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, 1998
Commission file number 0-10104
LA TEKO RESOURCES LTD.
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(Exact name of Registrant as specified in its charter)
British Columbia, Canada 87-0483319
- ------------------------------- ----------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Howe St., #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
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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 March 31, 1998, the registrant had 23,467,358 shares of its common stock
issued and outstanding.
<PAGE>
LA TEKO RESOURCES LTD.
Financial Information
ITEM 1- FINANCIAL STATEMENTS
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, 1997. 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.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN U.S. DOLLARS)
Unaudited - See Notice to Reader
December 31,
March 31, 1998 1997
--------------- --------------
CURRENT ASSETS
Cash and short-term deposits $ 266,895 $ 613,304
Accounts receivable 83,065 93,891
Prepaid expenses 122,590 160,090
------------ ------------
Total current assets 472,550 867,285
Mineral properties and deferred
costs 11,009,324 10,985,135
Plant and equipment 54,845 57,593
Investments 728,413 750,913
------------ ------------
$ 12,265,132 $ 12,660,926
CURRENT LIABILITIES
Bank demand loan $ - $ 150,000
Accounts payable and accrued
expenses 16,419 84,462
------------ ------------
$ 16,419 $ 234,462
SHAREHOLDERS' EQUITY
Common capital stock; no par
value; authorized: 100,000,000
shares; issued and outstanding:
23,467,358 (1997: 23,462,358) 18,182,217 18,182,217
Accumulated deficit (5,933,504) (5,755,753)
------------ ------------
12,248,713 12,426,464
$ 12,265,132 $ 12,660,926
<PAGE>
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
Three months ended March 31, 1998 Unaudited - See Notice to Reader
EXPENSES 1998 1997
---------- ----------
General and administrative
expenses $ 128,520 $ 215,924
Royalty and lease 37,500 37,500
Operating and mine maintenance 6,881 54,628
costs
Depreciation 3,650 12,991
New prospect evaluation - 42
---------- ----------
176,551 321,085
Loss from operations before other
items (176,551) (321,085)
OTHER ITEMS
Interest income (net) 3,199 28,929
Gain (loss) on sale of investments (4,399) -
Gain (loss) on sale of equipment - (2,768)
---------- ----------
NET LOSS $ (177,751) $ (294,924)
NET LOSS PER SHARE $ (0.008) $ (0.013)
<PAGE>
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOW
(EXPRESSED IN U.S. DOLLARS)
Three months ended March 31, 1998 and 1997 Unaudited - See Notice to Reader
Three Months Ended
-------------------------------
December 31,
March 31, 1998 1997
-------------- ------------
Supplemental Disclosures of Cash Flow
Information
Net loss $ (177,751) $ (294,924)
Charges (credits) to operations not
affecting cash:
(Gain) / loss on sale of investments 4,399 -
Depreciation 3,650 12,991
(Gain) / loss on sale of equipment - 2,768
---------- ----------
(169,702) (279,165)
Net changes
Decrease in accounts receivable and
pre-paid expenses 48,326 42,741
Decrease in accounts payable and
accrued expenses (67,677) (143,434)
---------- ----------
Net cash used in operating activities (189,053) (379,858)
Cash Flows from Investing Activities
Proceeds from sale of investments 18,101 -
Investment in mineral properties (21,260) -
Exploration costs capitalized (2,929) (44,121)
Purchase of plant and equipment (1,268) (17,793)
Proceeds from sale of equipment - 3,456
---------- ----------
Net cash used in investing activities (7,356) (58,458)
---------- ----------
Cash Flows From Financing Activities
Reduction of principal on debt - (372,500)
Cash proceeds from issuance of
common stock - 8,000
---------- ----------
