SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number 0-16019
INTERNATIONAL PRECIOUS METALS CORPORATION
-----------------------------------------
(Exact name of Registrant as specified in its Charter)
Province of Ontario, Canada
---------------------------
(Jurisdiction of formation)
86-0766060
Employer Identification Number
4633 South 36th Place, Phoenix, Arizona 85040
---------------------------------------------
(Address of principal executive offices)
(602) 414-1830
(Registrant's telephone number)
The registrant had 20,778,263 shares of outstanding common shares as of August
13, 1997.
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 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___.
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONTENTS
Part 1. Financial Information Page
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets June 30, 1996 and 1997 4-5
Consolidated Statements of Loss and Deficit Six Months
Ended June 30, 1996 and 1997 6
Consolidated Statements of Cash Flow
Six Months Ended June 30, 1996 and 1997 7
Consolidated Statements of Deferred Mineral Exploration
Expenditures Six Months Ended June 30, 1996 and 1997 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 6. Exhibits and Reports on Form 8-K 20
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<PAGE>
Currency
All dollar amounts set forth in this report are in Canadian dollars, except
where otherwise indicated. The following table sets forth (i) the rates of
exchange for the Canadian dollar, expressed in United States dollars, in effect
at the end of each of the periods indicated; (ii) the average of exchange rates
in effect on the last day of each month during such periods; and (iii) the high
and low exchange rates during each such periods, in each case based on the noon
buying rate in New York City for cable transfers in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York:
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year ended December 31,
1997 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Rate at end of period $ 0.7241 $ 0.7301 $ 0.7323 $ 0.7128 $ 0.7544 $ 0.7865
Average rate during period $ 0.7268 0.7334 0.7305 0.73 0.7729 0.8235
High $ 0.7487 0.7515 0.7527 0.7632 0.8046 0.8757
Low $ 0.7145 0.7215 0.7023 0.7103 0.7439 0.7761
</TABLE>
On August 11, 1997, the noon buying rate for $1.00 Canadian was $.7177 United
States
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<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,644,000 $ 2,391,000
Other assets (Note 5) 1,340,000 2,021,000
---------------- --------------
Total current assets 3,984,000 4,412,000
---------------- --------------
OTHER ASSETS
Acquisition of mineral rights - 1,105,000
Deferred mineral exploration expenditures (Note 6) 13,050,000 15,373,000
Capital assets (Note 7) 1,030,000 1,627,000
---------------- --------------
Total other assets 14,080,000 18,105,000
---------------- --------------
Total assets $ 18,064,000 $ 22,517,000
================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
--------------- -------------
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued charges $ 553,000 $ 959,000
Debentures (Note 8) 798,000 251,000
Vehicle and equipment loans 69,000 60,000
-------------- ------------
Total current liabilities 1,420,000 1,270,000
-------------- ------------
LONG TERM LIABILITIES
Vehicle and equipment loans 231,000 310,000
Deferred premium on flow-through shares 464,000 464,000
------------- ------------
Total long-term liabilities 695,000 774,000
------------ ------------
Total liabilities 2,115,000 2,044,000
------------- ------------
CONTINGENCIES AND COMMITMENTS (Note 10)
SHAREHOLDERS' EQUITY
Share capital 47,590,000 54,347,000
Deficit (31,641,000) (33,874,000)
------------- ------------
Total stockholders' equity 15,949,000 20,473,000
------------- ------------
Total liabilities and stockholders' equity $ 18,064,000 $ 22,517,000
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(In Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30, June 30, June 30,
1996 1997 1996 1997
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest Income $ 31,000 $ 61,000 $ 35,000 $ 99,000
---------------- ---------------- ---------------- ---------------
Total Income 31,000 61,000 35,000 99,000
---------------- ---------------- ---------------- ---------------
EXPENSES
Debenture interest - - - -
Administrative 201,000 1,395,000 295,000 2,166,000
Amortization 38,000 94,000 55,000 165,000
---------------- ---------------- ---------------- ---------------
Total expenses 239,000 1,489,000 350,000 2,331,000
---------------- ---------------- ---------------- ---------------
LOSS FOR THE PERIOD 208,000 1,428,000 315,000 2,232,000
DEFICIT, BEGINNING OF PERIOD 29,288,000 31,909,000 29,181,000 31,105,000
COSTS OF ISSUING SHARES 356,000 536,000 356,000 536,000
---------------- ---------------- ---------------- ---------------
DEFICIT, END OF PERIOD 29,852,000 33,873,000 29,852,000 33,873,000
