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 March 31, 1996
Commission File Number 0-27272
SUMMO MINERALS CORPORATION
(incorporated in British Columbia)
1776 Lincoln Street, Suite 1100
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 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
Registrant's classes of common stock, as of the latest
practicable date.
As of May 3, 1996, the Registrant had 17,725,980 shares of
Common Stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
March 31, 1996 and December 31, 1995
Consolidated Condensed Statement of Income
(Loss) and Deficit
Three Months Ended March 31, 1996 and 1995
Consolidated Statement of Mineral Property Costs
Three Months Ended March 31, 1996 and 1995
Consolidated Statement of Cash Flow
Three Months Ended March 31, 1996 and 1995
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
CONSOLIDATED BALANCE SHEET
Summo Minerals Corporation
(A Development Stage Company)
US Dollars (Unaudited)
ASSETS As of March As of December
31, 1996 31, 1995
Current
Cash $ 444,306 $ 527,725
Short term investments 1,787,908 2,454,951
Accounts receivable 3,418 6,115
Prepaid expenses 0 2,492
Total current assets 2,235,632 2,991,283
Mineral property at cost 4,413,962 4,012,012
Plants, buildings and
equipment at cost,
net of accumulated
depreciation 27,435 16,424
Total assets $6,677,029 $7,019,719
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable and
accrued liabilities $ 22,792 $ 87,123
Due to related party 10,485 130,261
Total current liabilities 33,277 217,384
Shareholders equity
Preferred shares, without
par value 100,000,000
authorized and none issued - -
Common shares, without par value
500,000,000 authorized,
17,575,980 issued at
March 31, 1996 and
December 31, 1995. 7,565,416 7,565,416
Deficit- accumulated during
development stage (921,664) (763,081)
Total shareholder's equity 6,643,752 6,802,335
Total liabilities &
shareholder's equity $6,677,029 $7,019,719
See Accompanying Notes
CONSOLIDATED CONDENSED STATEMENT OF INCOME (LOSS) AND
DEFICIT
Summo Minerals Corporation
(A Development Stage Company)
US Dollars (Unaudited)
For the Three Months Ending
Cumulative March 31, March 31,
from Inception 1996 1995
Expenses
General and
administration $ 885,426 $ 179,539 $ 158,997
Depreciation and
amortization 9,698 2,466 146
Exploration
expense 54,747 9,114 -
Interest and bank
charges, net (115,103) (32,536) (11,486)
Income (Loss)
before the
following (834,768) (158,583) (147,657)
Impairment of
mineral property
cost (91,446) - -
Gain on sale of
mineral property 4,550 - -
Net Income (Loss)
for the period (921,664) (158,583) (147,657)
Deficit-Beginning
of period - (763,081) (262,174)
Deficit-
End of Period $ (921,664) $ (921,664) $(409,831)
Earnings
(Loss) per Share $(0.01) $ (0.01)
See Accompanying Notes
<PAGE>
CONSOLIDATED STATEMENT OF MINERAL PROPERTY COSTS
Summo Minerals Corporation
(A Development Stage Company)
US Dollars
(Unaudited)
For the For the
Quarter Quarter
Ending Ending
Cumulative March 31, March 31,
from Inception 1996 1995
DIRECT
Lisbon Valley,
Utah, USA
Land acquisition,
staking, lease
& rental $1,470,236 $ 95,449 $14,448
Geophysical,
geological and
engineering 512,256 15,282 46,715
Drilling 451,861 3,256 14,050
Metallurgy 310,315 18,344 46,108
Feasibility 185,582 - 13,239
Legal 69,448 1,400 5,287
Taxes, licenses
and insurance 14,072 - -
Assaying 13,064 - -
Support, accommo-
dation and general
costs 634,729 221,470 51,344
3,661,563 355,201 191,191
Cashin, Colorado,
USA
Land acquisition,
staking, lease &
rental 281,866 3,998 270
Geophysical,
geological and
engineering 66,663 2,674 10,398
Drilling 124,358 - 859
Metallurgy 6,136 628 -
Legal 15,874 300 -
Taxes, licenses
and insurance 609 - -
