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 March 31, 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 Street, #500 Vancouver, B.C. V6C 2T6
(Address of principal executive offices) (Zip Code)
(604) 688-0833
(Registrant's telephone number, including area code)
N/A
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 April 25, 1997, the registrant had 23,462,258 shares of its common stock
issued and outstanding.
<PAGE>
LA TEKO RESOURCES LTD.
Part I - 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.
<PAGE>
LA TEKO RESOURCES LTD.
Condensed Consolidated Balance Sheets
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
ASSETS (Unaudited)
Current Assets
Cash and short-term deposits $ 2,238,389 $ 3,041,205
Receivables 14,364 15,918
Inventories 6,295 6,295
Pre-paid expenses 158,104 200,845
------------- ------------
Total current assets 2,417,152 3,264,263
Mineral properties and 10,559,261 10,515,140
deferred costs
Plant and equipment 210,848 210,716
Investments 500,913 500,913
------------- ------------
$ 13,688,174 $ 14,491,032
============= ============
LIABILITIES
Current Liabilities
Accounts payable and accrued $ 51,284 $ 194,718
expenses
Current portion of long-term -- 372,500
debt
------------- ------------
Total current liabilities 51,284 567,218
------------- ------------
SHAREHOLDERS' EQUITY
Common capital stock, no par
value; authorized 100,000,000
shares; issued and
outstanding: 23,462,258 and
23,457,258 18,225,342 18,217,342
Accumulated deficit (4,588,452) (4,293,528)
------------- ------------
13,636,890 13,923,814
------------- ------------
$ 13,688,174 $ 14,491,032
============= ============
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
Condensed Consolidated Statements of Operations
(Unaudited)
FOR THE THREE-MONTH PERIODS
ENDED
MARCH 31,
1997 1996
Sales of gold and silver $ -- $ --
Expenses
Operating and mine 54,628 30,201
maintenance costs
New prospect evaluation 42 32,478
General and administrative 215,924 181,916
expenses
Depreciation 12,991 11,337
Royalty and lease expenses 37,500 37,500
--------- --------
321,085 293,432
--------- --------
Income (loss) from operations (321,085) (293,432)
Other income (expense)
Abandonment of furnishings and (4,349) --
equipment
Gain on sale of equipment 1,581 3,875
Interest income (expense)(net) 28,929 (13,999)
--------- --------
Income (loss) before income (294,924) (303,556)
taxes
Income taxes -- --
Net loss $(294,924) $(303,556)
========= =========
Loss per share $( 0.013) $( 0.013)
========= =========
Weighted average shares
outstanding 23,142,906 23,328,422
========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
FOR THE THREE-MONTH PERIODS
ENDED
MARCH 31,
1997 1996
--------- ---------
Cash Flows From Operating
Activities
Net loss $(294,924) $(303,556)
Charges (credits) to operations
not affecting cash: (1,581) (3,875)
(Gain)/loss on sale of
equipment 4,349 --
Abandonment of furnishings and
equipment 12,991 11,337
Depreciation -- 1,875
--------- --------
Stock option compensation (279,165) (294,219)
--------- --------
Net changes
(Increase)/decrease in accounts
receivable and pre-paid
expenses 42,741 122,048
(Decrease)/increase in accounts
payable and accrued expenses (143,434) (177,300)
--------- --------
(100,693) (55,252)
--------- --------
Net cash used in operating
activities (379,858) (349,471)
--------- --------
Cash Flows From Investing
Activities
Exploration costs capitalized (44,121) (94,770)
Proceeds from sale of equipment 3,456 5,000
Purchase of equipment (17,793) (12,884)
--------- --------
Net cash used in investing
activities (58,458) (102,654)
--------- --------
Cash Flows From Financing
Activities
Reduction of debt (372,500) (55,000)
Cash proceeds from stock
issuance 8,000 73,968
--------- --------
Net cash provided by (used in)
financing activities (364,500) 18,968
--------- --------
Net increase (decrease) in cash
and cash equivalents (802,816) (433,157)
Cash and cash equivalents,
beginning of period 3,041,205 2,972,278
--------- ---------
Cash and cash equivalents, end
of period $ 2,238,389 $ 2,539,121
=========== ===========
Supplemental Disclosures of Cash
Flow Information
Cash paid during the period for $ 3,060 $ 33,003
interest
Cash paid during the period for $ -- $ 18,500
income taxes
Supplementary Schedule of Non-
cash Investing and Financing
Activities
Compensatory stock options $ -- $ 44,000
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these consolidated financial statements.
LA TEKO RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Share Capital
Authorized - 100,000,000 shares having no par value
Issued - 23,462,258 - March 31, 1997
During the first quarter of 1997, the Company issued 5,000 shares in
exchange for $8,000 upon exercise of employee stock options.
