SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12761
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
(Exact name of Small Business Issuer as Specified in its Charter)
Nevada 88-0180496
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
970 E. Main Street, Suite 200
Grass Valley, California 95945
(Address of Principal Executive Offices)
(916) 477-5961
(Issuer's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common, $.0001 par value per share: 45,229,903
outstanding as of November 1, 1997
Transitional Small Business Disclosure Format: Yes X No
PART I - FINANCIAL INFORMATION
BRUSH CREEK MINING AND DEVELOPMENT CO., INC. AND SUBSIDIARIES
Index to Financial Information
Period Ended September 30, 1997
Item Page Herein
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets
as of September 30, 1997 (unaudited)
and June 30, 1997 3
Condensed Consolidated Statements of
Operations (unaudited)for the three
months ended September 30, 1997 and
1996 and for the period July 1, 1989
(dated of resumption of development
stage enterprise activities) through
September 30, 1997 4
Condensed Consolidated Statements of
Cash Flows (unaudited)for the three
months ended September 30, 1997 and
1996 and for the period July 1, 1989
(dated of resumption of development
stage enterprise activities) through
September 30, 1997 5
Notes to Condensed Consolidated
Financial Statements (unaudited) 7
Item 2 - Management's Discussion and
Analysis or Plan of Operation 10
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1997 June 30, 1997
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 78,273 $ 111,059
Inventory 2,750 2,750
Total current assets 81,023 113,809
Office furniture and
equipment, net 37,552 45,547
Mineral properties and
mining equipment, net 10,132,701 10,190,581
Deposits 272,095 272,095
Total assets $10,523,371 $10,622,032
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $ 1,735,644 $ 1,771,014
Current portion of long
term debt 810,000 672,000
Other 3,700 3,700
Total current liabilities 2,549,344 2,446,714
Long-term debt,
net of current portion - 362,000
Total liabilities 2,549,344 2,808,714
Shareholder's Equity
Common Stock, $.0001
par value; authorized
100,000,000 shares;
issued and outstanding
41,629,482 and 31,370,482
shares as of September 30,
1997 and June 30, 1997,
respectfully 48,211,668 47,092,740
Accumulated deficit (11,260,214) (11,260,214)
Accumulated deficit during
the development stage (28,977,427) (28,019,208)
Total shareholders' equity 7,974,027 7,813,318
Total liabilities and
shareholders' equity $10,523,371 $10,622,032
See notes to Condensed Consolidated Financial Statements
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Period from
Three months July 1, 1989
Ended September through
September 30,
1997 1996 1997
Revenues:
Sale of Joint Venture - - $ 4,232,000
Other income - - 156,444
Interest income $ 2,598 $ 10,004 190,377
Total revenues $ 2,598 $ 10,004 $ 4,578,821
Expenses:
General and
administrative expense 375,164 263,807 15,434,085
General mining and
exploration 519,778 895,609 11,574,031
Loss on lease
abandonments - - 392,317
Depreciation and
amortization 65,875 98,651 1,499,777
Loss (gain) on sales
of mining equipment - 46,853 171,174
Interest expense - 29,250 492,294
Litigation settlement - - 4,137,032
Total expenses 960,817 1,334,170 33,700,710
Loss before
extraordinary item (958,219)(1,324,166) (29,121,889)
Extraordinary item -
net loss from debt
extinguishment net
of tax - - 144,462
Net loss $(958,219) $(1,324,166) $(28,977,427)
Loss per common share
before extraordinary
item $ (0.03) $ (0.08)
Net loss per common share $ (0.03) $ (0.08)
Weighted average common
shares outstanding 34,209,371 16,146,517
See notes to Condensed Consolidated Financial Statements
BRUSH CREEK MINING AND DEVELOPMENT CO., INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Period from
Three months July 1, 1989
Ended September through
September 30,
1997 1996 1997
Cash flows from operating
activities:
Net income (loss) $ (958,219) $(1,324,166) $(28,977,427)
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Gain on debt restructuring - - (144,462)
Depreciation and
amortization 65,875 98,651 1,499,777