LOSS PER SHARE (Note 11) $ 0.02 $ 0.08 $ 0.03 $ 0.13
================ ================ ================ ===============
Weighted Average Number of
Common Shares Outstanding 10,875,705 17,813,788 10,875,705 17,813,788
================ ================ ================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, June 30,
1996 1997
----------------- -----------------
<S> <C> <C>
NET INFLOW(OUTFLOW) OF CASH RELATED TO
THE FOLLOWING ACTIVITIES
OPERATING:
Loss for the period from continuing operations
(less write-off of mineral exploration expenditures) $ (315,000) $ (2,232,000)
Items not affecting cash (638,000) 154,000
----------------- -----------------
(953,000) (2,078,000)
----------------- -----------------
Changes in non-cash working capital components affecting operations:
Prepaids, deposits and accounts receivable 98,000 (598,000)
Accounts payable and accrued charges (284,000) 637,000
----------------- -----------------
(186,000) 39,000
----------------- -----------------
Mineral exploration expenditures (1,747,000) (2,324,000)
----------------- -----------------
Cash used in continuing operations (2,886,000) (4,363,000)
Discontinued petroleum operations - -
----------------- -----------------
Cash used in operating activities (2,886,000) (4,363,000)
INVESTING:
Related party advances (409,000) (83,000)
Furniture, fixtures, and capital assets (952,000) (752,000)
Acquisition of mineral rights to property - (1,105,000)
----------------- -----------------
Cash (used in) provided by investing activities (1,361,000) (1,940,000)
----------------- -----------------
FINANCING:
Debentures - (547,000)
Issue of shares for cash 7,844,000 6,757,000
Costs of issuing shares (357,000) -
Vehicle and equipment loans - (160,000)
----------------- -----------------
Cash provided by financing activities 7,487,000 6,050,000
----------------- -----------------
INCREASE (DECREASE) IN CASH DURING PERIOD 3,240,000 (253,000)
CASH, BEGINNING OF PERIOD 390,000 2,644,000
----------------- -----------------
CASH, END OF PERIOD $ 3,630,000 $ 2,391,000
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
CONSOLIDATED STATEMENTS OF DEFERRED MINERAL EXPLORATION EXPENDITURES
(In Canadian Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30, June 30,
1996 1997
------------- ---------------
<S> <C> <C>
PROPERTY
- --------
United States of America
------------------------
Engineering & Consulting $ 1,698,000 $ 1,355,000
Exploration - 821,000
Option Fees 4,000 -
------------ -------------
Total $ 1,702,000 $ 2,176,000
------------ -------------
Canada
------------
Engineering & Consulting - -
Exploration 45,000 148,000
Option Fees - -
------------ -------------
Total 45,000 148,000
------------ -------------
Grand Total $ 1,747,000 $ 2,324,000
Cumulative Mineral Property Costs
Deferred, beginning of period 5,851,000 13,049,000
------------ -------------
Cumulative Mineral Property Costs
Deferred, end of period $ 7,598,000 $ 15,373,000
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Presentation of Interim Information
In the opinion of the management of International Precious Metals
Corporation (the "Company"), the accompanying unaudited condensed
consolidated financial statements include all normal adjustments considered
necessary to present fairly the financial position as of June 30, 1997, and
cash flows and the results of operations for the six months ended June 30,
1996 and 1997. Interim results are not necessarily indicative of results
for a full year.
The condensed consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information included in
the Company's audited financial statements and notes for the year ended
December 31, 1996.
2. Business Organization
The Company is amalgamated under the laws of the Province of Ontario,
Canada. In 1995 the Company changed its name from International Platinum
Corporation to International Precious Metals Corporation. On October 23,
1995, The Company consolidated (reverse split) its issued and outstanding
capital by changing each common share into one-tenth of a common share.
Information pertaining to share capital, options, warrants and loss per
share for 1996 and 1997 have been stated on a post consolidated (reverse
split) basis.
3. Continuation of business
These consolidated financial statements have been prepared on a going
concern basis which assumes the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business.
The Company is a development stage corporation and as all of the Company's
properties are presently in the exploration stage, the continuation of the
Company as a going concern is dependent upon its ability to obtain equity
financing to permit the further exploration and development of its
properties.
As well, it is the intention of the Company's management to seek joint
venture partners for several of the Company's properties. To achieve this
end, management has prepared detailed reports on each of the properties and
engaged independent consultants to market the Company's properties.
