FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED August 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 0-12132
SILVERADO GOLD MINES LTD.
(Exact name of registrant as specified in its charter)
British Columbia, Canada 98 -0045034
- - - ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
Suite 505, 1111 West Georgia Street
Vancouver, British Columbia, Canada V6E 4M3 (604) 689-1535
- - - ------------------------------------------- -------------------------------
(Address of Principal Executive Offices) (Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 13(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for a 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 30, 1998
- - - -------------------- ---------------------------------
(Common stock (npv)) 10,197,890
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<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN U.S. DOLLARS
<S> <C> <C>
As at
August 31, November 30,
1998 1997
--------------- ---------------
Assets
Current Assets
Cash and cash equivalents $ 2,365 $ 20,914
Gold inventory (Note 2) 23,990 48,875
Accounts receivable 4,943 8,297
Prepaid expenses paid to related parties 738,713 366,303
--------------- ---------------
770,011 444,389
Mineral Properties and Development
Claims and options 2,406,257 2,436,972
Deferred exploration and development expenditures 13,490,732 13,576,470
--------------- ---------------
15,896,989 16,013,442
Less accumulated amortization (1,384,338) (1,384,338)
--------------- ---------------
14,512,651 14,629,104
Buildings, Plant and Equipment 3,334,481 4,481,399
Less accumulated depreciation (1,347,806) (1,385,423)
--------------- ---------------
1,986,675 3,095,976
Deferred Financing Fees (net of amortization of $152,138: 1997-$124,238) 33,862 61,762
--------------- ---------------
$ 17,303,199 $ 18,231,231
=============== ===============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities (Note 5) $ 715,872 $ 597,478
Capital lease obligations - current -- 81,749
--------------- ---------------
715,872 679,227
Long Term Liabilities
Capital lease obligations -- 9,741
Convertible debenture (Note 7) 2,000,000 2,000,000
--------------- ---------------
2,000,000 2,009,741
Shareholders' Equity
Share capital (Note 6)
Authorized: 100,000,000 common shares
Issued and outstanding: Augusti31, 1998 - 9,231,222 shares 44,665,687 43,084,420
November 30, 1997 - 8,001,222 shares
Unamortized stock compensation expense (1,866) (151,612)
Advances to related parties secured by common shares in the company -- (480,236)
Deficit (30,076,494) (26,910,309)
--------------- ---------------
14,587,327 15,542,263
--------------- ---------------
$ 17,303,199 $ 18,231,231
=============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
EXPRESSED IN U.S. DOLLARS
<S> <C> <C>
Nine Months Ended
August 31, August 31,
1998 1997
--------------- ---------------
Revenue from gold sales $ 99,857 $ 141,772
Less mining and processing costs 118,883 130,368
--------------- ---------------
Gain (loss) from Operations (19,026) 11,404
Employment contract expense 828,313 1,133,753
Administrative Expenditures 2,318,846 1,857,042
Loss for the period (3,166,185) (2,979,391)
Accumulated deficit at beginning of the period (26,910,309) (22,495,537)
--------------- ---------------
Accumulated deficit at end of the period $ (30,076,494) $ (25,474,928)
=============== ===============
Loss per share $ (0.37) $ (0.46)
=============== ===============
See accompanying notes to consolidated financial statements.
