UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period from _________ to _________
Commission File Number _____________________
IDAHO CONSOLIDATED METALS CORP.
(Exact Name of Small Business Issuer as Specified in its Charter)
British Columbia, Canada 82-0465571
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
504 Main Street, Suite 470
Post Office Box 1124
Lewiston, Idaho 83501
-------------------------------------------------
(Address of Principal Executive Offices)
(208) 743-0914
-------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 |_| No
|X|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 15,231,104 as of June 30, 1999.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
<PAGE>
IDAHO CONSOLIDATED METALS CORP.
Form 10-QSB
For the Fiscal Quarter ended June 30, 1999
TABLE OF CONTENTS
<TABLE>
Page
PART I
<S> <C>
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF THE COMPANY...................................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............................................10
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS....................................................................................14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................................................16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................................................16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................17
ITEM 5. OTHER INFORMATION....................................................................................17
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K...............................................................17
SIGNATURES.......................................................................................................18
</TABLE>
Page 2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF THE COMPANY
The following unaudited financial statements for the period ended June 30, 1999
are included in response to Item 1 and have been compiled by Staley, Okada,
Chandler & Scott, Chartered Accountants.
The financial statements should be read in conjunction with Management's
Discussion and Analysis or Plan of Operations and other financial information
included elsewhere in this Form 10-QSB.
Page 3
<PAGE>
IDAHO CONSOLIDATED
METALS CORP.
(An Exploration Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 1999
Unaudited - See Notice to Reader
U.S. Funds
STALEY, OKADA, CHANDLER & SCOTT
Chartered Accountants
Page 4
<PAGE>
NOTICE TO READER
- --------------------------------------------------------------------------------
We have compiled the interim consolidated balance sheet of Idaho Consolidated
Metals Corp. as at 30 June 1999 and the interim consolidated statements of
changes in shareholders' equity, operations and cash flow for the six months
then ended from information provided by management. We have not audited,
reviewed or otherwise attempted to verify the accuracy or completeness of such
information. Readers are cautioned that these statements may not be appropriate
for their purposes.
A partner of Staley, Okada, Chandler & Scott is an officer of the company.
Therefore, we are not independent from these interim consolidated financial
statements.
Burnaby, B.C. STALEY, OKADA, CHANDLER & SCOTT
6 August 1999 CHARTERED ACCOUNTANTS
- --------------------------------------------------------------------------------
Page 5
<PAGE>
Idaho Consolidated Metals Corp. Statement 1
(An Exploration Stage Company)
Interim Consolidated Balance Sheet
As at 30 June
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
ASSETS 1999 1998
- --------------------------------------------------------------------------------------------------------------------
Current
<S> <C> <C>
Cash $ 108,382 $ 461
Accounts receivable 5,569 8,671
Cash in trust - 50,000
--------------------------------------
113,951 59,132
Restricted Investments 82,000 90,000
Property Rights, Plant and Equipment 1,697,988 3,105,938
--------------------------------------
$ 1,893,939 $ 3,255,070
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
Current
Accounts payable - Related parties $ 152,662 $ 58,332
- Other 152,131 227,583
Current portion of notes payable 9,735 658,614
--------------------------------------
314,528 944,529
--------------------------------------
Notes Payable 555,121 10,857
--------------------------------------
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------
Share Capital - Statement 2 8,441,199 7,508,593
Convertible Securities 217,445 -
Deficit - Accumulated during the Exploration Stage - Statement 2 (7,634,354) (5,208,909)
--------------------------------------
1,024,290 2,299,684
--------------------------------------
$ 1,893,939 $ 3,255,070
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
ON BEHALF OF THE BOARD:
- --------------------------------, Director
- --------------------------------, Director
- See Accompanying Notes -
Page 6
<PAGE>
Idaho Consolidated Metals Corp. Statement 2
Interim Consolidated Statement of Changes
In Shareholders' Equity
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
Deficit
Accumulated
During the
Common Shares Convertible Exploration
Shares Amount Securities Stage Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - 31 December 1997 9,434,650 $ 7,508,593 $ - $ (4,866,470) $ 2,642,123
Loss for the period - - - (342,439) (342,439)
-----------------------------------------------------------------------------------
Balance - 30 June 1998 9,434,650 $ 7,508,593 $ - $ (5,208,909) $ 2,299,684
-----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Balance - 31 December 1998 9,434,650 $ 7,508,593 $ 249,862 $ (7,263,201) $ 495,254
