UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Under Section 12(b) or (g) of the Securities Exchange
Act of 1934
Canadian Northern Lites, Inc.
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(Exact name of Small Business Issuer as specified in its charter)
Texas, USA 76-048710
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State or other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization
Suite U13 Broadway Plaza, 601 W. Broadway, Vancouver, B.C. V5Z 4C
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(Address of principal executive offices)
Issuer's Telephone Number, (604) 879-8000
Securities to be registered pursuant to Section 12(b) of the Act:
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None
Securities to be registered pursuant to Section 12(g) of the Act:
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Common Shares, $0.001 par value.
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(Title of Class)
Page 1 of 187
Index to Exhibits on Page 43
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Introduction
Canadian Northern Lites Inc. (hereinafter also referred to as the "Company"
and/or the "Registrant") is a Company that was formed to explore properties
located in Canada for the presence of gemstones. The Company has interests in
four properties which it may, in the future, explore. Currently, these four
properties are in a dormant status. The four interests consist of a 20% joint
venture interest in the Ewer/Klinker Mineral Properties located near the town of
Vernon, British Columbia and a 100% interest in each of the Way 1, Banjo I and
Banjo II Mineral Properties also located near the town of Vernon, British
Columbia.
None of the Company's properties contain a known commercially viable deposit
suitable for mining.
The Company is voluntarily filing its registration statement on Form 10-SB in
order to make information concerning itself more readily available to the
public. As a result of filing its registration statement, the Company is
obligated to file with the Commission certain interim and periodic reports
including an annual report containing audited financial statements. The Company
intends to continue to voluntarily file these periodic reports under the
Exchange Act even if its obligation to file such reports is suspended under
applicable provisions of the Exchange Act.
The Company's principal office is located at Suite U-13 Broadway Plaza, 601 West
Broadway, Vancouver, British Columbia V5Z 4C2. The contact person is Mr. Terry
G. Cook, President and a member of the Board of Directors. The telephone number
is (604) 879-8000; the facsimile number is (604) 879-9004. The Company currently
does not maintain a website.
The Company's authorized capital includes 100,000,000 shares of common stock
with $0.001 par value. As of the close of the Company's latest fiscal year,
December 31, 1998, there were 17,211,000 shares of common stock outstanding. As
of June 30, 1999, there were also 17,211,000 shares of common stock outstanding.
The Company's common stock trades on the Over-the-Counter Electronic Bulletin
Board with the symbol "CANL".
The information in this Registration Statement is current as of August 25, 1999,
unless otherwise indicated.
Historical Corporate Development
The Company was incorporated in the state of Nevada on June 18, 1990 as QQQ
Huntor Associates, Inc. On July 21, 1995, the Company changed its domicile to
the state of Texas and merged into a Texas corporation called Unimex
Transnational Consultants, Inc. On April 26, 1996, the Company reorganized and
acquired all the issued and outstanding stock of Dakota Mining & Exploration
Ltd.("Dakota") for total compensation of 10,000,000 shares of the Company's
common stock. At this time the name of the Company was changed to Canadian
Northern Lites, Inc. As a result of that transaction, Dakota became a wholly
owned subsidiary of the Company.
As a result of the transaction in which the Company acquired all the outstanding
shares of Dakota, the group of shareholders that owned Dakota held 10,000,000
shares of the Company which was more than 50% of the voting shares at that time.
This resulted in the transaction being accounted for as a "reverse take-over" in
the consolidated financial statements.
On April 10, 1996, the Company entered into an agreement which was an Option To
Purchase some mineral claims (Ewer/Klinker Mineral Properties) located near
Vernon, British Columbia. This agreement originally gave the Company an option
to acquire a 100% interest in the claims, but that option expired unexercised on
January 15, 1998 and at that time a joint venture was created in which the
Company had a 20% interest. The activities of the joint venture are to be
controlled by a management committee and each joint venture partner is required
to advance funds for property development. To date, the management committee has
not been formed and the activities of the joint venture have not begun. As of
August 25, 1999, the Company is not aware of any financial commitments to the
joint venture under the direction of the management committee or a date at which
time any such commitments may start.
On May 5, 1998, the Company acquired a 100% interest in the Way I Claim; the
Banjo I Claim; and, the Banjo II Claim for total consideration of $50,000 from
456786 B.C. Ltd., a company controlled by Terry G. Cook, the President of the
Company.
All of the Company's mineral properties are currently in a dormant status.
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BUSINESS
The Company currently has a 100% interest in three mineral properties that it
believes may be suitable for gemstone exploration. The Company currently has no
immediate plans to begin exploration programs on any of these properties.
The Company also has a 20% joint venture interest in some mineral claims located
near Vernon, British Columbia. To date no activities of the joint venture have
begun.
Risk Factors
The Uncertainty of the Degree of Success of Possible Future Exploration Efforts
By the Company:
The Company's properties are currently in a dormant stage. Each property is
without any known gemstones. Development of the Company's properties will only
follow upon obtaining satisfactory exploration results. Gemstone exploration
involves a high degree of risk and few properties that are explored are
ultimately developed into producing mines. There is no assurance that the
Company's future mineral exploration and development activities will result in
any discoveries of gemstones. The long-term profitability of the Company's
operations will be in part directly related to the cost and success of its
future exploration programs, which may be affected by a number of factors.
The Company's gemstone operations will be subject to governmental legislation,
policies and controls relating to prospecting, development, production and
environmental protection, mining taxes and labor standards. Other factors, such
as market fluctuations, changing production costs, the supply and demand for
gemstones, the rate of inflation, the political environment and changes in
international investment patterns may have an adverse affect on the Company's
operations.
The Lack of Assurance That the Company Will Be Able to Meet Its Future Capital
Requirements:
The Company has no source of operating cash flow to fund future exploration
projects or corporate overhead. The Company has limited financial resources, and
there is no assurance that additional funding will be available. The Company's
ability to continue exploration of its properties will be dependent upon its
ability to raise significant additional funds in the future.
The Company has no history of significant earnings, and due to the nature of its
business, there can be no assurance that the Company will be profitable. The
Company has paid no dividends on its common shares since incorporation and does
not anticipate doing so in the foreseeable future. The only source of funds
available to the Company for future exploration expenditures is through the sale
of its equity shares. Even if the results of future exploration are encouraging,
the Company may not have sufficient funds to conduct the further exploration
that may be necessary to determine whether or not a commercially mineable
deposit exists. While the Company may generate additional working capital
through further equity offerings or through the sale or possible syndication of
one or more of its properties, there is no assurance that such funds will be
available. If available, future equity financing may result in substantial
dilution to purchasers under such offerings.
Operating Hazards and Risks Associated with the Mining Industry That the Company
Will Face If It Begins Exploration Work On Its Properties :
Mining operations generally involve a high degree of risk, which even a
combination of experience, knowledge and careful evaluation may not be able to
overcome. Hazards such as unusual or unexpected formations and other conditions
are involved. Operations in which the Company has a direct or indirect interest
will be subject to all the hazards and risks normally incidental to exploration,
development and production of precious and base metals, any of which could
result in work stoppages, damage to or destruction of mines and other producing
facilities, damage to life and property, environmental damage and possible legal
liability for any or all damage. The Company may become subject to liability for
cave-ins and other hazards for which it cannot insure or against which it may
elect not to insure where premium costs are disproportionate to the Company's
perception of the relevant risks. The payment of such insurance premiums and of
such liabilities would reduce the funds available for exploration activities.
Risks Associated with the Company's Failure to Comply with Canadian Mining
Regulations and Government Rules Associated with Mining in Canada:
The Company carries out exploration in Canada in the province of British
Columbia. In Canada, the Company's claims are worked under Provincial Mines Acts
and Regulations. The Company has the right to carry out exploration on its
claims subject to the terms and conditions outlined by the local mines
inspectors. The Company from time to time may be required to post small monetary
bonds to be held against project cleanup. Provincial labor health and welfare
codes apply to all operations. The Company generally carries out all exploration
work utilizing professional exploration consultants who carry general liability
and third party insurance.
The Company's exploration activities in Canada are regulated by various
government agencies, both federal and provincial. Environmental legislation
provides for restrictions and prohibitions on spills and releases or emission of
various substances produced in association with certain mining industry
operations, such as seepage from tailings disposal areas that would result in
environment pollution. A breach of legislation may result in imposition of fines
and penalties.
The Company has obtained all necessary permits for exploration work performed to
date, and to the best of its knowledge, the Company is in compliance with all
material laws and regulations that currently apply to its activities. There can
be no assurance, however, that all permits that the Company may require for its
future operations will be obtainable on reasonable terms or that such laws and
regulation would not have an adverse effect on any mining project that the
Company might undertake.
The Company is aware that environmental legislation is evolving in a manner that
will require more stringent assessments of proposed projects, stricter standards
and enforcement, including increased fines and penalties for non-compliance, and
a heightened degree of responsibility for companies and their officers,
directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Company's
operations. Environmental hazards caused by previous or existing owners or
operators of the properties may exist on the Company's properties that are
unknown to the Company at the present time. The Company is not covered by any
form of environmental liability insurance at the present time.
Risks Associated with Reclamation Obligations That the Company Will be Exposed
to Should It Decide to Explore Its Properties:
Reclamation requirements vary depending on the location and the managing agency,
but they are similar in that they aim to minimize long-term effects of
exploration by requiring the operating company to control possible harmful
discharges and to reestablish to some degree, pre-disturbance land forms and
vegetation. The Company is actively providing for or has carried out any
requested reclamation activities on its properties.
The Uncertainty of the Company's Ability to Obtain Future Permits and Licenses
Should It Decide to Explore Its Properties:
The operations of the Company may require licenses and permits from various
governmental authorities. There can be no assurances that the Company will be
able to obtain all necessary licenses and permits that may be required to carry
out exploration, development and mining at its properties.
Risks Associated with Penny Stock Classification:
The Company's stock is subject to "penny stock" rules as defined in 1934
Securities and Exchange Act rule 3151-1. The Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in penny
stocks. The Company's common shares are subject to these penny stock rules.
Transaction costs associated with purchases and sales of penny stocks are likely
to be higher than those for other securities. Penny stocks generally are equity
securities with a price of less than U.S. $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customer's account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information, must be given to the customer orally
or in writing prior to effecting the transaction and must be given to the
customer in writing before or with the customer's confirmation.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from such rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for the common shares in the United
States and shareholders may find it more difficult to sell their shares.
Dependence On Key Personnel
The Company's continued success is dependent, to a large degree, upon the
efforts of its current executive officers. The loss or unavailability of any
such person could have an adverse effect on the Company. At the present time the
Company does not maintain key man life insurance policies for any of these
individuals. Also, the continued success and viability of the Company is
dependent upon its ability to attract and retain qualified personnel in all
areas of its business, especially management positions. In the event the Company
is unable to attract and retain qualified personnel, its business may be
adversely affected. There are currently no employment agreements in place.
Management is; however, currently negotiating agreements with the executive
officers of the Company.
Limited Operating History
The Company only has no operating history upon which to base an evaluation of
its business and prospects. Operating results for future periods are subject to
numerous uncertainties, and there can be no assurance that the Company will
achieve or sustain profitability on an annual or quarterly basis. The Company's
prospects must be considered in light of the risks encountered by companies in
the early stage of development, particularly companies in new and rapidly
evolving markets. Future operating results will depend upon many factors,
including the level of product and price competition, the Company's success in
attracting and retaining motivated and qualified personnel, and in particular,
the ability of the Company to develop its inventory of properties and to raise
additional capital for other ventures within the mining industry.
The Ability to Manage Growth
Should the Company be successful in its efforts to develop its gemstone
properties or to raise capital for other mining ventures it will experience
significant growth in operations. If this occurs management anticipates that
additional expansion will be required in order to continue development. Any
expansion of the Company's business would place further demands on its
management, operational capacity and financial resources. The Company
anticipates that it will need to recruit qualified personnel in all areas of its
operations. There can be no assurance that the Company will be effective in
attracting and retaining additional qualified personnel, expanding its
operational capacity or otherwise managing growth. The failure to manage growth
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations.
Lack of a Dividend Policy
The Company does not presently intend to pay cash dividends in the foreseeable
future, as any earnings are expected to be retained for use in developing and
expanding its business. However, the actual amount of dividends received from
the Company will remain subject to the discretion of the Company's Board of
Directors and will depend on results of operations, cash requirements and future
prospects of the Company and other factors.
Possible Dilution to Present and Prospective Shareholders
The Company's plan of operation, in part, contemplates the accomplishment of
business negotiations by the issuance of cash, securities of the Company, or a
combination of the two, and possibly, incurring debt. Any transaction involving
the issuance of previously authorized but unissued shares of common stock, or
securities convertible into common stock, would result in dilution, possibly
substantial, to present and prospective holders of common stock.
Competition
There is competition from other mining exploration and development companies
with operations similar to those of the Company's. Many of the mining companies
with which the Company competes have operations and financial strength many
times that of the Company. Nevertheless, the market for the Company's possible
future production of minerals tends to be commodity oriented, rather than
company oriented. Accordingly, the Company expects to compete by taking
advantage of the market for all minerals present in its properties, to offset
the primarily fixed costs of mining any one of the jointly-occurring minerals.
Commodity prices fluctuate and there is no guarantee that market prices at any
one time will be higher than production costs.
The Company does not engage in any material hedging or other transactions which
are intended to manage risks relating to the fluctuations in mineral prices and
does not intend to do so in the foreseeable future.
History of Net Losses
The Company has had net losses for the past three years.
In the fiscal year ended 12/31/96, the Company had a net loss of $429,374; in
the fiscal year ended 12/31/97, the Company had a net loss of $519,159; and, in
the fiscal year ended 12/31/98, the Company had a net loss of $33,221.
There can be no assurance that this trend will not continue.
<PAGE>
Significant Customers and/or Suppliers
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N/A
Employees
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At 7/15/99 the Company operated with the services of its Directors, Executive
Officers, and no additional employees or consultants. There is no collective
bargaining agreement in place.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
SELECTED FINANCIAL DATA
The selected financial data in Table No. 1 for Fiscal 1998 and Fiscal 1997 ended
December 31st was derived from the financial statements of the Company which
were audited by McLean Majdanski Chartered Accountants, as indicated in their
report which is included elsewhere in this Registration Statement.
The selected financial data for the six month period ended June 30th, 1999 is
derived from the unaudited financial statements of the Company, also included
herein and, in the opinion of the Company, present fairly the information set
forth herein.
The selected financial data was extracted from the more detailed financial
statements and related notes included herein and should be read in conjunction
with such financial statements and with the information appearing under the
heading, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Table No. 1
Selected Financial Data
($ in 000, except per share data)
6 Months Year Year
Ended Ended Ended
6/30/99 12/31/98 12/31/97
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Revenue $0 $0 $0
Net Income (Loss) ($17.4) ($33.2) ($519.2)
Earnings (Loss) per Share ($0.001) ($0.002) ($0.035)
Dividends per Share 0 0 0
Wtg Avg #Shares (000) 17,211 17,211 14,494
Working Capital ($44) ($35) ($30)
Long Term Debt $198 $195 $223
Shareholders' Equity ($114) ($97) ($165)
Total Assets $128 $132 $88
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
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OPERATION
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Cash Balances
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The Company maintains its major cash balances at one financial institution, HSBC
(Hong Kong Shanghai Bank), located in Vancouver, British Columbia, Canada. The
balances are insured by the Canada Deposit Insurance Corporation. At August 25,
1999, there were no uninsured cash balances.
LIQUIDITY AND CAPITAL RESOURCES
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Fiscal 1998 and 1997 Ended 12/31
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Cash Used In 1998 Operating Activities totaled ($33,247), including the
($33,221) Net Loss; the primary adjusting items were $21,879 in Goods and
Service Tax Receivable and $4,988 for accounts payable. Cash provided by 1998
Financing Activities totaled $73,105.
Cash Used In 1997 Operating Activities totalled ($93,875), including the
($519,160) Net Loss; the primary adjusting items were $11,950 for the Loss on
Disposal of Assets, $413,334 for the Write off of Development and Property
Costs, ($3,105) for Goods and Services Tax Receivable and ($90,711) for Accounts
Payable. Cash provided from 1997 Financing Activities totaled $179,738.
RESULTS OF OPERATIONS
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Fiscal 1998 and 1997 Ended 9/30
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General and administrative expenses for the fiscal year ended December 31, 1998
totaled $35,735 and the Company experienced a net loss of ($33,221) against no
revenues. The major expenses during this period were $5,730 in accounting fees,
$4,630 in interest on long term debt, $3,625 in legal fees, $18,200 in
management fees, $1,742 in office supplies and service and $1,113 in wages and
benefits.
During fiscal 1997, general and administrative expenses totaled $70,308 and the
Company experienced a net loss of $519,160 against no revenues. The major
expenses during this period were $2,889 in accounting fees, $39,723 in
management fees, $6,406 in travel and $7,666 in wages and benefits. During this
period the Company also wrote off $413,334 in development and property costs.
The Six Months ended June 30, 1999
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General and administrative expenses for the six months ended June 30, 1999,
totaled $17,570. These costs were comprised of: $189 in bank charges and
interest, $3,444 in interest on long term debt, $3,914 in legal fees, $10,000 in
management fees, and only $23 in office supplies and service. The Company
reported a net loss for the six months ended June 30, 1999, of ($17,371).
Known Trends
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Management has determined that because of the deficiency in working capital,
significant operating losses and lack of liquidity, there is doubt about the
ability of the Company to continue in existence unless additional working
capital is obtained. Consequently such trends or conditions could have a
material adverse effect on the Company's financial position, future results of
operations, or liquidity. The Company currently has plans to raise sufficient
working capital through equity financing or reorganization of the Company.
Inflation
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The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a material impact on its operations
in the future.
Y2K Compliance
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The Company uses software and hardware systems by third parties in its
accounting and business systems. The Company has initiated a program to address
the Year 2000 concerns regarding its information technology systems. The program
is being coordinated by the President of the Company. The Company has completed
a review of Year 2000 readiness for its third party software and hardware. The
Company's accounting system software has been updated and is Year 2000
compliant. The development platform used by the Company's research and
development team is in the process of being upgraded to ensure that it is Year
2000 compliant. The Company's goal is to have all systems essential to its
operations Year 2000 compliant by November 1999.
The Company is also conducting a review of all hardware, comprised of internal
computer equipment, fax machines, photocopiers and the telephone system,
currently being used by the Company. This review includes consultations with
various manufacturers of the hardware and testing of the hardware by the
Company's President. The Company's goal is to complete its review, to include
receipt of certification from the manufacturers that all of its hardware is Year
2000 compliant by November 1999. The Company has updated all internal clocks and
calendars in order to be prepared for the Year 2000.
The Company relies on third parties to provide certain services to the Company,
such as elevator, light and power. As part of the Company's Year 2000 program,
the Company is in the process of seeking confirmation from such third parties
that their systems are Year 2000 compliant and that their services will continue
to be provided to the Company through the Year 2000.
The President of the Company is updated on a regular basis on the process of all
facts of its Year 2000 program. The Company does not expect the program to cost
in excess of $5,000 aggregate. Costs incurred to date have been immaterial.
Future costs will be expensed as incurred. Estimated costs and the anticipated
date by which the Company plans to complete Year 2000 modifications are based on
management's best estimates, which were derived using assumptions of future
events including availability of certain resources. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
from those planned.
The Company has not yet completed all necessary phases of the Year 2000 program.
In the event the Company does not complete additional phases or outside vendors
and third parties are not Year 2000 compliant by December 31,1999, the most
reasonable worst case scenario would be a reduction or suspension of operations
which could have a material impact on the Company's business or its financial
statements. In addition, disruptions in the economy generally resulting from
Year 2000 issues could also materially adversely affect the Company. The amount
of potential lost revenue cannot be reasonably estimated at this time.
The Company is evaluating the need for a contingency plan in the event any third
parties cannot demonstrate to the Company on a timely basis, their Year 2000
compliance. There can be no assurance that the systems of third parties will be
modified on a timely basis.
FORWARD-LOOKING STATEMENTS
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From time-to-time, the Company or its representatives may have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission
or other regulatory agencies. Words or phrases "will likely result", "are
expected to", "will continue", " is anticipated", "estimate", "project or
projected", or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Reform Act does not apply to initial
registration statements, including this filing by the Company. The Company
wishes to ensure that such statements are accompanied by meaningful cautionary
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
The risks identified here are not inclusive. Furthermore, reference is also made
to other sections of this Registration Statement that include additional factors
that could adversely impact the Company's business and financial performance.
Also, the Company operates in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, not can it access the impact of
all such risk factors on the Company's business or the extent to which any
factor or combination of factors may cause actual results to differ
significantly from those contained in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results.
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY
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The Company rents approximately 1,200 square feet of space at Suite U13 Broadway
Plaza, 601 West Broadway, Vancouver, British Columbia Canada V5Z 4C2 for
administrative efforts. The Company considers the facility adequate for current
purposes.
The Way 1 Claim - Vernon Area Southeastern, British Columbia
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The Way 1 does not represent a producing property. It is currently in a dormant
status. The Company has had no revenue from mining operations on The Way 1 Claim
to date.
Acquisition of the Way 1 Claim
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On May 5, 1998, the Company acquired a 100% interest in the Way 1 Claim and two
other claims, the Banjo 1 and the Banjo II for total consideration of $50,000
from 456786 B.C. Ltd., a company owned by Tery G. Cook, the President of the
Company.
Location and Access of the Way 1 Claim
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The Way 1 claim is a Four-Post Mineral claim located 23 kilometers north of
Vernon and 15 kilometer's south southwest of Falkland in the Okanagan region of
south-central British Columbia. The claim rests on the Thompson Plateau at 50
degrees 22' 27" North Latitude and 119 degrees 35' 17" West Longitude near the
headwaters of Ewers Creek. Ewers Creek flows east 8.5 kilometers where it joins
Equesis Crees south to the north arm of Okanagan Lake. Wiwash Rock Mountain and
Pinaus Lake lie 4.5 kilometres northeast and 6 kilometres north of the claims
respectively.
Access to the claim is gained by driving south on Westside Road to Six Mile
Road, 10.3 kilometers to the McGregor Main Logging Road and west 13.5 km to the
southern part of the claim.
Topography and Physiography
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The topographic relief is steep on the west and northern half of the property as
it lies at or near the bottom of the Ewers Creek Canyon. From here the terrain
rises in a series of vertical cliffs 25-50 meters in height from an elevation of
1,605 meters above sea level to the gently rolling Thompson Plateau with a
maximum elevation of 1490 meters on the eastern edge of the claim. A deeply
incised V-shapped valley with steep flow gradient bisects the middle of the
claim.
Vegetation includes birch, spruce and minor hemlock and cedar, with typical open
bush and dry grass of the Okanagan Valley. A large area of the claim is logged;
the resulting new undergrowth is a dense jungle of alder and spruce making
traversing arduous.
History and Previous Work
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No history of any note has been found regarding the Way 1 claim itself but it is
in close proximity to the Klinker Precious Opal Prospect.
The Klinder and Ewer claims were staked in 1991 and 1992 to cover the first
significant discovery of precious opal in British Columbia and in Canada. In
1995 and 1996, the deposit was bulk sampled using mechanized equipment. Numerous
nodules and veins of precious opal have been located in several pits on the
site. To date a total of 24 claims have been staked at this site.
Property Status
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The Way1 claim consists of the following mineral claim, located within the
Vernon Mining District:
Claim Name Tenure Number Units Record Date
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Way 1 365255 14 9/03/98
Property Geology
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The Way 1 claim is underlain by the volcanic and sedimentary rocks of the
Kamloops Group with the dominant lithology located as outcrop on the property
being the basal members of the Tranquille Formation of the Kamloops Group. An
angular unconformity found in Ewer Creek canyon arks the paleosurface of the
Upper Paleozoic sedimentary and volcanics of the Harper Ranch Group on which the
Kamloops group is laid. This unconformity slopes gently to the west at about 10
degrees.
In the course of prospecting, nine distinct geological units were recognized:
HARPER RANCH GROUP (Permian)
Unit 1 Dark green to black highly altered andesite with minor diorite and
lapilli tuff found in the Ewer Creek Canyon on the north part of the
claim.
Unit 2 Massive crystalline limestone with minor argillaceous tuff, argillite
and quartizite. This unit outcrops in the deeply incised valley in the
center of the claim and makes some of the cliffs in the upper reached
of Ewer Creek.
TRANQUILE FORMATION
All of the units on the property appear to have waterlain being locally well
bedded and have been dipped to the west southwest at about 10-15 degrees.
Downdip as the basin deepens as the units pass from the basal unit 3 to a
calcareous siltstone. Descriptions of the individual units are as follows:
Unit 3 Yellowish-brown to red weathering, well-bedded volcaniclastic/arkosic
matrix or clast dominant sediments. Lithologies include immature
tuffacewous wacke, arkose, minor siltstone and sandstone and layers of
lapilli tuff. Locally angular clasts of scoreacous basalt and andesite
up to 15 cm in width occupy as much as 40% of the rock. Individual
beds vary from 2mm to 25cm in thickness with color varying from pale
yllow t dark yellow brown. The rock is soft but well lithified. Sole
plating, mud cracks and ripples can be seen in a large amount of the
outcrops near Ewer Creek.
Unit 4 Poorly lithified ash flow tuff with abundant clasts of basalt making
up 50% of the outcrop. This unit is found mainly on top of the cliffs
marking deeply incised creek in the north central of the claim and on
the road near the northwestern boundary of the claim.
Unit 5 Reddish to maroon weathering, variably resistant, massive heterolithic
lahar. Blocks of mostly basalt occur a well rounded clasts less than
or equal t 30cm in diameter in a medium to coarse grained arkosic/tuff
matrix. This unit contains abundant agate sometime occupying more than
50% of the rock.
Unit 6 Dark green, dark green grey lapilli tuf outcropping near the edge of
the above unit and contains abundant agate.
Unit 8 Uniform black to dark green calcareous tuffaceous siltstone.
DEWDROP FORMATION
Unit 7 Fresh unaltered predominately scoriacous basalt/andesite forming sills
cutting the Tranquille Formation. Where flow banding is evident these
are locally filled with abundant agate. On the western boundary of th
claim adjoining a forestry cut block this unit is characterized by
very fine flows 2-3mm in thickness alternating red and black on fresh
surface and weathering dark and white respectively.
Unit 9 Fresh unaltered predominately scoriacous basalt/andesite forming the
topographic highs on the western edge of the property.
Conclusions and Recommendations
- -------------------------------
No economic minerals were found in the limited prospecting performed on the
property in 1997. Geology of the Way 1 claim appears to be volcanoclastic
sediments of the Tranzuille Formation of the Kamloops Group overlaying th
altered andesites lapilli tuffs and diorites of the Permian aged Harper Ranch
Group. In addition several outcrops were noted of basalt/andesites of the
Dewdrop Formation which are also part of the Kamloops Group.
Management believes that future exploration, should be concentrated on the
eastern half of the Way 1 claim.
The Banjo 1 and 2 Claims
- ------------------------
The Banjo 1 and 2 Claims do not represent a producing property. They are both
currently in a dormant status. The Company has had no revenue from mining
operations on Banjo 1 and 2 Claims to date.
Acquisition of the Banjo 1 and 2 Claims
- ---------------------------------------
On May 5, 1998, the Company acquired a 100% interest in the Banjo 1 and Banjo 2
claims for total consideration of $50,000 from 456786 B.C. Ltd., a company owned
by Terry G. Cook, the President of the Company.
Location and Access of the Banjo 1 and 2 Claims
- -----------------------------------------------
The Banjo 1 & 2 claims are Four-Post Mineral claims located 21 kilometers north
of Vernon and 16 kilometres south southwest of Falkland in the Okanagan region
of south-central British Columbia The claim rests on the Thompson Plateau
centered at 50(Degree) 21' 27" North Latitude and 119(Degree) 31' 17" West
longitude (UTM Co-Ordinates 5581000 N. 320000 E) near Ewers Creek. Ewers Creek
flows east 2.5 kilometers where it joins Equesis Creek (Six Mile Creek) south to
the north arm of Okanagan Lake. Siwash Rock Mountain and Pinaus Lake lie 1.0
kilometer north and 7 kilometers northwest of the claims respectively.
Access to the claim is gained by driving south on Westside Road to Six Mile
Road, 10.3 kilometers to the McGregor Main Logging Road and west 7.0 km. to the
central part of the claim.
Topography and Physiography
- ---------------------------
The topographic relief is steep on the northern half of the Banjo 2 property as
it lies at or near the bottom of the Ewers Creek Canyon. From here the terrain
rises in a series of vertical cliffs 25-50 meters in height from an elevation of
875 meters (2400') above sea level to the gently rolling Thompson Plateau with a
maximum elevation of 1433 meters (4700') on the southern edge of the claim.
Vegetation includes birch, spruce and minor hemlock and cedar, with typical open
bush and dry grass of the Okanagan Valley. A large area of the claim is logged;
the resulting new undergrowth is a dense jungle of alder and spruce making
traversing arduous.
<PAGE>
Property Status
- ---------------
The Banjo 1 & 2 claims consist of the following mineral claims, located within
the Vernon Mining District:
Claim Name Tenure Number Units Record Date
- ----------------------------------------------------------------
Banjo 1 366334 20 10/17/98
Banjo 2 366335 20 10/18/98
History and Previous Work
- -------------------------
No history of any note has been found regarding the Banjo 1 & Banjo 2 claims but
they are in close proximity to the Klinker Precious Opal Prospect.
The Klinker and Ewer claims were staked in 1991, 1992 respectively by R.W.
York-Hardy to cover the first significant discovery of precious opal in British
Columbia and in Canada. In 1995 and 1996, the deposit was bulk sampled using
mechanized equipment. Numerous nodules and veins of precious opal have been
located in several pits on the site. To date a total of 24 claims have been
staked at this site.