The consolidated financial statements do not give effect to adjustments, if
any, that may be necessary should the Company be unable to continue as a
going concern and be required to realize its assets and
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<PAGE>
liquidate its liabilities in other than the normal course of business. In
this event, the amounts realized on disposal of its assets may be
substantially less than their recorded amounts.
4. Significant accounting policies
(a) Basis of financial statement presentation
The accompanying consolidated financial statements are prepared in
accordance with the accounting principals generally accepted in
Canada. The major difference between these accounting principles and
those generally accepted in the United States is discussed in Note 11
of the Notes to the Consolidated Financial Statements. These financial
statements include the accounts of its subsidiary, 1020632 Ontario
Inc. (Georgia Lake). Additionally, the accounts of Hellens-Eplett
Mining Inc., Jamestown Platinum (Pty) Limited and South Africa Mining
(Pty) Limited, corporate exploration joint ventures, have been
included using the proportionate consolidation method. The exploration
operations of these joint ventures were discontinued in 1995.
(b) Deferred mineral exploration expenditures
All direct expenditures related to the exploration and development of
mineral properties in which the Company has a continuing interest are
deferred, pending the determination of the economic viability of the
project. Costs related to projects terminated or abandoned are
written-off; costs related to successful projects will be capitalized
and amortized over the estimated life of the projects using a unit of
production method.
(c) Deferred premium on flow through shares
The premium received on flow-through shares, representing the excess
of the price paid by an investor for flow-through shares over the
market value stipulated in the offering memorandum with respect to
such shares, has been deferred and is written-off or amortized as the
related projects on which the flow-through funds were expended are
written-off or amortized.
(d) Amortization
Capital assets are stated at cost. Amortization is recorded at rates
calculated to charge the cost of vehicles and office equipment and
fixtures to operations over their estimated useful lives of five years
on a straight line basis. Amortization relating to machinery and
equipment used directly in the exploration of projects has been
deferred. Maintenance and repairs are charged to operations as
incurred. Gains and losses on disposals are calculated on the
remaining net book value at the time of disposal and included in
income.
(e) Foreign currency translation
-10-
<PAGE>
Monetary assets and liabilities in foreign currencies have been
translated into Canadian dollars at the exchange rates prevailing at
the balance sheet date. Other assets and liabilities, revenue and
expenses arising from foreign currency transactions have been
translated at the exchange rate prevailing at the date of the
transaction. Gains and losses arising from these translation policies
are included in income.
5. Other assets June 30
-------
Related parties 1996 1997
---- ----
- Advances ( Note 9) $257,000 $1,136,000
- Investment in common shares, at cost
Namibian Copper Mines Inc., 1% interest 409,000 409,000
Prepaids, deposits and sundry receivables 369,000 476,000
----------------------
$1,035,000 $2,021,000
=========================
The advances to related parties are unsecured, non-interest bearing and have no
specific terms of repayment.
6. Deferred mineral exploration expenditures
Presented below is a discussion of the status of each of the Company's
significant mineral properties.
(a) Black Rock and Black Rock Extended
The Company holds rights to unpatented mining claims on federal land
administered by the U.S. Bureau of Land Management located
approximately 92 miles west of Phoenix, Arizona (the "Black Rock
Property"). On May 9, 1997, the Company entered into an agreement with
Omega Investment Corporation, an affiliate of Phoenix International
Mining, Inc.("Omega"), pursuant to which International Precious Metals
of Arizona ("IPMA"), a wholly owned subsidiary of the Company, agreed
to pay an aggregate of US$27,000,000 to Omega, consisting of
US$17,000,000 in cash and 1,000,000 common shares of the Company
valued at US$10.00 per share, to acquire all of the rights to the
unpatented mining claims comprising the Black Rock Property which the
Company does not presently own. As the first two payments under the
Purchase Agreement, IPMA and the Company on May 9, 1997 paid to Omega
US$500,000 plus 4,000,000 common shares (of which 3,000,000 common
shares will be held by Omega to secure the obligation of IPMA and the
Company to make the second payment). Pursuant to an agreement made by
the Company, Omega and IPMA as of July 29, 1997 (the "Extension
Agreement"), (i) the last date for the second payment was extended
from July 15, 1997 to October 15, 1997, (ii) the Company and IPMA will
pay to Omega US$5,000 plus a number (initially 500 and increasing
periodically to 1,500 as specified below) of common shares of the
Company per day for each day from July 15, 1997 to the date of the
second payment and (iii) the
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<PAGE>
Company and IPMA will issue and transfer to Omega an additional
3,000,000 common shares of the Company as security for the second
payment. The number of common shares payable is 500 for each day from
July 15 through August 15, 1,000 for each day from August 16 through
September 15, and 1,500 for each day from September 16 through October
15. Upon receipt of the second payment, Omega is obligated to return
6,000,000 common shares of the Company. (The Extension Agreement is
filed as an exhibit to this Report and is incorporated herein by
reference, and the descriptions of the Extension Agreement herein are
qualified by reference to the full text of the Extension Agreement.)
