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FORM 10-QSB/A
Amendment No. 1
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, 1996
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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
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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 MAY 15, 1996
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PIEDMONT MINING COMPANY, INC
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
At At
March 31 December 31
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including
$0 and $0 relating to the
Haile Mining Venture) $ 607,000 $ 782,000
Investment in Amax Gold common stock (Note B) 1,656,000 1,830,000
Accounts receivable 28,000 28,000
------------ ------------
TOTAL CURRENT ASSETS 2,291,000 2,640,000
PROPERTY AND EQUIPMENT (including $237,000
and $245,000 relating to the Haile
Mining Venture) 275,000 286,000
OTHER ASSETS
Deferred costs, net of accumulated
amortization (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 $ 4,324,000 $ 4,684,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (including $295,000 and
$234,000 relating to Haile Mining Venture) $ 375,000 $ 288,000
Accrued venture costs (Note C) 371,000 315,000
Accrued salaries and wages 6,000 9,000
Accrued arbitration award (Note E) 1,370,000 1,370,000
------------ ------------
TOTAL CURRENT LIABILITIES 2,122,000 1,982,000
------------ ------------
ACCRUED RECLAMATION COSTS 125,000 125,000
------------ ------------
DEFERRED GAIN 7,019,000 7,019,000
Less accumulated amortization (6,465,000) (6,341,000)
------------ ------------
554,000 678,000
SHAREHOLDERS' EQUITY
Common Stock 11,157,000 11,157,000
Contributed capital 317,000 317,000
Accumulated deficit (10,190,000) (9,882,000)
Unrealized gain on available-for-sale
securities (Note C) 239,000 307,000
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,523,000 1,899,000
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,324,000 $ 4,684,000
============ ============
</TABLE>
See notes to consolidated condensed financial statements
2
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PIEDMONT MINING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
<S> <C> <C>
NET SALES $ -0- $ -0-
COST OF SALES:
Depreciation expense 2,000 2,000
Haile Mining Venture expenses 124,000 141,000
Amortization of deferred gain (124,000) (141,000)
---------- ----------
2,000 2,000
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GROSS LOSS FROM OPERATIONS 2,000 2,000
OTHER (INCOME) EXPENSES:
General and administrative 168,000 156,000
Exploration 2,000 5,000
Professional fees 132,000 55,000
Interest and other, net (7,000) 23,000
Loss (Gain) on sale of stock (35,000) 94,000
Brokers fees and commissions 1,000 31,000
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261,000 364,000
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LOSS BEFORE INCOME TAXES 263,000 366,000
Income tax provision (benefit) 45,000 (120,000)
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NET LOSS $ 308,000 $ 246,000
========== ==========
NET LOSS PER COMMON SHARE $ .02 $ .02
========== ==========
CASH DIVIDENDS PER SHARE None None
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 15,043,869 15,043,869
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
3
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PIEDMONT MINING COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (308,000) $ (246,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 11,000 7,000
Amortization of deferred gain (124,000) (141,000)
Deferred income tax (benefit) expense 45,000 (120,000)
(Gain) Loss on sale of assets (35,000) 91,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable
and accrued expenses 141,000 9,000
Other -0- (4,000)
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NET CASH USED IN OPERATING ACTIVITIES (270,000) (404,000)
---------- ----------
INVESTING ACTIVITIES
Proceeds from sales of land, property and equipment -0- 3,000
Proceeds from sales of Amax Stock 95,000 2,597,000
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NET CASH PROVIDED BY INVESTING ACTIVITIES 95,000 2,600,000
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FINANCING ACTIVITIES
Payments on short-term debt -0- (2,197,000)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES -0- (2,197,000)
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(DECREASE) IN CASH AND CASH EQUIVALENTS (175,000) (1,000)
Cash and Cash equivalents at beginning of period 782,000 91,000
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 607,000 $ 90,000
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
4
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PIEDMONT MINING COMPANY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
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, after
which AGI commenced taking its 62.5% of the gold production.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1995.
There were no sales for the three months ended March 31, 1996 due to the
suspension of mining in 1991 and the completion in 1992 of recoveries of gold
from leaching of ore previously mined.
There were no mine operating expenses for the three months ended March 31,
1996 due to the suspension of mining in 1991 and production in 1992.
Depreciation expense remained unchanged at $2,000 because machinery and
equipment purchases were offset by fixed assets being fully depreciated.
General and administrative expenses increased 7.7% principally due to
reduced office personnel expenses offset by increased franchise and intangible
tax payments.
Professional fees increased 140% principally due to the increase in
required legal expense primarily as a result of the pending litigation against
AGI.
Exploration expenses declined 60% to $2,000 due to a decline in the
Registrant's North Carolina property lease expense.
Interest and other, net was $7,000 of interest income for the first three
months of 1996 compared to $23,000 of interest expense for the first three
months of 1995. This was a result of no borrowings in 1996, while earning
interest income on cash investments.
