U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F/A
(Mark One)
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY
31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO ______________
COMMISSION FILE NUMBER: 0-29616
BELMONT RESOURCES INC.
(Exact name of registrant as specified in its charter)
British Columbia, Canada Not Applicable
(State or jurisdiction of incorporation I.R.S. Employer
or organization) Identification No.)
666 Burrard Street, Suite 1180, Vancouver, British Columbia V6C 2X8
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 683-6648
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) been subject to such filing
requirements for the past 90 days. Yes X No.
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 20-F or any
amendment to this Form 20-F [ ].
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of June 16, 1999: Common Stock,
no par value -- $191,125. As of June 16, 1999, the registrant
had 19,764,012 shares of common stock issued and outstanding.
<PAGE>
TABLE OF CONTENTS
PART I PAGE
Item 1. DESCRIPTION OF BUSINESS 3
Item 2. DESCRIPTION OF PROPERTY 12
Item 3. legal proceedings 13
Item 4. CONTROL OF REGISTRANT 13
Item 5. NATURE OF TRADING MARKET 15
ITEM 6. EXCHANGE CONTRoLS AND OTHER LIMITATIONS
AFFECTInG SECURITY HOLDERS 15
ITEM 7. TAXATION 17
ITEM 8. SELECTED FINANCIAL DATA 20
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 20
Item 10. directors and officers of the registrant 24
Item 11. compensation OF DIRECTORS AND OFFICERS 26
Item 12. OPTIONS TO PURCHASE SECURITIES FROM
REGISTRANT OR SUBSIDIARIES 26
Item 13. INTEREST OF MANAGEMENT IN
CERTAIN transactions 27
PART II
Item 14. DESCRIPTION OF SECURITIES TO BE REGISTERED 27
PART III
Item 15. DEFAULTS UPON SENIOR SECURITIES 27
Item 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR
REGISTERED SECURITIES AND USE OF
PROCEEDS 27
PART IV
Item 17. FINANCIAL STATEMENTS AND EXHIBITS 27
SIGNATURE 29
PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
GLOSSARY
The Following is a "Glossary" of the terms used throughout this
document and the Exhibits hereto, or both:
Antimony Pyrite Ore: A mineral in which sulfur exists in
combination with antimony (a metallic element, brittle, lustrous,
and white in color).
Au: Latin, aurum-symbol for gold.
Contained Ounces Represent metallic ounces contained in a
mineral wherever extraction (dilution) loss and/or processing
metallurgical recovery, both in percent, has not been calculated
in the estimated ounces contained in the mineral.
Development Concessions: A permission or a right obtained through
an agreement, from the owner of a mining property, to exploit the
mineral or the metallic values contained in the mineral deposit.
Development: The process of preparing a property containing an
established commercially minable deposit, but which is not in
production, for extraction.
Diamond Drilling: Method of exploring below the surface of the
earth by using drills equipped with diamond bits.
Exploration: The search for mineral deposits on properties
which are not in either development or production.
Feasibility Study: A document outlining the technical and
financial details of the proposed project. This document is
usually prepared for submission to a financial institution that
is considering to loan funds for the implementation of the
project.
Floatation Mill: A plant for producing concentrates from
metallic minerals through a process of crushing, grinding, and
froth flotation.
Geochemical Sampling: The sampling of rocks, stream sediments,
and soils in order to locate anomalous concentrations of ore
minerals. The samples are usually analyzed by various methods to
determine the quantities of elements or minerals in each sample.
Geophysical Survey: The exploration of an area in which physical
properties relating to geology are used. Geophysical methods
include seismic, magnetic, gravity, electromagnetic, and induced
polarization techniques.
Gpt: Grammes per ton.
Mineral Deposits: Implication that the rocks contain sulfide
minerals and that these could be related to ore.
NSR: Net smelter return.
Ore: A mixture of valuable and non-valuable minerals which can
be mined and processed to produce a mineral product which can be
sold at a profit. The valuable mineral is usually a metallic
mineral.
Ore Beds: Ore aggregations or layers occurring between or in
rocks of sedimentary origin.
Re Zones: Zones or areas within a rock mass in which ore is known
to exist.
Pressate: Waste water or wash.
Probable (Indicated) Reserves: Reserves for which quantity
and grade and/or quality are computed from information similar to
that used for proven (measure) reserves, but the sites for
inspection, sampling, measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to
assume continuity between points of observation.
Production: The process of mineral deposit exploitation.
Proven (Measured) Reserves: Reserves for which (a) quantity if
computed from dimensions revealed in outcrops, trenches,
workings, or drill holes; grand and/or quality are computed form
the results of detained sampling and (b) the sites for
inspection, sampling, and measurement are spaced so closely and
the geologic character is so well defined that size, shape,
depth, and mineral content of reserves were well-established.
Proven and Probable Reserves: Represent that part of a mineral
deposit which could be economically and legally extracted or
produced at the time of the reserve estimation.
Sb: Periodic symbol for stibium pertaining to antimony.
Ton: A unit of mass. In the UK 1 ton=2240 pound (lb).
However, in the U.S. 1 ton=2000 pound. Therefore, the former is
referred to as a long ton in the U.S.
Tonne: A unit of mass equal to 1000 kg (1 kg=2.2046 pound)
The Company.
Belmont Resources Inc. (the "Company") is an internationally
diversified natural resource company engaged in the acquisition,
exploration, and if warranted, development of its resource
properties in Slovakia. The Company was originally incorporated
in the Province of British Columbia by registration of its
Memorandum and Articles on January 18, 1978. The Company's
current focus is to move its Slovakian mining project from the
exploration and development stages to the production stage within
the next year. Currently the Company is in the development stage
and has not generated any revenues from operations.
The Company became a reporting company in British Columbia
on February 14, 1979, which was the date a receipt was issued for
the Company's final prospectus by the British Columbia Securities
Commission. The Company has 50,000,000 shares of Common stock
authorized, and as of January 31, 1999, 19,600,012 shares of
common stock issued and outstanding. The Common stock of the
Company began trading on the Vancouver Stock Exchange on
February 14, 1979 under the trading symbol "BEO."
The Company's executive head office is located at 1180-666
Burrard Street, Vancouver, B.C., Canada V6C 2X8. The contact
person in the head office is Gary Musil, Secretary. The
telephone number is (604) 683-6648 and the facsimile number is
(604) 683-1350.
On December 17, 1996, Ivan P. Liptak retired as President
of the Company and resigned from the Board of Directors.
Additionally, Jurgen T. Preuss resigned as a Director on the
Board. Messrs. Liptak and Preuss actions were taken to permit
the Company to restructure management as a result of the
Slovakian property purchase. Vojtech Agyagos, a native
Slovakian, was named as President of the Company and appointed to
the Board.
The Company prepared for trading on the NASD OTC Bulletin Board
in 1998. The Form 20-FR was accepted for filing by the U.S.
Securities and Exchange Commission in September 1998 and the
Company began trading in October 6, 1998 under the symbol BEOVF.
Business Development.
Since its inception in 1978, the Company has been
primarily engaged in the exploration and development of mineral
resource properties. During 1990, the Company acquired a 100%
interest in the Lode Mining Claims A1 to A10 located in Eureka
County, Nevada, for $5,000 U.S. The Company abandoned the
property in 1992 and wrote off $11,500 U.S., which included the
property's purchase price and accumulated costs.
During 1993, the Company entered into a letter of intent
to acquire a 100% undivided interest in a group of vanadium
mineral claims located in Eureka and Nye Counties, Nevada. Under
the proposal the Company was to pay $25,000 U.S. for the claims
and expend $10,000 U.S. in exploration and development of the
property before May 1994. The letter of intent was later
modified to include 30 claims for a total of $40,000 U.S. for the
property and $10,000 U.S. in expenditures. Regulatory approval
was obtained from the Vancouver Stock Exchange and the Company
proceeded with the acquisition of the claims. After amending the
agreement concerning the 30 claims to require the Company to pay
all costs to re-stake the original claims, and due to the decline
in the price of vanadium, the Company terminated its option.
In 1995, the Company began a long-term strategy to acquire
and develop its natural resource property in Slovakia. Pursuant
to a purchase agreement dated June 7, 1996 and finalized August
20, 1996, the Company acquired a 51% ownership interest in
Slovgold Solvakia s.r.o. ("SSSRO"), a Slovakian company
incorporated on January 9, 1996, in exchange for the issuance of
5,500,000 shares of the Company's common stock at an assigned
value of $0.85 per share, and a deemed value of $1.24 per share
by the Vancouver Stock Exchange. SSSRO through an agreement with
Rudne Bane, s.p., a Slovakia state owned mining corporation,
dated May 1, 1996, owns a 100% interest in the Pezinok II mining
concession, a gold/antimony mine and mill located in Pezinok,
Slovak Republic.
At the time the Company acquired its 51% interest in
SSSRO, SSSRO owned the mineral exploitation rights to the Pezinok
II gold/antimony property referred to as a mining concession MHSR
18143/420/91 located in the Republic of Slovakia including a
lease for the mill/concentrator land & buildings (generator
bldg., compressor bldg., warehouses, assay lab, flotation, and
concentrate hall). Through a further agreement dated May 14,
1996, Rudne Bane agreed to sell to SSSRO various underground and
surface mine equipment and mill/concentrator equipment situated
on the above property. The amount agreed was for 2,969,725
Slovak crowns (approx. $138,000 Cdn.). This transaction was
completed in October 1996. A further agreement dated October
14, 1996, was entered into between Rudne Bane and SSSRO to
purchase the mill concentrator buildings and lands on which they
are situated. The amount agreed was for 2,749,409 Slovak crowns
(approx. $128,500 Cdn.). This transaction was completed in April
1997. The Company and SSSRO are now negotiating to purchase all
the other remaining mill/concentrator site buildings and land on
which they are situated.
The specific terms of the mining concession held by SSSRO
are detailed in a translated Mining Permit dated September 30,
1996. There are no minimum development requirements, royalty
arrangements, local labor requirements, or local ownership
requirements. The Pezinok II mining concession and mine which
ceased production in June 1992 was originally the property of
Rudne Bane, a Slovak Republic state owned mining corporation.
