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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, 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 April 30, 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
-----------------
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
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MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED BALANCE SHEETS
(U.S. Dollars)
<TABLE>
<CAPTION>
March 31,
2000 December 31,
Unaudited 1999
------------- -------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents $ 854,248 $ 483,471
Receivables and prepaid expenses 32,941 32,031
------------- -------------
Total current assets 887,189 515,502
Mineral properties and deferred exploration costs 3,994,409 3,622,902
Capital assets, net 56,393 62,059
------------- -------------
Total assets $ 4,937,991 $ 4,200,463
============= =============
LIABILITIES
Current:
Accounts payable and accruals $ 79,233 $ 155,748
Due to related parties 124,919 83,412
------------- -------------
Total current liabilities 204,152 239,160
------------- -------------
SHAREHOLDERS' EQUITY
Share capital 18,027,623 16,960,540
Accumulated deficit (13,293,784) (12,999,237)
------------- -------------
Total shareholders' equity 4,773,839 3,961,303
------------- -------------
Total liabilities and shareholders' equity $ 4,937,991 $ 4,200,463
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
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 July 1, 1994
-------------------------- (commencement)
March 31, March 31, through
2000 1999 March 31, 2000
------------ ----------- ---------------
<S> <C> <C> <C>
Administration fees $ 6,880 $ 8,019 $ 187,644
Audit and accounting 26,790 31,541 253,933
Consulting fees 27,998 42,848 810,788
Depreciation 986 1,359 50,915
Equipment rental 1,517 1,517 20,529
Foreign exchange (gain) loss (4,070) (11,584) 390,005
Insurance 16,613 16,144 170,189
Legal 30,334 51,988 492,446
Maintenance 0 51 343
Materials and supplies 0 0 45,512
Office overhead 24,405 48,693 1,233,451
Telephone 13,781 18,818 318,733
Transfer agent 6,041 1,217 79,635
Travel 8,121 15,190 305,240
Wages and benefits 39,602 50,847 941,461
Write-off of deferred costs 0 40,750 7,607,105
------------ ----------- ---------------
Total expenses 198,998 317,398 12,907,929
Gain on sale of capital assets 0 0 (35,004)
Interest income (8,635) (16,260) (439,370)
------------ ----------- ---------------
Net loss for the period 190,363 301,138 12,433,555
Accumulated deficit, beginning of the period 12,999,237 11,061,405 0
Share issue costs 104,184 0 843,014
Deficiency on acquisition of subsidiary 0 0 17,215
------------ ----------- ---------------
Accumulated deficit, end of the period $13,293,784 $11,362,543 $13,293,784
============ =========== ===============
Basic and diluted net loss per common share $ 0.01 $ 0.01
============ ===========
Weighted average shares outstanding 27,925,345 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 July 1, 1994
-------------------------- (commencement)
March 31, March 31, through
2000 1999 March 31, 2000
------------ ----------- ---------------
<S> <C> <C> <C>
Administration fees $ 4,098 $ 5,893 $ 328,599
Assays and analytical 30,013 52,020 917,369
Construction and trenching 0 0 507,957
Consulting fees 15,063 32,197 852,681
Depreciation 4,680 11,902 147,400
Drilling 145,008 4,691 875,393
Equipment rental 0 2,315 243,372
Geology 56,502 110,037 2,847,732
Geophysics 0 10,010 309,902
Insurance 5,502 9,706 212,204
Legal 563 23,747 576,946
Maintenance 4,682 11,797 152,021
Materials and supplies 20,652 27,930 428,429
Project overhead 3,727 8,666 287,358
Property and mineral rights 12,165 2,587 1,271,605
Telephone 4,068 2,667 62,875
Travel 37,514 72,788 961,868
Wages and benefits 27,270 41,516 741,664
------------ ----------- ---------------
Costs incurred during the period 371,507 430,469 11,725,375
Deferred costs, beginning of the period 3,622,902 3,305,711 0
Deferred costs, acquired 0 0 576,139
Deferred costs written off 0 (40,750) (7,607,105)
Mineral property option proceeds 0 0 (700,000)
------------ ----------- ---------------
Deferred costs, end of the period $3,994,409 $3,695,430 $ 3,994,409
============ =========== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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MINERA ANDES INC.
