10-Q 1 r10q2id03.txt IDLM020310Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Commission file number: 1-316 INDEPENDENCE LEAD MINES COMPANY (Exact name of registrant as specified in its charter) Arizona 82-0131980 (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 510 Cedar Street Wallace, Idaho 83873 (Address of principal executive offices) Registrant's telephone number, including area code: (208) 753-2525 Common Stock None Title of each class Name of each exchange on which registered Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the registrant's common stock at July 28, 2003 was 4,175,357 shares. INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED June 30, 2003 TABLE OF CONTENTS Page PART I FINANCIAL INFORMATION Item 1: Financial Statements . . . . . . . . . . . . . . . . 1 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 1 PART II OTHER INFORMATION Item 1: Legal Proceedings . . . . . . . . . . . . . . . . . 2 Item 2: Changes in Securities . . . . . . . . . . . . . . . 3 Item 3: Defaults upon Senior Securities . . . . . . . . . . 3 Item 4: Submission of Matters to a Vote of Security Holders . 3 Item 5: Other Information . . . . . . . . . . . . . . . . . . 3 Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . 3 CERTIFICATIONS and SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . F/S 6 [The balance of this page has been intentionally left blank.] PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. The unaudited financial statements of the Company for the periods covered by this report are included elsewhere in this report, beginning at page F/S-1. The unaudited financial statements have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company's management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. For further information refer to the financial statements and footnotes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2002 incorporated by reference herein. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2003. Six months Ended June 30, 2003 Compared to six months Ended June 30, 2002. During the six months ended June 30, 2003 the Company realized no income other than interest income of $260. General and administrative expenses increased to $39,600 for the six-month period ended June 30, 2003 as compared to $11,166 for the six- month period ended June 30, 2002. This increase is principally attributed to increased legal expenses incurred in 2003. For the quarter ended June 30, 2003, the Company experienced a net loss of $31,574, or $0.008 per share, compared to a net loss of $8,069, during the comparable period in the previous year. LIQUIDITY AND CAPITAL RESOURCES. The Company is the owner of fifteen patented and seventeen unpatented mining claims. This claim group ("the property") is situated Northwest of Hecla Mining Company's Lucky Friday Mine in the Coeur d'Alene Mining District, Shoshone County Idaho. Adjacent is the community of Mullan and U.S. Interstate Highway 90. Pursuant to the terms of an agreement dated February 8, 1968, among Hecla Mining Company ("Hecla"), Day Mines, Inc. ("Day"), Abot Mining Company ("Abot"), and the Company (the "Unitization Agreement"), the Eastern portion of the Company's Property (approximately five-eighths of the Property) was unitized with certain adjoining and near-by properties owned by Day and Abot into a unitized area, consisting of 55 claims, (known as the "DIA Area"). Under the terms of the Unitization Agreement, ores and minerals in place are owned by the parties thereto in the following percentages: Day (now Hecla by merger) 47.70% Independence 46.30% Abot 6.00% By a second agreement also dated February 8, 1968 (the "Lease Agreement"), Hecla leased the DIA Area for a period of fifty (50) years, subject to a 30-year extension, for the purpose of conducting mineral exploration and development of the DIA Area and mining such commercial ore as may be discovered in the DIA Area by Hecla. The Lease Agreement provides that all costs and expenses incurred in the exploration, development, and operation of the DIA Area are to be paid by Hecla subject to the right of Hecla to be reimbursed for such costs and expenses, together with all advance royalties paid, out of any future net profits realized from the operation of the DIA Area. After recovery of Hecla's costs and expenses and 1 amounts paid as advance royalties, and the establishment of a three month working capital reserve, net profit royalties are to be paid to the Company and the other property owners as follows: Day (now Hecla by merger) 19.08% Independence 18.52% Abot 2.40% Under the terms of the Unitization Agreement, one-half of the first net profit royalties received by the Company are to be paid over to Day (now Hecla) until Day recovers the sum of $450,000. The relationship of the parties to the Agreement may, under certain circumstances, be converted to a joint venture at the option of the property owners, where after the property owners would become participating, non-operating working interest owners who would share profits and expenses in connection with the DIA Area in the same ratio as exists pursuant to lease arrangement with Hecla described above. Until Hecla commences to pay