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, 1997
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 2, 1997, the Registrant had 20,003,160 shares of Common
Stock outstanding.
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TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
March 31, 1997 and December 31, 1996 . .. . . 1
Consolidated Condensed Statement of Income
(Loss) and Deficit
Three Months Ended March 31, 1997
and 1996 .. . .. . .. . .. . .. . .. . .. . . 2
Consolidated Statement of Mineral Property Costs
Three Months Ended March 31, 1997
and 1996 .. . .. . .. . .. . .. . .. . .. . . 3
Consolidated Statement of Cash Flow
Three Months Ended March 31, 1997
and 1996 .. . .. . .. . .. . .. . .. . .. . . 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
<PAGE>
CONSOLIDATED BALANCE SHEET
Summo Minerals Corporation
(A Development Stage Company)
US Dollars (Unaudited)
As of As of
March 31, December 31,
1997 1996
ASSETS
Current Assets
Cash $ 138,897 $ 214,481
Short term investments 360,537 636,342
Accounts receivable 2,145 813
Prepaid expenses 5,600 5,600
Total current assets 507,179 857,236
Mineral property at cost 6,160,361 5,878,099
Plants, buildings and equipment
at cost, net of accumulated
depreciation of $21,330 and
$19,709 respectively 956,799 784,176
Total assets $ 7,624,339 $ 7,519,511
LIABILITIES & SHAREHOLDERS EQUITY
Current Liabilities
Accounts payable and
accrued liabilities $ 130,111 $ 130,309
Due to related party 0 3,619
Total current liabilities $ 130,111 $ 133,928
Shareholders equity
Preferred shares, without
par value 100,000,000
authorized and none issued -- --
Common shares, without par
value 500,000,000 authorized,
20,003,160 and 19,623,160
issued and net of share
issuance costs of $12,519 and
$0 at March 31, 1997 and
December 31, 1996,
respectively. 9,352,581 9,011,388
Deficit- accumulated during
development stage (1,858,353) (1,625,805)
Total shareholder's equity 7,494,228 7,385,583
Total liabilities &
shareholder's equity $ 7,624,339 $ 7,519,511
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 March
from 31, 31,
Inception 1997 1996
Expenses
General and admini-
stration $1,846,434 $ 236,095 $ 179,539
Depreciation and
amortization 30,663 5,340 2,466
Exploration expense 66,849 0 9,114
Interest and bank
charges, net (172,489) (8,887) (32,536)
Income (Loss) before the
following (1,771,457) (232,548) (158,583)
Impairment of mineral
property cost (91,446) -- --
Gain on sale of mineral
property 4,550 -- --
Net Income (Loss) for
the period (1,858,353) (232,548) (158,583)
Deficit-Beginning of
period -- (1,625,805) (763,081)
Deficit- End of
period (1,858,353)(1,858,353) (921,664)
Earnings (Loss) per Share $ (0.01) $ (0.01)
See Accompanying Notes
CONSOLIDATED STATEMENT OF MINERAL PROPERTY COSTS
Summo Minerals Corporation
(A Development Stage Company)
US Dollars
For the For the
Quarter Quarter
Ended Ended
Cumulative March March
from 31, 31,
Inception 1997 1996
DIRECT
Lisbon Valley, Utah, USA
Land costs $ 1,310,933 $ 11,154 $ 95,449
Geophysical,
geological and
engineering 220,898 1,083 15,282
Drilling 483,671 -- 3,256
Metallurgy 349,729 15,218 18,344
Feasibility 488,612 -- --
Legal 68,048 -- --
Taxes, licenses and
insurance 14,072 -- --
Assaying 13,064 -- --
Permitting 1,372,131 98,048 1,400
Support, accommo-
dation and general
costs 636,868 55,951 221,470
4,958,026 181,454 355,201
Cashin, Colorado, USA
Land costs 411,485 763 3,998
Geophysical, geolo-
gical and engineering 50,347 100 2,674
Drilling 146,805 -- --
Metallurgy 24,370 -- 628
Legal 15,574 -- --
Taxes, licenses and
insurance 609 -- --
Permitting 20,438 -- --
Support, accommodation
and general costs 38,731 -- 6,735
708,359 863 14,035
Champion, New Mexico, USA
Land costs 186,042 2,716 31,190
Geophysical, geolo-
gical and engineering 23,366 1,024 4,726
Drilling 166,657 -- --
Metallurgy 5,657 313 2,808
Permitting 69 -- --
Support, accommodation
and general costs 2,223 75 (6,010)
384,014 4,128 32,714
Other, USA 201,408 95,817 --
Costs for the period 6,251,807 282,262 401,950
Balance-beginning of
period -- 5,878,099 4,012,012
Less: write-off of
mineral property (91,446) -- --
Balance - end of
period $ 6,160,361 $ 6,160,361 $4,413,962
See Accompanying Notes
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOW
Summo Minerals Corporation
(A Development Stage Company)
US Dollars (Unaudited)
For the Three Months Ending
Cumulative March March
from 31, 31,
Inception 1997 1996
Operating Activities
Net income (loss) $ (1,858,353) $ (232,548) $(158,583)
Reconciliation of net
income (loss) to net cash:
Depreciation and amorti-
zation 30,663 5,340 2,466
Impairment of mineral
properties at cost 91,446 -- --
Change in current assets
& liabilities
- accounts receivable (2,145) (1,332) 2,698
- prepaid expenses (5,600) -- 2,492
- accounts payable 75,838 (198) (64,331)
Net cash used in operating
activities (1,668,151) (228,738) (215,258)
Investing Activities
Mineral property cost (6,257,421) (282,262) (403,353)
Less shares issued for
property 495,792 -- --
Increase in accounts
payable 54,273 -- --
Plant, buildings and
equipment (981,848) (177,963) (12,074)
Net cash used in
investing activities (6,689,204) (460,225) (415,427)
Financing Activities
Issuance of share
capital (net of
issue costs) 8,856,789 341,193 --
Due to related party
- net -- (3,619) (119,777)
Net cash (used in)
provided by financing
activities 8,856,789 337,574 (119,777)
Net Increase (decrease)
in Cash 499,434 (351,389) (750,462)
Cash and cash equivalents
- beginning of period 850,823 2,982,676
Cash and Cash Equivalents
- end of period $ 499,434 $ 499,434 $2,232,214
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, 1996. 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, 1996. 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
The Company received a Letter of Commitment from ING Capital and
Heller Financial, Inc. to provide a $45 million loan for Lisbon
Valley Project subject to the Company providing $13.2 million of
equity to the project and an additional $3 million of equity in
the Company.