Shared issued on conversion
of promissory notes 2,079,531 407,112 (47,112) - 360,000
Shares issued - private
placement 2,000,000 200,000 - - 200,000
Shares issued - exercise of
warrants 1,716,923 325,494 (27,527) - 297,967
Equity component on issuance
of convertible securities - - 42,222 - 42,222
Loss for the period - - - (371,153) (371,153)
-----------------------------------------------------------------------------------
Balance - 30 June 1999 15,231,104 $ 8,441,199 $ 217,445 $ (7,634,354) $ 1,024,290
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- See Accompanying Notes -
Page 7
<PAGE>
Idaho Consolidated Metals Corp. Statement 3
Interim Consolidated Statement of Operations
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
1999 1998
----------------------------------- -------------------------------
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
30 June 30 June 30 June 30 June
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Expenses
General and administrative - Schedule 1 $ 119,126 $ 218,197 $ 169,717 $ 305,313
--------------------------------------------------------------------
Other Expenses (Income)
Abandonment of property rights - 8,453 - -
Interest income (2,136) (2,437) (1,652) (2,313)
Interest expense 86,358 146,940 30,267 39,439
--------------------------------------------------------------------
84,222 152,956 28,615 37,126
--------------------------------------------------------------------
Loss for the Period $ 203,348 $ 371,153 $ 198,332 $ 342,439
- ----------------------------------------------------------------------------------------------------------------------
Loss per Common Share $ 0.02 $ 0.03 $ 0.02 $ 0.04
- ----------------------------------------------------------------------------------------------------------------------
Weighted Average Number of Common Shares
Outstanding 13,470,749 13,470,749 9,434,686 9,434,686
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- See Accompanying Notes -
Page 8
<PAGE>
Idaho Consolidated Metals Corp. Statement 4
Interim Consolidated Statement of Cash Flow
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
1999 1998
----------------------------------- -------------------------------
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
Cash Resources Provided By (Used In) 30 June 30 June 30 June 30 June
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Activities
Loss for the period $ (203,348) $ (371,153) $ (198,332) $ (342,439)
Items not affected by cash
Amortization 1,594 3,187 2,276 4,552
Amortization of interest discount 59,741 97,271 - -
Changes in current assets and liabilities
Accounts receivable 14,271 (3,506) (4,320) (4,683)
Cash in trust - 50,000 - -
Accounts payable
- Related parties 68,583 23,975 (90,411) (78,041)
- Other (20,805) (75,577) 65,672 73,009
--------------------------------------------------------------------
Net cash used in operating activities (79,964) (275,803) (225,115) (347,602)
--------------------------------------------------------------------
Investing Activities
Property rights, plant and equipment (132,301) (234,977) (51,141) (88,454)
Restricted investments 10,000 8,000 - -
--------------------------------------------------------------------
Net cash used in investing activities (122,301) (226,977) (51,141) (88,454)
--------------------------------------------------------------------
Financing Activities
Proceeds of notes payable - 72,778 148,633 357,632
Net proceeds from issuance of convertible
securities - 42,222 - -
Share capital 297,967 497,967 - -
Repayment of notes payable (2,212) (2,212) - -
--------------------------------------------------------------------
Net cash provided by financing activities 295,755 610,755 148,633 357,632
--------------------------------------------------------------------
Net Increase (Decrease) in Cash 93,490 107,975 (127,623) (78,424)
Cash position - Beginning of period 14,892 407 128,084 78,885
--------------------------------------------------------------------
Cash Position - End of Period $ 108,382 $ 108,382 $ 461 $ 461
--------------------------------------------------------------------
</TABLE>
- See Accompanying Notes -
Page 9
<PAGE>
Idaho Consolidated Metals Corp. Schedule 1
Interim Consolidated Schedule of General and
Administrative Expenses
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
1999 1998
----------------------------------- -------------------------------
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
30 June 30 June 30 June 30 June
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fees and wages $ 20,998 $ 46,377 $ 60,656 $ 115,545
Professional fees 69,900 105,292 60,311 92,965
Travel 7,222 23,053 18,421 35,654
Shareholder information 5,738 7,580 12,473 22,841
Office and general 5,683 15,613 5,904 15,491
Office rent 5,559 10,938 5,196 11,579
Amortization 1,594 3,187 2,276 4,552
Transfer agent and filing fees 1,239 4,515 2,633 4,486
Entertainment and promotion 928 1,377 1,847 2,200
Property search 265 265 - -
--------------------------------------------------------------------
Expenses for the Period $ 119,126 $ 218,197 $ 169,717 $ 305,313
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Interim Consolidated Schedule of Resource Property Costs Schedule 2
U.S. Funds
Unaudited - See Notice to Reader
<TABLE>
1999 1998
----------------------------------- -------------------------------
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
30 June 30 June 30 June 30 June
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Direct - Mineral
Idaho County, Idaho, U.S.A.
