<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: June 30, 1998
FOR THE TRANSITION PERIOD FROM:
Commission File Number: 0-17048
GRAND CENTRAL SILVER MINES, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0429204
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
1010 Ironwood Drive
Suite 105
Coeur d'Alene, Idaho 83814
(Address of Principal Executive Offices, including zip code)
(208) 769-7340
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding at June 30, 1998: 7,312,068 shares
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF GRAND CENTRAL SILVER MINES, INC.
(Hereinafter referred to as Registrant of Company)
The condensed, consolidated financial statements of the
Registrant included herein have been prepared by the Registrant
from its own books and records. In the opinion of management, the
financial statements included in this quarterly report present
fairly in all material respects, the financial position of
Registrant and subsidiaries as of June 30, 1998, and September 30,
1997, the results of operations for the three months and nine
months ended June 30, 1998 and 1997, and the cash flows for the
nine months ended June 30, 1998 and 1997, in conformance with
generally accepted accounting principles.
As discussed in Item 2, a substantial portion of Registrant's
assets consist of investments in mineral properties for which
additional exploration is required to determine if they contain ore
reserves that are economically recoverable. The realization of
these investments is dependent upon the success of future property
sales, the existence of economically recoverable reserves, the
ability of the company to obtain financing or make other
arrangements for development, and upon future profitable
production. Accordingly, no provision for any asset impairment
that may result, in the event the Company is not successful in
developing or selling these properties, has been made in the
accompanying consolidated financial statements.
<PAGE> 3
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June
30, 1998 September
ASSETS (Unaudited) 30, 1997
<S> <C> <C>
CURRENT ASSETS
Cash $ 78,156 $ 30,080
Accounts receivable 143,215 -
Advances to related parties 5,865 26,312
Prepaid expenses 1,062 41,606
Marketable securities 199,000 150,000
------------ -----------
Total current assets 427,298 247,998
------------ -----------
MINERAL PROPERTIES 8,339,729 9,648,747
------------ -----------
PROPERTY AND EQUIPMENT
Leasehold improvements 7,517 7,517
Furniture and equipment 283,025 249,000
Vehicles 149,271 125,151
Field equipment 521,795 580,999
Leased automobiles
and equipment 53,026 84,620
Less: Accumulated depreciation
and amortization (662,670) (547,436)
------------ -----------
Total property and equipment 351,964 499,851
------------ -----------
OTHER ASSETS
Investments 1,188,329 -
Deposits and other assets 1,790 15,478
------------ -----------
TOTAL OTHER ASSETS 1,190,119 15,478
------------ -----------
TOTAL ASSETS $ 10,309,110 $10,412,074
============ ===========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these condensed
consolidated statements.
1
<PAGE> 4
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June
30, 1998 September
(Unaudited) 30, 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 494,414 $ 295,301
Accrued expenses 24,425 24,029
Payable to related party 1,000 476
Advances from shareholder 40,850 84,315
Leases payable - current portion 5,876 30,835
Notes payable - current portion 450,000 -
------------ ------------
Total current liabilities 1,016,565 434,956
------------ ------------
LONG TERM DEBT
Leases payable 13,001 22,041
Note payable 71,004 71,004
------------ ------------
Total long term debt 84,005 93,045
------------ ------------
TOTAL LIABILITIES 1,100,570 528,001
------------ ------------
MINORITY INTERESTS IN
CONSOLIDATED SUBSIDIARIES 32,724 32,724
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - $.01 par value;
40,000,000 shares authorized;
7,312,068 and 3,057,580 shares
issued and outstanding,
respectively 73,121 30,576
Additional paid-in capital 30,073,831 22,146,656
Accumulated deficit (20,463,319) (12,314,383)
Receivable related to sale
of common stock (507,817) (11,500)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 9,175,816 9,851,349
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 10,309,110 $ 10,412,074
============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these condensed
consolidated statements.
