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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 March 31, 1999
[ X ] 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 9
Shares outstanding as of April 30, 1999: 20,390,030 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,
1999 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 1,231,992 $ 1,869,765
Receivables and prepaid expenses 108,508 123,706
----------------- -----------------
Total current assets 1,340,500 1,993,471
----------------- -----------------
Mineral properties and deferred exploration costs 3,695,430 3,305,711
Capital assets, net 139,978 153,240
----------------- -----------------
Total assets $ 5,175,908 $ 5,452,422
================= =================
LIABILITIES
Current:
Accounts payable and accruals $ 80,284 $ 62,883
Due to related parties 43,501 36,278
----------------- -----------------
Total current liabilities 123,785 99,161
----------------- -----------------
SHAREHOLDERS' EQUITY
Share capital 16,414,666 16,414,666
Accumulated deficit (11,362,543) (11,061,405)
----------------- -----------------
Total shareholders' equity 5,052,123 5,353,261
----------------- -----------------
Total liabilities and shareholders' equity $ 5,175,908 $ 5,452,422
================= =================
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
1999 1998 March 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Administration fees $ 8,019 $ 8,476 $ 160,581
Audit and accounting 31,541 34,333 198,033
Consulting fees 42,848 44,848 665,770
Depreciation 1,359 1,265 10,848
Equipment rental 1,517 1,517 14,459
Foreign exchange (gain) loss (11,584) (17,181) 411,028
Insurance 16,144 17,938 104,676
Legal 51,988 14,184 403,823
Maintenance 51 12 317
Materials and supplies 0 18 45,512
Office overhead 48,693 64,881 1,094,260
Telephone 18,818 18,796 275,731
Transfer agent 1,217 3,920 63,615
Travel 15,190 11,954 251,851
Wages and benefits 50,847 56,170 765,549
Write-off of deferred expenditures 40,750 0 6,730,803
---------------- ---------------- ----------------
Total expenses 317,398 261,131 11,196,856
Interest income (16,260) (34,644) (419,043)
---------------- ---------------- ----------------
Net loss for the period 301,138 226,487 10,777,813
Accumulated deficit, beginning of the period 11,061,405 7,665,814 0
Share issue costs 0 4,316 567,515
Deficiency on acquisition of subsidiary 0 0 17,215
---------------- ---------------- ----------------
Accumulated deficit, end of the period $ 11,362,543 $ 7,896,617 $ 11,362,543
================ ================ ================
Net loss per common share $ 0.01 $ 0.01
================ ================
Weighted average shares outstanding 20,390,030 17,724,935
================ ================
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
1999 1998 March 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Administration fees $ 5,893 $ 5,861 $ 310,356
Assays and analytical 52,020 88,607 819,021
Construction and trenching 0 23,576 505,473
Consulting fees 32,197 48,752 795,965
Depreciation 11,902 18,286 144,452
Drilling 4,691 87,411 651,415
Equipment rental 2,315 8,837 239,222
Geology 110,037 130,705 2,582,515
Geophysics 10,010 1,440 258,598
Insurance 9,706 10,839 177,586
Legal 23,747 22,147 516,630
Maintenance 11,797 11,092 138,502
Materials and supplies 27,930 12,147 392,035
Project overhead 8,666 4,238 248,159
Property and mineral rights 2,587 113,446 1,249,265
Telephone 2,667 4,563 51,156
Travel 72,788 90,500 848,970
Wages and benefits 41,516 39,042 620,774
---------------- ---------------- ----------------
Costs incurred during the period 430,469 721,489 10,550,094
Deferred costs, beginning of the period 3,305,711 3,226,856 0
Deferred costs, acquired 0 0 576,139
Deferred costs written off (40,750) 0 (6,730,803)
Mineral property option proceeds 0 0 (700,000)
---------------- ---------------- ----------------
Deferred costs, end of the period $ 3,695,430 $ 3,948,345 $ 3,695,430
================ ================ ================
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 CASH FLOWS
(U.S. Dollars-Unaudited)
Period from
Three Months Ended July 1, 1994
------------------------------------- (commencement)
March 31, March 31, through
1999 1998 March 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Operating Activities