Geological $ 2,404 $ 10,708 $ 25,324 $ 40,005
Lease payments and acquisition 7,300 18,900 12,000 24,600
Camp and general 84 1,495 3,765 7,445
Assaying, staking and claim rental - - 3,382 5,456
Survey - - 498 4,776
Transportation 1,167 1,545 3,701 3,701
Environmental 2,577 3,287 - -
Montana, U.S.A.
Staking, filing and claim rental 37,599 64,139 - -
Geological 51,835 74,507 - -
Assaying 17,875 32,035 - -
Field transportation 10,382 21,642 - -
Survey 75 3,028 - -
Environmental 1,003 2,822 - -
Camp and general - 869 - -
--------------------------------------------------------------------
Costs for the Period $ 132,301 $ 234,977 $ 48,670 $ 85,983
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- See Accompanying Notes -
Page 10
<PAGE>
Idaho Consolidated Metals Corp.
Notes to Interim Consolidated Financial Statements
30 June 1999
U.S. Funds
Unaudited - See Notice to Reader
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The notes to the consolidated financial statements as at 31 December 1998,
as set forth in the company's 1998 Annual Report substantially apply to
these interim consolidated financial statements and are not repeated here.
- --------------------------------------------------------------------------------
2. Interim Consolidated Financial Statements Adjustments
The financial information given in the accompanying unaudited interim
consolidated financial statements reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of the results for
the interim periods reported. All such adjustments are of a normal
recurring nature. All financial statements presented herein are unaudited.
- --------------------------------------------------------------------------------
Page 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-QSB contains forward-looking statements. A forward looking
statement may contain words such as "will continue to be," "will be," "expect
to," "anticipates that," "to be" or "can impact." Management cautions that
forward-looking statements are subject to risks and uncertainties that could
cause the Company's actual results to differ materially from those projected in
forward-looking statements.
1. Results of Operations
Second Quarter 1999 Compared with Second Quarter 1998
The Company is in the exploration stage and has yet to generate revenue from
production. The Company continues to explore its mineral properties in an effort
to establish proven ore reserves, and has the additional resources of a joint
venture partner (Kinross Gold U.S.A., Inc.) to assist in this regard.
In the second quarter, general and administrative expenses decreased from
$169,717 to $119,126 compared to the second quarter of 1998, representing a 30%
savings. Significant decreases were experienced in management fees and wages,
travel and shareholder information expenses. On a quarter over quarter basis,
the Company reduced operating expenses by nearly $51,000.
The Company experienced a net loss for the period of $203,348, of which $119,126
was related to general and administrative expenses. The Company had a loss of
$198,332 for the same period in 1998.
During the quarter, the Company expended $132,301 on its resource property
exploration, development and acquisition program as compared to $48,670 in the
comparable 1998 period.
The Company's expenditures on its mining interests located in Idaho, U.S.A.
decreased to $13,532 for the quarter ended June 30, 1999 as compared to $48,670
in the same quarter in 1998 as the Company focuses its attention to its Montana
properties.
The Company has acquired three non-contiguous properties in Montana.
The first property consists of claims staked by the Company and a property
leased from Platinum Fox, Inc. under a Memorandum of Understanding. These 155
claims cover the upper member of the Ultramafic series composed of cumulates of
Olivine and Bronzite, as well as the contact between the Ultramafic and Banded
series. This property is parallel to the strike of the J.M. Reef and is
contiguous for 7 miles along the Reef. The property adjoins a portion of
Stillwater Mining Company's ("Stillwater") patented ground, which is currently
under development.
The second property consists of 119 claims staked by the Company along the
Picket Pin zone and is parallel to the western portion of the J.M. Reef.
