SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1996 Commission File Number: 0-9736 HORN SILVER MINES, INC. ------------------------------------------------------- (Exact name of registrant as specified in this charter) UTAH 87-0299832 - --------------------------------- ------------------ (State or other jurisdiction IRS Identification of incorporation or organization) Number 700 Clift Building, 10 West Broadway Salt Lake City, Utah 84119 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including Area Code (801) 322-5193 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 issuer's classes of common stock, as of the close of the period covered by this report: 121,779,316 Shares of Common Stock, no par value. 1 of 10 HORN SILVER MINES, INC. BALANCE SHEETS June 30, 1996 ASSETS ------ Current Assets: Cash $ 17,268 ---------- Property and equipment: Leasehold Improvements 5,634 Structures and Equipment 8,441 --------- 14,075 Less Accumulated Depreciation 13,616 --------- Net Property and Equipment 459 Other Assets 1,571 --------- Total Assets $ 19,298 ========= LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- Current Liabilities: Accounts Payable $ 22,422 Accrued Liabilities Due to Related Parties 17,343 Accrued Expenses 369 ---------- Total Current Liabilities $ 40,137 ---------- Stockholders' Deficit: Common Stock, no par value. 200,000,000 Shares Authorized, 121,779,316 Shares Issued and Outstanding $ 1,650,098 Accumulated Deficit (1,664,934) ----------- Total Stockholders' Deficit (20,836) ----------- Total Liabilities and Stockholders' Deficit $ 19,298 =========== Unaudited 2 of 10 HORN SILVER MINES, INC. STATEMENTS OF OPERATIONS AND CHANGES IN STOCKHOLDERS' EQUITY Six Period Ended June 30 ----------------- 1996 1995 ---- ---- REVENUES: Mining Royalties $ 11,500 $10,700 Interest 180 270 Other Income 427 360 -------- ------- Total Revenues $ 12,107 $11,336 EXPENSES: Salaries and Wages 3,450 3,734 General and Administrative 3,575 5,027 Legal and Accounting 5,747 750 Taxes and Licenses 398 766 Directors and Officer Compensation 11,263 11,263 Depreciation 178 178 ------- ------- 24,611 21,718 ------- ------- NET LOSS (12,504) (10,382) Stock Issued to Directors/Officer 22,525 22,525 Balance, Stockholders' Equity, December 31 (30,857) (18,935) -------- -------- Balance, Stockholders' Equity, June 30 $(20,836) $(6,792) Unaudited 3 of 10 HORN SILVER MINES, INC. STATEMENT OF OPERATIONS Second Quarter 1996 1995 ---- ---- REVENUES: Mineral Royalties $ 9,500 $ 9,500 Interest 71 136 Other Income 273 173 ------- ------- Total Revenues 9,844 9,809 EXPENSES: Salaries and Wages 1,350 2,100 General and Administrative 1,937 2,240 Legal and Accounting 5,747 300 Taxes and Licenses 231 500 Directors and Officer Compensation 5,631 5,631 Depreciation 89 89 ------- ------- Total Expenses 14,985 10,860 NET LOSS $(5,141) $(1,051) Unaudited 4 of 10 HORN SILVER MINES, INC. STATEMENT OF CASH FLOWS For the Six Month Period Ended, June 30, 1996 CASH FLOWS FOR OPERATING ACTIVITIES: Net Loss $(12,504) Adjustments Depreciation $ 178 Decrease in Accrued Taxes (304) Decrease in Officer/Director Payable (11,263) Stock Issued for Services to Directors and Officers 22,525 11,136 -------- ------- $ (1,368) CASH FLOWS FROM INVESTING ACTIVITIES: None -- CASH FLOWS FROM FINANCING ACTIVITIES: None -- ------- Net Decrease in Cash and Cash Equivalents (1,368) Cash and Cash Equivalents at Beginning of Year $18,636 ------- Cash and Cash Equivalents at End of Period $17,268 Unaudited 5 of 10 HORN SILVER MINES, INC. Notes to Financial Statements June 30, 1996 (1) Summary of Significant Accounting Policies - ------------------------------------------------ Organization The Company was incorporated in 1971 under the laws of the State of Utah. The Company is a "junior" natural resource Company whose activities are primarily acquisition, exploration and development of natural resources. Cash and Cash Equivalents For financial statement purposes, the Company considers all instruments with a maturity of less than three months to be cash equivalents. Property, Equipment and Mining Costs Expenditures for exploration of mineral properties are charged against income as incurred. Property acquisition costs and mine development costs incurred to expand capacity of operating mines, develop new ore bodies or develop new areas substantially in advance of current production are capitalized and charged to operations on the units-of-production method. Capitalized costs of abandoned projects or impaired properties are charged to operations in the year of abandonment. Corporate property and equipment are stated at cost. Acquisitions having a useful life in excess of one year are capitalized. Maintenance and repairs are expensed in the year incurred. Capitalized assets are depreciated by the straight-line method over estimated useful lives of the related assets, ranging from three to ten years. Income Taxes Deferred income taxes are provided in amounts sufficient to give effect to temporary differences between financial and tax reporting, principally related to accounting for mining properties. Effective January 1, 1994, the Company adopted the provision of SFAS 109 "Accounting for Income Taxes." The adoption of SFAS 109 changes the Company's method of accounting for income taxes from the deferred method (APB 11) to an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities. 