"An Exploration Stage Corporation"
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. Dollars-Unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended July 1, 1994
-------------------------- (commencement)
March 31, March 31, through
2000 1999 March 31, 2000
------------ ----------- ---------------
<S> <C> <C> <C>
Operating Activities
Net loss for the period $(190,363) $ (301,138) $(12,433,555)
Adjustments to reconcile net loss to
net cash used in operating activities:
Write-off of incorporation costs 0 0 665
Write-off of deferred costs 0 40,750 7,607,105
Depreciation 986 1,359 50,915
Gain on sale of capital assets 0 0 (35,004)
Change in:
Receivables and prepaid expense (910) 15,198 (30,955)
Accounts payable and accruals (76,515) 17,401 60,032
Due to related parties 41,507 7,224 124,919
------------ ----------- ---------------
Cash used in operating activities (225,295) (219,206) (4,655,878)
------------ ----------- ---------------
Investing Activities
Incorporation costs 0 0 (665)
Purchases of capital assets 0 0 (219,704)
Mineral properties and deferred exploration (366,827) (418,567) (11,577,975)
Acquisition of subsidiaries 0 0 (602)
Mineral property option proceeds 0 0 700,000
------------ ----------- ---------------
Cash used in investing activities (366,827) (418,567) (11,098,946)
------------ ----------- ---------------
Financing Activities
Shares issued for cash, less issue costs 962,899 0 16,609,072
------------ ----------- ---------------
Cash provided by financing activities 962,899 0 16,609,072
------------ ----------- ---------------
Increase (decrease) in cash and cash
equivalents 370,777 (637,773) 854,248
Cash and cash equivalents, beginning of the
period 483,471 1,869,765 0
------------ ----------- ---------------
Cash and cash equivalents, end of the period $ 854,248 $1,231,992 $ 854,248
============ =========== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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 periods ended March 31, 2000 and 1999 and for
the period from commencement (July 1, 1994) through March 31, 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>
March 31, 2000 Dec. 31, 1999
--------------- --------------
<S> <C> <C>
Accumulated deficit, end of period,
per Canadian GAAP $13,293,784 $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 3,841,410 3,482,068
--------------- --------------
Accumulated deficit, end of period,
per U.S. GAAP $22,865,684 $22,315,979
=============== ==============
</TABLE>
7
<PAGE>
MINERA ANDES INC.
"An Exploration Stage Corporation"
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(U.S. Dollars-Unaudited)
<TABLE>
March 31, Dec. 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
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Period from
Three Months Ended July 1, 1994
--------------------- (commencement)
March 31, March 31, through
2000 1999 March 31, 2000
---------- --------- ---------------
<S> <C> <C> <C>
Net loss for the period, per Canadian GAAP $190,363 $301,138 $12,433,555
Adjustment for acquisition of Scotia 0 0 248,590
Adjustment for compensation expense 0 0 6,324,914
Adjustment for deferred exploration costs 359,342 387,132 3,841,410
---------- --------- ---------------
Loss for the period, per U.S. GAAP $549,705 $688,270 $22,848,469
========== ========= ===============
Loss per common share, per U.S. GAAP $ 0.02 $ 0.03
========== =========
</TABLE>
3. Changes to Share Capital
On January 31, 2000, the Corporation raised gross proceeds of Cdn$1,496,365
(US$1,032,973) through a unit offering by way of a Canadian offering with the
issuance of 5,985,460 units at a price of Cdn$0.25 per unit. Each unit
comprised one common share and one common share purchase warrant, which entitles
the holder to purchase one further common share at an exercise price of Cdn$0.35
on or before January 31, 2001. In connection with the financing, the Corporation
paid 7.5 percent commission on the gross proceeds and issued 191,418 common
shares as additional commission.
During the quarter ended March 31, 2000, the Corporation issued 90,000 shares
for the exercise of stock options and received proceeds of Cdn$49,500
(US$34,110).
