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, 2005
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 [ ]
There were 4,825,793 shares of the issuer's common stock, par
value $1.00, outstanding as of July 1, 2005.
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INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT
ON FORM 10-QSB 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 . . 1
Item 3: Controls and Procedures . . . . . . . . . . . . . 4
PART II OTHER INFORMATION
Item 1: Legal Proceedings . . . . . . . . . . . . . . . . 4
Item 2: Unregistered Sales of Equity Securities
and 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 . . . . . . . . . . . . . . . . . . . . . .5
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 6
<Page>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements of Independence Lead Mines
Company (the "Company") for the period covered by this report are
included elsewhere in this report, beginning at page F/S 1.
The unaudited financial statements have been prepared 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.
FOEWARD-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
("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 "experts,"
"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.
OVERVIEW
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 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.
1
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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%
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 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 Lesee. 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
260,000 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 has 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 $723,147 and 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.
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 $37,987
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 attributed 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 $37,926, or $0.008 per share, compared
to $184,846, or $0.042 per share, during the comparable period in
the previous year.
Six months ended June 30, 2004 compared to the six months ended
June 30, 2003:
During the six months ended June 30, 2004 the Company realized no
income. General and administrative expenses increased to $184,848
for the six-month period ended June 30, 2004 as compared to
$39,600 for the six-month period ended June 30, 2003. This
increase was principally attributed to increased legal expenses
incurred in the second quarter of 2004. For the six months ended
June 30, 2004 the Company experienced a net loss $184,846, or
$0.042 per share, compared to a net loss of $31,574, during the
comparable period in the previous year.
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LIQUIDITY AND CAPITAL RESOURCES
The Company financed its obligations during the six months ended
June 30, 2005 by selling 150,000 shares of its common stock at an
average price of $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 were carried as treasury
stock by the Company, and in December 2003, 72,000 shares of
treasury stock were sold for $0.70 per share. In the first
quarter of 2004 an additional 25,036 shares of treasury stock
were sold for $0.75 per share. The remaining 36,400 shares of
treasury stock were sold in the second quarter of 2004 at an
average price of $0.97 per share. During the year ended December
31, 2004 the Company sold 357,000 shares of common stock in a
private placement at an average price of $0.62 per share and
issued 10,000 shares for services received.
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, principally in connection with its continuing
litigation with Hecla Mining Company.
Effect of Recently Issued Accounting Pronouncements.
In December 2004, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No.153
(hereinafter "SFAS No.153"). This statement addresses the
measurement of exchanges of nonmonetary assets. The guidance in
APB Opinion No.29, "Accounting for Nonmonetary Transactions," is
based on the principle that exchanges of nonmonetary assets
should be measured based on the fair value of the assets
exchanged. The guidance in that opinion, however, included
certain exceptions to that principle. SFAS No.153 amends APB
Opinion 29 to eliminate the exception for exchanges of
nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a
result of the exchange. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges
incurred during fiscal years beginning after the date of this
statement is issued. Management believes the adoption of this
statement will not impact the financial statements of the
Company.
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.152, which amends
SFAS Statement No.66, "Accounting for Sales of Real Estate," to
reference the financial accounting and reporting guidance for
real estate time-sharing transactions that is provided in AICPA
Statement of Position (SOP) 04-2, "Accounting for Real Estate
Time-Sharing Transactions." This statement also amends SFAS No.
67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects," to state that the guidance for (a) incidental
operations and (b) costs incurred to sell real estate projects,
does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the
guidance in SOP 04-2. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005.
Management believes the adoption of this statement will not
impact the financial statements of the Company.
In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.151, "Inventory
Costs-an amendment of ARB No. 43, Chapter 4" (hereinafter "SFAS
No. 151"). This statement amends the guidance in ARB No.43,
Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Under some circumstances,
SFAS No.151 mandates that items such as idle facility expense,
excessive spoilage, double freight, and re-handling costs be
recognized as current-period charges. In addition, this statement
requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the
production facilities. This statement is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005.