2
<PAGE> 5
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Operating revenue $ - $ 20,000 $ - $ 20,000
------------ ---------- ------------ ------------
Total revenues 20,000 20,000
------------ ---------- ------------ ------------
OPERATING EXPENSES
General and
administrative 791,196 343,192 1,623,294 1,188,278
Cost of property disposals - - 6,989 5,859
Mineral leases 10,181 54,665 67,564 196,492
Depreciation and
amortization 40,669 43,970 121,534 126,363
------------ ---------- ------------ ------------
Total operating expenses 842,046 441,827 1,819,381 1,516,992
------------ ---------- ------------ ------------
LOSS FROM OPERATIONS (842,046) (421,827) (1,819,381) (1,496,992)
OTHER INCOME (EXPENSE)
Interest and other
income 2,312 103,508 23,210 112,931
Interest expense (10,516) (4,590) (22,287) (12,815)
Gain on sale of assets 964 17,158 12,424 219,471
Loss on impairment
of assets (5,000,000) - (7,000,000) -
------------ ---------- ------------ ------------
Total other income
(expense) (5,007,240) 116,076 (6,986,653) 319,587
NET LOSS BEFORE MINORITY
INTERESTS (5,849,286) (305,751) (8,806,034) (1,177,405)
MINORITY INTERESTS IN
LOSS (INCOME) OF CONSOLIDATED
SUBSIDIARIES - - - -
------------ ---------- ------------ ------------
NET LOSS $ (5,849,286) $ (305,751) $ (8,806,034) $ (1,177,405)
============ ========== ============ ============
NET LOSS PER
COMMON SHARE $ (0.90) $ (0.11) $ (1.89) $ (0.42)
============ ========== ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,469,867 2,892,979 4,659,619 2,788,799
========= ========= ========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these condensed
consolidated statements.
3
<PAGE> 6
GRAND CENTRAL SILVER MINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
June 30, 1998 June 30, 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (8,806,034) $ (1,177,405)
Adjustments to reconcile net loss to
net cash used in operating activities:
Compensation and other expenses paid
through issuance of common stock 823,373 942,622
Write-off of mineral properties 7,000,000 -
Depreciation and amortization 121,534 126,363
Change in assets and liabilities:
Accounts receivable (143,215) 5,000
Receivable from related party 20,447 (93,255)
Prepaid expenses 40,554 (14,283)
Other assets 13,688 8,062
Accounts payable 199,113 226,721
Payable to related party 524 (5,474)
Accrued expenses 396 (15,589)
Advances from shareholders (43,465) (5,226)
Leases payable (33,999) (24,607)
Notes payable (100,000) (89,489)
------------ ------------
Net cash used in operating activities (907,084) (116,560)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (61,145) (101,716)
Acquisition of mineral properties (3,633,995) (877,168)
Acquisition of investments (1,237,329) -
----------- ------------
Net cash used in investing activities (4,932,469) (978,884)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of promissory notes 750,000 -
Issuance of common stock for notes 200,000 -
Issuance of common stock for
mineral properties 3,070,000 -
Issuance of common stock
for investments 1,149,550 -
Issuance of common stock for cash 100,896 1,010,600
Receivable related to sale of
common stock 617,183 9,400
----------- ------------
Net cash provided by financing activities 5,887,629 1,020,000
----------- ------------
NET INCREASE (DECREASE) IN CASH 48,076 (75,444)
CASH, BEGINNING OF PERIOD 30,080 133,556
----------- ------------
CASH, END OF PERIOD $ 78,156 $ 58,112
=========== ============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these condensed
consolidated statements.
4
<PAGE> 7
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
During the three months ended June 30, 1998, the Company:
* Issued 79,600 shares of common stock valued at $185,426 for
services of employees and contractors.
* Issued 12,500 shares of common stock valued at $25,250 for cash.
* Issued 25,000 shares of common stock valued at $50,000 as fees
for bridge financing.
* Issued 940,000 shares of common stock valued at $1,645,000 to
acquire a group of mineral properties.
* Issued 10,000 shares of common stock valued at $25,000 and cash
of $24,000 to acquire an interest in a minerals company.
