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 September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: 1-316
INDEPENDENCE LEAD MINES COMPANY
(Exact name of registrant as specified in its charter)
Arizona 82-0131980
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
510 Cedar Street
Wallace, Idaho 83873
(Address of principal executive offices)
Registrant's telephone number,
including area code: (208) 753-2525
Common Stock None
Title of each class Name of each exchange on which
registered
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 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 [ ]
The number of outstanding shares of the registrant's common stock
at November 1, 2001 was 4,175,357 shares.
<page>
INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2001
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 1
PART II - OTHER INFORMATION
Item 1: Legal Proceedings 2
Item 2: Changes in Securities 3
Item 3: Defaults upon Senior Securities 3
Item 4: Submission of Matters to a Vote of
Security Holders 3
Item 5: Other Information 3
Item 6: Exhibits and Reports on Form 8-K 3
SIGNATURES
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<page>
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-Q 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 nine-month period ended
September 30, 2001 are not necessarily indicative of the results that
may be expected for the full year ending December 31, 2001.
For further information refer to the financial statements and footnotes
thereto in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 incorporated by reference herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2001.
Nine months Ended September 30, 2001 Compared to nine months Ended
September 30, 2000.
During the nine months ended September 30, 2001 the Company realized no
income other than interest income of $5,854. General and administrative
expenses increased to $30,721 for the nine-month period ended September
30, 2001 as compared to $27,824 for the nine-month period ended
September 30, 2000. The increase is principally attributed to increased
consulting and shareholder expenses incurred in 2001. For the quarter
ended September 30, 2001, the Company experienced a net loss of
$14,599, or $0.003 per share, compared to net loss of $5,798, or $0.001
per share, during the comparable period in the previous year.
LIQUIDITY AND CAPITAL RESOURCES.
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%
Independence 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
-1-
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%
Independence 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 obligate 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. In the
quarter ended June 30, 2001 Hecla Mining Company announced that the
Lucky Friday Mine will begin to reduce Production in the third quarter
2001. Based on the announced continued partial operation, the
curtailment is not expected to affect the advance royalties currently
being paid to the Company.
Over the past 55 months ending September 30, 2001, Hecla (Lessee) has
chosen to mine and mill 917,430 tons of ore from the leased property.
During this period of time DIA Project costs increased by $14,125,000.
Independence (Lessor) feels the exchange of 917,430 tons of ore for the
$14,125,000 Project Debt is a colossal failure to act with prudence and
a failure to protect the interest of the (Lessor). Independence has
voiced it's concerns to the (Lessee). To remedy this wrong,
Independence will comply with the guidelines set forth under the
companies 1968 Lease Agreement under Article XVIII ARBITRATION.
The current officers and directors of the Company serve without
compensation and are not considered by the Company to be employees.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings pending.
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-2-
ITEM 2. CHANGES IN SECURITIES.
Neither the constituent instruments defining the rights of the
registrant's securities holders nor the rights evidenced by the
registrant's outstanding common stock have been modified, limited or
qualified.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The registrant has no outstanding senior securities.
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.
EXHIBITS. None.
REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the
registrant during the period covered by this report.
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-3-
INDEPENDENCE LEAD MINES COMPANY
TABLE OF CONTENTS
Page
Balance Sheets as of September 30, 2001
and December 31, 2000 F/S-2
Statements of Operations for the three Months
ended September 30, 2001 and 2000 and for the
nine Months ended September 30, 2001 and 2000 F/S-3
Statements of Cash Flow for the nine
Months Ended September 30, 2001 and 2000 F/S-4
Notes to Interim Financial Statements F/S-5
Signatures F/S-6
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F/S - 1
<Page>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
BALANCE SHEET - UNAUDITED
<Table>
<Caption>
ASSETS
September 30, 2001 December 31, 2000
------------- -------------
<s> <c> <c>
CURRENT ASSETS:
Cash $ 163,260 $ 196,726
Royalties & Interest Receivable 1,500 1,500
Investments 1,006 1,006
----- -----
Total current assets 165,766 199,232
----- -----
PROPERTY AND EQUIPMENT, at cost:
Equipment 0 0
Less accumulated depreciation 0 0
---- ----
0 0
Mining property 2,945,407 2,945,407
------ ------
Total property and equipment 2,945,407 2,945,407
OTHER ASSETS:
Unrecovered exploration costs 187,920 187,920
----- -----
Total assets $3,299,093 $ 3,332,559
===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,050 $ 12,389
Advances payable 0 0
Interest payable 0 0
Loans from Shareholders 0 0
Income taxes accrued (refund due) (2,314) 13,650
----- -----
Total current liabilities 2,736 26,039
---- ----