Mineralization is reported (from work conducted by Anaconda Mining Co.) along
the entire exposed strike length of the deposit. The majority of the
mineralization occurs within 10 to 20 metres at or below the contact on an
abrupt change in texture and mode in the anorthosite rock.
The third property consists of 75 claims, in three claim blocks, adjacent to
Stillwater's patented claims in the Black Butte Mountain area. The property
adjoins Stillwater's patented ground and is within 1.5 miles of the Stillwater
Mine. The claims cover up to 1,800 feet of the lower stratigraphic section of
the Platinum and Palladium (PGE) bearing Lower Banded Series. This horizon is
the host to the 26 mile long J.M. Reef, which contains the most developed PGE
deposit.
Page 12
<PAGE>
During the quarter ended June 30, 1999, the Company continued its staking and
filing program in Montana, U.S.A. and commenced its 1999 prospecting and
geological program on the Montana properties. The Company has staked multiple
sulfide rich horizons that are anomalous in platinum and palladium adjacent to
the operating Stillwater Mine located in Stillwater and Sweet Grass counties,
Montana. The Company conducted research of the geology of the area and detailed
title research into the land position. Based on the results of that research,
the Company has staked or acquired three large blocks of claims.
The Company's expenditures on its mining interests located in Montana, U.S.A.
have increased to $118,769 for the quarter ended June 30, 1999 as compared to $0
in the same quarter in 1998. Staking, filing and claim rental costs incurred in
the quarter ended June 30, 1999, amounted to $37,599 as compared to $0 in the
same period in 1998. The Company also expended $69,710 on geological and
assaying in the quarter ended June 30, 1999, as compared to $0 for these
activities in the same period in 1998.
Six Months Ended June 30, 1999 Compared with the Six Months Ended June 30, 1998
The Company is in the exploration stage and has yet to generate revenue from
production. The Company continues to explore its mineral properties in an effort
to establish proven ore reserves, and has the additional resources of a joint
venture partner (Kinross Gold U.S.A., Inc.) to assist in this regard.
For the six months ended June 30, 1999, general and administrative expenses
decreased from $305,313 to $218,197 compared to the six months ended June 30,
1998, representing a 29% savings. Significant decreases were experienced in
management fees and wages, travel and shareholder information expenses. On a
period over period basis, the Company reduced operating expenses by
approximately $87,000.
The Company experienced a net loss for the period of $371,153, of which $218,197
was related to general and administrative expenses. The Company had a loss of
$342,439 for the same period in 1998.
During the six months, the Company expended $234,977 on its resource property
exploration, development and acquisition program as compared to $85,983 in the
comparable 1998 period.
The Company's expenditures on its mining interests located in Idaho, U.S.A.
decreased to $35,935 for the six months ended June 30, 1999 as compared to
$85,983 in the same period in 1998 as the Company focuses its attention to its
Montana properties.
The Company's expenditures on its mining interests located in Montana, U.S.A.
have increased to $199,042 for the period ended June 30, 1999 as compared to $0
in the same period in 1998. Staking, filing and claim rental costs incurred in
the period ended June 30, 1999, amounted to $64,139 as compared to $0 in the
same period in 1998. The Company also expended $74,507 on geological and $32,035
on assaying in the period ended June 30, 1999, as compared to $0 on these
activities in the same period in 1998.
2. Liquidity and Capital Resources
The Company is dependent on the proceeds of debt and equity financings,
including but not limited to public offerings, private placements, issuances of
convertible securities and the exercise of stock options or warrants, as well as
from the optioning or sale of its properties and the sale of other assets to
fund its general and administrative expenditures and its mineral exploration and
development costs. Without such proceeds, the Company may not continue as a
going concern. See note 1 to the Company's December 31,
Page 13
<PAGE>
1998 Financial Statements for additional information. The Company will need
further funds to continue its operations and there is no reasonable assurance
that such funding will be available.
During the quarter ended June 30, 1999, the Tomasovich Family Trust as lender
(the "Trust"), elected to convert convertible loan #3 in the amount of $150,000
of the notes issued during 1998 for 932,608 units of the Company. Each unit
consists of one common share of the Company's stock and one non-transferable
share purchase warrant. The Company reduced notes payable by $150,000, reduced
convertible securities by $19,585 and increased share capital by $169,585 on
conversion of these notes. The remaining $19,585 of equity remains in
convertible securities until the related warrants are exercised.