Property Geology
- ----------------
A large portion of the Banjo 1 & 2 claims are underlain by the volcanic and
sedimentary rocks of the Harper Ranch Group with the dominant lithology located
as outcrop on the property being the andesite flows and flow breccias with
associated lapilli tuffs. Two bands of calcareous argillites with minor
siltstones form the sides of a tightly folded syncline whose axial plane strikes
340(Degree) and appears to plunge to the northwest. There was not enough
exposure to ascertain predominate fault structures within the Harper Ranch Group
but late faulting associated probably with Tertiary volcanism indicate a set of
normal faults striking north/south with a downthrow on the western side.
An angular unconformity marks the paleosurface on which the sediments and
volcanics of the Kamloops Group are laid. This unconformity dips gently to the
west at about 10 degrees.
In the course of prospecting, ten distinct geological units were recognized:
KAMLOOPS GROUP (TERTIARY)
- -------------------------
(UNITS FOUND ON THE SOUTHERN HALF OF BANJO 1)
DEWDROP FORMATION
- -----------------
Unit 10 Basalt/Andesite and Top Flow Breccias Fresh unaltered; black,
chocolate brown in colour with minor maroon, rusty red, terra cotta
brown section. Also include within this assemblage is the minor
interbedded tuffs and tephras
Unit 9 Lapilli Tuff: Fresh unaltered black to dark green grey volcanoclastic
forming lenses and reefs within the above basalts. Unit is
characterized by well rounded lapilli up to 5 cm. In diameter. The
basal members of this unit are locally filled with abundant agate.
TRANQUILLE FORMATION
- --------------------
Unit 8: Matrix Dominant Lahar: Yellowish-brown to red weathering, well-bedded
volcanoclastic/arkosic. Lithologies include immature tuffaceous wacke,
arkose, minor silstone and sandstone and layers of lapilli tuff.
Locally angular clasts of scoreacous basalt and andesite up to 15 cm.
in width occupy as much as 40% of the rock. Individual beds vary from
2 mm to 25 cm in thickness with colour varying from pale yellow to
dark yellow brown. The rock is soft but well lithified.
Unit 7: Lapilli Tuff: Dark green, dark green grey outcropping near the edge of
the above unit and contains abundant agate
Unit 6: Clast Dominat Lahar: Reddish to maroon weathering, variable resistant,
Massive Heterolithic. Blocks of mostly basalt occur as well rounded
clasts up to 30 cm. In diameter in a medium to coarse grained
arkosic/tuff matrix. This unit contains abundant agate sometime
occupying more than 50% of the rock.
HARPER RANCH GROUP (CARBONIFEROUS/PERMIAN)
- ------------------------------------------
Unit 5 Andesitic (?) Top Flow Breccia Dark green to black, moderately altered
dense, siliceous with minor Lapilli Tuff on the southwestern part of
the Banjo 2 claim. Very fine grained and breaking with a concoidal
fracture containing hornblende and augite as tiny black grains
Unit 4 Lapilli Tuff: Mottled dark green to black, moderate altered with
rounded lapilli up to 4 mm in diameter within a fine ash tuff matrix.
Weathers to a light brown to khaki on the surface with a powder like
coating. This unit forms the predominate unit within the prospecting
area. Generally massive to weakly fractured.
Unit 3 Argillite: Black to rust coloured, calcareous moderately fractured
with fractures containing quartz, calcite and locally 1 - 2% pyrite
Unit 2 Diorite (?): A highly altered dark green to black more mafic, coarser
grained and overall less sheared and fractured endmember of unit 1
below. Contains amber coloured quartz eyes and 1 - 2% pyrite
Unit 1 Greenstone: Highly altered fractured and sheared fractures filled with
quartz, carbonate and locally minor gypsum
A total of 7 rock samples were taken on the property and were assayed for any
economic minerals. The most mafic endmember of the volcanic group, Unit 2 was
correspondingly anomalous in Ni/Co/Cr. running 463 PPM No., 44 PPM Co. and 113
PPM Cr. respectively. All other samples were not anomalous.
Conclusions
- -----------
No economic minerals were found in the limited prospecting performed on the
property in 1997. Geology of the Banjo 1 claim consists largely of the volcanics
and associated volcanoclastic lapilli tuffs with minor calcareous argillites of
the Carboniferous/Permian Harper Ranch Group. An unconformity marks the
paleosurface of the Harper Ranch Group onto which the volcanoclastic sediments
of the Tranquille Formation and the basalt/andesites of the Dewdrop Formation of
the Kamloops Group are laid.
This unconformity dips to the west at 10 (Degree) transects the Banjo 1 claim in
a northwest-southeast direction
Management believes that if the Company does any work in the future in this area
that exploration should be concentrated on:
1) Structures cutting the Harper Ranch Group especially the faults that have a
north-south orientation to ascertain if there could be possibility of some
economic minerals within the faults. 2) The basal members of the Tranquille
sediments that lie on the unconformity with the Harper Ranch Group in the
southern half of the Banjo 1 claim.
The Ewer/Klinker Mineral Claims
The Ewer/Klinker Mineral Claims do not represent a producing property and the
Company's current operations are passive, in that the Company has a 20% interest
in a joint-venture which is involved in the Ewer/Klinker Mineral Claims.
To date, the joint venture has been engaged in no activity on the Ewer/Klinker
Mineral Claims.
The Company has had no revenue from mining operations on The Ewer/Klinker
Mineral Claims.
Acquisition of Interest
On April 10, 1996, the Company entered into an agreement which was an Option To
Purchase some mineral claims (Ewer/Klinker Mineral Properties) located near
Vernon, British Columbia. This agreement originally gave the Company an option
to acquire a 100% interest in the claims, but that option expired unexercised on
January 15, 1998 and at that time a joint venture was created in which the
Company had a 20% interest.
Location and Access:
The Ewer/Klinker Mineral Properties are located approximately 30 kilometers
northwest of Vernon in south central British Columbia (lat: 50 degrees, 21.5'
north longtitude, 34' east, Westwold 82L/5 1:50,000 map sheet).
History and Previous Work
The Klinker and Ewer claims were staked in 1991 and 1992. In 1995 and 1996, the
area was bulk sampled using mechanized equipment. Numerous nodules and veins of
precious opal have been located in several pits on the site; however, to the
best of the Company's knowledge a significant economic opal deposit has not been
discovered to date.
Property Status
No information has been made available to the Company regarding
"property status"
Property Geology
No information has been made available to the Company regarding "property
geology".
Conclusions
Management believes that further work must be done on the Ewer/Klinker Claims to
allow an adequate resource estimate to be made. To date no work has been done by
the joint venture partners in this area and management considers the property to
be in a dormant status.
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
The Registrant is a publicly-owned corporation, the shares of which are owned by
United States and Canadian residents. The Registrant is not controlled directly
or indirectly by another corporation or any foreign government.
Table No. 2 lists as of August 25, 1999 all persons/companies the Registrant is
aware of as being the beneficial owner of more than five percent (5%) of the
common stock of the Registrant.
Table No. 2
5% Shareholders
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- --------------------------------------------------------------
Common Terry G. Cook (1) 1,686,000 9.79%
Common William E. Gould 1,480,000 8.59%
Common Myron Kinach 1,475,000 8.57%
Common William Lumley 1,440,000 8.36%
TOTAL 6,081,000 35.33%
# Based on 17,211,000 shares outstanding as of August 25, 1999.
1. 1,500,000 of these shares are restricted pursuant to Rule 144
Table No. 3 lists as of August 25, 1999 all Directors and Executive Officers who
beneficially own the Registrant's voting securities and the amount of the
Registrant's voting securities owned by the Directors and Executive Officers as
a group.
Table No. 3
Shareholdings of Directors and Executive Officers
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- -------------------------------------------------------------------------
Common Terry G. Cook, President & Director 1,686,000 9.79%
Common Larry Low, Director 0 0.0%
Common Cam Dalgliesh, Secretary & Director 0 0.0%
Total 1,686,000 9.79%(1)
# Based on 17,211,000 shares outstanding as of August 25, 1999.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- ---------------------------------------------------------------------
Table No. 4 lists as of August 25, 1999 the names of the Directors of the
Company. The Directors have served in their respective capacities since their
election and/or appointment and will serve until the next Annual Shareholders'
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. All Directors are residents
and citizens of Canada.
Table No. 4
Directors
Date First
Elected
Name Age or Appointed
- -----------------------------------------------------------------
Terry G. Cook (1) 50 May 1998
Larry Low 35 May 1998
Cam Dalgliesh (1) 54 May 1998
(1) Member of Audit Committee.
Table No. 5 lists, as of August 25, 1999, the names of the Executive Officers of
the Company. The Executive Officers serve at the pleasure of the Board of
Directors. All Executive Officers are residents/citizens of the United States.
Table No. 5
Executive Officers
Name Position Date of Board Approval
- -----------------------------------------------------------------
Terry G. Cook President May 1998
Cam Dalgliesh Secretary May 1998
Business Experience
- -------------------
Terry G. Cook. Mr. Cook is President and a Director of the Company. He has been
employed by the Company since May 1999. His responsibilities include
coordinating strategy and planning. Mr. Cook is a graduate of the Harvard
Business School where he received an MBA in 1974. Since 1978 he has been the
President and a Director of Westridge Capital Ltd., a management and investment
company located in Vancouver, British Columbia. Mr. Cook has over 20 years
experience in creating and building small and medium sized businesses and real
estate ventures as a result of his work with Westridge Capital Ltd.
Cam Dalgliesh. Mr. Dalgliesh is Secretary and a Director of the Company. His
responsibilities include assisting Mr. Cook in general administration of the
Company and planning. Mr. Dalgliesh is a graduate of the University of Alberta.
He is an independent businessman with experience in several small and midium
sized businesses, including Factory Direct Sports Ltd. a Canadian based direct
marketing company which markets all types of sporting goods.
Larry Low. Mr. Low is a Director of the Company. His responsibilities include
assisting both Mr. Cook and Mr. Dalgliesh in the planning process for the
Company. Mr. Low is a graduate of the University of British Columbia. He has
been employed by the CGI Group Inc. as an information technology consultant
since 1997. The CGI Group Inc. is an international information technology firm
based in Montreal, Qurbec with an office in Vancouver, British Columbia.
Involvement in Certain Legal Proceedings
- ----------------------------------------
Other than that described above, there have been no events during the last five
years that are material to an evaluation of the ability or integrity of any
director, person nominated to become a director, executive officer, promoter or
control person including:
a) any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time;
b) any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
c) being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
enjoining, barring, suspending or otherwise limiting his/her involvement in any
type of business, securities or banking activities;
d) being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Family Relationships
- --------------------
There are no family relationships between any of the officers and/or directors.
Other Relationships/Arrangements
- --------------------------------
There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which he/she was selected as a Director or
Executive Officer. There are no material arrangements or understandings between
any two or more Directors or Executive Officers.
ITEM 6. EXECUTIVE COMPENSATION
- -------------------------------
The Company has no formal plan for compensating its Directors for their service
in their capacity as Directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors. The Board of Directors may
award special remuneration to any Director undertaking any special services on
behalf of the Company other than services ordinarily required of a Director.
During Fiscal 1998, no Director received and/or accrued any compensation for his
services as a Director, including committee participation and/or special
assignments.
The Company has no material bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's Directors or
Executive Officers. The Company has no stock option or other long-term
compensation program.
During 1998, no funds were set aside or accrued by the Company to provide
pension, retirement or similar benefits for Directors or Executive Officers.
The Company has no plans or arrangements in respect of remuneration received or
that may be received by Executive Officers of the Company in Fiscal 1998 to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control, where the value of such compensation exceeds
$60,000 per Executive Officer.
The Company has no written employment agreements.
Beginning on May 1, 1998 management fees payable to a company controlled by
Terry Cook, President of the Company, have been accrued by the Company at
$3000/month (Cdn) for management services.
Other than that disclosed above, no compensation was paid during Fiscal 1998 to
any of the officers or directors of the Company to the extent that they were
compensated in excess of $60,000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
Current management is unaware of any transactions since May 1998, or proposed
transactions, which have materially affected or will materially affect the
Company in which any Director, Executive Officer, or beneficial holder of more
that 10% of the outstanding common stock, or any of their respective relatives,
spouses, associates or affiliates has had or will have any direct or material
indirect interest other than those described below. Management believes that all
transactions with affiliated parties have been on terms at least as favorable to
the Company as the Company could have obtained from unaffiliated parties.
On May 5, 1998, the Company purchased the Way 1, Banjo 1 and Banjo 2 claims from
456786 B.C. Ltd. a company controlled by the President of Canadian Northern
Lites, Inc., Terry G. Cook.
ITEM 8. DESCRIPTION OF SECURITIES
- ----------------------------------
The authorized capital of the Registrant is 100,000,000 shares of common stock
with $0.001 par value of which 17,211,000 shares of common stock were issued and
outstanding at December 31, 1998, the end of the most recent fiscal year. At
August 25, 1999, there were also 17,211,000 shares of common stock outstanding.
All shares of common stock when issued were fully paid for and non-assessable.
Each holder of common stock is entitled to one vote per share on all matters
submitted for action by the stockholders. All shares of common stock are equal
to each other with respect to the election of directors and cumulative voting is
not permitted; therefore, the holders of more than 50% of the outstanding common
stock can, if they choose to do so, elect all of the directors. The terms of the
directors are not staggered. Directors are elected annually to serve until the
next annual meeting of shareholders and until their successor is elected and
qualified. There are no preemptive rights to purchase any additional common
stock or other securities of the Company. The owners ofr a majority of the
common stock may also take any action without prior notice or meeting which a
majority of shareholders could have taken at a regularly called shareholders
meeting, giving notice to all shareholders thereafter of the action taken. In
the event of liquidation or dissolution holders of common stock are entitled to
receive, pro rata, the assets remaining after creditors and holders of any class
of stock have liquidation rights senior to holders of shares of common stock
have been paid in full.
Dividends in cash, property or shares of the Company may be paid, as and when
declared by the Board of Directors, out of funds of the Company to the extent
and in the manner permitted by law.
Upon any liquidation, dissolution or winding up of the Company, and after paying
or adequately providing for the payment of all its obligations, the remainder of
the assets of the company shall be distributed, either in cash or in kind, pro
rata to the holders of the common stock, subject to preferences, if any, granted
to holders of the preferred shares. The Board of Directors may, from time to
time, distribute to the shareholders in partial liquidation from stated capital
of the Company, in cash or property, without the vote of the shareholders, in
the manner permitted and upon compliance with limitations imposed by law.
Each outstanding share of common stock is entitled to one vote and each
fractional share of common stock is entitled to a corresponding fractional vote
on each matter submitted to a vote of shareholders. Cumulative voting shall not
be allowed in the election of Directors of the company and every shareholder
entitled to vote at such election shall have the right to vote the number of
shares owned by him for as many persons as there are Directors to be elected,
and for whose election he has a right to vote. Preferred shares have no voting
rights unless granted by amendment to the Articles of Incorporation.
Debt Securities to be Registered. Not applicable.
- ---------------------------------
American Depository Receipts. Not applicable.
- -----------------------------
Other Securities to be Registered. Not applicable.
- ----------------------------------
<PAGE>
PART II
Item 1. Market Price Of And Dividends on the Registrant's ommon Equity and Other
- --------------------------------------------------------------------------------
Shareholder Matters
-------------------
The Company's common stock trades on the Over-the-Counter Electronic Bulletin
Board in the United States, having the trading symbol "CANL" and CUSIP# 136414
10 9. Trading volume and high/low/closing prices for the past ten quarters are
disclosed in the following table:
Table No. 7
Over-the-Counter Bulletin Board Trading Activity
Quarter
Ended High Low Close Volume
- -------- ------- ------- ------- ----------
06/30/99 $0.015 $0.010 $0.015 11,600
03/31/99 $0.01 $0.01 $0.01 3,000
12/31/98 $0.05 $0.01 $0.01 34,900
09/30/98 $0.06 $0.03 $0.05 3,000
06/30/98 $0.07 $0.029 $0.03 251,800
03/31/98 $0.05 $0.031 $0.031 113,200
12/31/97 $0.12 $0.05 $0.05 437,600
09/30/97 $0.12 $0.06 $0.12 569,200
06/30/97 $0.365 $0.063 $0.125 1,125,100
03/31/97 $0.75 $0.188 $0.188 1,708,700
The Company's common stock is issued in registered form. Madison Stock Transfer
(located in Brooklyn, New York) is the registrar and transfer agent for the
common stock.
On August 25, 1999 shareholders' list for the Company's common shares showed
twenty eight registered shareholders and 17,211,000 shares outstanding
The Company has researched the indirect holdings by depositories and other
financial institutions and believes it has in excess of 100 shareholders of its
common stock.
The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. The present policy of
the Company is to retain future earnings for use in its operations and expansion
of its business.
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
- --------------------------
Other than discussed below, the Company knows of no material, active or pending
legal proceedings against them; nor is the Company involved as a plaintiff in
any material proceeding or pending litigation.
Other than discussed below, the Company knows of no active or pending
proceedings against anyone that might materially adversely affect an interest of
the Company.
On March 26, 1997, the Joint venture Partner (re: Ewer/Klinker Mineral
Properties) filed a statement of claim in the Supreme Court of British Columbia
alleging than an amount of $29,847 was due for work done, goods supplied and
accounts incurred. The Company states that it has returned goods costing $12,499
thereby effectively reducing the Joint Venture Partner's claim to $17,348 for
various expenses that the Joint Venture Partner alleges are the responsibility
of the Company's wholly owned subsidiary, Dakota. Management believes that it is
not responsible for a number of expenses and believes that a number of expenses
are priced improperly, according to the terms of the Option Agreement.
Accordingly, management believes that this claim will be resolved with the Joint
Venture Partner for an amount considerably less than the amount requested.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------------------------------------------------------
Not Applicable
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- ------------------------------------------------
Not Applicable
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- --------------------------------------------------
The Company's By-Laws address indemnification under Article VII.
The Corporation shall indemnify its present or former Directors and officers,
employes, agents and other persons to the fullest extent permissible by, ad in
accordance with the procedures contained in, Article 2.02-1 of the Texas
Business Corporation Act. Such indemnification shall not be deemed to be
exclusive of any other rights to which a director, officer, agent or other
person may be entitled, consistent with law, under any provision of the Articles
of Incorporation or By-Laws of the Corporation, any general or specific action
of the Board of Directors, the terms of any contract, or as may be permitted or
required by common law.
<PAGE>
PART F/S
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The financial statements and notes thereto as required under ITEM #13 are
attached hereto and found immediately following the text of this Registration
Statement. The audit report of McLean Majdanski, Chartered Accountants, for the
audited financial statements for Fiscal 1998, 1997 and for the six months ended
June 30, 1999 and notes thereto is included herein immediately preceding the
audited financial statements.
(A-1) Audited Financial Statements: Fiscal 1998, 1997, and the six months ended
June 30, 1999.
<PAGE>
CANADIAN NORTHERN LITES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
Auditors' Report To The Shareholders
Consolidated Statement Of Operations Statement 1
Consolidated Statement Of Cash Flows Statement 2
Consolidated Balance Sheet Statement 3
Notes To Consolidated Financial Statements
Consolidated Schedule Of Administrative Expenses Schedule 1
Consolidated Schedule Of Share Capital,
Additional Paid-up Capital And Deficit
Accumulated During The Development Stage Schedule 2
<PAGE>
[McLean Majdanski Chartered Accountants Letterhead]
AUDITORS' REPORT
RE: JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
CONSOLIDATED FINANCIAL STATEMENTS
To the Shareholders of
Canadian Northern Lites, Inc.
We have audited the accompanying consolidated balance sheet of Canadian Northern
Lites, Inc. as at June 30, 1999, December 31, 1998 and December 31, 1997 and the
related consolidated statements of operations and cash flows for the six month
period ended June 30, 1999 and the years ended December 31, 1998 and 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. 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 financial position of the company as at June 30, 1999,
December 31, 1998 and 1997 and the results of its operations and cash flows for
the six month period ended June 30, 1999 and the years ended December 31, 1998
and 1997 in accordance with generally accepted accounting principles in the
United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's net capital deficiency, with no mining
operations to generate cash, raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also discussed in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/McLean Majdanski
Chartered Accountants
Vancouver, B.C.
August 23, 1999
(McLean Majdanski is a joint venture of incorporated professionals)
<PAGE>
CANADIAN NORTHERN LITES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
June 30 December 31 December 31
1999 1998 1997
(6 Months) (12 Months) (12 Months)
US$ US$ US$
---------- ---------- ----------
<S> <C> <C> <C>
EXPLORATION AND DEVELOPMENT EXPENSES
Exploration and development $3,928
Write off of development and property costs 413,334
----------
417,262
MARKETING EXPENSES (Note 6)
Courier and postage 1,754
Printing 5,970
Promotion and entertainment 4,002
Services 797
Telephone and fax 5,011
17,534
ADMINISTRATIVE EXPENSES
(Schedule 1 and Note 6) $17,570 $35,735 70,308
---------- ---------- ----------
LOSS BEFORE OTHER INCOME (LOSS) (17,570) (35,735) (505,104)
OTHER INCOME (LOSS)
Interest income 199 508
Gain (loss) on disposal of capital assets 26 (11,949)
Gain (loss) on extinguishment of
debt and accounts payable 1,980 (2,106)
---------- ---------- ----------
NET LOSS ($17,371) ($33,221) ($519,159)
========== ========== ==========
</TABLE>
(See accompanying notes)
<PAGE>
CANADIAN NORTHERN LITES, INC. Statement 2
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
June 30 December 31 December 31
1999 1998 1997
(6 Months) (12 Months) (12 Months)
US$ US$ US$
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($17,371) ($33,221) ($519,159)
Items not involving an outlay of cash
Loss on disposal of capital assets (26) 11,949
Write off of development and property costs 413,334
---------- ---------- ----------
(17,371) (33,247) (93,876)
Change in working capital items
Goods and services tax receivable (1,323) 21,879 (3,105)
Accounts payable 9,519 4,988 (90,711)
---------- ---------- ----------
(9,175) (6,380) (187,692)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 101,331
Stock issued in exchange for services 99,481
Deferred foreign currency translation gain (137) 482
Promissory note payable 50,000
Loan from shareholder 14,016
Advances from shareholders 3,444 (78,708) 66,241
---------- ---------- ----------
3,307 73,105 179,738
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of capital assets 4,356
Mineral property (50,000)
---------- ---------- ----------
(45,644)
---------- ---------- ----------
NET INCREASE IN CASH (BANK INDEBTEDNESS) (5,868) 21,081 (7,954)
CASH (BANK INDEBTEDNESS) AT
BEGINNING OF PERIOD 21,029 (52) 7,902
---------- ---------- ----------
CASH (BANK INDEBTEDNESS) AT
END OF PERIOD $15,161 $21,029 ($52)
========== ========== ==========
</TABLE>
(See accompanying notes)
<PAGE>
CANADIAN NORTHERN LITES, INC. Statement 3
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
<TABLE>
June 30 December 31 December 31
1999 1998 1997
(6 Months) (12 Months) (12 Months)
US$ US$ US$
<S> <C> <C> <C>
ASSETS
CURRENT
Cash (Note 11) $15,161 $21,029
Goods and services tax receivable (Note 11) 2,692 1,369 $23,248
---------- ---------- ----------
17,853 22,398 23,248
CAPITAL (Note 5) 4,330
MINERAL PROPERTIES (Note 3) 110,464 110,464 60,464
---------- ---------- ----------
$128,317 $132,862 $88,042
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
CURRENT
Bank indebtedness (Note 11) $52
Accounts payable (Note 11) $30,412 $20,893 15,905
Loan from shareholder (Notes 6 and 11) 14,016 14,016 14,016
---------- ---------- ----------
44,428 34,909 29,973
PROMISSORY NOTE PAYABLE (Notes 10 and 11) 50,000 50,000
ADVANCES FROM SHAREHOLDERS (Notes 6 and 11) 148,023 144,579 223,287
---------- ---------- ----------
242,451 229,488 253,260
CONTINGENT LIABILITY (Note 8)
SHAREHOLDERS' DEFICIT Share capital (Note 9 and Schedule 2)
Issued and outstanding 17,211 17,211 14,994
---------- ---------- ----------
Additional paid up capital 945,499 945,499 846,385
Deferred foreign currency translation gain (loss) 345 482
Deficit accumulated during development stage
Balance, beginning of period (1,059,818) (1,026,597) (507,438)
Net loss (17,371) (33,221) (519,159)
---------- ---------- ----------
Balance, end of period (1,077,189) (1,059,818) (1,026,597)
---------- ---------- ----------
(114,134) (96,626) (165,218)
---------- ---------- ----------
$128,317 $132,862 $88,042
========== ========== ==========
</TABLE>
Approved by Director:
(See accompanying notes)
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
1. BASIS OF PRESENTATION FOR A COMPANY IN THE DEVELOPMENT STAGE
The Company was first incorporated in the State of Nevada on June 18,
1990 as QQQ- Huntor Associates, Inc. On July 21, 1995, the Company
changed its domicile to the State of Texas and merged into a Texas
Corporation, Unimex Transnational Consultants, Inc. On April 26, 1996,
the Company reorganized and acquired all the issued and outstanding
stock of Dakota Mining & Exploration Ltd. ("Dakota") for 10,000,000
shares of the Company's common stock, and changed the name of the
Company to Canadian Northern Lites, Inc. As a result of that
transaction, Dakota became a legal subsidiary of the Company. However,
as stated in Note 2, Dakota is the acquirer in the consolidated
financial statements.
Dakota was incorporated on January 12, 1994 under the Company Act of
British Columbia and changed its name to Dakota Mining & Exploration
Ltd. from Eagle Ridge Manufacturing Ltd. on July 27, 1995. The Company's
purpose is to explore and develop mining properties in Canada. Dakota is
in the development stage because its activities have consisted of the
purchase of interests in mining properties and some exploration and
development. Dakota has not yet developed any mining properties into a
producing mine nor has it earned revenue in any other manner.
As at December 31, 1998 and June 30, 1999, both the Company and Dakota
do not have sufficient cash to cover current liabilities. Future
activities require cash being provided to the Company by investors or
lenders. As stated in Note 6, companies controlled by the president of
the Company, commenced in the 1998 fiscal year, to fund the
administrative expenses incurred by the Company. In addition, these
related parties have not requested cash to pay the management fees of
Cdn$3,000 per month that they charge the Company.
The financial statements are prepared on the assumption that the entity
is a going concern, meaning it will continue in operation for the
foreseeable future and will be able to realize its assets and discharge
its liabilities through the normal course of operations. Because the
Company has no cash and has not yet developed any producing mines, its
ability to realize assets and discharge its liabilities through the
normal course of its operations is dependent on continued funding from
companies controlled by the president, the receipt of additional funds
from investors and the establishment of successful operations.
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
2. BASIS OF CONSOLIDATION
As a result of the transaction in which the Company acquired all the
outstanding shares of Dakota, the group of shareholders that owned
Dakota held 10,000,000 shares of the Company which was more than 50% of
the voting shares at that time. This resulted in the transaction being
accounted for as a "reverse take-over" in the consolidated financial
statements which means that Dakota is the acquirer. Accordingly, the
consolidated financial statements are a continuation of the Dakota
financial statements, translated into U.S. Dollars. The consolidated
accounts include the fair value of the assets and liabilities of the
legal parent, Canadian Northern Lites, Inc. since the reverse take-over.
The $3,050 deficit of the legal parent as at the date of the reverse
take-over is eliminated on consolidation such that the consolidated
deficit reflects the deficit of Dakota plus the results of operations of
Dakota and Canadian Northern Lites, Inc., since the acquisition.
The parent company, Canadian Northern Lites Inc., has a fiscal year end
of December 31. The subsidiary company, Dakota, has a fiscal year end of
January 31. These consolidated financial statements have been prepared
using the December 31 financial statements of the parent, and the
January 31 financial statements of the subsidiary. There were no
intervening events that materially affect the consolidated financial
position or the consolidated results of operations and cash flows for
the fiscal periods presented.
3. MINERAL PROPERTIES
June 30 December 31 December 31
1999 1998 1997
Ewer/Klinker $60,464 $60,464 $60,464
Way1, Banjo I & II 50,000 50,000
-------- -------- -------
$110,464 $110,464 $60,464
======== ======== =======
(a) Ewer/Klinker Mineral Properties
On April 10, 1996, the Company entered into an agreement which was
an Option To Purchase certain mineral claims, located near Vernon,
British Columbia, from a Vernon mining company. This agreement was
pursuant to a Letter Of Intent between the Vernon mining company
and the Company that was signed in January, 1996. The payments
made to the Vernon company pursuant to the Letter Of Intent in
January, 1996 are reflected as an asset in the 1996 financial
statements. The Company paid
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
3. MINERAL PROPERTIES (Continued)
(a) Ewer/Klinker Mineral Properties (Continued)
$64,000 (Cdn$90,000) prior to the agreement and $411,000
(Cdn $560,000) pursuant to the agreement.
This option agreement originally gave the Company an option to
acquire a 100% interest in the property but that option expired
unexercised on January 15, 1998 and a joint venture was then
created. The Company now has a 20% joint venture interest in the
mineral claims and the Vernon mining company has the remaining 80%
interest.
The joint venture has the Vernon mining company as the operator
and managing venturer. However, the activities are to be
controlled by a management committee. Each joint venture party is
required to advance funds for the property development or the opal
business and failure to do so will result in a dilution of their
earned percentage interest. To date, the management committee has
not been formed and the activities of the joint venture have not
commenced. At present, the Company is not aware of any financial
commitments to the joint venture under the direction of the
management committee or when any such commitments may start.
The Company had title to several mineral claims on land adjacent
to the property referred to above and most of these claims were
allowed to lapse. As the future value of these properties is
unknown and their costs are minimal, their costs were written off
in 1997.
In 1998, the mineral property was written down to its estimated
net realizable value of $60,464 based on the "worst case" estimate
determined by a consultant geologist.
