1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
Commission File No. 0-4846-3
------------------------------------------------
CONSIL CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Idaho 82-0288840
--------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
--------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 208-769-4100
-------------
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange on
Title of Each Class Which Each Class is Registered
---------------------------- ------------------------------
Common stock, no par value Vancouver Stock Exchange
OTC Bulletin Board
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, and (2) has been subject to such filing
requirements for at least the past 90 days. Yes XX No
--------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's voting common stock held by
nonaffiliates was $284,257 at March 16, 2001, based on the latest trade date on
the Vancouver Stock Exchange of February 5, 2001. As of March 16, 2001, there
were 9,449,707 shares of the registrant's common stock outstanding.
2
PART I
Item 1. Business
(a) ConSil Corp. (ConSil), formerly Consolidated Silver Corporation, held
mineral properties in Shoshone County, Idaho known as the Silver Summit mine.
On November 14, 1995, ConSil's stockholders approved the sale of its interest in
the Silver Summit mine and adjacent mining properties located in Shoshone
County, Idaho to Sunshine Precious Metals, Inc. (Sunshine) for a cash payment of
$750,000 plus a variable production royalty tied to the price of silver. During
2000, Sunshine was reorganized through a Chapter 11 bankruptcy and shut down
operations at its Sunshine Mine located adjacent to the properties subject to
ConSil's production royalty.
Following the sale of ConSil's Silver Summit mine in 1995, ConSil was
actively involved in exploration and acquisition activities primarily in Mexico.
ConSil was unsuccessful in its exploration and acquisition activities and, since
the fourth quarter of 1997, ConSil has been inactive.
(b) No information is presented as to Industry Segments.
(c) ConSil has no patents, licenses, franchises or concessions which are
considered by ConSil to be of importance. The business is not of a seasonal
nature. Since the potential products (primarily silver) are traded on the open
market, ConSil has no control over the competitive conditions in the industry.
ConSil has spent no funds during the past five fiscal years on mineral
research activities relating to the development of new products or services or
the improvement of existing products or services. There were no exploration
expenses incurred in 1998, 1999 or 2000.
ConSil currently has no employees. Certain administrative services are
provided by employees of Hecla Mining Company (Hecla), the majority stockholder
of ConSil.
(d) For geographic information, see Note 6 of Notes to Consolidated
Financial Statements.
Item 2. Property
In 1995, stockholders approved the sale of all of ConSil's interest in the
Silver Summit mine, plant, equipment and all patented and unpatented mining
properties located in Shoshone
3
County, Idaho, to Sunshine Precious Metals, Inc. (Sunshine) for a cash payment
of $750,000 plus a variable production royalty tied to the price of silver. The
Silver Summit mine property is not currently producing minerals such that ConSil
would be entitled to production royalties from Sunshine. During 2000, Sunshine
was reorganized through a Chapter 11 bankruptcy and shut down operations at its
Sunshine Mine located adjacent to the properties subject to ConSil's production
royalty.
Following the sale of ConSil's Silver Summit mine in 1995, ConSil was
actively involved in exploration and acquisition activities primarily in Mexico.
ConSil was unsuccessful in its exploration and acquisition activities and, since
the fourth quarter of 1997, ConSil has been inactive.
Item 3. Legal Proceedings
There are no pending legal proceedings.
Item 4. Matters Voted on by Security Holders
Not applicable.
4
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The common stock of ConSil is traded on the over-the-counter market.
Quotations are published on the OTC Bulletin Board and in the National Quotation
Bureau "pink sheets" under the symbol CSLV. The common stock of ConSil was
listed for trading on the Vancouver Stock Exchange in Vancouver, British
Columbia, Canada, on April 2, 1996 under the symbol CS. There has not been an
active market for the common stock and the below-described quotations, when
available, do not constitute a reliable indication of the price that a holder of
the common stock could expect to receive upon sale of any particular quantity
thereof.
The following table sets forth the high and low bid prices for ConSil's
common stock as reported by the Spokane Quotation Service for the quarterly
periods indicated. The prices reported by the Spokane Quotation Service
represent prices between dealers which do not include retail markups, markdowns
or commissions and do not necessarily represent actual transactions.