SSSRO is owned by the former management of the Pezinok
mining concession who were granted the mineral rights and rights
to acquire the related equipment and milling operations by the
Slovakian government. Since the SSSRO acquisition, the Company
has completed registration of its interest in the Pezinok II
mining concession.
The Company gained approval for the Slovakian property
transaction from the Vancouver Stock Exchange on July 30, 1996.
The Slovakian property purchase included personal property assets
as well as real property assets including rights to the Pezinok
property which is located 4.5 kilometers North-West of the town
of Pezinok, Slovakia, which is located 22 kilometers east of
Bratislava, the capital of the Slovak Republic. Additionally,
the Slovakian purchase provided the Company with access to
experienced mining management within the Slovak Republic.
After the peaceful collapse of the Communist regime in the
then Socialist Republic of Czechoslovakia in November 1989 (known
as the Velvet Revolution), and the subsequent election of a new
government, the country redirected its socioeconomic ideology
toward pluralistic democracy and a free market economy. The
Republic of Slovakia is now an independent nation.
Slovakia was automatically granted membership into the
International Monetary Fund and the European Bank for
Reconstruction and Development following separation from the
Czech Republic. The country continues to undergo positive change
with the transformation of the country politically, socially, and
economically. The Slovak government has resolved to implement
the principles of a market economy and integration into the
European Union and has recently been granted Associate
Membership.
Of all the former Soviet bloc economies, the former
Czechoslovakia experienced the highest degree of state control,
with the almost complete absence of small scale private
enterprise. Various methods are being used for the effectual
transfer of real property ownership, including; public tenders,
public auctions, direct sales, and vouchers. Slovakian
legislation makes it possible for foreign entrepreneurs, both
individuals and legal entities, to carry out business activities
in the country under the same conditions and to the same extent
as Slovakian citizens. A foreign investor may either become co-
founder or sole proprietor (100% capital participation) of a
company in the country. He may also join an existing Slovak
legal entity or become a major partner of such legal entity.
There is no upper limit on the level of investment participation
by foreign entities in a Slovak legal business organization.
Foreign investors are guaranteed repatriation of profits and
capital from the Slovak Republic. Exploration and mining
licenses are granted by the state after consultation through
state agencies.
The basis for valuation of the Company's mining property
and its recent asset acquisitions is through an independent
valuation report (June 1996 Geological Report and Property
Evaluation the Pezinok II Gold/Antimony Property prepared by
Richard G. LaPrairie, P. Eng. and Dr. J. Duro Adamec, P. Geo.),
which contains specific information concerning the valuation.
In the valuation the Net Present Value discounted at 15% is
estimated to be $14,362,000 for 100% of the mineral rights owned
by SSSRO (or $7,324,620 as to 51% of the value). Accordingly,
the aggregate purchase price of the SSSRO Interest was 5,500,000
common shares of the Company at a deemed price of $1.24 per share
or $6,820,000.For more information concerning the Company's
property, see "Item 2: Description of Property."
SSSRO at the time it was acquired, had no history of
material revenues from mining operations. SSSRO had been
involved primarily in exploration and development of the Pezinok
property. The financial statements of SSSRO are consolidated
with those of the Company and are reported in the financial
statements attached to the Annual Report for the period ended
January 31, 1999.
In late 1997 gold and antimony prices began to fall. With
low prices causing major gold mine closures, the Company decided
to put the Pezinok property on a care and maintenance basis and
pursue other exploration activity such as oil and gas.
In March 1998, the Company entered into an agreement which
provided it with oil and gas exploration rights in an area
located in the Districts of Trebisov and Michalovce in the Slovak
Republic known as Kralovsky Chlmec. The Company owned a 90%
interest in the rights through a newly formed Slovakian entity
called Maseva Gas s.r.o. and Maseva, s.r.o., a Slovakian entity
owns a 10% interest. To proceed with exploration for oil and
gas, the Company entered into a letter of intent with EuroGas,
Inc., a publicly traded Utah corporation, to permit EuroGas with
the right to buy all of the Company's right, title, and interest
in and to the exploration concession.
On July 27, 1998, and amended October 9, 1998, the Company
signed an Acquisition Agreement with EuroGas, Inc., a Utah
corporation, whereby EuroGas acquired all of the Company's
interest in Maseva Gas s.r.o. The terms of the agreement with
EuroGas are that the Company receives 2,500,000 restricted shares
of its common stock and warrants to purchase 2,500,000 million
shares of EuroGas common stock at $2.50 U.S. per share at any
time prior to September 30, 2000. In addition, the Company will
retain a 22.5% working interest in the Maseva concession.
EuroGas will also bear the costs in connection with the drilling
of the first two new wells on the concession at no cost to the
Company. A copy of the amended agreement and warrant are
attached as Exhibit 1.1. For more information concerning the
Kralovsky Chlmec property, see "Item 2: Description of Property".
Subsequent to the year end the Company entered into an
agreement dated March 5, 1999 (see attached Exhibit 1.2) for the
right to acquire a 100% interest in 67 mineral claims in the Lac
Rocher Area, Quebec ("Lac Rocher "). The agreement provides the
Company the right to acquire a 100% interest in the Lac Rocher by
payment of $55,000 (paid) and issuance of 100,000 common shares
(paid) at a deemed price of $0.50 per share.
On March 16, 1999 the Company entered into an agreement
with Montoro Resources Inc. ("Montoro") (see attached Exhibit
1.3) whereby Montoro has been granted an option to acquire 50% of
the Company's 100% interest in Lac Rocher. In consideration,
Montoro will pay the Company $30,000 over a 2 month period, issue
50,000 common shares subject to a one-year hold period (received)
and incur $35,000 in exploration expenditures on the Lac Rocher
by September 30, 1999.
Plan of Operation.
The Company is in the business of the acquisition,
exploration, and if warranted, development of mining and oil/gas
properties. The Company, which has held various mining
interests, has recently focused its resources upon its property
interests in Slovakia. See "Item 2: Description of Property."
The Company intends to raise additional funds through private
financings, or joint ventures to permit further property
exploration and development of the Slovakian Properties, and to
move the properties into the production stage. No assurance can
be given that the Company will be able to raise the needed
capital to develop the Company's properties. Failure to raise
such financing could be detrimental to the success of the
Company. See "Item 9. Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Costs and Sources of Funding.
To date the Company's activities have been financed
primarily through the sale of equity securities. During 1997 -
fiscal year ending January 31, 1998, the Company raised $982,700
through the directors exercising of stock incentive stock options
(190,000 shares issued at $0.53; 900,000 shares issued at $0.98).
The proceeds from 1997 were used primarily to fund property
acquisitions and to pay operating costs. During 1998 - fiscal
year ending January 31, 1999, the Company raised $211,120 through
the exercise of directors/employees incentive stock options
(377,000 shares issued at $0.56 per share).
The Company will need to obtain additional funding to
pursue its business strategy during the next fiscal year. At the
present time, the Company anticipates seeking additional funding
through additional private placements, joint venture agreements,
production financing, pre-sale loans, or a combination of these
options. The Company's inability to raise additional capital to
fund operations through the remainder of this year and through
the next fiscal year would have a detrimental effect on the
Company's viability and capability to pursue its business plan.
No assurance can be given that the Company will be able to
raise sufficient proceeds to provide adequate funds to undertake
the Company's planned expansion for the next twelve months.
Governmental Approval.
The Company has obtained all necessary governmental
approvals for development of its properties in the Slovak
Republic. If additional approvals are necessary for any
development in the future, the Company intends to provide all the
necessary information to regulatory authorities and adjust its
development plans to enable it to obtain any requisite approvals.
In the event the Company is not able to obtain the necessary
approvals, the Company's development plans and operations could
be negatively impacted.
Governmental Regulation.
The mining and oil/gas industries are regulated in the
Slovak Republic. The Company currently believes its operations
in Slovakia are in compliance with all governmental regulations,
and it intends to comply with all governmental regulations as it
continues to explore, develop, and, if possible, exploit its
property.
Employees.
As of January 31, 1999, the Company and its subsidiary,
SSSRO, had no employees. The Company utilizes the services of
various individuals on a consulting basis. The Company considers
its labor relations to be excellent.
Risk Factors and Special Considerations.
Potential Profitability of Mining and Oil/Gas Ventures
Depends Upon Factors Beyond the Control of the Company. The
potential profitability of mineral properties and oil/gas
concessions is dependent upon many factors beyond the Company's
control. For instances, world prices of and markets for non-
precious and precious metals and minerals, oil and gas are
unpredictable, highly volatile, potentially subject to
governmental fixing, pegging, controls, or any combination of
these three, and respond to changes in domestic, international,
political, social, and economic environments. Additionally, due
to worldwide economic uncertainty, the availability and cost of
funds for production and other expenses have become increasingly
difficult, if not impossible, to project. These changes and
events may materially affect the financial performance of the
Company.
Competitiveness of Mining and Oil/Gas Industries. The
mining and oil/gas industries are intensely competitive. The
Company competes with numerous individuals and companies,
including many major mining and oil/gas companies, which have
substantially greater technical, financial, and operational
resources and staffs. Accordingly, there is a high degree of
competition for desirable mining leases, suitable prospects for
drilling operations and necessary mining equipment, as well as
for access to funds. There can be no assurance that the
necessary funds can be raised or that any projected work will be
completed.
Fluctuating Price and Demand. The marketability of natural
resources which may be acquired or discovered by the Company will
be affected by numerous factors beyond the control of the
Company. These factors include market fluctuations in pricing
and demand, the proximity and capacity of natural resource
markets and processing equipment, governmental regulations, land
tenure, land use, regulation concerning the importing and
exporting of minerals, and environmental protection regulations.
The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may result in the Company
not receiving an adequate return on invested capital to be
profitable or viable.
Comprehensive Regulation of Mining and Oil/Gas Industries.
Mining and oil/gas operations are subject to federal, provincial
and local laws relating to the protection of the environment,
including laws regulating removal of natural resources from the
ground and the discharge of materials into the environment.
