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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 September 30, 2000
[_] 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 October 31, 2000: 30,000,030 shares of common stock,
with no par value
Transitional Small Business Disclosure Format (Check One): Yes [_] No [X]
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TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
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......................... 12
SIGNATURES............................................................. 13
</TABLE>
2
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MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------------- --------------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 327,025 $ 483,471
Receivables and prepaid expenses 20,320 32,031
--------------------- --------------------
Total current assets 347,345 515,502
Mineral properties and deferred exploration costs 4,251,090 3,622,902
Capital assets, net 46,914 62,059
--------------------- --------------------
Total assets $ 4,645,349 $ 4,200,463
===================== ====================
LIABILITIES
Current:
Accounts payable and accruals $ 60,074 $ 155,748
Due to related parties 155,487 83,412
--------------------- --------------------
Total current liabilities 215,561 239,160
--------------------- --------------------
SHAREHOLDERS' EQUITY
Share capital 18,027,623 16,960,540
Accumulated deficit (13,597,835) (12,999,237)
--------------------- --------------------
Total shareholders' equity 4,429,788 3,961,303
--------------------- --------------------
Total liabilities and shareholders' equity $ 4,645,349 $ 4,200,463
===================== ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended Nine Months Ended July 1, 1994
------------------------------- --------------------------------- (commencement)
September 30, September 30, September 30, September 30, through
2000 1999 2000 1999 Sept. 30, 2000
--------------- -------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Administration fees $ 5,477 $ 6,580 $ 18,145 $ 21,959 $ 198,909
Audit and accounting 7,197 8,265 41,897 51,035 269,040
Consulting fees 18,906 42,422 74,964 124,407 857,754
Depreciation 986 1,359 2,957 4,077 52,886
Equipment rental (525) 1,517 2,510 4,552 21,522
Foreign exchange (gain) loss 4,076 3,291 6,248 (27,051) 400,323
Insurance 16,612 16,143 49,838 48,431 203,414
Legal 19,641 27,024 84,422 104,155 546,534
Maintenance 398 26 398 77 741
Materials and supplies (31) 0 0 0 45,512
Office overhead 18,409 26,991 76,576 138,796 1,285,622
Telephone 5,922 7,532 28,629 37,795 333,581
Transfer agent 3,534 5,539 12,434 7,943 86,028
Travel 520 10,109 9,101 36,803 306,220
Wages and benefits 32,911 50,061 105,646 152,035 1,007,505
Write-off of deferred expenditures 0 0 0 40,750 7,607,105
------------- -------------- -------------- ------------- --------------
Total expenses 134,033 206,859 513,765 745,764 13,222,696
Gain on sale of capital assets 0 0 0 0 (35,004)
Interest income (3,739) (2,430) (19,351) (26,959) (450,086)
------------- -------------- -------------- ------------- --------------
Net loss for the period 130,294 204,429 494,414 718,805 12,737,606
Accumulated deficit, beginning of the period 13,467,541 11,577,057 12,999,237 11,061,405 0
Share issue costs 0 0 104,184 1,276 843,014
Deficiency on acquisition of subsidiary 0 0 0 0 17,215
------------- -------------- -------------- ------------- --------------
Accumulated deficit, end of period $ 13,597,835 $ 11,781,486 $ 13,597,835 $ 11,781,486 $ 13,597,835
============= ============== ============== ============= ==============
Net loss per common share $ 0.00 $ 0.01 $ 0.02 $ 0.03
============= ============== ============== =============
Weighted average shares outstanding 30,000,030 20,390,030 29,310,992 20,390,030
============= ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF MINERAL PROPERTIES
AND DEFERRED EXPLORATION COSTS
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended Nine Months Ended July 1, 1994