Bid
----
High Low
------ ------
2000
First Quarter $ .03 $ .03
Second Quarter .03 .03
Third Quarter .03 .03
Fourth Quarter .03 .03
1999
First Quarter $ .15 $ .10
Second Quarter .10 .05
Third Quarter .03 .03
Fourth Quarter .03 .03
The number of holders of record of ConSil's common stock as of December 31,
2000 was 3,222. At December 31, 2000, Hecla held 7,418,300, or 78.503%, shares
of ConSil's outstanding common stock.
There have been no dividends declared or paid since ConSil's inception in
1969 and ConSil does not expect to declare dividends in the foreseeable future.
5
Item 6. Selected Financial Data(1)
Years Ended December 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ------------ ------------ ------------ ------------
Revenues $ 879 $ 1,036 $ 11,434 $ 280 $ 3,678
=========== ============ ============ ============ ============
Net loss $ (99,838) $ (89,721) $ (79,962) $ (537,017) $ (913,011)
============ ============ ============ ============ ============
Basic and diluted loss
per common share $ (0.01) $ (0.01) $ (0.01) $ (0.06) $ (0.10)
============ ============ ============ ============ ============
Total assets $ 1,503 $ 19,657 $ 27,356 $ 114,838 $ 472,970
============ ============ ============ ============ ============
Long-term debt $ - - $ - - $ - - $ - - $ - -
============ ============ ============ ============ ============
Note and interest
payable to Hecla $ 1,007,725 $ 925,209 $ 847,250 $ 777,420 $ 517,901
============= ============ ============ ============ ============
Accounts payable to
Hecla $ - - $ 248,650 $ 247,762 $ 318,865 $ 362,802
============= ============ ============ ============ ============
Redeemable preferred
stock $ - - $ - - $ - - $ - - $ - -
============= ============ ============ ============ ============
Cash dividends $ - - $ - - $ - - $ - - $ - -
============ ============ ============ ============ ============
(1) Following the sale of ConSil's Silver Summit mine in 1995,
ConSil was actively involved in exploration and acquisition
activities. ConSil was unsuccessful in its exploration and
acquisition activities and, since the fourth quarter of 1997,
ConSil has been inactive.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
INTRODUCTION
Except for the historical information contained herein, the matters
discussed that are forward-looking statements involve risks and uncertainties,
including the development of future projects, the impact of metals prices,
changing market conditions and regulatory environment, and other risks. Actual
results may differ materially from those projected or implied. Forward-looking
statements included herein represent ConSil's judgment as of the date of this
filing. ConSil disclaims, however, any intent or obligation to update these
forward-looking statements.
6
Following the sale of ConSil's Silver Summit mine in 1995, ConSil was
actively involved in exploration and acquisition activities, primarily in
Mexico. ConSil was unsuccessful in its exploration and acquisition activities
and, since the fourth quarter of 1997, ConSil has been inactive.
Mr. Roger A. Kauffman resigned as President and Director of ConSil on July
10, 2000 as a result of leaving his position with Hecla Mining Company, ConSil's
majority stockholder. Mr. Michael B. White has been appointed by ConSil's Board
of Directors to serve as the current President and Director. Mr. White also
serves as Hecla's Vice President - General Counsel and Secretary.
Mr. John P. Stilwell resigned from the Board of Directors of ConSil on
September 8, 2000 as a result of leaving his position with Hecla Mining Company.
Mr. Lewis E. Walde has been appointed to ConSil's Board of Directors. Mr. Walde
also serves as Hecla's Controller.
RESULTS OF OPERATIONS
2000 vs. 1999
-------------
ConSil reported a net loss of $99,838, or $0.01 per share, for the year
ended December 31, 2000 compared to a net loss of $89,721, or $0.01 per share,
in 1999. The increase in the net loss was due to an increase in interest
expense of $10,557 on the note payable to Hecla (see Note 3 of Notes to
Consolidated Financial Statements) and a decrease in interest and other revenue
of $157. These unfavorable variances were partly offset by a decrease in
general and administrative expenses of $597.
