SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
OR
o 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: 1-316
INDEPENDENCE LEAD MINES COMPANY
(Exact name of registrant as specified in its charter)
| Arizona | | 82-0131980 |
(State or other jurisdiction of incorporation) | | (IRS Employer Identification No.) |
510 Cedar Street
Wallace, Idaho 83873
(Address of principal executive offices)
Issuer’ss telephone number, including area code: (208) 753-2525
| Common Stock | | None |
| Title of each class | | Name of each exchange on which registered |
Check whether the issuer (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 as 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 [ ]
Yes x No o
Indicate by check mark whether the issuer is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o Accelerated filer o Non-accelerated filer x
Indicate by check mark whether the issuer is a shell company (as defined by Rule 12b-2 of the Exchange Act.
Yes o No x
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 4,825,793 shares of the issuer’s common stock, par value $1.00, outstanding as of June 30, 2005. Transitional Small Business Disclosure format (check one): Yes o No x
INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT
ON FORM 10-QSB/A FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2005
TABLE OF CONTENTS
| | | | Page |
| | | | |
| PART I - FINANCIAL INFORMATION | |
| | | | |
| Item 1: | | Financial Statements | 1 |
| | | | |
| Item 2: | | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
| | | | |
| PART II - | | OTHER INFORMATION | |
| | | | |
| Item 1: | | Legal Proceedings | 3 |
| | | | |
| Item 2: | | Unregistered Sales of Equity Securities & Use of Proceeds | 4 |
| | | | |
| Item 3: | | Defaults upon Senior Securities | 4 |
| | | | |
| Item 4: | | Submission of Matters to a Vote of Security Holders | 4 |
| | | | |
| Item 5: | | Other Information | 4 |
| | | | |
| Item 6: | | Exhibits and Reports on Form 8-K | 4 |
| | | | |
| F/S-8 |
[The balance of this page has been intentionally left blank.]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited financial statements of the Company for the periods covered by this report are included elsewhere in this report, beginning at page F/S-1.
The unaudited financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information with the instructions to Form 10-QSB and Rule 10-01 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. In the opinion of the Company's management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2005.
For further information refer to the financial statements and footnotes thereto in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2004 incorporated by reference herein.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-QSB, including this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements regarding future events and the Company’s future results that are subject to the safe harbors created under the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the Company’s management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of the Company’s future financial performance, the Company’s anticipated growth and potentials in its business, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified elsewhere herein and in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004 under “Risk Factors.” Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements for any reason.
Results of Operations for the Period Ended June 30, 2005.
Six months ended June 30, 2005 Compared to Six months Ended June 30, 2004.
During the six months ended June 30, 2005 the Company realized no income. General and administrative expenses decreased to $42,297 for the six-month period ended June 30, 2005 as compared to $184,848 for the six-month period ended June 30, 2004. This decrease is principally due to decreased legal and consulting expenses incurred in the first six months of 2005. Legal and consulting expenses were higher in 2004 because of active litigation being carried on by the Company with Hecla Mining Company (see Item 1, Legal Proceedings, in Part II - Other Information). For the six months ended June 30, 2005, the Company experienced a net loss of $42,236, or $0.009 per share, compared to a net loss of $184,848, or $0.042 for during the comparable period in the previous year.
Overview
The Company is the owner of fifteen patented and seventeen unpatented mining claims. This claim group (“the property”) is situated Northwest of Hecla Mining Company’s Lucky Friday Mine in the Coeur d’Alene Mining District, Shoshone County Idaho. Adjacent is the community of Mullan and U.S. Interstate Highway 90.
