Venture's assets,
liabilities, costs and revenues. Recovery and production of gold from the
leaching of ore previously mined continued until July 1, 1992 for the account
of the Registrant until the formation of the Venture on July 1, 1992, and for a
short period thereafter for the account of the Venture.
In connection with the grant of the option pursuant to the Option and
Earn-In Agreement with AGI in March 1991, and as part of the earn-in
conditions, AGI also paid the Registrant $1,000,000 in cash, assumed debt
service obligations during the option period (approximately $1,072,000) on the
Registrant's note to MMC Holding, Inc., provided financial support for a
reclamation bond increase at the Haile Property, funded all exploration costs
at the Haile Property during the option period, and provided at its expense a
preliminary feasibility study for the Haile Property. Upon the exercise by AGI
of its option in 1992, the Registrant received $1,750,000 in cash and 1,000,000
unregistered shares of AGI Common Stock. Because the Registrant has intended
to fund its share of the costs of the Venture, the excess of the fair value of
the consideration received from AGI over the carrying value of the interests in
the Haile Property sold and liabilities assumed was reflected as a deferred
gain and is being amortized to income in amounts equal to the sum of the
Registrant's share of the Haile Mining Venture's costs and expenses and the
Registrant's other direct costs of participation in the Venture.
As discussed in Note B to the accompanying financial statements, the
failure of AGI to implement the 1994 work plan and budget, the decision by AGI
to pursue the sale of its interest in the Venture, and the pending litigation
between the Registrant and AGI are expected to further delay any decision
whether to commence production to the Haile property.
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<PAGE> 13
PIEDMONT MINING COMPANY, INC.
THREE MONTHS COMPARISON (UNAUDITED) (CONT.)
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1994.
There were no sales or mine operating expenses for the three month
periods ended March 31, 1995 and 1994 due to the suspension of mining in 1991
and the completion in 1992 of recoveries of gold from leaching of ore
previously mined.
Depreciation expense decreased 75% principally as a result of the
limited expenditures for plant, machinery and equipment during the 1995 quarter
and the sale of certain equipment in early 1994.
General and administrative expenses decreased 9% principally due to
reduced office personnel expenses.
Professional fees decreased 23% principally due to the decrease in
required legal, accounting and consulting services.
There were no stock appreciation rights and stock awards expense for
the 1995 quarter because no awards or stock appreciation rights were issued
during the period and the Registrant's stock price declined below the exercise
price for all outstanding options.
Exploration expenses were unchanged because the Registrant's North
Carolina property lease expense was the same for both periods.
Interest and other, net increased by $92,000 principally due to the
increase in borrowing during 1995 with no offsetting income.
The Registrant commenced sales of its AGI Common Stock in early 1995.
The Registrant lost approximately $.19 per share sold, or $94,000, on sales of
AGI Common Stock during the first three months of 1995. Brokers' fees and
commissions were also incurred as a result of the Registrant's sales of AGI
Common Stock during the three months ending March 31, 1995.
The Registrant has been amortizing the deferred gain, recorded as a
result of the AGI option exercise, to income in amounts equal to the sum of the
Registrant's share of the Venture's costs and expenses and the Registrant's
other direct costs of participation in the Venture. Such costs and related
amortization amounted to $141,000 for the three months ended March 31, 1995.
This amount is 53% lower than the three months ended March 31, 1994 due to the
reduced expenditures at the Haile Property during the latter period.
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<PAGE> 14
PIEDMONT MINING COMPANY, INC.
THREE MONTHS COMPARISON (UNAUDITED) (CONT.)
The income tax benefit of $120,000 for the three months ended March 31,
1995 relates to the tax effect of the unrealized gain on securities
available-for-sale as discussed in Note E to the accompanying financial
statements.
The Registrant's net loss of $246,000 in the first quarter ended March
31, 1995 was due to the factors set forth above.
FINANCIAL CONDITION
The Registrant's financial condition and liquidity declined in the
first three months of 1995 due primarily to the funding of its 37.5% share of
the costs and expenses of the Venture and various corporate costs without any
offsetting revenues. Working capital declined to $2,872,000 at March 31, 1995,
compared with $3,065,000 at the end of 1994.
The Registrant's principal source of liquidity during the three months
ended March 31, 1995 was from loans on and dispositions of the 1,000,000
shares of AGI Common Stock it had acquired upon AGI's exercise of its option
with respect to the Haile Property. In connection with the exercise of the
option, AGI had agreed to lend up to $2,000,000 to the Registrant at the Regis-
trant's request, at the prime rate plus 2%, such loan to be secured by AGI
shares having a market value of at least 200% of the amount of the loan (or, if
less, all of the AGI shares) and to be repaid upon the earlier of the sale of
the shares pursuant to the Registrant's registration rights, AGI's repurchase
of the shares in lieu of registration, or expiration of the registration rights
(December 31, 1996). The Registrant began borrowing from AGI under this
arrangement in October 1993. This loan was paid in full on February 27, 1995.
The Registrant also has a credit arrangement with a broker for margin loans on
the AGI Common Stock not pledged to AGI. There was no principal outstanding
under this arrangement at March 31, 1995.