net profit royalties and during such period as the Lease Agreement is in effect, Hecla is obligated to pay an advance royalty to the Company of $750 per month subject to increase to $1,500 if production for the DIA Area exceeds 2,000 tons per month. The Company currently receives an advance royalty of $1,500 per month, which is recorded in the financial statements as deferred income. Pursuant to the terms of the February 8, 1968, agreements, Hecla will be 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. During 2002 Hecla mined and milled 159,651 tons containing 13 oz. Silver per ton, 7.45% lead, and 2.14% zinc. For the year 2002 the Project lost an additional $1,369,439. The DIA Project Total Costs at the end of first quarter 2003 were $32,674,780. None of the Projects exploration and development costs have been recovered. The DIA Project records show Hecla's management engaged in a massive pretence, representing the project as one with economic viability by declaring "Proven and Probable Reserves". In fact with the mining method chosen along with the deficiencies of the mill, and the actual economic condition, the record clearly shows there never were any Proven and Probable Reserves. Hecla's management chose to engage in "Fraudulent Pretence of Viability", resulting in the removal and waste of approximately 1,200,000 tons of mineralized material from Independence's mining claims. The current officers and directors of the Company serve without compensation and are not considered by the Company to be employees. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The Company has retained the Boise law firm of Marcus, Merrick, Christian and Hardee. As required by terms of a 1968 Lease Agreement with Hecla Mining Company, our Company gave notice of termination of that agreement in early March 2002. This agreement covered the DIA Project, which is Hecla's principle operation at the Lucky Friday mine near Mullan, Idaho. Both parties agreed to waive arbitration requirement contained in the lease and agreed to a trial without a jury. On June 17, 2002 the Independence Lead Mines Company's attorneys filed a complaint in the District Court of the First Judicial District of the State of Idaho, In And For the County of Kootenai, Case #CV-02-4061, and asked for Declaratory Judgment, Injunctive Relief, and Damages. On March 19, 2003 under Case#CV-02-4061 Independence's attorney filed a statement of undisputed material facts in a brief, and exhibits in support of a Motion For Partial Summary Judgment, or In The Alternative, For Preliminary Injunction. The contents of the brief are available from the court. It tells an astounding story of a calculated looting of Independence's mining claims, almost unimaginable in its scope and scale. A hearing was held July 17, 2003 on the Company's motion for Summary Judgment. The judge has taken the motion under advisement and a decision is expected within 30 days. 2 Independence moves for partial summary judgment as follows: 1. Judgment declaring Defendant Hecla Mining Company ("Hecla") to be in default of its obligations under the February 8, 1968 lease agreement between the parties known as the "DIA Project Agreement"; 2. Judgment declaring the DIA Project Agreement, and Hecla's leasehold interest in Independence's mining claims under it, terminated; 3. Judgment declaring the Unitization Agreement, entered into concurrently with the DIA Project Agreement, terminated; and 4. Judgment that Hecla has committed waste of Independence's mining claims, with the damages therefrom to be determined at trial. In the alternative, Independence moves for a preliminary injunction prohibiting Hecla from further mining on Independence's mining claims pending final resolution of this case. ITEM 2. CHANGES IN SECURITIES. Neither the constituent instruments defining the rights of the registrant's securities holders nor the rights evidenced by the registrant's outstanding common stock have been modified, limited, or qualified. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. The registrant has no outstanding senior securities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of the registrant's security holders during the period covered by this report. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. EXHIBITS. The following exhibit is filed as part of this report: NONE REPORTS ON FORM 8-K. No reports on Form 8-K were filed by the registrant during the period covered by this report. [The balance of this page has been intentionally left blank.] 3 INDEPENDENCE LEAD MINES COMPANY TABLE OF CONTENTS PAGE Balance Sheets as of June 30, 2003 and December 31, 2002 . . . . . . . . . . . . . . . . . F/S 2 Statements of Operations for the six Months ended June 30, 2003 and for the six Months ended June 30, 2002 . . . . . . . . . . . . . . . . . . . . . F/S 3 Statements of Cash Flow for the six Months ended June 30, 2003 and 2002 . . . . . . . . . F/S 4 Notes to Interim Financial Statements . . . . . . . . . .F/S 5 Certifications and Signatures . . . . . . . . . . . . . F/S 6 [The balance of this page has been intentionally left blank.] F/S 1 INDEPENDENCE LEAD MINES COMPANY (AN EXPLORATORY STAGE COMPANY) BALANCE SHEET - UNAUDITED