Three Months Ended
August 31, August 31,
1998 1997
--------------- ---------------
Revenue from gold sales $ 74,315 $ 64,290
Less mining and processing costs 91,999 85,533
--------------- ---------------
Gain (loss) from Operations (17,684) (21,243)
Employment contract expense 379,998 70,333
Administrative Expenditures 562,416 631,360
Loss for the period (960,098) (722,936)
Accumulated deficit at beginning of the period (29,116,396) (24,751,992)
--------------- ---------------
Accumulated deficit at end of the period $ (30,076,494) $ (25,474,928)
=============== ===============
Loss per share $ (0.11) $ (0.07)
=============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN U.S. DOLLARS
<S> <C> <C>
Nine Months Ended
August 31, August 31,
1998 1997
--------------- ---------------
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the year $ (3,166,185) $ (2,979,391)
Items not involving cash:
Employment contract expense 828,313 1,133,753
Depreciation 364,701 353,016
Amortization of deferred financing fees 27,900 27,900
Loss on disposal of buildings, plant and equipment 48,031 --
Changes in non-cash operating working capital:
Decrease (increase) in accounts receivable 3,354 (11,024)
Decrease in gold inventory 24,885 129,662
Increase in prepaid expenses paid to related parties (372,410) (770,425)
Increase in accounts payable and accrued liabilities 118,394 64,108
--------------- ---------------
(2,123,017) (2,003,059)
Financing:
Shares issued for cash 366,200 2,285,713
Shares issued for consulting services 75,000 --
Decrease in secured advances to related parties 480,236 --
Increase in unsecured loan -- 15,000
Decrease in loans payable secured by gold inventory -- (66,511)
Decrease in mineral claims payable -- (179,000)
Decrease in capital lease obligation (91,490) (34,629)
--------------- ---------------
829,946 2,020,573
Investments:
Mineral claims and options 69,915 54
Deferred exploration and development expenditures 600,036 (1,801,716)
Proceeds from sale of equipment 611,300 --
Purchases of equipment (6,729) (50,850)
--------------- ---------------
1,274,522 (1,852,512)
Increase (decrease) in cash and cash equivalents (18,549) (1,834,998)
Cash and cash equivalents at beginning of the period 20,914 1,925,469
--------------- ---------------
Cash and cash equivalents at end of the period $ 2,365 $ 90,471
=============== ===============
Supplemental cash flow information
Interest paid $ 80,000 $ 80,000
=============== ===============
Issue of shares for purchase of mineral property, a non-cash
financing and investing activity $ 289,200 $ --
=============== ===============
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
SILVERADO GOLD MINES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS) (UNAUDITED) AUGUST 31, 1998
1. Basis of Presentation
The financial information at August 31, 1998 and for the three month
period ended August 31, 1998 and August 31, 1997 included herein is
unaudited; however, such information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods. These consolidated financial statements are presented in
accordance with generally accepted accounting principles in the United
States. The results of operations for the nine month period ended August
31, 1998 are not necessarily indicative of the results to be expected for
the full year.
2. Gold Inventory
Gold inventory is valued at the lower of weighted average cost or
estimated net realizable value. At August 31, 1998 and August 31, 1997,
gold is valued at net realizable value.
3. Mineral Properties
(a) On January 30, 1998, the Company completed an Exploration and
Development Option Agreement with Placer Dome U.S. Inc. ("Placer Dome")
with respect to a 20.5 square mile portion of its Barelka / May and Range
Minerals properties on Ester Dome. This agreement provides for Placer Dome
to perform up to $10 million of work on the subject claims over a five-year
period, and to purchase up to 400,000 shares of the Company's stock at an
aggregate price of $5,450,000 over a four year period. The Company has
received $400,000 as part of this agreement which has been credited to
previously capitalized costs of this property.
(b) On December 19, 1997, the Company entered into an option agreement
to purchase the Ryan Lode property from La Teko Resources Ltd. for a total
purchase price of $12,000,000. The Company issued 100,000 shares of its
common stock as partial consideration under this agreement. On March 26,
1998, the Company notified La Teko Resources Ltd. that it was electing to
terminate its option relating to the Ryan Lode Property. Accordingly,
previously capitalized drilling costs and property payments totaling
$955,223 were written off during the prior periods.
(c) During the first quarter the Company received a waiver and
extension of its December 1997 royalty payment to the Alaska Mining Company
Inc., with respect to the Company's Hammond River claims.
4. Buildings Plant and Equipment
Buildings, plant and equipment are stated at cost. Depreciation is
provided on buildings, plant and equipment using the straight-line method
based on estimated lives of 3 to 20 years.
5. Accounts Payable
Accounts payable and accrued liabilities are delineated in the
following table:
<PAGE>
AUGUST 31, NOVEMBER 30,
1998 1997
------------- -------------
Accounts payable 456,476 334,812
Accrued interest 106,666 66,666
Accrued reclamation expenses 152,730 196,000
============= =============
$ 715,872 $ 597,478
============= =============
6. Share Capital
(a) Common Shares. Authorized: 100,000,000 common shares, without par
value.
(b) Reverse Stock Split and Increase in Authorized Shares. On May 11,
1998, at the Company's Annual General Meeting the shareholders approved a
reverse stock split of one for ten shares and approved an increase in the
Company's authorized shares to 100,000,000 common shares.
(c) Directors Options. The Company has reserved 347,500 common shares
for issuance, exercisable until August 14, 2004, in accordance with the
terms and conditions of its December 12, 1994, Stock Option Plan; and
45,000 common shares for issuance exercisable until June 1, 2002, in
accordance with the terms and conditions of its June 1, 1992, Stock Option
Plan. The Company accounts for stock compensation arising from options to
directors in accordance with APB 25, "Accounting for Stock Issued to
Employees".