During the quarter ended June 30, 1999, the Trust exercised 1,146,923 share
purchase warrants representing all of the non-transferable share purchase
warrants related to convertible loans #1 and #2. The Company received cash in
the amount of $240,967 on exercise of the warrants and issued 1,146,923 shares.
The Company reduced convertible securities by $27,527 and increased share
capital by $268,494 on exercise of these warrants.
During the quarter ended June 30, 1999, Mr. D. Steiner exercised 570,000 share
purchase warrants related to the March 1999 private placement. The Company
received cash in the amount of $57,000 on exercise of the warrants and issued
570,000 shares.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations and exploration activities, that the proceeds of the
warrants exercised in the quarter ended June 30, 1999, will not be sufficient to
satisfy the Company's contemplated cash requirements for the following 12 month
period. Any proceeds from the exercise of stock options or warrants will be
applied to satisfy the Company's contemplated cash requirements. The remaining
proceeds, if any, will be added to general working capital purposes or used to
reduce current liabilities.
The Company plans to conduct exploration and development on its various
properties within the constraints of current market conditions, with its
objective being the maximization of geologic understanding of the projects with
minimal expenditures. The Company's estimated budget, for the remainder of 1999,
for all properties is $540,000 including BLM rental fees and contractual
payments to underlying claim owners. The Company intends to conduct an extensive
exploration program on the recently staked and optioned claims located near the
operating Stillwater Mine in Montana. The program will consist of mapping,
sampling and geophysics by the Fall of 1999. The 1999 budget has been decreased
by $180,000 as the drilling program has been delayed until the second quarter of
2000 as a result of delays in the permitting process. The anticipated budget for
this program is $220,000 and is within the $540,000 budget for the remainder of
fiscal 1999. The remainder of the $540,000 budget will be spent on geologic
mapping, sampling and assays, geologic interpretation, geophysics, geochemical
soil sampling, property payments and claim rental fees. The estimated budget is
exclusive of expenditures by the Company's joint venture partner on the Petsite
property.
The Company requires approximately $150,000 for general and administrative
expenses for the remainder of the fiscal year and approximately $8,000 for
payments on its notes payable. The Company anticipates repayment of these notes
from the proceeds on the exercise of stock options and warrants.
As at June 30, 1999, the Company has a working capital deficiency of $200,577
versus a working capital deficiency of $885,397 for the same period in 1998.
Accounts payable to related parties accounts for approximately 76% of the
working capital deficiency. The Company anticipates improvement of this
deficiency from the proceeds of private placements and the exercise of stock
options and warrants during 1999.
Page 14
<PAGE>
Positive cash flow from the financing activities of the Company of $295,755 and
$148,633 were recorded during the quarters ended June 30, 1999 and 1998,
respectively. Positive cash flow from the financing activities of the Company of
$610,755 and $357,632 were recorded during the six months ended June 30, 1999
and 1998, respectively. The convertible securities increased to $217,445 at June
30, 1999 from $0 at June 30, 1998. The long-term debt increased to $555,121 at
June 30, 1999 from $10,857 in 1998 and current liabilities decreased to $314,528
in 1999 from $944,529 in 1998. Of the June 30, 1999, current liabilities,
$152,131 represents the amount due to non related party accounts payable
accounts, $152,662 represents accounts payable amounts due to various related
parties, and $9,735 represents the current portion of notes payable.
Negative cash flows from operating activities of ($79,964) and ($225,115) were
recorded during the quarters ended June 30, 1999 and 1998, respectively.
Negative cash flows from operating activities of ($275,803) and ($347,602) were
recorded during the six months ended June 30, 1999 and 1998, respectively. The
Company will continue recording negative cash flow from operating activities
unless significant revenue is generated from ore production. The continued
negative cash flow will have a material negative impact on liquidity.
Investing activities consist of funds being expended on acquisition and
exploration of resource properties. The net cash expended on investing
activities for the quarters ended June 30 increased to $(122,301) in 1999 from
$(51,141) in 1998. Negative cash flows from investing activities of ($226,977)
and ($88,454) were recorded during the six months ended June 30, 1999 and 1998,
respectively.
