UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1997
Commission File
Number: 0-9736
HORN SILVER MINES, INC.
---------------------------
Exact Name of Registrant.
UTAH 87-0299832
- ------------------------------ ----------------------
(State or other jurisdiction IRS Identification
of incorporation or organization) Number
4444 South 700 East, Suite 204
Salt Lake City, Utah 84107
- ------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (801) 381-5656
-----------------
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for 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 XX NO
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the period
covered by this report.
Common Stock, $.001 par value 6,314,285
- -------------------------------- ---------------------
Title of Class Number of Shares
Outstanding as of
June 30, 1997
<PAGE>
HORN SILVER MINES, INC.
FORM 10QSB
QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
No. Page
- --- ----
Item 1. Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . 3
Statement of Operations and Changes in
Stockholders' Equity . . .. . . . . . . . . . . . . 4
Statement of Operations. . . . . . . . . . . . . . . . 5
Statement of Cash Flows. . . . . . . . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . 7 to 11
Item 2.
Management's Discussion and Analysis of Financial
Condition and Result of Operations . . . . . . . . . . 10
PART II - OTHER INFORMATION
Other Information. . . . . . . . . . . . . . . . . . . 11
Signature Page . . . . . . . . . . . . . . . . . . . . 12
-2-
<PAGE>
HORN SILVER MINES, INC.
<TABLE>
<CAPTION>
BALANCE SHEET
June 30, 1997
ASSETS
<S> <C>
Current Assets:
Cash $ 5,301
Property and Equipment:
Leasehold Improvements 5,634
Structures and Equipment 8,441
----------
14,075
Less Accumulated Depreciation (13,974)
----------
Net Property Equipment 281
----------
Other Assets: 1,211
----------
Total Assets $ 6,793
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
Current Liabilities:
Accounts Payable $ 21,650
Accrued Liabilities Due to Related Parties 6,080
Accrued Expenses 49
----------
Total Current Liabilities 50,494
----------
Stockholder's Deficit:
Common Stock, par value $.001,
30,000, shares authorized;
6,314,285 shares issued
and outstanding 6,314
Additional Paid in Capital 1,669,099
Accumulated Deficit (1,696,399)
Total Stockholders' Deficit (20,986)
-----------
Total Liabilities and Stockholders' Equity $ 6,793
</TABLE>
Unaudited
-3-
<PAGE>
HORN SILVER MINES, INC.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS AND
CHANGES IN STOCKHOLDERS' EQUITY
<S> <C> <C>
Three Month Period Ended
June 30
------------------------
1997 1996
---- ----
REVENUES:
Mineral Royalties $ 26,644 $ 11,927
Interest Income 127 180
-------- --------
Total Revenues 26,771 12,107
EXPENSES:
Salaries and Wages 2,040 3,450
General and Administrative 20,732 3,575
Legal land Accounting 7,390 5,747
Taxes and Licenses 663 398
Directors' and Officer Fees -- 11,263
Depreciation -- 178
Stockholders' Meeting/Proxy
Expenses 15,538 0
-------- --------
$ 45,766 $ 24,611
-------- --------
NET GAIN (LOSS) $(18,995) $(12,504)
Stock Issued to Officer and Directors 22,525 22,525
Balance, Stockholders' Equity,
December 31, 1996/95 $(24,516) $(18,935)
Balance, Stockholders' Equity,
June 30, 1997/1996 $(20,986) $ (6,792)
</TABLE>
Unaudited
-4-
<PAGE>
HORN SILVER MINES, INC.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
<S> <C> <C>
Three Month Period Ended
June 30
------------------------
1997 1996
---- ----
REVENUES:
Mineral Royalties $ 25,139 $ 9,773
Interest Income 102 71
-------- --------
Total Revenues 25,241 9,844
EXPENSES:
Salaries and Wages 1,020 1,350
General and Administrative 16,778 1,937
Legal and Accounting 3,000 5,747
Taxes and Licenses 238 232
Directors' and Officer Fees -- 5,681
Depreciation -- 89
Stockholders' Meeting/Proxy 13,198 0
-------- --------
Total Expenses $ 34,236 $ 14,986
-------- --------
NET GAIN (LOSS) $ (8,995) $ (5,142)
</TABLE>
Unaudited
-5-
<PAGE>
HORN SILVER MINES, INC.