(b) Way1, Banjo I & II Mineral Properties
The Company purchased mineral properties from a company controlled
by a significant shareholder, who is also a director, for a price
of $50,000 ($78,500 Cdn) and the purchase was paid with a
promissory note as disclosed in Notes 6(f) and 10. There is no
independent appraisal supporting the value of the property. The
value was set by the directors after considering the consulting
geologist's report on neighbouring properties referred to in Note
3(a).
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES
(a) Amortization
Capital assets are recorded at cost. Amortization is calculated
using the declining balance method with no amortization recorded
in the year of addition or disposal. None of the assets were held
long enough to be amortized and accordingly, no amortization has
been recorded in these consolidated financial statements.
(b) Foreign Currency Translation Gain
The foreign currency translation gain relates to translating the
Canadian dollar financial statements of the wholly owned
subsidiary into US dollars. This amount is not included in the
statement of operations because the gains relate to translating
from the functional currency of the subsidiary into the reporting
currency of the parent.
5. CAPITAL ASSETS
December 31
1997
Furniture and equipment $4,330
===========
6. RELATED PARTIES
(a) Loan From Shareholder
This amount due to a shareholder bears interest at 18% per annum
and was due July 1, 1998. In the event the loan is paid in full on
or before July 1, 1998, the interest rate is reduced to 10% per
annum from the date of advancement of the funds to the date of
payment. Because this loan was still outstanding at July 1, 1999,
interest has been accrued at 18% per annum.
(b) Advances From Shareholders
The amount due to the shareholders is unsecured, non-interest
bearing and has no specific terms of repayment.
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
6. RELATED PARTIES (Continued)
(c) Management Fees
In fiscal 1997, management fees were charged to the Company by a
former director. Commencing in fiscal 1998, management fees of
Cdn$3,000 per month are charged by companies controlled by the
president of the Company. Since that time, these companies have
been funding the administrative expenses of the Company and its
parent. The accounts payable as at June 30, 1999 includes $25,829
payable to these related parties and the accounts payable as at
December 31, 1998 includes $14,065 (1997 - $Nil) payable to these
related parties.
(d) Accounting Services
Accounting services were provided by a former director and
shareholder of the Company. No fees were paid for these services.
(e) Other Expenses
Most other marketing and administrative expenses were
reimbursements to former directors and officers for expenses
incurred in their efforts to develop the Company's business.
(f) Purchase Of Mineral Properties From A Shareholder Who Is Also A
Director
The Company committed to purchase mineral properties from a
company controlled by a significant shareholder, who is also a
director, for a price of US$50,000 and the purchase was paid for
by issuing a $50,000 promissory note. See Notes 3(b) and 10.
7. INCOME TAX
(a) Canadian Development Expense
Per the Canadian Income Tax Act ("ITA"), the cost of any rights to
prospect, explore, drill or mine for minerals is included in the
Canadian development expenses. The Company's balance of Canadian
development expense is $357,000 (Cdn$560,000) and per the ITA, the
Company may deduct 30% of the year end balance of the cumulative
Canadian development expenses before the current year deduction.
To date, the Company has made no deduction.
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
7. INCOME TAX (Continued)
(b) Canadian Exploration Expense
Per the ITA, Canadian exploration expense includes any expense
incurred by a company for the purpose of determining the
existence, location, extent or quality of a mineral resource in
Canada and is eligible for a deduction, from the income of the
Company, of 133% of the expense. The Company has incurred no
significant Canadian exploration expenses.
(c) Income Tax Loss Carry Forwards
In addition to the Canadian development expense referred to in
7(a) above, the Company has losses available for deduction against
future Canadian taxable incomes until the years indicated. No
benefit from these losses has been reported in the financial
statements because the Company believes there is a 50% or greater
chance the carryforward balance will expire unused. The losses and
expiry dates are:
US$ Cdn$
June 30, 1999 exchange rate $1.5110
2002 $108 $163
2003 68,021 102,780
2004 378,561 572,005
2005 95,448 144,222
2006 28,071 42,415
-------- --------
$570,209 $861,585
======== ========
8. CONTINGENT LIABILITY
On March 26, 1997, the Joint Venture Partner filed a statement of claim
in the Supreme Court of British Columbia alleging that an amount of
$29,847 (Cdn$46,860) was due for work done, goods supplied and accounts
incurred. The Company states that it has returned goods costing $12,499
(Cdn$19,624) thereby effectively reducing the Joint Venture Partner's
claim to $17,348 (Cdn$27,236) for various expenses that the Joint
Venture Partner alleges are the responsibility of Dakota. However,
Dakota's management believes that it is not responsible for a number of
expenses and believes that a number of expenses are priced improperly,
according to the terms of the Option Agreement. Accordingly, management
believes that this claim will be resolved with the Joint Venture Partner
for an amount considerably less than the amount requested.
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
9. SHARE CAPITAL
(a) Authorized
100,000,000 common shares with a $0.001 par value.
(b) Issued and outstanding
<TABLE>
June 30 December 31 December 31
1999 1998 1997
<S> <C> <C> <C>
Number of shares 17,211,000 17,211,000 14,994,000
Dollar value $17,211 $17,211 $14,994
(c) Earnings Per Share
June 30 December 31 December 31
1999 1998 1997
Net loss $17,371 $33,221 $519,159
Common shares issued
Opening balance 17,211,000 14,994,000 14,994,000
May 717,000
December 1,500,000
---------- ---------- ----------
Closing balance 17,211,000 17,211,000 14,994,000
========== ========== ==========
Average outstanding
shares 17,211,000 15,537,250 14,994,000
========== ========== ==========
Loss per share $0.00 $0.00 $0.03
========== ========== ==========
There are no outstanding options so fully dilative earnings per share are not provided.
</TABLE>
10. PROMISSORY NOTE
To purchase the mineral properties discussed in Note 3(b), the Company
issued a $50,000 promissory note, due on demand, to a company that is a
major shareholder of Canadian Northern Lites, Inc. and whose controlling
shareholder is the president and a director of Canadian Northern Lites,
Inc. This note requires interest at 8%.
<PAGE>
CANADIAN NORTHERN LITES, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999, DECEMBER 31, 1998 AND 1997
11. FINANCIAL INSTRUMENTS
(a)Fair Value
The Company's financial instruments consist of cash, bank
indebtedness, accounts payable, loan from shareholder, promissory
note payable and advances from shareholders. Unless otherwise
stated, the fair values of these financial instruments, except for
the advances from shareholders, approximate their carrying values.
No interest is charged or paid on the advances from shareholders,
therefore, the fair values are more than their carrying values.
(b)Foreign Currency Risk
The Company has cash, goods and services tax receivable, bank
indebtedness, and accounts payable from purchases in Canada. As a
result, the Company is exposed to foreign exchange rate
fluctuations. The exposure to foreign currency is mitigated by the
fact that the cash and goods and services tax receivable partially
offset the accounts payable balance. The following are the
balances at June 30, 1999:
<TABLE>
Canadian$ Translation US$
<S> <C> <C> <C>
Cash $29,239 ($9,888) $19,351
Goods and services tax receivable 4,068 (1,376) 2,692
Accounts payable 45,957 (15,545) 30,412
</TABLE>
(c)Interest Rate Risk
As the interest rates are fixed on the loan from shareholder and
the promissory note payable, the Company is not exposed to
interest rate risk.
<PAGE>
CANADIAN NORTHERN LITES, INC. Schedule 1
CONSOLIDATED SCHEDULE OF ADMINISTRATIVE EXPENSES (Note 6)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
June 30 December 31 December 31
1999 1998 1997
(6 Months) (12 Months) (12 Months)
US$ US$ US$
<S> <C> <C>
Accounting $5,730 $2,889
Bank charges and interest (recovery) $189 (449) 672
Computer servicing 126
Insurance 469
Interest on long term debt 3,444 4,630 1,590
Legal 3,914 3,625 3,117
Management fees 10,000 18,200 39,723
Office supplies and service 23 1,742 3,431
Rent 3,331
Telephone and fax 429
Transfer agent fees 550 459
Travel 594 6,406
Wages and benefits 1,113 7,666
------- ------- -------
$17,570 $35,735 $70,308
</TABLE>
(See accompanying notes)
<PAGE>
CANADIAN NORTHERN LITES, INC. Schedule 2
CONSOLIDATED SCHEDULE OF SHARE CAPITAL, ADDITIONAL PAID UP Page 1 of 2
CAPITAL AND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
Deficit
Accumulated
Additional During The
Common Stock Paid-up Development
Shares Amount Capital Stage
<S> <C> <C> <C> <C>
Issuance of stock to officers, directors and
other individuals for organization costs 30,000 $300 $2,700
Reorganization of capital reducing the par
value from $.01 / share to $.001 / share (270) 270
----------- ----------- -----------
30,000 30 2,970
Issuance of stock for services from an
investment bank controlled by a director 12,000 12 5,988
Public issuance of common stock for cash 8,000 8 3,992
----------- ----------- -----------
Balance December 31, 1995 50,000 50 12,950
Issuance of common stock pursuant to
stock options of which 1,220 shares
were issued to an affiliate of the issuer 50,000 50 450
----------- ----------- -----------
Balance prior to stock split 100,000 100 13,400
Stock split effective April, 1996 300,000 300 (300)
----------- ----------- -----------
Balance after stock split 400,000 400 13,100
Stock issued for acquisition
of Dakota Mining & Exploration, Ltd. 10,000,000 10,000 59,488
Reorganization of deficit accumulated
during the development stage due to
reverse take-over 78,064 ($78,064)
----------- ----------- ----------- ---------
10,000,000 10,000 137,552 (78,064)
Issue of shares to H J S Financial
Services, Inc. for services rendered 24,000 24
Issuance of common stock for services
performed by former directors 4,000,000 4,000 596,822
Net loss for the year ended
December 31, 1996 (429,374)
----------- ----------- ----------- ---------
4,024,000 4,024 596,822 (429,374)
----------- ----------- ----------- ----------
Balance at December 31, 1996 14,424,000 $14,424 $747,474 ($507,438)
=========== =========== =========== ==========
(See accompanying notes)
CANADIAN NORTHERN LITES, INC. Schedule 2
CONSOLIDATED SCHEDULE OF SHARE CAPITAL, ADDITIONAL PAID UP Page 2 of 2
CAPITAL AND DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE
FOR THE SIX MONTHS ENDED JUNE 30, 1999
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Deficit
Accumulated
Additional During The
Common Stock Paid-up Development
Shares Amount Capital Stage
Balance at December 31, 1996 14,424,000 $14,424 $747,474 ($507,438)
Issuance of common stock
for services to former legal counsel 570,000 570 98,911
Net loss for the year ended
December 31, 1997 (519,159)
----------- ----------- ----------- -----------
Balance at December 31, 1997 14,994,000 14,994 846,385 (1,026,597)
Issuance of common stock to former
directors to repay amounts owing 667,000 667 82,672
Issuance of common stock to an arm's
length supplier 50,000 50 2,942
Issuance of common stock to a company
controlled by a current director to repay
an amount owing 1,500,000 1,500 13,500
Net loss for the year ended
December 31, 1998 (33,221)
----------- ----------- ----------- -----------
Balance at December 31, 1998 17,211,000 17,211 945,499 (1,059,818)
Net loss for the period ended
June 30, 1999 (17,371)
----------- ----------- ----------- -----------
Balance at June 30, 1999 17,211,000 $17,211 $945,499 ($1,077,189)
=========== =========== =========== ===========
</TABLE>
(See accompanying notes)
<PAGE>
PART III
Item 1. INDEX TO EXHIBITS:
- ---------------------------
Exhibit No. Description
- ----------- -----------
3.1 Amended Articles of Incorporation
10.1 Claims Purchase
10.2 Sale of Properties
10.3 Claims Held in Trust
10.4 Discontinuance of Legal Proceeding
10.5 Purchase Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
CANADIAN NORTHERN LITES, INC.
(Registrant)
By: /s/ Terry G. Cook
-------------------------------
Name: Terry G. Cook
Title: President
Date: August 31, 1999
NUMBER: 462447
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
CERTIFICATE OF INCORPORATION
I Hereby Certify that
EAGLE RIDGE MANUFACTURING LTD.
has this day been incorporated under the Company Act
issued under my hand at Victoria, British Columbia
on January 12, 1994
JOHN S. POWELL
Registrar of Companies
<PAGE>
COMPANY ACT
M E M 0 R A N D U M
OF
EAGLE RIDGE MANUFACTURING LTD.
We wish to be formed into a Company with limited liability under the
Company Act in pursuance of this Memorandum.
The name of the Company is EAGLE RIDGE MANUFACTURING LTD.
2. The authorized capital of the Company consists of 40,000 shares divided
into:
(a) 10,000 Class "A" Voting Common Shares without par value; (b) 10,000 Class
"B" Voting Common Shares without par value; (c) 10,000 Class "C" Non-voting
Common Shares without par value; (d) 10,000 Class "D" Non-Voting Redeemable
Preferred Shares with a par
value of $10.00 each;
The shares shall have attached thereto the special rights and
restrictions as set out in the Articles.
3. We agree to take the number and class of shares in the Company set opposite
our names.
-------------------------------------------------------------------------------
FULL NAME, RESIDENT ADDRESS AND OCCUPATION OF EACH SUBSCRIBER:
/s/ Barry Neil Florence
------------------------------------
BARRY NEIL FLORENCE, Businessman ONE HUNDRED (100) CLASS "A"
652 Southwind Drive VOTING COMMON SHARES
Kelowna, B.C. VlW 3Gl WITHOUT PAR VALUE
/s/ Stanley Robert Walt
------------------------------------
STANLEY ROBERT WALT, Businessman ONE HUNDRED (100) CLASS "A"
1679 Mountain Avenue VOTING COMMON SHARES
Kelowna, B.C. VlY 7H7 WITHOUT PAR VALUE
TOTAL SHARES TAKEN: TWO HUNDRED (200) CLASS "A"
VOTING COMMON SHARES
Dated this WITHOUT PAR VALUE
1lth day of January, 1994.
<PAGE>
ARTICLES
--------
0F
EAGLE RIDGE MANUFACTURING LTD.
TABLE OF CONTENTS
-----------------
PART ARTICLE SUBJECT
---- ------- -------
1 INTERPRETATION
1.1. Definition
Construction of Words
1.2. Definitions same as Company Act
1.3. Interpretation Act Rules of
Construction apply.
2 SHARES
2.1. Member entitled to Certificate
2.2. Replacement of Lost or Defaced
Certificate
2.3. Execution of Certificates
2.4. Recognition of Trusts
3 ISSUE OF SHARES
3.1. Directors Authorized
3.2. Conditions of Allotment
3.3. Commissions and Brokerage
3.4. Conditions of Issue
4 SHARE REGISTERS
4.1. Registers of Member, Transfers
and Allotments
4.2 Branch, Registers of Members
4.3. No Closing of Register of Members
5 TRANSFER AND TRANSMISSION
OF SHARES
5.1. Transfer of Shares
<PAGE>
PART ARTICLE SUBJECT
---- ------- -------
5.2. Execution of Instrument of Transfer
5.3. Enquiry as to Title not Required
5.4. Submission of Instruments of Transfer
5.5. Transfer Fee
5.6. Personal Representative Recognized
on Death
5.7. Death or Bankruptcy
5.8. Persons in Representative Capacity
6 ALTERATION OF CAPITAL
6.1. Increase of Authorized Capital
6.2. Other Capital Alterations
6.3. Creation, Variation and Abrogation
of Special Rights and Restrictions
6.4. Consent of Class Required
6.5. Special Rights of Conversion
6.6. Class Meetings of Members
7 PURCHASE AND REDEMPTION OF SHARES
7.1. Company Authorized to Purchase or
Redeem its Shares
7.2. & 7.3. Redemption of Shares
8 BORROWING POWERS
8.1. Powers of Directors
8.2. Special Rights Attached to and
Negotiability of Debt Obligations
8.3. Register of Debentureholders
8.4. Execution of Debt Obligations
8.5. Register of Indebtedness
9 GENERAL MEETINGS
9.1 Annual General Meetings
9.2. Waiver of Annual General Meetings
9.3. Classification of General Meetings
9.4. Calling of Meetings
9.5. Advance Notice for Election of
Directors
<PAGE>
PART ARTICLE SUBJECT
---- ------- -------
9.6. Notice for General Meeting
9.7. waiver or Reduction of Notice
9.8. Notice of Special Business at
General Meeting
10 PROCEEDINGS AT GENERAL MEETINGS
10 1. Special Business
10.2. Requirement of Quorum
10.3. Quorum
10.4. Lack of Quorum
10.5. Chairman
10.6. Alternate Chairman
10.7. Adjournments
10.8. Resolutions Need Not Be Seconded
10.9. Decisions by Show of Hands or Poll
10.10 Casting Vote
10.11. Manner of Taking Poll
10.12. Retention of Ballots Cast on a Poll
10.13. Casting of Votes
10.14. Ordinary Resolution Sufficient
11 VOTES OF MEMBERS
11.1 Number of Votes Per Share or Member
11.2. Votes of Persons in Representative
Capacity
11.3. Representative of a Corporate Member
11.4. Votes by Joint Holders
11.5. Votes by Committee for a Member
11.6. Appointment of Proxyholders;
11.7. Execution of Form of Proxy
11.8. Deposit of Proxy
11.9. Form of Proxy
11.10. Validity of Proxy Vote
11.11. Revocation of Proxy
12 DIRECTORS
12.1. Number of Directors
12.2. Remuneration and Expenses of Directors
12.3. Qualification of Directors
<PAGE>
PART ARTICLE SUBJECT
---- ------- -------
13 ELECTION AND REMOVAL OF DIRECTORS
13.1 Election at Annual General Meetings
13.2. Eligibility of Retiring Director
13.3. Continuance of Directors
13.4. Election of Less than Required
Number of Directors
13.5. Filling a Casual Vacancy
13.6. Additional Directors
13.7. Alternate Directors
13.8. Termination of Directorship
13.9. Removal of Directors
14 POWER AND DUTIES OF DIRECTORS
14.1. Management of Affairs and Business
14.2. Appointment of Attorney
15 DISCLOSURE OF INTEREST OF DIRECTORS
15.1. Disclosure of Conflicting Interest
15.2. Voting and Quorum re, Proposed Contract
15.3. Director May Hold Office or Place of
Profit with Company
15.4. Director Acting in Professional
Capacity
15.5. Director Receiving Remuneration from
Other Interests
16 PROCEEDINGS OF DIRECTORS
16.1. Chairman and Alternate
16.2. Meetings - Procedure
16.3. Meet4ngs by Conference Telephone
16.4. Notice of Meeting
16.5. Waiver of Notice of Meetings
16.6. Quorum
16.7. Continuing Directors may Act
During Vacancy
<PAGE>
PART ARTICLE SUBJECT
---- ------- -------
16.8. Validity of Acts of Directors
16.9. Resolution in Writing Effective
17 EXECUTIVE AND OTHER COMMITTEES
17.1. Appointment of Executive Committee
17.2. Appointment of Committees
17.3. Procedure at Meetings
18 OFFICERS
18.1. President and Secretary Required
18.2. Persons Holding More Than One
Office and Remuneration
18.3. Disclosure of Conflicting Interest
19 INDEMNITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
19.1. Indemnification of Directors
19.2. Indemnification of Officers,
Employees, Agents
19.3. Indemnification not validated by
non-compliance
19.4. Company May Purchase Insurance
20 DIVIDENDS AND RESERVES
20.1. Declaration of Dividends
20.2. Declared Dividend Date
20.3. Proportionate to Number of Shares Held
20.4. Reserves
20.5. Receipts from Joint Holders
20.6. No Interest on Dividends
20.7. Payment of Dividends
20.8. Capitalization of Undistributed Surplus
<PAGE>
PART ARTICLE SUBJECT
---- ------- -------
21 DOCUMENTS, RECORDS AND REPORTS
21.1. Documents to be Kept
21.2. Accounts to be Kept
21.3. Inspection of Accounts
21.4. & 21.5. Financial Statements and Reports
22 NOTICES
22.1. Method of Giving Notice
22.2. Notice to Joint Holder
22.3. Notice to Personal Representative
22.4. Persons to Receive Notice
23 RECORD DATES
23.1. Record Date
23.2. No Closure of Register of Members
24 SEAL
24.1. Affixation of Seal to Documents
24.2. Mechanical Reproduction of Signatures
24.3. Official Seal for Other Jurisdictions
25 PROHIBITIONS
25.1. Number of Members
25.2. No Securities to be Offered to the
Public
25.3. Restrictions on Transfers of Shares
26 RESTRICTIONS ON SHARE TRANSFERS
26.1. Offer to other Members 26.2. Directors may decline to
register
transfers
27 SPECIAL RIGHTS AND RESTRICTIONS
<PAGE>
PROVINCE OF BRITISH COLUMBIA
COMPANY ACT
ARTICLES
EAGLE RIDGE MANUFACTURING LTD.
PART 1
INTERPRETATION
--------------
1.1. In these Articles, unless there is something in the subject or
context inconsistent therewith:
"Board" and "the Directors" or "the directors" mean the Directors or
sole Director of the Company for the time being.
"Company Act" means the Company Act of the - Province of British
Columbia as from time to time enacted, and all amendments thereto, and
includes the regulations made pursuant thereto.
"seal" means the common seal of the Company.
"month" means calendar month.
"registered owner" or "registered holder" when used with respect to a
share in the authorized capital of the Company means the person
registered in the register of members in respect of such share.
Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography and other modes
of representing or reproducing words in a visible form.
Words importing the singular include the plural and vice versa; and
words importing male persons include female persons and words importing persons
shall include corporations.
<PAGE>
1. 2. The meaning of any words or phrases defined in the Company Act
shall, if not inconsistent with the subject or context, bear the same meaning
in these Articles.
1.3. The Rules of Construction contained in the Interpretation Act
shall apply, mutatis mutandis, to the interpretation of these Articles.
PART 2
SHARES AND SHARE CERTIFICATES
-----------------------------
2.1. Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him; provided that, in
respect of a share or shares held jointly by several persons, the Company shall
not be bound to issue more than one certificate, and delivery of a certificate
for a share to one of several joint registered holders or to his duly
authorized agent shall be sufficient delivery to all; and provided further that
the Company shall not be bound to issue certificates representing redeemable
shares, if such shares are to be redeemed within one month of the date on which
they were allotted. Any share certificate may be sent through the mail by
registered prepaid mail to the member entitled thereto, and neither the Company
nor any transfer agent shall be liable for any loss occasioned to the member
owing to any such share certificate so sent being lost in the mail or stolen.
2.2 If a share certificate
(i) is worn out or defaced, the Directors shall, upon production to them of
the said certificate and upon such other terms, if any, as they may think
of it, order the said certificate to be cancelled and shall issue a new
certificate in lieu thereof;
(ii) is lost, stolen or destroyed, then, upon proof thereof to the
satisfaction of the Directors and upon such indemnity, if any, as the
Directors deem adequate being given, a new share certificate in lieu
thereof shall be issued to the Person entitled to such lost, stolen or
destroyed certificate; or
(iii) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company issue
in his name two or more certificates each representing a specified number
of shares
<PAGE>
and in the aggregate the same number of shares the certificate so
surrendered, the Company shall cancel the certificate so surrendered and
issue in lieu thereof certificates in accordance with such request.
Such sum, not exceeding one dollar, as the Directors may from time to time fix,
shall be paid to the Company for each certificate to be issued under this
Article.
2.3. Every share certificate shall be signed manually by at least one
officer or Director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced and,
in such event, a certificate so signed is as valid as if signed manually,
notwithstanding that any person whose signature is so printed or mechanically
reproduced shall have ceased to hold the office that he is stated on such
certificate to hold at the date of the issue of a share certificate.
2.4. Except as required by law, statute or these Articles, no person
shall be recognized by the Company as holding any share upon any trust, and the
Company shall not be bound by or compelled in any way to recognize (even when
having notice thereof) any equitable, contingent, future or partial interest in
any share or in any fractional part of a share or (except only as by law,
statute or these Articles provided or as ordered by a court of competent
jurisdiction) any other rights in respect of any share except an absolute right
to the entirety thereof in its registered holder.
PART 3
ISSUE OF SHARES
---------------
3.1. Subject to Article 3.2. and to any direction to the contrary
contained in a resolution passed at a general meeting authorizing any increase
or alteration of capital, the shares shall be under the control of the
Directors who may, subject to the rights of the holders of the shares of the
Company for the time being issued, issue, allot, sell or otherwise dispose of,
and/or grant options on or otherwise deal in, shares authorized but not
outstanding at such times, to such persons (including Directors), in such
manner, upon such terms and conditions, and at such price or for such
consideration; as they, in their absolute discretion, may determine.
<PAGE>
3 .2. if the company is, or becomes, a company which is not a
reporting company and the Directors are required by the Company Act before
allotting any shares to offer them pro rata to the members, the Directors
shall, before allotting any shares, comply with the applicable provisions of
the Company Act.
3.3. subject to the provisions of the Company Act, the Company, or
the Directors on behalf of the Company, may pay a commission or allow a
discount to any person in consideration of his subscribing or agreeing to
subscribe, whether absolutely or conditionally, for any shares in the Company,
or procuring or agreeing to procure subscriptions, whether absolutely or condi-
tionally, for any such shares, provided that, if the Company is not a specially
limited company, the rate of the commission and discount shall not in the
aggregate exceed 25 per centum of the amount of the subscription price of such
shares.
3.4. No share may be issued until it is fully paid and the Company
shall have received the full consideration therefor in cash, property or past
services actually performed for the Company. The value of property or services
for the purpose of this Article shall be the value determined by the Directors
by resolution to be, in all circumstances of the transaction, the fair market
value thereof.
PART 4
SHARE REGISTERS
---------------
4.1. The Company shall keep or cause to be kept a register of members,
a register of transfers and a register of allotments within British Columbia,
all as required by the Company Act, and may combine one or more of such
registers. If the Company's capital shall consist of more, than one class of
shares, a separate register of members, register of transfers and register of
allotments may be kept in respect of each class of shares. The Directors on
behalf of the Company may appoint a trust company to keep the register of
members, register of transfers and register of allotments or, if there is more
than one class of shares, the Directors may appoint a trust company, which need
not be the same trust company, to keep the register of members, the register of
transfers and the register of allotments for each class of share. The Directors
on behalf of the Company may also appoint one or more trust companies,
including the trust company which keeps the said registers of its shares or of
a class thereof, as transfer agent for its shares or such class thereof, as the
case may be, and the same or another trust company or companies
<PAGE>
5.3. Neither the Company nor any Director, officer or agent thereof
shall be bound to inquire into the title of the person named in the form of
transfer as transferee, or, if no person is named therein as transferee, of the
person on whose behalf the certificate is deposited with the Company for the
purpose of having the transfer registered or be liable to any claim by such
registered owner or by any intermediate owner or holder of the certificate or
of any of the shares represented thereby or any interest therein for
registering the transfer, and the transfer, when registered, shall confer upon
the person in whose name the shares have been registered a valid title to such
shares.
5.4. Every instrument of transfer shall be executed by the transferor
and left at the registered office of the Company or at the office of its
transfer agent or registrar for registration together with the share
certificate for the shares to be transferred and such other evidence, if any,
as the Directors or the transfer agent or registrar may require to prove the
title of the transferor or his right to transfer the shares and the right of
the transferee to have the transfer registered. All instruments of transfer
where the transfer is registered shall be retained by the Company or its
transfer agent or registrar and any instrument of transfer, where the
transfer is not registered, shall be returned to the person depositing the
same together with the share certificate which accompanied the same when
tendered for registration.
5.5. There shall be paid to the Company in respect of the registration
of any transfer such sum, if any, as the Directors may from time to time
determine.
5.6. In the case of the death of a member, the survivor or survivors
where the deceased was a joint registered holder, and the legal personal
representative of the deceased where he was the sole holder, shall be the only
persons recognized by the Company as having any title to his interest in the
shares. Before recognizing any legal personal representative the Directors may
require him to obtain a grant of probate or letters of administration in
British Columbia.
5.7. Upon the death or bankruptcy of a member, his personal
representative or trustee in bankruptcy, although not a member, shall have the
same rights, privileges and obligations that attach to the shares formerly held
by the deceased or bankrupt member if the documents required by the Company Act
shall have been deposited at the Company's registered office.
<PAGE>
as registrar for its shares or such class thereof, as the case may be. The
Directors may terminate the appointment of any such trust company at any time
and may appoint another trust company in its place. 4.2. Unless prohibited by
the Company Act. the Company
4.2. Unless prohibited by the Company Act, the Company may keep or
cause to be kept one or more branch registers of members at such place or
places as the Directors may from time determine.
4.3. The Company shall not at any time close its register of members.
PART 5
TRANSFER AND TRANSMISSION
OF SHARES
-------------------------
5.1. Subject to the provisions of the Memorandum and of these Articles
that may be applicable, any member may transfer any of his shares by instrument
in writing executed by or on behalf: of such member and delivered to the
Company or its transfer agent. The instrument of transfer of any share of the
Company shall be in the form, if any, on the back of the Company's share
certificates or in such form as the Directors may from time to time approve.
Except to the extent that the Company Act may otherwise provide, the transferor
shall be deemed to remain the holder of the shares until the name of the
transferee is entered in the register of members or a branch register of
members in respect thereof.
5.2. The signature of the registered owner of any shares, or of his
duly authorized attorney, upon an authorized instrument of transfer shall
constitute a complete and sufficient authority to the Company, its
directors, officers and agents to register, in the name of the transferee as
named in the instrument of transfer, the number of shares specified therein
or, if no number is specified, all the shares of the registered owner
represented y share certificates deposited the instrument of transfer. If no
transferee is named in the instrument of transfer, the instrument of
transfer shall constitute a complete and sufficient authority to the Company,
its directors, officers and agents to register, in the name of the person in
whose behalf any certificate for the shares to be transferred is deposited
with the Company for the purpose of having the transfer registered, the number
of shares specified in the instrument of transfer or, if no number is
specified, all the shares represented by all share certificates deposited with
the instrument of transfer.
