-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MhynA0+TBJx1AmwZ9B0+zn7aq/n94PoqdduYsOqJY2HvTNJXQLUfx4KFb8n1O7oP JQLYJnH3uVFcJTlh8CJeOw== 0000914233-98-000042.txt : 19980414 0000914233-98-000042.hdr.sgml : 19980414 ACCESSION NUMBER: 0000914233-98-000042 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980413 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LA TEKO RESOURCES LTD CENTRAL INDEX KEY: 0000357281 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 870483319 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-10104 FILM NUMBER: 98592574 BUSINESS ADDRESS: STREET 1: 625 HOWE ST STREET 2: STE 500 CITY: VANCOUVER, B.C. STATE: A1 ZIP: 84101 BUSINESS PHONE: 6046880833 MAIL ADDRESS: STREET 1: 180 EAST 2100 SOUTH STREET 2: STE 204 CITY: SALT LAKE CITY STATE: UT ZIP: 84115 10-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-K/A ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended DECEMBER 31, 1997 Commission file number 0-10104 LA TEKO RESOURCES LTD. (Name of small business issuer in its charter) BRITISH COLUMBIA, CANADA 87-0483319 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization Ientification No.) SUITE 500, 625 HOWE ST. V6C 2T6 VANCOUVER, B.C. ------------------- - ------------------------------- (Zip Code) Issuer's telephone number, including area code: (604) 688-0833 Securities registered under Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------- ----------------------------------------- None None Securities registered under Section 12(g) of the Act: COMMON STOCK, WITHOUT PAR VALUE Indicate by check mark whether the issuer registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-BK is not contained in this form herein, and no disclosure will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]. The aggregate market price of the voting stock held by non-affiliates was computed at the average closing bid and asked prices in the Small Capitalization as quoted on the National Association of Securities Dealers Automatic Quotation System closing sales price on The Nasdaq Stock Market ("NASDAQ") on March 18, 1998 was approximately $17,601,000. As of March 18, 1998, the Company had outstanding 23,467,358 shares of its common stock, without par value. DOCUMENTS INCORPORATED BY REFERENCE. If the following documents are incorporated by reference, briefly describe them and identify the part of Form 10-K (e.g., Part I, Part II, etc.) Into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to rule 424(b) or (c) under the Securities Act of 1933 ("Securities Act"). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 31, 1990). NONE Form 10-K filed by La Teko Resources Ltd. on March 31, 1998, is hereby amended to include financial statements which were inadvertently omitted from the original filing. SIGNATURES In accordance with section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: April 14, l998. LA TEKO RESOURCES LTD. (Registrant) By /s/ Gerald G. Carlson Gerald G. Carlson, President (chief executive and financial officer and controller) CONSOLIDATED FINANCIAL STATEMENTS LA TEKO RESOURCES LTD. VANCOUVER, BRITISH COLUMBIA DECEMBER 31, 1997 1. AUDITORS' REPORT 2. CONSOLIDATED STATEMENTS OF OPERATIONS 3. CONSOLIDATED BALANCE SHEETS 4. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 5. CONSOLIDATED STATEMENTS OF CASH FLOWS 6. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BEDFORD CURRY & CO. CHARTERED ACCOUNTANTS Michael J. Bedford Inc. John E. Curry Inc. AUDITORS' REPORT To the Shareholders of La Teko Resources Ltd. We have audited the consolidated balance sheets of La Teko Resources Ltd. (a Canadian corporation) as of December 31, 1997 and 1996, and the consolidated statements of operations, changes in shareholders' equity and cash flows for the years ended December 31, 1997, 1996 and 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the consolidated financial position of the company as at December 31, 1997 and 1996, the changes in shareholders' equity and the consolidated results of its operations and its cash flows for the years ended December 1997, 1996 and 1995 in accordance with United States generally accepted accounting principles. As required by the British Columbia Company Act, we report that, in our opinion, these principles have been applied on a consistent basis. Vancouver, British Columbia BEDFORD CURRY & CO. February 28, 1998, except as to Note 11(b) CHARTERED ACCOUNTANTS which is as of March 26, 1998 LA TEKO RESOURCES LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (EXPRESSED IN U.S. DOLLARS) Year ended December 31, 1997 1997 