1999 vs. 1998
-------------
ConSil reported a net loss of $89,721, or $0.01 per share, for the year
ended December 31, 1999 compared to a net loss of $79,962, or $0.01 per share,
in 1998. The increase in the net loss was primarily due to decreases in
interest and other revenue of $10,398 and increased general and administrative
expenses of $2,232. These unfavorable variances were partly offset by a
decrease in interest expense of $2,871 on the note payable to Hecla (see Note 3
of Notes to Consolidated Financial Statements).
FINANCIAL CONDITION AND LIQUIDITY
At December 31, 2000, assets totaled $1,503 and stockholders' deficit
totaled $1,008,318. Cash and cash equivalents decreased by $9,790 to $1,419 at
December 31, 2000 from $11,209 at
December 31, 1999. Operating activities used $23,790 of cash during the year
ended December 31, 2000. The primary use of cash for operating activities was
for funding general and administrative expenses. This use of cash was partly
offset by an income tax refund received in 2000.
7
Financing activities provided $14,000 in cash during 2000. The $14,000 was
from additional proceeds on the note payable to Hecla Mining Company.
Working capital increased by $149,059 during 2000, from a negative
$1,157,377 at December 31, 1999 to a negative $1,008,318 at December 31, 2000.
The decrease in working capital was primarily the result of Hecla's forgiveness
of ConSil's accounts payable to Hecla and Minera Hecla, S.A. de C.V. (Hecla's
wholly owned subsidiary) of $248,897, partly offset by funding operating losses,
consisting principally of interest and general and administrative costs.
On February 28, 2001, ConSil and Hecla entered into an eighth amendment to
the loan agreement (see Note 3 of Notes to Consolidated Financial Statements)
which extended the due date to no later than March 31, 2002. As of December 31,
2000, $725,000 was payable to Hecla, excluding accrued interest of $282,725,
under the loan agreement. Any further exploration projects, potential
acquisitions or even limited operations are subject to ConSil being able to
raise funds from external sources. ConSil's planned 2001 expenditures include
the necessary expenditures to maintain the current inactive status of ConSil.
ConSil intends to finance these planned expenditures partially through existing
cash and cash equivalents. The financial statements have been prepared on a
going concern basis which assumes realization of assets and liquidation of
liabilities in the normal course of business. The current balance of cash and
cash equivalents is inadequate to fund ConSil's necessary expenditures for 2001.
Without additional funding from Hecla or other external sources, ConSil's
ability to continue to operate as a going concern is in significant doubt.
There can be no assurance that Hecla will provide ConSil additional funding or
that ConSil will be able to obtain financing from external sources. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
8
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
At December 31, 2000, ConSil's note payable to Hecla (refer to Note 3 of
Notes to Consolidated Financial Statements) was subject to changes in market
interest rates. However, due to the short-term nature of the debt, ConSil's
management does not believe it is at material risk with respect to changes in
market interest rates.
Item 8. Financial Statements and Supplementary Data
See Item 14 for index of Financial Statements and Supplemental Data filed
herewith.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
9
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
ConSil Corp.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
ConSil Corp. and subsidiaries (the Company) at December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has had recurring negative
working capital and stockholders' deficit that raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ PricewaterhouseCoopers LLP
Spokane, Washington
February 16, 2001
10
CONSIL CORP.
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(U.S. dollars)
----------------
ASSETS
2000 1999
----------- -----------
Current assets:
Cash and cash equivalents $ 1,419 $ 11,209
Other receivables 84 148
Prepaid expenses - - 300
Income tax refund receivable - - 8,000
----------- -----------
Total current assets 1,503 19,657
----------- -----------
Total assets $ 1,503 $ 19,657
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 2,096 $ 3,175
Accounts payable - Hecla Mining Company - - 248,650
Accrued interest payable - Hecla Mining Company 282,725 214,209
Note payable - Hecla Mining Company 725,000 711,000
----------- -----------
Total current liabilities 1,009,821 1,177,034
----------- -----------
Commitments (Note 3)
Stockholders' deficit:
Preferred stock; $0.25 par value; authorized
10,000,000 shares; issued and outstanding, none - - - -
Common stock; no par value; authorized
100,000,000 shares; issued 9,455,689 shares 2,360,572 2,111,675
Accumulated deficit (3,365,429) (3,265,591)
Less: Common stock reacquired at cost;
2000 and 1999 - 5,982 shares (3,461) (3,461)
----------- -----------
Total stockholders' deficit (1,008,318) (1,157,377)
----------- -----------
Total liabilities and stockholders' deficit $ 1,503 $ 19,657
=========== ===========
The accompanying notes are an integral part
of the consolidated financial statements.
