================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file Number 000-22731
MINERA ANDES INC.
(Exact name of small business issuer as specified in its charter)
ALBERTA, CANADA
(State or other jurisdiction of incorporation or organization)
NONE
(I.R.S. Employer Identification No.)
3303 N. SULLIVAN ROAD, SPOKANE, WA 99216
(Address of principal executive offices)
(509) 921-7322
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ] No [X]
Shares outstanding as of October 31, 1997: 19,216,050 shares of common stock,
with no par value
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
================================================================================
<PAGE>
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements............................3
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations................9
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K............................11
SIGNATURES....................................................................12
2
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars-Unaudited)
September 30, December 31,
1997 1996
--------------------- ---------------------
<S> <C> <C>
ASSETS
Current:
Cash $ 5,285,317 $ 6,660,633
Receivables 124,180 167,110
--------------------- ---------------------
5,409,497 6,827,743
Mineral properties and deferred exploration costs 5,250,711 3,440,879
Capital assets 246,129 48,575
--------------------- ---------------------
$ 10,906,337 $ 10,317,197
===================== =====================
=====================
LIABILITIES
=====================
Current:
Accounts payable and accruals $ 109,527 $ 227,829
109,527 227,829
--------------------- ---------------------
SHAREHOLDERS' EQUITY
Share capital 15,132,262 13,365,014
Accumulated deficit (4,335,452) (3,275,646)
--------------------- ---------------------
10,796,810 10,089,368
--------------------- ---------------------
$ 10,906,337 $ 10,317,197
===================== =====================
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(U.S. Dollars-Unaudited)
Period from
Three Months Three Months Nine Months Nine Months July 1, 1994
Ended Ended Ended Ended (commencement)
September 30, September 30, September 30, September 30, through
1997 1996 1997 1996 September 30, 1997
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Administration fees $ 9,111 $ 6,304 $ 25,531 $ 17,942 $ 112,412
Audit & accounting 13,541 6,006 42,423 30,522 89,803
Consulting fees 33,439 43,016 121,843 95,075 394,663
Depreciation 1,013 0 1,648 0 1,648
Equipment rental 2,427 0 2,427 942 5,354
Foreign exchange (gain) loss 37,300 6,397 127,338 (23,809) 75,787
Insurance 639 0 639 0 639
Legal 16,553 10,014 114,224 40,453 223,810
Materials & supplies 5,000 0 5,012 13,052 40,199
Office overhead 81,543 61,232 405,923 192,182 683,989
Telephone 11,523 14,902 43,812 36,874 171,449
Transfer agent 2,466 3,493 6,206 7,201 37,166
Travel 16,406 6,863 41,026 32,400 138,563
Wages & benefits 53,519 41,685 163,603 122,656 450,070
Write-off of deferred expenditures 0 0 0 0 1,528,647
------------- ------------- ------------- ------------- -------------
Total expenses 284,480 199,912 1,101,655 565,490 3,954,199
Interest income (41,648) 0 (128,983) 0 (202,787)
Loss for the period 242,832 199,912 972,672 565,490 3,751,412
Accumulated deficit, beginning of the period 4,088,497 2,250,935 3,275,646 1,798,026 0
Share issue costs 4,123 82,760 87,134 170,091 566,825
Deficiency on acquisition of subsidiary 0 0 0 0 17,215
------------- ------------- ------------- ------------- -------------
Accumulated deficit, end of the period $ 4,335,452 $ 2,533,607 $ 4,335,452 $ 2,533,607 $ 4,335,452
============= ============= ============= ============= =============
Loss per common share $ 0.01 $ 0.01 $ 0 .06 $ 0.05 $ 0.35
============= ============= ============= ============= =============
Weighted average shares outstanding 19,200,012 13,866,705 17,222,432 12,150,432 10,848,605
============= ============= ============= ============= ==============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES
AND DEFERRED EXPLORATION COSTS
(U.S. Dollars-Unaudited)
Period from
Three Months Three Months Nine Months Nine Months July 1, 1994
Ended Ended Ended Ended (commencement)
September 30, September 30, September 30, September 30, through
1997 1996 1997 1996 September 30, 1997
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Administration fees $ 5,080 $ 7,181 $ 19,821 $ 24,411 $ 276,697
Assays & analytical 35,169 24,668 172,970 70,132 509,348