The Company expects to raise cash for the second payment through
private placements of its securities, but its ability to do so will
depend on factors beyond its control, including economic and market
conditions.
In May 1997, the Company acquired rights to an additional 40 square
miles north of and contiguous to the Black Rock Property by staking
and filing lode claims (each relating to a 40-acre area) and placer
claims (each relating to a 160-acre area) with respect to that area.
Aerial photography, regional and detailed geological mapping,
sampling, a geophysical survey and compilation of existing and new
data is currently under way to generate potential drill targets in the
area.
The Company is continuously striving to optimize its gold and PGM
recovery techniques and advancing to large-scale testing. This test
work is also invaluable with regard to establishing a head grade of
the Black Rock Property mineralization. To that end, the Company has
under development fire assay procedures on raw Black Rock Property
samples, gravity concentrates and evaporative residues from leach
solutions. The fire assay development is yielding positive results
with gold and PGM produced as physical metal prills. Non-destructive
elemental determination has been used to verify elemental composition
of the metal prills recovered by fire assay procedures. Examples of
successful fire assay procedures for gold, platinum and rhodium are
shown in the electron microphotographs and elemental spectrographs
(plotted via Emission Dispersion Spectroscopy). Fire assay will
eventually be applied toward the Black Rock Property as the "yard
stick" by which all recovery procedures will be measured regarding
amenability and efficiency.
IPM has launched further drilling and exploration work on the Black
Rock Property to more fully and completely define the extent of the
precious metal deposit. The new exploration drilling began March 17,
1997. The reverse circulation drilling, on one kilometer spacings,
drilling to bedrock, will test material in areas previously unexplored
by the Company on the property. This drilling will also provide
important data on the surrounding eight square kilometers believed to
make up the larger portion of the observed geochemical anomaly.
(b) Big Trout Lake
The Company holds an interest in 223 claims, totaling 8,920 acres, on
a property located near Big Trout Lake in northwestern Ontario,
Canada, approximately 400 miles north of Thunder Bay. An expenditure
of approximately $200,000 is necessary to keep the property in good
standing. Since 1990, the company has limited its work on the property
because of financial constraints. Joint venture partners are being
sought to assist with the exploration funding for this prospect.
-12-
<PAGE>
(c) Eagle Lake
The Company holds 327 claims, consisting of 10,320 acres, located 20
miles west-southwest of Dryden, Ontario, Canada. All of these claims
are in good standing at least until 1999. Drilling from lake ice, 600
meters of core drilling was completed in early 1997. Each of the two
drill holes intersected massive sulfides up to 10 meters in width,
with no visible precious metals. One distinct zone of sphalerite
(zinc) with a true width of 0.9 meters was also intersected. Assays
are yet to be received. The expenditures upon these claims will enable
them to be held in good standing.
The Company has done limited work on the property since 1990, but
still holds an interest in the ground and, subject to the availability
of funds, plans to explore the property when conditions are favorable.
(d) Georgia Lake
The Company holds 14 claims covering 710.7 acres located at the west
end of Georgia Lake, 144 kilometers northeast of Thunder Bay, in
northwestern Ontario, Canada. The claims are held under fourteen
10-year leases which are in good standing until June 1, 2001 and
thirteen additional leases which are in default. This property is held
by the Company as a strategic reserve as it expects lithium to become
of interest and value with the advent of electric autos. Subject to
the availability of funds the Company intends to undertake further
exploration on the property through additional geological and other
research and analysis, and, to the extent consistent with this
analysis, the design and implementation of a core drilling program.
(e) Gold Hill
In 1995, the Company entered into a four year agreement for the rights
to explore the Gold Hill property. Additionally, within the terms of
the agreement the Company may purchase the rights to the property for
US$1,000,000
7. Capital assets
<TABLE>
<CAPTION>
Accumulated
amortization
Cost at June 30, 1997 June 30, 1997
-----------------------------------------------
<S> <C> <C> <C>
Machinery and equipment $ 719,000 $ 128,000 $ 590,000
Vehicles 593,000 84,000 590,000
Office Equipment and fixtures 648,000 119,000 528,000
-----------------------------------------------
$ 1,960,000 $ 331,000 $1,627,000
===============================================
</TABLE>
At December 31, 1996, the costs of the Company's machinery and equipment,
vehicles and office equipment and fixtures, net of accumulated
amortization, were $337,000, $311,000 and $382,000, respectively.