Pursuant to the terms of an agreement dated February 8, 1968, among Hecla Mining Company (“Hecla”), Day Mines, Inc. (“Day”), Abot Mining Company (“Abot”), and the Company (the “Unitization Agreement”), the Eastern portion of the Company’s Property (approximately five-eighths of the Property) was unitized with certain adjoining and near-by properties
owned by Day and Abot into a unitized area, consisting of 55 claims, (known as the “DIA Area”). Under the terms of the Unitization Agreement, ores and minerals in place are owned by the parties thereto in the following percentages:
| Day (now Hecla by merger) | | | 47.70 | % |
| | | 46.30 | % |
| Abot | | | 6.00 | % |
By a second agreement also dated February 8, 1968 (the “Lease Agreement”), Hecla leased the DIA Area for a period of fifty (50) years, subject to a 30-year extension, for the purpose of conducting mineral exploration and development of the DIA Area and mining such commercial ore as may be discovered in the DIA Area by Hecla.
The Lease Agreement provides that all costs and expenses incurred in the exploration, development, and operation of the DIA Area are to be paid by Hecla subject to the right of Hecla to be reimbursed for such costs and expenses, together with all advance royalties paid, out of any future net profits realized from the operation of the DIA Area. After recovery of Hecla’s costs and expenses and amounts paid as advance royalties, and the establishment of a three month working capital reserve,
net profit royalties are to be paid to the Company and the other property owners as follows:
| Day (now Hecla by merger) | | | 19.08 | % |
| | | 18.52 | % |
| Abot | | | 2.40 | % |
Under the terms of the Unitization Agreement, one-half of the first net profit royalties received by the Company are to be paid over to Day (now Hecla) until Day recovers the sum of $450,000. The relationship of the parties to the Agreement may, under certain circumstances, be converted to a joint venture at the option of the property owners, where after the property owners would become participating, non-operating working interest owners who would share profits and expenses in connection with the DIA Area in the same ratio as exists pursuant to lease arrangement with Hecla described above.
Until Hecla commences to pay net profit royalties and during such period as the Lease Agreement is in effect, Hecla is obligated to pay an advance royalty to the Company of $750 per month subject to increase to $1,500 if production for the DIA Area exceeds 2,000 tons per month. The Company currently receives an advance royalty of $1,500 per month, which is recorded in the financial statements as deferred income.
Pursuant to the terms of the February 8, 1968, agreements, Hecla will be obligated to pay a royalty of 18.52 percent of defined net profits after Hecla has recouped its costs to explore and develop this property from the new discovery to Independence Lead Mines Company.
Since June 30, 1999 the Company has experienced substantial differences with the Lessee. In January 1997, Hecla chose to go forward with the DIA Projects Phase III and by June 1, 1998 the Project reached full production. In the first year of full production the Project lost $785,000 after mining and milling 257,605 tons. Independence requested Hecla to stop mining to prevent loss of the resource. Hecla’s management has refused all requests to act with prudence, and continues to mine at this writing. Since Hecla chose to go forward with Phase III, through the end of 2004 there have been approximately 1,428,000 tons mined and milled and all development costs have been lost. Requests for prudence over the years have failed. During 2003 Hecla mined and milled 151,991 tons containing 15.76 oz. Silver per ton, 9.05% lead, and 2.18% zinc, and during 2004 164,624 tons were mined and milled assaying 13.17 oz. silver per ton, 7.78% lead, and 2.36% zinc.. For the year 2003 the Project lost $723,147and for the year 2004 the Project lost $3,000,605. The DIA Project total cost at December 31, 2004 was $36,353,259. We believe the record indicates the DIA Project was not viable to undertake with the mining method chosen and the existing economic conditions, and did not justify the start-up of a large mining operation on the Lessor’s property.
Liquidity and Capital Resources
The Company financed its obligations during the six months ended June 30, 2005 from cash on hand and by the sale of 150,000 shares of its common stock at an average price $0.54 per share. The Company’s only recurring source of funds has been a monthly advance royalty from Hecla Mining Company of $1,500. The Company has incurred operating losses since inception; these factors indicate doubt as to the ability of the company to continue business as a going concern. The financial statements do not contain any adjustments which might be necessary if the Company is unable to continue as a going concern. In order to maintain operations, the Company will have to raise additional capital through loans or through the sale of securities. If the Company is unable to raise additional capital, it may have to cease operations.
