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 May 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 June 24, 1998
- -------------------- ----------------------------
(Common stock (npv)) 8,951,222
<PAGE>
<TABLE>
SILVERADO GOLD MINES LTD.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN U.S. DOLLARS
<CAPTION>
As at
May 31, November 30,
1998 1997
------------- -------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 16,022 $ 20,914
Gold inventory (Note 2) 23,990 48,875
Accounts receivable 10,000 8,297
Prepaid expenses paid to related parties 681,188 366,303
------------- -------------
731,200 444,389
Mineral Properties and Development
Claims and options 2,509,731 2,436,972
Deferred exploration and development expenditures 13,508,923 13,576,470
------------- -------------
16,018,654 16,013,442
Less accumulated amortization (1,384,338) (1,384,338)
------------- -------------
14,634,316 14,629,104
Buildings, Plant and Equipment 3,470,207 4,481,399
Less accumulated depreciation (1,279,159) (1,385,423)
------------- -------------
2,191,048 3,095,976
Deferred Financing Fees (net of amortization of $142,838: 1997-$124,238) 43,162 61,762
------------- -------------
$ 17,599,726 $ 18,231,231
============= =============
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities (Note 5) $ 633,694 $ 597,478
Capital lease obligations - current -- 81,749
------------- -------------
633,694 679,227
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)
Issued and outstanding: May 31, 1998 - 8,551,222 shares 44,143,420 43,084,420
November 30, 1997 - 8,001,222 shares
Unamortized stock compensation expense (44,797) (151,612)
Advances to related parties secured by common shares in the company (16,195) (480,236)
Deficit (29,116,396) (26,910,309)
------------- -------------
14,966,032 15,542,263
------------- -------------
$ 17,599,726 $ 18,231,231
============= =============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
EXPRESSED IN U.S. DOLLARS
<CAPTION>
Six Months Ended
May 31, May 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Revenue from gold sales $ 25,542 $ 77,482
Less mining and processing costs 26,884 44,835
--------------- ---------------
Gain (loss) from Operations (1,342) 32,647
Employment contract expense 448,315 1,225,682
Administrative Expenditures 1,756,430 1,063,420
Loss for the period (2,206,087) (2,256,455)
Accumulated deficit at beginning of the period (26,910,309) (22,495,537)
--------------- ---------------
Accumulated deficit at end of the period $ (29,116,396) $ (24,751,992)
=============== ===============
Loss per share $ (0.27) $ (0.40)
=============== ===============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
May 31, May 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Revenue from gold sales $ 11,819 $ 19,580
Less mining and processing costs 10,652 21,921
--------------- ---------------
Gain (loss) from Operations 1,167 (2,341)
Employment contract expense 384,321 154,992
Administrative Expenditures 1,298,748 490,440
Loss for the period (1,681,902) (647,773)
Accumulated deficit at beginning of the period (27,434,494) (24,104,219)
--------------- ---------------
Accumulated deficit at end of the period $ (29,116,396) $ (24,751,992)
=============== ===============
Loss per share $ (0.20) $ (0.20)
=============== ===============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
SILVERADO GOLD MINES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
EXPRESSED IN U.S. DOLLARS
<CAPTION>
Six Months Ended
May 31, May 31,
1998 1997
-------------- --------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR):
Operations:
Loss for the year $ (2,206,087) $ (2,256,455)
Items not involving cash:
Employment contract expense 448,315 1,063,420
Depreciation 243,134 233,331
Amortization of deferred financing fees 18,600 18,600
Loss on disposal of buildings, plant and equipment 51,715 --
Changes in non-cash operating working capital:
Increase in accounts receivable (1,703) (3,973)
Decrease in gold inventory 24,885 44,129
Increase in prepaid expenses paid to related parties (314,885) (667,148)
Increase (decrease) in accounts payable and accrued liabilities 36,215 50,179
-------------- --------------
(1,699,811) (1,517,917)
Financing:
Shares issued for cash 258,500 1,560,470
Shares issued for consulting services 75,000 --
Decrease in payable to related parties 464,041 --
Decrease in loans payable secured by gold inventory -- (66,511)
Decrease in mineral claims payable -- (120,000)
Decrease in capital lease obligation (91,490) (17,155)
-------------- --------------
706,051 1,356,804
Investments:
Mineral claims and options 61,241 54
Deferred exploration and development expenditures 317,547 (1,168,352)
Proceeds from sale of equipment 611,300 --
Purchases of equipment (1,220) (55,345)
-------------- --------------
988,868 (1,223,643)
Increase (decrease) in cash and cash equivalents (4,892) (1,384,756)
Cash and cash equivalents at beginning of the period 20,914 1,925,469
-------------- --------------
Cash and cash equivalents at end of the period $ 16,022 $ 540,713
============== ==============
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 $ 384,000 $ --
============== ==============
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
SILVERADO GOLD MINES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN U.S. DOLLARS) (UNAUDITED) MAY 31, 1998
1. Basis of Presentation
The financial information at May 31, 1998 and for the three month period
ended May 31, 1998 and May 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 three month period ended May 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 May 31, 1998 and May 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.