Options, Warrants and Convertible Securities
Options Outstanding
EXERCISE
NAME SHARES PRICE EXPIRATION DATE
DIRECTORS
Gerald G. Carlson 500,000 $1.85 12/10/2001-04
Robert W. Gentry 100,000 $1.60 11/16/2000-03
100,000 $2.50 03/14/2001
Gordon Fretwell 100,000 $1.60 11/24/2000-03
John R. Hardesty 100,000 $1.60 11/16/2000-03
John S. Auston 100,000 $2.41 06/18/2001-04
Douglas R. Beaumont 100,000 $2.41 06/18/2001-04
PREVIOUS DIRECTORS
Jack Layne 200,000 $1.60 01/31/1998
David Tinsley 25,000 $1.60 06/05/1997
OTHERS
100,000 $2.13 04/01/1998-99
149,000 $1.60 08/17/1999
105,935 $1.60 11/16/2000
---------
1,679,935
Warrants
None
Convertible Securities
None
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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GENERAL
Commencing in 1990, the Company discontinued mining operations at the Ryan
Lode and embarked upon an extensive exploration program to further delineate
the extent of mineral reserves. The Company has had no income from sales of
mineral product since 1990 and will continue to sustain exploration, general
and administrative and mine property expenses through 1997 without income
from operations. 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 $2,238,000 cash on hand March 31, 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).
RESULTS OF OPERATIONS
Income
As noted above, 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
As noted above and in the accompanying statement of cash flows, during the
first quarter 1997, the Company expended $44,121 for capitalized costs
associated with the exploration and development of its mineral properties
compared to $94,770 which was expended during the first quarter 1996.
Operating and mine maintenance costs increased 81% to $54,628 for the first
quarter 1997 as compared to $30,201 in the first quarter 1996. The
variations between 1997 and 1996 were due principally to equipment repairs
and changes in salaries, wages and employee benefits related to the level of
environmental compliance and reclamation efforts associated with the Ryan
Lode Mine and its spent heap-leach pads.
New prospect evaluation expenses decreased 100% to only $42 for the first
quarter ended March 31, 1997 as compared to $32,478 in 1996, reflecting the
Company's decreased first quarter activities in seeking new exploration
prospects. These efforts have since been re-established.
General and administrative expenses, including corporate and project
overhead, increased 18.7% to $215,924 for the first quarter 1997 as compared
to $181,916 for the same quarter of 1996. The 1997 increase was primarily the
result of having hired a full-time corporate president and establishing
corporate offices in Vancouver B.C.
Interest expense for the first quarter 1997 was only $3,060 compared with
$33,003 for the comparable quarter of 1996. The substantial reduction was
the result of the Company having paid off all of its convertible debentures
during 1996 and through January 1997. The Company currently has no debt.
Interest income for the first quarter ended March 31, 1997 was approximately
$32,000 compared with $19,000 for the comparable quarter of 1996. Interest
income for the first quarter 1996 was under-accrued by approximately $12,000,
which amount was adjusted in the second quarter 1996.
Depreciation was approximately equal for the quarters ended March 31, 1997
and 1996. Office furniture and equipment increased nominally as the Company
established a new corporate office in Vancouver, British Columbia.
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company relied principally on net cash provided from
investing activities, namely the sale of a 65% interest in its True North
property to Newmont under the JV Agreement, to fund its cash requirements for
general and administrative costs, ongoing exploration and development
projects, and redemption of outstanding debentures. Cash on hand at December
31, 1996 in the amount of $3,041,205 is being used to fund 1997 financial
requirements.
At March 31, 1997, the Company had working capital of approximately
$2,366,000 compared with $2,697,000 at December 31, 1996. The Company
believes that it has sufficient working capital to meet its anticipated
expenditures for 1997.
During the first quarter 1997, cash flows from operating activities used
approximately $380,000, investing activities utilized $58,500, primarily
respecting capitalized exploration costs, and $364,500 was used in financing
activities, $372,500 for the redemption of convertible debentures. Remaining
cash requirements for 1997 will be provided for from current cash reserves.
The Company will receive no further cash payments from Newmont under the True
North JV Agreement and will not have operating capital resources to meet
budgeted expenditures. Beyond 1997, the Company may require additional
capital before initiating production on the Ryan Lode property, providing a
portion of the capital that may be required for large scale production at the
True North property, or undertaking significant other exploration or other
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 favorable to the Company.
The Company has outstanding options exercisable during 1997 to purchase an
aggregate of 1,079,000 shares of common stock at an average exercise price of
$1.82 per share, for a total of $1,963,780, 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 initial 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
quarter 1997 expenditures for these purposes were approximately $803,000.
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 vehicles 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. La Teko 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 special 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
Since the beginning of the quarter covered by this report, the Company
filed reports on form 8-K as follows:
DATE OF EVENT REPORTED ITEM REPORTED
January 7, 1997 Item 5. Other Events
March 26, 1997 Item 5. Other Events
April 16, 1997 Item 5. Other Events
April 24, 1997 Item 5. Other Events
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LA TEKO RESOURCES LTD.
Dated: May 8, 1997 By /s/ Gerald G. Carlson, President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1997, AND STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3 MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,238,389
<SECURITIES> 500,913
<RECEIVABLES> 14,364
<ALLOWANCES> 0
<INVENTORY> 6,295
<CURRENT-ASSETS> 2,417,152
<PP&E> 879,950
<DEPRECIATION> 669,102
<TOTAL-ASSETS> 13,688,174
<CURRENT-LIABILITIES> 51,284
<BONDS> 0
<COMMON> 18,225,342
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,668,174
<SALES> 0
<TOTAL-REVENUES> 31,989
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 323,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,660
<INCOME-PRETAX> (294,924)
<INCOME-TAX> 0
<INCOME-CONTINUING> (294,924)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (294,924)
<EPS-PRIMARY> (.013)
<EPS-DILUTED> (.013)
</TABLE>