In 1999 the Company acquired 38,436 shares of Independence Common Stock on the open market at an average price of $0.49 per share, and in 2000 the Company acquired 94,800 shares at an average price of $0.38 per share. These shares have been carried as treasury stock by the Company, and in December 2003, 72,000 shares of treasury stock were sold for $0.70 per share. The remainder of the treasure shares was sold in April 2004 at an average price of $0.98 per share. In the first six months of 2005 there were 150,000 shares of common stock sold at an average price of $0.54 per share.
The current officers and directors of the Company serve without compensation and are not considered by the Company to be employees.
Cash Flows for the Six Months Ended June 30, 2005 were as follows:
During the six-month period ended June 30, 2005, the Company’s cash position increased by $53,829, due to the private placement sale of 150,000 shares of common stock at an average price of $0.54 per share, and the receipt of $9,000 in advance royalties. During this period, the Company used $26,671 in operating activities.
Item 3. Controls and Procedures
Evaluation of Disclosure Controls.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Management has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) as of June 30, 2005.
Based upon this evaluation, we determined that there was a material weakness affecting our internal control over financial reporting. As a result of those weaknesses, our disclosure controls and procedures were not effective as of June 30, 2005. The material weakness was identified as follows: The person responsible for the accounting and reporting for the Company did not in all cases apply generally accepted accounting principles in recording the Company’s financial transactions or preparing its financial statements.
Management’s Remediation Initiatives.
Management plans to strive to minimize control weaknesses. As with any company our size, this lack of personnel familiar with generally accepted accounting principles (GAAP) is due to the Company’s limited resources. Although the Company’s President and Board of Directors review financial statements, this in itself cannot be assured to identify exposure to misstatements by the existing system. Hiring a CDPA experienced in GAAP to perform our quarterly close and prepare the related financial statements would improve the process, but this option may not be available because of the limited resources of the Company. The Company is considering control design changes that will mitigate this weakness.
Changes in Internal Control over Financial Reporting.
Except as noted above, there have been no changes during the six months ended June 30, 2005 in the Company’s internal controls over financdial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
Inherent Limitations on the Effectiveness of Controls.
Management, including the President, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any systems of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently in litigation with Hecla Mining Company over Hecla’s operation of the Lucky Friday Mine under the agreement covering the DIA Project. As required by terms of the 1968 Lease Agreement with Hecla Mining Company, our Company gave notice of termination of that agreement in early March 2002. This agreement covered the DIA Project, which is Hecla's principle operation at the Lucky Friday mine near Mullan, Idaho. Both parties agreed to waive arbitration requirement contained in the lease and agreed to a trial without a jury
A nine day trial was held from March 22nd through April 1st of 2004, and closing written arguments were submitted to the court by April 30, 2004. Further, the court required the parties to submit to the court a written rebuttal to the other party’s closing arguments by May 17, 2004. On July 19, 2004 the court ruled in favor of Hecla Mining Company, and the Company appealed the District Court’s ruling to the Idaho Supreme Court. On February 6, 2006 the Company, in the case of Independence Lead Mines Company, (Plaintiff) vs. Hecla Mining Company (Defendant), Docket No. 31042, presented oral arguments before the Idaho Supreme Court in Boise. This is a continuation of the Company’s assertion of a claim of breach of contract and waste, seeking declaratory and injunctive relief relating to Hecla’s operation on mining claims it leased from Independence. On April 24, 2006 the Idaho Supreme Court upheld the First District Court decision and subsequently denied a motion for rehearing.