----------------------------------- ------------------------------- (commencement)
September 30, September 30, September 30, September 30, through
2000 1999 2000 1999 Sept. 30, 2000
----------------- -------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Administration fees $ 4,988 $ 3,836 $ 13,926 $ 15,801 $ 338,427
Assays and analytical 160 5,234 51,466 107,162 938,822
Construction and trenching 0 0 0 2,484 507,957
Consulting fees 13,521 13,143 43,467 57,137 881,085
Depreciation 4,680 958 14,041 24,763 156,761
Drilling 0 0 198,448 83,661 928,833
Equipment rental 0 0 696 4,141 244,068
Geology 8,141 45,321 103,148 262,965 2,894,378
Geophysics 0 0 0 61,314 309,902
Insurance 5,899 9,705 16,904 29,274 223,606
Legal 4,356 17,245 7,568 74,259 583,951
Maintenance 759 2,172 7,146 20,609 154,485
Materials and supplies 577 1,723 23,089 40,224 430,866
Project overhead 2,020 11,090 7,051 30,086 290,682
Property and mineral rights 5,005 2,188 17,894 8,221 1,277,334
Telephone 7,606 1,426 14,790 9,032 73,597
Travel 8,228 12,453 65,767 113,926 990,121
Wages and benefits 33,249 25,576 92,787 106,730 807,181
---------------- -------------- ------------ ------------- -------------
Costs incurred during the period 99,189 152,070 678,188 1,051,789 12,032,056
Deferred costs, beginning of period 4,201,901 4,164,680 3,622,902 3,305,711 0
Deferred costs acquired 0 0 0 0 576,139
Deferred costs written off 0 0 0 (40,750) (7,607,105)
Mineral property option proceeds (50,000) 0 (50,000) 0 (750,000)
---------------- -------------- ------------ ------------- -------------
Deferred costs, end of the period $4,251,090 $4,316,750 $4,251,090 $4,316,750 $ 4,251,090
================ ============== ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Period from
Nine Months Ended July 1, 1994
------------------------------------------ (commencement)
September 30, September 30, through
2000 1999 Sept. 30, 2000
---------------------- -------------------- ---------------
<S> <C> <C> <C>
Operating Activities
Net loss for the period $ (494,414) $ (718,805) $ (12,737,606)
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 0 40,750 7,607,105
Depreciation 2,957 4,077 52,886
Gain on sale of capital assets 0 0 (35,004)
Change in:
Receivables and prepaid expense 11,711 59,757 (18,334)
Accounts payable and accruals (95,674) (36,755) 40,873
Due to related parties 72,075 12,521 155,487
------------------ ------------------ ----------------
Cash used in operating activities (503,345) (638,455) (4,933,928)
------------------ ------------------ ----------------
Investing Activities
Incorporation costs 0 0 (665)
Sale (purchases) of capital assets (1,853) 27,026 (221,557)
Mineral properties and deferred exploration (664,147) (1,027,026) (11,875,295)
Acquisition of subsidiaries 0 0 (602)
Mineral property option proceeds 50,000 0 750,000
------------------ ------------------ ----------------
Cash used in investing activities (616,000) (1,000,000) (11,348,119)
------------------ ------------------ ----------------
Financing Activities
Shares issued for cash, less issue costs 962,899 (1,276) 16,609,072
------------------ ------------------ ----------------
Cash (used in) provided by financing activities 962,899 (1,276) 16,609,072
------------------ ------------------ ----------------
Increase (decrease) in cash and cash equivalents (156,446) (1,639,731) 327,025
Cash and cash equivalents, beginning of the period 483,471 1,869,765 0
------------------ ------------------ ----------------
Cash and cash equivalents, end of the period $ 327,025 $ 230,034 $ 327,025
================== ================== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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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,
2000 and 1999 and for the period from commencement (July 1, 1994) through
September 30, 2000 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, 1999 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, 1999. 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, 1999.