Construction & trenching 0 75,334 27,987 253,332 436,962
Consulting fees 23,295 15,194 71,666 40,427 542,473
Depreciation 12,335 6,336 22,050 8,448 36,834
Drilling 0 96,170 54,805 96,720 280,050
Equipment rental 0 13,902 38,959 45,862 207,634
Geology 137,112 153,773 594,898 407,652 1,757,033
Geophysics 54,658 45,201 54,658 78,599 131,460
Insurance 12,826 15,376 28,515 30,564 102,754
Legal 38,179 15,075 76,966 40,510 345,599
Maintenance 11,701 23,084 26,763 35,622 86,812
Materials & supplies 18,349 17,624 51,647 49,753 293,715
Project overhead 11,745 13,436 31,922 23,903 194,035
Property & mineral rights 120,294 40,242 296,958 79,046 863,374
Telephone 1,468 1,814 4,508 3,442 29,465
Travel 46,213 24,755 143,443 68,371 413,728
Wages & benefits 32,816 32,597 91,296 98,278 395,246
------------- ------------- ------------- ------------- -------------
Costs incurred during the period 561,240 621,762 1,809,832 1,455,072 6,903,219
Deferred costs, beginning of period 4,689,471 2,718,280 3,440,879 2,534,970 0
Deferred costs acquired 0 0 0 0 576,139
Deferred costs written off 0 0 0 0 (1,528,647)
Mineral property option proceeds 0 0 0 (650,000) (700,000)
------------- ------------- ------------- ------------- -------------
Deferred costs, end of the period $ 5,250,711 $ 3,340,042 $ 5,250,711 $ 3,340,042 $ 5,250,711
============= ============= ============= ============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(U.S. Dollars-Unaudited)
Period from
Three Months Three Months Nine Months Nine Months July 1, 1994
Ended Ended Ended Ended (commencement)
September 30, September 30, September 30, September 30, through
1997 1996 1997 1996 September 30, 1997
------------- ------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Operating Activities
Loss for the period $ (242,832) $ (199,912) $ (972,672) $ (565,490) $ (3,751,412)
Non-cash items:
Write-off of incorporation costs 0 0 0 0 665
Write-off of deferred expenditures 0 0 0 0 1,528,647
Depreciation 1,013 0 1,648 0 1,648
------------- ------------- ------------- ------------- -------------
(241,819) (199,912) (971,024) (565,490) (2,220,452)
Net changes in non-cash working
capital items (258,907) 83,547 (75,373) 100,146 (14,652)
------------- ------------- ------------- ------------- -------------
Cash used in operating activities (500,726) (116,365) (1,046,397) (465,344) (2,235,104)
------------- ------------- ------------- ------------- -------------
Financing Activities
Shares issued for cash 78,146 1,194,899 1,767,248 4,903,730 9,683,387
Share subscription received 0 0 0 0 4,873,336
Shares issued for subsidiaries 0 0 0 0 575,537
Advances from related parties 0 (1,174,150) 0 (1,278,181) 0
Share issue costs (4,123) (82,760) (87,134) (170,091) (566,825)
------------- ------------- ------------- ------------- -------------
Cash (used in) provided by
financing activities 74,023 (62,011) 1,680,114 3,455,458 14,565,435
------------- ------------- ------------- ------------- -------------
Investing Activities
Incorporation costs 0 0 0 0 (665)
Purchases of capital assets (202,448) 6,336 (199,201) (54,911) (247,776)
Mineral properties and deferred
exploration costs (561,240) (621,762) (1,809,832) (1,455,072) (6,903,219)
Acquisition of subsidiaries 0 0 0 0 (593,354)
Mineral property option proceeds 0 0 0 650,000 700,000
------------- ------------- ------------- ------------- -------------
Cash used in investing activities (763,688) (615,426) (2,009,033) (859,983) (7,045,014)
------------- ------------- ------------- ------------- -------------
Increase (decrease) in cash (1,190,391) (793,802) (1,375,316) 2,130,131 5,285,317
Cash, beginning of the period 6,475,708 3,451,953 6,660,633 528,020 0
------------- ------------- ------------- ------------- -------------
Cash, end of the period $ 5,285,317 $ 2,658,151 $ 5,285,317 $ 2,658,151 $ 5,285,317
============= ============= ============= ============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
6
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars-Unaudited)
1. ACCOUNTING POLICIES
The accompanying consolidated financial statements of Minera Andes Inc. (the
"Corporation") for the three month and nine month periods ended September 30,
1997 and 1996 and for the period from commencement (July 1, 1994) through
September 30, 1997 have been prepared in accordance with accounting principles
generally accepted in Canada which differ in certain respects from principles
and practices generally accepted in the United States, as described in Note 3.
