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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 1998
[ ] 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 [X] No [ ]
Shares outstanding as of April 30, 1998: 19,936,433 shares of common stock, with
no par value
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
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<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)
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 3,128,334 $ 4,003,519
Funds in trust on exercise of warrants 806,136 0
Receivables and prepaid expenses 177,321 212,533
------------ ------------
4,111,791 4,216,052
------------ ------------
Mineral properties and deferred exploration costs 3,948,345 3,226,856
Capital assets, net 201,430 220,981
------------ ------------
Total assets $ 8,261,566 $ 7,663,889
============ ============
LIABILITIES
Current:
Accounts payable and accruals $ 80,794 $ 79,168
Due to related parties 138,991 118,273
------------ ------------
Total current liabilities 219,785 197,441
------------ ------------
SHAREHOLDERS' EQUITY
Share capital 15,938,398 15,132,262
Accumulated deficit (7,896,617) (7,665,814)
------------ ------------
Total shareholder's equity 8,041,781 7,466,448
------------ ------------
Total liabilities and shareholder's equity $ 8,261,566 $ 7,663,889
============ ============
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 Ended July 1, 1994
--------------------------------- (commencement)
March 31, March 31, through
1998 1997 March 31, 1998
------------ ------------ --------------
<S> <C> <C> <C>
Administration fees $ 8,476 $ 7,087 $ 128,511
Audit and accounting 34,333 17,801 131,643
Consulting fees 44,848 43,840 485,208
Depreciation 1,265 0 4,409
Equipment rental 1,517 0 8,389
Foreign exchange (gain) loss (17,181) 4,726 175,330
Insurance 17,938 0 36,514
Legal 14,184 30,034 257,600
Maintenance 12 0 177
Materials and supplies 18 0 43,295
Office overhead 64,881 81,507 830,213
Telephone 18,796 20,108 206,168
Transfer agent 3,920 0 53,075
Travel 11,954 8,396 206,353
Wages and benefits 56,170 48,817 557,976
Write-off of deferred expenditures 0 0 4,484,648
------------ ------------ ------------
Total expenses 261,131 262,316 7,609,509
Interest income (34,644) (40,772) (295,555)
------------ ------------ ------------
Net loss for the period 226,487 221,544 7,313,954
Accum. deficit, beginning of the period 7,665,814 3,275,646 0
Share issue costs 4,316 50,358 565,448
Deficiency on acquisition of subsidiary 0 0 17,215
------------ ------------ ------------
Accumulated deficit, end of the period $ 7,896,617 $ 3,547,548 $ 7,896,617
============ ============ ============
Net loss per common share $0.01 $0.01 $0.61
============ ============ ============
Weighted average shares outstanding 17,724,935 14,982,550 11,991,682
============ ============ ============
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 Ended July 1, 1994
--------------------------------- (commencement)
March 31, March 31, through
1998 1997 March 31, 1998
------------ ------------ --------------
<S> <C> <C> <C>
Administration fees $ 5,861 $ 7,437 $ 288,580
Assays and analytical 88,607 70,111 660,509
Construction and trenching 23,576 12,318 490,269
Consulting fees 48,752 16,877 641,112
Depreciation 18,286 4,858 77,573
Drilling 87,411 1,694 425,004
Equipment rental 8,837 20,779 223,837
Geology 130,705 241,978 2,114,710
Geophysics 1,440 0 188,067
Insurance 10,839 0 128,845
Legal 22,147 20,323 401,486
Maintenance 11,092 7,945 108,647
Materials and supplies 12,147 17,719 337,094
Project overhead 4,238 10,119 213,542
Property and mineral rights 113,446 82,583 1,131,898
Telephone 4,563 1,006 38,586
Travel 90,500 37,084 614,234
Wages and benefits 39,042 28,547 472,861
------------ ------------ ------------
Costs incurred during the period 721,489 581,378 8,556,854
Deferred costs, beginning of the period 3,226,856 3,440,879 0
Deferred costs, acquired 0 0 576,139
Deferred costs written off 0 0 (4,484,648)
Mineral property option proceeds 0 0 (700,000)
------------ ------------ ------------
Deferred costs, end of the period $ 3,948,345 $ 4,022,257 $ 3,948,345
============ ============ ============
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 Ended July 1, 1994