1996 1995 --------- -------- ------- EXPENSES General and administrative expenses $ 863,947 956,413 674,550 Operating and mine maintenance costs 387,855 275,623 151,179 Royalty and lease 150,000 150,000 286,901 Depreciation 45,244 54,828 51,092 New prospect evaluation 14,409 55,708 36,741 --------- --------- --------- 1,461,455 1,492,572 1,200,463 --------- --------- --------- Loss from operations before other items (1,461,455) (1,492,572)(1,200,463) Other income (expense) Interest income (expense) (net) 63,767 7,687 (62,893) Gain (loss) on sale of equipment (23,571) 7,969 (8,132) Abandonment of mineral property (40,966) - (454,305) Gain on sale of mineral property - 2,447,248 1,383,436 --------- --------- --------- Income (loss) before income taxes (1,462,225) 970,332 (342,357) Provision for income taxes expense - Note 5 - 14,547 22,500 --------- --------- --------- NET INCOME (LOSS) $(1,462,225) 955,785 (364,857) ========= ========= ========= Income (loss) per share - Note 8 $ (0.06) 0.04 (0.02) ========= ========= ========= LA TEKO RESOURCES LTD. CONSOLIDATED BALANCE SHEETS (EXPRESSED IN U.S. DOLLARS) December 31, 1997 1997 1996 ---------- --------- ASSETS Current Cash and short-term deposits $ 613,304 3,041,205 Accounts receivable 93,891 15,918 Inventories - 6,295 Prepaid expenses 160,090 200,845 ---------- --------- 867,285 3,264,263 Mineral properties and deferred costs (Note 2) 10,985,135 10,515,140 Plant and equipment (Note 3) 57,593 210,716 Investments (Note 4) 750,913 500,913 ---------- ---------- $12,660,926 14,491,032 ========== ========== LIABILITIES Current Bank demand loan $ 150,000 - Accounts payable and accrued expenses 84,462 194,718 Current portion of long-term debt - 372,500 ---------- --------- 234,462 567,218 SHAREHOLDERS' EQUITY Common capital stock; no par value; authorized: 100,000,000 shares; issued and outstanding: 23,467,358 (1996: 23,457,258) (Note 6) 18,182,217 18,217,342 Accumulated deficit (5,755,753) (4,293,528) ---------- --------- 12,426,464 13,923,814 ---------- --------- $12,660,926 14,491,032 ========== ========== LA TEKO RESOURCES LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (EXPRESSED IN U.S. DOLLARS) Year ended December 31, 1997 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 public offering and private placement costs - (45,360) - (45,360) Compensatory stock options - 64,190 - 64,190 Net income (loss) - - (364,857) (364,857) ---------- ---------- ---------- ---------- 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 (reduction) - (43,125) - - Net income (loss) - - (1,462,225) (1,462,225) 10,100 (35,125) (1,462,225) (1,454,225) ---------- ---------- ---------- ---------- Balance, December 31, 1997 36,878,329 24,439,523 (5,755,753) 18,726,895 Less treasury shares (13,410,971) (6,257,306) - (6,257,306) ---------- ---------- ---------- ---------- Balance, December 31, 1997 23,467,358 18,182,217 (5,755,753) $12,469,589 ========== ========== ========== =========== LA TEKO RESOURCES LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (EXPRESSED IN U.S. DOLLARS) Year ended December 31, 1997 1997 1996 1995 ------------ -------- --------- Supplemental disclosures of Cash Flow Information Net income (loss) $ (1,462,225) 955,785 (364,857) Charges (credits) to operations not affecting cash: (Gain) loss on sale of equipment 23,571 (7,969) 10,004 Depreciation 45,244 54,828 51,092 Gain on sale of mineral property - (2,447,248) (1,383,436) Abandonment of mineral property 40,966 2,294 454,305 Compensatory stock options (43,125) 188,125 64,190 ---------- ---------- ---------- (1,395,569) (1,254,185) (1,168,702) Net changes (Increase) decrease in accounts receivable and pre-paid expenses (30,923) 84,654 (87,506) Increase (decrease) in accounts payable and accrued expenses (110,256) (45,723) 101,707 ---------- ---------- ---------- Net cash used in operating activities (1,536,748) (1,215,254) (1,154,501) Cash Flows from Investing Activities Investment in mineral properties (209,818) (107,752) (272,950) Exploration costs capitalized (551,143) (304,906) (321,984) Purchase of plant and equipment (70,252) (65,080) (13,047) Proceeds from sale of equipment 154,560 9,800 13,705 Increase in investments (250,000) (269,844) - Proceeds from sale of mineral property 250,000 2,500,000 3,500,000 ---------- ---------- ---------- Net cash provided by (used in) investing activities (676,653) 1,762,218 2,905,724 ---------- ---------- ---------- Cash Flows From Financing Activities Proceeds from debt financing - - 200,000 Reduction of principal on debt (372,500) (700,085) (202,115) Cash