F/S 2 INDEPENDENCE LEAD MINES COMPANY (AN EXPLORATORY STAGE COMPANY) STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED DURING THE EXPLORATION STAGE - UNAUDITED

INDEPENDENCE LEAD MINES COMPANY (AN EXPLORATORY STAGE COMPANY) STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED DURING THE EXPLORATION STAGE - UNAUDITED continued

F/ S 3 INDEPENDENCE LEAD MINES COMPANY (AN EXPLORATORY STAGE COMPANY) STATEMENTS OF CASH FLOW - UNAUDITED

F/S 4 NOTES TO INTERIM FINANCIAL STATEMENTS - UNAUDITED Financing information presented in the Company's quarterly reports follow the policies set forth in its Annual Report on Form 10-K filed with the Securities and Exchange Commission. In accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X, these quarterly reports do not include all of the information and footnotes. In the opinion of the Company's management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2003 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2003. 1. Nature of business: Independence Lead Mines Company ("the Company") is a corporation organized under the laws of the State of Arizona on September 16,1929. The Company is the owner of fifteen patented and fourteen unpatented mining claims. This claim group (the "property") is situated Northwest of Hecla Mining Company's Lucky Friday Mine in the Coeur d'Alene Mining District, Shoshone County Idaho. The Company's property is part of the "DIA Area" which is currently being developed and mined by Hecla Mining Company. The Company has been in the 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. 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 basis. The financial statements do not contain any adjustments, which might be necessary if the Company is unable to continue as a going concern. 2. Common stock: In September 1997 the capitalization of the Company was increased from 4,000,000 shares to 5,000,000 shares. [The balance of this page has been intentionally left blank.] F/S 5 INDEPENDENCE LEAD MINES COMPANY AN EXPLORATION STAGE COMPANY June 30, 2003 CERTIFICATIONS I, Bernard C. Lannen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Independence Lead Mines Company. 2. Based on my knowledge, this annual 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 quarterly 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 registrant's other certifying officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 28, 2003 /s/ Merlin D. Bingham ------------ President F/S 6 INDEPENDENCE LEAD MINES COMPANY AN EXPLORATION STAGE COMPANY June 30, 2002 CERTIFICATIONS I, Wayne L. Schoonmaker, certify that: 1. I have reviewed this quarterly report on Form 10-Q 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 quarterly 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 registrant's other certifying officer and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d- 14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: July 28, 2003 /s/ Wayne L. Schoonmaker ------------ Principal Accounting Officer F/S 7 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-Q for the period ended June 30, 2003, 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; 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: July 28, 2003 F/S 8 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-Q for the period ended June 30, 2003, 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; 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 Accounting Officer Dated: July 28, 2003 F/S 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INDEPENDENCE LEAD MINES COMPANY By: /s/ Bernard C. Lannen ------------ Bernard C. Lannen, its President Date: July 28, 2003 By: /s/ Wayne Schoonmaker ------------ Wayne Schoonmaker, its Principal Accounting Officer Date: July 28, 2003 F/S-10

INDEPENDENCE LEAD MINES CO 10-Q