DEFERRED INCOME: 351,500 337,250
----- -----
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par value,
Authorized 5,000,000 shares;
issued 4,308,793 and outstanding
4,175,357 shares at 12/31/00; issued
4,308,793 and outstanding
4,175,357 shares at 09/30/01. 4,308,793 4,308,793
Treasury Stock (55,290) (55,290)
Additional Paid-In
Capital (Deficit) (108,293) (108,293)
----- -----
4,145,210 4,145,210
Less deficit accumulated during the
exploration stage (1,200,353) (1,175,940)
Total Stockholders equity 2,944,857 2,969,270
----- -----
Total liabilities and
stockholders' equity $3,299,093 $3,332,559
===== =====
The accompanying notes are an integral part of these financial statements
</table>
F/S - 2
<Page>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE EXPLORATION STAGE - UNAUDITED
<Table>
<Caption>
Quarter Nine Months Quarter Nine Months
Ended Ended Ended Ended
Sept.30, 01 Sept.30, 01 Sept.30, 00 Sept.30, 00
------ ------ ------ ------
<s> <c> <c> <c> <c>
REVENUE $ 0 $ 0 $ 0 $ 0
--- --- --- ---
EXPENSES
Consulting 3,150 10,534 6,300 8,775
Licenses and fees 0 48 300 1,116
Office expense 985 1,023 0 343
Office services 150 450 150 450
Shareholder Relations 5,050 6,612 348 2,773
Transportation 1,493 1,493 0 4,236
Accounting 0 87 0 923
Legal 5,368 10,474 3,409 9,208
--- --- --- ---
Total expenses 16,196 30,721 10,507 27,824
---- ---- ---- ----
LOSS FROM OPERATIONS ($16,196) ($30,721) (10,507) (27,824)
OTHER INCOME AND (EXPENSE)
Interest, net 1,370 5,854 2,909 4,972
Legal settlement 0 0 0 358,085
--- --- --- ---
Total other income $1,370 $5,854 2,909 363,057
---- ---- ---- ----
NET INCOME (LOSS)
before income taxes (14,826) (24,867) (7,598) 335,233
Provision for income taxes (227) (454) 1,800 (10,500)
---- ---- ---- ----
NET INCOME (LOSS) ($14,599) ($24,413) ($5,798) $324,733
DEFICIT, accumulated during
the exploration stage,
beginning of period $(1,185,754) ($1,175,940) $(1,150,883)($1,481,414)
----- ----- ----- -----
DEFICIT, accumulated during
the exploration stage,
end of period ($1,200,353) ($1,200,353)($1,156,681)($1,156,681)
===== ===== ===== =====
Income (Loss) per share ($0.003) ($0.006) ($0.001) $0.077
Weighted average common
shares outstanding 4,175,357 4,175,357 4,193,357 4,238,357
____________________
The accompanying notes are an integral part of these financial
statements.
</table>
F/ S - 3
<Page>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF CASH FLOW - UNAUDITED
<Table>
<Caption>
Nine Months Nine Months
Ended Ended
September 30, 2001 September 30, 2000
------------- -----------
<s> <c> <c>
Operating Activities:
Net income (loss) ($24,413) $ 324,733
Adjustments to reconcile net loss to net
cash used in operating activities: 0 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 0 0
Increase (decrease) in accounts payable (7,339) (24,511)
Increase (decrease) in advances payable 0 (86,100)
Increase (decrease) in deferred income 14,250 13,500
Increase (decrease) in interest payable 0 (20,381)
Increase (decrease) in taxes payable (15,964) 10,500
---- ----
Net cash used in operating activities (33,466) 217,741
---- ----
Investing activities:
Purchase of Company's capital stock 0 (36,095)
--- -----
Net cash used in investing activities 0 (36,095)
--- ----
Financing activities:
Proceeds from the sale of Land 0 103,000
Retirement of director's shares 0 (48,000)
Repurchase and retirement of common stock 0 (1,500)
Repayment of long-term debt 0 (42,000)
--- ----
Net cash provided by financing activities 0 (11,500)
--- ----
Net increase (decrease) in cash (33,466) 193,146
Cash and cash equivalent,
beginning of period 196,726 5,298
---- ----
Cash and cash equivalent, end of period $ 163,260 $ 198,444
==== ====
Disclosure of accounting policy
For the nine months ended September 30, 2001
and September 30, 2000, the Company
had no cash equivalents.
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 0 $ 916
Income taxes 15,510 30
The accompanying notes are an integral part of these financial
statements.
</Table>
F/S - 4
<Page>
INDEPENDENCE LEAD MINES COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS - UNAUDITED
Financial information presented in the Company's quarterly
reports follow the policies set forth in its Annual Report on
Form 10-K filed with the Securities and Exchange Commission. In
accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q, and
Rule 10-01 of Regulation S-X, these quarterly reports do not
include all of the information and footnotes.
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 nine-month period ended September 30, 2001 are
not necessarily indicative of the results that may be expected
for the full year ending December 31, 2001.
1. Nature 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 has been in the development stage since its inception.
The Company's only recurring source of funds is a monthly advance
royalty from Hecla Mining Company of $1,500. The financial
statements do not contain any adjustments which might be
necessary if the Company is unable to continue as a going
concern.
2. Common stock:
In September 1997 the capitalization of the Company was
increased from 4,000,000 shares to 5,000,000 shares.
During the nine months ended September30, 2000 the Company
purchased 93,000 shares of the Company's common stock on the
open market at an average price of $0.39 per share. These
purchases brought the total treasury shares held by the
Company to 131,436 shares at September 30, 2000. There were
no stock purchases in the nine months ended September 30,
2001.
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F/S - 5
<Page>
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.
INDEPENDENCE LEAD MINES COMPANY
By: /s/ Bernard C. Lannen
--------
Bernard C. Lannen, its
President
Date: November 13, 2001
By: /s/ Wayne Schoonmaker
--------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: November 13, 2001
F/S-6