Mining and oil/gas operations are also subject to federal,
provincial, and local laws and regulations which seek to maintain
health and safety standards by regulating the design and use of
methods and equipment. Various permits from government bodies
are required for operations to be conducted; no assurance can be
given that such permits will be received. No assurance can be
given that environmental standards imposed by federal,
provincial, or local authorities will not be changed or that any
such changes would not have material adverse effects on the
Company's activities. Moreover, compliance with such laws may
cause substantial delays or require capital outlays in excess of
those anticipated, thus causing an adverse effect on the Company.
Additionally, the Company may be subject to liability for
pollution or other environmental damages, which it may elect not
to insure against due to prohibitive premium costs and other
reasons.
Financial Considerations. The Company's decision as to
whether its property contains commercial mineral deposits and
whether its concession contains commercial oil/gas and should be
brought into production will require substantial funds and depend
upon the results of exploration programs and feasibility studies
and the recommendations of duly qualified engineers, geologists,
or both. This decision will involve consideration and evaluation
of several significant factors including, but not limited to; (1)
costs of bringing a property into production, including
exploration and development work, preparation of production
feasibility studies, and construction of production facilities;
(2) availability and costs of financing; (3) ongoing costs of
production; (4) market prices for the Products to be produced;
(5) environmental compliance regulations and restraints; and (6)
political climate, governmental regulation and control, or both.
Risks Associated with Mining and Oil/Gas. Mining and
oil/gas operations generally involve a high degree of risk.
Hazards such as unusual or unexpected geological formations,
power outages, labor disruptions, flooding, explosions, rock-
bursts, cave-ins, landslides, inability to obtain suitable or
adequate machinery, equipment or labor, and other risks are
involved. The Company may become subject to liability for
pollution, cave-ins, or hazards against which it cannot
adequately insure or which it may elect not to insure. Incurring
any such liability may have a material adverse effect on the
Company's financial position and operations.
Foreign Countries and Regulatory Requirements. The
Company's properties are located in the Slovak Republic where
mineral and oil/gas exploration activities may be affected by
varying degrees of political instability, terrorism, military
repression, and haphazard changes in government regulations such
as tax laws, business laws, and mining laws. Any changes in
regulations or shifts in political conditions are beyond the
control of the Company and may adversely affect its business.
Operations may be affected in varying degrees by government
regulations with respect to restrictions on production, price
controls, export controls, income taxes, expropriation of
property, environmental legislation, and mine safety.
Additionally, although the Company has investigated the title to
its properties in the Slovak Republic and is satisfied that it
holds title under Slovakian laws, the Company cannot guarantee
title. Title to and the extent of mining applications and titles
may be disputed and the title to mining properties in Slovakia
may be subject to unregistered encumbrances, transfers, title
defects, and historical claims of indigenous persons. The
Company is presently unaware of any specific concerns with
operating in the Slovak Republic. The general risks referenced
reflect political turmoil present in many countries during the
restructuring of the Eastern Bloc countries during the past two
decades.
Currency Fluctuations. The Company maintains its accounts
in Canadian and Slovakian currencies. The Company's operations
in Canada and the Slovak Republic make it subject to foreign
currency fluctuations and such fluctuations may materially affect
the Company's financial position and results. Future revenues
and expenses will be denominated in Canadian, U.S., and Slovakian
currencies. Currency markets have been relatively unstable over
the past two years and are anticipated to remain unstable in the
near to mid-term. If the Company's Slovakian property is brought
into production, the sale of production commodities will most
likely be denominated in U.S. dollars. The Company does not
maintain significant monetary assets or liabilities denominated
in Slovakian Crowns. Fluctuations in the rates of currencies for
both U.S. and Slovakian currencies could have a material impact
on the results of operations and financial position of the
Company when reported in Canadian currency. The Company does not
engage in currency hedging activities. The Company is not aware
of any current or anticipated factors which would cause the
currency to fluctuate substantially.
Foreign Investment Policies. Currently there are no
restrictions on the repatriation of profits from Slovakia to
Canada. In addition the Slovak government has implemented the
principals of a market economy and integration into the European
Union and has been granted Associate Membership. The Slovak
Republic is also a member of the International Monetary Fund and
the European Bank. In the event Slovakia acts to enact
restrictions on the repatriation of profits, such action could
have a materially adverse effect on the Company's Slovakian
operation.
Key Personnel. The Company depends on its President Vojtech
Agyagos, born and raised in Slovakia, who was instrumental in
arranging this acquisition and negotiating further equipment and
land purchases. The loss of his management services would have a
material effect on the Company particularly relating to the
Company's activities in Slovakia. The Company does not maintain
key man insurance on the lives of any of its management or
employees.
Currency and Exchange Rates.
All dollar amounts set forth in this report are in
Canadian dollars, except where otherwise indicated. The
following table sets forth (i) the rates of exchange for the
Canadian dollar, expressed in U.S. dollars, in effect at the end
of each of the periods indicated; (ii) the average exchange rates
in effect on the last day of each month during such periods;
(iii) the high and low exchange rate during such periods, in each
case based on the noon buying rate in New York City for cable
transfers in Canadian dollars as certified for customs purposes
by the Federal Reserve Bank of New York.
1998 1997 1996
Rate at end of Period .6507 .6969 .7300
Average Rate During Period .6748 .7229 .7332
High Rate .7121 .7472 .7524
Low Rate .6307 .6969 .7219
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's right, title, or claim to its properties and
its location, history of known previous operations, present
condition, notable rock formations and mineralization, intended
exploration and development, reserves data, and the nature and
state of equipment located at the property is as follows:
(a) Pezinok Property, Slovak Republic.
The following is a summary taken from a geological report
and property evaluation by Richard G. LaPrairie P.Eng. and Dr.
Juraj (Duro) Adamec P. Geo dated July 25, 1996 and submitted as
Exhibit filed with the original 20-FR. The report covers the
Pezinok II property and Company believes that the summary of the
report is fair and accurate.
The Pezinok property (the "Property") is located 4.5 km north-
west of the town of Pezinok, Slovakia, which is itself 22 km east
of Bratislava, the capital of the Slovak Republic. The Property
is accessible by paved road from Pezinok. Bratislava, Slovakia,
is the nearest major city to the Property and it is a 40 minute
drive from the Vienna, Austria International Airport. Supplies,
equipment, and labor are available in Pezinok.
The Pezinok mine is located in the foothills of the
Karpaty mountains. The valleys are located at an elevation of
250 meters above sea level and the peaks obtain an elevation of
about 400 meters. The mine area is covered by a stand of heavy
timber and the surrounding lands are used for growing grapes.
Drilling and underground development on the Property has
outlined a proven ore body containing 965,065 tons of proven ore
grading 3.76 g/t of gold and 0.28% antimony. The vein has a
strike length of one kilometer on the Property and is continuous
on to the adjacent properties. It has been traced over a total
strike length of three kilometers. Total tonnage proven and
probable reserves on the Property are estimated at 1,564,888
tons. The gold vein is near vertical and has an average width of
5.69 meters. The vein carrying the gold values is paralleled by
a similar vein that was mined for antimony ore. The Company
believes that there is potential for the delineation of
additional resources on other unexplored sub-parallel structures
on the Property.
The Company is inviting joint venture partners to fund further
metallurgical testing work, partners who have financial resources
and expertise, with the Company retaining an interest in the
project.
(b) Kralovsky Chlmec Exploration Territory, Slovak Republic.
The Kralovsky Chlmec exploration territory in eastern
Slovak Republic comprises a 849.7 Km2 (209,950 acres) area,
located in the Districts of Trebisov and Michalovce. The
concession area is south and adjacent to the Trebisov area on
which EuroGas/Nafta has drilled six wells and has engaged a
petroleum engineering firm to prepare a reserve analysis on the
Trebisov reservoir.
During 1998 the Company commissioned an evaluation report by
Geological Exploration and Environmental Research Services Ltd.
("GEOMEGA") of Budapest, Hungary coordinated by Dr. Frerenc
Horvath. GEOMEGA recommended that a 3D seismic survey be
completed over 360 Km2 of the concession. This extensive report
has been turned over to Maseva Gas/EuroGas, the operator, for
review and outline of a work program and related budget for 1999.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such action by
or against the company has been threatened.
ITEM 4. CONTROL OF REGISTRANT.
The Company's securities are recorded on the books of its
transfer agent in registered form. The majority of such shares
are, however, registered in the name of intermediaries such as
brokerage houses and clearing houses on behalf of their
respective clients. The Company does not have knowledge of the
beneficial owners thereof. To the best of its knowledge the
Company is not directly nor indirectly owned or controlled by
another corporation(s) or by a foreign government.
The following table sets forth information regarding the
beneficial ownership of shares of the Company's Common Stock as
of June 16, 1999 by (i) all stockholders known to the Company to
be beneficial owners of more than 5% of the outstanding Common
Stock; (ii) each director; and (iii) all officers and directors
of the Company as a group. Except as may be otherwise indicated
in the footnotes to the table, each person has sole voting power
and sole dispositive power as to all of the shares shown as
beneficially owned by them.
Name of Common Stock Percent
Beneficial Owner (1) Beneficially Owned (2) Owned (3)
Slovgold Mining A.G. (4) 5,500,000 27.83%
CDS & Co. (5) 3,700,494 18.72%
CEDE & Co.(5) 8,853,918 44.80%
All officers
and Directors (6) 1,098,000 5.55%
as a group (six total)
(1) Unless otherwise noted, the Company believes that all Shares are
beneficially owned and that all entities or persons named in the
table or their family members have sole voting and investment
power with respect to all Shares owned by them.
(2) Each group is deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date
hereof upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that
options or warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60
days from the date hereof, have been exercised.
(3) Assumes 19,764,012 Shares outstanding plus, for each group, any
securities that specific person has the right to acquire upon
exercise of presently exercisable stock options and warrants.
Options and warrants held by persons other than the specific
individual for whom an ownership interest percentage is being
calculated are not considered in calculating that specific
individual's ownership interest percentage.