<PAGE>
5.8. Any person becoming entitled to a share in consequence of the
death or bankruptcy of a member upon such documents and evidence being
produced to the Company as the Company Act requires, or who becomes entitled
to a share as a result of an order of a Court of competent jurisdiction or a
statute, has the right either to be registered as a member in his
representative capacity in respect of such share, or, if he is a personal
representative, instead of being registered himself, to make such transfer of
the share as the deceased or bankrupt person could have made; but the Directors
shall, as regards a transfer by a personal representative or trustee in
bankruptcy, have the same right, if any, to decline or suspend registration
of a transferee as they would have in the case of a transfer of a share by the
deceased or bankrupt person before the death or bankruptcy.
PART 6
ALTERATION OF CAPITAL
---------------------
6. 1. The Company may by ordinary resolution filed with the Registrar
amend its Memorandum to increase the authorized capital of the Company by:
(i) creating shares with par value or shares without par value, or
both;
(ii) increasing the number of shares with par value or shares without
par value, or both; or
(iii) increasing the par value of a class of shares with par value, if
no shares of that class are issued.
6.2. The Company may by special resolution alter its Memorandum to
subdivide, consolidate, change from shares with par value to shares without par
value, or from shares without par value to shares with par value, or change
the designation of, all or any of its shares but only to such extent, in such
manner and with such consents of member; holding a class of shares which is
the subject of or affected by such alteration, as the Company; Act provides.
6.3. The company may alter its Memorandum or these Articles
(i) by special resolution, to create, define and attach special rights
or restrictions to any shares, and
<PAGE>
( ii) by special resolution and by otherwise complying with any
applicable provision of its Memorandum or these Articles, to vary or
abrogate any special rights and restrictions attached to any shares
and in each case by filing a certified copy of such resolution with the
Registrar but no right or special right attached to any issued shares shall be
prejudiced or interfered with unless all members holding shares of each class
whose right or special right is so prejudiced or interfered with consent
thereto in writing, or unless a resolution consenting thereto is passed at a
separate class meeting of the holders of the shares of each such class by a
majority of three-fourths, or such greater majority as may be specified by the
special rights attached to the class of shares, of the issued shares of such
class.
6.4. Notwithstanding such consent in writing or such resolution, no
such alteration shall be valid as to any part of the issued shares of any class
unless the holders of the rest of the issued shares of such class either all
consent thereto in writing or consent thereto by a resolution passed by the
votes of members holding three-fourths of the rest of such shares.
6.5. If the Company is or becomes a reporting company, no resolution
to create, vary or abrogate any special right of conversion attaching to any
class of shares shall be submitted to any meeting of members unless, if so
required by the Company, Act, the British Columbia Securities Commission shall
have consented to the resolution.
6.6. Unless these Articles otherwise provide, the provisions of these
Articles relating to general meetings shall apply, with the necessary changes
and so far as they are applicable, to a class meeting of members holding a
particular class of shares but the quorum at a class meeting shall be one
person holding or representing by proxy one-third of the shares affected.
PART 7
PURCHASE AND REDEMPTION
OF SHARES
-----------------------
7. 1. Subject to the special rights and restrictions attached to any
class of shares, the Company may, by a resolution of the Directors and in
compliance with the Company Act, purchase any of its shares at the price and
upon the terms specified in such resolution or redeem any class of its shares
in accordance with the special rights and restrictions attaching thereto.
<PAGE>
No such purchase or redemption shaLl be made if the Company Is Insolvent at the
time of the proposed purchase or redemption or if the proposed purchase or
redemption would render the Company insolvent. Unless the shares are to be
purchased through a stock exchange or the Company is purchasing the shares from
dissenting members pursuant to the requirements of the Company Act, the Company
shall make its offer to purchase pro rata to every member who holds shares of
the class or kind, as the case may be, to be purchased.
7.2. If the Company proposes at its option to redeem some but not all
of the shares of any class, the Directors may, subject to the special rights
and restrictions attached to such class of shares, decide the manner in which
the shares to be redeemed shall be selected.
7.3. Subject to the provisions of the Company Act, any shares
purchased or redeemed by the Company may be sold or issued by it, but, while
such shares are held by the Company, it shall not exercise any vote in respect
of these shares and no dividend shall be paid thereon.
PART 8
BORROWING POWERS
----------------
8.1. The Directors may from time to time on behalf of the Company
(i) borrow money in such manner and amount, on such security, from
such sources and upon such terms and conditions as they think fit,
(ii) issue bonds, debentures, and other debt obligations either
outright or as security for any liability or obligation of the
Company or any other person, and
(iii) mortgage, charge, whether by way of specific or floating charge,
or give other security on the undertaking, or on the whole or any part
of the property and assets, of the Company (both present and future).
8.2. Any bonds, debentures or other debt obligations of the company
may be issued at a discount, premium or otherwise, and with any special
privileges as to redemption, surrender, drawing, allotment of or conversion
into or exchange for shares
<PAGE>
or securities, attending and voting at general meetings of Company, appointment
of Directors or otherwise and may by their terms be assignable free from any
equities between the Company and the person to whom they were issued or any
subsequent holder thereof, all as the Directors may determine.
8.3. The Company shall keep or cause to be kept within the Province of
British Columbia in accordance with the Company Act a register of its
debentures and a register of debentureholders, which registers may be combined,
and, subject to the provisions of the Company Act, may keep or cause to be kept
one or more branch registers of its debentureholders at such place or places as
the Directors may from time to time determine and the Directors may by
resolution, regulation or otherwise make such provisions as they think fit
respecting the keeping of such branch registers.
8.4. Every bond, debenture or other debt obligation of the Company
shall be signed manually by at least one Director or officer of the Company or
by or on behAlf of a trustee, registrar, branch registrar, transfer agent or
branch transfer agent for the bond, debenture or other debt obligation
appointed by the Company or under any instrument under which the bond,
debenture or other debt obligation is issued and any additional signatures may
be printed or otherwise mechanically reproduced thereon and, in such event, a
bond, debenture or other debt obligation so signed is as valid as if signed
manually notwithstanding that any person whose signature is so printed or
mechanically reproduced shall have ceased to hold the office that he is
stated on such bond, debenture or other debt obligation to hold at the date of
the issue thereof.
8.5. The Company shall keep or cause to be kept a register of its
indebtedness to every Director or officer of the Company or an associate of any
of them in accordance with the provisions of the Company Act.
PART 9
GENERAL MEETINGS
----------------
9.1. Subject to any extensions of time permitted pursuant to the
Company Act, the first annual general meeting of the Company shall be held
within fifteen months from the date of incorporation and thereafter an annual
general meeting shall be held once in every calendar year at such time (not
being more than thirteen months after the holding of the last preceding annual
general meeting) and place as may be determined by the Directors.
<PAGE>
9.2. If the Company is, or becomes, a company which is not reporting
company and all the members entitled to attend and vote at an annual general
meeting consent in writing to all the business which is required or desired to
be transacted at the meeting, the meeting need not be held.
9.3. All general meetings other than annual general meetings are
herein referred to as and may be called extraordinary general meetings.
9.4. The Directors may, whenever they think fit, convene an
extraordinary general meeting. An extraordinary general meeting, if
requisitioned in accordance with the, Company Act, shall be convened by the
Directors or, if not convened by the Directors, may be convened by the
Requisitionists as provided in the Company Act.
9.5. If the Company is or becomes a reporting company, advance
notice of any general meeting at which Directors are to be elected shall be
published in the manner required by the Company Act
9.6. A notice convening a general meeting specifying the place, the
day, and the hour of the meeting, and, in case of.. special business, the
general nature of that business, shall be given as provided in the Company Act
and in the manner hereinafter in these Articles mentioned, or in such other
manner (if any) as may be prescribed. by ordinary resolution, whether. previous
notice thereof has been given or not, to such persons as are entitled by law or
under these Articles to receive such notice from the Company. Accidental
omission to give notice of a meeting to, or the non-receipt of notice of a
meeting, by any member shall not invalidate the proceedings at that meeting.
9.7. All the members of the Company entitled to attend and vote at a
general meeting may, by unanimous consent in writing given before, during or
after =he meeting, or if they are present at the meeting by a unanimous vote,
waive or reduce the period of notice of such meeting and an entry in the minute
book of such waiver or reduction shall be sufficient evidence of the due
convening of the meeting.
9.8. Except as otherwise provided by the Company Act, where any
special business at a general meeting includes considering, approving,
ratifying, adopting or authorizing any document or the execution thereof or the
giving of effect there to, the notice convening the meeting shall, with respect
to such document, be sufficient if it states that a copy of the document or
proposed document is or will be available for
<PAGE>
inspection by members at the registered office or records office of the company
or at some other place in British Columbia designated in the notice during
usual business hours up to the date of such general meeting.
PART 10
PROCEEDINGS AT GENERAL MEETINGS
-------------------------------
10.1. All business shall be deemed special business which is
transacted at
(i) an extraordinary general meeting other than the conduct of, and
voting at, such meeting; and
(ii) an annual general meeting, with the exception of the conduct of,
and voting at, such meeting, the consideration of the financial
statement and of the respective reports of the Directors and Auditor,
fixing or changing the number of directors, approval of a motion to
elect two or more directors by a single resolution, the election of
Directors, the appointment of the Auditor, the fixing of the
remuneration of the Auditor and such other business as by these
Articles Or the Company Act may be transacted at a general meeting
without prior notice thereof being given to the members or any
business which is brought under consideration by the report of the
Directors.
10.2. No business, other than election of the chairman or the
adjournment of the meeting, shall be transacted at any general meeting unless a
quorum of members, entitled to attend and vote, is present at the commencement
of the meeting, but the quorum need not be present throughout the meeting.
10.3. Save as herein otherwise provided, a quorum shall be two persons
present and being, or representing by proxy, members holding not less than
one-twentieth of the shares which may be voted at the meeting. If there is only
one member the quorum is one person present and being, or representing by
proxy, such member. The Directors, the Secretary, or, in his absence, an
Assistant Secretary, and the solicitor of the Company shall be entitled to
attend any general meeting but no such person shall be counted in the quorum or
be entitled to vote at any general meeting unless he shall be a member or
proxyholder entitled to vote thereat.
<PAGE>
10.4. If within half an hour from the time appointed for a general
meeting a quorum is not present, the meeting, if convened upon the requisition
of members, shall be dissolved. In any other case it shall stand adjourned to
the same day in the next week, at the same time and place, and, if at the
adjourned meeting a quorum is not present within half an hour from the time
appointed for the meeting, the person or persons present and being, or
representing by proxy, a member or members entitled to attend and vote at the
meeting shall be a quorum.
10.5. The Chairman of the Board, if any, or in his absence the
President of the Company or in his absence a Vice President of the Company, if
any, shall be entitled to preside as chairman at every general *meeting of the
Company.
10.6. If at any general meeting neither the Chairman of the Board nor
President nor a Vice-President is present within fifteen minutes after the time
appointed for holding the meeting or is willing to act as chairman, the
Directors present shall choose one of their number to be chairman or if all the
Directors present decline to take the chair or shall fail to so choose or if no
Director be present, the members present shall choose one of their number to be
chairman.
10.7. The chairman may and shall, if so directed by the meeting,
adjourn the meeting from time to time and from place to place, but no business
shall be transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When a meeting
is adjourned for thirty days or more, notice, but not "advance notice", of the
adjourned meeting shall be given as in the case of an original Meeting. Save as
aforesaid, it shall not be necessary to give any notice of an adjourned
meeting or of the business to be trans acted at an adjourned meeting.
10.8. No motion proposed at a general meeting need be seconded and the
chairman may propose or second a motion.
10.9. Subject to the provisions of the Company Act, at any general
meeting a resolution put to the vote of the meeting shall be decided on a show
of hands, unless (before or on the declaration of the result of the show of
hands) a poll is directed by the chairman or demanded by at least one member
entitled to vote who is present in person or by proxy. The chairman shall
declare to the meeting the decision on every question in accordance with the
result of the show of hands or the poll, and such decision shall be entered in
the book of proceedings of the Company. A declaration by the chairman that a
resolution has been carried, or carried unanimously, or by a particular
majority, or lost or not carried by a particular majority and an entry
<PAGE>
to that effect in the book of the proceedings of the Company shall be
conclusive evidence of the fact, without proof of the number or proportion of
the votes recorded in favour of, or against, that resolution.
10.10 In the case of an equality of votes, whether on show of hands or
on a poll, the chairman of the meeting at which the show of hands takes place
or at which the poll is demanded shall not be entitled to a second or casting
vote.
10.11. No poll may be demanded on the election of a chairman. A poll
demanded on a question of adjournment shall be taken forthwith. A poll demanded
on any other question shall be taken as soon as, in the opinion of the
chairman, is reasonably convenient, but in no event later than seven days after
the meeting and at such time and place and in such manner as the chairman of
the meeting directs. The result of the poll shall be deemed to be the
resolution of and passed at the meeting at which the poll was demanded. Any
business other than that upon which the poll has been demanded may be proceeded
with pending the taking of the poll. A demand for a poll may be withdrawn. In
any dispute as to the admission or rejection of a vote the decision of the
chairman made in good faith shall be final and conclusive.
10.12. Every ballot cast upon a poll and every proxy appointing a
proxyholder who casts a ballot upon a poll shall be retained by the Secretary
for such period and be subject to such inspection as the Company Act may
provide.
10.13. On a poll a person entitled to cast more than one vote need
not, if he votes, use all his votes or cast all the votes he uses in the same
way.
10.14 Unless the Company Act, the Memorandum or these Articles
otherwise provide, any action to be taken by a resolution of the members may
be taken by an ordinary resolution.
PART II
VOTES OF MEMBERS
----------------
11.1. Subject to any special voting rights or restrictions attached to
any class of shares and the restrictions on joint registered holders of shares,
on a show of hands every member who is present in person and entitled to vote
thereat
<PAGE>
shall have one vote and on a po11 every member shall have one vote for each
share of which he is the registered holder and may exercise such vote either in
person or by proxyholder.
11.2. Any person who is not registered as a member but is entitled to
vote at any general meeting in respect of a share, may vote the share in the
same manner as if he were a member; but, unless the Directors have previously
admitted his right to vote at that meeting in respect of the share, he shall
satisfy the directors of his right to vote the share before the time for
holding the meeting, or adjourned meeting, as the case may be, at which he
proposes to vote.
11.3. Any corporation not being a subsidiary which is a member of the
Company may by resolution of its directors or other governing body authorize
such person as it thinks fit to act as its representative at any general
meeting or class meeting. The person so authorized shall be entitled to
exercise in respect of and at such meeting the same powers on behalf of the
corporation which he represents as that corporation could exercise if it were
an individual member of the Company personally present, including, without
limitation, the right, unless restricted by such resolution, to appoint a
proxyholder to represent such corporation, and shall be counted for the purpose
of forming a quorum if present ' at the meeting. Evidence of the appointment of
any such representative may be sent to the Company by written instrument,
telegram, telex or any method of transmitting legibly recorded messages.
Notwithstanding the foregoing, a corporation being a member may appoint a
Proxyholder.
11.4. In the case of joint registered holders of a share the vote of
the senior who exercises a vote, whether in person or by proxyholder, shall be
accepted to the exclusion of the votes of the other joint registered holders;
and for this purpose seniority shall be determined by the order in which the
names stand in the register of members. Several legal personal representatives
of a deceased member whose shares are registered in his sole name shall for
the purpose of this Article be deemed joint registered holders.
11.5. A member of unsound mind entitled to attend and vote, in respect
of whom an order has been made by any court having jurisdiction, may vote,
whether on a show of hands or on a poll, by his committee, curator bonis, or
other person in the nature of a committee or curator bonis appointed by that
court, and any such committee, curator bonis, or other person may appoint a
proxyholder.
11.6. A member holding more than one share in respect of which he is
entitled to vote shall be entitled to appoint one or more (but not more than
five) proxyholders to attend,
<PAGE>
act and vote for him on the same occasion. If such a member should appoint more
than one proxyholder for the same occasion he shall specify the number of
shares each proxyholder shall be entitled to vote. A member may also appoint
one or more alternate proxyholders to act in the place and stead of an absent
proxyholder.
11.7. A form of proxy shall be in writing under the hand of the
appointor or of his attorney duly authorized in writing, or, if the appointor
is a corporation, either under the seal of the corporation or under the hand of
a duly authorized officer or attorney. A proxyholder need not be a member off
the Company if
(i) the Company is at the time a reporting company, or
(ii) the member appointing the proxyholder is a corporation, or
(iii) the Company shall have at the time only one member, or
(iv) the persons present in person or by proxy and entitled to vote at
the meeting by resolution permit the proxyholder to attend and vote;
for the purpose of such resolution the proxyholder shall be counted in
the auorum but shall not be entitled to vote
and in all other cases a proxyholder must be a member.
11.8. A form of proxy and the power of attorney or other authority, if
any, under which it is signed or a notarially certified copy thereof shall be
deposited at the registered office of the Company or at such other place as is
specified for that purpose in the notice convening the meeting, not less than
48 hours (excluding Saturdays, Sundays and holidays) before the time for
holding the meeting in respect of which the person named in the instrument is
appointed. In addition to any other method of depositing proxies provided for
in these Articles, the Directors may from time to time by resolution make
regulations relating to the depositing of proxies at any place or places and
fixing the time or times for depositing the proxies not exceeding 48 hours
(excluding Saturdays, Sundays and holidays) preceding the meeting or adjourned
meeting specified in the notice calling a meeting of members and providing for
particulars of such proxies to be sent to the Company or any agent of the
Company in writing or by letter, telegram, telex or any method of transmitting
legibly recorded messages so as to arrive before
<PAGE>
the commencement of the meeting or adjourned meeting at the office of the
Company or of any agent of the Company appointed for the purpose of receiving
such particulars and providing that proxies so deposited may be acted upon as
though the proxies themselves were deposited as required by this Part and votes
given in accordance with such regulations shall be valid and shall be counted.
11.9. Unless the Company Act or any other statute or law which is
applicable to the Company or to any class of its shares requires any other form
of proxy, a proxy, whether for a specified meeting or otherwise, shall be in
the form following, but may also be in any other form that the Directors or the
chairman of the meeting shall approve:
(Name of Company)
The undersigned being a member of the above named Company, hereby
appoints or
failing him
as proxyholder for the undersigned to attend, act and vote for an on
the behalf of the undersigned at the general meeting of the Company to
be held on the day and at any adjournment
thereof.
Signed this day of , 19 .
(Signature of member).
11.10. A vote given in accordance with the terms of a proxy is valid
notwithstanding the previous death or incapacity of the member giving the proxy
or the revocation of the proxy or of the authority under which the form of
proxy was executed or the transfer of the share in respect of which the proxy
is given, provided that no notification in writing of such death, incapacity,
revocation or transfer shall have been received at the registered office of
the Company or by the chairman of the meeting or adjourned meeting for which
the proxy was given before the vote is taken.
11.11. Every proxy may be revoked by an instrument in writing
(i) executed by the member giving the same or by his attorney
authorized in writing or, where the member is a corporation, by a duly
authorized officer or attorney of the corporation; and
<PAGE>
(ii) delivered either at the registered office of the Company at any
time up to and including the last business day preceding the day of
the meeting, or any adjournment thereof at which the proxy is to be
used, or to the chairman of the meeting on the day of the meeting or
any adjournment thereof before any vote in respect of which the
proxy is to be used shall have been taken
or in any other manner provided by law.
PART 12
DIRECTORS
---------
12.1. The subscribers to the Memorandum of the Company are the first
Directors. The Directors to succeed the first Directors may be appointed in
writing by a majority of the subscribers to the Memorandum or at a meeting of
the subscribers, or if not so appointed, they shall be elected by the members
entitled to. vote on the election of Directors and the number of Directors
shall be the same as the number of Directors so appointed or elected. The
number of Directors, excluding additional Directors, may be fixed or changed
from time to time by ordinary resolution, whether previous notice thereof has
been given or not, but notwithstanding anything contained in these Articles
the number of Directors shall never be less than one or, if the Company is or
becomes a reporting company, less than three.
12.2. The remuneration of the Directors as such may from time to time
be determined by the Directors or, if the Directors shall so decide, by the
members. Such remuneration may be in addition to any salary or other
remuneration paid to any officer or employee of the Company as such who is also
a Director. The Director shall be repaid such reasonable travel ling, hotel and
other expenses as they incur in and about the business of the Company and if
and Director shall perform any professional or other services for the Company
that in the opinion of the Directors are outside the ordinary duties of a
Director or shall otherwise be specially occupied in or about the Company's
business, he may be paid a remuneration to be fixed by the Board, or, at the
option of such Director, by the Company in general meeting, and such
remuneration may be either in addition to, or in substitution for any other
remuneration that he may be entitled to receive. The Directors on behalf of the
Company,
<PAGE>
unless otherwise determined by ordinary resolution, may pay a gratuity or
pension or allowance on retirement to any Director who has held and salaried
office or place of profit with the Company or to his spouse or dependents and
may make contributions to any fund and pay premiums for the purchase or
provision of any such gratuity, pension or allowance.
12.3. A Director shall not be required to hold a share in the capital
of the Company as qualification for his office but shall be qualified as
required by the Company Act, to become or act as a Director.
PART 13
ELECTION AND REMOVAL OF DIRECTORS
---------------------------------
13. 1. At each annual general meeting of the Company all the Directors
shall retire and the members entitled to vote thereat shall elect a Board of
Directors consisting of the number of Directors for the time being fixed
pursuant to these Articles. If the Company is, or becomes, a company that is
not a reporting company and the business to be transacted at any annual general
meeting is consented to in writing by all the members who are entitled to
attend and vote thereat such annual general meeting shall be deemed for the
purpose of this Part to have been held on such written consent becoming
effective.
13.2. A retiring Director shall be eligible for re-election.
13.3. Where the Company fails to hold an annual general meeting in
accordance with the Company Act, the Directors then in office shall be deemed
to have been elected or appointed as Directors on the last day on which the
annual general meeting could have been held pursuant to these Articles and they
may hold office until other Directors are appointed or elected or until the
day on which the next annual general meeting is held.
13.4. If at any general meeting at which there should be an election
of Directors, the places of any of the retiring Directors are not filled by
such election, such of the retiring Directors who are not re-elected as may be
requested by the newly-elected Directors shall, if willing to do so, continue
in off ice to complete the number of Directors for the time being fixed
pursuant to these Articles until further new Directors are elected at a general
meeting convened for the purpose. If any such election or continuance of
Directors does not result in the election or continuance of the number of
Directors for the time being fixed pursuant to these Articles such number shall
be fixed at the number of Directors actually elected or continued in office.
<PAGE>
13.5. Any casual vacancy occurring in the Board of Directors may be
filled by the remaining Directors or Director.
13.6. Between successive annual general meetings the Directors
shall have power to appoint one or more additional Directors but not more than
one-third of the number of Directors fixed pursuant to these Articles and in
effect at the last general meeting at which Directors were elected. Any
Director so appointed shall hold office only until the next following annual
general meeting of the Company, but shall be eligible for election at such
meeting and so long as he is an additional Director the number of Directors
shall be increased accordingly.
13.7. Any Director may by instrument in writing delivered to the
Company appoint any person to be his alternate to act in his place at meetings
of the Directors at which he is not present unless the Directors shall have
reasonably disapproved the appointment of such person as an alternate Director
and shall have given notice to that effect to the Director appointing the
Alternate Director within a reasonable time after delivery of such instrument
to the Company. Every such alternate shall be entitled to notice of meetings of
the Directors and to attend and vote as a Director at a meeting at which the
person appointing him is not personally present, and, if he is a Director, to
have a separate vote on behalf of the Director he is representing in addition
to his own vote. A Director may at any time by instrument, telegram, telex or
any method of transmitting legibly recorded messages delivered to the Company
revoke the appointment of an alternate appointed by him. The remuneration
payable to such an alternate shall be payable out of the remuneration of the
Director appointing him.
13.8. The office of Director shall be vacated if the Director:
(i) to the registered office of the Company; or
(ii) is convicted of an indictable offence and the other Directors
shall have resolved to remove him; or
(iii) ceases to be qualified to act as a Director pursuant to the
Company Act.
13.9. The Company may by special resolution remove any Director before
the expiration of his period of office, and may by an ordinary resolution
appoint another person in his stead.
<PAGE>
PART 14
POWERS AND DUTIES OF DIRECTORS
------------------------------
14.1. The Directors shall manage, or supervise the management of, the
affairs and business of the Company and shall have the authority to exercise
all such powers of the Company as are not, by the Company Act or by the
Memorandum or these Articles, required to be exercised by the Company in
general meeting.
14.2. The Directors may from time to time by power of attorney
or other instrument under the seal, appoint any person to be the attorney of
the Company for such purposes, and with such powers, authorities and
discretions; (not exceeding those vested in or exercisable by the Directors
under these Articles and excepting the powers of the Directors relating to the
constitution of the Board and of any of its committees and the Appointment or
removal of officers and the power to declare dividends) and for such period,
with such remuneration and subject to such conditions as the Directors may
think fit and any such appointment may be made in favour of any of the
Directors or any of the members of the Company or in favour of any
corporation, or of any of the members, directors, nominees or managers of any
corporation, firm or joint venture and any such power of attorney may contain
such provisions for the protection or convenience of persons dealing with such
attorney as the Directors think of it. Any such attorney may be authorized by
the Directors to sub-delegate all or any of the powers, authorities and
discretions for the time being vested in him.
PART 15
DISCLOSURE OF INTEREST OF
DIRECTORS
-------------------------
15.1. A Director who is, in any way, directly or indirectly interested
in an existing or proposed contract or transaction with the Company or who
holds any office or possesses any property whereby, directly or indirectly, a
duty or interest might be created to conflict with his duty or interest as a
Director shall declare the nature and extent of his interest in such contract
or transaction or of the conflict or potential conflict with his duty and
interest as a Director, as the case may be, in accordance with the provisions
of the Company Act.
<PAGE>
15.2. A Director shall not vote in respect of any such contract or
transaction which the Company in which he is interested and if he shall do so
his vote shall not be counted, but he shall be counted in the quorum present at
the meeting at which such vote is taken. Subject to the provisions of the
Companies Act, the foregoing prohibitions shall not apply to
(i) any such contract or transaction relating to a loan to the
Company, which a Director or a specified corporation or a specified
firm in which he has an interest has guaranteed or joined in
guaranteeing the repayment of the loan or any part of 'the loan;
(ii) any contract or transaction made or to be. made with, or for the
benefit of a holding corporation or a subsidiary corporation of
which a Director is a director;
(iii) any contract by a Director to subscribe for or underwrite
shares or debentures to be issued by the Company or a subsidiary of
the Company, or any contract, arrangement or transaction in which a
Director is, directly or indirectly, interested if all the other
Directors are also, directly or indirectly interested in the contract,
arrangement or transaction;
(iv) determining the remuneration of the Directors;
(v) purchasing and maintaining insurance to cover Directors against
liability incurred by them as Directors; or
(vi) the indemnification of any Director by the Company.
These exceptions may from time to time be suspended or amended to any extent
approved by the Company in general meeting and permitted by the Company Act,
either generally or in respect or any particular contract or transaction or for
any particular period.
15.3. A Director may hold any office or place of profit with the
Company (other than the office of auditor of the Company) in conjunction with
his office of Director for such period and on such terms (as to remuneration or
otherwise) as the Directors may determine and no Director or intended Director
shall be disqualified by his office from contracting with the Company either
with regard to his tenure of any such other
<PAGE>
office or place of profit or as vendor, purchaser or otherwise, and, subject
to compliance with the provisions of the Company Act, no contract or
transaction entered into by or on behalf of the Company in which a Director is
in any way interested shall be liable to be voided by reason thereof.
15.4. Subject to compliance with the provisions of the Company Act, a
Director or his firm may act in a professional capacity for the Company
(except as auditor of the Company) and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director.
15.5. A Director may be or become a director or other officer or
employee of, or otherwise interested in, any corporation or firm in which the
Company may be interested as a shareholder or otherwise, and, subject to
compliance with the provisions of the Company Act, such Director shall not be
accountable to the Company for any remuneration or other benefits received by
him as director, officer or employee of, or from his interest in, such other
corporation or firm, unless the Company in general meeting otherwise directs.
PART 16
PROCEEDINGS OF DIRECTORS
------------------------
16.1. The Chairman of the Board, if any, or in his absence, the
President shall preside as chairman at every meeting of the Directors, or if
there is no Chairman of the Board or neither the Chairman of the Board nor the
President is present within fifteen minutes of the time appointed for holding
the meeting or is willing to act as chairman, or, if the Chairman of the Board,
if any, and the President have advised the Secretary that they will not be
present at the meeting, the Directors present shall choose one of their number
to be chairman of the meeting.
16.2. The Directors may meet together for the dispatch of business,
adjourn and otherwise regulate their meetings, as they think fit. Questions
arising at any meeting shall be decided by a majority of votes. In case of an
equality of votes the chairman shall not have a second or casting vote.
Meetings of the Board held at regular intervals may be held at such place, at
such time and upon such notice (if any) as the Board may by resolution from
time to time determine.
<PAGE>
16.3. A Director may participate in a meeting of the Board or of any.
committee of the Directors by means of conference telephones or other
communications facilities by means of which all Directors participating in the
meeting can hear each other and provided that all such Directors agree to such
participation. A Director participating in a meeting in accordance with
this Article shall be deemed to be present at the meeting, and to have so
agreed and shall be counted in the quorum therefor and be entitled to speak
and vote thereat.
16.4. A Director may, and the Secretary or an Assistant secretary upon
request of a Director shall, call a meeting of the Board at any time.
Reasonable notice of such meeting specifying the place, day and hour of such
meeting shall be given by mail, postage prepaid, addressed to each of the
Directors and alternate Directors at his address as it appears on the books of
the Company or by leaving it at his usual business or residential address or by
telephone, telegram, telex, or any method of transmitting legibly recorded
messages. It shall not be necessary to give notice of a meeting of Directors to
any Director or alternate Director (i) who is at the time not in the Province
of British Columbia or (ii) if such meeting is to be held immediately following
a general meeting at which such Director shall have been elected or is the
meeting of Directors of which such Director is appointed.