(d) Employee Options. From time to time the Company issues options for
the purchase of common shares to selected part time independent contract
employees as sole compensation for contracted services in accordance with
the terms and conditions of its April 20, 1994, Stock Option and Stock
Bonus Plan. The Company accounts for compensation arising from these
options in accordance with Statement of Financial Standards No. 123,
"Accounting for Stock Based Compensation". Under this statement, stock
compensation cost to contract employees is measured at the grant date of
the stock option based on the value of the award and is recognized over the
service period.
(e) Warrants. In connection with the private placement of common
shares the Company has outstanding at August 31, 1998, warrants for 89,200
common shares exercisable until September, 1998; warrants for 36,000 common
shares exercisable until October, 1998; warrants for 100,000 common shares
exercisable until August, 1999; warrants for 55,000 common shares
exercisable until September, 1999, warrants for 500,000 common shares
exercisable until March 22, 2000, warrants for 200,000 common shares
exercisable until June 23, 2000 and warrants for 140,000 common shares
exercisable until August 4, 2000.
(f) Other Share Transactions. The Company issued 100,000 of its common
shares to La Teko Resources Ltd. in consideration for an extension of its
payment obligations with respect to the Ryan Lode property. The Company has
reserved 107,700 common shares for issuance upon the potential conversion
of a convertible debenture; 110,000 common shares for issuance with respect
to a potential purchase of property; and has agreed to grant options to
purchase 50,000 of its common shares, exercisable until September 5, 1999,
to Millennium Holdings Group Inc. as partial consideration for a consulting
agreement. The Company issued 70,000 common shares with respect to its
<PAGE>
renegotiation of the Range Minerals II and Burggraf agreements, precedent
to executing an agreement with Placer Dome. On March 23, 1998, the Company
entered into an agreement with IBK Capital Corporation to redeem one-half
of an outstanding warrant for 100,000 shares exercisable at $2.80 per share
until August 20, 1999 in consideration for the issuance of new warrants for
500,000 shares exercisable at $2.20 per share until March 22, 2000; a
warrant for 250,000 shares exercisable at $1.00 per share until June 22,
1998; and a warrant for 250,000 shares exercisable at $1.00 immediately On
May 21, 1998, the Company issued 125,000 common shares in consideration for
a consulting agreement to Millennium Holdings Group Inc. On June 24, 1998
the Company completed a Reg D offering for 400,000 common shares with a
warrant of 200,000 common shares at $0.25 per share, exercisable until June
24, 2000. The Company completed a Reg D offering on August 6, 1998 for
280,000 common shares with a warrant of 140,000 common shares at $0.30 per
share, exercisable until August 4, 2000.
7. Convertible Debenture
In July, 1994, the Company issued a convertible callable debenture
with interest payable at the rate of 8.0% per annum on December 31 and June
30 each year. The debenture is unsecured and is due July 2, 1999, subject
to prior redemption or conversion. The debenture may be converted in whole
or in part by the holder into common shares of the Company at a conversion
price of $1.857 U.S. per share (the "Conversion Price"), subsequently
modified to $18.57 as a result of the Company's 1/10 "reverse stock split"
approved May 11, 1998. In addition, conversion of the debenture may be
called by the Company provided that the average trading price of the
Company's common stock has exceeded 125% of the Conversion Price for the
period of 20 consecutive trading days. Financing fees paid related to the
debenture have been deferred and are being amortized on a straight line
basis over the debenture term of 60 months. The Company completed payment
of the December 31, 1997 interest installment on March 25, 1998. The
interest installment due June 30 was unpaid on August 31, 1998.
8. Commitments and Contingencies
The Company has a lease agreement for office premises for a term of 10
years commencing April 1, 1994, with an approximate annual rate of $120,000
(Cdn.) including operating costs.
9. Subsequent Events
On September 10,1998, the Company completed a Reg D offering for
433,334 units at $0.15 for a total of $65,000. A unit consisted of one
share and one half warrant. The warrants are exercisable until September
10, 2000 at an exercise price of $0.18. On September 25, 1998, the Company
completed a Reg S private placement for 533,334 units at $0.15 for a total
of $80,000. A unit consisted of one share and one warrant. The warrants are
exercisable until September 25, 2000 at an exercise price of $0.18.
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain factors which
have significantly affected the Company's financial position and operating
results during the period included in the accompanying condensed consolidated
financial statements.