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
<S> <C> <C>
Six Month Period Ended
June 30
-----------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (18,995) $ (12,594)
Adjustments:
Depreciation -- 178
Decrease in Accrued Expenses (277) (304)
Increase in liability for
services to Directors and
Officer -- 11,262
---------- ---------
$ (19,230) $ (1,368)
CASH FLOWS FROM INVESTING ACTIVITIES:
None -- --
CASH FLOWS FROM FINANCING ACTIVITIES:
None -- --
----------- -----------
Net Decrease in Cash and Cash
Equivalents $ (19,230) $ (1,368)
Cash and Cash Equivalents at
Beginning of Period 24,531 18,636
---------- ----------
Cash and Cash Equivalents at End of
Period $ 5,301 $ 17,268
</TABLE>
Unaudited
-6-
<PAGE>
HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Summary of Significant Accounting Policies
------------------------------------------
Organization
- ------------
The Company was incorporated in 1971 under the laws of the State
of Utah. The Company is a "junior" natural resource company
whose activities are primarily acquisition, exploration and
development of natural resources.
On June 30, 1983, the stockholders of the Company approved a
proposed merger between the Company and Tintic Mineral Resources,
Inc., a Utah corporation. The holders of Tintic Common Stock
became entitled to five shares of the Company Common Stock for
each of their shares of Tintic Common Stock.
On October 8, 1996, the Company entered into an option agreement,
(the "Option Agreement") with PAB Oil & Mining, Inc. ("PAB"), a
Utah-based mining company. Under the terms of an Option
Agreement, which wa approved at the Company's Annual Meeting of
Shareholders held on March 28, 1997, PAB was granted the right to
purchase shares of the Company's Common Stock for $850,000, such
that after the issuance of the shares PAB would hold 75% of the
Company's outstanding Common Stock. The proceeds from the sale
of the Company's stock to PAB will be used to finance a major
exploration and development program on the Company's mining
properties.
At that Annual Meeting of Shareholders held on March 28, 1997,
the Company's shareholders approved a 1-for-20 reverse stock
split of the Company's Common Stock and amendments to the
Company's Articles of Incorporation to reduce the authorized
shares of Common Stock from 200,000,000 shares to 30,000,000
shares, and to change the par value of Common Stock from no par
value to $.001 par value.
Cash and Cash Equivalents
- -------------------------
For financial statement purposes, the Company considers all
instruments with a maturity of less than three months to be cash
equivalents.
Property, Equipment and Mining Costs
- ------------------------------------
Expenditures for exploration of mining properties are charged
against income as incurred. Property acquisition costs and mine
development costs incurred to expand capacity of operating mines,
develop new ore bodies or develop new areas substantially in
advance of current production are capitalized and charged to
operations on the units-of-production method. Capitalized costs
of abandoned projects or impaired properties are charged to
operations in the year of abandonment.
Corporate property and equipment are stated at cost.
Acquisitions having a useful life in excess of one year are
capitalized. Maintenance and repairs are expenses in the year
incurred. Capitalized assets are depreciated by the
straight-line method over the estimated useful lives of the
related assets, ranging from three to ten years.
Income Taxes
- ------------
Deferred income taxes are provided in amounts sufficient to give
effect to temporary difference between financial and tax
reporting, principally related to accounting for mining
properties.
Effective January 1, 1994, the Company adopted the provision of
SFAS 109, "Accounting for Income Taxes." The adoption of SFAS
109 changes the Company's method of accounting for income taxes
from the deferred method (APB 11) to an asset and liability
method. The asset and liability method requires the recognition
of deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between tax bases and
financial reporting bases of other assets and liabilities.
Under the provisions of SFAS 109, the Company elected not to
restate prior years' consolidated financial statements since
there was no cumulative effect of the initial adoption on prior
years' retained earnings. Additionally, there was no effect of
the adoption of SFAS 109 upon income before taxes for fiscal year
1996.
(Loss) Per Common Share
- -----------------------
Losses per common share are calculated based on the weighted
average number of shares of common stock outstanding during the
period.
Net Operating Loss Carryforward
- -------------------------------
At December 31, 1996 the Company had a new operating loss
carryforward available for both financial reporting and income
tax purposes. No amounts have been recognized in the financial
statements for the benefit of these losses due to the uncertainty
as to whether they will ultimately be realized. The amount of
and utilization of the net operating losses for income tax
purposes is dependent in part upon the tax laws in effect at the
time of the utilization and changes in ownership of the Company
which may reduce the amount of loss allowable. The net operating
loss carryforward available for tax purposes is approximately
$1,640,000 which begins to expires in the year 2000. A valuation
allowance has been provided for the entire net operating loss and
no other deferred tax assets or liabilities existed at June 30,
1997.