16.5. Any Director of the Company may file with the Secretary a
document executed by him waiving notice of any past, present or future meeting
or meetings of the Directors being, or required to have been, sent to him and
may at any time withdraw such waiver with respect to meetings held thereafter.
After filing such waiver with respect to future meetings and until such
waiver is withdrawn no notice need be given to such Director and, unless the
Director otherwise requires in writing to the Secretary, to his alternate
Director of any meeting or Directors and all meetings of the Directors so held
shall be deemed not to be improperly called or constituted by reason of
notice not having been given to such Director or alternate Director.
16.6. The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and if not so fixed shall be two
Directors or, if the number of Directors is fixed at one, shall be one
Director.
16.7. The continuing Directors may act notwithstanding any vacancy in
their body, but, if and so long as their number is reduced below the number
fixed pursuant to these Articles as the necessary quorum of Directors, the
continuing Directors may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of the Company, but
for no other purpose.
<PAGE>
16.8. Subject to the provisions of the Company Act, all acts done by
any meeting of the Directors or of a committee of Directors, or by any person
acting as a Director, shall, notwithstanding that it be afterwards discovered
that there was some defect in the qualification, election or appointment of
any such Directors or of the members of such committee or person acting as
aforesaid, or that they or any of them were disqualified, be as valid as if
every such person had been duly elected or appointed and was qualified to be a
Director.
16.9. A resolution consented to in writing, whether by document,
telegram, telex or any method of transmitting legibly recorded messages or
other means, by all of the Directors shall be as valid and effectual as if it
had been passed at a meeting of the Directors duly called and held. Such
resolution may be in two or more counterparts which together shall be deemed to
constitute one resolution in writing. Such resolution shall be filed with the
minutes of the proceedings of the Directors and shall be effective on the date
stated thereon or on the latest date stated on any counterpart.
PART 17
EXECUTIVE AND OTHER COMMITTEES
------------------------------
17.1. The Directors may by resolution appoint an Executive Committee
to consist of such member or members of their body as they think fit, which
Committee shall have, and may exercise during the intervals between the
meetings of the Board, all the powers vested in the Board except the power to
fill vacancies in the Board, the power to change the membership of, or fill
vacancies in, said Committee or any other committee of the Board and such other
powers, if any, as may be specified in the resolution. The said committee shall
keep regular minutes of its transactions and shall cause them to be recorded in
books kept for that purpose, and shall report the same to the Board of
Directors at such times as the Board of Directors may from time to time
require. The Board shall have the power at any time to revoke or override the
authority given to or acts done by the Executive Committee except as to acts
done before such revocation or overriding and to terminate the appointment or
change the membership of such Committee and to fill vacancies in it. The
Executive Committee may make rules for the conduct of its business and may
appoint such assistants as it may deem necessary. A majority of the members of
said Committee shall constitute a quorum thereof.
<PAGE>
17.2. The Directors may by resolution appoint one or more committees
consisting of such member or members of their body as they think fit and may
delegate to any such committee between meetings of the Board such powers of the
Board (except the power to fill vacancies in the Board and the power to change
the membership of or fill vacancies in any committee of the Board and the power
to appoint or remove officers appointed by the Board) subject to such
conditions as may be prescribed in such resolution, and all committees so
appointed shall keep regular minutes of their transactions and shall cause them
to be recorded in books kept for that purpose, and shall report the same to the
Board of Directors at such times as the Board of Directors may from time to
time require. The Directors shall also have power at any time to revoke or
override any authority given to or acts to be done by any such committees
except as to acts done before such revocation or overriding and to terminate
the appointment or change the membership of a committee and to fill vacancies
in it. committees may make rules for the conduct of their business and may
appoint such assistants as they may deem necessary. A majority of the members
of a committee shall constitute a quorum thereof.
17.3. The Executive Committee and any other committee may meet and
adjourn as it thinks proper. Questions arising at any meeting shall be
determined by a majority of votes of the members of the committee present, and
in case of an equality of votes the chairman shall not have a second or
casting vote. A resolution approved in writing by all the members of the Exec-
utive Committee or any other committee shall be as valid and effective as if
it had been passed at a meeting or such Committee duly called and constituted.
Such resolution may be in two or more counterparts which together shall be
deemed to constitute one resolution in writing. Such resolution shall be filed
with the minutes of the proceedings of the committee and shall be effective on
the date stated thereon or on the latest date stated in any counterpart.
PART 16
OFFICERS
--------
18.1. The Directors shall, from time to time, appoint a President, and
a Secretary and such other officers, if any, as the Directors shall determine
and the Directors may, at any time, terminate any such appointment. No officer
shall be appointed unless he is qualified in accordance with the provisions of
the Company Act.
<PAGE>
18.2. One person may hold more than one of such offices except that
the offices of President and Secretary must be held by different persons unless
the Company has only one member. Any person appointed as the Chairman of the
Board, the President or the Managing Director shall be a Director. The other
officers need not be Directors. The remuneration of the officers of the Company
as such and the terms and conditions of their tenure of office or employment
shall from time to time be determined by the Directors; such remuneration may
be by way of salary, fees, wages, commission or participation in profits or any
other means or all of these modes and an officer may in addition to such
remuneration be entitled to receive after he ceases to hold such office or
leaves the employment of the Company a pension or gratuity. The Directors may
decide what functions and duties each officer shall perform and may entrust to
and confer upon him any of the powers exercisable by them upon such terms and
conditions and with such restrictions as they think fit and may from time to
time revoke, withdraw, alter or vary all or any of such functions, duties and
powers. The Secretary shall, inter alia, perform the functions of the Secretary
specified in the Company Act.
18.3. Every officer of the Company who holds any office or possesses
any property whereby, whether directly or indirectly, duties or interests might
be created in conflict with his duties or interests as an officer of the
Company shall, in writing, disclose to the President the fact and the nature,
character and extent of the conflict.
PART 19
INDF14NITY AND PROTECTION OF
DIRECTORS, OFFICERS AND EMPLOYEES
---------------------------------
19.1. Subject to the Provisions of the Company Act, the Directors
shall cause the Company to indemnify a Director or former Director of the
Company and the Directors may cause the Company to indemnify a director or
former director of a corporation of which the Company is or was a shareholder
and the heirs and personal representatives of any such person against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, actually and reasonably incurred by him or them including
an amount paid to settle an action or satisfy a judgment in a civil, criminal
or administrative action or proceeding to which he is or they are made a party
by reason of his being or having been a Director of the Company
<PAGE>
or a director of such corporation, including any action brought the Company or
any such corporation. Each Director of the Company on being elected or
appointed shall be deemed to have contracted with the Company on the terms of
the foregoing indemnity.
19.2. Subject to the provisions of the Company Act, the Directors may
cause the Company to indemnify any officer, employee or agent of the Company or
of a corporation of which the Company is or was a shareholder (notwithstanding
that he is also a Director) and his heirs and personal representatives against
all costs, charges and expenses whatsoever incurred by him or them and
resulting from his acting as an officer, employee or agent of the Company or
such corporation. In addition the Company shall indemnify the Secretary or an
Assistant Secretary of the Company (if he shall not be a full time employee of
the Company and notwithstanding that he is also a Director) and his respective
heirs and legal representatives against all costs, charges and expenses
whatsoever incurred by him or them and arising out of the functions assigned to
the Secretary by the Company Act or these Articles and each such Secretary and
Assistant Secretary shall on being appointed be deemed to have contracted with
the Company on the terms of the foregoing indemnity.
19.3. The failure of a Director or officer of the Company to comply
with the provisions of the Company Act or of the Memorandum or these Articles
shal1 not invalidate any indemnity to which he is entitled under this Part.
19.4. The Directors may cause the Company to purchase and maintain
insurance for the benefit of any person who is or was serving as a Director,
officer, employee or agent of the Company or as a director, officer, employee
or agent of any corporation of which the Company is or was a shareholder and
his heirs or personal representatives against any liability incurred by 'him as
such Director, director, officer, employee or agent.
PART 20
DIVIDENDS AND RESERVE
---------------------
20.1. The Directors may from time to time declare and authorize
payment of such dividends, if any, as they may deem advisable and need not give
notice of such declaration to any member. No dividend shall be paid otherwise
than out of funds and/or assets properly available for the payment of dividends
and a declaration by the Directors as to the amount of such funds
<PAGE>
or assets available for dividends shall be conclusive. The Company may pay any
such dividend wholly or in part by the distribution of specific assets and in
particular by paid up shares, bonds, debentures or other securities of the
Company or any other corporation or in any one or more such ways as may be
authorized by the Company or the Directors and where any difficulty arises with
regard to such a distribution the Directors may settle the same as they think
expedient, and in particular may fix the value for distribution of such
specific assets or any part thereof, and may determine that cash payments in
substitution for all or any part of the specific assets to which any members
are entitled shall be made to any members on the basis of the value so fixed in
order to adjust the rights of all parties and may vest any such specific assets
in ' trustees for the persons entitled to the dividend as may seem expedient to
the Directors.
20.2. Any dividend declared on shares of any class by the Directors
may be made payable on such date as is fixed by the Directors.
20.3. Subject to the rights of members (if any) holding shares with
special rights as to dividends, all dividends on shares of any class shall be
declared and paid according to the number of such shares held.
20.4. The Directors may, before declaring any dividend, set aside out
of the funds properly available for the payment of dividends such sums as they
think proper as a reserve or reserves, which shall, at the discretion of the
Directors, be applicable for meeting contingencies, or for equalizing
dividends, or for any other purpose to which such funds of the Company may be
properly applied, and pending such application may, at the like discretion,
either be employed in the business of the Company or be invested in such
investments as the Directors may from time to time think fit. The Directors may
also, without placing the same in reserve, carry forward such funds, which they
think prudent not to divide.
20.5. If several persons are registered as joint holders of any share,
any one of them may give an effective receipt for any dividend, bonuses or
other moneys payable in respect of the share.
20.6. No dividend shall bear interest against the Company. Where the
dividend to which a member is entitled includes a fraction of a cent, such
fraction shall be disregarded in making payment thereof and such payment shall
be deemed to be payment in full.
<PAGE>
20.7. Any dividend, bonuses or other moneys payable in respect of
shares may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or in the case of joint holders, to the
registered address of that one of the joint holders who is first named on
the register, or to such person and to such address as the holder or joint
holders may direct in writing. Every such cheque or warrant shall be made
payable to the order of the person to whom it is sent. The mailing of such
cheque or warrant shall, to the extent of the sum represented thereby (plus the
amount of any tax required by law to be deducted) discharge all liability for
the dividend, unless such cheque or warrant shall not be paid on presentation
or the amount of tax so deducted shall not be paid to the appropriate taxing
authority.
20.8. Notwithstanding anything contained in these Articles the
Directors may from time to time capitalize any undistributed surplus on hand
of the Company and may from timd to time issue as fully paid and non-assessable
any unissued shares, or any bonds, debentures or debt obligations of the
Company as a dividend representing such undistributed surplus on hand or any
part thereof.
PART 21
DOCUMENTS, RECORDS AND REPORTS
------------------------------
21.1. The Company shall keep at its records office or at such other
place as the Company Act may permit, the documents, copies, registers,
minutes, and records which the Company is required by the Company Act to keep
at its records office or such other place, as the case may be.
21.2. The Company shall cause to be kept proper books of account and
accounting records in respect of all financial and other transactions of the
Company in order properly to record the financial affairs and condition of the
Company and to comply with the Company Act.
21.3. Unless the Directors determine otherwise, or unless otherwise
determined by an ordinary resolution, no member of the Company shall be
entitled to inspect the. accounting records of the Company.
21.4. The Directors shall from time to time at the expense of the
Company cause to be prepared and laid before the Company in general meeting
such financial statements and reports as are required by the Company Act.
<PAGE>
21.5. Every member shall be entitled to be furnished once gratis on
demand with a copy of the latest annual financial statement of the Company
and, if so required by the Company Act, a copy of each such annual financial
statement and interim financial statement shall be mailed to each member.
PART 22
NOTICES
-------
22.1. A notice, statement or report may be given or delivered by the
Company to any member either by delivery to him personally or by sending it by
mail to him to his address as recorded in the register of members. Where a
notice, statement or report is sent by mail, service or delivery of the notice,
statement or report shall be deemed to be effected by properly addressing,
prepaying and mailing the notice, statement or report and to have been given on
the day, Saturdays, Sundays and holidays excepted, following the date of
mailing. A certificate signed by the Secretary or other officer of the
Company or of any other corporation. acting in that behalf for the Company that
the letter, envelope or wrapper containing the notice, statement or report was
so addressed, prepaid and mailed shall be conclusive evidence thereof.
22.2. A notice, statement or report may be given or delivered by the
Company to the joint holders of a share by giving the notice to the joint
holder first named in the register of members in respect of the share.
22.3. A notice, statement or report may be given or delivered by the
Company to the persons entitled to a share in consequence of the death,
bankruptcy or incapacity of a member by sending it through the mail prepaid
addressed to them by name or by the title of representatives of the deceased
or incapacitated person or trustee of the bankrupt, or by any like descrip-
tion, at the address (if any) supplied to the Company for the purpose by the
persons claiming to be so entitled, or (until such address has been so
supplied) by giving the notice in a manner in which the same might have been
given if the death, bankruptcy or incapacity had not occurred.
22.4. Notice of every general meeting or meeting of members holding a
class of shares shall be given in a manner hereinbefore authorized to every
member holding at the time of the issue of the notice or the date fixed for
determining the members entitled to such notice, whichever is the earlier,
shares which confer the right to notice of and to attend and vote at any such
meeting. No other person except the auditor
<PAGE>
of the Company and the Directors of the Company shalL be entitled to receive
notices of any such meeting.
PART 23
RECORD DATES
------------
23.1. The Directors may fix in advance a date, which shall not be more
than the maximum number of days permitted by the Company Act preceding the date
of any meeting of members or any class thereof or of the payment of any
dividend or of the proposed taking of any other proper action requiring the
determination of members as the record date for the determination of the
members entitled to notice of, or to attend and vote at, any such meeting and
any adjournment thereof, or entitled to receive payment of any such dividend or
for any other proper purpose and, in such case, notwithstanding anything
elsewhere contained in these Articles, only members of record on the date so
fixed shall be deemed to be members for the purposes aforesaid.
23.2. Where no record date is so fixed for the determination of
members as provided in the preceding Article the date on which the notice is
mailed or on which the resolution declaring the dividend is adopted, as the
case may be, shall be the record date for such determination.
PART 24
SEAL
----
24.1. The Directors may provide a seal for the Company and, if they do
so, shall provide for the safe custody of the seal which shall not be affixed
to any instrument except in the presence of the following persons, namely,
(i) any two Directors, or
(ii) one of the Chairman of the Board, the President, the Managing
Director, a Director and a Vice-President together with one of the
Secretary, the Treasurer, the Secretary-Treasurer, an Assistant
Secretary, an Assistant Treasurer and an Assistant
Secretary-Treasurer, or
<PAGE>
(iii) if the Company shall have only one member, the President or the
Secretary, or
(iv) such person or persons as the Directors may from time to time by
resolution appoint
and the said Directors, officers, person or persons in whose presence the seal
is so affixed to an instrument shall sign such instrument. For the purpose of
certifying under seal true copies of any document or resolution the seal may be
affixed in the presence of any one of the foregoing persons.
24.2. To enable the seal of the Company to be affixed to any bonds,
debentures, share certificates, or other securities of the Company, whether in
definitive or interim form, on which facsimiles of any. of the signatures of
the Directors or officers of the Company are, in accordance with the Company
Act and/or these Articles, printed or otherwise mechanically reproduced there
may be delivered to the firm or company employed to engrave, lithograph or
print such definitive or interim bonds, debentures, share certificates or other
securities one or more unmounted dies reproducing the Company's seal and the
Chairman of the Board, the President, the Managing Director or a Vice-President
and the Secretary, Treasurer, Secretary-Treasurer, an Assistant Secretary, an
Assistant Treasurer or an Assistant Secretary-Treasurer may by a document
authorize such firm or company to cause the Company's seal to be affixed to
such definitive or interim bonds, debentures, share certificates or other
securities by the use of such dies. Bonds, debentures, share certificates or
other securities to which the Company's seal has been so affixed shall for all
purposes be deemed to be under and to bear the Company's seal lawfully affixed
thereto.
24.3. The Company may have for use in any other province, state,
territory or country an official seal which shall have on its face the name of
the province, state, territory or country where it is to be used and all of the
powers conferred by the Company Act with respect thereto may be exercised by
the Directors or by a duly authorized agent of the Company.
PART 25
PROHIBITIONS
------------
25.1. The number of members shall be limited to fifteen
25.2. No shares or debt obligations issued by the Company shall be
offered for sale to the public.
<PAGE>
25.3 No shares shall be transferred without the previous consent of
the Directors expressed by a resolution of the Board and the Directors shall
not be required to give any reason for refusing to consent to any such proposed
transfer.
PART 26
RESTRICTION ON SHARE TRANSFERS
------------------------------
26.1 No shares in the capital of the Company shall be transferred by
any member, or the personal representative of any deceased member or trustee in
bankruptcy of any bankrupt member, or the liquidator of a member which is a
corporation, except under the following conditions:
(a) A person (herein called the proposing transferor") desiring to
transfer any share or shares in the Company shall give notice in
writing (herein called the "Transfer notice"). to the Company
that he desires to transfer the same. The transfer notice shall
specify the price, which shall be expressed in lawful money of
Canada, and the terms of payment upon which the proposing
transferor is prepared to transfer the share or shares and shall
constitute the Company his agent for the sale thereof to any
member or members of the Company at the price and upon the terms
of payment so specified. The transfer notice shall also state
whether or not the proposing transferor has had an offer to
purchase the shares or any of them from, or proposes to sell the
shares or any of them to, any particular person or persons who
are not members and if so the names and addresses of such persons
shall be specified in the transfer notice. The transfer notice
shall constitute an offer by the proposing transferor to the
other members of the Company holding shares of the class or
classes included in the transfer notice and shall not be
revocable except with the sanction of the directors. If the
transfer notice pertains to shares of more than one class then
the consideration and terms of payment for each class of shares
shall be stated separately in the transfer notice.
<PAGE>
(b) The directors shall forthwith upon receipt thereof transmit the
transfer notice to each of the members, other than the proposing
transferor, holding shares of the class or classes set forth in
the transfer notice and request the member to whom the transfer
notice is sent to state in writing within 14 days whether he is
willing to accept any, and if so, the maximum number of shares he
is willing to accept at the price and upon the terms specified in
the transfer notice. A member shall only be entitled to purchase
shares of the class or classes held by him.
(c) Upon the expiration of the 14 days notice period referred to in
article 26.1(b), if the directors shall have received from the
members entitled to receive the transfer notice sufficient
acceptances to take up the full number of shares offered by the
transfer notice and, if the transfer notice includes shares of
more than one class, sufficient acceptances from the members of
each class to take up the full number of shares of each class
offered by the transfer notice, the directors shall thereupon
apportion shares so offered among the members so accepting and so
far as may be, pro rata, according to the number of shares held
by each of them respectively, and in the case of more than one
class of shares, then Pro rata in respect of each class. If the
directors shall not have received sufficient acceptances as
aforesaid, they, may, but only with the consent of the proposing
transferor who shall not be obliged to sell to members in the
aggregate less than the total number of shares of one or more
classes of shares offered by the transfer notice, apportion the
shares so offered among the members so accepting so far as may be
according to the number of shares held by each respectively but
only up to the amount accepted by, such members respectively.
Upon any such apportionment being made the proposing transferor
shall be bound upon payment of the price to transfer the shares
to the respective members to whom the directors have apportioned
same. If, in any case, the proposing transferor, having become so
bound fails in transferring any share, the Company may receive
the purchase money for that share and shall upon receipt cause
the name of the purchasing member to be entered in the register
as the holder of the shares and cancel the certificate of the
share held by the proposed transferor, whether the same shall be
produced to the Company or not, and shall hold such purchase
money in trust for the proposing transferor. The receipt of the
Company for the purchase money shall be a good discharge to the
purchasing member and after his name has been entered in the
register the validity of the proceedings shall not be questioned
by any person.
<PAGE>
(d) In the event that some or all of the shares offered shall not be
sold under the preceding articles within the 14 day period
referred to in article 26.1(b), the proposing transferor shall be
at liberty for a period of 90 days after the expiration of that
period to transfer such of the shares so offered as are not sold
to any person provided that he shall not sell them at a price
less than that specified in the transfer notice or on terms more
favourable to a purchaser than those specified in the transfer
notice.
(e) The provisions as to transfer contained in this article shall not
apply:
(i) If before the proposed transfer of shares is made, the
transferor shall obtain consents to the proposed transfer
from members of the Company, who at the time of the transfer
are the registered holders of two-thirds or more of
the issued shares of the class to be transferred of the
Company or if the shares comprise more than one class, then
from the registered holders of two-thirds or more of the
shares of each class to be transfered and such. consent
shall be taken to be a waiver of the application to the
preceding articles as regards such transfer; or
(ii) To a transfer of shares desired to be made merely for the
purpose of effectuating the appointment of a new trustee for
the owner thereof, provided that it is proved to the
satisfaction of the Board that such is the case.
26.2. Notwithstanding anything contained in these articles the
directors may in their absolute discretion decline to register any transfer of
shares and shall not be required to disclose their reasons therefor.
<PAGE>
Part 27 -- Special Rights and Restrictions
------------------------------------------
27.1. At all meetings of the members of the Company the holders or the
Class "A" Voting Common Shares and Class "B" Voting Common Shares shall be
entitled to one vote for each Class "A" Voting Common Share and Class "B"
Voting Common Share held.
27.2 The holders of the Class "A" Voting Common Shares and Class "B"
Voting Common Shares and the holders of the Class "C" Non-Voting Common Shares
shall share equally in the income or loses of the Company.
27.3 As soon as possible following the conclusion of each financial
year of the Company, the "Net Income (or Loss)" (as hereinafter defined) of
the Company for the financial year then ended shall be allocated by the
directors to each of the Class "A" Voting Common Shares and Class "B" Voting
Common Shares with the Class "C" Non-Voting Common Shares, which have been
issued in the proportion that the number or the issued shares or the class to
which the allocation is made bears to the total shares issued in the Class "A"
Voting Common Shares arid Class "B" Voting Common Shares and the Class "C"
Non-Voting Common Shares. The directors may from time to time make interim
allocations or the estimated Net Income (or Loss) For any Financial year in the
manner described herein. If an interim allocation of the estimated Net Income
(or Loss) for any financial year has been made, the actual Net Income (or
Loss) or the Company allocated for such financial year shall be decreased (or
increased), by the amount of such interim allocation made.
The net income or loss as allocated and accumulated on the books of
the Company amongst the said classes of shares shall be kept separate and for
the benefit of the shareholders or that class and the directors may from time
to time distribute by way of dividends to any particular class of shareholders
all or any portion of the net accumulated income or a particular class as
the directors in their absolute discretion deem expedient, without any
portion of the accumulated net income by way or dividend to the shareholders of
any other class.
For the purposes of this section, the term "Net Income (or Loss)"
shall mean all credits to or charges against the retained earnings of the
Company for the subject period other than dividends declared on any or the
issued and outstanding shares of any class of tile authorized capital stock of
the Company and, without restricting the generality or the foregoing, shall
include net income or loss or the Company for the subject period as calculated
under generally accepted accounting principles any capital gains and/or capital
losses and income tax or recoveries related thereto, any prior period
adjustments received during the subject period and any provision for recovery
of income taxes. The term "Net Allocated Earnings", when used herein with
respect to a particular class of shares shall mean the net amount or the net
incomes (or losses) less distributions, which have been allocated or deducted
with respect to that particular class of shares up to the date
<PAGE>
in question.
27.4 1n the event of liquidation, dissolution, or winding-up of the
Company or other distribution of the assets among the shareholders other
than by way of dividends, the accumulated net income as allocated and not
paid shall be divided among the shareholders of each such class, and when
the accumulated net income has been so distributed, the holders of the Class
"A" Voting Common Shares and Class "B" Voting Common Shares and the Class
"C" Non-Voting Common Shares shall be entitled to share equally, share for
share, any further distribution of the assets of the Company.
27.5 No shares of any class of shares shall be issued unless shares
have been first issued to the shareholders of each other class of shares and
the shareholders of each such other classes of shares shall have a pre-emptive
right to acquire the offered shares in proportion to their respective holdings
in the corporation at such price and on such terms as those shares are to be
offered to the first named class or shares.
27.6 The special rights, privileges arid restrictions attached to any
class of shares in the Company may be modified, abrogated, dealt with or
affected with the sanction of either:
(a) a consent in writing signed by all holders of the issued shares
of all classes or shares; or
(b) a resolution passed at a separate general meeting of the holders
of the issued shares of all classes of shares by a majority of
not less than three-quarters (3/4) of the holders of all classes
of shares who are present in person or represented by proxy. To
such general meeting all or the provisions of the Company's
Articles relating in any manner to general meetings or to the
proceedings thereat or to the rights of members at or in
connection therewith shall mutatis mutandis apply.
2.7.7 The holders of the Class "D" Redeemable Non-Voting Preferred
Shares shall not have any voting rights for any purpose
27.8 The directors of the Company may in their discretion declare
dividends on either the Class "A" Voting Common Shares, Class "B" Voting
Common Shares, Class "C" Non-Voting Common Shares, Class "D" Redeemable
Non-Voting Preferred Shares, to the exclusion of the other class or classes of
shares provided only that dividends shall not be declared and paid on the
Class "A" Voting Common Shares and Class "D" Voting Common Shares and the
Class "C" Non-Voting Common Shares if the declaration and payment of such a
dividend would, in the opinion of the directors, render the Company unable to
redeem the then Issued Class "D" Redeemable Non-Voting Preferred Shares at
their redemption price of $10.00 per share plus any dividends declared thereon
and remaining unpaid.
27.9 The holders of the Class 'U" Redeemable Non-Voting
<PAGE>
Preferred Shares as such shall not be entitled to any dividends thereon
unless and until the directors shall have determined to declare and pay
dividends upon and in respect of such shares and, in that event, the holders of
the Class "D" Redeemable Non-Voting Preferred Shares shall be entitled to
payment of dividends out of moneys of the Company properly applicable to the
payment of dividends, such dividends as may be determined by the directors of
the Company, payable at such time and at such place as the directors may
determine.
27.10 The Class "D" Redeemable Non-Voting Preferred Shares shall rank,
both as regards dividends and return or capital, in priority to all other
shares of the Company but shall not confer any further right to participate in
profits or assets.
27.11 The holders of the Class "D" Redeemable Non-Voting Preferred
Shares shall have the right at any time to demand the Company redeem, in whole
or in part, their ho1dings of the Class "D" Redeemable Non-Voting Preferred
Shares at a sum equal to $10.00 per share together with all dividends declared
thereon and unpaid.
27.12 The Company may, at its option, at any time redeem the whole or
any part of the Class "D" Redeemable Non-Voting Preferred Shares on payment for
each share to be redeemed of the sum of $10.00, together with all dividends
declared thereon and unpaid; in case a part only of then outstanding Class "D"
Redeemable Non-Voting Preferred Shares is at any time to be redeemed, the
shares so to be redeemed shall be selected by lot in such manner as the
directors in their discretion shall decide or, if the directors so determine,
may be redeemed pro rata. disregarding fractions and the directors may make
such adjustments as may be necessary to avoid the redemption of fractional
parts of shares.
27.13 In the event of the liquidation, dissolution or winding-up or
the Company, whether voluntary or involuntary, the holders or the Class "D"
Redeemable Non-Voting Preferred Shares shall be entitled to receive, before
any distribution of the assets of the Company among the holders of the Class
"A" Voting Common Shares and Class "B" Voting Common Shares and the Class "C"
Non-Voting Common Shares, the sum of $10.00 per share and any dividends
declared thereon and unpaid and no more.
<PAGE>
FULL NAME(S), ADDRESS(ES) AND OCCUPATION(S)
OF SUBSCRIBER(S)
-------------------------------------------
/s/Barry Neil Florence
-------------------------------
BARRY NEIL FLORENCE, Businessman ONE HUNDRED (100) CLASS "A"
652 Southwind Drive VOTING COMMON SHARES
Kelowna, B.C. VIW 3GI WITHOUT PAR VALUE
/s/Stanley Robert Walt
-------------------------------
STANLEY ROBERT WALT, Businessman ONE HUNDRED (100) CLASS "A"
1679 Mountain Avenue VOTING COMMON SHARES
Kelowna, B.C. VIY 7H7 WITHOUT PAR VALUE
TOTAL SHARES TAKEN: TWO HUNDRED (200) CLASS "A" VOTING COMMON SHARES
WITHOUT PAR VALUE
DATED At Kelowna, British Columbia, this 11 day of January , 1994.
WITNESS to the above signature(s):
/s/ R. Michael N. Haynes
-------------------------------------
R. Michael N. Haynes
Barrister & Solicitor
202 - 1433 St. Paul Street
Kelowna.B.C. V1Y 2E4
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 7
(subsidiary)
Dakota Mining and Exploration Ltd.
(formerly Eagle Ridge Manufacturing Ltd.
Amendment to the Articles of Incorporation
- --------------------------------------------------------------------------------
<PAGE>
NUMBER: 462447
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I Hereby Certify that
EAGLE RIDGE MANUFACTURING LTD.
has this day changed its name to
DAKOTA MINING & EXPLORATION LTD.
Issued under my hand at Victoria, British Columbia
on July 27, 1995
JOHN S. POWELL
Registrar of Companies
Exhibit 10.1
DAKOTA MINING & EXPLORATION LTD
MEETING OF BOARD OF DIRECTORS
May 5, 1998
THE MEETING WAS HELD pursuant to waiver of Notice. Directors present
were LARRY LOW and CAM DALGLEISH. The meeting was called for the purpose of
Dakota Mining & Exploration Ltd acquiring from 456786 B.C. Ltd, for $50,000
USD, a 100% interest in mineral claims as described below:
WAY I CLAIM:
The WAY 1 claim is a mineral claim located 23 kilometers north of
Vernon and 15 kilometers south southwest of Falkland in the Okanagan region of
south-central British Columbia.