11
CONSIL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2000, 1999 and 1998
(U.S. dollars)
------------
2000 1999 1998
----------- ----------- -----------
Revenue:
Interest $ 879 $ 1,036 $ 6,206
Other - - - - 5,228
----------- ----------- -----------
879 1,036 11,434
----------- ----------- -----------
Expenses:
General and administrative 23,201 23,798 21,566
Interest expense on note payable to
Hecla Mining Company 77,516 66,959 69,830
----------- ----------- -----------
100,717 90,757 91,396
----------- ----------- -----------
Loss before income taxes (99,838) (89,721) (79,962)
Income tax provision - - - - - -
----------- ----------- -----------
Net loss $ (99,838) $ (89,721) $ (79,962)
=========== =========== ===========
Basic and diluted loss per common share $ (0.01) $ (0.01) $ (0.01)
=========== =========== ===========
Weighted average number of
common shares outstanding 9,449,707 9,449,707 9,449,707
=========== =========== ===========
The accompanying notes are an integral
part of the consolidated financial statements.
12
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2000, 1999 and 1998
(U.S. dollars)
----------------
2000 1999 1998
--------- --------- ---------
Operating activities:
Net loss $ (99,838) $ (89,721) $ (79,962)
Noncash elements included in net loss:
Deferred income tax provision - - - - 8,000
Change in:
Other receivables 64 (28) 60,451
Prepaid expenses 300 (300) - -
Income tax refund receivable 8,000 8,000 (8,000)
Accounts payable and accrued expenses (832) 4,063 (77,350)
Accrued interest payable on note to
Hecla Mining Co. 68,516 66,959 69,830
--------- --------- ---------
Net cash used by operating activities (23,790) (11,027) (27,031)
--------- --------- ---------
Financing activities:
Proceeds from note payable to Hecla Mining Co. 14,000 11,000 - -
--------- --------- ---------
Net cash provided by financing
activities 14,000 11,000 - -
--------- --------- ---------
Net decrease in cash and cash equivalents (9,790) (27) (27,031)
Cash and cash equivalents at beginning
of year 11,209 11,236 38,267
--------- --------- ---------
Cash and cash equivalents at end of year $ 1,419 $ 11,209 $ 11,236
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid (received) for income taxes $ (8,000) $ (8,000) $ 30
========= ========= =========
Cash paid for interest $ 9,000 $ - - $ - -
========= ========= =========
See Note 4 for noncash investing activities
The accompanying notes are an integral
part of the consolidated financial statements.
13
CONSIL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 2000, 1999 and 1998
(U.S. dollars)
-----------------
Preferred Stock Common Stock
--------------------- -------------------------
Accumulated Treasury
Shares Amount Shares Amount Deficit Stock
-------- ----------- ---------- ----------- ------------ ------------
BALANCES,
December 31, 1997 - - $ - - 9,455,689 $ 2,111,675 $ (3,095,908) $ (3,461)
Net loss (79,962)
----- --------- --------- ----------- ------------ --------
BALANCES,
December 31, 1998 - - - - 9,455,689 2,111,675 (3,175,870) (3,461)
Net loss (89,721)
------ --------- --------- ----------- ------------ ---------
BALANCES,
December 31, 1999 - - - - 9,455,689 2,111,675 (3,265,591) (3,461)
Increase in equity accounts
due to forgiveness of debt - - 248,897
Net loss (99,838)
------ ---------- --------- ----------- ------------ ---------
BALANCES,
December 31, 2000 - - $ - - 9,455,689 $ 2,360,572 $ (3,365,429) $ (3,461)
====== ========== ========= =========== ============ =========
The accompanying notes are an integral
part of the consolidated financial statements.