The Registrant recorded a gain of approximately $35,000 on AGI stock sold
during the first three months of 1996, compared to a loss of $94,000 in the
prior year quarter.
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PIEDMONT MINING COMPANY, INC.
THREE MONTHS COMPARISON (CONT.)
As a result of the Registrant's reduced AGI stock sales for the three
months ending March 31, 1996, brokers fees and commissions were $1,000 compared
to $31,000 in 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 $124,000 for the three months ended March 31, 1996.
This amount is 12% lower than the three months ended March 31, 1995 due to the
lack of exploration expenditures and the maintenance status of the property.
The Registrant recorded a deferred income tax provision of $45,000 for the
three months ended March 31, 1996 relating principally to a increase in the
valuation allowance against deferred income tax assets. This increase was
directly attributable to accounting for the unrealized gain on the AGI Common
Stock as further discussed in Note D. The offsetting tax benefit relating to a
reduction of the deferred tax liability associated with the unrealized gain on
the AGI Common Stock is recorded as an adjustment to shareholder's equity.
The Registrant's net loss of $308,000 in the first quarter ended March 31,
1996 was due to the factors set forth above.
FINANCIAL CONDITION
The Registrant's financial condition and liquidity continued to decline in
the first three months of 1996 due primarily to the accrual of its 37.5% share
of the costs and expenses of the Venture and the funding of various corporate
and legal costs without any offsetting revenues. In addition, the Registrant
has accrued effective December 31, 1995 $1,370,000 for the arbitration award
entered against it in March 1996 as discussed in Part II, Item 1 -- Legal
Proceedings, and Note E to the accompanying financial statements. Working
capital declined to $169,000 at March 31, 1996, compared with $658,000 at the
end of 1995.
The Registrant's principal source of liquidity since the beginning of 1995
has been the sale of some of the shares of AGI Common Stock it had acquired
upon AGI's exercise of its option with respect to the Haile Property which the
Registrant began to liquidate in January of 1995. Proceeds from the sale of
such shares were also used to repay previous borrowings against such shares
made in 1993 and 1994. At March 31, 1996, the Registrant held 240,900 shares of
AGI Common Stock and had approximately $607,000 in cash and cash equivalents.
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 additional cash for the
foreseeable future. Thus, further declines in the market price of the AGI
Common Stock could severely affect the Registrant's liquidity. The closing
price of AGI Common Stock on the New York Stock Exchange on March 31, 1996 was
$6.875.
The continued deterioration in the Registrant's cash position during the
first three months of 1996 and increasing litigation costs have resulted in
uncertainty whether the Registrant would be able to fund its ongoing corporate
and legal expenses through the end of 1996 if the Registrant is required to pay
the $1,370,000 arbitration award in favor of AGI before there is a satisfactory
resolution of the Registrant's
6
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PIEDMONT MINING COMPANY, INC.
THREE MONTHS COMPARISON (CONT.)
claims against AGI in its pending litigation. (See Part II, Item 1- Legal
Proceedings.) The Registrant is vigorously pursuing its motions to stay or
vacate the arbitration award, but on April 26, 1996 the Magistrate Judge to
whom the Registrant's motions were referred entered a report to the Court
recommending that the motions be denied and that judgement be entered against
the Registrant on the arbitration award. The Registrant has filed objections
and exceptions to the Magistrate Judge's report and has requested oral
argument, but a ruling by the Court could be imminent. If a judgement is
entered on the arbitration award prior to resolution of the Registrant's claims
against AGI and the Registrant determines that enforcement of such judgement
would impair its ability to prosecute its claims against AGI, it may be
necessary for the Registrant to seek protection under the Federal Bankruptcy
Code to stay enforcement of the award.
Even if the Registrant is not ultimately required to pay the arbitration
award to AGI or the enforcement of the arbitration award is stayed pending
resolution of the Registrant's claims against AGI, the Registrant will need
additional financing if the Haile Mining Venture decides to develop and
commence mining operations at the Haile Property pursuant to the Venture
Agreement, or if prior to a production decision the Venture incurs
substantially more expenditures for which the Registrant is responsible.
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 is made by the Haile Mining Venture, the
Registrant's share of the Venture's total costs of developing and commencing
mining operations at the Haile Property, as estimated in the Preliminary
Feasibility Study prepared in December 1991 by AGI pursuant to the Option and
Earn-In Agreement, could be as great as $30,000,000, depending upon the nature,
size and scope of the operations and other variables, which have not yet been
determined. Although the Registrant and AGI agreed in their Venture Agreement
to seek project financing for the development of the Haile Property if a
production decision is made, there is no assurance that project financing will
be available and the Registrant may be required to seek its own separate
financing.
7
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PIEDMONT MINING COMPANY, INC.
FINANCIAL CONDITION (CONT.)
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: August 12, 1996 By /s/ Thomas L. Ross, III
--------------------------
Thomas L. Ross, III
Secretary and Controller
(Chief Accounting Officer)
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