Loss on lease abandonments - - 444,359
Loss on litigation
settlement - - 4,107,032
Loss (gain) on sale of
mining equipment - 46,853 49,164
Other - - 43,576
Shareholder payment of
services - - 105,055
Stock and debt for services 96,875 - 799,943
Change in inventory - (3,415) (410)
Change in note receivable - - 47,462
Change in prepaid expenses - (16,384) 501,736
Change in deposits and
other current assets - 14,425 (115,961)
Change in deposits - - (29,065)
Change in accounts payable
and accrued liabilities 15,683 (126,956) 4,339,154
Total adjustment 178,433 13,174 11,647,360
Net cash provided by (used
in) operating activities (779,786) (1,310,992) (17,330,067)
Cash flows from investing
activities:
Acquisition of mineral
properties, equipmen t,
and deferred developments - (13,358) (5,074,429)
Acquisition of office
equipment - (8,225) (260,101)
Proceeds from sale of
equipment - - 384,356
Proceeds from acquisition
of Trans-Russian - - 20,060
Net cash provided by (used
in) investing activities - (21,583) (4,930,114)
Cash flows from
financing activities:
Advances from (to)
affiliates - - 2,009,127
Payment made to affiliates - - (343,798)
Proceeds from issuance of
common stock 971,000 238,751 21,237,513
Proceeds from warrant
extensions - - 207,750
Proceeds from issuance
of notes payable - - 870,043
Payments on long-term
debt (224,000) (19,005) (1,646,029)
Proceeds from convertible
debenture - - 300,000
Payments on convertible
debenture - - (300,000)
Net cash provided
by financing
activities 747,000 219,746 22,334,606
Net increase
(decrease) in cash (32,786) (1,112,829) 74,425
Cash at beginning of period 111,059 1,275,413 3,848
Cash at end of period $ 78,273 $ 162,584 $ 78,273
Cash paid during the
period for interest
(net of amounts
capitalized) - - 337,602
See notes to Condensed Consolidated Financial Statements
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1997, the
condensed consolidated statements of operations and cash flows for the
three months ended September 30, 1997 and 1996 and for the period July 1,
1989 (date of resumption of development stage enterprise activities)
through September 30, 1997, have been prepared by the Brush Creek Mining
and Development Co., Inc. (the "Company") without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at September 30, 1997 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1997 Form
10-KSB. The results of operations for the periods ended September 30, 1997
and 1996 are not necessarily indicative of the operating results for the
full year.
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, B. Creek Acquisition Corp. and Alpha
Hardware.
NOTE 2 - OPERATIONS AND BASIS OF PRESENTATION
The Company was incorporated in 1982 and operated as a mining and mineral
development company until April 17, 1989, at which time its mining
operations, all of which had been conducted through the Brush Creek Joint
Venture (BCJV) (40% owned) were terminated. Shortly thereafter, the
Company became actively engaged in acquiring additional mineral properties,
raising capital, and preparing properties for resumed production. The
Company did not have any significant operations or activities from April
17, 1989 through June 30, 1989 and suspended all mining operations and
reduced its activities to a care and maintenance level. Accordingly, the
Company is deemed to have reentered the development stage effective July 1,
1989.
In February 1992, the Company began limited production at the Ruby Mine
under a permit that limited mill capacity to 225 tons per day. Production
was terminated due to adverse weather conditions in December 1992. The
Company resumed limited production at the Ruby Mine in July 1993 and
gradually increased production until October 1996 when production was
suspended. In early 1997, the Company began preparing the lower Brush Creek
Mine for limited production. In June 1997, the Company received interim
approval from the United States Forest Service to transport thirty tons of
ore per day from the lower Brush Creek Mine to the Ruby mill site. The
Company has not commenced economic production and is therefore still
considered to be in the development stage.