(4) The beneficial holders of the shares held by this company
are Salvatore Capuano, Kurt Peutl, Claudio Galluzzi, Matthias
Bunzli and Gerard J. Sieger controlling 20% each.
(5) The beneficial owners of CDS & Co. and CEDE & Co. are
unknown to the Company and its Officers and Directors.
(6) Includes 894,000 options outstanding held by the Officers
and Directors of the Company.
There are no voting agreements or similar arrangements
(formal, informal, written, or oral) known to management to
exist.
ITEM 5. NATURE OF TRADING MARKET.
The Company's securities are currently traded on the
Vancouver Stock Exchange under the symbol "BEO." The following
table sets forth, for the period from January 1, 1998 through
December 31, 1998, the high and low trades for the Common stock
as reported by the National Quotation Bureau Incorporated (the
Company has only one class of capital stock, common shares
without par value):
Calendar Quarter Trading Quotations (high-low)
1998 (Cdn$) 1997 (Cdn$)
High Low High Low
First 1.10 0.44 1.55 0.95
Second 1.14 0.70 1.61 0.87
Third 1.19 0.55 1.12 0.81
Fourth 0.75 0.46 1.39 0.44
The Company's securities began trading on the NASD OTC
Bulletin Board market under the symbol "BEOVF" on October 6,
1998. For the period October 6, 1998 through December 31, 1998,
the trades ranged from a low of $0.30 USD and a high of $0.49 USD
per share.
The Company's securities are recorded on the books of its
transfer agent in registered form. As of June 16, 1999 the
approximate number of record holders of the Company's Common
stock was 1,109, 1,051 of which are United States shareholders of
record holding a total of 4,792,193 shares, or approximately
24.2% of the outstanding class. Some of the outstanding shares
of the Company are, however, registered in the name of
intermediaries such as brokerage houses and clearing houses on
behalf of their respective clients. The Company does not have
knowledge of the beneficial owners thereof.
The Company has not paid any cash dividends on its Common
stock since its incorporation and anticipates that, for the
foreseeable future, earnings, if any, will continue to be
retained for use in its business.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY HOLDERS.
Canada has no system of exchange controls. There are no
exchange restrictions on borrowing from foreign countries nor on
the remittance of dividends, interest, royalties and similar
payments, management fees, loan repayments, settlement of trade
debts, or the repatriation of capital. The Investment Canada Act
(the "Act") enacted on June 20, 1985, as amended by the Canada-
United States Free Trade Agreement Implementation Act (Canada),
requires the prior notification and, in certain cases, advance
review and approval by the Government of Canada of the
acquisition by a "non-Canadian" of "control" of a "Canadian
business," all as defined in the Act. For the purposes of the
Act, "control" can be acquired through the acquisition of all or
substantially all of the assets used in the Canadian business, or
the direct or indirect acquisition of interests in an entity that
carries on a Canadian business or which controls the entity which
carries on the Canadian business. Under the Act, control of a
corporation is deemed to be acquired through the acquisition of a
majority of the voting shares of a corporation, and is presumed
to be acquired where more than one-third, but less than a
majority, of the voting shares of a corporation are acquired,
unless it can be established that the corporation is not
controlled in fact through the ownership of voting shares. Other
rules apply with respect to the acquisition of non-corporate
entities. Under the Act, the Company is considered a Canadian
business.
Investments requiring review and approval include direct
acquisitions of Canadian businesses with assets with a gross book
value of $5,000,000 or more; indirect acquisitions of Canadian
businesses with assets of $50,000,000 or more; and indirect
acquisitions of Canadian businesses where the value of assets of
the entity or entities carrying on business in Canada, control of
which is indirectly being acquired, is greater than $5,000,000
and represents greater than 50% of the total value of the assets
of all of the entities, control of which is being acquired.
Subject to certain exceptions, where an investment is made by an
"American," or the vendor of the Canadian business is an
"American" (as defined in the Act), the monetary thresholds
discussed above are higher. In these circumstances the monetary
threshold with regard to direct acquisitions is $150,000,000 in
constant 1992 dollars as determined in accordance with the Act.
The monetary threshold for indirect acquisitions, where the value
of the assets of the entity or entities carrying on business in
Canada is greater than 50% of the total value of the assets of
all of the entities being acquired, is $150,000,000 in constant
1992 dollars as determined in accordance with the Act. Other
indirect acquisitions of Canadian businesses by or from Americans
are not subject to review.
An "American", as defined under the Act, includes an
individual who is a national of the United States or is lawfully
admitted for permanent residence within the meaning of the
Immigration and Nationality Act of the United States, and a
corporation that is controlled by an American in accordance with
the Act. Special rules apply with respect to investments by non-
Canadians to acquire control of Canadian businesses that engage
in certain specified activities, including financial services,
transportation services, and activities relating to Canada's
cultural heritage or national identity. If an investment is
reviewable, an application for review in the form prescribed by
regulation is normally required to be filed with the Agency
(established by the Act) prior to the investment taking place and
the investment may not be consummated until the review has been
completed and ministerial approval obtained. Applications for
review concerning indirect acquisitions may be filed up to 30
days after the investment is consummated. Applications concerning
reviewable investments in culturally sensitive and other
specified activities referred to in the preceding paragraph are
required upon receipt of a notice for review. There is, moreover,
provision for the Minister (a person designated as such under the
Act) to permit an investment to be consummated prior to
completion of review if he is satisfied that delay would cause
undue hardship to the acquirer or jeopardize the operation of the
Canadian business that is being acquired.
The Agency will submit the application for review to the
Minister, together with any other information or written
undertakings given by the acquirer and any representation
submitted to the Agency by a province that is likely to be
significantly affected by the investment. The Minister will then
determine whether the investment is likely to be of "net benefit
to Canada," taking into account the information provided and
having regard to certain factors of assessment prescribed under
the Act. Among the factors to be considered are: (i) the effect
of the investment on the level and nature of economic activity in
Canada, including the effect on employment, on resource
processing, on the utilization of parts, components and services
produced in Canada, and on exports from Canada; (ii) the degree
and significance of participation by Canadians in the Canadian
business and in any industry in Canada of which it forms a part;
(iii) the effect of the investment on productivity, industrial
efficiency, technological development, product innovation, and
product variety in Canada; (iv) the effect of the investment on
competition within any industry or industries in Canada; (v) the
compatibility of the investment with national industrial,
economic and cultural objectives enunciated by the government, or
legislature of any province likely to be significantly affected
by the investment; and (vi) the contribution of the investment to
Canada's ability to compete in world markets.
Within 45 days after a completed application for review
has been received, the Minister must notify the investor that (a)
he is satisfied that the investment is likely to be of "net
benefit to Canada," or (b) he is unable to complete his review in
which case he shall have 30 additional days to complete his
review (unless the investor agrees to a longer period) or (c) he
is not satisfied that the investment is likely to be of "net
benefit to Canada."
If the Minister is unable to complete his review and no
decision has been taken within the prescribed or agreed upon
time, the Minister is deemed to be satisfied that the investment
is likely to be of "net benefit to Canada."
Where the Minister has advised the investor that he is not
satisfied that the investment is likely to be of net benefit to
Canada, the acquirer has the right to make representations and
submit undertakings within 30 days of the date of the notice (or
any further period that is agreed upon between the investor and
the Minister). On the expiration of the 30-day period (or an
agreed extension), the Minister must notify the investor whether
or not he is satisfied that the investment is likely to be of
"net benefit to Canada." In the latter case, the investor may not
proceed with the investment or, if the investment has already
been consummated, must relinquish control of the Canadian
business.
ITEM 7. TAXATION.
Canadian Federal Income Taxation.
The following discussion is a summary of the principal
Canadian federal income tax considerations generally applicable
to purchasers of the Company's Common stock pursuant to this
registration who, for purposes of the Income Tax Act (Canada)
(the "Canadian Act"), deal at arm's length with the Company, hold
shares of Common stock as capital property, are not residents of
Canada at any time when holding Common stock, and do not use or
hold and are not deemed to use or hold Common stock in or in the
course of carrying on business in Canada.
This summary is based on the current provision of the
Canadian Act, the regulations thereunder and the Canada-United
States Income Tax Convention (1980) (the "Treaty") as amended.
This summary takes into account specific proposals to amend the
Canadian Act and the regulations thereunder publicly announced by
the Minister of Finance prior to the date hereof and the
Company's understanding of the current published administrative
and assessing practices of Revenue Canada, Taxation. This summary
does not take into account Canadian provincial income tax laws or
the income tax laws of any country other than Canada.
A shareholder of the Company will generally not be subject
to tax pursuant to the Canadian Act on a capital gain realized on
a disposition of Common stock unless the Capital Stock is
"taxable Canadian property" to the shareholder for purposes of
the Canadian Act and the shareholder is not eligible for relief
pursuant to an applicable bilateral tax treaty. The Capital Stock
will not be taxable Canadian property to a shareholder provided
that the Company is a "public corporation" within the meaning of
the Canadian Act and provided that such shareholder, or persons
with whom such shareholder did not deal at arm length (within the
meaning of the Canadian Act), or any combination thereof, did not
own 25% or more of the issued shares of any class or series of
the Company at any time within five years immediately preceding
the date of disposition. The Company has qualified and elected to
be a "public corporation" within the meaning of the Canadian Act.
In addition, the Treaty will generally exempt a shareholder who
is a resident of the United States for purposes of the Treaty
from tax in respect of a disposition of Common stock provided
that the value of the shares of the Company is not derived
principally from real property (including resource property)
situated in Canada and provided such shareholder does not have
and has not had within the 12-month period preceding the
disposition a permanent establishment or fixed base available to
such shareholder in Canada.
Any dividend, including stock dividends, paid or credited,
or deemed to be paid or credited, by the Company to a shareholder
will be subject to Canadian withholding tax at the rate of 25% on
the gross amount of the dividend, subject to the provisions of
any applicable income tax convention. Pursuant to the Treaty, the
rate of withholding tax generally will be reduced to 15% in
respect of dividends paid to a shareholder who is a resident of
the United States for purposes of the Treaty and further reduced
to 5% if the beneficial owner of the shares is a corporation
owning at least 10% of the voting shares of the Company. The
reduction to 5% for corporations owning at least 10% of the
voting shares of the Company is phased in at 7% for dividends
paid before 1996 and at 6% for dividends paid before 1997.