During the first quarter of 1995, the Registrant began selling shares
of the AGI Common Stock on the open market and applied a portion of the
proceeds of such sales to repayment in full of the loan from AGI and repayment
of the outstanding balance due the broker on the margin loans. Through March
31, 1995, the Registrant had sold 512,600 of such shares at an average net
price per share of $5.01, and at March 31, 1995 held 487,400 shares of AGI
Common Stock with no borrowing against such shares. The market price of AGI
Common Stock at March 31, 1995 was $5.875 per share.
Further sales of or margin loans on the remaining shares of the AGI
Common Stock held by the Registrant may be its only source of cash for the
forseeable future. Thus, declines in the market price of the AGI Common Stock
could adversely affect the Registrant's liquidity.
-14-
<PAGE> 15
PIEDMONT MINING COMPANY, INC.
THREE MONTHS COMPARISON (UNAUDITED) (CONT.)
The Registrant believes its current cash position and funds available
from loans on or dispositions of the AGI Common Stock will provide sufficient
capital for its continued operations through the end of 1995, including any
amounts it could be required to pay for its share of the 1995 Venture expenses
(see Note B to the accompanying financial statements) and any amounts it would
ultimately pay or be required to pay on the disputed claim for reallocation of
certain Venture expenses described in Note F to the accompanying financial
statements. However, the Registrant will need additional financing to develop
and commence mining operations at the Haile Property, or if prior to a
production decision substantially more expenditures are incured at the Haile
Property for which the Registrant is responsible, or if the Registrant decides
to resume its North Carolina exploration program. Additional financing for
such purposes could be sought through the issuance of additional shares of the
Registrant's Common Stock or other equity securities, through debt financing,
or through various arrangements (including joint ventures or mergers) with
third parties. However, the Registrant currently has no commitments for any
such additional financing, and there is no assurance that the Registrant could
obtain any such additional financing if and when needed.
If a production decision were to be made, the total costs of
developing and commencing mining operations at the Haile Property, as estimated
in the Preliminary Feasibility Study prepared in December 1991 pursuant to the
Option and Earn-In Agreement, could be as great as $80,000,000, and could be
even more, depending upon the nature, size and scope of the operations and
other variables, which have not yet been determined. Although the Registrant
and AGI had agreed in the Venture Agreement to seek project financing for the
development of the Haile Property if a production decision were made, there is
no assurance that project financing will be available and the Registrant may be
required to seek its own separate financing.
-15-
<PAGE> 16
PIEDMONT MINING COMPANY, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On March 29, 1995, the Registrant and its wholly-owned subsidiary,
Kershaw Gold Company, Inc., as plaintiffs, filed a complaint in the Court of
Common Pleas for Lancaster County, South Carolina (Case No. 95-155) against
Amax Gold Inc., Lancaster Mining Company, Inc. and Haile Mining Company, Inc.,
alleging breach of contract by defendants Amax Gold Inc., Lancaster Mining
Company, Inc. and Haile Mining Company, Inc., and tortious interference with
contractual rights by defendant Amax Gold Inc. The complaint asks for actual
and punitive damages in an unspecified amount as the Court and jury shall
determine. A trial by jury is demanded. AGI has not yet filed a response to
this complaint.
The action arises out of the Haile Mining Venture and the allegations
in the complaint relate to various breaches of the Venture Agreement and
Management Agreement for the Haile Mining Venture by the defendants, including
the failure of the defendants to implement the 1994 program and budget for the
Venture. Defendant Amax Gold Inc. is also alleged to have intentionally
procured such breaches by the other defendants through its domination and
control of the other defendants.
Items 2, 3, 4 and 5 are inapplicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three
months ended March 31, 1995.
-16-
<PAGE> 17
PIEDMONT MINING COMPANY, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PIEDMONT MINING COMPANY, INC.
Date: May 12, 1995 By /s/ Robert M. Shields, Jr.
--------------------------------------------
Robert M. Shields, Jr.
Chairman and Chief Executive Officer
Date: May 12, 1995 By /s/ Thomas L. Ross, III
--------------------------------------------
Thomas L. Ross, III
Secretary and Controller
(Chief Accounting Officer)
-17-
<PAGE> 18
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
EXHIBITS
FORM 10-QSB
QUARTERLY REPORT
For the quarter ended Commission File Number
March 31, 1995 0-16436
PIEDMONT MINING COMPANY, INC.
EXHIBIT INDEX
Sequentially
Exhibit No Exhibit Description Numbered Page
- - ---------- ------------------- -------------
27 Financial Data Schedule (filed in 19
electronic format only).
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF PIEDMONT MINING COMPANY, INC. FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 1995 INCLUDED IN THE COMPANY'S FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 90,000
<SECURITIES> 2,866,000
<RECEIVABLES> 28,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,988,000
<PP&E> 271,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,017,000
<CURRENT-LIABILITIES> 116,000
<BONDS> 0
<COMMON> 11,157,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,017,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 2,000
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 341,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,000
<INCOME-PRETAX> (366,000)
<INCOME-TAX> (120,000)
<INCOME-CONTINUING> (246,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (246,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