4. 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 year. 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
<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 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
- ------------------
The Corporation has working capital of $0.7 million, sufficient to cover its
budgeted expenditures for mineral property and exploration activities on its
properties in Argentina, Colombia and Romania and general and administrative
expenses through the end of 2000. During the last three months, the Corporation
closed the remaining portion of the prospectus offering for $1.0 million
(Cdn$1.5 million) through the issuance of 5,985,460 units at a price of Cdn$0.25
per unit. Completion of this offering included an exercised over-allotment
option of Cdn$300,000. The closing was the second and final closing under a
prospectus dated November 29, 1999. The total prospectus raised Cdn$2.3
million.
Each unit consisted of one common share and one common share purchase warrant.
One common share purchase warrant entitles the holder to purchase one additional
common share at Cdn$0.35 per share on or before January 31, 2001. Canaccord
Capital Corporation was the agent for the offering, and received a 7.5 percent
commission of the gross proceeds, and common shares equal to approximately 4
percent of the units sold, in lieu of the agent's option.
The Corporation has budgeted and plans to spend approximately $0.8 million on
its mineral property and exploration activities and general and administrative
expenses for the year ending December 31, 2000, with most properties being kept
on care and maintenance. The Corporation's existing funds will be sufficient to
finance these activities through the end of 2000. If additional funds are
raised during 2000, through the exercise of warrants or options, through a
further equity financing, by the sale of property interests or by joint venture
financing, additional exploration could be planned and carried out on the
Corporation's properties over the northern hemisphere summer in Romania, and
beginning before year-end for the Latin American projects. 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
9
<PAGE>
the form of equity, debt, or a combination of equity and debt. The Corporation
has no current plan 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 2000 compared with first quarter 1999
The Corporation had a net loss of $190,000 ($0.01 per share) for the first
quarter of 2000, compared with a net loss of $301,000 ($0.01 per share) for the
first quarter of 1999. The decrease in net loss can be attributed to a
reduction in the Corporation's expenses in the first quarter of 2000 as compared
to the first quarter of 1999 Total mineral property and deferred exploration
costs were $372,000 during the first quarter of 2000, compared with $430,000
spent in the first quarter of 1999. The Corporation is maintaining its staff in
Argentina at minimum levels, while still completing geological consulting
contracts on its major property. Expenditures in both years were focused on the
El Pluma/Cerro Saavedra property.
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".
At March 31, 2000, the Corporation had cash and cash equivalents of
approximately $0.9 million compared to $1.2 million at March 31, 1999. Working
capital at March 31, 2000 was $0.7 million, sufficient to cover its budgeted
expenditures for mineral property and exploration activities on its properties
in Argentina, Colombia and Romania and general and administrative expenses
through the end of 2000. The Corporation's operating activities used $0.2
million in each of the first quarters of 2000 and 1999. Investing activities
used $0.4 million in each of the first quarters of 2000 and 1999, with focus in
both periods being on the El Pluma/Cerro Saavedra property. Financing
activities in the first three months of 2000 of $1.0 million, compared to no
financing activities in the first three months of 1999, included the second
closing of a financing under a prospectus dated November 29, 1999. Cash and
cash equivalents increased in the first quarter by $0.4 million in 2000 compared
with a decrease of $0.6 million in the same period in 1999.
10
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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
11
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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: May 15, 2000 By: /s/ Allen V. Ambrose
--------------------- ------------------------------------
Allen V. Ambrose
President
By: /s/ Bonnie L. Kuhn
------------------------------------
Bonnie L. Kuhn
Secretary and Chief Financial Officer
12
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EXHIBIT INDEX
-------------
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
13
<TABLE> <S> <C>
<PAGE>
<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, 2000 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-31-2000
<CASH> 854,248
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 887,189
<PP&E> 4,183,431
<DEPRECIATION> 132,629
<TOTAL-ASSETS> 4,937,991
<CURRENT-LIABILITIES> 204,152
<BONDS> 0
0
0
<COMMON> 18,027,623
<OTHER-SE> (13,293,784)
<TOTAL-LIABILITY-AND-EQUITY> 4,937,991
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 190,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (190,363)
<INCOME-TAX> 0
<INCOME-CONTINUING> (190,363)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,363)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