proceeds from issuance of common stock 8,000 222,048 991,066 Public offering and reorganization costs - - (45,360) Short-swing profits - - 2,100 ---------- ---------- ---------- Net cash provided by (used in) financing activities (364,500) (478,037) 945,691 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (2,577,901) 68,927 2,696,914 Cash and cash equivalents, beginning of year 3,041,205 2,972,278 275,364 ---------- ---------- ---------- Cash and cash equivalents, end of year $ 463,304 3,041,205 2,972,278 ========== ========== ========== Cash and cash equivalents are represented by: Cash $ 613,304 3,041,205 2,972,278 Bank indebtedness (150,000) - - ---------- ---------- ---------- $ 463,304 3,041,205 2,972,278 ========== ========== ========== Supplemental Disclosures of Cash Flow Information Cash paid during the period for interest $ 2,562 94,196 134,072 Cash paid during the period for income taxes - 37,047 - Supplementary Schedule of Non-cash Investing and Financing Activities Depreciation capitalized into deferred costs - - 4,835 LA TEKO RESOURCES LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) Year ended December 31, 1997 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the company and its wholly-owned subsidiaries, La Teko Resources, Inc., a Nevada corporation and Ryan Lode Mines, Inc., an Alaska Corporation. The consolidated financial statements are presented in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FOREIGN CURRENCY TRANSLATION - Transactions in Canadian dollars, primarily related to certain asset acquisitions and administrative expenses, have been translated to U.S. dollars as prescribed by SFAS No. 52 "Foreign Currency Translation". Balance sheet items have been converted to U.S. dollars at exchange rates on specific dates of asset acquisition, where practicable, or at year-end exchange rates. Operating statement amounts have been converted at actual rates on dates of specific transactions. INCOME (LOSS) PER SHARE - Income (loss) per share of common stock is computed based on the weighted average number of common shares outstanding during the year. CASH EQUIVALENTS - For purposes of the Statement of Cash Flows, the company considers all short-term debt instruments with maturities of less than three months as cash equivalents. MARKETABLE SECURITIES - The company has adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The company classifies its marketable debt securities as "held to maturity" if it has the positive intent and ability to hold the securities to maturity. All other marketable debt and equity securities are classified as "available for sale". Securities classified as "available for sale" are carried in the financial statements at fair value. Realized gains and losses determined using the specific identification method are included in earnings; unrealized holding gains and losses are reported as a separate component of stockholders' equity. Securities classified as held to maturity are carried at amortized cost. INVESTMENTS - Investments in marketable securities are carried at cost, which approximates market value. Investments are written down to recognize a loss when a reduction in value is considered to be other than a temporary decline. MINERAL PROPERTIES AND DEFERRED COSTS - Mineral properties and deferred costs are recorded at the lower of cost or the present value of estimated recoverable amounts applicable thereto. Exploration and development expenses are deferred until the mineral properties are brought into production, at which time they are amortized on a units-of-production basis, or until the properties are abandoned or sold, at which time the deferred costs are written off or charged against sales proceeds. Capitalized costs and deferred exploration are evaluated at least annually to determine the probability of recovery and the requirement for periodic adjustments. Certain properties are in the exploration or development stage. The ultimate realization of capitalized costs is dependent upon the determination of economically recoverable reserves, the ability of the company to obtain necessary financing to complete development, future profitable production and/or proceeds from sale of these properties. When a property is determined not to be commercially productive or its value impaired, the accumulated costs are charged to operations to the extent that costs exceed estimated net realizable value. PLANT AND EQUIPMENT - Plant and equipment are recorded at cost and are depreciated on the declining balance method over their estimated useful lives at