Management believes the adoption of this statement will not
impact its financial statements.
Page 3
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ITEM 3. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES.
The Company's principal executive officer and principal
financial officer have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is
defined in Rules 13a-13(e) and 15d-15(e) under the Exchange Act)
as of the end of the period covered by this report. Based on such
evaluation, the Company's principal executive officer and
principal financial officer have concluded that, as of the end of
such period, the Company's disclosure controls and procedures are
effective in recording, processing, summarizing and reporting, on
a timely basis, information required to be disclosed by the
Company in the reports that it files or submits under the
Exchange Act.
Changes in Internal Control over Financial Reporting.
There was no change in the Company's internal control over
financial reporting that occurred during the fiscal quarter to
which this report relates that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
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. The Company has retained the
Boise law firm of Marcus, Merrick, Christian and Hardee as it's
attorneys. 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 the
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. Independence is currently
in the process of appealing the court's opinion to the Idaho
Supreme Court. As of the date of this Form 10QSB, a hearing date
has not been set for the appeal.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
During the six months ended June 30 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. Proceeds 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. The Company has
not had a meeting of shareholders since 1997.
ITEM 5. OTHER INFORMATION.
None.
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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-7 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.
3. EXHIBITS: The exhibits filed as part of this report and
the exhibits incorporated herein by reference are listed in the
Exhibit Index at page E-1.
(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 Consolidated
Financial Statements or related notes.
[The balance of this page has been intentionally left blank.]
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INDEPENDENCE LEAD MINES COMPANY
(An Exploratory Stage Company)
SIGNATURES
In accordance with Section 12, 13 or 15(d) 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: August 12, 2005
By: /s/ Wayne Schoonmaker
------------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: August 12, 2005
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EXHIBIT INDEX
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.C. Section 1350. Furnished herewith.
[The balance of this page has been intentionally left blank.]
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EXHIBIT 31.1
INDEPENDENCE LEAD MINES COMPANY
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Bernard C. Lannen, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Independence Lead Mines Company.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The small business issuer's other certifying officer and I,
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) for the small business issuer and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
small business issuer is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b) evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
5. The small business issuer's other certifying officer and I
have disclosed, based on our most recent evaluation, to the small
business issuer's audit committee of the small business issuer's
board of directors(or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which are reasonably likely to adversely affect
the small business issuer's ability to record, process,
summarize, and report financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal controls.
Date: August 12, 2005
/s/ Bernard C. Lannen
------------
President
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<page>
EXHIBIT 31.2
INDEPENDENCE LEAD MINES COMPANY
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Wayne L. Schoonmaker, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Independence Lead Mines Company.
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations, and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The small business issuer's other certifying officer and I,
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) for the small business issuer and have:
a) designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
small business issuer is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
b) evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
5. The small business issuer's other certifying officer and I
have disclosed, based on our most recent evaluation, to the small
business issuer's audit committee of the small business issuer's
board of directors(or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which are reasonably likely to adversely affect
the small business issuer's ability to record, process,
summarize, and report financial information; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal controls.
Date: August 12, 2005
/s/ Wayne L. Schoonmaker
------------
Principal Financial Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Independence Lead
Mines Company (the "Company") on Form 10-QSB for the period ended
June 30, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Bernard C.
Lannen, President of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition, and results of
operations of the Company.
/s/ Bernard C. Lannen
- -----------
President
Dated: August 12, 2005
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Independence Lead
Mines Company (the "Company") on Form 10-QSB for the period ended
June 30, 2005, as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Wayne L.
Schoonmaker, Principal Accounting Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
2. The information contained in the Report fairly presents, in
all material respects, the financial condition, and results of
operations of the Company.
