UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1996
Commission File Number 0-27272
SUMMO MINERALS CORPORATION
(incorporated in British Columbia)
1776 Lincoln Street, Suite 900
Denver, Colorado 80203
(303) 861-5400
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 periods 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
Registrant's classes of common stock, as of the latest
practicable date.
As of August 8, 1996, the Registrant had 18,185,980
shares of Common Stock outstanding.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
June 30, 1996 and December 31, 1995 1
Consolidated Condensed Statement of Income (Loss)
and Deficit
Three Months and Six Months
Ended June 30, 1996 and 1995 2
Consolidated Statement of Mineral Property Costs
Six Months Ended June 30, 1996 and 1995 3
Consolidated Statement of Cash Flow
Six Months Ended June 30, 1996 and 1995 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 8
CONSOLIDATED BALANCE SHEET
Summo Minerals Corporation
(A Development Stage Company)
U.S. Dollars
(Unaudited)
ASSETS
As of June 30, As of December
1996 31, 1995
Current
Cash $ 732,216 $ 527,725
Short term investments 1,081,117 2,454,951
Accounts receivable 3,127 6,115
Prepaid expenses - 2,492
__________ __________
Total current assets 1,816,460 2,991,283
Mineral property at cost 4,851,298 4,012,012
Plants, buildings and
equipment at cost,
net of accumulated
depreciation 236,872 16,424
__________ __________
Total assets $6,904,630 $7,019,719
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable and
accrued liabilities $ 192,554 $ 87,123
Due to related party - 130,261
__________ __________
Total current liabilities 192,554 217,384
Shareholders equity
Preferred shares,
without par value
100,000,000 authorized
and none issued - -
Common shares, without
par value
500,000,000 authorized,
18,185,980 and 17,575,980
issued at June 30, 1996
and December 31, 1995,
respectively. 7,898,556 7,565,416
Deficit - accumulated
during development
stage (1,186,480) (763,081)
________________ _______________
Total shareholders
equity 6,712,076 6,802,335
________________ _______________
Total liabilities &
shareholders
equity $ 6,904,630 $ 7,019,719
See Accompanying Notes
CONSOLIDATED CONDENSED STATEMENT OF INCOME (LOSS) AND DEFICIT
Summo Minerals Corporation
(A Development Stage Company)
U.S. Dollars (Unaudited)
Three Months Ending Six Months Ending
June 30, June 30,
Cumulative
from
Inception 1996 1995 1996 1995
Expenses
General and $1,167,427 282,001 43,107 461,540 202,104
Admini-
stration
Depreciation 13,600 3,902 108 6,368 254
and
Amortization
Exploration 56,349 1,602 - 10,716 -
Expense
Interest and (137,792) (22,689) (28,284) (55,225) (39,770)
bank charges,
net
_______________________________________________
Income (Loss)
before the
following: (1,099,584) (264,816) (14,931)(423,399)(162,588)
Impairment of (91,446) - - - -
mineral prop-
erty cost
Gain on
sale of
mineral
property
________________________________________________
Net Income (1,186,480) (264,816) (14,931)(423,399)(162,588)
(Loss) for the
period:
Deficit - - (921,664)(409,831)(763,081)(262,174)
Beginning
of period
Deficit -
End of
Period (1,186,480)(1,186,480)(424,762)(1,186,480)(424,762)
_
______________________________________________________
Earnings (Loss) - $(0.01) - $(0.02) $(0.01)
per Share
See Accompanying Notes
CONSOLIDATED STATEMENT OF MINERAL PROPERTY COSTS
Summo Minerals Corporation
(A Development Stage Company)
U.S. Dollars (Unaudited)
For the For the
Six Months Six Months
Cumulative Ending Ending
from June 30, June 30,
Inception 1996 1995
DIRECT
Lisbon Valley,
Utah, U.S.A
Land acquisition, $ 1,157,336 $ 104,966 $ 66,755
staking, lease
& rental
Permitting 662,603 340,186 17,927
Geophysical, 542,338 45,364 94,971
geological and
engineering
Drilling 451,861 3,256 65,937
Metallurgy 330,024 38,053 80,789
Feasibility 235,263 49,681 110,408
Legal 71,301 3,253 13,508
Taxes, licenses 14,072 - -
and insurance
Assaying 13,064 - -
Support, accommodation 539,078 125,819 99,843
and general costs
________________________________________
4,016,940 710,578 550,138
Cashin, Colorado,
U.S.A
Land acquisition, 285,613 7,745 4,490
staking, lease
& rental
Geophysical, geological 73,279 9,290 8,972
and engineering
Drilling 124,433 75 32,090
Metallurgy 6,136 628 -
Legal 16,454 880 40
Taxes, licenses and 609 - -
insurance
Support, accommodation 70,167 17,331 10,919
and general costs
________________________________________
576,691 35,949 56,511
Champion, New Mexico, U.S.A
Land acquisition, 139,476 61,743 1,434
staking, lease
& rental
Geophysical, geological 23,869 5,348 5,980
and engineering
Drilling 87,785 22,676 -
Metallurgy 2,808 2,808 -
Legal 200 200 363
Support, accommodation (2,464) (6,009) -
and general costs
________________________________________
251,674 86,766 7,777
________________________________________
Other, U.S.A 91,446 - 2,622
________________________________________
Cost for the period 4,936,751 833,293 617,048
Balance - 4,012,012 1,695,871
beginning of period
Less: Write-off (91,446) - -
of mineral property
________________________________________
Balance - $ 4,845,305 $4,845,305 $2,312,919
end of period
See Accompanying Notes.