The impact of the above on the interim consolidated financial statements is as
follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------------- -----------------------
<S> <C> <C>
Accumulated deficit, end of period, per Canadian GAAP $13,597,835 $12,999,237
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 6,324,914
Adjustment for share issue costs (843,014) (738,830)
Adjustment for deferred exploration costs 4,092,362 3,482,068
----------------------- -----------------------
Accumulated deficit, end of period, per U.S. GAAP $23,420,687 $22,315,979
======================= =======================
</TABLE>
7
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MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------------- ------------------
<S> <C> <C>
Share capital, per Canadian GAAP $18,027,623 $16,960,540
Adjustment for acquisition of Scotia 248,590 248,590
Adjustment for compensation expense 6,324,914 6,324,914
Adjustment for share issue costs (843,014) (738,830)
---------------------- ------------------
Share capital, per U.S. GAAP $23,758,113 $22,795,214
====================== ==================
<CAPTION>
Period from
Three Months Ended Nine Months Ended July 1, 1994
--------------------------------- ------------------------------- (commencement)
Sept. 30, Sept. 30, Sept. 30, Sept. 30, through
2000 1999 2000 1999 Sept. 30, 2000
------------- ---------------- -------------- -------------- --------------
<C> <C> <C> <C> <C>
Net loss for the period, per
Canadian GAAP $ 130,294 $ 204,429 $ 494,414 $ 718,805 $ 12,737,606
Adjustment for acquisition
of Scotia 0 0 0 0 248,590
Adjustment for
compensation expense 0 0 0 0 6,324,914
Adjustment for deferred
exploration costs 44,184 149,882 610,294 1,002,818 4,092,362
------------- ------------- -------------- -------------- ------------
Loss for period, per U.S.
GAAP $ 174,478 $ 354,311 $ 1,104,708 $ 1,721,623 $ 23,403,472
============= ============= ============== ============== ============
Loss per common share,
per U.S. GAAP $ 0.01 $ 0.02 $ 0.04 $ 0.08
============= ============= ============== ==============
</TABLE>
3. Basic and Diluted Loss Per Common Share
Basic earnings per share (EPS) is calculated by dividing loss applicable to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
potentially dilutive securities were exercised or converted to common stock. Due
to the losses in 2000 and 1999, potentially dilutive securities were excluded
from the calculation of diluted EPS, as they were anti-dilutive. Therefore,
there was no difference in the calculation of basic and diluted EPS in 2000 and
1999.
8
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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
175,536 hectares in three provinces in Argentina. The Corporation also holds a
license and an application-in-process for an exploration license in Colombia
totaling approximately 9,539 hectares and exploration licenses in Romania
totaling approximately 23,000 hectares. 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 and Results of Operations
--------------------------------------------
The Corporation has working capital of $0.1 million, only sufficient to cover
its budgeted expenditures for mineral property and exploration activities on its
properties through the end of 2000.
During the quarter ended September 30, 2000, the Corporation entered into two
property transactions and a private placement that will have a near term impact
on its operations and financing. Option to purchase agreements were entered into
on two of the Corporation's gold exploration properties in Chubut Province,
Argentina, for total consideration of $1.25 million and a 2 percent net smelter
return royalty. Under the terms of these agreements, the Corporation received
$50,000 on signing (recorded as mineral property option proceeds) and will
receive a further $50,000 after six months. Payments increase to $100,000 every
six months thereafter, until the full $1.25 million has been paid at the end of
four years. The Corporation entered into a memorandum of understanding for the
exploration and development of its El Pluma/Cerro Saavedra property in Santa
Cruz Province, Argentina, whereby the Peruvian company, Mauricio Hochschild &
Cia. Ltda. ("Hochschild"), can earn a 51 percent interest in the property by
spending $3 million over three years. In addition, Hochschild will pay the
Corporation $200,000 upon signing the definitive agreement (expected to be in
the fourth quarter of 2000) and semi-annual payments totaling $400,000 per year
until pilot plant production is achieved. In September 2000, the Corporation
entered into a private placement special warrant financing with its largest
shareholder, N.A. Degerstrom, Inc., totaling Cdn$235,000 (approximately
$155,000), whereby Degerstrom will be issued 1,175,000 special warrants at a
price of Cdn$0.20. Each special warrant unit will be comprised of one common
share and one common share purchase warrant. The share purchase warrants will be
exercisable for one common share at a price of Cdn$0.20 for the first year and
Cdn$0.25 for the second year. This private placement obtained regulatory
approval and is expected to be completed in the fourth quarter, 2000.