United States Taxation.
For federal income tax purposes, an individual who is a
citizen or resident of the United States or a domestic
corporation ("U. S. Taxpayer") will recognize a gain or loss on
the sale of the Company's Common stock equal to the difference
between the proceeds from such sale and the adjusted cost basis
in the Common stock. The gain or loss will be a capital gain or
capital loss if the Company's Common stock is a capital asset in
the hands of the U.S. Taxpayer.
For federal income tax purposes, a U.S. Taxpayer will be
required to include in gross income dividends received on the
Company's Common stock. A U.S. Taxpayer who pays Canadian tax on
a dividend on the Common stock will be entitled, subject to
certain limitations, to a credit (or alternatively, a deduction)
against federal income tax liability. A domestic corporation that
owns at least 10% of the voting stock of the Company should
consult its tax advisor as to applicability of the dividends
received deduction or deemed paid foreign tax credit with respect
to dividends paid on the Company's Common stock.
For any taxable year of the Company, if at least 75% of
the Company's gross income is "passive income" (as defined in the
Internal Revenue Code of 1986, as amended (the "Code")), or if at
least 50% of the Company's assets, by average fair market value,
are assets that produce or are held for the production of passive
income, the Company will be a Passive Foreign Investment Company
("PFIC"). There can be no assurance that the Company will not be
determined to be a PFIC in its current or future taxable years.
If the Company is a PFIC for any taxable year during which
a U.S. Taxpayer owns any Common stock, the U.S. Taxpayer will be
subject to special U.S. federal income tax rules, set forth in
Sections 1291 to 1297 of the Code, with respect to all of such
U.S. Taxpayer's Common stock. For example, gifts, exchanges
pursuant to corporate reorganizations, and use of the Common
stock as security for a loan may be treated as taxable
disposition, and a stepped-up basis upon the death of such a U.S.
Taxpayer may not be available. Furthermore, in the absence of an
election by such U.S. Taxpayer to treat the Company as a
"qualified electing fund" (the "QEF election"), as discussed
below, the U.S. Taxpayer would be required to (i) report any gain
on disposition of any Common stock as ordinary income rather
than capital gain, (ii) to compute the tax liability on such gain
and on certain distributions as if the items had been earned pro
rata over the U.S. Taxpayer's holding period (or a certain
portion thereof) for the Common stock and (iii) would be subject
to the highest ordinary income tax rate for each taxable year of
the U.S. Taxpayer in which the items were treated as having been
earned. Such U.S. Taxpayer would also be liable for interest
(which may be non-deductible by certain U.S. Taxpayers) on the
foregoing tax liability as if such liability had been due with
respect to each such prior year.
If the Company is a PFIC for any taxable year during which
a U.S. Taxpayer owns any Common stock, the adverse taxation of
disposition gains and certain distributions may be avoided by any
U.S. Taxpayer who makes a QEF Election on or before the due date
(including extensions) for filing such U.S. Taxpayer's tax return
for such taxable year. Such a U.S. Taxpayer would be taxed on
dividends and capital gains as if the Company had never been a
PFIC, but would also be taxed on its pro-rata share of the
Company's earnings and profits for the Company's taxable year in
which it was (or was treated as) a PFIC and which ends with or
within such U.S. Taxpayer's taxable year, regardless of whether
such amounts are actually distributed by the Company. Should such
an election be made (and if the Company is a PFIC, U.S. Taxpayers
are strongly urged to consider this special election), there are
a number of specific rules and requirements applicable thereto,
and such an electing U.S. Taxpayer is strongly urged to consult
his own tax advisor in that regard.
The foregoing discussion of Canadian taxation and United
States taxation is of a general and summary nature only and is
not intended to be, nor should it be considered to be, legal or
tax advice to any particular shareholder. Accordingly,
prospective investors should consult their own tax advisors as to
the tax consequences of receiving dividends from the company or
disposing of their common stock.
ITEM 8. SELECTED FINANCIAL DATA.
The selected financial data of the Company for the fiscal
years ended January 31, 1999, 1998, 1997, 1996, and 1995 was
derived from the financial statements of the Company which have
been audited by Dale, Matheson, Carr-Hilton, Independent
Chartered Accounts. The financial data for the fiscal years
1999, 1998, and 1997 is included in the Company's audited reports
which are attached as Exhibits to this Form 20-F. The audited
information in the Summary Financial Data Chart was extracted
from the more detailed consolidated financial statements and
related notes included herein and should be read in conjunction
with such financial statements. The audited data in the
following table was derived from financial statements prepared in
accordance with Canadian Generally Accepted Accounting Principals
("Canadian GAAP"); reference is made to Financial Statement Notes
for a discussion of the material differences between Canadian
GAAP and U.S. GAAP, and their effect on the Company's financial
statements. Footnote 16 to Financial Statements sets forth the
material differences between U.S. GAAP and Canadian GAAP for the
audited selected financial data of the Company for the fiscal
years 1999, 1998, 1997, 1996, and 1995.
Year Year Year Year Year
Ended Ended Ended Ended Ended
1/31/99 1/31/98 1/31/97 1/31/96 1/31/95
Canadian GAAP
Revenue $5,458,032 $ 5,562 $ 7,104 $ 0 $ 491
Net Profit (Loss) 5,221,816 (437,456) (246,538) (50,091) (52,938)
Per Share 0.27 (0.01) (0.02) (0.01) (0.01)
Actual Outst.
Shares 19,600,012 19,223,012 18,133,012 9,963,112 9,828,112
Dividends nil nil nil nil nil
Total Assets 11,595,739 6,170,105 5,598,377 86,556 127,574
Shareholder
Equity 10,432,662 6,108,166 5,562,922 62,721 92,562
U.S. GAAP
Weighted Ave
Shares* 20,548,012 21,011,012 14,321,580 9,843,208 9,803,537
Net Profit
(Loss) 5,221,816 (437,456) (246,538) 50,091 52,938
Per Share 0.25 (0.02) (0.017) (0.005) (0.01)
Total Assets 11,595,739 6,170,105 5,593,477 86,556 127,574
Shareholder
Equity 10,432,662 6,108,166 5,562,922 62,721 92,662
* Stock Options, Warrants, and other similar instruments are
considered to be common stock equivalents ("CSE's") at all
times; however, as the inclusion of CSE's has the effect of
decreasing the loss per share, CSE's are excluded from the Net
Loss Per Share computation.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements of the Company and notes thereto contained
elsewhere in this report.
Results of Operations.
The Company focused its attention and resources during the
years ended January 31, 1997 and 1998 upon the SSSRO acquisition
which represented a major step in the Company's plan to move from
exploration and development into production. The Company's
interest in SSSRO began during 1996, during which the Company
developed a long-term strategy to acquire and develop the
Slovakian property. Pursuant to a purchase agreement dated June
7, 1996 and finalized August 20, 1996, the Company acquired a 51%
ownership interest in SSSRO in exchange for the issuance of
5,500,000 shares of the Company's common stock at an assigned
value of $0.85 per share, and a deemed value of $1.24 per share
by the Vancouver Stock Exchange.
The assets of SSSRO upon acquisition consisted of $152,348
in cash, $153,659 in accounts receivable, $4,918,817 in mineral
property rights, ($200,000) in inter-company advances, ($100,997)
in accounts payable, and ($8,673) in various expenses for a total
value of $4,915,154. The Pezinok property contributes all of the
$5,339,126 carried as resource property assets. For more
information concerning the Pezinok property, see "Item 2:
Description of Property."
The SSSRO property acquisition accounted for the majority
of all changes in line item operating results during the fiscal
years 1998 and 1997. To date, including fiscal 1999 and 1998, the
Company has not generated any operating income. All revenues for
past years relate solely to interest revenues on the Company's
term deposits.
The Company anticipates expending approximately $50,000
throughout fiscal year 2000 on care and maintenance to maintain
its good standing on the Pezinok Mine property . The Company's
total capital needs are predicated by the current general
administrative expenses and by the budgeted
exploration/development expenditures. One source of funds
presently available to the Company is through the sale of equity
capital. Another alternative for the financing of further
exploration/development would be an offering by the Company of an
interest in its property to be earned by another party or parties
carrying out further exploration/development to commercial
production. The Company is currently exploring such joint
venture opportunities.
Fiscal 1999 Compared with Fiscal 1998 During fiscal year
1999, general and administrative costs were $236,216 compared to
$266,547 for the comparable period the previous year, a decrease
of $30,331 or 11.4% The net decrease is comprised primarily of
increases and decreases in certain categories as follows:
Decreases of $3,665 in audit and accounting, $4,281 in legal
fees, $8,025 in travel and promotion, $43,923 in project
investigation costs; Increases of $4,000 in management fees, and
$5,684 in shareholder information; and other line item increases
and decreases under $3,000.
During fiscal year 1999, the Company also experienced a
foreign exchange loss of $2,419 ($4,241 in 1998) which was due to
general currency fluctuations. The Company maintains accounts in
Canadian, Slovakian, and U.S. currencies to be able to
effectively conduct business in each of the countries. The
Company does not consider the currency loss material to
operations.
The Company incurred $284,750 in costs relating to the
acquisition of the Maseva Gas interest. All costs incurred up to
the date of disposition have been reversed in the accounts
against the sale proceeds value assigned to the 2,500,000 shares
of EuroGas, Inc. received. The Company is holding the shares for
resale as an investment in securities.
Fiscal 1998 Compared with Fiscal Year 1997. During fiscal
year 1998, general and administrative costs were $266,547
compared to $253,642 for the comparable period last year, an
increase of $12,905 or 5%. The net increase is comprised
primarily of increases and decreases in certain categories as
follows: an increase of $11,621 in audit and accounting
expenses, a decrease of 21,959 in legal fees, an increase of
$32,500 in management fees, an increase of $45,000 in project
investigation charges, a decrease of $32,973 in travel and
promotion and other line item increases and decreases under
$10,000. Each of the line item changes are attributable to the
SSSRO acquisition which required a significant amount of travel
during 1996 for due diligence because of the property's location
in Europe and the subsequent follow through items conducted
during 1997. The property location also resulted in a general
increase in management and administration costs.
