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 March 31, 1998 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 X 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 6,088,966
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Title of Class Number of Shares
Outstanding as of
March 31, 1997
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HORN SILVER MINES, INC.
FORM 10-QSB
QUARTER ENDED MARCH 31, 1998
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 Cash Flows...............................................5
Notes to Financial Statements.........................................6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Result of Operations....................................9
PART II - OTHER INFORMATION
Other Information....................................................10
Signature Page.......................................................11
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HORN SILVER MINES, INC.
BALANCE SHEET
March 31, 1998
ASSETS
Current Assets:
Cash $ 1,957
Property and Equipment:
Leasehold Improvements 5,634
Structures and Equipment 8,441
14,075
Less Accumulated Depreciation (14,075)
Net Property Equipment --
Other Assets: 1,211
-----------
Total Assets $ 3,168
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 8,625
Accrued Liabilities Due to Related Parties 31,043
Accrued Expenses 232
-----------
Total Current Liabilities 39,900
Stockholder's Equity:
Common Stock, par value $.001,
30,000,000 shares authorized;
6,088,966 shares issued
and outstanding 6,089
Additional Paid in Capital 1,695,639
Accumulated Deficit (1,738,460)
-----------
Total Stockholders' Deficit (36,732)
Total Liabilities and Stockholders' Equity $ 3,168
Unaudited
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HORN SILVER MINES, INC.
STATEMENT OF OPERATIONS AND
CHANGES IN STOCKHOLDERS' EQUITY
Three Month Period Ended
March 31,
------------
1998 1997
---- ----
REVENUES:
Mineral Royalties $ 4,500 $ 1,505
Interest Income 7 25
-------- --------
Total Revenues 4,507 1,530
EXPENSES:
Mineral Lease and Exploration Expenses 500 0
Salaries and Wages 900 1,020
General and Administrative 4,762 3,357
Legal and Accounting 4,160 4,390
Taxes and Licenses 625 340
Directors' and Officer Fees -- --
Depreciation -- --
Stockholders' Meeting and Proxy Fees -- 2,340
-------- --------
Total Expenses $ 10,662 $ 11,732
-------- --------
NET GAIN (LOSS) $ (6,155) $(10,202)
Payment on PAB agreement for stock 4,400 --
Previous year's adjustment on voided checks 1,293 --
Balance, Stockholders' Equity,
December 31, 1997/96 $(36,270) $(24,516)
-------- --------
Balance, Stockholders' Equity,
March 31, 1997/96 $(36,732) $(34,718)
Unaudited
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HORN SILVER MINES, INC.
STATEMENT OF CASH FLOWS
Nine Month Period Ended
March 31
--------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (6,155) $(10,202)
Adjustments:
Increase/(Decrease) in Accrued Expenses 203 (45)
Prior year adjustment on voided checks 1,293 --
-------- --------
$ (4,659) $(10,247)
CASH FLOWS FROM INVESTING ACTIVITIES:
None
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from option agreement 4,400
Net Decrease in Cash and Cash Equivalents $ (259) $(10,247)
Cash and Cash Equivalents at Beginning of Period 2,216 24,531
-------- --------
Cash and Cash Equivalents at End of Period $ 1,957 $ 14,284
Unaudited
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HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
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 was
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.
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HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 expire 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 March 31,
1998.
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HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 March 31, 1998.
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 conciliable 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 conciliable 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.
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HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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 $9,182 in
fiscal year 1997. The amount of $5,144.50 has been paid thus far in the
first quarter of 1998, which is primarily attributed to the legal fees
and costs incurred but not paid in 1997 relating to the preparation of
documents regarding the transaction with PAB Oil and Mining Co. and the
preparation of proxy materials related to the General Stockholders'
Meeting held on March 28, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
Liquidity and Capital Resources
Working capital decreased by approximately $462 for the nine months
ended March 31, 1998 for a total deficit of ($36,732).
Results of Operations - Three Month Period
Revenues increased by $2,977 for the three month period ended March 31,
1998 as compared to the same period of time in 1997. This was primarily
due to the payment from Arapahoe Mining Company as per contract.
Expenses increased by $1,070 for the three month period of 1998 as
compared to the same period of time in 1997. This was primarily because
the costs incurred in 1997 in connection with the agreement with PAB
Oil and Mining Company and the stockholder's meeting/proxy costs were
not incurred in 1998.
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HORN SILVER MINES, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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
Stockholders approved a 1-for-20 reverse stock split and
amendment to the Articles of Incorporation as explained in the
notes to the financial statements.
ITEM 3. Submission of Matters to a Vote of Security Holders
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.
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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 hereunto duly authorized.
REGISTRANT
HORN SILVER MINES, INC.
Registrant
DATED: 6/7/98 By: /s/ John P,. Bogdanich
John P. Bogdanich, President
and Treasurer (Principal
Executive and Financial Officer)
10Q-730M.HSM
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