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<PAGE>
8. Debentures
The Company has not paid the amount outstanding on a debenture of $ 250,000
by its due date and is negotiating the settlement of this amount. This
amount remains outstanding at June 30, 1997.
Relating to the Black Rock properties, the Company issued in 1995 to
Phoenix International Mining (Phoenix") debentures totaling $3,274,000
(US$2,400,000). These debentures were convertible into common shares and
bear interest starting in 1996. During 1996, the Company repaid $2,726,000
(US$2,000,000)of debentures using cash of $2,026,000 (US$1,500,000) and
issuing 303,000 common shares for $700,000.
Accounts payable includes $186,000 in unpaid debenture interest, including
interest on a debenture discharged in 1994.
9. Related party transactions
Other assets (Note 5) relate to amounts from and investments in
corporations which have senior management in common with the Company.
In addition to items disclosed separately in the financial statements, the
following transactions took place in the normal course of business with
related parties. These transactions are measured at the exchange amount,
which is the amount of consideration established and agreed to by the
related parties.
(a) During the quarter ended June 30, 1997, the Company incurred legal and
secretarial fees provided by directors and senior officers of the
Company amounting to $55,000 ( 1996 $12,300). These fees have been
charged to administrative expense.
(b) During the quarter ended June 30, 1997, consulting fees were charged
by directors and senior officers of the Company amounting to $139,000
(1996 $90,000). Of the total fees, $93,000 (1996 $64,000) has been
charged to administrative expenses and $46,000 (1996 $26,000)
pertaining to time spent overseeing the Black Rock exploration has
been included in the Company's deferred mineral exploration
expenditures.
10. Contingencies
(a) Interest on debenture
In 1994, the Company negotiated a settlement of a $500,000 debenture
plus a portion of interest owing. As of June 30, 1997, the amount of
the interest owing is currently in dispute due to alternate methods
used in interest calculation. The Company is negotiating a settlement
of this dispute and an additional amount of $75,000 may become
payable.
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<PAGE>
(b) Recovery of deferred mineral exploration expenditures
The recoverability of deferred expenditures is dependent upon various
factors, including the existence of economically recoverable reserves,
the ability to obtain the necessary financing to complete development
of future profitable operations or profitable disposal of the
properties. Pending the profitable operation or disposal of a
property, cash requirements must be provided by future debt or equity
financing.
(c) The Company is obligated to make a payment of US$16,500,000 to Omega
and to pay to Omega US$5,000 plus a number (initially 500 and
increasing periodically to 1,500) of common shares of the Company per
day for each day from July 15, 1997 until such payment is made. Omega
holds 6,000,000 common shares of the Company as security for the
performance of the obligations of the Company and IPMA. See Note 6(a).
11. Differences between accounting principles generally accepted in Canada and
those in the United States
The financial statements are prepared in accordance with accounting
principles generally accepted in Canada. In these financial statements, the
major differences between accounting principles generally accepted in
Canada( "Canadian GAAP") and those in the United States ("US GAAP") are as
follows:
(a) The Company follows the practice of charging share issue cost to the
deficit account. Under U.S. GAAP, such costs would be charged to the
share capital account. Although this difference does not affect net
shareholders' equity, under U.S. GAAP the Company's share capital and
deficit accounts would be reduced as indicated below.
(b) The Company follows the practice of accounting for the premium on
flow-through shares as a deferred credit which is written-off or
amortized as the related project expenditures, on which the flow
through funds are expended, are written off or amortized. Under U.S.
GAAP, this premium would be treated as a reduction of deferred mineral
exploration expenditures. Although this difference does not affect net
loss, the deferred premium on flow-through shares would be eliminated
and deferred mineral exploration expenditures would be reduced as
indicated below.
(c) A business combination in 1986 was accounted for using the purchase
method of accounting. Under U.S. GAAP, this business combination would
have been accounted for as a pooling of interests. This difference
does not affect net loss for the six months ended June 30, 1996 and
1997. The deferred exploration expenditures would have been reduced by
$605,000 as at June 30, 1996 and 1997, and the Company's share capital
account would have been reduced by $676,000 as at June 30, 1996 and
1997.