2. Mineral Properties
------------------
No amounts have been recorded for mineral properties in the
financial statements since management has not been able to obtain
sufficient information to support the ultimate recovery of these
costs. The following is a brief summary of the significant
mineral properties in which the Company has an interest as of
June 30, 1997.
The Company currently owns approximately 244 patented mining
claims and approximately 20 unpatented mining claims covering
approximately 6,000 acres located in Beaver County, Utah. The
claims comprise most of the San Francisco Mining District. The
two principal mines on the properties, which were productive in
the past, are the Horn Silver and Cactus Mines.
The Horn Silver Mine, which represents a very small part of the
overall acreage, produced silver, gold, copper and lead until
about 1930. The Cactus Mine, with a production history dating
from 1910, produced significant amounts of copper, gold and
silver until about 1913. The Company also owns a one-half
interest in the Imperial Mine, a once productive mine, and
adjacent patented mining claims located in the San Francisco
Mining District.
The Company owned a working interest in two developed oil and gas
leases in Osage County, Oklahoma, which were exchanged for a
1-1/2% overriding royalty interest in all oil and gas production
from the leases with Golden Oil Company. These leases comprise
approximately 160 gross acres.
3. Commitments
-----------
The Company has entered into various cancellable mining leases
and royalty agreements as a lessee and lessor. Future minimum
lease and royalty payments received and paid under the Company's
current agreements are minimal. In addition to the lease
payments required above, certain leases also require minimal work
requirements of approximately $100 per claim or payment of $100
to the Bureau of Land Management each year. Certain leases also
have provisions allowing the Company to purchase all rights to
those properties, thereby reducing future commitments for royalty
payments. The leases are cancellable at any time, which would
terminate any further lease payments or work commitments. The
lease agreements also provide that the lease will remain in
effect as long as exploration or development is being conducted
with reasonable diligence or production continues in commercial
quantities.
4. Related Party Transactions
--------------------------
The Company has paid legal fees and related costs to a law firm
(in which one of its directors is a shareholder) of approximately
$850 in legal fees in the year 1996. The Company paid $9,182 in
legal fees and related costs to the law firm during the six
months ended June 30, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Working capital decreased by approximately $3,530 for the six
months ended June 30, 1997 for a total deficit of $20,986 at June
30, 1997.
Results of Operations - Six Month Period
- ----------------------------------------
Revenues increased by $14,664 for the six months ended June 30,
1997 as compared to the same period of time in 1996. This was
primarily due to a large payment from Arapahoe Mining Company per
contract.
Expenses increased by $21,155 for the six months ended June 30,
1997 as compared to the same period of time in 1996. This
increase was primarily due to the costs incurred in connection
with the agreement with PAB Oil and Mining Company and the
stockholder's meeting/proxy costs.
Results of Operations - 2nd Quarter/Three Month Period
- ------------------------------------------------------
Revenues increased by $15,397 for the second quarter of 1996 as
compared to the same period of time in 1996. This increase was
primarily due to the receipt of a large payment from Arapahoe
Mining Company per contract.
Expenses increased by $19,048 for the six months ended June 30,
1997 as compared to the same period of time in 1996. This
increase was primarily incurred in connection with the proxies
and stockholders' meeting as well as increases in travel and
office rented expenses.
HORN SILVER MINES, INC.
(An Exploratory Stage Company)
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
-----------------
The Company is unaware of any threatened or pending
litigation.
ITEM 2. Change in Securities
--------------------
The stockholders approved a 1-for-20 reverse stock
split and amendment to the Articles of Incorporation
as described in the Notes to the Financial
Statements.
ITEM 3. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The stockholders approved an "Option Agreement" with
PAB Oil and Mining, Inc. as explained in the Notes to
the Financial Statements.
ITEM 4. Other Information
-----------------
None
ITEM 5. Exhibits and Reports on Form 8-K
--------------------------------
There are no exhibits and the Company has not filed
any report on Form 8-K during the quarter for which
this report is filed.
<PAGE>
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.
REGISTRANT
HORN SILVER MINES, INC.
-----------------------
Registrant
DATED: October 4, 1997 By: John P. Bogdanich,
President and Treasurer
(Principal Executive,
Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET OF HORN SILVER MINES, INC. FOR THE SIX MONTHS
ENDED JUNE 30, 1997, AND THE RELATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,301
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,301
<PP&E> 14,075
<DEPRECIATION> 13,974
<TOTAL-ASSETS> 6,793
<CURRENT-LIABILITIES> 27,779
<BONDS> 0
0
0
<COMMON> 6,314,285
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,793
<SALES> 0
<TOTAL-REVENUES> 26,771
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,995)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,995)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