Net cash used in financing activities - (364,500)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (196,409) (802,816)
Cash and cash equivalents, beginning
of period 463,304 3,041,205
---------- ----------
Cash and cash equivalents, end of
period $ 266,895 $2,238,389
========== ==========
Cash paid during the period for
interest - 3,060
Cash paid during the period for income
taxes - -
Supplementary Schedule of Non-cash
Investing and Financing Activities - -
Depreciation capitalized into deferred
costs - -
Stock issued as bonus compensation - -
<PAGE>
LA TEKO RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(EXPRESSED IN U.S. DOLLARS)
For the years ended December 1996 and 1997 and three months ended March 31,1998
Unaudited - See Notice to Reader
Common Stock Accumulated
----------------------- ------------
Shares Amount Deficit Total
---------- ---------- ------------ -----------
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 (loss) - - 955,785 955,785
---------- ---------- ---------- ----------
Balance, December 31, 1996 36,868,229 24,474,648 (4,293,528) 20,181,120
1997
Common stock issued for:
Exercise of options 5,000 8,000 - 8,000
Other 5,100 - - -
Compensatory stock options - (43,125) - (43,125)
(reduction)
Net income (loss) - - (1,462,225) (1,462,225)
---------- ---------- ---------- ----------
Balance, December 31, 1997 36,878,329 24,439,523 (5,755,753) 18,683,770
Three months ended March 31,
1998
Common stock issued for:
Exercise of options - - - -
Net loss - - (177,751) (177,751)
---------- ---------- ---------- ----------
Balance, March 31, 1997 36,878,329 24,439,523 (5,933,504) 18,506,019
Less treasury shares (13,410,971) (6,257,306) - (6,257,306)
---------- ---------- ---------- ----------
Balance, March 31, 1997 23,467,358 18,182,217 (5,933,504) $12,248,713
========== ========== ========== ===========
<PAGE>
LA TEKO RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS)
Three months ended March 31, 1998 and 1997 Unaudited - See Notice to Reader
1. SHARE CAPITAL
AUTHORIZED - 100,000,000 shares having no par value
ISSUED - 23,467,358
During the first quarter no shares were issued or options granted.
Options outstanding at March 31, 1998:
Number Price Expire
------- ------- -------------
300,000 $1.60 11/16/2000-03
100,000 $2.50 03-14-2001
200,000 $2.41 06/05/2001-04
500,000 $1.85 12-10-2001-04
100,000 $2.13 06/30/1998
24,000 $1.60 08/17/1999
100,000 $1.50 07/16/2002-05
100,000 $1.60 06/30/1998
50,000 $1.60 12/31/1998
150,000 $1.05 10/08/2002-05
WARRANTS OUTSTANDING - None
2. SUBSEQUENT EVENTS
A. On May 1, 1998, the Company completed a private placement of 2,000,000
units at $0.85 per unit for gross proceeds of $1,700,000. Each unit
consists of one common share and one share purchase warrant. Each warrant
entitles the holder to purchase one share at a price at $1.05 in the first
12 months after closing and $1.25 in the 12 months thereafter.
A finder's fee is payable with respect to the transaction, amounting to
5.9% of the gross proceeds, plus 133,000 share purchase warrants on the
same terms as those described above.
As part of the private placement, the Company granted the subscriber a
right of first refusal to finance the purchase of Newmont Exploration
Limited's ("Newmont") interest in the True North project in the event that
such interest is offered through the Company's right of first opportunity
as defined under the terms of its joint venture agreement with Newmont.
B. On April 24, 1998, the Company agreed to a private placement of 700,000
units at $0.85 per unit for gross proceeds of $595,000. Each unit consists
of one common share and one share purchase warrant. Each warrant entitles
the holder to purchase one share at a price of $1.05 in the first 12 months
after closing and $1.25 in the 12 months thereafter.