The Way 1 mineral claim consists of 20 units in the Vernon Mining
Division (Tenure 259425) as shown in the attached map.
BANJO I CLAIM:
The Banjo I claim is a claim located 21 kilometers north of Vernon and
16 kilometers south southwest of Falkland in the Okanagan region of
south-central British Columbia.
The Banjo I mineral claim consists of 20 units in the Vernon Mining
Division (Tenure 340943) as shown in the attached map.
BANJO II CLAIM:
The Banjo II claim is a claim located 21 kilometers north of Vernon and
16 kilometers south southwest of Falkland in the Okanagan region of
south-central British Columbia.
The Banjo II mineral claim consists of 20 units in the Vernon Mining
Division (Tenure 340944) as shown in the attached map.
THE FOLLOWING ACTION WAS RESOLVED AND TAKEN: In exchange for a 100%
interest in the Way 1, Banjo I and Banjo II mineral claims, as described above,
the Officers are empowered and directed to request that the directors of
Canadian Northern Lites Inc. issue a $50,000 USD Promissory Note, Due on
Demand, from Canadian Northern Lites Inc. to 456786 B.C. Ltd, bearing interest
at 8%/annum calculated and compounded semi-annually.
The price and terms of this acquisition reflect a thorough review of
the consulting report entitled "Summary Report On The Opal Occurrence Within
The Ewer -Klinker Claims, British Columbia, Canada, by Dr. Robert Coenraads,
which became available in May 1998, to the new directors of Dakota Mining &
Exploration Ltd. and of Canadian Northern Lites Inc. Dr. Coenraads report
concluded that there was limited evidence of the presence of precious opal on
the Ewer and Klinker properties. The price and terms also reflect the discovery
by the new directors in May, 1998 of the lack of a workable business
relationship with the Operator of the Ewer-Klinker properties.
THERE BEING NO FURTHER BUSINESS, the meeting was adjourned, and the
Secretary directed to prepare written minutes of the Meeting and obtain the
signatures thereto of the Directors present.
THE UNDERSIGNED DIRECTORS hereby Acknowledge or Waive Notice of this
Meeting and Approve the foregoing Minutes of the Board.
/S/ Larry Low /S/ Cam Dalgleish
----------------------------- -----------------------------
LARRY LOW CAM DALGLEISH
DIRECTOR DIRECTOR
Exhibit 10.2
456786 B.C. Ltd
2888 W. 3 1 " Avenue
Vancouver, B.C.
V6L2A2
May 5, 1998
Dakota Mining & Exploration Ltd.
Suite U-13, 601 W. Broadway
Vancouver, B.C.
V5Z 4C2
Dear Sirs:
Re: Sale Of Mineral Properties to Dakota Mining & Exploration Ltd.
456786 B.C. Ltd. a company duly incorporated in the Province of British
Columbia, Canada, and having its registered office at 2888 W. 3 1 " Avenue,
Vancouver, British Columbia, V6L 2A2 ("the Offeror") owns mineral properties
("the Vernon Properties") described in Schedule "A" attached, being mineral
claims adjacent to, or in close proximity to the Klinker and Ewer mineral
properties of Dakota Mining and Exploration Ltd. ("the Purchaser"), a
wholly-owned subsidiary of Canadian Northern Lites Inc.
The Offeror hereby offers to sell the "Vernon Properties" to the Purchaser on
the following terms:
1. A total purchase price of $50,000.00 U.S. payable as follows:
$ 50,000 USD by way of the issue by Canadian Northern Lites Inc. of a $50,000
USD Promissory Note in favor of -456786 B.C. Ltd.
2. Upon receipt by the Offeror of a Directors' Resolution from the Purchaser to
have Canadian Northern Lites Inc. issue the Offeror a $50,000 Promissory Note,
with interest @ 8%/annum calculated and compounded semi-annually, the Offeror
is to deliver to the Purchaser a 100% undivided interest in the Way 1, Banjo I
and Banjo 11 mineral claims, as described in attached Exhibit A.
The Offeror represents and warrants:
(a) that it owns and has the authority and capacity to enter into this
Agreement;
(b) that the Offeror remains in possession of a 100% undivided interest, free
and clear of any liens or encumbrances, in mineral claims north-west of Vernon,
B.C., as described in Schedule "A", and furthermore that these claims are in
good standing with B.C. Mines and Minerals.
<PAGE>
Page 2
4. The transaction of purchase and sale contemplated hereby will close on May
5, 1998 (the "Closing Date").
5. Time is of the essence of this Agreement.
6. This agreement shall be governed by British Columbia law.
If you agree with the contents of this letter agreement, please sign one copy
of the same; return to the Offeror; and retain the deposit herewith.
Yours truly
/s/T. G. Cook
President
456786 B.C. Ltd.
<PAGE>
Page 3
Accepted this 5th day of May, 1998
Dakota Mining & Exploration Ltd.
/s/Cam Dalgliesh
----------------
Cam Dalgliesh, Secretary & Director, Dakota Mining & Exploration Ltd.
Canadian Northern Lites Inc.
/s/Cam Dalgliesh
----------------
Cam Dalgliesh, Secretary & Director, Canadian Northern Lites Inc.
<PAGE>
Page 4
SCHEDULE "XI
(forming part and parcel of an Agreement dated May 5, 1998 between 456786 B.C.
Ltd. ("the Offeror"); and Dakota Mining & Exploration Ltd. (" the Purchaser ")
and Canadian Northern Lites Inc.
The Vernon Properties being sold to Dakota Mining & Exploration Ltd. are
described as follows:
Property 1.
The Way I Mineral Claim: consists of the following mineral claim, located
within the Vernon Mining District:
Claim Name: WAY I
Tenure No.: 295425
Units: 20
Record Date: June 14, 1996
parcel of this Schedule "A." and forming part and
Claim Location: as per attached map entitled "CLAIM LOCATION"
Property ?.
The Banjo 1 Mineral Claim: consists of the fOllOwing mineral claim, located
within the Vernon Mining District:
Claim Name: BANJO I
Tenure No.: 340943
Units: 20
Record Date: October 15, 1995
Claim Location: as per attached map entitled "CLAIM LOCATION" and forming part
and parcel of this Schedule "A."
<PAGE>
Page 5
Property 3.
The Banjo 2 Mineral Claim: consists of the following mineral claim, located
within the Vernon Mining District:
Claim Name: BANJO 2
Tenure No.: 340944
Units: 20
Record Date: October 15, 1995
Claim Location: as per attached map entitled "CLAIM LOCATION" and forming part
and parcel of this Schedule "A."
Exhibit 10.3
DECLARATION OF TRUST
Know All Men By These Presents that Terry G. Cook of Suite U-13, 601 W.
Broadway, Vancouver, B.C.V5Z-4C2, does hereby declare that title to the mineral
claims shown below are held in the name of Terry G. Cook but that all these
claims are held in trust for Dakota Mining & Exploration Ltd of Suite U-13 -
601-W. Broadway, Vancouver, B.C. V5Z-4C2.The claims are:
WAY I CLAIM:
The WAY 1 claim is a mineral claim located 23 kilometers north of Vernon
and 15 kilometers south southwest of Falkland in the Okanagan region of
south-central British Columbia.
The Way 1 mineral claim consists of 20 units in the Vernon Mining Division
(Tenure # 365255).
BANJO I CLAIM:
The Banjo I claim is a claim located 21 kilometers north of Vernon and 16
kilometers south southwest of Falkland in the Okanagan region of south-central
British Columbia.
The Banjo I mineral claim consists of 20 units in the Vernon Mining
Division (Tenure # 366334).
BANJO II CLAIM:
The Banjo II claim is a claim located 21 kilometers north of Vernon and 16
kilometers south southwest of Falkland in the Okanagan region of south-central
British Columbia.
The Banjo II mineral claim consists of 20 units in the Vernon Mining
Division (Tenure # 366335).
Terry G. Cook has no interest whatsoever in the said mineral claims
other than that of a bare trustee and that any distribution whether income or
capital and whether in cash or otherwise, and any rights in respect of the said
mineral claims do not in any manner belong to Terry G. Cook, but are the
property of the said Dakota Mining & Exploration Ltd.
Terry G. Cook does hereby declare that the said shares are held in the
name of Terry G. Cook solely as a matter of convenience.
DATED for reference the 18th day of Oct 1998.
<PAGE>
SIGNED, SEALED and DELIVERED
/s/ Terry G. Cook
------------------------------
By Terry G. Cook in Terry G. Cook
the presence of:
/s/ Michael Dufton
------------------------------
Witness
Michael Dufton
Exhibit 10.4
NATURE OF INTEREST: CHARGE JUDGMENT) HEREWITH FEE OF $25.00
Legal Description:
PID: 009-484-353 (as to an undivide 1/2 Judgement Creditor's name and
interest of DAVID DEERAN RAMBARAN) address:
Lot 74, Section 14, Township 39, NWD,
Plan 76567 TERENCE GORDON COOK
2888 West 31st Avenue
Vancouver, B.C.
V6L 2A2
Judgment Debtor's name, address Full name, address, telephone
and occupation number of person presenting
application:
DEERAN RAMBARAN aka PETER N. CRAWFORD
DAVID RAMBRAN 5670 Yew Street
2941 Delahaye Drive Vancouver, B.C.
Coquitlam, B.C. V6M 3Y# #266-7174
V3B 7E8
Businessman
-------------------------------
Signature of Applicant or
Solicitor or Authorized Agent
For Land Title
Office Use Only
No. C976727
VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
BETWEEN: TERENCE GORDON COOK
judgment creditor
AND: CANADIAN NORTHERN LITES INC.
DEERAN RAMBARAN aka DAVID RAMBARAN
judgment debtors
CERTIFICATE OF JUDGMENT
I, the undersigned, Registrar of the said Court, do hereby certify that on
the 10th day of March, 1998 the above mentioned Terence Gordon cook obtained a
Judgment against Deeran Rambaran aka David Rambaran, a judgment debtor in the
above-mentioned action, for the sum of $20,000.00, and $2,909.59 interest, and
$649.69 costs, making together the sum of $23,559.28.
AS WITNESS my hand and the Seal of the said Court, this 12 day of March, 1998.
/s/
-------------------------------
District Registrar
<PAGE>
No. C976727
VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
BETWEEN:
TERENCE GORDON COOK
PLAINTIFF
AND:
CANADIAN NORTHERN LITES INC.
and DEERAN RAMBARAN aka DAVID RAMBARAN
aka DAVID DEERAN RAMBARAN
DEFENDANTS
===========================================
AMENDED
WRIT OF SUMMONS
===========================================
JOHN RICHTER of
MUNRO & CRAWFORD
Barristers and Solicitors
5670 Yew Street
Vancouver, B.C.
V6M 3Y#
Telephone: (604)-#266-7174
Fax: (604)-#266-7998
<PAGE>
Dated: January 27, 1998
----------------------- -------------------------------
Plaintiff [or solicitor]
<PAGE>
2
IF YOU INTEND TO DEFEND this action, or if you have a set off or
counterclaim which you wish to have taken into account at the trial, YOU MUST
GIVE NOTICE of your attention by filing a form entitled "Appearance" in the
above Registry of this Court within the Time for Appearance endorsed hereon and
YOU MUST ALSO DELIVER a copy of the "Appearance" to the plaintiff's address for
delivery, which is set out in this writ.
YOU OR YOUR SOLICITOR may file the "Appearance". You may obtain a form of
"Appearance" at the Registry.
IF YOU FAIL to file the "Appearance" within the proper Time for Appearance,
JUDGMENT MAY BE TAKEN AGAINST YOU without further notice.
TIME FOR APPEARANCE
Where this Writ is served on a person in British Columbia, the time for
appearance by that person is 7 days from the service (not including the date of
service).
Where this Writ is served on a person outside British Columbia, the time for
appearance by that person, after service, shall be 21 days in the case of a
person residing anywhere within Canada, 28 days in the case of person residing
in the United States of America, and 42 days in the case of a person residing
elsewhere.
[or where the time for appearance has been set by order of the court, within
that time.]
1. The address of the registry is: 800 Smithe Street, Vancouver, B.C., V6Z 2E1
2. The ADDRESS FOR DELIVERY is: Munro & Crawford, 5670 Yew Street, Vancouver,
B.C., V6M 3Y3
Fax number for delivery (:if any): 604-266-7998
3. The name and office address of the plaintiff's solicitor is: Peter N.
Crawford at Munro & Crawford, 5670 Yew Street, Vancouver, B.C., V6M 3Y3
The plaintiff's claim is:
The Plaintiff's claim is against the Corporate Defendant for the return of
$20,000.00 advanced by the Plaintiff to the Corporate Defendant on or about May
15, 1997, together with contact interest at the rate of 18% per annum compounded
semi-annually, pursuant to the Promissory Note issued to secure the payment of
the monies.
The Plaintiff's claim is against the Personal Defendant by virtue of a Personal
Guarantee granted by the Personal Defendant to the Plaintiff on or about May 25,
1997.
<PAGE>
AMENDED PURSUANT TO RULE 24(1)(a)
ORIGINAL FILED DECEMBER 17, 1887
No. C976727
VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
BETWEEN:
TERENCE GORDON COOK
PLAINTIFF
AND:
CANADIAN NORTHERN LITES INC.
and DEERAN RAMBARAN aka DAVID RAMBARAN
aka DAVID DEERAN RAMBARAN
DEFENDANTS
AMENDED WRIT OF SUMMONS
Plaintiff: Terrence Gordon Cook
2888 West 31st Avenue
Vancouver, B.C.
V6L 2A2
Defendant(s): Canadian Northern Lites Inc. Deeran Rambaran aka
#308 - 2963 Glen Drive David Rambaran aka
Coquitlam, B.C. David Deeran Rambaran
V3B 2P7 2911 Delahaye Drive
Coquitlam, B.C.
V3B 7E8
ELIZABETH THE SECOND, by the Grace of God, the United Kingdom, Canada
and Her other Realms and Territories, Queen, Head of the Commonwheath,
Defender of the Faith.
To the defendant(s): Canadian Northern Lites Inc. and
Deeran Rambaran aka David Rambaran
aka David Deeran Rambaran
TAKE NOTICE that this action has been commenced against you by
the plaintiff for the claim(s) set out this writ.
No. C976727
VANCOUVER REGISTRY
IN THE SUPREME COURT OF BRITISH COLUMBIA
BETWEEN:
TERENCE GORDON COOK
PLAINTIFF
AND:
CANADIAN NORTHERN LITES INC.
And DEERAN RAMBARAN aka
DAVID RAMBARAN aka
DAVID DEERAN RAMBARAN
DEFENDANTS
NOTICE OF DISCONTINUANCE
TAKE NOTICE that the PLAINTIFF, TERENCE GORDON COOK discontinues this
proceeding against CANADIAN NORTHERN LITES INC. and DEERAN RAMBARAN aka DAVID
RAMBARAN aka DAVID DEERAN RAMBARAN.
DATED at Vancouver, in the Province of British Columbia, this 195h day of
August, 1999.
/s/Terence Gordon Cook
--------------------------
TERENCE GORDON COOK
- --------------------------------------------------------------------------------
Exhibit 8
Opal Option to Purchase Agreement
April 10, 1996
and
Prospector's Agreement
October 1, 1993
- --------------------------------------------------------------------------------
<PAGE>
THIS AGREEMENT effective as of the 10th day of April, 1996 is made
BETWEEN;
OKANAGAN OPAL INC., a company duly incorporated under the laws of the
Province of British Columbia, having an office at 119 Campbell Avenue,
in the City of Revelstoke, British Columbia
(hereinafter referred to as "OOI")
OF THE FIRST PART
AND;
CANADIAN NORTHERN LITES INC., a company duly incorporated under the
laws of the State of Texas, in the United States of America and having
an office located at 219 Broadway, Suite 261, LAGUNA BEACH, CALIFORNIA
92651
(hereinafter referred to as "CANADIAN")
A. Okanagan Opal Inc., under and subject to the terms
<PAGE>
and conditions of the October 1, 1993 created Prospectors Agreement, has
acquired a legal and equitable 100% right, title and interest in and to the
Klinker and Ewer mineral claims located in the Vernon Mining Division of British
Columbia which constitute the Klinker Property as described in Schedule "A"
attached hereto ("the Property"), subject only to the obligations expressed
therein;
B. Canadian desires to acquire a sole and exclusive Option to Purchase the
Klinker Property from Okanagan Opal Inc. and is prepared to pay the full
purchase price demanded for the Klinker-Property by OOI, being $8,000,000.00 and
20% of outstanding shares of Canadian; however, Canadian wishes first to see
further development of the "opal deposit" and the related "opal business"
currently being developed by OOI; and if Canadian wishes, to have the
opportunity to see further exploration work conducted on the property in order
to further define the full economic potential of the opal deposits which occur
on the property prior to Canadian Exercising the Option to Purchase the Klinker
Property.
C. Therefore, in a Joint Letter of Intent signed January 7, 1996, between OOI
and BOB ZABA (Public Company) now known as "Canadian", the intent and integrity
of which will survive the signing of this agreement, insofar as may be required
for the interpretation only of the terms of this agreement, where the context of
the Joint Letter of Intent does not indicate a direct contradiction of the terms
of this agreement, Okanagan Opal Inc. has agreed to grant an option to Canadian
whereby Canadian can purchase all of OOI's interest in the Klinker Property in
accordance with and under the terms of this "Option to Purchase Agreement".
Canadian is prepared to make "Option Payments" and other payments and
commitments to OOI in order to maintain a sole and exclusive "Option to
Purchase" for the given period of time and under the terms and conditions as
hereinafter described.
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the terms,
conditions, covenants, representations, promises, warranties and agreements
hereinafter set forth and made in mutual consideration each to the other and in
reliance thereon; and in consideration of the sum of ten dollars ($10.00) each
to the other paid, the receipt of which is mutually acknowledged; and for other
good and valuable considerations hereinafter contained, the sufficiency of which
is mutually acknowledged and accepted, the parties agree as follows:
1.0 DEFINITIONS
1.1 For the purposes of this Agreement the following words and phrases shall
have the following meanings;
a) "Agreement" means this Option to Purchase Agreement, as the same may
be amended, supplemented or modified from time to time.
b) "Property" means those certain mineral claims which are listed and
shown in Schedule "A" annexed hereto.
c) "Option" means the option granted by OOI to Canadian to acquire a one
hundred percent (100%) right, title and interest from OOI in and to
the Property in accordance with specified terms and conditions of this
agreement and the Prospectors Agreement.
d) "Option Period" means the period during the term of this Agreement
from Commencement Date hereof up to and including the date of
"Exercise of the Option", or the earlier termination of this
Agreement.
e) "Commencement Date" is the date first appearing above.
<PAGE>
f) "Option Term" is the period of time commencing on the Commencement
Date and ending January 15, 1998
g) "Termination Date" is January 15, 1998, or as otherwise expressly
provided for herein.
h) "Exercise of Option to Purchase" means that Canadian having been
provided ample opportunity prior to the Termination Date to assess the
Property and the related "Opal Business" in order to determine and
resolve its interest in and desire to purchase the Klinker Property;
will, prior to the expiry of the Option Term, make the "Initial
Purchase Payment" to OOI and will declare in writing its "Intent to
Purchase" the Klinker Property in order to "Exercise the Option to
Purchase" a full 100% interest in the property in accordance with the
terms and conditions of the Agreement, including the obligation to
complete OOI's obligations under the Prospector's Agreement.
i) "Payment(s), means shares or cash payable to OOI under the terms and
conditions of this Agreement.
j) "Shares" means common shares, share options, share purchase warrants
or other stock instruments which might be presently authorized or
imminently contemplated for acquisition, allocation or distribution to
the Company, Canadian.
k) "Minerals" means those substances defined as minerals under the
Mineral Act of British Columbia which includes all metallic and
non-metallic minerals; and for the purposes hereof specifically
<PAGE>
includes "Precious Opal" and the rocks in which they are hosted and
any associated minerals which might be of economic value; and includes
those rocks which occur on the claims which might be required for use
in the mining, concentrating and disposal of waste or tailings related
to production from the property; or, rocks and minerals which
themselves may have a market value as an Industrial Mineral as
interpreted under the Mineral Act.
l) "Exploration and Development" means all direct or indirect
examination, interpretation and analysis conducted on Canadian's
behalf and intended to determine and fully evaluate the economic
potential of any mineral deposits found on the Property and the
preparation of those deposits for production.
M) "Exploration and Development Expenditures" means all expenses incurred
in direct connection with conducting pre-approved, budgeted
exploration and development programs conducted on the Opal Project at
the request of and deemed to be for the purpose of allowing Canadian
to assess the Opal Business.
n) "Exploration and Development Programs" means plans, including budgets,
for every kind of work done on or in respect of the Opal Project by or
under the direction of OOI for assessment of the
<PAGE>
Opal Business for the purposes of Canadian and without limiting the
generality of the foregoing, includes geophysical, geochemical,
geological surveys and such other physical and technical fieldwork
studies and mapping that are necessary to explore the Property,
including drilling, surface and underground exploration and
development, designing, examining, investigating, interpreting all
information and data gathered related to the evaluation of the
economic potential of the Property and the Opal Business and all other
work usually considered to be development and evaluation work
conducted for the purpose of determining the economic viability of the
Opal Business.
o) "Production" or "Mining" means the act by the parties hereto of
recovering marketable minerals through excavation and processing
activities conducted on the Property.
p) "Operator" means OOI or its appointed representative under this
Agreement.
q) "Earned Interest" or "Retained Interest" means a percentage ownership
in the Property as may be deemed to be held from time to time by the
parties hereto under the terms of this Agreement; with the
understanding that these Interests are "Participating Interest" as
defined below.
r) "Participating Interest" except as otherwise provided herein, means
that the party owning such interest must contribute its proportionate
share of the opal business costs in order to maintain such interest
and that party would be subjected to dilution of its deemed interest
in the property for non-participation on those costs.
<PAGE>
s) "Dilution" means to have ones earned or retained interest reduced in
accordance with a dilution formula to be adopted from a dilution
clause generally accepted in the industry.
t) "Joint Letter of Intent" means that document jointly signed on January
7, 1996 which outlines the intent upon which this "Option to Purchase
Agreement" has been based; a copy of which is included herein as
Schedule B.
u) "Prospectors Agreement" means that Agreement between the original
prospectors and Okanagan Opal Inc. signed on October 1, 1993; a copy
of which is included herein as Schedule C, as amended by the document
included herein as Schedule D.
v) "Opal Business" means the business of mining, sorting, concentrating,
grading, cutting, processing and mounting opal from the Klinker
Property to create opal product and further means the business of
selling rough opal or opal product at the wholesale and/or retail
level as is deemed appropriate from time to time; which is being
developed by and for the benefit of the parties hereto. Under this
Agreement Canadian does not acquire an interest in the Company
"Okanagan Opal Inc." but will participate in the Opal Business which
OOI is developing except as expressly described in paragraph 6.7.
w) "Net Profits" and "Net profit after taxes" means the residual amount
of the gross revenue generated by the opal business which remains
after the sale of opal product produced from the Klinker Property
after all operating costs, depreciation, capitalized exploration and
development costs and
<PAGE>
applicable taxes, including corporate income taxes, have been
deducted.
1.2 Included Words: This Agreement shall read with such changes in gender or
number as the context shall require.
1.3 Headings: The headings to the articles, paragraphs parts or clauses of the
Agreement are inserted for convenience only and shall not affect the
construction or intent hereof.
1.4 References: Unless otherwise stated, a reference herein to a numbered or
lettered article, paragraph, clause or schedule refers to the specific item
bearing that number or letter in this Agreement. A reference to "this
Agreement", "hereof", "hereunder", "herein" or words of similar meaning, refer
specifically and exclusively to this Agreement including the schedules hereto,
together with any amendments thereof.
1.5 Schedules: the following schedules are incorporated into this Agreement by
reference;
Schedule Description
-------- -----------
A Property Description
B Joint Letter of Intent
C Prospectors Agreement
D Amendment to the Prospectors' Agreement
<PAGE>
1.6 Severability: If any provision of this Agreement is or shall become illegal,
invalid, or unenforceable, in whole or in part, the remaining provisions shall
nevertheless be and shall remain valid and subsisting and the said remaining
provisions shall be interpreted considering the original intent of the whole
Agreement and will be construed as if this Agreement had been executed without
the illegal, invalid or unenforceable portion.
2.0 REPRESENTATIONS AND WARRANTIES
2.1 OOI makes representation and warrants to Canadian that the mineral claims
comprising the Property are in good standing as of the date hereof; and that-OOI
is the legal and beneficial owner of the Property having complied with the terms
and conditions contained in the Prospectors Agreement; that OOI has the right to
enter into this Agreement and to dispose of the Property; that OOI has good
title to the Property; and that the Property is clear of encumbrances, save the
royalty requirement under the Prospectors Agreement and the Property is clear of
adverse claims or challenges.
2.2 Canadian has or shall have at the requisite times the financial resources to
discharge their obligations in respect to this Agreement. It is intended by the
parties that Public funds raised by Canadian prior to exercise of this Option to
Purchase shall be used primarily for conducting the required engineering or
exploratory programs to determine viability of exercise of this option and
secondarily for day to day operations of Canadian and for accumulating funds for
purchase of the Klinker Property.
2.3 The parties will diligently and in good faith perform their duties and
obligations under this Agreement in keeping with good industry standards and in
the event of a party conducting or supervising Exploration and Development, then
<PAGE>
it shall conduct or supervise the same in a careful, diligent, efficient and
professional manner, shall file eligible work for assessment credits with the
appropriate authorities as required to maintain the Property in good standing
under the terms and conditions of the Agreement.
2.4 OOI will release to Canadian and the Operator copies of all available data
and information with respect to the Property including copies of all reports,
maps, analytical/mineralogical results and other technical data as it becomes
available from time to time.
2.5 OOI will provide assistance to Canadian in the promotion of Canadian as a
publicly traded company, and will give all reasonable truthful declarations and
data and estimates as may be required for that purpose.
3.0 OPTION CONSIDERATIONS
3.1 Canadian will make payments to OOI as provided for below. The continuation
of the "Option to Purchase Agreement" will be subject to the timely receipt of
all of the "Option Payments" listed below:
a) Interim Option Payment of $10,000.00 due on or before January 17, 1996;
b) Option Payment of $20,000.00 due on or before March 1, 1996;
c) Option Payment of $30,000.00 due on or before March 31, 1996;
d) Option Payment of $100,000.00 due on or before April 30, 1996;
e) Option Payment of $400,000.00 due on or before July 31, 1996;
the option payments so described shall not constitute advances paid toward the
purchase price, and more specifically, shall not constitute part payment of the
payment described in paragraph 4.2(a).
<PAGE>
3.2 In addition to the "Option Payments" and the other terms and conditions
contained in this agreement, Canadian will also be required to make the "stock
payment" outlined below on or before two days following execution of this
agreement.
i) On signing and in consideration for signing, this agreement, Canadian
will transfer to OOI at Nominal Value, that number of shares which
represents a full undivided 20% portion of the outstanding issued or
committed shares of Canadian representing a full 20% interest in the
shares of the company after any restructuring or dilution of Canadian
stock, at present represented at not less than 2,000,000 shares out of
total issued shares of 10,000,000;
3.3 Each payment as set out in paragraph 3.1 shall be considered a
non-refundable deposit; however, having paid the full cash and share payments
due by July 31, 1996 Canadian will be deemed to have earned a 20% participating
interest in and to the Klinker Property and will be eligible to receive a 20%
interest in net profits after taxes from the "Opal Business" after the
commencement date upon execution of this agreement; provided full and final
payment of those cash and share payments due on or before July 31, 1996 (see
Items 3.1 and 3.2 above) are received by OOI.
<PAGE>
3.4 OOI as operator and utilizing the Option Payment funds provided under
Paragraph 3.1 will pursue the development of its vertically integrated "Opal
Business" plan in regards to Mining and will pursue product and market
development during the Option Period. Gross revenue generated during the Option
Period will firstly be allocated to the costs associated with those portions of
the "Opal Business" which generated the revenue with any residual revenue being
declared as Net Profits.
3.5 Should the parties hereto, in the interests of speedy completion of the
development of the property decide that additional exploration work, product or
market development, mine expansion, production expansion or other variation or
changes to the OOI "Business Plan" is warranted, the costs of which exceed the
$560,000.00 paid pursuant to paragraph 4.2, then Canadian will be required, with
reasonable notice given under the terms and conditions of this agreement, to
finance these additional costs, and Canadian will receive no further interest in
the project for having provided the additional financing.
3.6 Canadian, at Canadian's sole expense and with OOI as operator; will have the
period of time from commencement of this agreement to January 15, 1998 to
conduct Exploration and Development Programs to assist Canadian in assessing the
overall potential of the Opal Business and to determine whether Canadian plans
to exercise its Option to Purchase.
3.7 During the Option Period OOI or its appointed representative will be the
operator. In consultation with a Consulting Geological /Mining Engineer,
mutually acceptable to Canadian and OOI, the Operator shall determine the
budgets and the details for the Exploration and Development Programs on the
Property which Programs will take into consideration the overall size of the
Property and the diversity of the Opal Business so as to examine all reasonable
exploration targets and business aspects.
<PAGE>
3.8 Canadian having fully met or completed its commitments under Section 3.1 and
3.2 to acquire a 20% participating interest in the property would have until
January 15, 1998 the sole right and discretion to, in writing, terminate its
option to acquire any further interest in the property, whereupon this agreement
would terminate and a Joint Venture as evidenced pursuant to paragraphs 3.9 and
3.10 would be created with interest at 80% to OOI and 20% to Canadian.
3.9 Canadian, upon failure to Exercise its Option to Purchase on or before
January 15, 1998, under the terms and conditions-herein outlined; will result in
termination of the agreement. Thereafter an 80% OOI/20% Canadian Joint Venture
would be formed with both parties earned interest, being a participating
interest. OOI would remain as the operator and managing venturer under any joint
venture and said joint venture would be structured in accordance with acceptable
industry standards, including the formation of a management committee.