The Company then filed a complaint against Hecla on December 11, 2006 in the United States District Court for the District of Idaho. On January 5, 2007 the Company filed a Complaint for Rescission of Contract against Hecla Mining Company in the First Judicial District of the State of Idaho. A hearing was held on May 9, 2007 and the judge ruled in favor of Hecla. The Company subsequently filed a petition for the appeal to be heard in federal court, which was denied. The Company has now filed an appeal with the Ninth Circuit Court of Appeals in San Francisco.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six months ended June 30, 2005 the Company sold 150,000 shares of the Company’s common stock in private placement transactions without registration under the Securities Act in reliance upon the exemptions from the registration requirements provided by Section 4(2), and Rule 506 of Regulation D under the Securities Act. The proceeds of $80,500 have been used for Company operations and to finance the litigation with Hecla Mining Company.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the registrant’s security holders during the period covered by this report.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
a. Documents which are filed as a part of this report:
| 1. | Financial Statements: The required financial statements are contained in pages F/S-1 through F/S-8 of this Form 10-QSB. |
| | 2. | Financial Statement Schedules: Financial statement schedules have been omitted as they are not applicable or the information is included in the Financial Statements. |
| | | 31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed herewith. |
| | | 31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act. Filed herewith. |
| | | 32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350. Furnished herewith. |
| | | 32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.cC. Section 1350. Furnished herewith. |
b. See (a)(3) above for all exhibits filed herewith.
c. All schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes.
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INDEPENDENCE LEAD MINES COMPANY
TABLE OF CONTENTS
| | | Page |
| | | |
| Balance Sheets as of June 30, 2005 and December 31, 2004 | | F/S-1 |
| | | |
| Statements of Operations for the three and six-Month periods ended June 30, 2005 and June 30, 2004 | | F/S-2 |
| | | |
Statement of Changes in Stockholders’ Equity for the six Months ended June 30, 2005 | | F/S-3 |
| | | |
| Statements of Cash Flow for the six Months ended June 30, 2005 and June 30, 2004 | | F/S-4 |
| | | |
| Notes to Interim Financial Statements | | F/S-5 |
| | | |
| Certifications and Signatures | | F/S-8 |
[The balance of this page has been intentionally left blank.]
INDEPENDENCE LEAD MINES COMPANY
BALANCE SHEETS
| | | | June 30, 2005 | | | December 31, 2004 | |
| | | | (Unaudited) | | | | |
ASSETS | | | | | | | |
| CURRENT ASSETS: | | | | | | | |
| Cash | | $ | 108,494 | | $ | 54,665 | |
| Royalties receivable | | | 1,500 | | | 1,500 | |
| Marketable securities | | | 1,006 | | | 1,006 | |
| Prepaid expenses | | | 14,940 | | | 20,000 | |
| Total current assets | | | 125,940 | | | 77,171 | |
| | | | | | | | |
| | | | | | | | |
| Total assets | | $ | 125,940 | | $ | 77,171 | |
| | | | | | | | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | |
| | | | | | | | |
| Accounts payable | | $ | 2,746 | | $ | 1,541 | |
| Accounts payable - related parties | | | 1,250 | | | 950 | |
| | | | | | | | |
| Total current liabilities | | | 3,996 | | | 2,491 | |
| | | | | | | | |
| DEFERRED INCOME: | | | 419,000 | | | 410,000 | |
| | | | | | | | |