This transaction is subject to regulatory approval.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is in the business of exploration and development of mineral
properties, with two advanced-stage projects, True North and Ryan Lode, one mid
11
stage project, Scheelite Dome, and four early stage exploration projects. The
Company has provided for recent years' operations primarily from the receipt of
funds from Newmont Exploration Limited ("Newmont") pursuant to the True North JV
Agreement and the cash proceeds from issuance of common stock. It is anticipated
that the $267,000 cash on hand March 31,1998 combined with gross proceeds of
$2,295,000 from private placements done subsequent to the end of the first
quarter are sufficient to cover expenditures required for the balance of 1998.
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:
CAPITALIZED
BALANCE ADDITIONS BALANCE
PROJECT DECEMBER 31, 1997 (DELETIONS) 1998 03/ 31/98
- ------------------- ------------------ ---------------- -----------
True North 225,465 44 225,509
Ryan Lode 9,770,530 - 9,770,530
Margarita 430,652 - 430,652
Juniper 231,762 - 231,762
Twin Buttes 227,671 911 228,582
Discovery Gulch 99,055 1,974 101,029
Lucky Gulch 0 - 0
Scheelite Dome - 21,260 21,260
----------- ------- -----------
Total Mineral Properties
and Deferred Costs $10,985,135 $24,189 $11,009,324
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 1998.
EXPENSES
During the first quarter of 1998, the Company expended $24,189 for capitalized
costs associated with the acquisition, exploration and development of its
mineral properties compared to $44,121 which was expended during the comparable
period of 1997. The expenditure reflects the normal low level of activity on the
properties during the winter months.
General and administrative expenses, including corporate and project overhead
decreased to $128,520 for the first three months of 1998 as compared to $215,924
for the same three month period for 1997. The decrease reflects the closure
the Fairbanks office, the absence of costs incurred in transferring the head
office functions from Salt Lake City to Vancouver, which occurred in the first
quarter of 1997, and a focused effort to minimize costs.
Operating and mine maintenance costs were $6,881 for the first three months of
1998 as compared to $54,628 in the first three months of 1997, reflecting the
operatorship of Silverado Gold Mines, Ltd. ("Silverado") during this period and
reduced reclamation and environmental monitoring activities at the Ryan Lode
project following a major effort last year. There will be further costs in
1998, however the costs are expected to be at substantially lower levels than
were incurred in 1997.
Royalty and lease payments were identical at $37,500 for the first quarter.
Net interest income for the first three months of 1998 was $3,199 compared with
$28,929 for the comparable three months of 1997. The decrease in interest
income reflects the reduction in term deposits. The Company currently has no
debt, having completed the repayment of its outstanding debt last year.
Depreciation declined to $3,650 from $12,991 for the first quarter as some of
the equipment required for the Ryan Lode and Fairbanks office was disposed of in
1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1998, the Company has relied on its December
31, 1997 cash on hand of $613,304 to fund its requirements for general and
administrative costs and ongoing exploration and development projects.
At March 31, 1998, the Company had working capital of approximately $456,000
compared with $2,365,868 for the comparable period in 1997. The Company
believes that it has sufficient working capital combined with gross proceeds of
$2,295,000 from private placements done subsequent to the end of the first
quarter to cover expenditures required for the balance of 1998.
During the three months of 1998, cash flows from operating activities used
approximately $189,000 and investing activities $7,000, primarily respecting
capitalized exploration costs offset by the proceeds from the sale of
investments. During the three months of the comparable period in 1997, cash
flows from operating activities used approximately $380,000 and investing
activities $58,000, again primarily respecting capitalized exploration costs.
Remaining cash requirements for 1998 will be provided for from current cash
reserves and the private placements referred to above.
On March 30, 1998, the Company announced that it had received notice from
Silverado that Silverado was terminating its right to purchase the Ryan Lode
property near Fairbanks, Alaska. Thus the Company will not be receiving any cash
payments which were due under the terms of the purchase agreement and will be
responsible for ongoing reclamation and property maintenance.
The Company will receive no further cash payments from Newmont under the True
North JV Agreement. Beyond 1998, 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
favorable to the Company.