14
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Summary of Significant Accounting Policies
ConSil Corp. (ConSil), formerly Consolidated Silver Corporation, and its
wholly owned subsidiary, Minera ConSil, S.A. de C.V. (formed on December 20,
1995) currently have no operating properties. ConSil is currently inactive.
The accompanying consolidated financial statements include the accounts of
ConSil and its wholly owned subsidiary. All significant intercompany
transactions and accounts are eliminated in consolidation. The preparation of
consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
At December 31, 2000, ConSil had 9,449,707 common shares outstanding of
which Hecla Mining Company (Hecla, the majority stockholder of ConSil) owned
7,418,300 shares or 78.503% of the outstanding shares.
The financial statements have been prepared on a going concern basis which
assumes realization of assets and liquidation of liabilities in the normal
course of business. At December 31, 2000, ConSil had negative working capital
of $1,008,318 and a stockholders' deficit of $1,008,318. Included in current
liabilities is a $725,000 note payable and related accrued interest of $282,725
due to Hecla which are due upon demand by authorized representatives of Hecla,
but in no event later than March 31, 2002. The Company does not have the
ability or sources of financing to repay this debt. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
15
Exploration
Exploration costs are charged to operations as incurred. However, ConSil
has conducted no exploration in 1998, 1999 or 2000.
Basic and Diluted Loss Per Common Share
Basic earnings per share (EPS) is calculated by dividing the net loss by
the weighted-average number of common shares outstanding for the year. Diluted
EPS reflects the potential dilution that could occur if potentially dilutive
securities were exercised or converted to common stock. Due to the losses in
2000, 1999 and 1998, potentially dilutive securities were excluded from the
calculation of diluted EPS as they were anti-dilutive. Therefore, there was no
difference in the calculation of basic and diluted EPS in 2000, 1999 and 1998.
Cash Equivalents
ConSil considers cash equivalents to be highly liquid investments purchased
with a remaining maturity of three months or less. ConSil's financial
instruments that are exposed to concentrations of credit risk consist primarily
of cash and cash equivalents. ConSil places its cash and temporary cash
investments with institutions of high credit-worthiness.
Income Taxes
ConSil records deferred tax liabilities and assets for the expected future
income tax consequences of events that have been recognized in its financial
statements. Deferred tax liabilities and assets are determined based on the
temporary differences between the financial statement carrying amounts and the
tax bases of assets and liabilities using enacted tax rates in effect in the
years in which the temporary differences are expected to reverse.
Accounting for Stock Options
ConSil measures compensation cost for stock option plans using the
intrinsic value method of accounting prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." ConSil also
provides the required disclosures of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
16
2. Income Taxes
The components of ConSil's income tax provision (benefit) for the years
ended December 31, 2000, 1999 and 1998 were as follows:
2000 1999 1998
--------- ---------- ---------
Current:
Federal $ - - $ - - $ - -
State - - - - (8,000)
--------- --------- ---------
- - - - (8,000)
--------- --------- ---------
Deferred:
Federal - - - - - -
State - - - - 8,000
--------- --------- ---------
- - - - 8,000
--------- --------- ---------
Total $ - - $ - - $ - -
========= ========= =========
The income tax provision (benefit) for the years ended December 31, 2000,
1999 and 1998 differed from the amounts which would have been provided by
applying the statutory federal income tax rate to the loss before income taxes.