3.10 Under said 80% OOI/20% Canadian Joint Venture either parties failure to
provide their percentage portion of operating funds to advance the property
development or the opal business, based upon recommendation made by the mutually
appointed independent consultant, or the management committee, will signify an
act of non-participation and will result in the non-participating party being
declared delinquent for failure to perform its financial obligations under the
joint venture. The delinquent party's earned percentage interest in the property
will then be subject to dilution by way of an industry standard "dilution
formula" for non-participations, such standard to be determined in accordance
with paragraph 9.8.
3.11 The parties hereto agree that Canadian will ensure that the board of
directors will consist of not less than 5 individuals and that OOI will have the
right to appoint 2 directors to the board of Canadian.
<PAGE>
3.12 In the event that a Joint Venturers interest shall fall at or below 3%, the
Venturer shall have no right to further participate in the "Opal Business" or
Klinker Property, and shall have been deemed to have transferred its remaining
interest in the Joint Venture and the property to the other Venturer, and the
Joint Venture shall be thereupon deemed to have ceased and dissolved.
3.13 After exercise and completion of "Purchase Obligations", any assets which
may have accrued to OOI during the-period of this Agreement and are not
transferred pursuant to this agreement, if jointly owned, shall be transferred
at fair market value unless otherwise agreed between the parties.
4.0 EXERCISE OF OPTION TO PURCHASE
4.1 On or before January 15, 1998, Canadian having conducted all necessary and
sufficient exploration and development programs, and having concluded all
necessary studies, and having used good and sound business processes and
practices to satisfy itself of the Klinker Property and Opal Business potential
must make a decision whether or not to "Exercise" its "Option to Purchase". Upon
Canadian having made the decision to "Exercise the Option to Purchase", Canadian
will give notice in writing to OOI of its intent to Purchase the Klinker
Property under the following terms and conditions and the general provisions of
this Agreement.
4.2 Therefore, on or before January 15, 1998, having made the decision and in
writing the commitment to Exercise the Option to Purchase the Klinker Property;
Canadian will be obligated to complete the property purchase subject to
termination of the agreement as hereinafter provided, together with such sums or
"interest reductions"
<PAGE>
as are set out hereafter which the parties agree are to be considered a true
pre-estimation of costs occasioned by noncompliance, for failure to complete the
purchase under the terms and conditions set forth herein. Canadian, having
exercised it option to purchase would be required to make the following mutually
agreed to and accepted "Purchase Payments" which would be due and payable in
cash to OOI as follows:
a) $1,600,000 due and payable on or before January 15, 1998 to earn an
additional 16% participating interest in the Klinker Property with
said, additional interest being only a deemed interest subject to a
"interest reduction" reducing this additional interest from 16% to an
earned 5% participating interest in the "Opal Business" from the
Klinker Property if the full purchase price is not paid as outlined
herein. Canadian, would, having commenced the purchase of the Klinker
Property, be eligible to receive 36% of the net profits after taxes
from the "Opal Business" as conducted by the operator provided the
next payment towards the full purchase price is received by January
15, 1999 and provided the full purchase price of $8,000,000 is paid as
required herein;
b) $1,600,000 due and payable on or before January 15, 1999 to earn an
additional 16% participating interest in the Klinker Property with
said additional interest being only a deemed interest subject to a
"interest reduction" reducing this additional interest from 16% to an
earned 5% participating interest in the "Opal Business" from the
Klinker Property if the full purchase price is
<PAGE>
not paid as outlined herein. Canadian would, having continued the
purchase of the Klinker Property, be eligible to receive 52% of the
net profits after taxes from the "Opal Business" as conducted by the
operator provided the next payment towards the full purchase price is
received by January 15, 2000 and provided the full purchase price of
$8,000,000 is paid as required herein;
c) $1,600,000 due and payable on or before January 15, 2000 to earn an
additional 16% participating interest in the Klinker Property with
said additional interest being only a deemed interest subject to a
"interest reduction" reducing this additional interest from 16% to an
earned 5% participating interest in the "Opal Business" from the
Klinker Property if the full purchase price is not paid as outlined
herein. Canadian would, having continued the purchase of the Klinker
Property, be eligible to receive 68% of the net profits after taxes
from the "Opal Business" as conducted by the operator provided the
nest payment towards the full purchase price is received by January
15, 2001, and provided the full purchase price of $8,000,000 is paid
as required herein.
d) $1,600,000 due and payable on or before January 15, 2001 to earn an
additional 16% participating interest in the Klinker Property with
said additional interest being only a deemed interest subject to a
"interest reduction" reducing this additional interest from 16% to an
earned 5% participating interest in the "Opal Business" from the
Klinker Property if the full purchase price is
<PAGE>
not paid as outlined herein. Canadian would, having continued the
purchase of the Klinker Property, be eligible to receive 84% of the
net profits after taxes from the "Opal Business" as conducted by the
operator provided the next payment towards the full purchase price is
received by January 15, 2002 and provided the full purchase price of
$8,000,000 is paid as required herein.
e) The final payment of $1,600,000; for a cumulative purchase payment of
$8,000,000 due and payable on or before January 15, 2002, would earn
Canadian the final 16% interest in the Klinker Property; would remove
the subject to "interest reduction" under Items 4.1(a) to (d) above
and would trigger the conversion of all of the participating interests
referred to above to fully earned interests in the Klinker Property.
The payment of the full $8,000,000 purchase price would therefore earn
Canadian a 100% right, title and interest to the Klinker Property
subject to Prospectors Agreement.
4.3 It is understood and agreed by the parties hereto that, considering the 20%
participating interest in the Klinker Property earned for the transfer of 20% of
Canadian's shares and considering the cash option payments made under Section 3
above; Canadian can only earn up to an additional 20% interest in and to the
Klinker Property to hold only a maximum of a 40% participating interest in the
"Opal Business" from the Klinker Property if Canadian does not fully exercise
its Option to Purchase by paying the full Purchase Price of $8,000,000 on or
before January 15, 2002 Canadian would have the option, at its sole discretion,
accelerate the purchase of the Klinker Property in order more quickly purchase
the 100% interest in the Klinker
<PAGE>
Property and to then be eligible to earn the full net profits from the full
"Opal Business" as it relates to the Klinker Property. Once the payment schedule
is advanced all subsequent payments must be equally advanced.
4.4 Canadian, upon raising public funds for the express purpose of purchasing
the Klinker Property, after those expenses listed in paragraph 2.2 would be
required to have said funds placed into a trust fund with OOI's designated
lawyer, or such party as may be mutually agreed in writing by both parties, to
be designated and held exclusively for that purpose.
4.5 After Canadian has Exercised its option to Purchase the costs of conducting
the "Opal Business" will be proportionately funded by the parties hereto out of
Gross revenue generated by the "Opal Business". The scope of the "Opal Business"
and expansion thereof will be determined by the cash flow generated by the "Opal
Business". The purchase payments to be received by OOI under Section 4.2 are not
expected to contribute to the "Opal Business" operating costs.
4.6 Having Exercised its Option to Purchase the Klinker Property under 4.2 it is
agreed by the Prospectors and OOI that Canadian will have also assumed the
responsibility to pay the royalties due to the Prospectors under the Prospectors
Agreement. Canadian may elect to do this in one of the following alternative
ways;
a) By making annual "advanced royalty payments" to the Prospectors, at
the same time as the annual purchase payments are made to OOI under
4.2 above, a total of five annual payments each in the sum of
$100,000.00 cash and 30,000 free trading shares of the Company
Canadian for a total "advance royalty buy-out" of $500,000.00 cash and
150,000 free trading shares of the Company, Canadian, or,
<PAGE>
b) By making a one time "advance royalty payment" of $750,000.00 cash and
200,000 free trading shares of the Company, Canadian to the
Prospectors at the time the final payment is made towards the purchase
price under 4.2(e) above.
c) By electing to accept and meet any and all of the remaining terms and
conditions under the Prospectors Agreement at such time as Canadian
earns a full 100% interest in the property under 4.2 above.
in the interim period, prior to Canadian having exercised its rights hereunder
to Purchase the Property and to pay out the Prospectors Royalties in advance,
and particularly during the period prior to 1998, it will be OOI's on going
responsibility to make royalty payments to the prospectors in accordance with
the terms and conditions of the Prospectors Agreement. This will be considered
an operating expense and Prospectors Royalties would continue as an operating
expense upon Canadian's election of alternate 4.6(c) above until all royalty
obligations are meet (see iii below).
i) In the event Canadian elects to make five advance royalty payments as
a pay out under 4.6(a) above then these cash and stock payments will
be made in lieu of royalty payments from production.
ii) In the event Canadian elects to make a single advance royalty payment
as a payout under 4.6(b) above then regular royalty payments will be
made from production as an ongoing operating expense in accordance
with the Prospectors Agreement. It is understood and accepted by
Canadian and OOI that this could result in the prospectors receiving
cash and royalty payments which may exceed the original cash payable
under the Prospectors Agreement.
<PAGE>
iii) In the event Canadian elects to accept and take on OOI's royalty
responsibilities under the Prospectors Agreement under 4.6(c) above
then Canadian will continue to pay royalties on production under the
terms and conditions of the Prospectors Agreement after having earned
its 100% interest in the property which would be subject to the
payment of royalties until the full amount of the royalty due is paid;
and Canadian will, upon making the final royalty payments from
production, arrange to transfer 300,000 shares of Canadian to the
prospectors so as to meet the obligation which Canadian assumed from
OOI under the terms and conditions of this agreement. Having completed
these payments to the Prospectors, Canadian will be deemed to have met
all of the remaining terms and conditions and requirements including
any and all unpaid Prospectors Royalties relating to the Prospectors
Agreement.
In the event that Canadian fails to complete the property purchase as outlined
in 4.2 above, any and all cash and shares received by the Prospectors as advance
royalty payments would be credited as outlined below; and would be considered as
advances towards the full royalty amounts payable under the Prospectors
Agreement. Thereafter OOI would re-assume the remaining royalty and share
payments due under the terms of the Prospectors Agreement and the royalty
payments would once again become an operating expense until the full amount is
paid out.
- Cash payments made as advance royalty payments will reduce the total
cash amount due dollar for dollar
- share payments made under 4.6 (a) and (b) will be credited on a two
for one basis (ie each share received from Canadian as part of an
advance royalty payment will reduce OOI's ongoing obligation by two
shares).
<PAGE>
Canadian will not be allowed to buy-out the Prospectors Royalties in a manner
disproportionate with or in preference to its paid interest earned in the
property from time to time under 4.2 above.
The Prospectors shall acknowledge adhesion to this amendment to the Prospectors
Agreement by signing acknowledgement and agreement to this paragraph 4.6 to be
affixed as Schedule "D" to this Agreement.
5.0 TRANSFER OF TITLE OF MINERAL CLAIMS
5.1 A full 20% participating interest in the Property will be deemed to have
been conveyed and transferred to Canadian effective immediately upon signing
this Agreement; subject only to the terms and conditions as outlined herein.
5.2 A further 5% participating interest in the Property will be deemed to have
been conveyed and transferred to Canadian effective immediately upon having made
each of the required Purchase Payments anticipated under Items 4.2(a) to (d)
above.
5.3 The final 60% participating interest in the Property will be deemed to have
been conveyed and transferred to Canadian effective immediately upon having made
the required final purchase payment anticipated under Item 4.2(e) above.
5.4 As previously outlined in Section 3.0, in the event Canadian provides
funding equal to a minimum of $560,000.00 on or before July 31, 1996 but does
not continue to exercise the option beyond that point; Canadian's earned
interest will be fixed at a maximum of a 20% participating interest level and
the option to Purchase will terminate. A Joint Venture would then be formed
under which the interests of
<PAGE>
both parties would be subject to dilution for nonparticipation. OOI would be the
designated operator of the Joint Venture. Budgets would be based on
recommendations made by a mutually designated consultant. Title to the property
would be registered proportionately in the names of the Joint Venture Partners
and would be managed and administered by OOI.
5.5 In the event Canadian fails to complete the purchase of the property after
having Exercised its Option to Purchase and after having made one or more
payments towards the ultimate purchase price as envisioned under Section 4.2
then Canadian's earned interest would be fixed at the maximum of a deemed earned
interest between 25% and 40% depending upon the number of payments made towards
the purchase price; and the Option to Purchase will terminate. The interest in
the Joint Venture would be established in accordance with the following formula;
Venturer's Interest =
Deemed Interest + Actual Contribution of Venturer Total Deemed Interest + Actual
Contribution by both Venturers
times 100
A Joint Venture Partnership would then be formed under which the interests of
both parties would be subject to dilution for non-participation. OOI would be
the designated operator of the Joint Venture. Budgets would be based on
recommendations made by a mutually designated consultant. Title to the property
would be registered proportionately in the names of the Joint Venture Partners
and would be managed and administered by OOI.
<PAGE>
5.6 In the event this agreement terminates prior to completion of the proposed
payments as set forth in Paragraph 3. 1, sub paragraphs (a) through (e) and in
Paragraph 3.2 hereof, one hundred per cent (100%) rights, title and interest in
the Property shall revert to OOI; with no interest being retained by Canadian.
5.7 In the period of time between the events specified in paragraph 5.1 and the
event specified in paragraph 4.2(e) the property and "Opal Business" shall
continue to be operated and managed by OOI.
5.8 OO agrees with Canadian that during the period set out in 5.7 that Canadian
will receive its pro-rata share of net profits after taxes, pursuant to the
option, for sales generated by the "Opal Business". The $560,000.00 option
payment received pursuant to paragraph 3~1 will accrue as expenses to OOI to be
deducted from earnings prior to distribution of profits. OOI shall be permitted
to characterize the nature of regulate the sum to minimize payment of taxes and
has deferred expenses against future income over such period of time as shall be
selected by OOI.
5.9 During the period prior to January 15, 1998 the payments received pursuant
to paragraph 3.1 will be utilized to develop the "Opal Business" but shall not
be utilized for any purposes concerned with exploration. Any and all exploratory
functions or engineering studies shall be conducted by OOI under contract to
Canadian, and at the sole expense of Canadian for purposes of determination of
the advisability of exercise of the option herein, or as may be required by
regulatory authorities pursuant to statute. All remuneration accruing to OOI
shall be billed and agreed at prevailing industry rates and in accordance with
good practice and standards as set within the industry or by legislation.
<PAGE>
5.10 All corporate and promotional expenses incurred by Canadian shall be
considered as solely to the account of Canadian and not in any way against OOI.
All information obtained as part of the property and project assessment during
the currency of this agreement is to be communicated openly, freely and
completely between-the parties.
6.0 OTHER CONSIDERATIONS & PROTECTION OF THE PARTIES
6.1 The parties hereto agree that each may protect their individual interests
under this Agreement by registering this Agreement or any other document which
they may consider advisable against the titles of the Klinker Property.
6.2 Canadian hereby.covenants and agrees to indemnify and save harmless OOI,
their successors and assigns, against and from any and all action, damages,
debts, accounts, claims and demands of any nature whatsoever at law or in equity
which may be brought against Canadian arising from the acquisition of the
company Canadian from its previous owners and shareholders; or subsequently as a
result of the day to day business of Canadian as a public company.
6.3 Canadian, hereby covenants and agrees to indemnify and save harmless OOI,
their successors and assigns, against and from any and all action, damages,
debts, accounts, claims and demands of any nature whatsoever at law or in equity
which may be brought against Canadian arising from the acquisition of a
percentage interest in the Klinker Property and from Canadian's actions or
business dealings after the date first above written.
6.4 The parties hereto agree that during the currency of this agreement Canadian
will have the right, at all reasonable times, but wholly at their own risk and
expense, to examine the property and data therefrom and in particular that
information relating to production from the property and information relating to
the "Opal Business".
<PAGE>
6.5 The parties hereto acknowledge that any and all information received must
be treated with discretion and that portions of said information must be
treated as proprietary and confidential in nature and as such said information
is to be retained in the strictest confidence. It is therefore agreed by the
parties hereto that, in order to protect the various rights, interests and
entitlements of each of the parties hereto and in particular to protect the
confidentiality of certain information which will necessarily be disclosed by
and between the parties hereto in order that each might assess and determine
the viability and integrity of their respective roles under the agreement, each
of the' parties hereto will have the right to, in writing, place express and
specific restrictions on the use and dissemination of information which they
feel is of a proprietary and confidential nature and the recipient of said
information will be bound to maintain the confidential and proprietary nature
of such information.
6.6 OOI, or the designated operator, must be given the opportunity and
responsibility to review for accuracy only and the final authority to approve,
change or disapprove of any and all news or information releases about the
property for accuracy only and/or "Opal Business" which are considered by OOI
to be of a promotional or technical nature.
6.7 The "Tourist Segment" of the "Opal Business" as developed to date by OOI
will remain solely the property of OOI. OOI has included in its "tourist
market" development numerous items other than opal from which sales revenue is
generated. The revenues from the "tourist business" which will include some
Okanagan opal products will be solely owned by OOI and Canadian will not
participate in the net profits from this business which will be separately and
clearly documented and accounted for by OOI. Canadian, at its own expense would
have the right at all reasonable times to inspect the books of OOI's tourist
business.
<PAGE>
6.8 It will be OOI's intent to pursue its present tourist oriented retail
marketing plan in conjunction with "tourist fee digging". OOI or its assignees
must be deemed to have free and sole rights and exclusive access to "dumped"
materials for "tourist fee digging activities" and will have the right to
freely collect "dumped" material for its sole use and gain in the manufacture
of tourist items and jewelry. OOI would at all times have the right to purchase
rough opal from the operator at fair market value. A "fair market value" will
be determined for the rough opal purchased by the OOI Tourist business based on
the formulas which have been developed for payment of "Prospectors Royalties".
Canadian would not participate in the profits from the "Tourist Business" which
will in itself be a fully integrated "Opal Business" having a base of
operations limited to the Vernon/North Okanagan Area.
7.0 PROPERTY MAINTENANCE/AREA OF COMMON INTEREST
7.1 Prior to the date that the Option to Purchase is fully exercised and prior
to Canadian having earned a full 100% right, title and interest in the property
as herein provided for it is the undertaking of OOI, as the operator, to ensure
maintenance of the mineral claims in accordance with all applicable regulations
during the currency of this agreement and under the terms and conditions
specifically outlined in the Agreement.
7.2 An area of common interest is acknowledged by the parties hereto which
provides for the inclusion under the general terms and conditions of this
Agreement of all properties acquired by the parties hereto within a two and one
half (2.5) kilometer radius around the perimeter of the original claim block;
whether by staking or by option or purchase from others after the commencement
date.
<PAGE>
8.0 NOTICE
8.1 Any notice to be given or any delivery to be made hereunder shall be in
writing and shall be deemed to be well, sufficiently and duly given or made if;
a) delivered in person and left with a secretary or other office employee at the
relevant address set forth below; or
b) telegraphed, telexed, faxed or sent by other wire communication and
confirmed by prepaid registered letter; or
c) sent in a prepaid registered letter deposited in a Canadian Post
Office; if sent to Canadian; addressed to it at;
219 Broadway
Suite 261
LAGUNA BEACH, CALIFORNIA
USA 92651
and if sent to OOI; addressed to it at;
Okanagan Opal Inc.
P.O. Box 298
VERNON, B.C.
VlT 6M2
and any notice or delivery so given or made is deemed to have been received on
the fifth day after mailing thereof if sent by prepaid registered mail, or on
the day of delivery in person, or on the day of telegraphing, telexing or
communication by other wire service, provided that the same is a business day
and if not, on the next business day.
<PAGE>
8.2 Any party hereto may from time to time, by notice in writing, change its
address for the purpose of Section 8.0.
9.0 GENERAL
9.1 No party shall have the right to assign all or any portion of its interests
under this agreement without the prior written consent and approval of the
other parties; which consent shall not be unreasonably withheld.
9.2 This Option to Purchase is non-transferable without the written consent and
full approval of OOI. In the event Canadian attempts to sell, transfer or
otherwise convey its rights hereunder to a third party without- first obtaining
written consent and approval from OOI; will result in the full purchase price
immediately becoming due and payable to OOI and any delay or failure to pay the
full purchase price as would then be required will result in immediate
termination of the agreement which could result in penalties resulting in a
loss to Canadian of all or part of the earned percentage interest in the
property from time to time as herein described.
9.3 With respect to the Property, all negotiations, understandings and
agreements, heretofore had between the parties hereto, are merged in this
Agreement which when considered in the context of the Letter of Intent dated
January 7, 1996 (see Schedule B hereto) and in consideration of the ongoing
royalty commitments under the Prospectors Agreement (see Schedule C and D
hereto) solely and completely expresses all of the understandings and/or
agreements had between the parties. This Agreement complete with the attached
Schedules shall supersede and replace any other agreement or arrangement,
whether oral or written heretofore existing between the parties in respect of
the subject matter of this Agreement.
<PAGE>
9.4 It is not the purpose of intention of the parties hereto to create, and
this Agreement does not create and is not to be construed as creating, a mining
joint venture, or other partnership, association or any other relationship
rendering either party liable for the debts of the other; save as to the
commitments obliged under the terms and conditions of this Agreement.
9.5 A Joint Venture Partnership will be formed only in the event that the
Option to Purchase is terminated and then only if Canadian has earned a
retained participating interest as provided for in this Agreement.
9.6 This Agreement shall terminate;
a) at the end of the day on which any payment due or obligation required
under Section 3.0 or Section 4.0 of this Agreement has not been paid
or otherwise met; subject only to paragraph 10.1; or
b) On Canadian giving notice of termination to OOI which it shall be at
liberty to do at anytime.
c) As elsewhere herein specifically described for failure to comply with
the terms and conditions of this Agreement.
9.7 Any reference to money amounts in this agreement shall mean lawful currency
of Canada.
9.8 The parties hereto agree that all disputes or adverse claims which arise
with respect to this agreement shall be submitted to binding arbitration before
a single arbitrator, or if the parties cannot agree upon a single arbitrator,
then such arbitration shall be before a board of three
<PAGE>
arbitrators and such arbitration shall be in accordance with the provisions of
the Commercial Arbitration Act, Bill 221986, and any amendments thereto or
replacements thereof. The cost of arbitration shall be borne by the parties as
the arbitrators may direct.
9.9 The parties hereto, hereby covenant that;
a) no act or thing will be done that will adversely affect the rights,
title or interest of others hereunder,
b) from time to time and at all times required, to do such further acts
and execute such documents as shall be reasonably required in order to
fully perform and carry out and implement the provisions of or the
intent of the agreement.
10.0 ENFORCEABILITY
10.1 Any default or breach or non-performance of any of the covenants,
agreements and conditions to be performed and observed on the part of Canadian
or OOI shall not automatically terminate this agreement and said party will
have thirty (30) days from receipt of written notice of such default, breach or
non-performance in which to rectify same or to have commenced meaningful and
progressive curative action.
10.2 FORCE MAJEURE - Except as provided herein, time is of the essence in this
agreement;
a) Notwithstanding anything herein contained to the contrary, if any of
the parties hereto is prevented
from or delayed in performing any
<PAGE>
obligation under this agreement and such failure is occasioned by any
cause beyond said parties control, including, without limiting the
generality of the foregoing, the operation of any law, regulation or
order of the Government or constituted authority, inability to secure
any necessary permit, license or other authorization from the
Government or constituted authority, labour disturbance or dispute,
strike, lockout, riot, explosion, war, invasion, inability to obtain
material, supplies, power, fuel or labour, interference by civil or
military authority or acts of God, then, subject to subparagraph
10.2(b) below, the time for the observance of the condition or
performance of the obligation in question shall be extended for a
period equivalent to the total period the cause of the prevention or
delay persists or remains in effect regardless of the length of such
total period;
b) If any party hereto claims suspension of its obligations as aforesaid,
it shall promptly notify the other parties to that effect and shall
take all reasonable steps to remove or remedy the cause and effect of
the force majeure described in the said notice insofar as it is
reasonably able so to do and as soon as possible.
c) Poor market conditions or other limiting financial conditions
resulting in a lack of ability by Canadian to raise and provide the
funds necessary to make the cash payments required under this
agreement will not be deemed as a Force Majeure but is rather an
economic factor which must be resolved by Canadian.
10.3 This agreement shall enure to the benefit of, and be binding upon the
parties hereto and their respective successors and assigns.
<PAGE>
10.4 This agreement shall be governed by and interpreted in accordance with the
laws of the Province of British Columbia and in accordance with acceptable
mineral industry standards.
IN WITNESS WHEREOF THE CORPORATE SEAL of CANADIAN NORTHERN LITES INC. has been
hereto affixed in the presence of its duly qualified officers on such behalf,
all as of the day and year first above written.
The Common Seal of the Company,
CANADIAN NORTHERN LITES INC.
was hereunto affixed in the
presence of;
------------------------------
AUTHORIZED SIGNATORY
------------------------------
AUTHORIZED SIGNATORY
IN WITNESS WHEREOF THE CORPORATE SEAL of OKANAGAN OPAL INC. has been hereto
affixed in the presence of its duly qualified officers on such behalf, all as
of the day and year first above written.
The Common Seal of the Company,
OKANAGAN OPAL INC. was hereunto
affixed in the presence of:
------------------------------
AUTHORIZED SIGNATORY
------------------------------
AUTHORIZED SIGNATORY
<PAGE>
SCHEDULE A
To the Agreement entered into between CANADIAN NORTHERN LITES INC. and the
property owners, namely OKANAGAN OPAL INC.; dated April 10/96.
PROPERTY DESCRIPTION
--------------------
KLINKER PROPERTY MINERAL CLAIMS
Claim Name Units Record #s Expiry Date
---------- ----- --------- -----------
Klinker 1 1 302379 July 7, 2003
Klinker 2 1 302280 July 7, 2003
Ewer 1 1 307237 Jan. 12, 2003
Ewer 2 1 307238 Jan. 12, 2003
Ewer 3 1 307239 Jan. 13, 2003
Ewer 4 1 307240 Jan. 13, 2003
Ewer 5 1 307241 Jan. 13, 2003
Ewer 6 1 307242 Jan. 13, 2003
Ewer 7 1 307243 Jan. 13, 2003
Ewer 8 1 307244 Jan. 13, 2003
Ewer 9 1 307245 Jan. 13, 2003
Ewer 10 1 318280 June 9, 2003
Ewer 11 1 307246 Jan. 13, 2003
Ewer 12 1 307247 Jan. 13, 2003
Ewer 13 1 307248 Jan. 13, 2003
Ewer 14 1 307249 Jan. 13, 2003
Ewer 15 1 307250 Jan. 13, 2003
Ewer 16 1 307251 Jan. 13, 2003
Ewer 17 1 307252 Jan. 13, 2003
Ewer 18 1 307253 Jan. 13, 2003
Ewer 19 1 307254 Jan. 13, 2003
Ewer 20 1 307255 Jan. 13, 2003
Ewer 21 1 307256 Jan. 13, 2003
Ewer 22 1 307258 Jan. 13, 2003
Ewer 23* 1 338119 July 16, 2003
Paul Fr.* 1 326981 June 17, 2003
Paul 2 Fr.* 1 333923 Jan. 26, 2003
<PAGE>
Klinker Fr.* 1 338117 July 16, 2003
Klinker #2 Fr.* 1 338118 July 16, 2003
Light* 1 342130 Nov. 3, 1997
*These claims, which may acquire some ground as a result of the Section 35
Complaint filed by Okanagan Opal Inc., are considered part of the agreement. It
is not possible at this time to determine how much ground, if any, these claims
presently control or may acquire. See map on Page 2 of Schedule "A" attached.
* Title to these claims is recorded in the name Robert W. Yorke-Hardy, Box 298,
Vernon, B.C. and are held in trust by, him for Okanagan Opal Inc. The expiry
dates shown herein assumes acceptance of the application of assessment work
from the 1995 program. The claims are all located and recorded in the Vernon
Mining Division of British Columbia. All claims have been located in accordance
with the requirements of the Mineral Act of British Columbia.
Title to the balance of the claims is recorded in the name of Robert W.
Yorke-Hardy and Glen Grywacheski of Vernon, British Columbia, and are held in
trust by them for Okanagan Opal Inc. The expiry dates shown herein assumes
acceptance of the application of assessment work from the 1995 program. The
claims are all located and recorded in the Vernon Mining Division of British
Columbia. All claims have been located in accordance with the requirements of
the Mineral Act of British Columbia.
<PAGE>
Map of Klinker Property
<PAGE>
Page 1
SCHEDULE 'D'
Being the excerpt from the Option Agreement between OKANAGAN OPAL INC. (OOI)
and CANADIAN NORTHERN LITES INC. (CANADIAN), constituting an amendment to the
Opal claims agreement dated October 1, 1993 generally, and paragraph 3.0
specifically.
4.6 Having Exercised its Option to Purchase the Klinker Property under 4.2 it
is agreed by the Prospectors and OOI that Canadian will have also assumed the
responsibility to pay the royalties due to the Prospectors under the
Prospectors Agreement. Canadian may elect to do this in one of the "following
alternative ways;
a) By making annual "advanced royalty payments" to the Prospectors, at
the same time as the annual purchase payments are made to OOI under
4.2 above, a total of five annual payments each in the sum of
$100,000.00 cash and 30,000 free trading shares of the Company
Canadian for a total "advance royalty buy-out" of $500,000.00 cash and
150,000 free trading shares of the Company, Canadian, or,
b) By making a one time "advance royalty payment" of $750,000.00 cash and
200,000 free trading shares of the Company, Canadian to the
Prospectors at the time the final payment is made towards the purchase
price under 4.2(e) above.
c) By electing to accept and meet any and all of the remaining terms and
conditions under the Prospectors Agreement at such time as Canadian
earns a full 100% interest in the property under 4.2 above.
