Back to GetFilings.com



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________

Commission file number: 1-316

INDEPENDENCE LEAD MINES COMPANY
(Exact name of registrant as specified in its charter)

Arizona 82-0131980
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)

510 Cedar Street
Wallace, Idaho 83873
(Address of principal executive offices)

Registrant's telephone number,
including area code: (208) 753-2525

Common Stock None
Title of each class Name of each exchange
on which registered

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period as the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]

The number of outstanding shares of the registrant's common stock
at November 1, 2002 was 4,175,357 shares.


INDEPENDENCE LEAD MINES COMPANY QUARTERLY REPORT
ON FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 2002


TABLE OF CONTENTS Page

PART I - FINANCIAL INFORMATION
Item 1: Financial Statements . . . . . . . . . . . . . . . . 1

Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 1

PART II - OTHER INFORMATION

Item 1: Legal Proceedings . . . . . . . . . . . . . . . . . 2

Item 2: Changes in Securities . . . . . . . . . . . . . . . 3

Item 3: Defaults upon Senior Securities . . . . . . . . . . 3

Item 4: Submission of Matters to a Vote of Security Holders . 3

Item 5: Other Information . . . . . . . . . . . . . . . . . . 3

Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . 3


SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 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 nine-month period
ended September 30, 2002 are not necessarily indicative of the
results that may be expected for the full year ending
December 31, 2002.

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, 2001 incorporated by reference
herein.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2002.

Nine months Ended September 30, 2002 Compared to nine months
Ended September 30, 2001.

During the nine months ended September 30, 2002 the Company
realized no income other than interest income of $1,808. General
and administrative expenses decreased to $21,109 for the nine-
month period ended September 30, 2002 as compared to $30,721 for
the nine-month period ended September 30, 2001. This decrease is
principally attributed to reduced consulting, legal, and
shareholder expenses incurred in 2002. For the quarter ended
September 30, 2002, the Company experienced a net loss of $9,957,
or $0.002 per share, compared to a net loss of $14,599, 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. 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.

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. Because of problems with Hecla Mining
Company over the management of the DIA area (see below), the
Company in early March 2002 notified Hecla that it considers the
DIA lease terminated and until this dispute is settled, the
Company continues to receive advance royalty payments.

Since June 30, 1999 the Company has experienced substantial
differences with the Lesee. To establish a greater understanding
of the DIA Project, Independence commissioned Mine Systems
Design, Inc to conduct an overview of the Project. Under Hecla's
management, as of December 31, 2001 more than 944 tons have been
mined and milled while incurring more than $15,000,000 of
additional DIA Project debt. We believe the record indicates the
DIA Project was not viable to undertake the mining method chosen
and the existing economic conditions, and did not justify the
startup of a large mining operation on the Lessor's property.
Because we believe this action by Hecla's management resulted in
the waste of the resource, the Company gave written notice to
Hecla Mining Company on March 1, 2002 of termination of the
February 8, 1968 Lease Agreement and called for arbitration under
the terms of the Agreement. Subsequently, both parties agreed to
waive the arbitration provisions of the Lease Agreement and go to
trial (see "Item 1. Legal Proceedings." below). In search for
justice the Company has already invested a great deal of time and
expense in an overview of the DIA Project. This will help
expedite the process of preparing for trial. Management is very
confident, but neither the timing nor outcome of the Company's
Complaint for Declaratory Judgment, Injunctive Relief and Damages
can be known at this time.

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 Mareus, Merrick,
Christian and Hardez, and in early March 2002, the Company gave
notice of termination of the 1968 Lease Agreement covering the
DIA Project, which is Hecla's principle operation at it's Lucky
Friday mine near Mullan, Idaho. Both parties agreed to waive
arbitration and go to trial without a jury. In late June 2002 the
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.

-2-

ITEM 2. CHANGES IN SECURITIES.

Neither the constituent instruments defining the rights of the
registrant's securities holders nor the rights evidenced by the
registrant's outstanding common stock have been modified,
limited, or qualified.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

The registrant has no outstanding senior securities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of the registrant's security
holders during the period covered by this report.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS. 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 September 30, 2002
and December 31, 2001 . . . . . . . . . . . . . . . . . F/S-2

Statements of Operations for the
three Months Ended September 30, 2002 and 2001
and for the nine months Ended September 30,
2002 and 2001 . . . . . . . . . . . . . . . . . . . . F/S-3

Statements of Cash Flow for the nine
Months Ended September 30, 2002 and 2001 . . . . . . . F/S-4

Notes to Interim Financial Statements . . . . . . . . . . F/S-5

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


ASSETS
September 30, 2002 DECEMBER 31, 2001
----------------- ------------

CURRENT ASSETS:
Cash $ 159,750 $ 167,674
Royalties Receivable 0 1,500
Investments 1,006 1,006
Prepaid Expenses 5,000 0
----- -----
Total current assets 167,256 170,180
------ ------
PROPERTY AND EQUIPMENT, at cost:
Equipment 0 0
Less accumulated depreciation 0 0
--- ---
0 0
Mining property 2,945,407 2,945,407
------ ------
Total property and equipment 2,945,407 2,945,407

OTHER ASSETS:
Unrecovered exploration costs 187,920 187,920
----- -----
Total assets $3,300,583 $ 3,303,507
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 14,337 $ 10,926
Income taxes accrued (1,275) 536
----- -----
Total current liabilities 13,062 11,462
----- -----
DEFERRED INCOME: 369,500 356,000
------ ------
STOCKHOLDERS' EQUITY:

Common Stock, $1.00 par value,
authorized 5,000,000 shares;
issued 4,308,793 and outstanding
4,175,357 shares at 12/31/01;
issued 4,308,793 and outstanding
4,175,357 shares at 09/30/02. 4,308,793 4,308,793

Treasury Stock Additional (55,290) (55,290)
Paid-In Capital(Deficit) (108,293) (108,293)
------ ------
4,145,210 4,145,210
Less deficit accumulated during
the exploration stage (1,227,189) (1,209,165)
------- -------
Total Stockholders equity 2,918,021 2,936,045
-------- --------
Total liabilities and
stockholders' equity $3,300,583 $3,303,507
======= =======
The accompanying notes are an integral part of these financial
statements.