(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 totally $743,016 were written off
during the quarter.
(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>
MAY 31, NOVEMBER 30,
1998 1997
----------- -----------
Accounts payable $ 413,714 $ 334,812
Accrued interest 66,666 66,666
Accrued reclamation expenses 153,314 196,000
----------- -----------
$ 633,694 $ 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 May 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 and warrants for 250,000 common shares
exercisable until March 22, 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
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 $4.20 per share
until April 2, 1999 in consideration for the issuance of new warrants for
500,000 shares exercisable at $2.20 per share until March 22, 1999; 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.
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.
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 June 22, 1998, the Company completed a Reg D private placement for
400,000 units at $0.20 for a total of $80,000. A unit consisted of one
share and one half warrant. The warrants are exercisable until June 23,
2000 at an exercise price of $0.25.
<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.
Six Months 1998 v. 1997
- -----------------------
The Company continued to engage in limited exploration activities during the
second 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
partial execution of a warrant for its common shares. 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
decreased as a function of a repayment of the capital lease. 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 substantially 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 totally $743,016 associated with the Ryan Lode.
Liquidity and Capital Resources at May 31, 1998
- -----------------------------------------------
During the first six months of 1998 the Company received cash from sale of
equipment, from the partial execution of a warrant, and from the proceeds of a
250,000 share private placement. 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 May 31, 1998, the
Company's cash position remained relatively unchanged at $16,022 as it continued
to incur limited expenses. The Company completed payment of the December 31,
1997, semi-annual interest installment on March 25, 1998.
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. The Company intends to resume development of both placer
and lode gold deposits at Nolan, subject to the availability of financing.
(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.
OTHER INFORMATION
Item 4 Submission of Matters to Vote of Security Holders.
- ------ --------------------------------------------------
The Annual General Meeting of Shareholders was held on May 11, 1998. Results of
the voting were as follows:
(a) Election of Directors In Favor Against Withheld
--------------------- -------- ------- --------
Garry L. Anselmo 63,630,494 nil 989,026
K. Maxwell Fleming 64,085,454 nil 544,066
James F. Dixon 64,066,938 nil 562,582
(b) KPMG as Auditors In Favor Against Withheld
---------------- -------- ------- --------
65,170,724 1,502,979 313,600
(c) Reverse Stock Split* In Favor Against Withheld
-------------------- -------- ------- --------
57,586,122 9,420,874 47,443
(d) Increase Authorized Share 100,000**
-----------------------------------
In Favor Against Withheld
-------- ------- --------
53,262,036 13,753,878 56,631
*973,069 shares not voted
**80,757 shares not voted
Item 5 Other Information.
- ------ ------------------
None.
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
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 16,022
<SECURITIES> 0
<RECEIVABLES> 691,188
<ALLOWANCES> 0
<INVENTORY> 23,990
<CURRENT-ASSETS> 731,200
<PP&E> 3,470,207
<DEPRECIATION> (1,279,159)
<TOTAL-ASSETS> 17,599,726
<CURRENT-LIABILITIES> 633,694
<BONDS> 0
0
0
<COMMON> 44,143,420
<OTHER-SE> (29,177,388)
<TOTAL-LIABILITY-AND-EQUITY> 17,599,726
<SALES> 25,542
<TOTAL-REVENUES> 25,542
<CGS> 26,884
<TOTAL-COSTS> 26,884
<OTHER-EXPENSES> 2,204,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,206,087)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,206,087)
<EPS-PRIMARY> (0)
<EPS-DILUTED> 0
</TABLE>