The reasons for the differences were as follows:
2000 1999 1998
----------------- ---------------- -----------------
Computed "statutory"
benefit $ (33,945) 34% $ (30,505) 34% $ (27,187) (34)%
Change in valuation
allowance due to
uncertainty of
recovery of deferred
tax assets 33,945 34 30,505 34 27,187 34
--------- ---- --------- ---- --------- ----
$ - - - - $ - - - - $ - - - -
========= ==== ========= ==== ========= ====
17
At December 31, 2000 and 1999, ConSil had the following deferred tax asset:
2000 1999
---------- ---------
Net operating loss carryforwards
and capitalized exploration
costs and other $ 761,017 $ 727,072
Valuation allowance (761,017) (727,072)
---------- ---------
Net deferred tax asset $ - - $ - -
========== =========
The change in the valuation allowance during the years ended December 31,
2000, 1999 and 1998 were as follows:
2000 1999 1998
-------- -------- -------
Balance,
beginning of year $727,072 $696,567 $669,380
Change due to
nonutilization of net
operating loss carryforwards 33,945 30,505 27,187
-------- -------- --------
Balance, end of year $761,017 $727,072 $696,567
======== ======== ========
ConSil recorded the above valuation allowance to reflect the estimated
amount of the deferred tax asset which may not be realized principally due to
limitation of the refunds available during the carryback period and the
uncertainty regarding the generation of future taxable income to utilize
reversing deductible items. The realization of ConSil's future deductible items
that are not recoverable through the refund of prior income taxes is dependent
upon ConSil's ability to generate future taxable income. If it becomes more
likely than not that ConSil will generate future taxable income, the valuation
allowance could be adjusted in the near term.
At December 31, 2000, ConSil had federal and state net operating loss
carryforwards of $712,000 substantially all of which will expire in the year
2012 and 2013.
18
3. Note Payable
On June 28, 1996, ConSil and Hecla entered into a loan agreement whereby
Hecla agreed to make available to ConSil a loan not to exceed $500,000. Under
the terms of the loan agreement, ConSil agreed to pay interest on the
outstanding balance at the prime interest rate plus one and one-half percent.
The loan was payable upon demand by Hecla and was due in its entirety on or
before December 31, 1996. The loan agreement places certain restrictions on
ConSil including restrictions on assets, indebtedness, increases in
compensation, loans or advances to shareholders, directors, or employees,
capital stock, and hiring of new employees. These restrictions can be altered
with the prior consent of Hecla. This loan agreement was subsequently amended
on eight separate occasions, increasing the amount available to borrow to
$725,000 and extending the repayment date to March 31, 2002 with all other terms
remaining substantially identical to the original loan agreement. At December
31, 2000, ConSil was in compliance with the restrictions under the loan
agreement. At December 31, 2000, there was $725,000 outstanding under the loan
agreement with Hecla, having an interest rate of 11.0%, and accrued interest due
to Hecla totaling $282,725. Interest expense related to this note for the years
ended December 31, 2000, 1999 and 1998 was $77,516, $66,959 and $69,830,
respectively.
19
4. Related Party Transactions
In addition to related party transactions described in
Note 3, during the years ended December 31, 1998, general and administrative
expenses of $279, were charged to ConSil by Hecla. There were no charges for
general and administrative expenses to ConSil by Hecla in 1999 and 2000.
During the third quarter of 2000, Hecla forgave $248,897 of ConSil and
Minera ConSil's accounts payable to Hecla Mining Company and Minera Hecla, S.A.
de C.V. (Hecla's wholly owned subsidiary). ConSil recorded the forgiveness of
the accounts payable as an equity contribution.
5. Fair Value of Financial Instruments
The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies. However,
considerable judgment is required to interpret market data and to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts ConSil could realize in a current market
exchange.
The estimated fair values of financial instruments were as follows:
December 31,
---------------------------------------------
2000 1999
--------------------- ---------------------
Carrying Fair Carrying Fair
Amounts Value Amounts Value
--------- ---------- --------- ---------
Financial assets:
Cash and cash equivalents $ 1,419 $ 1,419 $ 11,209 $ 11,209
Other receivables 84 84 148 148
Income tax refund
receivable - - - - 8,000 8,000
Financial liabilities:
Current liabilities 284,821 284,821 466,034 466,034
Current note payable 725,000 725,000 711,000 711,000
Due to the nature of cash and cash equivalents, receivables, and current
liabilities, the fair value approximates their carrying amounts. The fair value
of the note payable approximates its carrying value due to the term and variable
interest rate associated with the note.
20
6. Geographic Segments
The tables below present information about ConSil's single industry segment
(silver) as of and for the years ended December 31:
2000 1999 1998
---------- ---------- ----------
Net income (loss)
United States $ (99,102) $ (88,877) $ (86,603)
Mexico (720) (868) 6,871
Canada (16) 24 (230)
--------- --------- ---------
$ (99,838) $ (89,721) $ (79,962)
========= ========= =========
General corporate assets(1)
United States $ 327 $ 17,669 $ 25,033
Canada 1,176 1,515 1,870
Mexico - - 473 453
--------- --------- ---------
$ 1,503 $ 19,657 $ 27,356
========= ========= =========
(1) General corporate assets consist primarily of cash and cash
equivalents and miscellaneous and income tax refund receivables.