| Total liabilities | | | 422,996 | | | 412,491 | |
| | | | | | | | |
| STOCKHOLDERS' EQUITY (DEFICIT): | | | | | | | |
| | | | | | | | |
| Common Stock, $1.00 par value, authorized | | | | | | | |
| 5,000,000 shares; issued 4,825,793 shares and | | | | | | | |
| 4,675,793 shares at 6/30/05 and 12/31/04, respectively. | | | 4,825,793 | | | 4,675,793 | |
| Discount on common stock issued | | | (266,242 | ) | | (196,742 | ) |
| | | | 4,559,551 | | | 4,479,051 | |
| Accumulated deficit (restated) | | | (4,856,607 | ) | | (4,814,371 | ) |
| Total Stockholders equity | | | ( 297,056 | ) | | (335,320 | ) |
| | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 125,940 | | $ | 77,171 | |
The accompanying notes are an integral part of these financial statements
INDEPENDENCE LEAD MINES COMPANY
STATEMENTS OF OPERATIONS
| | | Three Months | | Six Months | | Three Months | | Six Months | |
| | | Ended | | Ended | | Ended | | Ended | |
| | | June 30, 2005 | | June 30, 2005 | | June 30, 2004 | | June 30, 2004 | |
| | | (Unaudited) | | (unaudited) | | (unaudited) | | (Unaudited) | |
| | | | | | | | | | |
Revenue | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| | | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | |
| Consulting | | | 4,063 | | | 5,187 | | | 34,750 | | | 40,109 | |
| Taxes and fees | | | 104 | | | 104 | | | 364 | | | 364 | |
| Office expense | | | 94 | | | 94 | | | 1,422 | | | 2,711 | |
| Office services | | | 150 | | | 300 | | | 150 | | | 300 | |
| Shareholder and Public Relations | | | 443 | | | 1,093 | | | 2,094 | | | 2,684 | |
| Transportation and Travel | | | 1,459 | | | 1,459 | | | 2,200 | | | 2,800 | |
| Legal | | | 23,240 | | | 34,060 | | | 71,090 | | | 135,880 | |
| Total expenses | | | 29,553 | | | 42,297 | | | 112,070 | | | 184,848 | |
| | | | | | | | | | | | | | |
Loss from Operations | | | (29,553 | ) | | (42,297 | ) | | (112,070 | ) | | (184,848 | ) |
| | | | | | | | | | | | | | |
| Other Income (expense) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Interest, net | | | 20 | | | 61 | | | 2 | | | 2 | |
| Total other income | | | 20 | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
(Loss) before income taxes | | | (29,533 | ) | | (42,236 | ) | | (112,068 | ) | | (184,848 | ) |
| Provision for income taxes | | | 0 | | | 0 | | | 0 | | | 0 | |
| | | | | | | | | | | | | | |
Net (Loss) | | $ | (29,553 | ) | $ | (42,236 | ) | $ | (112,068 | ) | $ | (184,848 | ) |
| | | | | | | | | | | | | | |
| (Loss) per share | | | ($0.006 | ) | | ($0.009 | ) | | ($0.025 | ) | | ($0.042 | ) |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| shares outstanding | | | 4,823,156 | | | 4,761,594 | | | 4,459,126 | | | 4,357,414 | |
The accompanying notes are an integral part of these financial statements.
INDEPENDENCE LEAD MINES COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
| | | | | | | Discount on | | Number | | Common | |
| | | Common Stock | | Of | | Stock | | Accumulated | |
| | | Shares | | Amount | | Issued | | Deficit | | Total | |
| Balances, December 31, 2004 | | | | | $ | 4,675,793 | | $ | (4,814,371 | | $ | (196,742 | ) | $ | (335,320 | ) |
| | | | | | | | | | | | | | | | | |
| | | 150,000 | | | 150,000 | | | ( 69,500 | ) | | 0 | | | 80,500 | |
| | | | | | | | | | | | | | | | | |
Net loss, six Months ended June 30, 2005 | | | 0 | | | 0 | | | 0 | | | (42,236 | ) | | (42,236 | ) |
| | | | | | | | | | | | | | | | |
| | | 4,825,793 | | $ | 4,825,793 | | $ | (266,242 | ) | | ($4,856,607 | ) | $ | (299,056 | ) |
(The balance of this page has been intentionally left blank)
The accompanying notes are an integral part of these financial statements.