F/S - 2


INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)

STATEMENTS OF OPERATIONS AND DEFICIT ACCUMULATED
DURING THE EXPLORATION STAGE - UNAUDITED


QUARTER SIX MONTHS QUARTER SIX MONTHS
ENDED ENDED ENDED ENDED
SEPT.30, 02 SEPT.30, 02 SEPT.30, 01 SEPT.30, 01
----------- ----------- ----------- -----------

REVENUE $ 0 $ 0 $ 0 $ 0
----- ----- ----- -----
EXPENSES
Consulting 3,825 5,163 3,150 10,534
Licenses and fees 0 48 0 48
Office expense 81 600 985 1,023
Office services 150 450 150 450
Shareholder and Public Relations 425 1,195 5,050 6,612
Transportation and Travel 0 1,648 1,493 1,493
Accounting 0 0 0 87
Legal 5,462 8,180 5,368 10,474
----- ----- ----- -----
Total expenses 9,943 21,109 16,196 30,721
----- ------ ------ ------
LOSS FROM OPERATIONS ($9,943) ($21,109) (16,196) (30,721)

OTHER INCOME AND (EXPENSE)

Interest, net 548 1,808 1,370 5,854
--- ----- ----- -----
Total other income $548 $1,808 $1,370 $5,854
--- ----- ----- -----
NET INCOME(LOSS)
BEFORE INCOME TAXES (9,395) (19,301) (14,826) (24,867)
Provision for income taxes 562 (1,275) (227) (454)
----- ----- ----- -----
NET INCOME (LOSS) ($9,957) ($18,026) ($14,599) ($24,413)

DEFICIT, accumulated during the
exploration stage,
beginning of period ($1,217,234) ($1,209,165) ($1,185,754) ($1,175,940)

DEFICIT, accumulated during the
exploration stage,
end of period ($1,227,191) ($1,227,191) ($1,200,353) ($1,200,353)
========== ========== ========== ==========
Income(Loss)per share ($0.002) ($0.004) ($0.003) ($0.006)

Weighted average common
shares outstanding 4,175,357 4,175,357 4,175,357 4,175,357
- -----------------------
The accompanying notes are an integral part of these financial statements.

F/ S - 3


INDEPENDENCE LEAD MINES COMPANY
(AN EXPLORATORY STAGE COMPANY)
STATEMENTS OF CASH FLOW - UNAUDITED


NINE MONTHS NINE MONTHS
ENDED ENDED
SEPT.30, 2002 SEPT.30, 2001
---------- ----------

Operating Activities:
Net income (loss) ($18,026) ($24,413)

Adjustments to reconcile net loss to net cash
used in operating activities: 0 0

Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (5,000) 0
(Increase) decrease in accounts receivable 0 0
Increase (decrease) in accounts payable 3,412 (7,339)
Increase (decrease) in deferred income 13,500 14,250
Increase (decrease) in taxes payable (1,810) (15,964)
----- -----
Net cash used in operating activities (7,924) (33,466)
---- ----
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 Land 0 0
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 0 0
--- ---
Net increase (decrease) in cash (7,924) (33,466)

Cash and cash equivalent, beginning of period 167,674 196,726
----- -----
Cash and cash equivalent, end of period $159,750 $163,260
====== ======
Disclosure of accounting policy
For the nine months ended September 30,
2002 and September 30, 2001, the Company
had no cash equivalents.

Supplemental disclosure of cash flow information:

Cash paid during the year for:
Interest $ 0 $ 0
Income taxes 536 15,510

The accompanying notes are an integral part of these financial statements.

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 nine-month period ended September 30, 2002 are
not necessarily indicative of the results that may be expected
for the full year ending December 31, 2002.

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.

During the three months ended March 31, 2000 the Company
purchased 47,000 shares of the Company's common stock on the open
market at an average price of $0.49 per share. These purchases
bring the total treasury shares held by the Company to 85,436
shares. There were no stock purchases in the nine months ended
September 30, 2002 and 2001.

[The balance of this page has been intentionally left blank.]
F/S - 5



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


INDEPENDENCE LEAD MINES COMPANY

By: /s/ Bernard C. Lannen
------------
Bernard C. Lannen, its
President
Date: November 04, 2002

By: /s/ Wayne Schoonmaker
------------
Wayne Schoonmaker, its
Principal Accounting Officer
Date: November 04, 2002

F/S-6


CERTIFICATIONS

I, Bernard Lannen certify that:

1. I have reviewed this report on Form 10-Q of Independence
Lead Mines Company.

2. Based on my knowledge, this 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 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 report.

Date: November 04, 2002

/s/ Bernard Lannen
- ------------------
President

I, Wayne Schoonmaker certify that:

1. I have reviewed this report on Form 10-Q of Independence
Lead Mines Company.

2. Based on my knowledge, this 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 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 report.

Date: November 04, 2002

/s/ Wayne Schoonmaker
- ---------------------
Principal Accounting Officer