rates varying from 10% to 30% per year. Maintenance and repairs are expensed as incurred. Replacements and major improvements are capitalized. FAIR VALUE OF FINANCIAL INSTRUMENTS THAT APPROXIMATE CARRYING VALUES - The company has financial instruments, none of which are held for trading purposes. The company estimates that the fair value of such financial instruments does not differ materially from the aggregate carrying values of its financial instruments reported in the financial statements. The estimated fair value amounts have been determined by the company using available market information and appropriate valuation methodologies. Considerable judgement is necessarily required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the company could realize in a current market exchange. As a result of the risk associated with these financial instruments, the cost applicable thereto approximates market. INCOME TAXES - The company follows the tax allocation method of accounting for income taxes, whereby deferred taxes and tax benefits are provided to the extent that current taxes are affected by differences in accounting methods for book and income tax purposes, primarily related to capitalization of equipment and exploration and development costs, and depreciation and amortization related thereto. NOTE 2 - MINERAL PROPERTIES AND DEFERRED COSTS [CAPTION] Capitalized Capitalized Balance Additions Balance Additions Balance December 31, (Deletions) December 31, (Deletions) December 31, 1995 1996 1996 1997 1997 ----------- ---------- ----------- ---------- ---------- Ryan Lode Acquisition cost $4,839,376 - 4,839,376 (250,000) 4,589,376 Deferred exploration and dev't expenses 4,882,993 73,570 4,956,563 224,591 5,181,154 ---------- --------- ---------- ---------- ---------- Total Ryan Lode 9,722,369 73,570 9,795,939 (25,409) 9,770,530 ---------- --------- ---------- ---------- ---------- Margarita Acquisition cost 350,100 - 350,100 - 350,100 Deferred exploration and development expense 4,554 71,540 76,094 4,458 80,552 ---------- --------- ---------- ---------- ---------- Total Margarita 354,654 71,540 426,194 4,458 430,652 ---------- --------- ---------- ---------- ---------- Juniper Deferred exploration and development expenses 78,211 90,294 168,505 63,257 231,762 ---------- --------- ---------- ---------- ---------- Total Juniper 78,211 90,294 168,505 63,257 231,762 ---------- --------- ---------- ---------- ---------- True North Acquisition cost - - - 154,818 154,818 Deferred exploration and development expenses - - - 70,647 70,647 ---------- --------- ---------- ---------- ---------- Total True North - - - 225,465 225,465 ---------- --------- ---------- ---------- ---------- Twin Buttes Acquisition cost - 30,000 30,000 45,000 75,000 Deferred exploration and development expenses - 27,634 27,634 125,037 152,671 ---------- --------- ---------- ---------- ---------- Total Twin Buttes - 57,634 57,634 170,037 227,671 ---------- --------- ---------- ---------- ---------- Discovery Acquisition cost - 15,000 15,000 10,000 25,000 Deferred exploration and development expenses - 20,555 20,555 53,500 74,055 ---------- --------- ---------- ---------- ---------- Total Discovery - 35,555 35,555 63,500 99,055 ---------- --------- ---------- ---------- ---------- Lucky Gulch Acquisition cost - 10,000 10,000 - 10,000 Deferred exploration and development expenses - 21,313 21,313 9,653 30,966 Abandonment of property - - - (40,966) (40,966) ---------- --------- ---------- ---------- ---------- Total Lucky Gulch - 31,313 31,313 (31,313) - ---------- --------- ---------- ---------- ---------- Total Mineral Properties $10,155,234 359,906 10,515,140 469,995 10,985,135 ========== ========= ========== ========== ==========
RYAN LODE MINE The principal Ryan Lode leasehold interest consists of 10 patented lode claims and 15 unpatented lode claims. The company's lease, dated November 7, 1992, provides for a primary term of 20 years commencing January 1, 1993 with four five-year extensions, all subject to the timely payment of production and/or advance royalty payments of $150,000 for the primary term and escalating in $50,000 increments for each 5 year extension increasing to $350,000 per year in 2028 and annually thereafter. Advance minimum royalties may be applied against production royalties for the year of production only. The Ryan Lode Mine includes other claims subject to net profits and net smelter returns royalties with advance minimum royalty requirements. Generally, net profits royalties payable to the State of Alaska on future production