INDEPENDENCE LEAD MINES COMPANY
STATEMENTS OF CASH FLOW
| | Six Months Ended | | Six Months Ended | |
| | | June 30, 2005 | | June 30, 2004 | |
| | | (Unaudited) | | (Unaudited) | |
| Operating Activities: | | | | | |
| Net (loss) | | | ($42,236 | ) | | ($184,84 | ) |
| | | | | | | | |
| Adjustments to reconcile net loss to net cash | | | | | | | |
| used in operating activities: | | | 0 | | | 0 | |
| | | | | | | | |
| Common stock issued for services | | | 0 | | | 8,000 | |
| | | | | | | | |
| Changes in operating assets and liabilities: | | | | | | | |
| | | | | | | | |
| (Increase) decrease in prepaid expenses | | | 5,060 | | | 0 | |
| Increase (decrease) in accounts payable | | | 1,505 | | | (3,072 | ) |
| | | | | | | | |
| Increase (decrease) in deferred income | | | 9,000 | | | 9,000 | |
| Net cash used in operating activities | | | (26,671 | ) | | (170,918 | ) |
| | | | | | | | |
| Financing activities: | | | | | | | |
| | | | | | | | |
| Proceeds from sale of Common Stock | | | 80,500 | | | 166,442 | |
| | | | | | | | |
| Net cash provided by financing activities | | | 80,500 | | | 166,442 | |
| | | | | | | | |
| Net increase (decrease) in cash | | | 53,829 | | | (4,476 | ) |
| | | | | | | | |
| Cash, beginning of period | | | 54,665 | | | 72,300 | |
| | | | | | | | |
| Cash, end of period | | $ | 108,494 | | $ | 67,824 | |
| | | | | | | | |
| Disclosure of accounting policy | | | | | | | |
| For the six months ended June 30, 2005 | | | | | | | |
| and June 30, 2004, the Company | | | | | | | |
| had no cash equivalents. | | | | | | | |
| | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | |
| | | | | | | | |
| Cash paid during the period for: | | | | | | | |
| Interest | | $ | 0 | | $ | 0 | |
| Income taxes | | | 0 | | | 0 | |
| | | | | | | | |
| | | | | | | |
| Common stock issued for services | | | 0 | | | 8,000 | |
The accompanying notes are an integral part of these financial statements.
INDEPENDENCE LEAD MINES COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS - UNAUDITED
Note 1 - Organization and Description of business
Independence Lead Mines Company (“the Company”) is a corporation organized under the laws of the State of Arizona on September 16,1929. The Company is the owner of fifteen patented and fourteen unpatented mining claims. This claim group (the “property”) is situated Northwest of Hecla Mining Company’s Lucky Friday Mine in the Coeur d’Alene Mining District, Shoshone County Idaho. The Company’s property is part of the “DIA Area” which is currently being developed and mined by Hecla Mining Company. The Company’s only recurring source of funds has been a monthly advance royalty from Hecla Mining Company of $1,500. In March 2002, the Company notified Hecla Mining Company that it considered the DIA Lease terminated and as a result would no longer accept advance royalty payments. Subsequent to that notice, the Company began accepting advance royalty payments, pending the outcome of the dispute between the Company and Hecla Mining Company. On July 19, 2004 the First District Court ruled in favor of Hecla Mining Company and the Company appealed the court’s decision to the Idaho Supreme Court. On April 24, 2006 the court upheld the First District Court Decision. On May 26, 2006 the Company requested that the Court grant rehearing of the case, which was subsequently denied. The Company has now filed an appeal with the Ninth Circuit Court of Appeals in San Francisco.
Note 2 - Basis of Presentation
The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10QSB and Regulation S-B as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements. These unaudited interim financial statements should be read in conjunction with the financial statements for the year ended December 31, 2005. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of operations.
Certain balances from prior year financial statements have been reclassified to conform with the current year presentation. Operating results for the six month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.
Note 3 - Recent Accounting Pronouncements
In May 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154 (“SFAS No. 154”), “Accounting Changes and Error Corrections.” This statement requires entities that voluntarily make a change in accounting principle to apply that change retrospectively to prior periods’ financial statements, unless this would be impracticable. SFAS No. 154 supersedes APB Opinion No. 20, “Accounting Changes,” which previously required that most voluntary changes in accounting principle be recognized by including in the current period’s net income the cumulative effect of changing to the new accounting principle. SFAS No. 154 also makes a distinction between “retrospective application” of an accounting principle and the “restatement” of financial statements to reflect the correction of an error. SFAS No. 154 applies to accounting changes and error corrections that are made in fiscal years beginning after December 15, 2005. Management believes the adoption of this statement will not have an immediate material impact on the financial statements of the Company.