The Company also incurred project investigation charges of
$45,000 related to completion of a due diligence assessment
report on an oil and gas concession. During October 1997 the
Company entered into an agreement with EuroGas Inc. to acquire an
interest in the concession. Upon review of the report, the
Company decided not to proceed with the concession. Two property
acquisitions, the Nevada property and the AMI3 property, were
written-off by the Company during fiscal year 1998. Based upon
work performed on the two properties and the attendant probable
return of investment on the properties, the Company determined
further resources would not be expended.
Liquidity and Capital Requirements.
The Company's financial performance is dependent on many
external factors. World prices and markets for metals, minerals,
oil and gas are cyclical, difficult to predict, volatile, subject
to government fixing, pegging, or control, and respond to changes
in domestic and international political, social, and economic
environments. Additionally the availability and costs of funds
for production and other costs are increasingly difficult to
project. All of these factors can materially affect the
financial performance of the Company.
To date the Company's activities have been financed
primarily through the sale of equity securities. During the year
1997 - fiscal year ending January 31, 1998 the Company issued
1,090,000 shares upon the exercising of incentive stock options
which netted the Company treasury $982,700.
During the year 1998 - fiscal year ending January 31, 1999
the Company issued 377,000 shares upon the exercising of
incentive stock options which netted the Company treasury
$211,120.
During 1996, the Company completed a private placement of
1,000,000 units at $0.44 per unit for a total of $440,000 before
costs. Each unit consisted of one share of common stock and one
purchase warrant for the purchase of one share at $0.44 per share
if exercised on or before May 2, 1997 and at $0.52 per share if
exercised on or before May 2, 1998. The proceeds from the 1996
offering were used primarily to fund mineral property
acquisitions and to pay operating costs.
The Company will need to obtain additional funding to
pursue its business strategies during the next fiscal year. At
the present time, the Company anticipates seeking funding through
additional private placements, joint venture agreements,
production financing, pre-sale loans, or a combination of these
options. The Company's inability to raise additional capital to
fund operations through the remainder of this year and through
the next fiscal year may have a detrimental effect on the
Company's viability and capability to pursue its business plan.
In an effort to ensure adequate working capital throughout
the year, the Company attempts to raise capital through private
means each time that the current assets (cash and accounts
receivable) drop to a level below the prior year's general and
administrative costs. The Company intends to continue to raise
private placement capital to supply working capital; although,
the Company cannot warrant its ability to raise all necessary
capital. The inability to raise working capital would have a
material adverse effect on the Company's operations. In the
event capital cannot be raised, the Company will limit the level
of exploration expenditures while it seeks to raise capital.
No assurance can be given that the Company will be able to
raise sufficient proceeds to provide adequate funds to undertake
the Company's planned expansion for the next twelve months.
Year 2000 Issue.
The Year 2000 issue arises because many computerized
systems use two digits rather than four to identify a year. Date
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using the year
2000 date is processed. In addition, similar problems may arise
in some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant system failure which
could affect the Company's ability to conduct normal business
operations. This creates potential risk for all companies, even
if their own computer systems are Year 2000 compliant. It is not
possible to be certain that all aspects of the Year 2000 issue
affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully
resolved.
The Company has identified all significant applications
that will require modification to address the Year 2000 issue.
Internal and external resources are being used to make the
required modifications and test Company systems for the year
2000. The modifications process of all significant applications
is substantially complete, and the Company intends to complete
modifications and conduct testing by the end of 1999.
Forward Looking Statements.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, and as contemplated under the
Private Securities Litigation Reform Act of 1995, including
statements regarding, among other items, the Company's business
strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and
the industry in which it operates. The words "believe,"
"expect," "anticipate," "intends," "forecast," "project," and
similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and
uncertainties, certain of which are beyond the Company's control.
The Company cautions that these statements are further qualified
by important factors that could cause actual results to differ
materially from those in the forward looking statements,
including, among others, the following: reduced or lack of
increase in demand for the Company's products, competitive
pricing pressures, changes in the market price of ingredients
used in the Company's products and the level of expenses incurred
in the Company's operations. In light of these risks and
uncertainties, there can be no assurance that the forward-looking
information contained herein will in fact transpire or prove to
be accurate. The Company disclaims any intent or obligation to
update "forward looking statements".
PART III.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
Directors and Executive Officers.
The names, ages and positions of the Company's Directors
and executive officers as of January 31, 1999 are listed below:
Name Age Position with Nationality First
the Company Elected
Vojtech Agyagos 55 President, Director Canadian 1996
Gary Musil 48 Secretary, Director Canadian 1992
Kenneth B. Liebscher 56 Director Canadian 1992
Peter John 44 Director German 1996
Peter E. Serck 63 Director Canadian 1996
Nicolo Bellanca 41 Director Italian 1996
Vojtech Agyagos has served as the President and a Director
since December 1996. Mr. Agyagos has been self-employed as a
consultant and manager to companies involved in the acquisition
and development of resource properties since July 1991. From
1982 to 1985 and from 1985 to 1991 he served as the President and
a Director of Inter-Globe Resources and Stanholm Resources
respectively. From May 1993 to January 1995, Mr. Agyagos served
as President and a Director of Stina Resources Ltd. Mr. Agyagos
provides general administrative services to the Company which are
detailed in his management consulting agreement with the Company.
Gary Musil has served as Secretary and a Director of the
Company since August 1992. From 1988 to the present, Mr. Musil
has served as the Secretary and a Director for E.T.C. Industries
Ltd., from 1990 to 1996 as a director for Veto Resources Ltd.,
from 1988 to 1996 as the Secretary and a Director for El Bravo
Gold Mining Ltd., and Secretary of Montoro Resources Inc. since
February 1999. Mr. Musil has been self-employed since 1991. Mr.
Musil holds a Diploma in Business Administration and was enrolled
for three years in the Certified General Accountant program.
Prior to his self-employment he was employed for 15 years as a
Divisional Controller and Accountant for a mining producing
company. Mr. Musil provides accounting and bookkeeping services
to the Company which are detailed in his consulting agreement.
Kenneth B. Liebscher has served as a Director since May
1992. Mr. Liebscher, from 1992 to the present time has served as
the President and as a director of E.T.C. Industries Ltd. and as
a director of Montoro Resources Inc. since December 1998. Mr.
Liebscher currently works with U.S. and Foreign Co. as its Sales
Manager, a position he has held since 1993. From 1990 to 1992 he
worked for Ivoclar N.A. as its Executive Vice President of Sales
and Marketing.
Peter John has served as a Director since April 1996.
Since 1979, Mr. John has been self-employed as an industrial
designer. He received a design degree from Fachhochschule Design
in 1979.
Peter E. Serck has served as a Director since August
1996. He currently owns as a sole proprietor Ventures
Diversified Co. and has over 20 years of experience as an
investment advisor.
Nicolo Bellanca has served as a Director since April 1996.
Mr. Bellanca has served as a director for Montoro Resources Inc.
from 1995 to the present, and from April 1, 1999 as a director of
E.T.C. Industries Ltd. Since 1990, Mr. Bellanca has been
employed as a Tourism Director and other positions in the tourist
industry.
Board of Directors Committees and Compensation.
The Board of Directors has the responsibility for
establishing broad corporate policies and for overseeing the
overall performance of the Company. However, in accordance with
corporate legal principles, it is not involved in day-to-day
operating details. Members of the Board are kept informed of the
Company's business through discussions with the Chairman and
other officers, by reviewing analyses and reports sent to them,
and by participating in Board and committee meetings.
The Board held eleven meetings in fiscal year 1999 with an
average attendance of over 68%. All directors attended a
majority of the meetings held during their tenures as directors.
Board members are not presently compensated, but are reimbursed
for their expenses associated with attending Board and Committee
meetings.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
The Company currently has one executive officer who holds
stock options. Compensation paid during the last fiscal year to
the three highest paid Executive Officers of the Company is as
follows:
Summary Compensation Table
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND YEAR SALARY BONUS OTHER AWARDS PAYOUTS
PRINCIPAL ($) ($) ANNUAL (1)
POSITION COMP. RESTRICT OPTIONS LTIP ALL
STOCK SARS(#)PAYOUTS OTHER
($)
Vojtech
Agyagos 1999 54,000(2) -0- -0- -0- 300,000 -0- -0-
President 1998 50,000(2) -0- -0- -0- -0- -0- -0-
1997 2,500(2) -0- -0- -0- 900,000 -0- -0-
(1) The remuneration described in the table does not include the
cost to the Company of benefits furnished to the named executive
officer. The value of such benefits cannot be precisely
determined; however, the executive officer named above did not
receive other compensation in excess of the lesser of $50,000 or
10% of such officers' cash compensation.
(2) The above-named executive officer listed is employed by the
Company or any subsidiary of the Company. The "Salary" indicated
reflects management fees paid to the executives by the Company.
No funds were set aside or accrued by the Company during
the most recent fiscal year to provide pension, retirement, or
similar benefits for directors or officers.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
SUBSIDIARIES.
Stock Options to purchase securities from the Company are granted
to Directors and Employees of the Company on terms and conditions
acceptable to the regulatory authorities in Canada. The Company
has no formal written stock option plan.
Certain options have been issued pursuant to the
guidelines of the Vancouver Stock Exchange ("VSE"), which state
that the aggregate number of shares that may be reserved for
issuance pursuant to incentive stock options shall not exceed 10%
of the issued shares of a company at the time of granting.
Further, the guidelines state that the exercise price of an
incentive stock option shall not be less than the average closing
price of the Company's shares traded through the facilities of
the Vancouver Stock Exchange within the ten (10) trading days
immediately preceding the day on which the options are granted
and publicly announced.