are 3% whereas the royalties based on gross value of mineral products removed from the mining properties are 5%. Advance minimum royalty payments are to be deducted from production royalties. On December 19, 1997 the company agreed with Silverado Gold Mines Ltd. ("Silverado") for Silverado to acquire an option to purchase all of its interest in the Ryan Lode property, for $12,000,000. As consideration for the grant of the option, Silverado delivered 1,000,000 of its common shares to the company (Note 4). Silverado is required to make payments to the company and to complete minimum expenditures on the property as follows: Cash Expenditure --------- ------------ On January 30, 1998 (Plus $150,000 to be applied to advance royalty) $ 50,000 - On February 27, 1998 450,000 - By December 1, 1998 300,000 $1,000,000 By December 1, 1999 400,000 $1,000,000 By December 1, 2000 700,000 $1,000,000 On the earlier of June 1, 2002, the completion of a Mining facility or 30 days after commencement of commercial production 3,000,000 - 6 months after above payment date 7,100,000 - ---------- ---------- $12,000,000 ========== ========== Should the property not proceed into commercial production by June 1, 2002, Silverado may extend the construction period for up to 5 years by making annual payments of $500,000 to the company, $375,000 of which will be credited to the purchase price. Silverado has not made the payments to the company due on January 30, 1998 and February 27, 1998 or the advance royalty payment of $150,000 (which was made by the company on its due date) and the company has given notice to Silverado that it is in default of the terms of the agreement, see Note 11(b). The company has reduced the carrying cost of the Ryan Lode property by the market value of the 1,000,000 Silverado shares option consideration, being $250,000. MARGARITA The Margarita project comprises 34 unpatented lode mining claims consisting of the Margarita, MX and NWM claims in Santa Cruz County, Arizona. A royalty of 10% of net profits is payable on the first 20,000 ounces of product removed for the property and 15% thereafter. "Net profits" is determined after deduction of exploration costs, capital expenditures and all other operating costs. There are additional obligations to prior owners for a 3% net smelter return royalty on the Margarita properties. JUNIPER In February 1995, the company located 104 state of Alaska prospecting sites on approximately 16,131 acres approximately 30 miles north northeast of Fairbanks, Alaska and in 1996, the company staked 403 State of Alaska claims on the property. TRUE NORTH On January 10, 1994, the company executed a mining property transfer agreement with AMAX and acquired the 2,333-acre True North project. It has subsequently staked and acquired additional claims, bringing the total True North property to approximately 10,100 acres. In June 1995, the company executed a joint-venture agreement with Newmont Exploration Limited, a subsidiary of Newmont Gold Mining Company, whereby Newmont acquired a 65% interest in the True North property, contingent upon its continued development of the property and the payment of specified amounts required to explore, develop and place the property into production, The agreement provided for Newmont to pay La Teko $6 million in cash, to expend at least $3 million during 1995 and 1996 for exploration, development and property payments on the True North property and, if it continued with the project, to expend up to an additional $18 million for a feasibility study and the installation of capital equipment required to place the property into production. Newmont has satisfied its $3 million capital requirement for 1995 and 1996 and has extended the required date for completion of a feasibility study by continued active exploration work. In 1995, as a result of the $3.5 million received in cash, the company reflected a $1,383,436 gain from the sale of mineral properties. In 1996, Newmont paid $2.5 million and the company recognized an additional $2,447,248 gain. In accordance with generally accepted accounting principles applicable to the mining industry, the company wrote off all of its previously capitalized True North costs against the $6 million cash received from Newmont. If Newmont determines that the results of a future feasibility study do not warrant development of the True North property, then Newmont will be deemed to have elected to terminate the joint venture. If Newmont determines, in its sole discretion, that the results of the feasibility study warrant development