6 of 10 HORN SILVER MINES, INC. Notes to Financial Statements - Continued (1) Summary of Significant Accounting Policies - Continued - ------------------------------------------------------------ Income Taxes - Continued Under the provisions of SFAS 109, the Company elected not to restate prior years' consolidated financial statements since there was no cumulative effect of the initial adoption on prior years' retained earnings. Additionally, there was no effect of the adoption of SFAS 109 upon income before taxes for fiscal year 1995. (Loss) Per Common Share Losses per common share are calculated based on the weighted average number of shares of common stock outstanding during the period. (2) Mineral Properties - ------------------------ No amounts have been recorded for mineral properties in the financial statements since management has not been able to obtain sufficient information to support the ultimate recovery of these costs. The following is a brief summary of the significant mineral properties in which the Company has an interest as of June 30, 1996. The Company currently owns approximately 244 patented mining claims and approximately 20 unpatented mining claims covering approximately 6,000 acres located in Beaver County, Utah. The claims comprise most of the San Francisco Mining District. The two principal mines on the properties, which were productive in the past, are the Horn Silver and Cactus Mines. the Horn Silver Mine, which represents a very small part of the overall acreage, shipped silver, gold, copper and lead until about 1930. The Cactus Mine, with a production history dating from 1910, shipped significant amounts of copper, gold and silver until about 1913. The Company also owns a one-half interest in the Imperial Mine, a once productive mine, and adjacent patented mining claims located in the San Francisco Mining District. 7 of 10 HORN SILVER MINES, INC. Notes to Financial Statements - Continued (3) Commitments - ----------------- The Company has entered into various cancelable mining leases and royalty agreements as a lessee and lessor. Future minimum lease and royalty payments received and paid under the Company's current agreements are minimal. In addition to the lease payments required above, certain leases also require minimum work requirements of approximately $100 per claim. Certain leases also have provisions allowing the Company to purchase all rights to the properties thereby reducing future commitments for royalty payments. The leases are cancelable at the Company's option at any time which would terminate any further lease payments or work commitments. The lease agreements also provide that the lease will remain in effect as long as exploration or development is being conducted with reasonable diligence or production continues in commercial quantities. The Company leases its office facilities under an operating lease which requires payments of approximately $3,000 per year. (4) Related Party Transactions - -------------------------------- The Company has paid legal fees and related costs to a law firm in which one of its directors is a shareholder of approximately $4,190 for the year ended December 31, 1994. There were no legal fees paid to the firm during fiscal 1995 although the firm rendered legal services for the Company during that period. The Company paid $850 in legal fees and related costs to the law firm in the second quarter of 1996. (5) Income Taxes - ------------------ At December 31, 1994, the Company had net operating loss carryforwards available for both financial reporting and income tax purposes. No amounts have been recognized in the financial statements for the benefit of these losses due to the uncertainty as to whether they will ultimately be realized. The amount of and utilization of the net operating losses for income tax purposes is dependent in part upon the tax laws in effect at the time of the utilization and changes in ownership of the Company which may reduce the amount loss allowable. The net operating loss carryforward available for tax purposes is approximately $1,620,000 which begins to expire in the year 2000. A valuation allowance has been provided for the entire net operating loss and no other deferred tax assets or liabilities existed at June 30, 1996. 8 of 10 HORN SILVER MINES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS Liquidity and Capital Resources - ------------------------------- Working capital increased by approximately $10,900 for the six months ended June 30, 1996 for a total deficit of $20,836 at June 30, 1996. Results of Operations - --------------------- Revenues increased by $661 as of the six month period ended June 30, 1996 compared to the same period of time in the year 1995. The increase was primarily due to the additional annual lease payment of $7,500 from Dotson Exploration on the Beaver Lake Mining claims. Expenses increased by $2,893 for the six month period ended June 30, 1996 compared to the same period in 1995. This increase was primarily due to the payment of the past due legal and auditing fees during this period. Results of Operations--Second Quarter - ------------------------------------- Revenues were approximately identical for the second quarter of 1996 as compared to the same period of time in 1995. Expenses increased by approximately $4,125 in the second quarter of 1996 as compared to the same period in 1995. This increase was primarily due to the payment of the past due legal and auditing fees during this period. 9 of 10 HORN SILVER MINES, INC. (An Exploratory Stage Company) PART II - OTHER INFORMATION ITEM 1. Legal Proceedings ----------------- Horn Silver Mines, Inc. is unaware of any threatened or pending litigation. ITEM 2. Change in Securities -------------------- None ITEM 3. Defaults Upon Senior Securities ------------------------------- None ITEM 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- None ITEM 5. Other Information ----------------- None ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- There are no exhibits and the Company has not filed any report on Form 8-K during the quarter for which this report is filed. 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. Date: October 7, 1996 Page P. Blakemore, Sr. President and Treasurer (Principal Executive and Financial Officer) 10 of 10 10QS-EDG.HSM