(d) U.S. GAAP does not follow the practice of deferral of period costs
such as certain administrative expenses. This difference would have
increased the net loss and decreased the deferred exploration
expenditures by $290,000 for the year ended December 31, 1996. This
difference does not affect net loss for the six months ending June 30,
1996 and 1997.
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<PAGE>
<TABLE>
<CAPTION>
June 30
-------
(a) Balance Sheet 1996 1997
---- ----
<S> <C> <C>
Deferred mineral exploration expenditures
Under Canadian GAAP $ 7,598,000 $16,478,000
Premium on flow-through shares - (b) above (464,000) (464,000)
Pooling - (c) above (605,000) (605,000)
Period costs - (d) above ---------------------------------
Under U.S. GAAP $ 6,529,000 $15,409,000
=================================
Deferred premium on flow through shares
Under Canadian GAAP $ 464,000 $ 464,000
Applied to deferred mineral exploration
expenditure - (b) above (464,000) $ (464,000)
---------------------------------
Under U.S. GAAP $ - $ -
=================================
Share capital
Under Canadian GAAP $35,842,000 $54,347,000
Share issue Costs - (a) above - (536,000)
Pooling - (c) above (676,000) (676,000)
---------------------------------
Under U.S. GAAP $35,166,000 $53,135,000
=================================
Deficit
Under Canadian GAAP $29,000,000 $33,874,000
Share issue costs - (a) above - (536,000)
Pooling - (c) above (71,000) (71,000)
Period costs - (d) above ---------------------------------
Under U.S. GAAP $28,929,000 $33,267,000
=================================
</TABLE>
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<PAGE>
(b) Statement of loss and deficit:
June 30
-------
1996 1997
---- ----
Net loss for the period under Canadian GAAP $350,000 $2,232,000
Pooling Adjustment - (c) above - -
Period cost adjustment - (d) above
------------------------
Net loss for the period under U.S. GAAP $350,000 $2,232,000
========================
Loss per share (Note 9) - under U.S. GAAP $.01 $.05
==== ====
12. Subsequent Events
Pursuant to the Extension Agreement made by the Company, Omega and IPMA as
of July 29, 1997, (i) the last date for payment by the Company and IPMA of
US$16,500,000 to Omega was extended from July 15, 1997 to October 15, 1997,
(ii) the Company and IPMA will pay to Omega US$5,000 plus a number
(initially 500 and increasing periodically to 1,500) of common shares of
the Company per day for each day from July 15, 1997 to the date of the such
payment and (iii) the Company and IPMA will issue and transfer to Omega an
additional 3,000,000 common shares of the Company as security for such
payment. See Note 6 (a).
ITEM 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere herein.
Liquidity, Capital Resources and Limited Operations
From inception, July 22, 1980, the Company has financed virtually all of its
exploration activities through various equity financings, which continue to be
the Company's major source of capital. Interest income realized from excess cash
balances has been applied to the Company's administrative costs. Exploration for
precious metals continues to be the Company's major activity. The Company
acquires its interests in various properties either by its own grass roots
exploration efforts, or by participation in the exploration of properties owned
by others, in which case the Company may earn an interest in the properties by
the expenditure of its funds on the properties or by making payments or issuing
its shares to the property owner. Conversely, the Company may allow others to
earn an interest in its properties by the expenditure of their funds on the
exploration of the Company's properties.
-17-
<PAGE>
In 1996, proceeds from shares issued totaled $12,841,000 and exploration
activities resulted in expenditures of $3,290,000. At June 30, 1997, the Company
has cash resources of approximately $2,391,000.
Of the 20,768,263 common shares of the Company outstanding on June 30, 1997,
459,473 were "flow-through" shares. "Flow-through" shares are common shares of
the Company issued to investors under the terms of agreements which provide that
the funds received will be expended on Canadian Explorations
Expenditures("CEE"), as defined in the Income Tax Act Canada, and that
unexpended funds will be held in trust. The CEE so incurred are deductible for
income tax purposes only by the shareholder and, accordingly, are not available
to the Company.
At June 30, 1997, the Company had a working capital surplus of $3,142,000.
Current assets were $4,412,000, compared to current liabilities of $1,270,000,
for a current ratio of 4 to 1. This compares to current assets of $3,984,000,
and current liabilities of $1,420,000 at December 31, 1996, resulting in a
current ratio of 3 to 1. As discussed in Note 6(a), the Company is obligated to
make a payment of US$16,500,000 on or before October 15, 1997 and expects to
raise cash for such payment through private placement of its securities. Other
than such payment, the Company's liquidity needs are generally being met from
its available cash resources.