of the True North property, then the joint venture will proceed with development and the initiation of production, with Newmont being obligated to contribute for development up to $18 million. Any amounts by which the True North development costs exceed the $18 million development commitment, as adjusted, will be borne by Newmont and La Teko in proportion to their respective participating interest. Newmont may terminate the joint venture at any time in its sole discretion without further liability, in which case it would be required to convey to La Teko the 65% interest in the True North property acquired from La Teko and contributed to the joint venture plus its 65% interest in subsequently-acquired property in the area of interest. Newmont will not be entitled to reimbursement of any amounts paid to La Teko, spent on the True North property or contributed to the joint venture prior to termination. Termination of the joint venture by Newmont would not relieve it of the obligation for exploration, development or reclamation costs incurred but not yet paid prior to the date of termination. TWIN BUTTES During April 1996, the company consummated a five-year agreement with the University of Alaska to explore its Twin Buttes property, located 28 miles northeast of Fairbanks, Alaska, adjacent to La Teko's Juniper property. The initial acquisition cost was $30,000 for an exclusive development and mining lease. During the current period the company made its first annual option payment of $45,000 and continued its geochemical sampling program initiated in 1996. DISCOVERY On May 24, 1996, the company acquired approximately 3,000 acres known as Discovery Gulch in the Circle Mining District, Alaska. The exploration lease required an initial payment of $15,000 plus annual payments of $10,000 on the first two anniversary dates and $35,000 annually thereafter. The property is subject to a 2% NSR royalty on production from the property. The exploration requirement for 1998 is $35,000. During the fourth exploration season, the exploration commitment increases to $100,000 with an additional $50,000 increase annually thereafter. LUCKY GULCH Management has elected not to continue its interest in the property and accordingly accumulated acquisition and exploration costs have been written-off in the current period. NOTE 3 - PLANT AND EQUIPMENT Accumulated Net Book Value Cost Depreciation 1997 1996 --------- ------------ ------- ------- Office furniture and equipment $ 51,163 10,461 40,702 37,579 Machinery and equipment 19,464 2,573 16,891 79,347 Buildings - - - 78,814 Trucks - - - 13,380 Site work and roads - - - 1,596 --------- ------- ------- ------- $ 70,627 13,034 57,593 210,716 ========= ======= ======= ======= NOTE 4 - INVESTMENTS 1997 1996 --------- -------- International Freegold Mineral Development Inc. - 1,500,000 shares at cost $ 500,913 500,913 Silverado Gold Mines Ltd. - 1,000,000 shares 250,000 - --------- -------- $ 750,913 500,913 ========= ======== The shares in Silverado Gold Mines Ltd. are reported at their fair market value on the date obtained (Note 2). As at December 31, 1997 and 1996, the market value of the investments approximated their reported amounts. NOTE 5 - INCOME TAXES Provision for income tax expense differs from the amount calculated at the statutory U.S. federal income tax rate due to the following: 1997 1996 1995 ----------- -------- -------- U.S. federal income tax expense at statutory rate $ (476,862) 367,145 112,978 Alternative minimum taxes U.S. federal and state - 14,547 22,500 Benefits of losses not recognized 476,862 - - Utilization of net operating loss carry forwards - (367,145) (112,978) ---------- --------- -------- Provision for income tax expense $ - 14,547 22,500 ========== ========= ======== The company has a net operating loss carry forward available to offset future taxable income of approximately $10,964,000 expiring in 2006 through 2012. No deferred tax assets have been provided for these amounts since realization is not assured. NOTE 6 - CAPITAL STOCK Information regarding stock options is summarized below: Number of Option Price Options Per Share --------- ------------- Outstanding at January 1, 1995 390,000 $1.60 - 2.13 Granted 877,935 1.60 Exercised - Expired - Forfeited - --------- ----------- Outstanding at December 31, 1995 1,267,935 1.60 - 2.13 Granted 800,000 1.85 - 2.50 Exercised (138,780) 1.60 Expired - - Forfeited (245,155) 1.60 --------- ----------- Outstanding at December 31, 1996 1,684,000 1.60 - 2.50 Granted 250,000 1.05 - 1.50 Exercised (5,000) 1.60 Expired - - Forfeited (285,000) 1.60 --------- ----------- Outstanding at December 31, 1997 1,644,000 $1.05 - 2.50 ========= ----------- NOTE 7 - STOCK-BASED COMPENSATION The Financial Accounting Standards Board has issued Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) which established financial accounting and reporting standards for stock-based compensation. The new standard defines a fair value method of accounting for an employee stock option or similar equity instrument. This statement gives entities the choice between adopting the fair value method or continuing to use the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25 with footnote disclosure of the pro forma effects as if the fair value method had been adopted. The company has opted for the latter approach. Had compensation expense for the company's stock option plan been determined based on the fair value at the grant date for awards in 1997, 1996 and 1995 consistent with the provisions of SFAS No. 123, the company's results of operations would have been reduced to the pro forma amounts indicated below: 1997 1996 1995 ----------- -------- -------- Net (loss) income - as reported $(1,462,225) 955,785 (364,857) Net (loss) income - pro forma $(1,705,846) 663,202 (446,719) (Loss) income per share - as reported $ (0.06) 0.04 (0.02) (Loss) income per share - pro forma $ (0.07) 0.03 (0.02) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 1997 1996 1995 ----------- -------- -------- Expected dividend yield - - - Expected stock price volatility 45.11% 39.66% 39.66% Risk-free interest rate 5.50% 6.13% 5.25% Expected life of options 8 years 5 years 5 years The weighted average fair value of options granted during 1997, 1996 and 1995 are $.70, $1.22, and $.80, respectively. The following table summarizes information about stock options outstanding at December 31, 1997: Options Outstanding Options Exercisable -------------------------------- --------------------- Weighted Average Range of Number Remaining Weighted Number Weighted Exercise Outstanding Contractual Average Exercisable Average Prices at Life Exercise at Exercise 12/31/97 (Years) Price 12/31/97 Price ------------- ---------- ---------- --------- --------- --------- $1.05 to 1.50 250,000 7.7 $1.23 62,500 $1.23 1.60 to 2.13 1,094,000 5.0 1.76 819,000 1.76 2.41 to 2.50 300,000 6.3 2.44 200,000 2.46 $1.05 to 2.50 1,644,000 6.2 $1.81 1,081,500 $1.86 NOTE 8 - EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share," which requires companies to present basic earnings per share (EPS) and diluted earnings per share, instead of the primary and fully diluted EPS as previously required. The new standard also requires additional informational disclosures, and makes certain modifications to the previously applicable EPS calculations defined in Accounting Principles Board No. 15. The new standard is required to be adopted by all public companies for reporting periods ending after December 15, 1997, and requires restatement of EPS for all prior periods reported. During the year ended December 31, 1997, the company adopted this standard. Earnings per share information in accordance with SFAS 128 is as follows: Year Ended December 31, 1997 ------------------------------------------ Loss Shares Per-Share (Numerator) (Denominator) Amount ----------- -------------- --------- Net Loss $(1,462,225) Less preferred stock dividends - BASIC AND DILUTED EPS Loss available to common stockholders $(1,462,225) 23,463,000 $(.06) Year Ended December 31, 1996 ------------------------------------------ Loss Shares Per-Share (Numerator) (Denominator) Amount ----------- ------------- ---------- Net Income $955,785 Less preferred stock dividends - BASIC EPS Income available to common stockholders 955,785 23,393,000 $.04 EFFECT OF DILUTIVE SECURITIES Stock options - 122,000 DILUTED EPS Income available to common stockholders plus assumed conversions $955,785 23,515,000 $.04 Year Ended December 31, 1995 ------------------------------------------ Loss Shares Per-Share (Numerator) (Denominator) Amount ----------- ------------- ---------- Net Loss $(364,857) Less preferred stock dividends - ----------- ------------- ---------- BASIC AND DILUTED EPS Income available to common stockholders (364,857) 23,183,000 $(.02) NOTE 9 - RELATED-PARTY TRANSACTIONS During the year the company paid directors fees of $20,629 (1996: $19,800). Legal fees of $41,293 (1996: $25,324) were paid to a corporation controlled by a director of the company. NOTE 10 - COMMITMENTS AND CONTINGENCIES The company is obligated for various royalty payments based