As of January 31, 1999, there were a total of 30,000
outstanding share options exercisable at $0.56 per share with an
expiration date of August 9, 1999, and a total of 918,000
outstanding share options exercisable at $0.56 with expiration
date of February 24, 2000. A total of 948,000 outstanding
options are held by officers and directors of the Company. The
stock options granted by the Company have been issued at current
market value at the time of grant. All options granted during
fiscal year 1999 were granted at the then current market value.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
During the most recently completed fiscal year ending on January
31, 1999, the following transactions took place with related
parties:
Management fees totaling $54,000 were paid to Vojtech Agyagos
pursuant to an agreement commencing January 1, 1997. The
management fees paid to Mr. Agyagos are equivalent to fees that
would have to be paid to an unrelated third party for similar
services.
Office rent totaling $18,000 was paid to Ostrov Resources
Ltd., a company managed by Vojtech Agyagos. The monthly rental
increased from $1,000 to $1,500 per month effective March 1,
1997. The rent paid to Ostrov is equivalent to rent that would
have to be paid to an unrelated third party for similar
facilities.
The Company paid $55,350 in office services to 311180
British Columbia Ltd., a company controlled by Gary Musil.
Effective August 1, 1996, the Company terminated its rental
agreement with 311180, but continues with an office services
contract paid on an hourly basis. The fees for office services
paid to 311180 British Columbia Ltd. are equivalent to fees that
would have to be paid to an unrelated third party for similar
services.
PART II.
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
Not Applicable.
PART III.
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR
REGISTERED SECURITIES AND USE OF PROCEEDS.
Not Applicable.
ITEM 17. FINANCIAL STATEMENT AND EXHIBITS.
The Company's financial statements are stated in Canadian
Dollars and are prepared in accordance with Canadian Generally
Accepted Accounting Principals (GAAP), the application of which,
in the case of the Company, conforms in material respects for the
periods presented with United States GAAP, except as discussed in
the notes to the financial statements.
(a) Index to Financial Statements and Schedules Page
Report of Independent Auditor . . . . . . . . . . . . . . . . F-1
Balance Sheets of the Company as of January 31, 1999
and January 31, 1998 . . . . . . . . . . . . . . . . . . . . . F-2
Statements of Deficit for the year ended January 31, 1999,
the year ended January 31, 1998, and the year ended
January 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Operations for the year ended January 31, 1999,
the year ended January 31, 1998, and the year ended
January 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flow for the year ended January 31, 1999,
the year ended January 31, 1998, and the year ended
January 31, 1997 . .. .. . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . F-7
(b) Exhibits included or incorporated by reference herein: See
Exhibit Index
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant certifies that it meets all
of the requirements for filing on Form 20-F and has duly caused
this Annual Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BELMONT RESOURCES INC.
Dated: July 28, 1999 By: /s/ Gary Musil
Gary Musil, Secretary
<PAGE>
AUDITORS' REPORT
To the Shareholders of
Belmont Resources Inc.
We have audited the consolidated balance sheets of Belmont
Resources Inc. as at January 31, 1999 and 1998 and the
consolidated statements of deficit, operations, and cash flows
for each of the years ended January 31, 1999, 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 audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present
fairly, in all material respects, the consolidated financial
position of the company as at January 31, 1999 and 1998 and the
results of its operations and the changes in its financial
position for each of the years ended January 31, 1999, 1998 and
1997 in accordance with generally accepted accounting principles.
As required by the Company Act of British Columbia, we report
that, in our opinion, these principles have been applied on a
basis consistent with that of the preceding year.
/s/ Dale, Matheson, Carr-Hilton, Independent Chartered
Accountants
Vancouver, B.C.
June 15, 1999
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED BALANCE SHEETS - JANUARY 31, 1999 AND 1998
(IN CANADIAN DOLLARS)
1999 1998
$ $
ASSETS
CURRENT ASSETS
Cash 29,809 37,523
Term deposit 200,000 600,000
Investment in securities 3,437,100
(Note 6)
Accounts receivable (Note 17,436 10,553
10)
Prepaid expenses
3,486 8,736
3,687,831 656,812
INVESTMENT IN SECURITIES 2,291,400
(Note 6)
ADVANCES (Note 7) 55,000
RESOURCE PROPERTIES (Note 5) 5,339,126 5,261,663
CAPITAL ASSETS (Note 4) 222,382 251,630
11,595,739 6,170,105
See Accompanying Notes
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED BALANCE SHEETS - JANUARY 31, 1999 AND 1998
(IN CANADIAN DOLLARS)
1999 1998
$ $
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 45,744 53,046
Future income taxes (Note 8) 568,603 ________
614,347 53,046
DUE TO SHAREHOLDERS 220 220
NON-CONTROLLING INTEREST (Note 3) 8,673 8,673
FUTURE INCOME TAXES (Note 8) 539,837 ________
1,163,077 61,939
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 9) 13,520,425 13,309,305
DEFICIT (3,087,763) (7,201,139)
10,432,662 6,108,166
11,595,739 6,170,105
COMMITMENTS (Note 11)
See Accompanying Notes
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF DEFICIT
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(IN CANADIAN DOLLARS)
1999 1998 1997
$ $ $
BALANCE, beginning of year (7,201,139) (6,763,683) (6,517,145)
NET INCOME (LOSS) FOR THE YEAR 4,113,376 (437,456) (246,538)
BALANCE, end of year (3,087,763) (7,201,139) (6,763,683)
See Accompanying Notes
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(IN CANADIAN DOLLARS)
1999 1998 1997
$ $ $
REVENUE
Interest income 14,282 5,562 7,104
Gain on sale of oil and
gas property (Note 5(a)) 5,443,750 ______ _______
5,458,032 5,562 7,104
EXPENSES
Amortization 916 1,297 711
Audit and accounting 13,068 16,723 5,102
Bad debts 1,600
Foreign exchange loss 2,419 4,241
Interest and bank charges 1,075 718 5,508
Legal 17,831 22,112 44,071
Management fees 54,000 50,000 17,500
Office and sundry 9,900 6,502 19,756
Project investigation 1,077 45,000
Regulatory filing fees 5,811 7,841 10,040
Rent 18,000 17,500 9,100
Telephone and facsimile 6,909 4,750 5,608
Transfer agent fees 12,154 12,631 18,881
Travel and promotion 22,650 30,675 63,648
Secretarial and
administration services 57,995 39,830 41,854
Shareholder information 12,411 6,727 10,263
Write-off of mineral properties 176,471 _______
236,216 443,018 (253,642)
INCOME (LOSS) BEFORE INCOME TAXES 5,221,816 (437,456) (246,538)
FUTURE INCOME TAX PROVISION 1,108,440
NET INCOME (LOSS) FOR THE YEAR 4,113,376 (437,456) (246,538)
EARNINGS (LOSS) PER SHARE (Note 2(f)) 0.21 (0.02) (0.02)
FULLY DILUTED EARNINGS (LOSS)
PER SHARE (Note 2(h)) 0.20 (0.02) (0.02)
See Accompanying Notes
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(IN CANADIAN DOLLARS)
1999 1998 1997
$ $ $
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net income (loss) for the year 4,113,376 (437,456) (246,538)
Add non-cash items:
Amortization 916 1,297 711
Future income tax 1,108,440
Gain on sale of oil and gas property (5,443,750)
Write-off of resource properties _______ 176,471 ________
(221,018) (259,688) (245,827)
Net changes in non-cash
working capital items
(net of effect of acquisition
of subsidiary)
Accounts receivable (6,883) 40,924 (30,524)
Advances from (to) related parties 2,000 8,000
Prepaid expenses 5,250 (4,665) 134,796
Accounts payable and accrued liabilities (7,302) 26,260 (290,546)
Loans payable (7,500)
(229,953) (195,169) (431,601)
INVESTING ACTIVITIES
Mineral property expenditures (333,801) (199,569) (238,281)
Advances (55,000)
Acquisition of capital assets (114,648) (150,093)
Acquisition of subsidiary,
net of cash acquired 145,944
(388,801) (314,217) (242,430)
FINANCING ACTIVITIES
Issuance of share capital 211,040 982,700 837,989
Due to shareholders 220
211,040 982,920 837,989
(DECREASE) INCREASE IN CASH (407,714) 473,534 163,958
CASH, beginning of year 637,523 163,989 31
CASH, end of year 229,809 637,523 163,989
CASH REPRESENTED BY
Cash 29,809 37,523 63,771
Term deposit 200,000 600,000 100,218
229,809 637,523 163,989
See Accompanying Notes
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS
The Company's primary business is acquisition exploration and
development of resource properties. Funding for operations is
raised through public and private share offerings and sale of
resource interests.
The Company, through its subsidiary, holds the mining rights and
certain equipment for a mineral property that was previously
state owned and mined by the Slovakian government. The Company
is in the process of assessing the feasibility of reworking and
reopening the mine. (Note 3).
Future operations are dependant on the Company's ability to raise
sufficient funding through share offerings, sale of investments,
debt or profitable operations to support current and future
expenditures.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
The consolidated financial statements include the accounts and
operations of Slovgold Slovakia s.r.o. (SSSRO). The Company owns
51% interest pursuant to a share acquisition agreement. (Note 3).
All significant intercompany transactions and balances have been
eliminated. The non-controlling interest has been recorded at
historical cost within the subsidiary.
b) Capital assets
Capital assets are recorded at a carrying amount equal to cost
which is lower than estimated fair value. Fair value of capital
assets is reviewed whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable determined with reference to the expected discounted
present value of future cash flows from such assets. Any
impairment in value below carrying costs would be charged to
income in the period such impairment is determinable.
Amortization is provided at various rates to amortize the cost
over the estimated useful life of the asset. Amortization of
capital assets related to mineral property development has been
capitalized in mineral property interests where such amortization
relates to direct development activities.
c) Mineral property interests
Costs incurred in respect of mineral property interests during
the exploration and development stage are capitalized together
with the cost of acquisition until such time as a property is in
commercial production, sold or abandoned.
The recoverable value of mineral property interests, as reported
on the balance sheet, is dependant upon future commercial success
or proceeds from disposition.