--------------------------------- (commencement)
March 31, March 31, through
1998 1997 March 31, 1998
------------ ------------ --------------
<S> <C> <C> <C>
Operating Activities
Net loss for the period $ (226,487) $ (221,544) $ (7,313,954)
Non-cash items:
Write-off of incorporation costs 0 0 665
Write-off of deferred expenditures 0 0 4,484,648
Depreciation 1,265 0 4,409
------------ ------------ ------------
(225,222) (221,544) (2,824,232)
Net changes in non-cash working capital items (748,580) 56,834 (763,670)
------------ ------------ ------------
Cash used in operating activities (973,802) (164,710) (3,587,902)
------------ ------------ ------------
Investing Activities
Incorporation costs 0 0 (665)
Purchases of capital assets 0 (5,928) (283,412)
Mineral properties and deferred exploration (721,489) (581,378) (8,556,854)
Non-cash item: depreciation 18,286 4,858 77,573
Acquisition of subsidiaries 0 0 (593,354)
Mineral property option proceeds 0 0 700,000
------------ ------------ ------------
Cash used in investing activities (703,203) (582,448) (8,656,712)
------------ ------------ ------------
Financing Activities
Shares issued for cash 0 1,689,102 14,556,723
Share subscriptions received 806,136 0 806,136
Shares issued for subsidiaries 0 0 575,537
Share issue costs (4,316) (50,358) (565,448)
------------ ------------ ------------
Cash provided by financing activities 801,820 1,638,744 15,372,948
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents (875,185) 891,586 3,128,334
Cash and cash equivalents, beginning of the period 4,003,519 6,660,633 0
------------ ------------ ------------
Cash and cash equivalents, end of the period $ 3,128,334 $ 7,552,219 $ 3,128,334
============ ============ ============
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 period ended March 31, 1998 and 1997 and for
the period from commencement (July 1, 1994) through March 31, 1998 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 2. 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, 1997 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, 1997. 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. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Differences between Canadian and U.S. generally accepted accounting principles
("GAAP") as they pertain to the Corporation relate to accounting for share issue
costs, loss per share, non-cash issuance of common shares, the acquisition of
Scotia Prime Minerals, Incorporated, compensation expense associated with the
release of shares from escrow, mineral properties and deferred exploration
costs, stock-based compensation and non-cash working capital items and are
described in Note 13 to the Corporation's consolidated financial statements for
the year ended December 31, 1997.
a. The impact of the above on the interim consolidated financial statements is
as follows:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Accumulated deficit, end of period,
per Canadian GAAP $ 7,896,617 $ 3,547,548
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 3,820,939
Adjustment for share issue costs (565,448) (530,049)
------------ ------------
Accumulated deficit, end of period,
per U.S. GAAP $ 13,904,673 $ 7,087,028
============ ============
</TABLE>
7
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, March 31,
1998 1997
-------------- --------------
<S> <C> <C>
Share capital, per Canadian GAAP $15,938,398 $15,054,116
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 3,820,939
Adjustment for share issue costs (565,448) (530,049)
----------- -----------
Share capital, per U.S. GAAP $21,946,454 $18,593,596
=========== ===========
</TABLE>
Period from
July 1, 1994
(commencement)
through
March 31, 1998
----------------
Net loss for the period, per Canadian GAAP $ 7,313,954
Adjustment for acquisition of Scotia 248,590
Adjustment for compensation expense 6,324,914
-----------
Loss for the period, per U.S. GAAP $13,887,458
===========
Loss per common share, per U.S. GAAP $ 1.16
===========
There were no U.S. GAAP adjustments relating to the net loss reported for the
twelve months ended March 31, 1998 and 1997.
b. The following table sets forth the components of the net changes in
non-cash working capital items as reflected in the consolidated statements
of changes in financial position under U.S. GAAP.