/s/ Wayne L. Schoonmaker
- ------------
Principal Financial Officer
Dated: August 12, 2005
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INDEPENDENCE LEAD MINES COMPANY
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheets as of June 30, 2005
and December 31, 2004 . . . . . . . . . . . . . . . F/S 2
Statements of Operations for the three
and six-month periods ended
June 30, 2005 and June 30, 2004 . . . . . . . . . . F/S 3
Statements of Cash Flow for the six-
month periods ended June 30, 2005
and June 30, 2004 . . . . . . . . . . . . . . . . F/S 4
Notes to Interim Financial Statements . . . . . . . . F/S 5
[The balance of this page has been intentionally left blank.]
F/S 1
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INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
BALANCE SHEET - UNAUDITED
<Table>
<Caption>
ASSETS
June 30, 2005 DECEMBER 31, 2004
-------------- ------------
<s> <c> <c>
CURRENT ASSETS:
Cash $ 108,494 $ 54,665
Royalties receivable 1,500 1,500
Investments 1,006 1,006
----- -----
Total current assets 111,000 57,171
------ ------
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:
Refunds and deposits received 104,713 104,713
Unrecovered exploration costs 187,920 187,920
----- -----
Total assets $3,349,040 $ 3,295,211
======= =======
Table continued next page.
</table>
<Page>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
BALANCE SHEET - UNAUDITED
<Table>
<Caption>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 2005 DECEMBER 31, 2004
(Unaudited) (Unaudited)
-------------- ------------
<s> <c> <c>
CURRENT LIABILITIES:
Accounts payable $3,996 $ 1,741
Accrued Expenses 0 0
----- -----
Total current liabilities 3,997 1,741
----- -----
DEFERRED INCOME: 419,000 410,000
------ ------
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par value,
authorized 5,000,000 shares;
4,825,793 shares issued at
6/30/05 and 4,675,793 shares
issued at 12/31/04 4,825,793 4,675,793
Additional
Paid-In Capital(Deficit) (266,242) (196,742)
------ ------
4,504,551 4,479,051
Deficit accumulated during
the Exploration stage (1,633,507) (1,595,581)
------- -------
Total Stockholders equity 2,926,044 2,883,470
-------- --------
Total liabilities and
stockholders' equity $3,349,040 $3,295,211
======= =======
The accompanying notes are an integral part of these financial
statements.
</Table>
F/S 2
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF OPERATIONS
<Table>
<Caption>
QUARTER SIX MONTHS QUARTER SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30,'05 JUNE 30,'05 JUNE 30,'04 JUNE 30,'04
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
REVENUE $ 0 $ 0 $ 0 $ 0
EXPENSES
Consulting 4,062 5,937 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 21,000 29,000 71,090 135,880
----- ----- ----- -----
Total expenses 27,312 37,987 112,070 184,848
----- ------ ------ ------
LOSS FROM OPERATIONS (27,312) (37,987) (112,070) (184,848)
OTHER INCOME AND (EXPENSE)
Interest, net 20 61 2 2
--- ----- ----- -----
Total other income $20 $61 $2 $2
--- ----- ----- -----
NET INCOME(LOSS)
BEFORE INCOME TAXES (27,292) (37,926) (112,068) (184,846)
Provision for income taxes 0 0 0 0
----- ----- ----- -----
NET INCOME (LOSS) (27,292) (37,926) (112,068) (184,846)
Table continues on next page.
</Table>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF OPERATIONS
continued
<Table>
<Caption>
QUARTER SIX MONTHS QUARTER SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30,'05 JUNE 30,'05 JUNE 30,'04 JUNE 30,'04
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Income(Loss)per share ($0.006) ($0.008) ($0.025) ($0.042)
Weighted average common
shares outstanding 4,775,793 4,750,793 4,459,126 4,357,414
- -----------------------
The accompanying notes are an integral part of these financial statements.