* Issued 271,051 shares of common stock valued at $203,287 for
conversion of debt to common stock and payment of accrued
interest.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included
herein have been prepared by the Company, without audit, in
accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules,
regulations and instructions of the Securities and Exchange
Commission pertaining to Form 10-Q and Article 10 of
Regulation S-X. These condensed consolidated financial
statements reflect all adjustments which, in the opinion of
management, are necessary to present fairly the results of
operations for the interim period presented. All adjustments
are of a normal recurring nature. Certain information,
footnotes and disclosures normally included in complete
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the following disclosures are adequate. It is
suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended
September 30, 1997.
2. Net loss per common share is based on the weighted average
number of common shares outstanding during the period.
3. The Company carries its marketable securities at the lower of
cost or market value (FMV):
COST FMV
Royal Silver Mines, Inc. $ 150,000 $218,253
Summit Silver Mines, Inc. $ 49,000 $241,666
Fair market value is based on the closing or average price per
share of common stock on June 30, 1998.
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. On February 4, 1998, the Company declared a 1-for-10 reverse
stock split. Before the split, the Company had 37,653,898
outstanding shares of common stock. After effecting the stock
split and adjusting for rounding, the Company had 3,765,417
shares of common stock outstanding. All disclosures
concerning stock have been restated for all periods presented.
5. On April 12, 1998, the Company entered into an option
agreement with Arizuma Resources, Inc. Under the terms of the
five-month agreement expiring September 2, 1998, Arizuma
granted an option to the Company to enter into a joint venture
with Arizuma for the exploration and development of certain
mining properties in the Wonder Mining District, Churchill
County, Nevada. The option agreement calls for an initial
option payment of $5,000 by the Company. At the end of the
option period, the Company can exercise its option to acquire
a 70% interest in the joint venture by paying an additional
$5,000 to Arizuma, spending $1,200,000 over a four-year period
(including $100,000 in calendar 1998) on project work
commitments, and by making staggered payments to Arizuma
totalling $90,000 during the same four-year period.
6. On June 19, 1998, the Company issued 940,000 shares of its
common stock valued at $1,645,000 to acquire a group of
mineral properties under common control from an outside
entity. Properties acquired included patented mining claims
in Beaver County, Utah and in Mohave County, Arizona. In the
transaction, the Company also acquired mineral rights to
sixty-three claims in the Cripple Creek area of Teller County,
Colorado.
7. On June 30, 1998, the Company recorded a loss on impairment of
assets by the writedown of $5,000,000 of mineral properties,
primarily in the Tintic District, considered by management to
have less value than their recorded cost. On July 20, 1998,
the Company negotiated a settlement with a former
officer/director wherein the former employee agreed to
transfer to the Company $50,000 in cash and 398,810 shares of
his stock in Grand Central in exchange for certain mining
properties in the Tintic District. The Company retained a 2%
net smelter royalty interest on these properties in addition
to full indemnification against related, prospective
environmental liabilities.
8. Minority interest in consolidated financial statements is
adjusted based upon annual financial information only.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Financial Condition, Liquidity and Capital Resources.
Since inception on June 21, 1984, the Company has been engaged in
exploration, acquisition, and development of mineral properties
primarily through joint ventures. The Company's principal capital
resources have been acquired through issuance of common stock,
through joint venture operations, and through sales of various
properties. The Company has primarily relied upon joint venture
partners to finance the on-going costs of holding and developing
properties.
At June 30, 1998, there was deficit working capital of $638,267
compared to deficit working capital of $186,958 at September 30,
1997. This change is primarily the result of a build-up in
accounts payable and short-term debt, coupled with decreased sales
of the Company's stock for cash.
At June 30, 1998, the Company owned 1,091,267 shares of Royal
Silver Mines, Inc. common stock, which was approximately seventeen
percent of the total shares outstanding as of June 30, 1998. The
current market value of this stock is about $ .20 per share (see
Note 3). At June 30, 1998, the Company owned 483,333 shares of
Summit Silver Mines, Inc., whose stock was then valued at $.50 per
share.