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - OPERATIONS AND BASIS OF PRESENTATION (Continued)
The Company's consolidated financial statements have been presented on the
basis that it is a going concern, which contemplates the realization of the
mineral properties and other assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred losses of
$40,237,641 from inception to September 30, 1997 and had a working capital
deficit of $2,468,321 at September 30, 1997. These factors raise doubt
about the Company's ability to continue as a going concern. There is no
assurance that the Company will be successful in establishing probable or
proven ore reserves, or determining if the mineral properties can be mined
economically. These consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Management of the Company periodically reviews the recoverability of the
capitalized mineral properties and mining equipment. Management takes into
consideration various information including, but not limited to, historical
production records from previous mine operations, results of exploration
activities conducted to date, estimated future metal prices, and reports
and opinions of internal and external geologists, mine engineers and
consultants. Accordingly, in management's opinion, based on such
information, the capitalized costs in mineral properties and mining
equipment do not exceed their estimated net realizable value.
NOTE 3 - STOCKHOLDERS' EQUITY
In July 1997, the Company issued 150,000 shares of its Common Stock for
certain consulting services. The shares were registered with the Securities
and Exchange Commission on Form S-8. The shares are valued at $0.375, the
average of the bid and asked price for the Company's Common Stock on July
8, 1997.
Also in July 1997, the Company sold 600,000 shares of its Common Stock
pursuant to a Private Placement at a price of $0.125 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a
net amount of $75,000 from the sale.
Also in July 1997, the Company sold 1,933,332 shares of its Common Stock
pursuant to a Private Placement at a price of $0.15 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a
net amount of $290,000 from the sale. The Company also approved a 10%
commission for a finder's fee in connection with the Private Placement.
BRUSH CREEK MINING AND DEVELOPMENT COMPANY, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - STOCKHOLDERS' EQUITY (Continued)
In August and September 1997, the Company sold 3,050,000 shares of its
Common Stock pursuant to a Private Placement at a price of $0.10 per share.
The shares were sold pursuant to Regulation D and Section 4(2). The Company
received a net amount of $305,000 from the sale. The Company also approved
a 10% commission for a finder's fee in connection with the Private
Placement.
Also in August 1997, the Company issued 125,668 shares to pay for certain
consulting fees. The shares were registered with the Securities and
Exchange Commission on Form S-8. The shares are valued at $0.40625, the
average of the bid and asked price for the Company's Common Stock on August
25, 1997.
In September 1997, the Company sold 4,300,000 shares of its Common Stock
pursuant to a Private Placement at a price of $0.07 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a
net amount of $301,000 from the sale.
Also in September 1997, the Company issued 100,000 shares to pay for
certain consulting fees. The shares were registered with the Securities and
Exchange Commission on Form S-8. The shares are valued at $0.313, the
average of the bid and asked price for the Company's Common Stock on
September 26, 1997.
NOTE 4 - SUBSEQUENT EVENTS
In October 1997, the Company sold 3, 550,000 shares of its Common Stock
pursuant to a Private Placement at a price of $0.10 per share. The shares
were sold pursuant to Regulation D and Section 4(2). The Company received a
net amount of $355,000 from the sale.
In November 1997, the Company issued 50,421 shares to pay for certain
consulting fees. The shares were registered with the Securities and
Exchange Commission on Form S-8. The shares are valued at $1.25, the
average of the bid and asked price for the Company's Common Stock on
November 5, 1997.
NOTE 5 - SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Noncash investing and financing activities for the three months ended
September 30, 1997 are as follows:
Company stock issued for the payment
of accounts payable $147,928
Item 2. Management's Discussion and Analysis or Plan of Operation.
Introduction
The following discussion should be read in conjunction with the
Financial Information and Notes thereto included in this report and is
qualified in its entirety by the foregoing.
This report contains certain forward-looking statements and
information relating to the Company that are based on the beliefs and
assumptions made by the Company's management as well as information
currently available to the management. When used in this document, the
words "anticipate", "believe", "estimate", and "expect" and similar
expressions, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or
expected. The Company has no obligation to publicly release the result of
any revisions which may be made to any forward-looking statements to
reflect anticipated or unanticipated events or circumstances occurring
after the date of such statements.
Liquidity and Capital Resources
At September 30, 1997, the Company had working capital deficit of
$2,468,321 which represents an increase in working capital deficit of
$135,416 as compared to a working capital deficit of $2,332,905 at June 30,
1997. The decrease in working capital was primarily due to a decrease in
available cash and an increase in current portion of long-term debt.