Page 15
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Civil Suit by Gumprecht - Promissory NOTE
During 1997, a lawsuit was brought against the Company, IMD and Mr. Joseph
Swisher by the plaintiffs, Thomas Gumprecht and Bonnie Witrak (the
"Plaintiffs"). The Plaintiffs brought the action to collect on a promissory note
dated October 19, 1995 entered into between the Plaintiffs and the Company in
the amount of $250,000. In connection with the execution of the promissory note,
the Company and Plaintiffs entered into a security agreement, which granted the
Plaintiffs a security interest in certain assets. The Plaintiffs sought
possession of certain assets, which included equipment located at the Eckert's
Hill Mine and Mill site and at the Golden Eagle site. The Plaintiffs sought a
judgment in the total amount of $308,000 for principal and interest up to and
including October 1, 1997.
During 1998, the Company elected to allow a default to be entered in the lawsuit
and the Court ordered the Company to pay the amount of $332,216 (paid) which
included interest through May 17, 1998. The Plaintiffs' claim for attorney fees
was denied by the Court and they have appealed this decision. The Company has
indicated its willingness to attend a settlement conference to conclude this
matter.
Civil Suit by Gumprecht - Share Exchange
During 1996, a lawsuit was brought against IMD and Mr. Joseph Swisher, by Thomas
Gumprecht (the "Plaintiff"). During 1997, the Plaintiff filed an Amended
Complaint which added the Company and Delbert and Elli Steiner as defendants
(with IMD and Joseph Swisher, collectively the "Defendants"). The Plaintiff
alleges that the Plaintiff made various loans to Idaho Non-Metallic Mineral, a
company owned in part by Mr. Steiner and Mr. Swisher, in exchange for shares of
Silver Crystal Mines and IMD. The Plaintiff claims that prior to December 1991,
the parties to the lawsuit had an oral agreement to exchange the Plaintiff's
shares in Silver Crystal and IMD for 250,000 of the Company's shares, which were
owned by IMD. The Plaintiff is seeking transfer of such shares. The Defendants
deny that any such oral agreement was made and have raised the statute of frauds
and statute of limitations as defenses to the Plaintiff's claims.
During 1998, the claims for securities fraud and negligent misrepresentation
were dismissed by the Court, on summary judgment. The remaining claims of the
lawsuit are in the discovery phase, the trial set for August 23, 1999 has been
put aside and the parties have agreed to non-binding arbitration set to commence
on October 1, 1999. The Company is of the view that the allegations are
generally without merit and will continue to defend such actions vigorously.
Page 16
<PAGE>
Civil Suit by Gumprecht - Derivative Action
Thomas Gumprecht and Kirke White (the "Plaintiffs") filed an Amended Complaint,
Shareholders Direct and Derivative Action in the District Court of the Second
Judicial District of the State of Idaho, in and for the County of Idaho on
August 5, 1997. While the Complaint names the Company as a defendant on several
pages, the Company is not named formally as a party to the Amended Complaint.
The lawsuit makes allegations against Mr. Steiner and names the Company with
respect to the transfer of various funds and alleged agreements between Mr.
Steiner and the Plaintiffs set out more particularly as follows:
The Plaintiffs allege that Mr. Joseph Swisher was involved in the creation of
the Company, an allegation that the Company denies. The Plaintiffs further
allege that the Company paid Silver Crystal $800,000 for the construction of the
Eckert's Hill Mine and Mill site which the Company admits. The Plaintiffs allege
that such funds were diverted for the personal use of Mr. Joseph Swisher, which
the Company denies. These funds were utilized by the Company for an independent
metallurgical evaluation of the entire Swisher-Br Process and for general and
administrative expenditures.
The Plaintiffs alleged that an agreement was made in August of 1995 by IMD to
exchange the Plaintiffs' stock in Silver Crystal for that of the Company owned
by IMD. The Company admits an offer was made to this effect but denies that such
offer was accepted and as a result no agreement was formed.
The Plaintiffs allege that Mr. Steiner solicited funds from the Plaintiffs while
acting as their attorney and deposited such funds into his attorney/client trust
account and/or his attorney general business account. The Plaintiffs allege such
funds were given to Mr. Steiner in exchange for stock in the Company, owned by
IMD, which was not delivered. The Plaintiffs allege that the solicitation of
funds, the depositing of such funds into Mr. Steiner's client accounts, the
disbursement of such funds without accounting, and the failure transfer stock to
the Plaintiffs exhibits negligence by failure to exhibit the care expected of a
reasonably prudent attorney acting in the same or similar circumstances in the
same or similar community. Mr. Steiner specifically denies soliciting funds from
the Plaintiffs and states that the disbursement of such funds was undertaken at
the instruction of the Plaintiff, Mr. Gumprecht. All alleged negligence was
prior to or at the time of the incorporation of the Company and for which the
statute of limitations has run, prior to the date of the filing of the
complaint. Mr. Steiner further denies the remainder of the aforementioned
allegations.