</Table>
F/S 3
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF CASH FLOW
<Table>
<Caption>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30,2005 JUNE 30,2004
(UNAUDITED) (UNAUDITED)
---------- ----------
Operating Activities:
Net income (loss) ($37,926) ($184,846)
Adjustments to reconcile net
loss to net cash
used in operating activities:
Common stock issued for services 0 8,000
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses 0 0
(Increase) decrease in accounts receivable 0 0
Increase (decrease) in accounts payable 2,255 (3,071)
Increase (decrease) in deferred income 9,000 9,000
Increase (decrease) in taxes payable 0 0
----- -----
Net cash used in operating activities (26,671) (170,917)
---- ----
Investing activities:
Purchase of Company's capital stock 0 0
--- ---
Net cash used in investing activities 0 0
--- ---
Financing activities:
Proceeds from the sale of Common Stock 80,500 166,441
Retirement of director's shares 0 0
Repurchase and retirement of common stock 0 0
Repayment of long-term debt 0 0
--- ---
Net cash provided by financing activities 80,500 166,441
--- ---
Net increase (decrease) in cash 53,829 (4,476)
Cash and cash equivalent, beginning of period 54,665 72,300
----- -----
Cash and cash equivalent, end of period $108,494 $67,824
====== ======
Supplemental Cash Flow Disclosures:
Interest $ 0 $ 0
Income taxes $ 0 $ 0
Non Cash Investing and Financing Activities:
Common stock issued for services 0 8,000
- -----
The accompanying notes are an integral part of these financial statements.
</table>
F/S 4
<Page>
INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
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 has been in the exploration stage since its inception.
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. Subsequently 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 court ruled in favor of
Hecla Mining Company. Subsequently, the Company has begun the
process of appealing the court's decision to the Idaho Supreme
Court.
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 10-QSB 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, 2004. 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.
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 December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153 (hereinafter
"SFAS No. 153"). This statement addresses the measurement of
exchanges of nonmonetary assets. The guidance in APB Opinion No.
29, "Accounting for Nonmonetary Transactions," is based on the
principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. The guidance in
that opinion, however, included certain exceptions to that
principle. SFAS No. 153 amends APB Opinion 29 to eliminate the
exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. This statement
is effective for financial statements for fiscal years beginning
after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges incurred during fiscal years
beginning after the date of this statement is issued Management
believes the adoption of this statement will not impact the
financial statements of the Company.
F/S-5
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 152, which amends
SFAS Statement No. 66, "Accounting for Sales of Real Estate," to
reference the financial accounting and reporting guidance for
real estate time-sharing transactions that is provided in AICPA
Statement of Position (SOP) 04-2, "Accounting for Real Estate
Time-Sharing Transactions." This statement also amends SFAS No.
67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects," to state that the guidance for (a) incidental
operations and (b) costs incurred to sell real estate projects,
does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the
guidance in SOP 04-2. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005.
Management believes the adoption of this statement will not
impact the financial statements of the Company.
In November 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 151, "Inventory
Costs-an amendment of ARB No. 43, Chapter 4" (hereinafter "SFAS
No. 151"). This statement amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Under some circumstances,
SFAS No. 151 mandates that items such as idle facility expense,
excessive spoilage, double freight, and re-handling costs be
recognized as current-period charges. In addition, this statement
requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the
production facilities. This statement is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005.
Management believes the adoption of this statement will not
impact 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 ("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-CAPITAL STOCK
Preferred Stock
The Company has no preferred stock authorized.
F/S 6
<page>
Common stock:
In September 1997 the capitalization of the Company was increased
from 4,000,000 shares to 5,000,000 shares of $1.00 par value
common stock. During the year ended December 31, 2004 the Company
sold 357,000 shares of common stock at an average of $0.62 per
share and issued 10,000 shares of common stock for services
received. In addition, the Company sold 61,436 shares of treasury
stock at an average price of $0.88 per share. In the six months
ended June 30, 2005 the Company sold 150,000 shares of its common
stock at an average of $0.54 per share.
NOTE 7-OTHER ASSETS
In September 2004 the Company paid $104,713 to Hecla Mining
Company as reimbursement for Hecla's legal fees incurred in the
trial between the Company and Hecla. If the Company prevails in
it's appeal of the court's adverse opinion, the $104,713 will be
returned to the Company.
[The balance of this page has been intentionally left blank.]
F/S 5
</page>