Also, they are unaudited but, in the opinion of management, include all
adjustments, consisting only of normal recurring items, necessary for a fair
presentation. Interim results are not necessarily indicative of results which
may be achieved in the future. The December 31, 1996 financial information has
been derived from the Corporation's audited consolidated financial statements.
These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1996. The accounting policies set forth in the audited annual consolidated
financial statements are the same as the accounting policies utilized in the
preparation of these consolidated financial statements, except as modified for
appropriate interim presentation.
2. MINERAL PROPERTIES
Santa Clara Project
The Santa Clara property was subject to a joint venture with Cominco Ltd.
("Cominco"), under the terms of a Memorandum of Understanding signed between the
Corporation and Cominco in March, 1996. During July, 1997, Cominco advised the
Corporation that it would be terminating the Memorandum of Understanding with
respect to Santa Clara, and this was effected during the third quarter of 1997
(after the required 60 days notice). This also terminated the relationship
between the Corporation and Cominco.
3. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Differences between Canadian and U.S. generally accepted accounting principles
as they pertain to the Corporation relate to accounting for share issue costs,
loss per share, non-cash issuance of common shares and the acquisition of Scotia
Prime Minerals, Incorporated ("Scotia"), and are described in Note 13 to the
Corporation's consolidated financial statements for the year ended December 31,
1996.
The impact of the above on the interim consolidated financial statements is as
follows:
7
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Accumulated deficit, end of period,
per Canadian GAAP $ 4,335,452 $ 2,533,607 $ 4,335,452 $ 2,533,607
Adjustment for acquisition of Scotia 248,590 248,590 248,590 248,590
Adjustment for share issue costs (566,825) (420,838) (566,825) (420,838)
-------------- -------------- -------------- --------------
Accumulated deficit, end of period,
per U.S. GAAP $ 4,017,217 $ 2,361,359 $ 4,017,217 $ 2,361,359
============== ============== ============== ==============
September 30, December 31,
1997 1996
-------------- --------------
Share capital, per Canadian GAAP $ 15,132,262 $ 13,365,014
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for share issue costs (566,825) (479,691)
-------------- --------------
Share capital, per U.S. GAAP $ 14,814,027 $ 13,133,913
============== ==============
Period from
July 1, 1994
(commencement)
through
Sept. 30, 1997
--------------
Loss for the period, per Canadian GAAP $ 3,751,412
Adjustment for acquisition of Scotia 248,590
--------------
Loss for the period, per U.S. GAAP $ 4,000,002
==============
Loss per common share, per U.S. GAAP $ 0.37
==============
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Note Regarding Forward-Looking Statements
- -----------------------------------------
The information in this report includes "forward-looking" statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and is subject to the safe harbor created by
those sections. Factors that could cause results to differ materially from those
projected include, but are not limited to, results of current exploration
activities, the market price of precious and base metals, the availability of
joint venture partners or sources of financing, and other risk factors detailed
in the Corporation's Securities and Exchange Commission filings.
Overview
- --------
The principal business of the Corporation is the exploration and development of
mineral properties, consisting of mineral rights and applications for mineral
rights, covering approximately 210,000 hectares in six provinces in the Republic
of Argentina. The lands are comprised of option-to-purchase contracts,
exploration and mining agreements and direct interests through the Corporation's
filings for exploration concessions. The Corporation carries out its business by
acquiring, exploring and evaluating mineral properties through its ongoing
exploration program. Following exploration, the Corporation either seeks to
enter joint ventures to further develop these properties or disposes of them if
the properties do not meet the Corporation's requirements. The Corporation's
properties are all early stage exploration properties and no proven or probable
reserves have been identified.
Plan of Operations
- ------------------
The Corporation has budgeted and plans to spend approximately $2.7 million over
the next 12 months for mineral property and exploration activities on its
properties in Argentina. Most of these funds will be expended through the end of
the 1997/1998 field season, which the Corporation expects will end in May 1998.
The Corporation believes that its existing funds and projected sources of funds
will be sufficient to finance this planned exploration and the related ongoing
activities for this future period. If the Corporation were to determine to
develop a property or group of properties beyond the stage of exploration,
substantial additional financing would be necessary. Such financing would likely
be in the form of equity, debt or a combination of equity and debt. The
Corporation has no current plans to seek such financing and there is no
assurance that such financing, if necessary, would be available to the
Corporation on favorable terms, if at all.
Results of Operations
- ---------------------
Third quarter 1997 compared with third quarter 1996
- ---------------------------------------------------
The Corporation had a net loss of $243,000 for the third quarter of 1997,
compared with a net loss of $200,000 for the third quarter of 1996. The major
factors in the higher loss during the quarter this year were a foreign exchange
loss on Canadian invested funds which resulted from adverse movement in the
exchange rate for the Canadian dollar, and additional costs resulting from the
Corporation's increased investor relations activities and expanded operations.