9
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The Corporation has budgeted and plans to spend approximately $0.2 million on
its mineral property and exploration activities and general and administrative
expenses for the balance of the 2000 year and is budgeting to spend a total of
approximately $0.7 million during 2001, with most properties being kept on care
and maintenance. Because the Corporation's existing funds (and funds to be
received from the above transactions) will only be sufficient to fund these
activities through the next six months, the Corporation will need to raise
additional funding during this period in order to continue its operations over
the longer term. Such funding could be through a further equity financing, by
the sale of additional property interests or by joint venture financing. For the
next three years, however, exploration and development on the Corporation's
major property, El Pluma/Cerro Saavedra, will be funded by Hochschild under the
terms of the definitive agreement. Additional funding will be required to enable
the Corporation to plan and carry out exploration on its other properties. There
can be no assurance that the Corporation will be successful in raising
sufficient funds to continue its exploration program and fund general and
administrative expenses.
If the Corporation were to develop a property or a group of properties beyond
the exploration stage, 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 is working on various plans to obtain such
financing but there is no assurance that such financing will be available to the
Corporation on favorable terms.
Third quarter 2000 compared with third quarter 1999
The Corporation had a net loss of $130,000 (less than $0.01per share) for the
third quarter of 2000, compared with a net loss of $204,000 ($0.01 per share)
for the third quarter of 1999. During the 2000 quarter, the Corporation
continued its cost cutting in all areas, compared with the 1999 quarter. Total
mineral property and deferred exploration costs net, after mineral option
proceeds of $50,000, were $49,000 during the third quarter of 2000, compared
with $152,000 in the third quarter last year.
Nine months ended September 30, 2000 compared with the nine months ended
September 30, 1999 The Corporation had a net loss of $494,000 for the nine
months ended September 30,2000, compared with a net loss of $719,000 for the
comparable period in 1999. Total mineral property and deferred exploration costs
for the nine months net, after mineral option proceeds of $50,000, were $628,000
in 2000 and $1,052,000 in the comparable period last year. Expenditures in both
years were focused on the El Pluma/Cerro Saavedra property. Deferred
expenditures related to mineral properties and exploration were $4,251,000 at
September 30, 2000, compared with $4,317,000 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. However,
there can be no assurance that the Corporation will be successful with such
financings. See "Plan of Operations and Results of Operations".
At September 30, 2000, the Corporation had cash and cash equivalents of
$327,000, compared to $230,000 at September 30, 1999. Working capital at
September 30, 2000 was $132,000. The Corporation's operating activities showed
some savings and used $503,000 for the first nine months of 2000, compared with
$638,000 in the same period in 1999. Investing activities were $616,000 in the
2000 period compared with $1,000,000 in the same period in 1999. The focus in
both periods was on the El Pluma/Cerro Saavedra
10
<PAGE>
property. Cash and cash equivalents decreased by $156,000 the first nine months
of 2000 compared to a decrease of $1,640,000 in the same period in 1999.
The Corporation's ability to continue in operation is dependent on its ability
to secure additional financing, and while it has been successful in doing so in
the past (including the property and financing transactions in "Plan of
Operations and Results of Operations" above), there can be no assurance it will
be able to do so in the future. Management is actively pursuing such additional
sources of financing; however, in the event this does not occur, there is doubt
about the ability of the Corporation to continue as a going concern. These
financial statements do not include the adjustments that would be necessary
should the Corporation be unable to continue as a going concern.
11
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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
12
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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 13, 2000 By: /s/ Allen V. Ambrose
------------------------- ---------------------------
Allen V. Ambrose
President
Date: November 13, 2000 By: /s/ Bonnie L. Kuhn
------------------------- ----------------------------
Bonnie L. Kuhn
Chief Financial Officer and
Secretary
13
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EXHIBIT INDEX
-------------
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
14