The Company in 1996 made non-interest bearing loans to Namibian Copper Mines
Inc.("Namibian") to cover the operating expenses of Namibian, including the
salaries of its executive officers. Namibian is controlled by Alan Doyle and
shares office space with the Company. Several of the executive officers of
Namibian also are executive officers of the Company. At June 30, 1997, Namibian
owed US$451,000 to the Company an account of such loans. Failure of Namibian to
repay such loans would have a negative effect on the liquidity and capital
resources of the Company.
The Company is in default on an outstanding debenture in the amount of $250,000
and is negotiating with the holder of the debenture. A failure of such
negotiations could have a negative effect on the liquidity and capital resources
of the Company.
Results of Operations
1997 Compared to 1996
- ---------------------
The loss for the six months ended June 30, 1997 of $2,232,000 was larger than
the loss for 1996 of $315,000 due primarily to increases in administrative
expenses.
During 1996, the Company: (i) issued 2,484,000 common shares under private
placements ranging from $3.00 to $3.45 per share, resulting in proceeds of
$8,244,000; (ii) issued 2,103,000 common shares pursuant to the exercise of
warrants at prices ranging from $1.00 to $3.80 per share for cash consideration
of $3,004,000; (iii) issued 336,000 common shares under private placements and
pursuant to the exercise at prices ranging from $1.20 to $3.00 per share for
consideration of $792,000 to retire debentures and interest; (iv) issued 424,475
common shares pursuant to the exercise of options at prices ranging from $1.45
to $3.28 per share for cash consideration of $773,000, and 15,834 common shares
at prices ranging from $1.45 to $2.50 per share pursuant to the exercise of
options for services valued at $27,000; and issued warrants providing the right
to purchase of
-18-
<PAGE>
2,700,000 common shares at prices ranging from US$2.82 to US$4.40 per share in
connection with the private placements.
During 1996 the Company repaid US$2,000,000 of debentures of a total of
US$2,400,000 of debentures issued to Phoenix in 1995.
Administration costs of $2,166,000 for the six months ended June 30, 1997 have
increased from $261,000 for the six months ended June 30, 1996, primarily
because of increased consulting fees and increased compensation and office
expenses relating to a major expansion of exploration activities by the Company.
Impact of Inflation on the Company
The Company has no control over the prices of the products in which it deals,
i.e., precious metals. The prices of these commodities are determined by world
markets and are subject to volatile fluctuation over short periods of time.
To date, the major impact of inflation on the Company has been with respect to
costs which have increased moderately in recent years in North America, where
most of the Company's activities take place.
-19-
<PAGE>
PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on June 20, 1997.
(b) Under the Company's By-Laws as in effect at the Meeting, no ballot of votes
was required unless either (i) at least 5% of the proxies submitted were
against a matter proposed at the Meeting or (ii) a shareholder requested a
ballot. In accordance with the By-Laws, all of the matters described below
were approved at the Meeting by a show of hands, and no ballot was taken.
1. To elect the following five Directors of the Company to serve for a
one-year term.
John Blaikie
Alan D. Doyle
Russell French
VLR (Lee) Furlong
David Kornhauser
2. To ratify the appointment of Stern Cohen, Chartered Accountants, as
independent auditors of the Company for the fiscal year ending
December 31, 1997.
3. To adopt new By-Laws for the Company.
Item 6: Exhibits and reports on Form 8-K
(a) The following exhibits are filed with this report:
10(bb) Amended Property Purchase Agreement dated as of July 29,
1997 among the Company, International Precious Metals of
Arizona and Omega International Corporation
27 Financial Data Schedule
(b) No reports were filed on Form 8-K this quarter
-20-
<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.
INTERNATIONAL PRECIOUS METALS CORPORATION
August 14, 1997
/s/ Billie J. Allred
----------------------------------
Billie J. Allred
Chief Financial Officer
August 14, 1997
/s/Tanya Nelson
----------------------------------
Tanya Nelson
Chief Accounting Officer
-21-
<PAGE>
INTERNATIONAL PRECIOUS METALS CORPORATION
Quarterly Report on Form 10-Q For
The Quarter Ended June 30, 1997
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
10(bb) Amended Property Purchase Agreement dated as of
July 29, 1997 among the Company, International
Precious Metals of Arizona and Omega International
Corporation
27 Financial Data Schedule
AMENDED PROPERTY PURCHASE AGREEMENT
THIS AGREEMENT made as of the 29th day of July, 1997.