Support, accommodation
and general costs 59,271 6,435 1,049
554,777 14,035 12,576
Champion, New Mexico,
USA
Land acquisition,
staking, lease &
rental 108,923 31,190 -
Geophysical,
geological and
engineering 23,247 4,726 -
Drilling 65,109 - -
Metallurgy 2,808 2,808 -
Support, accommodation
and general costs (2,465) (6,010) -
197,622 32,714 -
Other, USA 91,446 - 2,622
Cost for the period 4,505,408 401,950 206,389
Balance-beginning
of period 4,012,012 1,695,871
Less: Write-off of
mineral property (91,446) - -
Balance - End
of Period $4,413,962 $4,413,962 $1,902,260
See Accompanying Notes
CONSOLIDATED STATEMENT OF CASH FLOW
Summo Minerals Corporation
(A Development Stage Company)
US Dollars
(Unaudited)
For the Three Months Ending
Cumulative March 31, March 31,
from Inception 1996 1995
Operating
Activities
Net income (loss) $ (921,664) $ (158,583) $ (147,657)
Reconciliation
of net income (loss)
to net cash:
Depreciation and
amortization 9,698 2,466 1,466
Impairment of
mineral properties
at cost 91,446 - -
Change in current
assets and liabi-
lities
accounts receivable ( 3,417) 2,698 174
prepaid expenses 0 2,492 225
accounts payable (31,481) (64,331) 38,709
Net cash (used in)
provided by operating
activities (855,418) (215,258) (107,083)
Investing Activities
Mineral property
cost (4,512,425) (403,353) (207,793)
Less shares issued
for property 495,792 - -
Increase in accounts
payable 54,273 - -
Plant, buildings
and equipment (30,116) (12,074) (2,554)
Net cash used in
investing
activities (3,992,476) (415,427) (210,347)
Financing
Activities
Issuance of share
capital (net of
issue costs) 7,069,624 - 2,322,917
Proceeds of loan
from related party 285,144
Payments of loan
from related party (285,144)
Due to related
party - net 10,484 (119,777) 36,887
Net cash provided
by financing activi-
ties 7,080,108 (119,777) 2,359,804
Net increase
(decrease) in cash 2,232,214 (750,462) 2,042,374
Cash and cash
equivalents -
beginning of period 2,982,676 176,961
Cash and cash
equivalents -
end of period $2,232,214 $2,232,214 $2,219,335
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 have 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 quarter 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 March 31, 1996, a total of 8,275,000 shares of authorized
Common Shares were reserved for the following:
Stock Options 1,925,000
Warrants 6,350,000
8,275,000
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.
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 US mineral property base, the reporting currency
was changed to the US dollar. The Company's financial statements
were translated into US dollars using a translation of
convenience. US 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
March 31, March 31,
1996 1995
Weighted Average Number of Shares
Canadian Basis 17,575,980 10,598,980
U.S. Basis 17,200,982 9,848,985
Income (Loss) Per Share
U.S. Basis (.01) (.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. US
GAAP allows only supplemental disclosure of non-cash items. For
US 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 $.16 million for the first
quarter 1996 as compared to a net loss of $.15 million in 1995.
Expenses
General and administrative expenses increased $.02 million to
$.18 million for the first quarter 1996 compared to $.11 million
in 1995 due primarily to increased salary expenses ($.07 million)
which were partially offset by a decrease in foreign exchange
loss ($.05 million) caused by a decrease in the exchange rate for
the Company's Canadian assets.
Exploration expenses increased $.01 million for the first quarter
1996 compared to $0 for 1995 due to increased activity in
evaluating additional exploration targets.
