SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-10104
LA TEKO RESOURCES LTD.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
British Columbia, Canada 87-0483319
------------------------------- -----------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Howe St., #500
Vancouver, B.C. V6C 2T6
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(Address of principal executive offices) (Zip Code)
(604) 688-0833
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(Registrant's telephone number, including area code)
N/A
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Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
As of June 30, 1997, the registrant had 23,467,358 shares of its common stock
issued and outstanding.
LA TEKO RESOURCES LTD.
Financial Information
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ITEM 1. FINANCIAL STATEMENTS
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The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form 10-
K for the year ended December 31, 1996. The accompanying financial statements
have not been examined by independent accountants in accordance with generally
accepted auditing standards, but in the opinion of management such financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to summarize fairly the Company's financial position and
results of operations.
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
1997 1996
-------- --------
EXPENSES
General and administrative expenses 561,476 526,755
Operating and mine maintenance costs 101,286 105,333
Royalty and lease 75,000 75,000
Depreciation 28,564 26,797
New prospect evaluation -- 39,333
766,326 773,218
-------- --------
Loss from operations before other items (6,326) (773,218)
-------- --------
OTHER ITEMS
Interest income 46,301 --
Gain on sale of equipment 1,581 7,407
Loss on abandonment of furnishings
and equipment (4,505) 7,447
--------- ---------
NET LOSS $ (722,949) (758,364)
========= =========
LA TEKO RESOURCES LTD.
CONSOLIDATED BALANCE SHEET
(EXPRESSED IN U.S. DOLLARS)
JUNE 30, 1997
(Unaudited)
1997 1996
-------- --------
CURRENT ASSETS
Cash and short-term deposits$ $ 1,642,830 $ 2,142,038
Accounts receivable 19,579 53,084
Inventories 3,148 6,295
Prepaid expenses 102,635 89,889
---------- ----------
Total current assets 1,768,192 2,291,306
---------- ----------
Mineral properties and deferred costs 10,736,199 10,292,061
Plant and equipment 239,040 209,503
Investments 500,913 231,069
---------- ----------
$13,244,344 $13,023,939
========== ==========
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 35,480 $ 118,999
Current portion of long-term debt -- 868,000
---------- ----------
Total current liabilities 35,480 986,999
Long-term debt -- 15,000
---------- ----------
35,480 1,001,999
SHAREHOLDERS' EQUITY
Common capital stock; no par value;
authorized: 100,000,000 shares;
issued and outstanding: 23,467,358
(1996: 23,318,478) 18,225,341 18,029,617
Accumulated deficit (5,016,477) (6,007,677)
---------- ----------
13,208,864 12,021,940
---------- ----------
$13,244,344 $13,023,939
========== ==========
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(EXPRESSED IN U.S. DOLLARS)
FOR YEARS ENDED DECEMBER 1995 AND 1996
AND SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
Common Stock Accumulated
Shares Amount Deficit Total
------------- ---------- ---------- ----------
Balance, December
31, 1994 36,287,809 23,052,479 (4,884,456) 18,168,023
1995
Common stock issued for:
Public offering sales 70,520 177,005 -- 177,005
Exercise of warrants 371,120 814,061 -- 814,061
Short swing profits -- 2,100 -- 2,100
Less offering costs -- (45,360) -- (45,360)
Compensatory stock options -- 64,190 -- 64,190
Net loss -- -- (364,857) (364,857)
---------- ---------- --------- ----------
441,640 1,011,996 (364,857) 647,139
---------- ---------- --------- ----------
Balance, December
31, 1995 36,729,449 24,064,475 (5,249,313) 18,815,162
1996
Common stock issued for:
Exercise of options 138,780 222,048 -- 222,048
Compensatory stock options -- 188,125 -- 188,125
Net income -- -- 955,785 955,785
---------- ---------- --------- ----------
138,780 410,173 955,785 1,365,958
---------- ---------- --------- ----------
Balance, December
31, 1996 36,868,229 24,474,648 (4,293,528) 20,181,120
Six months ended June 30, 1997
Common stock issued for:
Exercise of options 5,000 8,000 -- 8,000
Other 5,100 -- -- --
Net loss -- -- (722,949) (722,949)
---------- ---------- --------- ----------
10,100 8,000 (722,949) (714,949)
---------- ---------- --------- ----------
Balance, June
30, 1997 36,878,329 24,482,648 (5,016,477) 19,466,171
Less treasury shares (13,410,971) (6,257,307) -- (6,257,307)
---------- ---------- --------- ----------
Balance, June
30, 1997 23,467,358 $18,225,341 $(5,016,477) $13,208,864
========== ========== ========= ==========
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
1997 1996
---------- ---------
Cash flows from operating activities
Net loss $(722,949) $(758,364)
Charges (credits) to operations
not affecting cash:
Loss on abandonment of furnishings
and equipment 4,505 --
Gain on sale of investment (1,581) (7,407)
Depreciation 28,564 26,797
Compensatory expense - stock options granted -- 66,000
--------- ---------
(691,461) (672,974)
Net changes
Decrease in accounts receivable and
pre-paid expenses 97,696 158,444
Decrease in accounts payable and accrued expenses (159,238) (121,441)
Increase in current portion of long-term debt -- 155,704
--------- ---------