on future mining and/or earnings from its mineral properties, as further described in Note 2. Subject to regulatory approval, the company has agreed to issue 65,000 shares as part of a severance agreement with a former senior employee. La Teko cannot insure for environmental pollution and, consistent with industry practice, has elected not to insure for losses from mine cave-ins, mine flooding, earthquake and other possible natural hazards caused by the unavailability of such coverage or the cost thereof. The company may in the future be exposed to contingencies relating to the foregoing or liabilities that may arise under the governmental regulations relating to the environment. It is not, however, aware of any existing material contingencies respecting compliance with environmental requirements or previous activities. NOTE 11 - SUBSEQUENT EVENT (A) SCHEELITE DOME By agreement dated November 24, 1997, as amended February 2, 1998, the company obtained an option from Kennecott Canada Explorations Inc. to earn a 100% interest in the Scheelite Dome project in the Mayo mining district, Yukon Territory, Canada. The company must make C$135,000 in payments to the underlying property owner and carry out C$800,000 worth of exploration expenditures as follows: a) Pay C$70,000 and conduct C$150,000 of exploration in 1998; b) Pay C$65,000 and conduct C$200,000 of exploration in 1999; c) Conduct C$200,000 of exploration in 2000; and d) Conduct C$250,000 of exploration in 2001. Should the company exercise its option and deliver a feasibility study to Kennecott, Kennecott shall have 60 days in which to select to reacquire a 49% interest in the project by paying 150% of 49% of the expenditures incurred by the company. (B) SALE OF RYAN LODE MINE TO SILVERADO GOLD MINES LTD. The company entered into an agreement with Silverado Gold Mines Ltd. ("Silverado") on December 19, 1997 whereby Silverado acquired an option to purchase the Ryan Lode property, as described in Note 2. Silverado did not make certain payments to the company that subsequently became due and, on March 26, 1998, Silverado gave notice to the company that it was terminating the agreement. NOTE 12 - DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINICPLES These consolidated financial statements have been prepared in accordance with U.S. GAAP, which, in the case of the company, conforms in all material respects with Canadian GAAP, except as follows: a. Under U.S. GAAP the income (loss) per share is calculated using the weighted average number of common and common equivalent shares during the year, using the "treasury stock method" for stock options and warrants outstanding. Common equivalent shares which include common stock options were not included in the calculation of income (loss) per share, because the effects were antidilutive or immaterial. The income (loss) per share under Canadian GAAP is not significantly different from the income (loss) per share under U.S. GAAP. The company has determined that the application of Statement of Financial Accounting Standard No. 128 concerning the presentation of earnings per share under U.S. GAAP, which is effective for the company's 1998 fiscal year, would not have resulted in a basic loss per share or a fully diluted loss per share that is different from the basic loss per share under Canadian GAAP. b. U.S. GAAP requires, pursuant to Statement of Financial Accounting Standard No. 109, that a deferred tax asset be recognized for loss carry-forwards. Although the company has U.S. tax loss carry-forwards (Note 5), due to uncertainty as to utilization prior to their expiry, the deferred tax asset amounts have been completely offset in these consolidated financial statements by an uncertainty provision. c. The company accounts for its stock-based compensation expense under the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25. Under Canadian GAAP no recognition is given to any part of a stock option as representing compensation. The changes to the consolidated statements of operations and income (loss) per share under Canadian GAAP would be as follows: 1997 1996 1995 ----------- -------- --------- Net income (loss) for the year as reported $(1,462,225) 955,785 (364,857) Compensatory stock option expense (reduction) (43,125) 188,125 64,190 ----------- -------- --------- Net income (loss) for the year under Canadian GAAP $(1,505,350) 1,143,910 (300,667) =========== ========= ========= Income (loss) per share under Canadian GAAP $ (0.06) 0.05 (0.01) =========== ========= ========= -----END PRIVACY-ENHANCED MESSAGE-----