Interest income increased $.02 million to $.03 million for the
first quarter 1996 as compared to $.01 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 $.10 million to $.21 million in the first
quarter 1996 as compared to $.11 million in 1995 due to the use
of cash to decrease accounts payable and other accrued liability
balances.
Net cash used in investing activities increased 100% to $.42
million in the first quarter 1996 compared to $.21 million in
1995. The difference is due to increased development activity on
the Lisbon Valley property ($.17 million); increased exploration
activity on the Champion property ($.03 million) and investment
in office equipment ($.01 million).
Net cash used in financing activities was $.12 million in the
first quarter 1996 compared to cash provided by financing
activities of $2.36 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 $45 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.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders
There were no matters submitted to a vote
of shareholders.
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 to
report a change in accountants.
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,
effective May 10, 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
EXHIBIT 10.31
PURCHASE AGREEMENT
This Agreement, effective as of the 29th day of February,
1996, is between MICHAEL L. WILCOX ("Seller"), whose address is
P.O. Box 202, La Sal, UT 84530, and SUMMO USA CORPORATION, a
Colorado corporation ("Purchaser"), whose address is 1776 Lincoln
St., Suite 1100, Denver, CO 80203.
Recitals
Seller represents that he is the owner of and is in
possession of certain lands in San Juan County, Utah more particularly
described as follows:
Township 31 South, Range 25 East, SLB&M
San Juan County, Utah
Section 1: Lots 1, 2, 3, and 4 (also Known as N1/2
N1/2)
Township 31 South, Range 26 East, SLB&M
San Juan County, Utah
Section 6: NW1/4NW1/4
said lands together all appurtenances and water rights incident
thereto, and all improvements and personal property thereon,
subject to mineral reservations of record, being herein referred
to as the "Property."
Seller is willing sell and Purchaser desires to purchase
Property.
NOW THEREFORE, in consideration of Ten Dollars ($10.00) in
hand paid to Seller, the receipt and sufficiency of which are
hereby acknowledged, and further in consideration of the mutual
covenants, agreements, and promises herein contained, the parties
hereto agree as follows:
Purchase. Seller agrees to sell to Purchaser, and Purchaser
agrees to purchase, all of Seller's right, title, and interest in
the Property upon the terms and conditions set forth in this
Agreement, for the amount of Fifty Thousand Dollars ($50,000.00)
(the "Purchase Price").
Closing. (a) Unless the parties agree that the closing
shall take place at some other time and place, the closing shall take
place at the office of South Eastern Utah Title Company, whose
address is 117 S. Main, Room 118, Monticello, Utah, at 10:00
o'clock a.m. on the 14th day of March, 1996.
(b) At the closing, Seller shall deliver to Purchaser (i) a
general warranty deed in the form of Exhibit B attached hereto,
and (ii) a 1970 ALTA Form B owner's policy of title insurance showing
title to be marketable and to be vested in Purchaser at the
closing.
(c) At the closing, Purchase shall pay the Purchase Price
to Seller by certified or cashier's check or by wire transfer to
Seller's account.
(d) Purchaser shall pay all recording fees and documentary
transfer taxes. Real property taxes shall be prorated as of the
date of the exercise of the option.
Title. Seller warrants that he is in possession of the
Property, that he has the right to enter into this Agreement,
that he knows of no other person claiming any interest in the
Property, and that the Property is free from all liens and encumbrances,
except liens for property taxes not yet due and payable. Seller
warrants and will defend title to the Property against all
persons whomsoever.
Grazing Rights. Seller agrees that from time to time, upon
Purchaser's request made within two (2) years after the date of
this Purchase Agreement, Seller shall take all steps necessary to
relinquish or cause to be relinquished all grazing rights, Federal,
State, or private, held by Seller or by Wilcox Ranches, a
partnership, on the Property and on the additional lands more
particularly shown on the map set out in Exhibit A attached
hereto and incorporated by reference herein.