<TABLE>
<CAPTION>
Period from
Three Months Ended July 1, 1994
--------------------------------- (commencement)
March 31, March 31, through
1998 1997 March 31, 1998
------------ ------------ --------------
<S> <C> <C> <C>
Add (deduct) non-cash working capital items:
Receivables and prepaid expenses $ 35,212 $ 95,405 $ (177,321)
Funds in trust on exercise of warrants (806,136) 0 (806,136)
Accounts payable and accruals 1,626 (44,518) 80,796
Due to related parties 20,718 5,947 138,991
------------ ------------ ------------
$ (748,580) $ 56,834 $ (763,670)
============ ============ ============
</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 ("1934 Act"), 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 570,000 acres in six provinces in the Republic of
Argentina. The lands comprise 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 $1.9 million over
the next 12 months for mineral property and exploration activities and on its
properties in Argentina. 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.
Results of Operations
- ---------------------
First quarter 1998 compared with first quarter 1997
- ---------------------------------------------------
The Corporation had a net loss of $226,000 ($0.01 per share) for the first
quarter of 1998, compared with a net loss of $222,000 ($0.01 per share) for the
first quarter of 1997. Although these losses were almost identical, there were
some variations from year to year: audit expenses were higher in 1998,
reflecting the additional reporting required by the Corporation as a reporting
company under the 1934 Act; the Canadian dollar strengthened somewhat in the
first quarter of 1998, whereas it had fallen for most of 1997, and this resulted
in an exchange gain in 1998; and the Corporation incurred additional insurance
expense as a result of its expanding operations as a public corporation. Total
mineral property and deferred exploration costs were $721,000 during the first
quarter of 1998, compared with $581,000 in the first quarter last year. The
major reason for the 1998 increase was the drilling program on the Corporation's
property in Santa Cruz Province, Argentina. This program resulted in several
drill holes that cut high-grade mineralization in holes up to 800 meters apart,
with mineralization open in three directions. The highest grade hole cut 617
grams/tonne (g/t) silver and 4.05 g/t gold over a 115 foot thickness. The
Corporation has increased its land position in the region, and has already begun
a second phase of drilling and exploration on El Pluma/Cerro Saavedra, the
discovery property.
9
<PAGE>
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. However,
there can be no assurance that the Corporation will be successful with such
financings.
At March 31, 1998, the Corporation had cash and cash equivalents of $3.1
million, and a receivable for an additional $0.8 million from the exercise of
warrants. These latter funds were received in trust by the Corporation's
transfer agent during the quarter, and the Corporation received the funds early
in April 1998. This compares with the $7.6 million in cash and cash equivalents
at March 31, 1997, when the Corporation had funds on hand from its special
warrant private placement at the end of 1996 and from the exercise of warrants
in February 1997. Working capital at March 31, 1998 was $3.9 million. The
Corporation's operating activities used $0.2 million in 1998 (before the
adjustment for working capital items which included the funds received in trust
from the exercise of warrants), which was the same as for the first quarter of
1997. Investing activities used $0.7 million compared with $0.6 million in 1997,
reflecting the higher level of drilling activity this year. Financing activities
this year included $0.8 million of funds from the exercise of warrants, compared
with $1.7 million in 1997, also from the exercise of warrants. Cash and cash
equivalents decreased in the first quarter of 1998 by $0.9 million, whereas
there was an increase of $0.9 million in the first quarter of 1997.
10
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit Number Description
-------------- -----------
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: May 11, 1998 By: ALLEN V. AMBROSE
-------------------------------------
Allen V. Ambrose
President
Date: May 11, 1998 By: 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
three-month period ended March 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,128,334
<SECURITIES> 0
<RECEIVABLES> 983,457
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,111,791
<PP&E> 4,231,756
<DEPRECIATION> 81,981
<TOTAL-ASSETS> 8,261,566
<CURRENT-LIABILITIES> 219,785
<BONDS> 0
0
0
<COMMON> 15,938,398
<OTHER-SE> (7,896,617)
<TOTAL-LIABILITY-AND-EQUITY> 8,261,566
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 226,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (226,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> (226,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (226,487)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