Net cash used in operating activities (753,003) (480,267)
Cash Flows from Investing Activities
Exploration costs capitalized (221,060) (121,828)
Proceeds from sale of equipment 3,456 9,800
Purchase of plant and equipment (63,268) (34,104)
Investment in mineral properties -- (15,000)
--------- ---------
Net cash used in investing activities (280,872) (161,132)
--------- ---------
Cash Flows From Financing Activities
Reduction of debt (372,500) (345,289)
Cash proceeds from issuance of common stock 8,000 156,448
--------- ---------
Net cash used in financing activities (364,500) (188,841)
--------- ---------
Net decrease in cash and cash equivalents (1,398,375) (830,240)
Cash and cash equivalents, beginning of period 3,041,205 2,972,278
--------- ---------
Cash and cash equivalents, end of period $1,642,830 $2,142,038
========= =========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest $2,396 58,565
Cash paid during the period for income taxes -- 300
Supplementary Schedule of Non-cash Investing and Financing Activities
Depreciation capitalized into deferred costs -- --
Stock issued as bonus compensation -- --
LA TEKO RESOURCES LTD.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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GENERAL
The Company is in the business of exploration and development of mineral
properties, with two advanced-stage projects, True North and Ryan Lode, and five
early stage exploration projects. The Company has provided for recent years'
operations primarily from the receipt of funds from Newmont pursuant to the True
North JV Agreement and the cash proceeds from issuance of common stock. It is
anticipated that the $1,642,830 cash on hand June 30, 1997 is sufficient to
cover expenditures required for the balance of 1997.
All dollar amounts included herein respecting Management's Discussion and
Analysis are in U.S. dollars except where noted otherwise as Canadian dollars
(CAN).
CAPITALIZED COSTS
Costs of acquisition and deferred exploration expenditures associated with the
Company's mineral properties are summarized as follows:
Balance Capitalized Additions Balance
PROJECT December 31, 1996 (Deletions) 1997 June 30, 1997
- ----------------- ----------------- --------------------- -------------
True North 0 70,201 70,201
Ryan Lode 9,795,939 48,864 9,844,803
Margarita 426,194 525 426,719
Juniper 168,505 14,858 183,363
Twin Buttes 57,634 75,482 133,116
Lucky Gulch 31,313 793 32,106
Discovery 35,555 10,336 45,891
---------- -------- -----------
Total Mineral
Properties and
Deferred Costs 10,515,140 221,059 10,736,199
=========== ======== ===========
RESULTS OF OPERATIONS
Income
The Company has not received operating revenues during any of the last three
years and will not have income from sales of mineral product in 1997.
Expenses
During the first half of 1997, the Company expended $221,059 for capitalized
costs associated with the exploration and development of its mineral properties
compared to $136,828 which was expended during the first six months of 1996. The
increase was due primarily to $70,201 paid to Newmont for the Company's 35%
share of the initial acquisition costs for a number of new properties added to
the True North JV.
General and administrative expenses, including corporate and project overhead
increased to $561,476 for the first six months of 1997 as compared to $526,755
for the same six month period for 1996. Most of this difference was in the
first quarter, as the second quarter 1997 result, $345,552 is virtually the same
as the second quarter 1996, $344,839.
Operating and mine maintenance costs were $101,286 for the first half 1997 as
compared to $105,333 in the first half 1996, again reflecting reclamation and
environmental monitoring activities at the Ryan Lode project.
Royalty and lease payments of $75,000, compared with $75,000 in the first half
of 1996.
Net interest income for the first six months of 1997 was $46,301 compared with
$7,447 for the comparable six months of 1996. The increase reflects the
reduction in interest expense resulting from the redemption of the company's
debentures. The Company currently has no debt.
Depreciation was approximately equal for the six month periods ended June 30,
1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, the Company has relied on its December 31, 1996
cash on hand of $3,041,205 to fund its requirements for general and
administrative costs, ongoing exploration and development projects, and
redemption of debentures.
At June 30, 1997, the Company had working capital of approximately $1,733,000
compared with $2,697,000 at December 31, 1996. The Company believes that it has
sufficient working capital to meet its anticipated expenditures for the
remainder of 1997.
During the six months of 1997, cash flows for operating activities used
approximately $753,000, investing activities $280,240, primarily respecting
capitalized exploration costs, and $372,500 for the redemption of convertible
debentures. Remaining cash requirements for 1997 will be provided from current
cash reserves.
Subsequent to the quarter, on July 16, 1997, the Company announced the sale of
its Ryan Lode property for $12 million over five years. The transaction will
close, with an initial payment of $500,000 on completion of a 60 day due
diligence period. If this payment is made, as anticipated, it will not only add
to the Company's treasury, but it will also relieve the Company of significant
ongoing reclamation and property maintenance costs related to the Ryan Lode
project.