Net loss for the period $ (301,138) $ (226,487) $ (10,777,813)
Adjustments to reconcile net loss to net cash used
in operating activities:
Write-off of incorporation costs 0 0 665
Write-off of deferred expenditures 40,750 0 6,730,803
Depreciation 1,359 1,265 10,848
Change in:
Receivables and prepaid expense 15,198 35,212 (108,508)
Funds in trust on exercise of warrants 0 (806,136) 0
Accounts payable and accruals 17,401 1,626 80,284
Due to related parties 7,224 20,718 43,502
---------------- ---------------- ----------------
Cash used in operating activities (219,206) (973,802) (4,020,219)
---------------- ---------------- ----------------
Investing Activities
Incorporation costs 0 0 (665)
Purchases of capital assets 0 0 (295,279)
Mineral properties and deferred exploration (418,567) (703,203) (10,405,642)
Acquisition of subsidiaries 0 0 (17,817)
Mineral property option proceeds 0 0 700,000
---------------- ---------------- ----------------
Cash used in investing activities (418,567) (703,203) (10,019,403)
---------------- ---------------- ----------------
Financing Activities
Shares issued for cash, net 0 801,820 15,271,614
---------------- ---------------- ----------------
Cash provided by financing activities 0 801,820 15,271,614
---------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents (637,773) (875,185) 1,231,992
Cash and cash equivalents, beginning of the period 1,869,765 4,003,519 0
---------------- ---------------- ----------------
Cash and cash equivalents, end of the period $ 1,231,992 $ 3,128,334 $ 1,231,992
================ ================ ================
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, 1999 and 1998 and for
the period from commencement (July 1, 1994) through March 31, 1999 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, 1998 financial information has been derived from the Corporation's
audited consolidated financial statements.
These consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended
December 31, 1998. 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
and stock-based compensation and are described in Note 13 to the Corporation's
consolidated financial statements for the year ended December 31, 1998.
The impact of the above on the interim consolidated financial statements is as
follows:
<TABLE>
<CAPTION>
March 31, 1999 Dec. 31, 1998
---------------- ----------------
<S> <C> <C>
Accumulated deficit, end of period,
per Canadian GAAP $ 11,362,543 $ 11,061,405
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 6,324,914
Adjustment for share issue costs (567,515) (567,515)
Adjustment for deferred exploration costs 3,562,605 3,175,473
---------------- ----------------
Accumulated deficit, end of period,
per U.S. GAAP $ 20,931,137 $ 20,242,867
================ ================
</TABLE>
7
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
March 31, Dec. 31,
1999 1998
-------------- --------------
<S> <C> <C>
Share capital, per Canadian GAAP $ 16,414,666 $ 16,414,666
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 6,324,914
Adjustment for share issue costs (567,515) (567,515)
-------------- --------------
Share capital, per U.S. GAAP $ 22,420,655 $ 22,420,655
============== ==============
</TABLE>
<TABLE>
<CAPTION>
Period from
Three Months Ended July 1, 1994
------------------------------------- (commencement)
March 31, March 31, through
1999 1998 March 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net loss for the period, per Canadian GAAP $ 301,138 $ 226,487 $ 10,777,813
Adjustment for acquisition of Scotia 0 0 248,590
Adjustment for compensation expense 0 0 6,324,914
Adjustment for deferred exploration costs 387,132 608,043 3,562,605
---------------- ---------------- ----------------
Loss for the period, per U.S. GAAP $ 688,270 $ 834,530 $ 20,913,922
================ ================ ================
Loss per common share, per U.S. GAAP $ 0.03 $ 0.05
================ ================
</TABLE>
3. Summary of Significant Accounting Policies
In January 1999, the Corporation adopted the requirements of Canadian Institute
of Chartered Accountants (CICA) 1540, "Cash Flow Statements", in preparing the
statement of cash flows. The comparative information for the three months ended
March 31, 1998 has been restated to reflect the presentation in the current
period.