7. Reconciliation of U.S. Generally Accepted Accounting Principles (GAAP) to
Canadian GAAP
ConSil prepares its consolidated financial statements in accordance with
generally accepted accounting principles as practiced in the United States of
America. There were no differences between U.S. GAAP and Canadian GAAP with
respect to stockholders' deficit at December 31, 2000 and 1999. The differences
between U.S. GAAP and Canadian GAAP with respect to the net loss for the years
ended December 31, 2000, 1999 and 1998 were as follows:
21
2000 1999 1998
----------- ----------- -----------
Net loss for the year ended
December 31, per U.S. generally
accepted accounting principles $ (99,838) $ (89,721) $ (79,962)
Adjustments to conform with Canadian
generally accepted accounting
principles:
Deferred income tax benefit - - - - 8,000
---------- ---------- ----------
Net loss for the year ended
December 31, per Canadian
generally accepted accounting
principles $ (99,838) $ (89,721) $ (71,962)
========== ========== ==========
8. Basic and Diluted Loss Per Common Share
In accordance with SFAS 128, the following table presents a reconciliation
of the numerators (net loss) and denominators (shares) used in the basic and
diluted loss per common share computations for the years ended December 31,
2000, 1999 and 1998.
2000 1999 1998
-------------------------------------------------------------------------------------------------------------
Per Share Per Share Per Share
Net Loss Shares Amount Net Loss Shares Amount Net Loss Shares Amount
-------------------------------------------------------------------------------------------------------------
Net loss $ (99,838) $ (89,721) $ (79,962)
Basic loss $ (99,838) 9,449,707 $ (0.01) $ (89,721) 9,449,707 $ (0.01) $ (79,962) 9,449,707 $ (0.01)
========= ========= ======= ========= ========= ======= ========= ========= =======
Effect of dilutive
securities (1)
Diluted loss $ (99,838) 9,449,707 $ (0.01) $ (89,721) 9,449,707 $ (0.01) $ (79,962) 9,449,707 $ (0.01)
========= ========= ======= ========= ========= ======= ========= ========= =======
(1) Dilutive Securities
As of December 31, 2000, 1999 and 1998, there were 60,000, 120,000 and
180,000 shares, respectively, available for issue under granted stock
options. These options were not included in the computation of diluted
loss per common share as a loss was incurred in each of these years and
their inclusion would be antidilutive.
22
9. Stock Option Plans
In 1997, the shareholders of ConSil approved two stock option plans. The
ConSil Stock Option Plan provides for stock-based grants to selected officers,
directors and other key employees. The ConSil Corp. Incentive Stock Option Plan
provides for stock-based grants to participating employees. The option price of
stock options issued under the Incentive Stock Option Plan may not be less than
the fair market value on the date of grant. The terms of the options under
either plan shall be no longer than five years from the date of grant. During
2000, 1999 and 1998, there were no options granted under either plan. At
December 31, 2000, there were 885,000 shares available for grant under the
plans.
Transactions concerning stock options pursuant to both of the above-
described plans are summarized as follows:
Exercise
Shares Price
----------- ----------
Outstanding, December 31, 1997 and 1998 180,000 $0.87
Expired (60,000) $0.87
---------
Outstanding, December 31, 1999 120,000 $0.87
Expired (60,000) $0.87
---------
Outstanding, December 31, 2000 (60,000) $0.87
=========
All of the options outstanding as of December 31, 2000 are fully
exercisable and have a remaining life of 1.0 year.
23
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated herein by reference
to Item 12 of this report.