In March 2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 47 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 clarifies that the term “conditional asset retirement obligation,” which as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The entity must record a liability for a “conditional” asset retirement obligation if the fair value of the obligation can be reasonably estimated. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. Management believes the adoption of this statement will not have an immediate material impact on the financial statements of the Company.
Note 4 - Marketable Securities
The Company’s investments in equity securities are intended to be held for a short period and are classified as trading securities. These securities are recorded at fair value as current assets on the balance sheet under the caption of marketable securities. The Company’s marketable securities consist of capital stock of other companies in the mining industry.
Note 5 - Mineral Properties
The Company is the owner of fifteen patented and fourteen unpatented mining claims. This claim group (“the property”) is situated Northwest of Hecla Mining Company’s Lucky Friday Mine in the Coeur d’Alene Mining District, Shoshone County, Idaho. Adjacent are the community of Mullan and U.S. Interstate Highway 90.
Pursuant to the terms of an agreement dated February 8, 1968, among Hecla Mining Company (“Hecla”), Day Mines, Inc. (“Day”), Abot Mining Company J(“Abot”), and the Company (the “Unitization Agreement”), the Eastern portion of the Company’s Property (approximately five-eighths of the Property) was unitized with certain adjoining and near-by properties owned by Day and Abot into a unitized area, consisting of 55 claims (known as the “DIA Area”).
By a second agreement also dated February 8, 1968 (the “Lease Agreement”), Hecla leased the DIA Area for a period of fifty (50) years, subject to a 30-year extension, for the purpose of conducting mineral exploration and development of the DIA Area and mining such commercial ore as may be discovered in the DIA Area by Hecla.
The Lease Agreement provides that all costs and expenses incurred in the exploration, development, and operation of the DIA Area are to be paid by Hecla subject to the right of Hecla to be reimbursed for such costs and expenses, together with all advance royalties paid, out of any future net profits realized from the operation of the DIA Area. After recovery of Hecla’s costs and expenses and amounts paid as advance royalties, and the establishment of a three month working capital reserve, net profit royalties are to be paid to the Company and the other property owners. The Company is currently receiving $1,500 per month in advance royalties.
Note 6 - Restatements
The Company has restated its financial statements to reflect a retroactive adjustment to write off the costs of previously impaired mining property ($2,945,407) and unrecovered exploration costs ($187,920). The adjustment resulted in an increase of the balance of accumulated deficit at June 30, 2005 and December 31, 2004 of $3,133,327 and corresponding reductions in the mining property and unrecovered exploration cost accounts at those dates. The Company has also restated the previously issued financial statements to reflect the correction of prepaid expenses and deposits which had overstated assets by $52,371. The adjustments resulted in an increase of previously reported second quarter 2005 net loss by $2,241
Note 7 - Capital Stock
Preferred Stock
The Company has no preferred stock authorized.
Common Stock
In September 1997 the capitalization of the Company was increased from 4,000,000 snares to 5,000,000 shares of $1.00 par value common stock. In September 2005 the capitalization of the Company was increased from 5,000,000 shares of $1.00 par value common stock to 10,000,000 shares of $0.10 par value common stock. The common stock and additional paid-in capital accounts will be retroactively adjusted to reflect the change in capitalization beginning in the quarter ending September 30, 2005. In the second quarter of 2005 the Company sold 80,000 shares of its common stock at an average price of $0.52 per share.
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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.
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| | INDEPENDENCE LEAD MINES COMPANY |
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| By: | /s/ Bernard C. Lannen |
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Bernard C. Lannen, its |
| | President |
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| | | Date: November 12, 2007 |
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| By: | /s/ Wayne Schoonmaker |
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Wayne Schoonmaker, its |
| | Principal Accounting Officer |
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| | Date: November 12, 2007 |