The Company has outstanding options exercisable during 1998 to purchase an
aggregate of 1,650,000 shares of common stock at an average exercise price of
$1.81 per share, for a total of $ 2,986,500 but cannot predict whether any
material number of such options will be exercised.
PROJECTED 1998 REQUIREMENTS
During the period when payments due to the Company from Silverado for the Ryan
Lode property were overdue (after January 27, 1998) and while consideration was
being given to the sale of securities the Company budgeted approximately
$700,000 to continue with the True North project under joint venture with
Newmont, fund the continuation of basic activities at the Ryan Lode property and
other prospects and meet other ongoing operating expenses. The Company is in
the process of revising the interim budget as the sale of securities has
occurred through private placements. The Company is also evaluating various
courses of action for the Ryan Lode property.
Notwithstanding Newmont's announcement of its intent to continue with the True
North Joint Venture the decisions by Newmont respecting its True North
activities are beyond the ability of the Company to predict or control. Newmont
is planning substantial additional exploration and development work during 1998,
including $2.1 million for prefeasibilty studies through the full year and $1.5
million for exploration through the end of June. 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. Newmont may also elect to attempt to sell
an interest in the joint venture agreement, in which case the Company has the
right of first opportunity to acquire Newmont's interest. Subsequent to the end
of the first quarter as part of the private placement with Kinross Gold
Corporation ("Kinross"), La Teko has granted Kinross a right of first refusal to
finance the purchase of Newmont's interest in the True North Project in the
event such interest is offered to La Teko through La Teko's right of first
opportunity as defined under the terms of the joint venture agreement between La
Teko and Newmont. Under the agreement between La Teko and Kinross, if Newmont
elects to sell all or part of its 65% interest in True North (the "Newmont
Interest") and if Kinross elects to finance La Teko to acquire the Newmont
Interest, Kinross will advance the funds necessary for La Teko to acquire the
Newmont Interest by means of a 120 day interest-free loan (the "Loan"), secured
by the Newmont Interest. At the election of either La Teko or Kinross, La Teko
would repay the Loan by conveying the Newmont Interest to Kinross, provided that
La Teko may elect to retain 15/65ths of the Newmont Interest. In such case, La
Teko would repay the remainder of the Loan in cash or, at La Teko's option, by
issuing shares to Kinross at a 10% premium to market.
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. 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.
PART II
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
The following exhibits are included a part of this report:
Exhibit SEC
No. Reference No. Title of Document Location
- -------- ------------- ---------------------- -----------
27.01 27 Financial Data Schedule This filing
(B) REPORTS ON FORM 8-K
During the quarter ended March 31, 1998 the Company filed the following reports
on Form 8-K:
Date of event reported Item reported
- ------------------------ -------------------------
December 29, 1997 Item 5. Other events
January 6, 1998 Item 5. Other events
January 14, 1998 Item 5. Other events
February 3, 1998 Item 5. Other events
February 10, 1998 Item 5: Other events
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.
LA TEKO RESOURCES LTD.
Date: May 15, 1998 By /s/ Gerald G. Carlson
Chief Executive Officer, President, Chief
Financial Officer, and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998, AND STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED
MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 266,895
<SECURITIES> 0
<RECEIVABLES> 205,655
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 472,550
<PP&E> 11,809,256
<DEPRECIATION> (16,674)
<TOTAL-ASSETS> 12,265,132
<CURRENT-LIABILITIES> 16,419
<BONDS> 0
<COMMON> 18,182,217
0
0
<OTHER-SE> (5,933,504)
<TOTAL-LIABILITY-AND-EQUITY> 12,265,132
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (176,551)
<OTHER-EXPENSES> (4,399)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,199
<INCOME-PRETAX> (177,751)
<INCOME-TAX> 0
<INCOME-CONTINUING> (177,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (177,751)
<EPS-PRIMARY> (0.008)
<EPS-DILUTED> (0.008)
</TABLE>