The mining industry is capital intensive. During the fiscal year ended
June 30, 1997, the Company raised $2.1 million from the sale of shares of
Common Stock. During the first quarter of 1998, the Company obtained
additional equity financings. At September 30, 1997, the Company had a
working capital deficit of $2,468,321 and had no material revenues from
mining operations. Additional financing will be required in order for the
Company to cover its mining and development costs and to engage in full
scale mining operation. At this time, the Company has no definitive plans
regarding additional financing, but believes that it will likely be
obtained through equity financing such as stock offerings or joint
ventures. No assurances can be given that the Company will be able to raise
cash from additional financing efforts and, even if such cash is raised,
that it will be sufficient to satisfy the Company's capital requirements.
If the Company is unable to obtain sufficient funds from future financings
and/or operations, the Company may not be able to achieve its business
objectives and may have to scale back its development plans. In addition,
the Company may be required to seek protection under the bankruptcy laws.
The Company estimates its mining development and operating costs
to be approximately $4 million for the fiscal year ending June 30, 1998.
The majority of the funds will be used for operations in the lower Brush
Creek mine and Ruby mill. Additional financing will be required to perform
the intended work. There can be no assurance that the Company will be able
to obtain such financing or that financing will be obtained on terms
favorable to the Company.
Results of Operations
The Company had total revenues of $2,598 (from interest only) during
the three months ended September 30, 1997 compared to total revenues of
$10,004 (from interest only) during the three months ended September 30,
1996. The Company had no revenues from operations during such periods. The
Company had a $958,219 net loss for the three months ended September 30,
1997 compared to a net loss of $1,324,166 for the comparable fiscal 1996
period. This change in net loss is primarily due to a reduction in general
mining and exploration costs, partially offset by an increase in general
and administrative expenses. General and administrative expenses increased
$111,357 from the same period in the prior fiscal year primarily due to an
increase in administrative payroll, professional fees and an increase in
NASDAQ fees.
The price of gold has a material effect on the Company's financial
operations. Following deregulation, the market price for gold has been
volatile. Since the end of 1987 the price of gold has declined from a high
of approximately $500 per ounce to approximately $332 per ounce at
September 30, 1997. Instability in the price of gold may affect the
profitability of the Company's operations if and when the Company realizes
economic production.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the Company's Form 10-KSB for fiscal year ended
June 30, 1997 and the financial statements included therein and in
particular to Part I, Item 3 and Note 13 to the consolidated financial
statements, the full contents of which are incorporated by reference herein
in accordance with Rule 12b-23 of the General Rules and Regulations under
the Securities Exchange Act of 1934. There has been no material changes in
legal proceedings during the quarter ended September 30, 1997.
Item 2. Changes in Securities.
During the quarter ended September 30, 1997, the Company sold the
following equity securities that were not registered under the Securities
Act of 1933: 600,000 restricted shares of Common Stock at $.125 per share
wherein the Company received net proceeds of $75,000 in July 1997;
1,933,332 restricted shares of Common Stock at $.15 per share wherein the
Company received net proceeds of $290,000 in July 1997; 4,300,000
restricted shares of Common Stock at $.07 per share wherein the Company
received net proceeds of $301,000 in September 1997; and 3,050,000
restricted shares of Common Stock at $.10 per share wherein the Company
received net proceeds of $305,000 in August and September 1997. All shares
were sold under Regulation D and Section 4(2). Investors who acquired such
shares were required to be accredited investors. The Company has agreed to
register the shares pursuant to a registration statement to be filed with
the Securities and Exchange Commission.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
There are no exhibits applicable to this Form 10-QSB.
(b) Reports on Form 8-K.
Listed below are reports on Form 8-K filed during the fiscal
quarter ended September 30, 1997.
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRUSH CREEK MINING AND
DEVELOPMENT CO., INC.
(Registrant)
Dated: November 17, 1997 By: /s/James S. Chapin
James S. Chapin,
Chief Executive Officer
Dated: November 17, 1997 By: /s/James S. Chapin
James S. Chapin,
Principal Financial Officer
and Principal Accounting
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BRUSH
CREEK MINING AND DEVELOPMENT CO., INC. QUARTERLY REPORT FOR THE QUARTER
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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