<PAGE>
Page 2
In the interim period, prior to Canadian having exercised its rights hereunder
to Purchase the Property and to pay out the. Prospectors Royalties in advance,
and particularly during the period prior to 1998, it will be OOI's on going
responsibility to make royalty payments to the prospectors in accordance with
the terms and conditions of the Prospectors Agreement. This will be considered
an operating expense and Prospectors Royalties would continue as an operating
expense upon Canadian's election of alternate 4.6(c) above until all royalty
obligations are meet (see iii below).
i) In the event Canadian elects to make five advance royalty payments as
a pay out under 4.6(a) above then these cash and stock payments will
be made in lieu of royalty payments from production.
ii) In the event Canadian elects to make a single advance royalty payment
as a payout under 4.6(b) above then regular royalty payments will be
made from production as an ongoing operating expense in accordance
with the Prospectors Agreement. It is understood and accepted by
Canadian and OOI that this could result in the prospectors receiving
cash and royalty payments which may exceed the original cash payable
under the Prospectors Agreement.
iii) In the event Canadian elects to accept and take on OOI's royalty
responsibilities under the Prospectors Agreement under 4.6(c) above
then Canadian will continue to pay royalties on production under the
terms and conditions of the Prospectors Agreement after having earned
its 100% interest in the property which would be subject to
<PAGE>
Page 3
the payment of royalties until the full amount of the royalty due is paid; and
Canadian will, upon making the final royalty payments from production, arrange
to transfer 300,000 shares of Canadian to the prospectors so as to meet the
obligation which Canadian assumed from OOI under the terms and conditions of
this agreement. Having completed these payments to the Prospectors, Canadian
will be deemed to have met all of the remaining terms and conditions and
requirements including any and all unpaid Prospectors Royalties relating to the
Prospectors Agreement.
In the event that Canadian fails to complete the property purchase as outlined
in 4.2 above, any and all cash and shares received by the Prospectors as
advance royalty payments would be credited as outlined below; and would be
considered as advances towards the full royalty amounts payable under the
Prospectors Agreement. Thereafter OOI would re-assume the remaining royalty and
share payments due under the terms of the Prospectors Agreement and the royalty
payments would once again become an operating expense until the full amount is
paid out.
- Cash payments made as advance royalty payments will reduce the total
cash amount due dollar for dollar
- share payments made under 4.6 (a) and (b) will be credited on a two
for one basis (ie each share received from Canadian as part of an
advance royalty payment will reduce OOI's ongoing obligation by two
shares).
Canadian will not be allowed to buy-out the Prospectors Royalties in a manner
disproportionate with or in preference, to its paid interest earned in the
property from time to time under 4.2 above.
<PAGE>
Page 4
The Prospectors shall acknowledge adhesion to this amendment to the Prospectors
Agreement by signing acknowledgement and agreement to this paragraph 4.6 to be
affixed as Schedule 'D' to this Agreement.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
) ---------------------------
--------------------------- ) ROBERT W. YORKE-HARDY
)
--------------------------- )
)
--------------------------- )
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)---------------------------
--------------------------- ) GLEN GRYWACHESKI
)
--------------------------- )
)
--------------------------- )
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 9
Map of Opal Claims
per
April 10, 1996 Agreement
- --------------------------------------------------------------------------------
<PAGE>
Map of Klinker Property
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 10
Opal Claims / Klinker Project
Exploration Budget
for Third Quarter 1996
- --------------------------------------------------------------------------------
<PAGE>
KLINKER PROJECT 1996
EXPLORATION BUDGET
(Period from June to September)
Phase 1:
Field Management and Administration:
------------------------------------
Y-H Technical Services Ltd. (part time daily) to
a cumulative total of 10 days per month @$300/day $ 3,000
Camp and Field Equipment & Field Supplies Expenses:
---------------------------------------------------
- includes field office, camp trailer, safety gear,
hand tools and equipment, site vehicles (Jeep & ATV),
radio and cell phone, food & general camp supplies
for up to 4 people, first aid and fire fighting
equipment gas and propane, diesel, flagging, topo
thread, office supplies, field books, etc.
31 days per month @ $250/day $ 7,750
Equipment Rentals:
------------------
- 3 water pumps with hoses @ $1,000/mo
- 5,000 waft generator @ $ 500/mo
- 170 cfm compressor c/w
hoses, jack hammer, @ $1,700/mo
chisels and oiler $3,200/mo. $ 3,200
Bobcat w/ buckets and breaker (part time) to a
cumulative total of 10 days/mo. (based on $5,000/mo.) $ 1,700
Vehicle (4X4 crew cab or van) ------- $ 1,800
----------
$ 17,450
Wages and Sub-Contracts:
Geologist 21 days/mo. @ $250/day $ 5,250
Geologist 21 days/mo. @ $225/day $ 4,725
Lead hand - $ 4,000
Helper - $ 2,500
Weekend watchman -- part time 4 days/mo $ 750
----------
$ 17,225
Sub Total -- $34,675 per month.
10% Continqency $ 3,465
----------
Monthly Total $ 38,140
Assuming a project duration will be 4 month then total costs for the above
portions of the project will be:
$38,140/mo. X 4 = $152,560 $152,560
<PAGE>
Other Costs:
------------
Government Bond and fees - $ 7,500
Airborne Lineation Study Contract - $ 3,000
Grid preparation -
- 50 kilometres of chained & compassed grid - 35 lines @ 50 $ 15,000
metre spacings, - stations on lines @ 10 metre spacings.
Geochemical Analyses -
250 soil geochem $ 6,250
250 rock geochem $ 6,250
Geophysical Surveys (including independent reports)
50 kilometres of magnetometer $ 7,500
50 kilometres of VLF-EM (2 channels) $ 7,500
ground penetrating radar or gravity surveys - test area $ 15,000
Small excavator for exploration stripping -
- 10 days/mo. X $600/day X 4 months $ 24,000
Ongoing Costs: (October 1, 1996 to March 31, 1997)
--------------------------------------------------
Data compilation and report preparations
Geologist -
6 months @ $5,250/mo. $ 31,500
Geologist -
3 months @ $4,725/mo. $ 14,175
Management and Administration - (part time)
6 months @ $1,500/mo. $ 9,000
----------
Sub Total -- $146,675
10% Contingency $ 14,667
Total $161,342
TOTAL PHASE 1 $313,902
Phase 2: (Contingent on Phase 1 results)
Large excavator with rock breaker for bulk sampling
- 10 days @ $1,500/day $ 15,000
Drilling -
Diamond drilling HQ core
- 2000 feet @ $30/ft. $ 60,000
Percussion drilling 6" holes
- 5000 feet @ $10/ft. $ 50,000
Sub Total - $125,000
20% Contingency $ 25,000
----------
Total $150,000
TOTAL PHASE 1 & 2 $463,902
GST $ 32,473
----------
GRAND TOTAL $496,375
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 11
Specimen Stock Certificate
Canadian Northern Lites, Inc.
- --------------------------------------------------------------------------------
<PAGE>
Sample Stock Certificate
Front
<PAGE>
Sample Stock Certificate
Back
<PAGE>
- --------------------------------------------------------------------------------
Exhibit F1
Unimex Transnational Consultants, Inc.'s
Audited Financial Statements
as of
December 31, 1995 and 1994
- --------------------------------------------------------------------------------
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Consolidated Financial Statements
December 31, 1995 and 1994
<PAGE>
CONTENTS
Accountants' Report ......................................................3
Consolidated Balance Sheets ..............................................4
Consolidated Statements of Operations ....................................5
Consolidated Statements of Stockholders' Equity...........................6
Consolidated Statements of Cash Flows ....................................7
Notes to the Consolidated Financial Statements............................8
<PAGE>
CROUCH BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Unimex Transnational Consultants, Inc.
We have audited the accompanying consolidated balance sheets of Unimex
Transnational Consultants, Inc. (A Development Stage Company), as of December
31, 1995 and 1994, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1995, 1994
and 1993, and from Inception on June 18, 1990 through December 31, 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 the audits to
obtain reasonable assurance about 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. We believe that our audits provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Unimex
Transnational Consultants, Inc. (A Development Stage Company) as of December
31, 1995 and 1994, and the results of its operations and cash flows for the
years ended December 31, 1995, 1994 and 1993 and from inception on June 18,
1990 through December 31, 1995 in conformity with generally accepted accounting
principles.
Salt Lake City, Utah
March 8, 1996
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31,
--------------------------
1995 1994
----------- -----------
Assets
Current assets
Cash $ 2,250 $ -
Prepaid expenses $ 1,700 -
----------- -----------
Total Current Assets 3,950 -
----------- -----------
Other assets
Organization cost (Note 1) 6,000 -
----------- -----------
Total Assets $ 9,950 $ -
=========== ===========
Liabilities and Stockholders Equity
Liabilities $ - $ -
----------- -----------
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001
par value, issued and
50,000 and 30,000, respectively 50 30
Additional Paid in Capital 12,950 2,970
Deficit Accumulated During the
Developmental Stage (3,050) (3,000)
----------- -----------
Total Equity 9,950 -
----------- -----------
Total Liabilities and Stockholders' Equity $ 9,950 $ -
=========== ===========
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Cumulative
Total
Since
For the Years ended December 31, Inception
---------------------------------- ----------
1995 1994 1993
Revenues: $ - $ - $ - $ -
Expenses:
Bank charges 50 - - 50
Amortization - 3,000 - 3,000
-------- -------- -------- --------
Total Expenses 50 3,000 - -
Net Loss $ (50) $(3,000) $ - $(3,050)
Net Loss Per Share $ (.002) $ (.10) $(.000) $ (.099)
======== ======== ======== ========
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Consolidated Statement of Stockholder' Equity
From Inception on June 18, 1990 through December 31, 1995
<TABLE>
Additional Deficit accumulated
Common Stock Paid-in during the
Shares Amount Capital Development Stage
-------- -------- ---------- --------------------
<S> <C> <C> <C> <C>
Issuance of stock to officers, 30,000 $ 30 $ 2,970 $ -
directors and other
individuals for
organization costs
on April 10, 1991
Net Loss from inception
through December 31, 1992 - - - -
Net Loss for the years ended
December 31, 1993 - - - -
--------- --------- --------- ---------------------
Balance at
December 31, 1993 30,000 $ 30 2,970 $ -
Net Loss for the year ended (3,000)
December 31, 1994 --------- --------- --------- ---------------------
Balance at
December 31, 1994 30,000 30 2,970 (3,000)
Issuance of common stock to
the public for cash on
October 31, 1995 8,000 8 3,992 -
Issuance of common stock
for services 12,000 12 5,988 -
Net Loss for the year
ended December 31, 1995 (50)
--------- --------- --------- ---------------------
Balance December 31, 1995 50,000 $ 50 $ 12,950 $ (3,050)
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flow
Cumulative
Total
Since
For the Years ended December 31, Inception
---------------------------------- ----------
1995 1994 1993
Cash Flows From
Operating Activities:
Net Loss $ (50) $ (3,000) $ - $ (3,050)
-------- -------- -------- ----------
Less non-cash items:
Amortization - 3,000 - 3,000
-------- -------- -------- ----------
Net Cash Used by Operating
Activities (50) - - (50)
-------- -------- -------- ----------
Cash flow from Investing
Activities:
Cash paid for prepaid
expenses (1,700) - - (1,700)
-------- -------- -------- ----------
Net cash used in Investing
Activities (1,700) - - (1,700)
-------- -------- -------- ----------
Cash Flows From Financing
Activities:
Proceeds From Issuance of
Common Stock 4,000 - - 4,000
-------- -------- -------- ----------
Net Cash Provided by 4,000 - - 4,000
Financing Activities -------- -------- -------- ----------
Net Increase (Decrease) in Cash
and Cash Equivalents 2,250 - - 2,250
-------- -------- -------- ----------
Cash and Cash Equivalents at
Beginning of Year - - - -
-------- -------- -------- ----------
Cash and Cash Equivalents at
End of Year $ 2,250 $ - $ - $ 2,250
======== ======== ======== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - Summary Of Significant Accounting Policies
a. Organization
Unimex Transnational Consultants, Inc. (the Company) was first
incorporated in the State of Nevada on June 18, 1990 as QQQ-Huntor Associates,
Inc., On July 21, 1995 the Company changed its domicile to the State of Texas
and merged into a Texas Corporation Unimex, Transnational Consultants, Inc.
Neither company has any operating activity and is in the development stage.
b. Accounting Method
The Company recognizes Income and expense on the accrual basis of accounting.
C. Earnings (Loss) Per Share -
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date of the financial
statements.
d. Cash and Cash Equivalents
The company considers all highly liquid Investments with
maturities of three months or less to be cash equivalent-..
e. Provision for Income Taxes
No provision for income taxes have been recorded due to net
operating loss carryforwards totaling approximately $3,000 that will be offset
against future taxable income. These NOL carryforwards begin to expire in the
year 2009. No tax benefit has been reported in the financial statements because
the Company believes there is a 50% or greater chance the carryforward will
expire unused.
f. Organization Expenses
Expenses incurred in the organization or reorganization of the
Company have been capitalized and are being amortized over a 60 month period.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming
that the company will continue as a going concern. The company has no assets
and has had recurring operating losses for the past several years and is
dependent upon financing to continue operations. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. It is management's plan to find an operating company to merge
with, thus creating necessary operating revenue.
<PAGE>
NOTE 4
Unimex Transnational Consultants, Inc.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1995, August 31, 1995 and 1994
NOTE 3 - Capitalization & Stock Split
On April 10, 1991 the Company issued 30,000 shares of its common
stock to officers, directors and other individuals for services performed in
the organization of the Company.
In October 1995 the Company completed a limited public offering
of 12,000 shares of its previously authorized, but unissued common stock. Gross
proceeds from the offering were $4,000.
Also in October 1995, the Company Issued 5,000 shares for
services provided in connection with the reorganization of the Company. A value
of $6,000 was assigned to the services by tile board of director
NOTE 4 - Development Stage Company
The Company is a development stage company as defined in
Financial Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts in raising capital and searching for a
business operation with which to merge, or assets to acquire, In order to
generate significant operations.
NOTE 5 - Related Party Transactions
The Company prepaid $1,700 to HIS Financial Services for
management and consulting services to be performed in 1996. HIS Is partially
owned by a major shareholder and officer of the Company.
<PAGE>
- --------------------------------------------------------------------------------
Exhibit F2
Dakota Mining and Exploration Ltd.
Audited Financial Statements
as of
January 31, 1996
- --------------------------------------------------------------------------------
<PAGE>
DAKOTA MINING & EXPLORATION LTD.
FINANCIAL STATEMENTS
JANUARY 31, 1996
<PAGE>
DAKOTA MINING & EXPLORATION LTD.
JANUARY 31, 1996
CONTENTS
Page
AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheet 2
Statement of loss and deficit 3
Statement of Changes in Financial Position 4
Notes to Financial Statements 5-6
LUNDGREN & COMPANY
CHARTERED ACCOUNTANTS
<PAGE>
LUNDGREN & COMPANY CHARTERED ACCOUNTANTS
Page 1
AUDITOR'S REPORT
To the Shareholders of
Dakota Mining & Exploration Ltd.
We have audited the balance sheet of Dakota Mining & Exploration Ltd. as at
January 31, 1996, and the statements of loss and deficit and changes in
financial position for the year then ended. 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 audit.
we conducted our audit in accordance with generally accepted 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 financial statements present fairly, in all material
respects, the financial position of the company as at January 31, 1996 and the
results of operations and changes in financial position of the company for the
year then ended, in accordance with generally accepted accounting principles.
Kelowna, B.C.
March 7, 1996
CHARTERED ACCOUNTANTS
#101 - 3140 Lakeshore Road, Kelowna, B.C. VlW 3T1
Phone: (604) 861-3255p Fax: (604) 868-3419
<PAGE>
Page 2
DAKOTA MINING & EXPLORATION LTD.
BALANCE SHEET
AS AT JANUARY 31, 1996
(with comparative figures for 1995)
1996 1995
---- ----
ASSETS
OPTIONS (Note 3) $ 125,938 $ -
CAPITAL ASSETS 475 -
INCORPORATION COSTS 1,219 1,219
---------- ----------
$ 127,632 $ 1,219
========== ==========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 26,139 $ 2,400
---------- ----------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 5) 210,718 200
DEFICIT (109,225) (1,381)
---------- ----------
101,493 (1,181)
---------- ----------
$ 127,632 $ 1,219
========== ==========
APPROVED ON BEHALF OF THE BOARD:
Director
----------------------------------
Director
----------------------------------
<PAGE>
Page 3
DAKOTA MINING & EXPLORATION LTD.
STATEMENT OF LOSS AND DEFICIT
FOR THE YEAR ENDED JANUARY 31, 1996
(with comparative figures for 1995)
1996 1995
---- ----
REVENUE
Consulting $ - $ 29,700
------------ ------------
EXPENSES
Consulting fees 41,946 -
General and
administrative expenses 65,898 31,081
------------ ------------
107,844 31,081
------------ ------------
LOSS BEFORE INCOME TAXES (107,844) (1,381)
------------ ------------
NET LOSS (107,844) (1,381)
DEFICIT, beginning of year (1,381) -
------------ ------------
DEFICIT, end of year $ (109,225) $ (1,381)
============ ============
LUNDGREN & COMPANY
CHARTERED ACCOUNTANTS
<PAGE>
Page 5
DAKOTA MINING & EXPLORATION LTD.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1996
1. CHANGE OF NAME
The company changed its name to Dakota Mining & Exploration Ltd.from Eagle
Ridge Manufacturing on July 27, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of business
The company is in the business of developing mining properties.
(b) The company is incorporated in the Province of British Columbia
(c) Capital Assets
Capital assets are recorded at cost. Amortization is provided annually at
rates calculated to write-off the assets over their estimated useful lives.
3. OPTIONS
In the year prior to January 31, 1996, the company negotiated and signed a
"Letter of Intent". During the year non-refundable option payments of
$100,000 were made with a further $20,000 payable at year end. Subsequent
option payments are due as follows:
on or before March 31, 1996 $ 30,000
on or before April 30, 1996 100,000
on or before July 31, 1996 400,000
The letter of intent terminates whenever an option payment is not made on
the appointed date. Related direct costs have also been capitalized and
included.
In addition, the company holds the patent rights for manufacture and
distribution in Canada of a disposable cat litter house. As the future
valuation of this product is unknown the patent is assigned a valuation of
$1.
LUNDGREN & COMPANY
CHARTERED ACCOUNTANTS
<PAGE>
Page 6
DAKOTA MINING & EXPLORATION LTD.
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1996
4. LOSS CARRY FORWARD
The company has losses to be carried forward for income tax purposes in the
amount of $102,943 of which $163 expires in 2002 and $102,780 in 2003.
Estimated income tax recoveries have not been recorded in the financial
statements as their realization is not virtually certain.
5. CAPITAL STOCK
10,000 Class A voting common shares without par value;
100,000 Class B voting common shares without par value;
10,000 Class C Non-voting common shares without par value;
10,000 Class D Non-voting redeemable preferred shares with
a par value of $10.00 each.
1996 1995
------ ------
Stated capital:
10,000 Class A common shares $ 210,718 $ 200
6. SUBSEQUENT EVENTS.
On March 1, 1996 the company negotiated and signed an addendum to the
"Letter of Intent" paying $20,000 previously due and owing at January 31,
1996.
LUNDGREN & COMPANY
CHARTERED ACCOUNTANTS
<PAGE>
- --------------------------------------------------------------------------------
Exhibit F3
Combined and Consolidated
Unaudited Financial Statements
as of
April 30,1996
- --------------------------------------------------------------------------------
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Financial Statements
April 30, 1996, December 31, 1995 and 1994
<PAGE>
CONTENTS
Accountants' Report . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Operations . . . . . . . . . . . . .6
Consolidated Statements of Stockholders' Equity . . . . . . . .7
Consolidated Statements of Cash Flows . . . . . . . . . . . . .9
Notes to the Consolidated Financial Statements . . . . . . . .10
<PAGE>
CROUCH, BIERWOLF & CHISHOLM
Certified Public Accountants
50 West Broadway, Suite 1130
Salt Lake City, Utah 84101
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Canadian Northern Lites. Inc.
formerly Unimex Transnational Consultants, Inc.
We have audited the accompanying consolidated balance sheets of Canadian
Northern Lites, Inc. (A Development Stage Company), as of December 31, 1995 and
1994. and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1995, 1994 and 1993, and
from inception on June 18, 1990 through December 31, 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 the audits to
obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis
for our opinion,
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Canadian Northern
Lites, Inc. (A Development Stage Company) as of December 31, 1995 and 1994, and
the results of its operations and cash flows for the years ended December 31,-
1995, 1994 and 1993 and from inception on June 18, 1990 through December 31,
1995 in conformity with generally accepted accounting principles.
The financial statements for the period April 30, 1996 were not audited by us
and accordingly, we express no opinion or other form of assurance on them.
Salt Lake City, Utah
March 8, 1996
<PAGE>
Jun-06-96 04:21P
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
Assets
April 30, December 31,
---------------------
1996 1995 1994
---------- -------- --------
(Unaudited)
Current assets
Cash $ 1,150 $ 2,250 $ -
Prepaid expenses - 1,700 -
---------- --------- ---------
Total Current Assets $ 1,150 $ 2,250 $ -
---------- --------- ---------
Fixed assets 340 - -
---------- --------- ---------
Other assets
Mining claims (Note 6) 111,450 - -
Organization cost (Note 1) 6,471 6,000 -
---------- --------- ---------
Total other assets 117,921 6,000 -
---------- --------- ---------
Total $ 119,411 $ 9,950 $ -
========== ========= =========
The accompanying notes are an integral part of these financial statements
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
April 30, December 31,
---------------------
1996 1995 1994
---------- -------- --------
(Unaudited)
Liabilities
Accounts Payabel $ 4,388 $ - $ -
Loans payable -
shareholders (Note 5) 35,735 - -
---------- ---------- ----------
Total Liabilities 40,123 - -
---------- ---------- ----------
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001
par value, issued and
outstanding 10,400,000,
200,000 and 120,000,
respectively 10,400 200 120
Additional Paid in Capital 150,352 12,800 2,880
Deficit Accumulated During the
Developmental Stage (81,464) (3,050) (3,000)
---------- ---------- ----------
Total Equity 79,288 9,950 -
---------- ---------- ----------
Total Liabilities and
Stockholders' Equity $ 119,411 $ 9,950 $ -
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
For the Cumulative
four months Total
ended April For the years ended December 31, Since
30, 1996 1995 1994 1993 Inception
----------- -------- -------- -------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues: $ - $ - $ - $ - $ -
Expenses:
Consulting 1,900 - - - 1,900
Bank charges - 50 - - 50
Professional fees 1,100 - - - 1,100
Amortization 400 - 3,000 - 3,400
--------- --------- -------- -------- ---------
Total Expenses . 3,400 50 3,000 - 6,450
Net Loss $ (3,400) $ (50) $(3,000) $ - $(6,450)
========= ========= ======== ======== =========
Net Loss Per Share $ (.008) $(.000) $ (.25) $(.000) $ (.024)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From Inception on June 18, 1990 through April 30, 1996
<TABLE>
Additional Deficit accumulated
Common Stock Paid-in during the
Shares Amount Capital Development Stage
-------- -------- ---------- --------------------
<S> <C> <C> <C> <C>
Issuance of stock to officers,
directors and other individuals
for organization costs on
April 10, 1991 120,000 $ 120 $ 2,880 $ -
Net Loss from inception
through December 31, 1992 - - - -
Net Loss for the years ended
December 31, 1993 - - - -
--------- --------- ---------- --------
Balance at December 31, 1993 120,000 120 2,880 -
Net Loss for the year ended
December 31, 1994 - - - (3,000)
--------- --------- ---------- --------
Balance at December 31, 1994 120,000 120 2,880 (3,000)
Issuance of common stock to
the public for cash on
October 31, 1995 32,000 32 3,968 -
Issuance of common stock
for services 48,000 48 5,952 -
Net Loss for the year
ended December 31, 1995 - - - (50)
--------- --------- ---------- --------
Balance at December 31, 1995 200,000 200 12,800 (3,050)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity
From Inception on June 18, 1990 through April 30. 1996
Additional Deficit accumulated
Common Stock Paid-in during the
Shares Amount Capital Development Stage
-------- -------- ---------- --------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 200,000 $ 200 $ 12,800 $ (3,050)
Issuance of common stock
for services 200,000 200 - -
Stock issued for acquisition
of Dakota Mining &
Exploration, LTD. 10,000,000 10,000 62,538 -
Reorganization of retained
earnings due to reverse
acquisition - - 75,014 (75,014)
Net loss for the four months
ended April 30, 1996 - - - (3,400
---------- --------- --------- ---------
Balance at April 30, 1996
(Unaudited) 10,400,000 $ 10,400 $150,352 $ 81,464
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flow
<TABLE>
For the Cumulative
four months Total
ended April For the years ended December 31, Since
30, 1996 1995 1994 1993 Inception
----------- -------- -------- -------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net loss $ (3,400) $ (50) $ (3,000) $ $ (6,450)
Less non-cash items
Amortization 400 - 3,000 - 3,400
Stock issued for services 200 - - - 200
(Increase)/decrease in
prepaid expenses 1,700 (1,700) - - (2,850)
-------- ------- --------- -------- ----------
Net Cash Used by Operating
Activities (1,100) (1,750) - - (2,850)
-------- ------- --------- -------- ----------
Cash Flows from Financing
Activities:
Proceeds from issuance of
common stock - 4,000 - - 4,000
-------- ------- --------- -------- ----------
Net Cash Provided by
Financing Activities - 4,000 - - 4,000
-------- ------- --------- -------- ----------
Net increase/(decrease) in
cash and cash equivalents (1,100) 2,250 - - 1,150
Cash and cash equivalents at
beginning of year 2,250 - - - -
Cash and cash equivalents at
end of year $ 1,150 $ 2,250 $ - $ - $ 1.150
======== ======= ========= ======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants. Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 1996 (Unaudited), December 31, 1995, and 1994
NOTE I - Summary of Significant Accounting Policies
a. Organization
Canadian Northern Lites. Inc. (the Company) was first incorporated in
the State of Nevada on June 18, 1990 as QQQ-Huntor Associates, Inc. On July
21, 1995 the Company changed its domicile to the State of Texas and merged
into a Texas Corporation Unimex Transnational Consultants, Inc. On April
26, 1996, the Company reorganized and acquired all the issued and
outstanding stock of Dakota Mining & Exploration LTD. (Dakota) for
10,000.000 shares of the Company's common stock. and change the name of the
Company to Canadian Northern Lites. Inc. Dakota is a British Columbia
Corporation, organized on January 12, 1994, as Eagle Ridge Manufacturing
LTD. In July of 1995 it changed its name to Dakota. In January 1996, Dakota
signed a letter of intent with Okanagan Opal, Inc. to enter on "option to
purchase agreement." This agreement gives Dakota the option to purchase a
100% interest in the Klinker Properties, which consists of 30 mining claims
in the Vernon Mining Division of British Columbia, Canada. These mines
contain precious opals which the Company intends to extract.
b. Accounting Method
The Company recognizes income and expense on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Cash and Cash Equivalents
The company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
e. Provision for Income Taxes
No provision for income taxes have been recorded due to net operating
loss carry forwards totaling approximately $6,000 that will be offset
against future taxable income. These NOL carryforwards begin to expire in
the year 2009. No tax benefit has been reported in the financial statements
because the Company believes there is a 50% or greater chance the
carryforward will expire unused.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 1996 (Unaudited), December 31, 1995, and 1994
NOTE I - Summary of Significant Accounting Policies (Continued)
f. Organization Expenses
Expenses incurred in the organization or reorganization of the Company
have been capitalized and are being amortized over a 60 month period.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. The Company currently has no
operating revenues and is dependent on financing to continue to make
payments on the option agreement discussed in Note 6. The realization of
the mining claims recorded is also dependent upon the successful mining of
the mining claims discussed. Because these mining operations have not yet
commenced, it is uncertain the Company can continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE 3 - Capitalization & Stock Split
On April 10, 1991 the Company issued 120,000 shares of its common
stock to officers, directors and other individuals for services performed
in the organization of the Company.
In October 1995 the Company completed a limited public offering of
48,000 shares of its previously authorized, but unissued common stock.
Gross proceeds from the offering were $4,000.
Also in October 1995, the Company issued 32.000 shares for services
provided in connection with the reorganization of the Company. A value of
$6,000 was assigned to the services by the board of directors.
In January 1996, the Company issued 200,000 shares for services
rendered.
On April 26, 1996, the Board authorized the issuance of 10,000,000
shares of common stock for all the issued and outstanding stock of Dakota
Mining. The net equity of Dakota was $72,538 at the time of acquisition.
On April 17, 1996. the Company effected a 4 for I forward stock split.
These financial statements have been retroactively restated to reflect the
split.
<PAGE>
Canadian Northern Lites, Inc.
(formerly Unimex Transnational Consultants, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
April 30, 1996 (Unaudited), December 31, 1995, and 1994
NOTE 4 - Development Stage Company
The Company is a development stage company as defined in Financial
Accounting Standards Board Statement No. 7. It is concentrating
substantially all of its efforts in raising capital and developing its
business operation in order to generate significant revenues.
NOTE 5 -Related Party Transactions
The Company paid $1,700 to HJS Financial Services for management and
consulting services performed in 1996. HJS is partially owned by a major
shareholder and officer of the Company.
Shareholders of the Company have advanced $35,735 to the Company to
pay the required option payments on the mining claims discussed in Note 6.
NOTE 6 - Mining Claims/Option Agreement
As discussed in, Note 1. the Company entered into an "option to
purchase agreement," whereby the Company may purchase a 100% interest in
several opal mining claims in B.C. Canada. The option provides the Company
to purchase a 20% interest in the properties for payments of $400,235, due
at various times through July 31, 1996. The Company has the option to
remain a 20% interest in what will then become a joint venture, or purchase
additional interests each year for five years for a 100% interest. The five
annual payments are for $1,143,530, beginning January 15, 1998, for a total
purchase price of $6.117,883.
At April 30, 1996 $111,450 in option payments had been made and
subsequent to April 30, an additional $71,470 was made.