A M O N G S T:
INTERNATIONAL PRECIOUS METALS CORPORATION OF ARIZONA, a corporation
incorporated under the laws of the Sate of Arizona, being a wholly owned
subsidiary of International Precious Metals Corporation,
(hereinafter referred to as "IPMA")
OF THE FIRST PART;
-and-
OMEGA INVESTMENT CORPORATION, a corporation incorporated under the laws of
the Cayman Islands,
(hereinafter referred to as the "Omega")
OF THE SECOND PART;
-and-
INTERNATIONAL PRECIOUS METALS CORPORATION, a corporation amalgamated under
the laws of the Province of Ontario,
(hereinafter referred to as "IPM")
OF THE THIRD PART;
WHEREAS pursuant to a property purchase agreement dated as of the 9th day
of May, 1997 (the "Agreement"), between IPMA, Omega and IPM, Omega agreed to
transfer to IPMA a 100% ownership interest in the Property (as such capitalized
term and all other capitalized terms not otherwise defined herein are defined in
the Agreement) for a purchase price of $27,000,000.00 (US);
AND WHEREAS the balance of the purchase price for the Property being the
sum of $16,500,000.00 (US) was payable on or before July 15, 1997;
<PAGE>
AND WHEREAS IPMA wishes to obtain an extension of time within which to pay
the aforesaid $16,500,000.00;
NOW THEREFORE in consideration of the mutual covenants and payments
contained in the Agreement and herein, the parties hereto agree as follows:
1. The payment of the balance of the purchase price for the Property in the
amount of $16,500.000.00 be extended from July 15, 1997, to October 15, 1997.
2. In consideration for Omega extending the date for the payment of the
said $16,500,000.00, IPMA shall pay, or caused to be paid, the following to
Omega:
(a) the sum of Five Thousand Dollars ($5,000.00) per day for each day
subsequent to July 15, 1997, that the balance of the said
$16,500,000.00 has not been paid;
(b) 500 common shares of IPM per day for each day subsequent to July 15,
1997, that the balance of the said $16,500,000.00 has not been paid,
to August 15, 1997;
(c) 1,000 common shares of IPM per day for each day subsequent to August
15, 1997, that the balance of the said $16,500,000.00 has not been
paid, to September 15, 1997; and
(d) 1,500 common shares of IPM per day for each day subsequent to
September 15, 1997, that the balance of the said $16,500,000.00 has
not been paid, to October 15, 1997.
IPMA shall pay the amount referred to above, as applicable, on or before
the 15th day of the month for the amounts and number of common shares owing for
the previous forty five (45) day period. As an example, the interest payment and
common shares required to be issued for the forty five (45) day period from July
15, 1997, to August 31, 1997, will be made on September 15, 1997.
3. Additionally, IPM shall issue to Omega an additional 3,000,000 common
shares as Security Shares, which shares shall be subject to the Escrow Agreement
made as of the 9th day of May, 1997, between IPMA, Omega, IPM and Conway
Kleinman Kornhauser & Gotlieb.
4. The Agreement as changed, altered, amended or supplemented by this
Amended Property Purchase Agreement, shall continue in full force and effect and
is hereby confirmed by the parties hereto.
6. The Agreement shall henceforth be read in conjunction with this Amended
Property Purchase Agreement and the Agreement and this Amended Property Purchase
Agreement shall henceforth have effect so far as is practicable as if all of the
provisions of the Agreement and of this Amended Property Purchase Agreement were
contained in one instrument.
-2-
<PAGE>
IN WITNESS WHEREOF the parties have duly executed this Agreement as of this
29th day of July, 1997.
SIGNED, SEALED and ) INTERNATIONAL PRECIOUS METALS CORPORATION
DELIVERED in the )
presence of )
)
) Per:_____________________________________
)
)
)
) OMEGA INVESTMENT CORPORATION
)
)
)
) Per:_____________________________________
)
)
)
) INTERNATIONAL PRECIOUS METALS CORPORATION
) OF ARIZONA
)
)
) Per:_____________________________________
-3-
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<ARTICLE> 5
<CIK> 0000818029
<NAME> International Precious Metals Corporation
<CURRENCY> Canadian dollar
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 0.7241
<CASH> 2,391,000
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<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 4,412,000
<PP&E> 1,627,000
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 1,270,000
<BONDS> 0
0
0
<COMMON> 20,778,263
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<TOTAL-COSTS> 2,331,000
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<INCOME-PRETAX> (2,232,000)
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