Nine Months 1998 v. 1997
- - - ------------------------
The Company continued to engage in limited exploration activities during the
third quarter of 1998. It received some revenue from sales of existing gold
inventory, but received most of its cash from sale of equipment and from the
private placements or offerings. Current assets increased to reflect advances to
its contractor during the quarter, while Buildings, Plant and Equipment were
reduced reflecting the equipment sale. Current liabilities increased as a
function of the interest due on the debenture currently unpaid. Long term
liabilities decreased as a result of the capital lease repayment, leaving the
Company's $2 million convertible debenture. Employment contract expense was
reduced reflecting the fact that the Company has now absorbed most of the cost
of previously issued contracts (see Note 6(d)). Administrative expenses
increased primarily as a result of writing off previously capitalized drilling
costs and property payments totaling $955,223 associated with the Ryan Lode.
Liquidity and Capital Resources at August 31, 1998
- - - --------------------------------------------------
During the first nine months of 1998 the Company received cash from sale of
equipment, from the partial execution of a warrant, and from the proceeds of
several private placements. Also it eliminated the remainder of its long-term
lease obligations, thereby reducing its debt portfolio to its convertible
debenture and its on-going trade payables. At August 31, 1998, the Company's
cash position was $2,365. But subsequent to the end of the quarter $145,000 was
received through private placements. The Company completed payment of the
December 31, 1997, semi-annual interest installment on March 25, 1998. However
the interest installment due on June 30,1998 remains unpaid.
Results of Operations
- - - ---------------------
(a) Ester Dome Gold Project
The Company completed an agreement with Placer Dome U.S. Inc. ("Placer
Dome") granting Placer Dome an option to explore 20.5 miles of the Ester
Dome project. The optioned claims include the Rhyolite and Ready Bullion
targets, but exclude the St. Paul gold deposit, and the Grant Mine and
Mill. The Company intends to continue investigation of the St. Paul gold
deposit, subject to the availability of financing.
(b) Ryan Lode Gold Project
The Company issued 100,000 to La Teko Resources Ltd. ("La Teko") as
consideration for deferring its payment obligations with respect to this
project. However, the Company found it necessary to drop its purchase
option due to the excessive drop in gold prices and the significant
reclamation expenses associated with the property.
(c) Nolan Gold Project
At the Nolan Gold Project in northern Alaska, the Company completed a
number of reclamation activities. During the last quarter the Company
resumed small scale production of a placer site on Nolan.
(d) Other Properties
The Company continued to maintain its other properties in good
standing, pending further exploration and development, subject to the
availability of financing.
<PAGE>
OTHER INFORMATION
Item 5 Other Information.
- - - ---------------------------
Subsequent to quarter end, the Company completed the following share issues:
On September 10,1998, the Company completed a Reg D offering for 433,334
units at $0.15 per share. A unit consists of one share and one half warrant. The
warrants are exercisable until September 10, 2000 at an exercise price of $0.18.
On September 25, 1998, the Company completed a Reg S private placement for
533,334 units at $0.15 per share. A unit consists of one share and one warrant.
The warrants are exercisable until September 25, 2000 at an exercise price of
$0.20.
Item 6 Exhibits and Reports on Form 8-K.
- - - ------------------------------------------
Exploration and Development Option Agreement between Silverado Gold Mines
Ltd., Silverado Gold Mines Inc., and Placer Dome U.S. Inc. filed April 14, 1998.
The Company filed Current Reports on Form 8-K on December 19, 1997 and January
28, 1998.
- - - -------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SILVERADO GOLD MINES LTD.
/s/ G.L. Anselmo
----------------
G.L. Anselmo
President / CEO / CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 0000731727
<NAME> Silverado Gold Mines Ltd.
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-START> Dec-1-1997
<PERIOD-END> Aug-31-1998
<CASH> 2,365
<SECURITIES> 0
<RECEIVABLES> 743,656
<ALLOWANCES> 0
<INVENTORY> 23,990
<CURRENT-ASSETS> 770,011
<PP&E> 3,334,481
<DEPRECIATION> (1,347,806)
<TOTAL-ASSETS> 17,303,199
<CURRENT-LIABILITIES> 715,872
<BONDS> 0
0
0
<COMMON> 44,665,687
<OTHER-SE> (30,078,360)
<TOTAL-LIABILITY-AND-EQUITY> 17,303,199
<SALES> 99,857
<TOTAL-REVENUES> 99,857
<CGS> 118,883
<TOTAL-COSTS> 118,883
<OTHER-EXPENSES> 3,147,159
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,166,185)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,166,185)
<EPS-PRIMARY> (0)
<EPS-DILUTED> 0
</TABLE>