The Company received the Final Environmental Impact Statement
from the BLM, which means the Company could now start
construction, if the financing were complete.
Cactus Property, California
The Company signed a six month Option to Purchase the Cactus Gold
Mine Property in California in January 1997. Current exploration
activity on this property includes title and environmental review
and exploration drilling.
3. COMMITMENTS
Common Shares Issuable
At March 31, 1997, a total of 6,244,680 shares of authorized
Common Shares were reserved for the following:
Stock Options 1,612,500
Warrants 4,632,180
6,244,680
On January 29, 1997, 280,000 warrants were exercised at a price
of $1.21 Cdn.
On February 3, 1997, 100,000 warrants were exercised at a 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. generally accepted accounting
principles, the contingently cancelable escrow shares which
existed at March 31, 1996 would not be reflected as issued and
outstanding and would be excluded from loss per share
calculations. No contingently cancelable escrow shares existed
at March 31, 1997.
FINANCIAL STATEMENT PRESENTATION
March 31, 1996
Weighted Average Number of Shares
Canadian Basis 17,575,980
U.S. Basis 17,200,982
Income (Loss) Per Share
U.S. Basis (.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
Cautionary Statement for Purposes of the Safe Harbor Provisions
of the Private Securities Litigation Reform Act of 1995
The matters discussed in this report, when not historical
matters, are forward looking statements that involve a number of
risks and uncertainties that could cause actual results to differ
materially from projected results.
Such factors include, among other things, the speculative nature
of mineral exploration, commodity prices, production and reserve
estimates, environmental and governmental regulations,
availability of financing, force majeure events, and other risk
factors as described from time to time in the Company's filings
with the Securities and Exchange Commission.
The following discussion should be read in conjunction with the
Company's consolidated financial statements included in this
report. All monetary figures discussed are in U.S. dollars.
Results of Operations
The Company reported a net loss of $0.23 million for the first
quarter 1997 as compared to a net loss of $0.16 million in 1996.
Expenses
General and administrative expenses increased $0.06 million to
$0.24 million for the first quarter 1997 compared to $0.18
million in 1996 due primarily to increased salary expenses
($0.03 million) in addition to increased general office and
professional expenses ($0.03 million).
Interest income decreased $0.024 million to $0.009 million for
the first quarter 1997 as compared to $0.03 million for 1996
reflecting the use of the Company's interest earning assets in
daily operations.
Capital Resources and Liquidity
Cash Flow - The Company s net cash used in operating activities
increased $0.02 million to $0.23 million in the first quarter
1997 as compared to $0.21 million in 1996 due to the use of cash
to decrease accounts payable and other accrued liability
balances.
Net cash used in investing activities increased $0.04 million to
$0.46 million in the first quarter 1997 compared to $0.42
million in 1996. The difference is due to decreased development
activity on the Lisbon Valley property (down $0.22 million); the
addition of new exploration activity on the Cactus Gold property
($0.09 million) and increased capitalized investment in the
Lisbon Valley Property; ($0.17 million).
Net cash provided by financing activities was $0.34 million in
the first quarter 1997 compared to cash used in financing
activities of $0.12 million in 1996. This was due to the
exercise of warrants in the amount of approximately $0.25 million
and the exercise of options for $0.10 million. These increases
were offset by share issuance costs of approximately $0.01
million.
The Company had $0.50 million in cash and cash equivalents and
working capital of $0.38 million as of March 31, 1997 compared
to $0.85 million of cash and cash equivalents and working capital
of $0.72 million at December 31, 1996.
Outlook
The Company is continuing efforts to establish a financing
package which will allow the Company to proceed with the final
engineering and construction of the Lisbon Valley project.
This package may entail relinquishing part of the project in
return for a commitment to supply capital in the project.
Pending successful completion of the Company s financing efforts,
the Company plans to start the construction of the Lisbon Valley
mine later in 1997. The Company has insufficient cash on hand
to meet its operating requirements if this capital raising is not
completed. In such a circumstance, the Company may have to sell
additional shares for working capital, however no assurance can
be given that this capital can be raised in the existing equity
market.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits filed with the Form 10-Q
None
Exhibits and Reports on Form 8-K
None
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.
Date: May 15, 1997 SUMMO MINERALS CORPORATION
By: /s/ Gregory A. Hahn
Gregory A. Hahn, President
and Chief Executive Officer
By: /s/ James D. Frank
Frank D. Frank, Vice-
President of Finance
and Chief Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 499,434
<SECURITIES> 0
<RECEIVABLES> 2,145
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 507,179
<PP&E> 956,799
<DEPRECIATION> (21,330)
<TOTAL-ASSETS> 7,624,339
<CURRENT-LIABILITIES> 130,111
<BONDS> 0
0
0
<COMMON> 9,352,581
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,624,339
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (241,435)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (216)
<INCOME-PRETAX> (232,548)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (232,548)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
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