The Company will receive no further cash payments from Newmont under the True
North JV Agreement. Beyond 1997, the Company may require additional capital for
ongoing administrative, exploration, development and acquisition activities. In
order to meet such long-term needs, it will be necessary to obtain required
capital from the sale of securities, possible new joint ventures or similar
arrangements, project financing or other sources. There can be no assurance
that any required additional funds will be available or can be obtained on terms
favourable to the Company.
The Company has outstanding options exercisable during 1997 to purchase an
aggregate of 1,654,935 shares of common stock at an average exercise price of
$1.86 per share, for a total of $ 3,078,180, but cannot predict whether any
material number of such options will be exercised.
PROJECTED 1997 REQUIREMENTS
During 1997, the Company budgeted approximately $1,998,000 in capital to fund
the continuation of permitting and reclamation activities at the Ryan Lode mine
and related royalty payments, continue with the True North project under joint
venture with Newmont, undertake exploration of its other prospects and make
related minimum royalty and other property payments, evaluate and perhaps
acquire other potential prospects, retire $373,000 in convertible debentures,
and meet other ongoing operating expenses. First half 1997 expenditures for
these purpuses were approximately $1,398,000. The sale of Ryan Lode will result
in some 1997 savings, although the bulk of the 1997 program will have been
completed prior to closing of the sale.
Notwithstanding Newmont's announcement of its intent to continue with the True
North Joint Venture and that it is planning substantial additional exploration
and development work during 1997, decisions by Newmont respecting its True North
activities are beyond the ability of the Company to predict or control.
Provisions of the joint venture agreement are such that Newmont may withdraw
from the joint venture at its sole discretion. In the event of termination by
Newmont, the Company will re-acquire, at no cost, Newmont's 65% interest in the
True North project, including subsequently-acquired acreage, together with all
exploration data, and the Company will then become obligated for the continuing
carrying costs and expenses of the True North project.
COMMITMENTS AND CONTINGENCIES
Operations are subject to certain lease and royalty obligations.
The Company carries insurance against property damage including insurance on its
machinery and equipment and motor vehic les and also comprehensive general
liability and liability policies applicable to motor vehicles. The Company has
elected not to insure against business interruption.
The Company cannot insure for environmental pollution and has elected not to
insure for mine cave-ins, flooding, earthquake and other possible natural
hazards consistent with industry practice. The Company may in the future be
exposed to contingencies and liabilities relating to the foregoing that may
arise under governmental regulations relating to the environment. The Company
is not aware of any existing material contingencies respecting compliance of its
previous activities with environmental requirements.
The Company has implemented procedures to minimize the possibility of chemical
spills, especially in its drilling and heap-leaching operations and utilizes a
patented process in the neutralization of cyanide and other chemical solutions
prior to disseminating liquids from its retention ponds into the environment.
CHANGING PRICES, CURRENCY EXCHANGE RATES AND INFLATION
The value of the Company's properties and its proposed operations have been and
will continue to be affected generally by changes in gold prices. The Company's
ability to obtain exploration capital through joint ventures or other
arrangements with other mining firms and attract additional capital, if
required, through the sale of securities or borrowings on attractive terms are
also affected by gold prices. Such prices are subject to substantial
fluctuations that are beyond the ability of the Company to control or predict.
Although certain of the Company's costs and expenses are affected by the level
of inflation, inflation has not had a significant effect on the Company's
operations. Similarly, the Company's operations, all of which except for its
executive offices are located in the United States, are not materially affected
by fluctuations in the exchange rate between Canadian and US dollars.
OTHER
The Company has reviewed all recently issued, but not yet adopted, accounting
standards in order to determine their effects, if any, on the results of
operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have significant effects
on current or future operations.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) EXHIBITS
The following exhibits are included as part of this report: none.
(b) REPORTS ON FORM 8-K
During the quarter ended June 30, 1997, the Company filed the following
reports on Form 8-K:
Date of Event Reported Item(s) Reported
- ---------------------- --------------------
April 16, 1997 Item 5. Other Events
April 24, 1997 Item 5. Other Events
May 8, 1997 Item 5. Other Events
May 15, 1997 Item 5. Other Events
June 5, 1997 Item 5. Other Events
June 12, 1997 Item 5. Other Events
June 18,1997 Item 5. Other Events
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SIGNATURES
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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.
LA TEKO RESOURCES, LTD.
(Registrant)
Date: August 27, 1997 By /s/ Gerry G. Carlson
Chief Executive Officer, President, Chief
Financial and Accounting Officer, and
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF JUNE 30, 1997, AND STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,642,830
<SECURITIES> 0
<RECEIVABLES> 122,214
<ALLOWANCES> 0
<INVENTORY> 3,148
<CURRENT-ASSETS> 1,768,192
<PP&E> 12,161,390
<DEPRECIATION> (685,238)
<TOTAL-ASSETS> 13,244,344
<CURRENT-LIABILITIES> 35,480
<BONDS> 0
<COMMON> 18,225,341
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0
<OTHER-SE> (5,016,477)
<TOTAL-LIABILITY-AND-EQUITY> 13,244,344
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (766,326)
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<INCOME-PRETAX> (722,949)
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<NET-INCOME> (722,949)
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