Total mineral property and deferred exploration costs during the quarter were
$561,000 in 1997, compared with $622,000 in 1996. This decrease resulted from
the fact that the Corporation performed trenching and drilling on its properties
in 1996 but not in 1997. This decrease was partially offset by higher property
and mineral rights expenditures in 1997 on new properties and on properties
which had previously been subject to joint ventures (with the joint venture
partners picking up these costs).
9
<PAGE>
Nine months ended September 30, 1997 compared with nine months ended
September 30, 1996
- ---------------------------------------------------------------------
The Corporation had a net loss of $973,000 for the nine months ended September
30, 1997, compared with a net loss of $565,000 for the comparable period in
1996. The increase resulted from an increase in general and administrative
expenses and office overhead incurred as a result of the Corporation's financing
and investor relations activities and expanded operations. The foreign exchange
loss during the nine months in 1997 was $127,000 compared with a gain of $24,000
in 1996, again the result of adverse movements in the Canadian dollar during the
last twelve months. These additional expenses were offset by interest income of
$129,000 earned on invested balances received as a result of the Corporation's
equity financings. The Corporation had no interest income in the comparable
period in 1996. Total mineral property and deferred exploration costs during the
nine months were $1.8 million in 1997 compared with $1.5 million in 1996. There
were, however, significant differences within categories of expenditures from
1996 to 1997. During the 1996 period the Corporation spent $350,000 on
construction, trenching and drilling, compared with $83,000 during the 1997
period. Also during the 1997 period, the Corporation performed more early stage
exploration (including mapping, sampling and analytical work) on several new
properties which have not yet reached the drilling stage, resulting in
additional assaying and analytical costs ($173,000 in 1997 compared with $70,000
in 1996) and geological consulting costs ($595,000 in 1997 compared with
$408,000 in 1996). The Corporation also spent $297,000 during the 1997 period on
property and mineral rights, compared with $79,000 in 1996. Deferred
expenditures related to mineral properties and exploration increased to $5.25
million at September 30, 1997 compared with $3.34 million a year earlier.
Liquidity and Capital Resources
- -------------------------------
Due to the nature of the mining industry, the acquisition, exploration and
development of mineral properties requires significant expenditures prior to the
commencement of production. To date, the Corporation has financed its activities
through the sale of equity securities and joint venture arrangements. The
Corporation expects to use similar financing techniques in the future.
At September 30, 1997, the Corporation had cash and cash equivalents of $5.3
million, compared to cash and cash equivalents of $2.7 million as of September
30, 1996. This increase is due to the receipt of proceeds from the Corporation's
1996 equity financings and the exercise of warrants issued in an earlier
financing. Working capital at September 30, 1997 was $5.3 million.
The Corporation's operating activities used $1.0 million in the nine months of
1997 compared with $457,000 in the same period in 1996. This reflects the
additional general and administrative, financing and investor relations
expenditures in 1997 compared with 1996. Financing activities dropped from $3.5
million during the nine months in 1996 (from an equity private placement and the
Cominco private placement) to $1.7 million in 1997 (from the issuance of common
shares upon exercise of warrants). Net cash used in investing activities
increased from $0.9 million during the 1996 period to $2.0 million in 1997,
reflecting higher expenditures during the 1997 period. During the 1996 period,
the Corporation received $0.7 million in mineral option proceeds.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following are filed as exhibits to this Quarterly Report:
27 Financial Data Schedule
(b) Reports on Form 8-K: None
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MINERA ANDES INC.
Date: November 10, 1997 By: /s/ ALLEN V. AMBROSE
----------------- -------------------------------------
Allen V. Ambrose
President
Date: November 10, 1997 By: /s/ ALLAN J. MARTER
----------------- -------------------------------------
Allan J. Marter
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
27. Financial Data Schedule
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited interim consolidated financial statements of Minera Andes Inc. for the
nine-month period ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,285,317
<SECURITIES> 0
<RECEIVABLES> 124,180
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,409,497
<PP&E> 5,535,322
<DEPRECIATION> 38,482
<TOTAL-ASSETS> 10,906,337
<CURRENT-LIABILITIES> 109,527
<BONDS> 0
0
0
<COMMON> 15,132,262
<OTHER-SE> (4,335,452)
<TOTAL-LIABILITY-AND-EQUITY> 10,906,337
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 972,672
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (972,672)
<INCOME-TAX> 0
<INCOME-CONTINUING> (972,672)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (972,672)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
