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 November 5, 1996, the Registrant had 18,390,980 shares of
Common Stock outstanding.
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
September 30, 1996 and December 31, 1995. . . . 1
Consolidated Condensed Statement of Income
(Loss) and Deficit
Three Months and Nine Months Ended
September 30, 1996 and 1995 2
Consolidated Statement of Mineral Property Costs
Nine Months Ended September 30, 1996 and 1995 3
Consolidated Statement of Cash Flow
Nine Months Ended September 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)
US Dollars (Unaudited)
ASSETS As of As of
September December
30, 1996 31, 1995
Current
Cash $ 69,344 $ 527,725
Short term investments 439,710 2,454,951
Accounts receivable 67,833 6,115
Prepaid expenses 0 2,492
Total current assets 576,887 2,991,283
Mineral property at cost 5,402,183 4,012,012
Plants, buildings and
equipment at cost,
net of accumulated
depreciation 688,489 16,424
Total assets $6,677,559 $7,019,719
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable and
accrued liabilities $ 136,528 $ 87,123
Due to related party 0 130,261
Total current liabilities 136,528 217,384
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. 7,993,531 7,565,416
Deficit- accumulated during
development stage (1,462,500) (763,081)
Total shareholder's equity 6,531,031 6,802,335
Total liabilities &
shareholder's equity $6,677,559 $7,019,719
See Accompanying Notes
CONSOLIDATED CONDENSED STATEMENT OF INCOME (LOSS) AND DEFICIT
Summo Minerals Corporation
(A Development Stage Company)
US Dollars (Unaudited)
Three Months Nine Months
Ending Ending
Cumulative September 30, September 30,
from Inception 1996 1995 1996 1995
Expenses
General and administration
$1,453,994 $286,567 $178,839 $748,107 $380,943
Depreciation and amortization
19,011 5,411 4,558 11,779 4,812
Exploration Expense
57,066 717 26,272 11,433 26,272
Interest and Bank Charges, net
(154,467) (16,675) (16,954) (71,900) (56,724)
Income(Loss) Before the following
(1,375,604) (276,020) (192,715) (699,419) (355,303)
Impairment of mineral property cost
(91,446) - - - -
Gain on sale of mineral property
4,550 - - - -
Net Income(Loss) for the period
(1,462,500) (276,020) (192,715) (699,419) (355,303)
Deficit - Beginning of period
- (1,186,480) (424,762) (763,081) (262,174)
Deficit - End of Period
(1,462,500)(1,462,500) (617,477)(1,462,500)(617,477)
Earnings(Loss) Per Share
$(0.02) $ (0.02) $ (0.04) $(0.03)
See Accompanying Notes
CONSOLIDATED STATEMENT OF MINERAL PROPERTY COSTS
Summo Minerals Corporation
(A Development Stage Company)
US Dollars
(Unaudited)
For the For the
9 months 9 months
Ending Ending
Cumulative Sept. 30, Sept. 30,
from Inception 1996 1995
DIRECT
Lisbon Valley, Utah, USA
Land acquisition,
staking, lease
& rental $1,190,343 $137,973 $596,413
Permitting 836,999 514,582 70,737
Geophysical,
geological and
engineering 522,961 25,987 124,289
Drilling 451,861 3,256 88,313
Metallurgy 349,215 57,244 126,178
Feasibility 243,670 58,088 180,528
Legal 71,301 3,253 22,939
Taxes, licenses
and insurance 14,072 - -
Assaying 13,064 - -
Support, accommo-
dation and general
costs 659,553 246,294 264,836
4,353,039 1,046,677 1,474,233
Cashin, Colorado,USA
Land acquisition,
staking, lease &
rental 399,097 121,229 116,883
Geophysical,
geological and
engineering 69,686 5,697 14,261
Drilling 124,433 75 84,236
Metallurgy 8,459 2,951 5,464
Legal 16,454 880 751
Taxes, licenses
and insurance 609 - -
Support, accommodation
and general costs 73,513 20,677 11,089
692,251 151,509 232,684
Champion, New Mexico, USA
Land acquisition,
staking, lease &
rental 159,632 81,899 79,306
Geophysical,
geological and
engineering 27,485 8,964 12,439
Drilling 164,648 99,539 645
Metallurgy 2,808 2,808 -
Legal 200 200 363
Support, accommodation
and general costs 2,120 (1,425) 314
356,893 191,985 93,067
Other, USA 91,446 - 2,622
Cost for the period 5,493,629 1,390,171 1,802,606
Balance-beginning
of period - 4,012,012 1,695,871
Less: Write-off of
mineral property (91,446) - -
Balance - End
of Period $5,402,183 $5,402,183 $3,498,477
See Accompanying Notes
CONSOLIDATED STATEMENT OF CASH FLOW
Summo Minerals Corporation
(A Development Stage Company)
US Dollars
(Unaudited)
For the Nine Months Ending
Cumulative Sept. 30, Sept. 30,
from Inception 1996 1995
Operating
Activities
Net income (loss) $(1,462,500) $ (699,419) $ (355,303)
Reconciliation
of net income
loss) to net cash:
Depreciation and
amortization 19,011 11,779 4,812
Impairment of
mineral properties
at cost 91,446 - -
Change in current
assets and liabi-
lities