The Plaintiffs are seeking recission and restitution of funds, compensatory
damages, specific performance of the alleged contract, the formation of a
constructive trust in the Golden Eagle Mining properties and all Company stock
owned by Mr. Joseph Swisher and IMD, punitive damages for $1,000,000, and
several orders relating to the Golden Eagle Property, Silver Crystal Mines,
Inc., IMD and Mr. Swisher.
The lawsuit is on hold pending the plaintiffs locating a shareholder who will be
willing to represent a class of Silver Crystal shareholders in the action. There
are no specific claims or allegations made against the Company.
The Company is of the view that the allegations are generally without merit and
will continue to defend such actions vigorously.
Civil Suit Against Geoffrey Magnuson
The Company commenced a lawsuit against Geoffrey Magnuson, a former officer of
the Company, in the District Court of the Second Judicial District of the State
of Idaho, in and for the County of Nez Perce on
Page 17
<PAGE>
September 26, 1997. The Company sued for diversion of corporate assets,
conversion of corporate property, including but not limited to, books, records
and geological data, breach of fiduciary duty and slander, and sought as relief:
(a) an order compelling Mr. Magnuson to account for his alleged misconduct
in appropriating the Company's property and to pay to the Company the
amount of such damage to the Company's business and goodwill;
(b) an order mandating Mr. Magnuson to return all property belonging to
the Company and to pay to the Company the amount of any damage to the
Company.
On April 21, 1999, the Company filed a dismissal of this action, without
prejudice.
ITEM 2. CHANGES IN SECURITIES and use of proceeds
Conversion of Convertible Promissory Notes Payable
On May 13, 1999, the Tomasovich Family Trust as lender (the "Trust"), Theodore
Tomasovich being both Trustee of the Trust and a Director of the Company,
elected to convert $150,000 of the notes issued during 1998 for 932,608 units of
the Company. Each unit consisted of one common share of the Company's stock and
one non-transferable share purchase warrant. The warrants allow the holder to
purchase additional common shares at C$0.28 per share to May 15, 2000.
The Company reduced notes payable by $150,000, reduced convertible securities by
$19,585 and increased share capital by $169,585 on conversion of these notes.
The remaining $19,585 of equity remains in convertible securities until the
related warrants are exercised.
Exercise of Warrants
On June 7,1999, Mr. D. Steiner exercised 570,000 share purchase warrants related
to the March 1999 Private Placement upon payment of cash in the amount of
$57,000 and the Company issued 570,000 shares.
On June 11, 1999, the Trust exercised 1,146,923 share purchase warrants
representing all of the non-transferable share purchase warrants related to
convertible loans #1 and #2. The Company received cash in the amount of $240,967
on exercise of the warrants and issued 1,146,923 shares. The Company reduced
convertible securities by $27,527 and increased share capital by $268,494 on
exercise of these warrants.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended June 30, 1999, the following matters were submitted to
a vote of, and approved by, the security holders at the Company's annual general
meeting held on June 28, 1999;
Page 18
<PAGE>
(a) to elect Delbert W. Steiner, Theodore Tomasovich, Robert A. Young and
Jag Vyas as directors for the ensuing year;
(b) to appoint PricewaterhouseCoopers LLP as auditors for the ensuing year
and to authorize the directors of the Company to fix the remuneration
of the auditors; and
(c) to approve the granting, generally, by the board of directors of new
stock options and the amendment of existing stock options granted to
insiders of the Company until the date of the next annual general
meeting.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibit 27.
(b) None.
Page 19
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 2nd day of September, 1999.
IDAHO CONSOLIDATED METALS CORPORATION
By: /s/ "DELBERT W. STEINER"
-------------------------------------
Delbert W. Steiner
President and Chief Executive Officer
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 indicated on the 10th day of September, 1999.
Signature Title Date
--------- ----- ----
/s/ "DELBERT W. STEINER" Director, President and September 2, 1999
- -------------------------- Chief Executive Officer
Delbert W. Steiner
/s/ "KENNETH A. SCOTT" Chief Financial Officer September 2, 1999
- --------------------------
Kenneth A. Scott
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