The Company's total assets consist primarily of interests in
mineral properties. This asset decreased from $9,648,747 at
September 30, 1997, to $8,339,729 as of June 30, 1998. The
decrease is due primarily to the recognition of $7,000,000 of asset
impairment ($2,000,000 in the quarter ending March 31, 1998 and
$5,000,000 in the quarter ending June 30, 1998). These write-downs
were partially offset by the acquisition of certain Coeur d'Alene
silver properties and patented mining claims and a working interest
in a joint venture and the purchase in June 1998 of $1,645,000 of
patented mining claims in Colorado, Utah and Arizona.
During the nine months ended June 30, 1998, the Company's
operations used $907,084 of cash, as compared to using $116,650 of
cash during the same period in the preceding year. Approximately
half ($823,373) of the Company's G & A expenses of $1,623,294 were
paid through the issuance of common stock during the first nine
months of fiscal 1998 as compared to $942,622 of G & A expenses
(totalling $1,188,278) being funded in the prior fiscal year by
stock issuance. There were substantially more acquisitions of
mineral properties and investments in 1998, almost all of which
were financed by the issuance of common stock (which aggregated
$4,725,717) and to a smaller extent by promissory notes ($750,000).
By contrast, there was no funding
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (CONTINUED)
in the first nine months of 1997 from notes or lenders, although
cash generated by stock sales was $1,010,600 in the first nine
months of 1997 as opposed to only $100,896 in the corresponding
period of fiscal year 1998. There was a receivable of $1,125,000
generated in March of 1998 from the sale of common stock, with cash
funding of $617,183 from this transaction received in the quarter
ending June 30, 1998.
The Company does not have sufficient capital to fully explore and
develop its mineral properties, nor does the Company currently have
continuing revenues. The Company plans to continue financing its
exploration activities through joint ventures, production
activities, equity or debt funding, or by selling properties and
retaining royalty interests. In addition, the Company holds
royalty interests on properties sold during fiscal years 1992 and
1997 that are currently under exploration and development by other,
larger mining companies.
Results of Operations
The Company posted losses of $5,849,286 and $8,806,034 for the
three months and nine months ending June 30, 1998, respectively.
The principal component of each loss was the write-down in June
1998 of $5,000,000 and in March 1998 of $2,000,000 of mineral
properties considered by management to have less value than
originally recorded cost. There were virtually no revenues during
the first nine months of fiscal 1997 or fiscal 1998.
Operating expenses for the nine months ending June 30, 1998 were
$1,819,381, up almost $302,000 from the corresponding period of the
prior year primarily as a result of increased general and
administrative expenditures. General and administrative expenses
for the first nine months of fiscal 1998 included severance and
compensation expense for terminated employees unlike the same
period of the preceding year.
These condensed consolidated financial statements include the
following companies, with the state of incorporation and percentage
of ownership as shown: Centurion Mines Corporation, Utah, 100%;
Centurion Exploration Incorporated, Utah, 100%; Dotson Exploration
Company, Nevada, 100%; Mammoth Mining Company, Nevada, 81.8%; The
Gold Chain Mining Company, Utah, 61.1% and Tintic Coalition Mines
Corporation, Utah, 80%.
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated this 13th day of August, 1998.
GRAND CENTRAL SILVER MINES, INC.
By Its Chief Executive Officer:
/s/ John P. Ryan
John P. Ryan, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at June 30, 1998 (Unaudited)
and the Consolidated Statement of Income for the nine months ended June
30, 1998 (Unaudited) and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1998
<CASH> 78,156
<SECURITIES> 199,000
<RECEIVABLES> 143,215
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 427,298
<PP&E> 1,014,634
<DEPRECIATION> 662,670
<TOTAL-ASSETS> 10,309,110
<CURRENT-LIABILITIES> 1,016,565
<BONDS> 0
0
0
<COMMON> 73,121
<OTHER-SE> 9,102,695
<TOTAL-LIABILITY-AND-EQUITY> 10,309,110
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,819,381
<OTHER-EXPENSES> 7,000,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,287
<INCOME-PRETAX> (8,806,034)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,806,034)
<EPS-PRIMARY> (1.89)
<EPS-DILUTED> (1.89)
</TABLE>