accounts receivable (67,833) (61,718) 773
prepaid expenses - 2,492 (969)
accounts payable 22,429 (10,421) 497,643
Net cash (used in)
provided by operating
activities (1,397,447) (757,287) 146,956
Investing Activities
Mineral property
cost (5,493,629) (1,390,171) (1,802,606)
Less shares issued
for property 495,792 - 58,369
Increase in accounts
payable 114,099 59,826 -
Plant, buildings
and equipment (707,500) (683,844) (21,236)
Net cash used in
investing
activities (5,591,238) (2,014,189) (1,765,473)
Financing
Activities
Issuance of share
capital (net of
issue costs) 7,497,739 428,115 2,618,859
Proceeds of loan
from related party 285,144
Payments of loan
from related party (285,144)
Due to related
party - net - (130,261) (182,229)
Net cash provided
by financing activi-
ties 7,497,739 297,854 2,436,630
Net increase
(decrease) in cash 509,054 (2,473,622) 818,113
Cash and cash
equivalents -
beginning of period 2,982,676 176,961
Cash and cash
equivalents -
end of period $ 509,054 $ 509,054 $ 995,074
See Accompanying Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 nine 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 September 30, 1996, a total of 7,872,500 shares of authorized
Common Shares were reserved for the following:
Stock Options 1,522,500
Warrants 6,350,000
7,872,500
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.
On July 7, 1996, the Board of Directors issued an additional
20,000 options to an employee of the Company at an exercise price
of $1.90 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. generally 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
Sept. 30, Sept. 30,
1996 1995
Weighted average number of shares
Canadian Basis 17,882,221 11,813,540
U.S. Basis 17,607,221 11,063,545
Income (Loss) Per Share
U.S. Basis (.04) (.03)
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 $0.7 million for the first
nine months of 1996 as compared to a net loss of $0.36 million in
1995.
Expenses
General and administrative expenses increased $0.37 million to
$0.75 million for the first six months of 1996 compared to $0.38
million in 1995 due primarily to increased salary expenses ($0.30
million) and other G & A expenses attributable to setting up
offices in Denver, Colorado.
Exploration expenses increased $0.01 million for the first nine
months of 1996 compared to $0.03 for 1995 due to increased
activity in evaluating additional exploration targets.
Interest income increased $0.02 million to $0.07 million for the
first nine months of 1996 as compared to $0.05 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 $0.90 million to $0.76 million in the first
nine months of 1996 as compared to ($0.15) million in 1995, due
to a general increase in accounts payable in 1995 and an
increase in G & A expenses in 1996.
Net cash used in investing activities increased by $0.25 to $2.01
million in the first nine months of 1996 compared to $1.77
million in 1995. The difference is due to increased development
activity and an increased exploration activity on the Champion
property ($0.10 million) and investment in plant, building and
equipment ($0.68 million), which includes the initial
engineering on Lisbon Valley planned construction.
Net cash used in financing activities was $0.30 million in the
first nine months of 1996 compared to cash provided by financing
activities of $2.44 million in 1995. The Company's primary use
of cash in this area was the reduction of amounts owed to related
parties in 1996.
The Company had $0.51 million in cash and cash equivalents and
working capital of $0.80 million as of September 30, 1996
compared to $2.98 million of cash and cash equivalents and
working capital of $2.77 million at December 31, 1995.
The Company will complete a $1 million Private Placement in
November 1996 to increase working capital.
Outlook
Pending availability of financing, the Company plans to start the
construction of the Lisbon Valley mine in 1997. The Company
will seek financing of approximately $48 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, with the above private placement, to
meet its operating requirements until mid 1997, at which time it
may have to sell additional stock for working capital, if it
does not complete a project financing as indicated above.
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.
* Incorporated by reference from 10-Q filed August 9,1996.
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, thereunto duly authorized,
effective November 6, 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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