CONSOLIDATED STATEMENT OF CASH FLOW
Summo Minerals Corporation
(A Development Stage Company)
U.S. Dollars (Unaudited)
For the For the
Six Months Six Months
Cumulative Ending Ending
from June 30, June 30,
Inception 1996 1995
Operating Activities $(1,186,480) $(423,399) $(162,588)
Net income (loss)
Reconciliation of
net income (loss)
to net cash:
Depreciation and 13,600 6,368 254
amortization
Impairment of 91,446 - -
mineral properties
at cost
Change in current
assets & liabilities
- accounts receivable (3,127) 2,988 (627)
- prepaid expenses - 2,492 (492)
- accounts payable 138,281 105,431 113,888
________________________________________
Net cash (used in) (946,280) (306,120) (49,565)
provided by
operating activities
________________________________________
Investing Activities
Mineral property (4,954,726) (845,654) (810,310)
cost
Less shares issued 495,792 - -
for property
Increase in accounts 54,273 - -
payable
Plant, buildings (238,490) (220,448) (5,999)
and equipment
________________________________________
Net cash used in
investing activities (4,643,151) (1,066,102) (816,309)
________________________________________
Financing Activities
Issuance of share 7,402,764 333,140 2,433,650
capital (net of
issue costs)
Proceeds of loan 285,144
from related
party
Payments of loan (285,144)
from related
party
Due to related party
- net - (130,261) 36,887
________________________________________
Net cash provided by 7,402,764 202,879 2,470,537
financing activities
________________________________________
Net Increase (decrease) 1,813,333 (1,169,343) 1,604,663
in Cash
Cash and cash 2,982,676 176,961
equivalents -
beginning of period
________________________________________
Cash and cash $1,813,333 $1,813,333 $1,781,624
equivalents-end of
period
________________________________________
See Accompanying Notes.
1. GENERAL
The Company, which is organized in British Columbia, presents all
financial statements in U.S. dollars unless otherwise indicated
in Canadian (Cdn.) dollars under accounting principles generally
accepted in Canada.
Except as disclosed herein, there has been no material change in
the information disclosed in the Notes to Consolidated Financial
Statements included in the Annual Report on Form 10-K of Summo
Minerals Corporation and Subsidiary (the Company) for the year
ended December 31, 1995. In the opinion of Management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation has been included. Operating
results for the periods presented are not necessarily indicative
of the results that may be expected for the full year.
The accounting policies followed by the Company are set forth in
Note 2 to the Company's financial statements in Form 10-K for the
year ended December 31, 1995. It is suggested that these
financial statements be read in conjunction with the financial
statements and notes included in the Form 10-K.
2. MINERAL PROPERTY COSTS
Lisbon Valley, Utah
During the first six months of 1996, the Company acquired the 200
acre Wilcox ranch situated within the boundaries of the Lisbon
Valley property for $50,000.
Champion Property, New Mexico
The Company has completed staking an additional 176 unpatented
mining claims surrounding this property to allow additional space
for facility siting and project permitting.
3. COMMITMENTS
Common Shares Issuable
At June 30, 1996, a total of 8,806,671 shares of authorized
Common Shares were reserved for the following:
Stock Options 1,672,500
Warrants 7,134,171
__________
8,806,671
On February 1, 1996, the Company issued an additional 510,000
options to officers and directors of the Company at an exercise
price of $1.20 Cdn.
On March 26, 1996, the Board of Directors issued an additional
360,000 performance based options to officers of the Company at
an exercise price of $1.10 Cdn.
On April 22, 1996, the Board of Directors issued an additional
7,500 options to an employee of the Company at an exercise price
of $1.75 Cdn.
On April 30, 1996, the Board of Directors issued an additional
150,000 options to Directors of the Company at an exercise price
of $1.51 Cdn.
On May 29, 1996, the Board of Directors issued an additional
150,000 options to Directors of the Company at an exercise price
of $2.50 Cdn.
On June 9, 1996, the Board of Directors issued an additional
50,000 options to Directors of the Company at an exercise price
of $2.10 Cdn.
4. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
These consolidated financial statements are prepared in
accordance with accounting principles generally accepted in
Canada. The U.S. Securities and Exchange Commission ( SEC )
requires that financial statements of certain foreign companies
contain a reconciliation presenting the statements on the basis
of accounting principles generally accepted in the United States.
For SEC purposes the Company is in the development stage as
defined by Statement of Financial Accounting Standards No. 7,
Accounting and Reporting by Development Stage Enterprises. For
periods prior to January 1, 1995, the Company's reporting
currency was the Canadian dollar. As a result of the change in
status of its U.S. mineral property base, the reporting
currency was changed to the U.S. dollar. The Company's financial
statements were translated into U.S. dollars using a translation
of convenience. U.S. GAAP requires translation in accordance
with the current rate method. The Company's restatement of the
prior year accounts is not materially different from the
translation of convenience. Any other differences in accounting
principles as they pertain to the accompanying consolidated
financial statements are not material except as follows:
a) Contingent Shares. Under U.S. general accepted accounting
principles, the contingently cancelable escrow shares would not
be reflected as issued and outstanding and would be excluded from
loss per share calculations.
FINANCIAL STATEMENT PRESENTATION
June 30, June 30,
1996 1995
Weighted Average Number
of Shares
Canadian Basis 17,720,760 11,420,759
U.S. Basis 17,445,760 10,670,764
Income (Loss)
Per Share
U.S. Basis (.02) (.01)
b) Tax Disclosure. Federal income tax expense differs from
the amount that would be provided by applying the statutory rate
primarily due to a full valuation allowance for net operating
loss carry-overs.
c) Cash Flow. For Canadian GAAP financial statements the
consolidated statement of cash flows presents non-cash items.
U.S. GAAP allows only supplemental disclosure of non-cash items.
For U.S. GAAP purposes, the investing portion of the consolidated
cash flow statement would present mineral property costs net of
the shares issued for property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company reported a net loss of $0.42 million for the first
six months 1996 as compared to a net loss of $0.16 million in
1995.
Expenses
General and administrative expenses increased $0.26 million to
$0.46 million for the first six months of 1996 compared to $0.20
million in 1995 due primarily to increased salary expenses ($0.16
million) and other G & A expenses due to setting up offices in
Denver, Colorado.
Exploration expenses increased $0.01 million for the first six
months 1996 compared to $0 for 1995 due to increased activity in
evaluating additional exploration targets.
Interest income increased $0.02 million to $0.06 million for the
first six months 1996 as compared to $0.04 million for 1995
reflecting the additional time the Company had to invest funds
received from private placement stock offerings.
Capital Resources and Liquidity
Cash Flow - The Company's net cash used in operating
activities increased $0.28 million to $0.31 million in the first
six months of 1996 as compared to $0.50 million in 1995 due to
increase in G & A expenses.
Net cash used in investing activities increased by $0.25 to $1.07
million in the first six months of 1996 compared to $0.82 million
in 1995. The difference is due to increased development activity
on the Lisbon Valley property ($0.16 million); increased
exploration activity on the Champion property ($0.08 million) and
investment in plant, building and equipment ($0.22 million),
this is includes the initial engineering on Lisbon Valley planned
construction.
Net cash used in financing activities was $0.20 million in the
first six months 1996 compared to cash provided by financing
activities of $2.47 million in 1995. The Company had a Private
Placement Offering in 1995 but used cash to decrease amounts owed
to related parties in 1996.
The Company had $2.23 million in cash and cash equivalents and
working capital of $2.20 million as of March 31, 1996 compared to
$2.98 million of cash and cash equivalents and working capital of
$2.77 million at December 31, 1995.
Outlook
Pending availability of financing, the Company plans to start the
construction of the Lisbon Valley mine later in 1996. The
Company will seek financing of approximately $46 million through
a combination of a senior debt facility, a subordinated debt
agreement, a new equity issue of stock in the Company, or a sale
of equity in the project. Management believes the Company has
sufficient cash on hand to meet its operating requirements until
that point.
If the Company does not finance the Lisbon Valley mine by
December 1996, it will have to seek a small private placement to
fund its working capital for 1997.
PART II - OTHER INFORMATION
Item 6. Exhibits filed with the Form 10-Q
* 10.31 Wilcox Ranch Purchase Agreement
Exhibits and Reports on Form 8-K
The registrant filed a current report on Form 8-K dated
January 25, 1996 to report a change in accountants.
* Incorporated by reference from 10-Q filed May 3, 1996.
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, there unto duly authorized,
effective August 9, 1996.
SUMMO MINERALS CORPORATION
By: /s/ Gregory A. Hahn
Gregory A. Hahn
President and Chief Executive Officer
By: /s/ James D. Frank
James D. Frank
Vice President - Finance & CFO
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