Stock Pond. Purchaser acknowledges the existence of a stock
pond constructed by Seller in Section 36, Township 30 South,
Range 25 East, SLB&M. When earth-moving equipment becomes available to
Purchaser (which Purchaser estimates shall occur within ___
months from the date of this Purchase Agreement), Purchaser shall, at no
cost to Seller, assist Seller in the construction of a
replacement stock pond of similar size and character on other land owned or
controlled by Seller.
Inurement. All covenants, conditions, limitations, and
provisions herein contained apply to and are binding upon the
parties hereto, their heirs, representatives, successors, and
assigns.
Modification. No modification, variation, or amendment of
this Agreement shall be effective unless the modification,
variation, or amendment is in writing and is signed by Seller and
Purchaser.
Waiver. No waiver of any breach or default under this
Agreement shall be effective unless the waiver is in writing and
signed by the party against whom the waiver is claimed. No
waiver of any breach or default shall be deemed to be a waiver of any
other or subsequent breach or default.
Entire Agreement. This Agreement sets forth the entire
agreement of the parties and, except as herein expressly
provided, supersedes all previous and contemporaneous agreements,
representations, warranties, or understandings, written or oral.
Construction. The paragraph headings are for convenience
only, and shall not be used in the construction of this
Agreement.
Governing Law. The formation, interpretation, and
performance of this Agreement shall be governed by the law of the state of
Utah.
Additional Documents. Seller will provide Purchaser with
such additional documents as may be necessary to carry out the
purposes of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SELLER:
/s/ Michael L. Wilcox
PURCHASER:
SUMMO USA CORPORATION
By: /s/ Gregory A. Hahn
President
STATE OF UTAH )
) ss.
COUNTY OF SAN JUAN )
The foregoing instrument was acknowledged before me this
14th day of March, 1996, by Michael L. Wilcox, the person named in and
who executed the foregoing instrument.
/s/ Jean L. Pehrson
Notary Public
Residing at
Monticello, Utah 84535
My Commission Expires: 4/20/97
[SEAL]
STATE OF COLORADO )
) ss.
COUNTY OF JEFFERSON )
The foregoing instrument was acknowledged before me this
20th day of February, 1996, by Gregory A. Hahn as President of Summo
USA Corporation, a Colorado corporation, the corporation named in and
that executed the foregoing instrument, on behalf of the
corporation.
/s/ Michelle Hebert
Notary Public
Residing at
Lakewood, Colorado 80227
My Commission Expires: 3/18/99
[SEAL]
EXHIBIT B
WARRANTY DEED
MICHAEL L. WILCOX and JOAN I. WILCOX ("Grantors"), whose
address is P.O. Box 202, La Sal, UT 84530, for the consideration
of Ten Dollars ($10.00) and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, convey
and warrants to SUMMO USA CORPORATION, a Colorado corporation
("Grantee"), whose address is 1776 Lincoln St., Suite 1100,
Denver, CO 80203, the real property more particularly described
as follows:
Township 31 South, Range 25 East, SLB&M
San Juan County, Utah
Section 1: Lots 1, 2, 3, and 4 (also known as N1/2 N1/2)
Township 31 South, Range 26 East, SLB&M
San Juan County, Utah
Section 6: NW1/4 NW1/4
together with all appurtenances and water rights incident
thereto, and all improvements and personal property thereon,
subject to mineral reservations of record (the "Property").
TO HAVE AND TO HOLD the Property to Grantee, its successors
and assigns.
IN WITNESS WHEREOF, Grantors have executed this Warranty
Deed this _____ day of February, 1996.
/s/ Michael L. Wilcox
/s/ Joan I. Wilcox
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<PERIOD-END> MAR-31-1996
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<SECURITIES> 1,787,908
<RECEIVABLES> 3,418
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<PP&E> 4,451,095
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0
0
<COMMON> 7,565,416
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