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, located primarily in the Republic of Argentina, consisting
of mineral rights and applications for mineral rights, covering approximately
198,000 hectares in six provinces in 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 $0.6 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 1999 compared with first quarter 1998
The Corporation had a net loss of $301,000 ($0.01 per share) for the first
quarter of 1999, compared with a net loss of $226,000 (also $0.01 per share) for
the first quarter of 1998. The increase in net loss can be attributed to two
expense categories: legal expenses (incurred for the unit financing, announced
in February 1999, which was not proceeded with) and deferred expenditures
written-off (which related to period expenditures for properties written-off at
December 31, 1998). Total mineral property and deferred exploration costs were
$430,000 during the first quarter of 1999, compared with $721,000 in the first
quarter of last year. The major reason for the decrease from 1998 to 1999 was
the timing of the El Pluma/Cerro Saavedra drilling programs; in 1998 the
drilling program started early in the first quarter, while 1999's drilling
program began at the very end of the quarter. Compared with the first quarter of
1999, property and mineral rights costs were also much higher in the first
quarter of 1998 when the Corporation incurred property acquisition costs for the
Agua Blanca and Santa Clara properties, which were subsequently abandoned.
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
9
<PAGE>
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, 1999, the Corporation had cash and cash equivalents of $1.2
million, down from $3.1 million at March 31, 1998. Working capital at March 31,
1999 was $1.2 million. The Corporation's operating activities used $0.2 million
in the first quarter of 1999, compared with $1.0 million in 1998 (but this
earlier period included funds held in trust at quarter end, from the exercise of
warrants, of $0.8 million). Investing activities used $0.4 million in the first
quarter of 1999, compared with $0.7 million in the same period last year, as a
result of the later timing of the Santa Cruz project drilling and the 1998
expenditures for properties subsequently dropped. There were no financing
activities in the first quarter of 1999 (following the termination of the
proposed unit financing), whereas the Corporation received $0.8 million in the
same period last year from the exercise of warrants. Cash and cash equivalents
decreased in the first quarter by $0.6 million in 1999 and $0.9 million in 1998.
Year 2000 Issue
- ---------------
As the year 2000 approaches, there are uncertainties concerning whether computer
systems will properly recognize date-sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or fail.
The Corporation's computer systems and software are already configured to
accommodate dates beyond the year 2000. The Corporation believes that the year
2000 will not pose significant operational problems for the Corporation's
computer systems; however, the Corporation has not yet completed its assessment
of all of its systems, or the computer systems of suppliers and other third
parties with whom it deals. While it is not possible at this time to assess the
effect of a third party's inability to adequately address year 2000 issues, the
Corporation does not believe the potential problems associated with year 2000
will have a material effect on its financial results.
New Accounting Pronouncement
- ----------------------------
In January 1999, the Corporation adopted the requirements of Canadian Institute
of Chartered Accountants (CICA) 1540, "Cash Flow Statements", in preparing the
statement of cash flows. The comparative information for the three months ended
March 31, 1998 has been restated to reflect the presentation in the current
year.
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 10, 1999 By: /s/ ALLEN V. AMBROSE
----------------------- -------------------------------------
Allen V. Ambrose
President
Date: May 10, 1999 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
<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, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,231,992
<SECURITIES> 0
<RECEIVABLES> 29,494
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,340,500
<PP&E> 3,990,709
<DEPRECIATION> 155,301
<TOTAL-ASSETS> 5,175,908
<CURRENT-LIABILITIES> 123,785
<BONDS> 0
0
0
<COMMON> 16,414,666
<OTHER-SE> (11,362,543)
<TOTAL-LIABILITY-AND-EQUITY> 5,175,908
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 301,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (301,138)
<INCOME-TAX> 0
<INCOME-CONTINUING> (301,138)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (301,138)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