Item 11. Executive Compensation
No executive compensation was paid during 2000, 1999, or 1998.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners as of March 1, 2001:
Title Name and Amount and Percent
of Address of Nature of of
Class Beneficial Owner Beneficial Ownership Class
--------- -------------------- -------------------- ---------
Common Stock Hecla Mining Company
Coeur d'Alene, Idaho 7,418,300 shares 78.503
(b) Security ownership of management as of March 1, 2001:
Common Shares
Year First Owned Beneficially,
Elected As Directly or Indirectly, Percent
Name Age A Director as of March 1, 2001 of Class (4)
---- --- ---------- ----------------------- ------------
Nigel P.H. Cave 33 -0- *
Secretary since 1997. Attorney
at Law, Borden, Ladner & Gervais
since 1993.
Michael B. White 50 1989 61,000 (1) *
President since 2000, Vice
President from 1992 to 2000, and
Secretary from 1982 to 1995. Mr.
White is Vice President-General
Counsel and Secretary of Hecla
Mining Company.
David F. Wolfe (2) 57 -0- *
Treasurer since 1993. Mr. Wolfe
is also Treasurer of Hecla Mining
Company.
Lewis E. Walde (3) 34 2000 -0- *
Mr. Walde is also Controller of
Hecla Mining Company
All Officers and Directors as a Group (4 Individuals) 61,000 0.8%
24
There are no family relationships between any of the executive officers and
directors.
* Less than one percent (1%) of the total issued and outstanding shares of
common stock.
(1) Includes 60,000 shares subject to options granted under ConSil's Stock
Option Plan issued at the rate of $0.87, expiring on January 13, 2002.
Additionally, Mr. White is the beneficial owner of 2,618 shares of common
stock of Hecla Mining Company, the majority shareholder of ConSil, and
holds 143,200 options currently exercisable. The exercise price of these
options is currently greater than the market price of Hecla Mining
Company's common stock.
(2) Additionally, Mr. Wolfe is the beneficial owner of 50 shares of common
stock of Hecla Mining Company, the majority shareholder of ConSil, and
holds 16,500 options currently exercisable. The exercise price of these
options is currently greater than the market price of Hecla Mining
Company's common stock.
(3) Additionally, Mr. Walde holds 11,500 options currently exercisable.
The exercise price of these options is currently greater than the
market price of Hecla Mining Company's common stock.
(4) In addition to the 9,449,707 shares of common stock currently outstanding,
the 60,000 shares subject to options granted under ConSil's Stock Option
Plan were deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the common stock owned by such
persons.
Item 13. Certain Relationships and Related Transactions
During the third quarter of 2000, Hecla forgave $248,897 of ConSil and
Minera ConSil's accounts payable to Hecla Mining Company and Minera Hecla,
S.A. de C.V. (Hecla's wholly owned subsidiary). ConSil recorded the
forgiveness of the accounts payable as an equity contribution.
25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Index to Consolidated Financial Statements:
Page
Report of Independent Accountants 9
Consolidated Balance Sheets at December 31, 2000
and 1999 10
Consolidated Statements of Operations for the
Years Ended December 31, 2000, 1999 and 1998 11
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998 12
Consolidated Statements of Changes in Stockholders'
Deficit for the Years Ended December 31, 2000,
1999 and 1998 13
Notes to Consolidated Financial Statements 14
(b) Reports on Form 8-K
None.
(c) Exhibits
The exhibit numbers in the following list correspond to the
numbers assigned to such Exhibits in Item 601 of Regulation S-K.
Number Description of Exhibits
10.1(b) Loan Agreement - Eighth Amendment
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, on March 27,
2001.
CONSIL CORP.
By: /s/ Michael B. White
--------------------------------
Michael B. White,
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael B. White 3/27/01 /s/ Lewis E. Walde 3/27/01
------------------------------- ------------------------------
Michael B. White Date Lewis E. Walde Date
President and Director Director
(principal executive officer)
/s/ David F. Wolfe 3/27/01
-------------------------------
David F. Wolfe Date
Treasurer (principal accounting
and financial officer)
27
LIST OF EXHIBITS TO BE FILED WITH THIS 10-K
Number Description of Exhibits
------ -----------------------
10.1(d) Loan Agreement - Eighth Amendment(1)
_______________________________
(1) See Exhibits 10.1(a) through (c) attached to Form 10-K filed March 29, 2000
under File No. 000-04846