The Company reviews its mineral property interests whenever
events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable in relation to its
expected discounted future cash flows. Should an impairment in
carrying amount be indicated upon review, a write-down to
estimated fair value would be recorded at that time. (Note 5(b))
Proceeds on dispositions of partial interests on properties are
credited as a reduction of carrying costs. No profit or loss is
realized until all the related costs have been offset by
disposition proceeds. If a property is placed into commercial
production, accumulated costs to production will be amortized on
the units of production method.
d) Administrative costs
Administrative costs not directly associated with mineral
properties are recognized as period costs and are expensed in the
period incurred.
e) Translation of foreign currencies
The Company's functional currency is Canadian dollars. Monetary
assets and liabilities are translated at the exchange rate in
effect at the balance sheet date, and non-monetary assets and
liabilities are translated at exchange rates at acquisition date.
Revenues and expenses are translated at rates approximating
exchange rates in effect at the time of the transactions.
Exchange gains or losses arising on translation of current
monetary items are included in operations for the year.
f) Earnings (loss) per share
Basic earnings (loss) per share is calculated using the weighted
average number of common shares outstanding. Fully diluted
earnings per share, assuming that all outstanding share purchase
options were exercised at the beginning of the period, has been
presented for the current year, however, the effect for 1998 and
1997 is anti-dilutive and no adjustment has been made.
g) Income taxes
The Company has chosen early adoption of CICA Handbook Section
3465 "Future Income Taxes" which replaces "deferred income
taxes". This accounting guideline applies retroactively to
record the effects of future income taxes using the expected rate
of tax payable on temporary differences between the accounting
and tax basis of assets. There is no material effect in these
financial statements to prior year's as a result of retroactive
adoption of this guideline.
Future income taxes recorded in these financial statements result
from the recognition of a gain on sale of a mineral interest
where share consideration was received as proceeds. The tax
payable on the disposition has been deferred for income tax
purposes until the shares received are sold. Available tax loss
carryforwards where it is likely they can be utilized in the
future to offset the taxable gain on sale of the securities have
been used as a reduction of future income taxes payable related
to the disposition.
h) Measurement uncertainty
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Significant areas requiring the use of management estimates
relate to the carrying value of the investment in securities and
the determination of impairment of assets, and their useful lives
for depreciation, amortization and income taxes. Financial
results as determined by actual events could differ from those
estimates.
The recorded cost of the Slovakian property is based on the value
of the share consideration paid. The recorded amount is an
estimate of value only and may not reflect recoverable value as
this will be dependant on the development program, the nature of
the mineral deposit, commodity prices, adequate funding and the
ability of the Company to bring the mine into profitable
production. (Note 5(b)).
i) Financial instruments
The Company holds short-term interest bearing deposits with
maturity dates under 30 days with interest at current market
rates. Accordingly, the fair market value of these investments
are approximately equal to cost.
Other financial instruments include investments in securities
(Note 6), accounts receivable, loan receivable and accounts
payable which are short-term in nature and are valued at
recoverable amounts at the balance sheet date.
j) Risk management
The Company's largest assets are the mineral property interests
in Slovakia held by a Slovakian subsidiary (Notes 3 and 5(b)) and
the investment in securities resulting from the sale of an oil
and gas interest (Note 6). The Company could accordingly, be at
risk for foreign currency fluctuations and developing legal and
political environments and price fluctuations in resource sector
markets.
The Company does not maintain significant cash or other monetary
assets or liabilities in Slovakia. The Company relies on local
consultants for the management of the mining operation and for
legal and accounting matters.
k) Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use
two digits rather than four to identify a year. Data-sensitive
systems may recognize the year 2000 as 1900 or some other date,
resulting in errors when information using year 2000 dates is
processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000 Issue may be
experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which
could affect an entity's ability to conduct normal business
operations. The Company is not heavily reliant on computerized
systems in its operations. It is not possible to be certain that
all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers,
or other third parties will be fully resolved.
3. ACQUISITION OF SLOVGOLD SLOVAKIA S.R.O.
Pursuant to a purchase agreement completed August 20, 1996, the
Company acquired 51% ownership interest in Slovgold Slovakia
s.r.o. ("SSSRO"), a Slovakian company, in exchange for the
issuance of 5,500,000 common shares of the Company at an assigned
value of $0.85 per share. The Company paid a finder's fee of
275,000 shares from treasury at an assigned value of $0.85 per
share.
In addition, the Company paid 142,000 Slovak Crown ($6,404 Cdn.)
to SSSRO.
The mineral rights and rights to acquire the related equipment
and milling operation were granted by the Slovakian Government to
former management of the mine.
The acquisition was accounted for using the purchase method. The
acquisition did not constitute a reverse takeover for accounting
purposes. The 51% interest was acquired from a shareholder of
Slovgold. Belmont was deemed to be the acquirer and the minority
interest was retained by other unrelated shareholders.
Subsequent to the acquisition, control of Belmont remained with
the shareholders and Board of Belmont. The assets upon
acquisition consisted of:
___$___
Cash 152,348
Accounts receivable 153,659
Mineral property rights 4,918,817
Intercompany advances (200,000)
Accounts payable (100,997)
4,923,827
Non-controlling interest (8,673)
4,915,154
SSSRO has a fiscal year end of December 31 for government filing
requirements.
The accounts and operations of SSSRO have been consolidated as at
and for the periods January 1 to December 31, 1999, 1998 and
1997.
4. CAPITAL ASSETS
1999 1998
$ $
Accumulated
Cost Amortization Net Net
Building 113,809 7,433 106,376 113,809
Mining equipment 139,605 27,962 111,643 130,281
Office furniture
and equipment 10,629 6,266 4,363 7,540
264,043 41,661 222,382 251,630
The building and mining equipment are held by the subsidiary and
are dedicated to the mining site. (See Note 5). The building
has an estimated useful life of fifteen years and the mining
equipment has estimated useful lives of between five and fifteen
years.
5. RESOURCE PROPERTIES
Maseva Pezinok II 1999 1998
Property Property Total Total
$ $ $ $
Acquisition costs:
Balance, beginning
of year 4,918,817 4,918,817 4,995,288
Staking costs and expense
reimbursements 60,000 60,000
Option payment 100,000
Joint venture
capital contribution 12,030 12,030 _______
Balance, end of year 72,030 4,918,817 4,990,847 5,095,288
Disposal of
mineral property (72,030) (72,030) (176,471)
4,918,817 4,918,817 4,918,817
Deferred development costs:
Balance, beginning of year 342,846 342,846 242,191
Administration
expenses 3,666 2,033 5,699 3,977
Amortization 28,412 28,412 1,086
Building and equipment rentals 23,614 23,614 29,065
Consulting fees 24,175 353 24,528 17,447
Guard services 6,939 6,939 4,461
Legal and accounting 46,514 4,698 51,212 4,670
Mining equipment and supplies 43 43 1,043
Reports and maps 58,140 692 58,832 3,279
Sampling and testing 24,189
Staking costs 56,920 56,920
Travel and
accommodation 22,268 10,679 32,947 9,478
Translation cost 1,037 1,037
Wages and benefits 1,960
Balance, end
of year 212,720 420,309 633,029 342,846
Disposal of
mineral property (212,720) (212,720)
420,309 420,309 342,846
Total resource
properties 5,339,126 5,339,126 5,261,663
a) Maseva Property
The Company entered into an agreement dated March 16, 1998 with
Maseva s.r.o. ("Maseva") wherein the Company can acquire the
rights to explore for oil and gas over an 849.7 km? concession
area in Eastern Slovakia, Slovak Republic.
Under the agreement, a joint venture company, Maseva Gas s.r.o.
based in Slovakia was formed. Belmont owns a 90% interest.
$270,000 Slovak crowns and $30,000 Slovak crowns were contributed
to the newly formed joint venture by Belmont and Maseva
respectively.
On October 9, 1998, the Company entered into an agreement with
EuroGas, Inc. to sell its 90% ownership in Maseva Gas s.r.o. in
exchange for 2,500,000 common shares and warrants for the
purchase of up to an additional 2,500,000 shares of EuroGas at
$2.50 U.S. per share. The EuroGas, Inc. shares were assigned an
accounting value of $5,728,500 for the purposes of recording the
proceeds of this disposition and carrying value of the shares
received. No value was assigned to the share purchase warrants.
The Company retained a 22.5% working interest in the overall
concession under the agreement. All costs incurred up to the
date of disposition have been reversed in the accounts against
the sale proceeds. The gain on disposition has been recorded as
follows:
Assigned proceeds for EuroGas, Inc. shares $5,728,500
Less: costs incurred 284,750
Net gain on disposition $5,443,750
The Company is holding the shares for resale as an investment in
securities. (Note 6)
No contribution is required by the company under the working
interest on the first two wells drilled.
b) Pezinok II Mining Concession
By agreement dated May 1, 1996 with Rudne Bane, s.p., a Slovakia
State owned mining corporation, the company's 51% subsidiary
acquired 100% interest in the Pezinok II mining concession, a
former producing gold/antimony mine and mill, located in Pezinok,
Slovak Republic.
The Company is maintaining its interest in the Pezinok II mining
concessions and is seeking a joint venture partner to continue
development plans.
As a result of depressed gold prices and weak resource sectors
worldwide, the Company has been unable, to date, to find a joint
venture partner or commit its own resources to fund the reopening
of the Pezinok mine as planned.
Management feels that based on a June 1996 independent evaluation
of the project and current gold prices the project remains
viable. The mining and environmental permits for reopening the
project expire at the end of 1999. However, should the Company
complete part of the planned program the permit may be extended .
Should the Company be unable to find a joint venture partner or
raise funds to complete the planned program before expiry of the
permits, the project may have to be abandoned.
The recorded carrying value of the resource interests in the
financial statements assumes a joint venture partner will be
found and the mine will be reopened.
Should worldwide resource and commodity markets remain depressed
and financing not be arranged, the carrying value of the interest
will be significantly lower than current book value and may be
written off entirely. The determination as to this will be
made by management in the ensuing year.
As at the audit report date no joint venture partner or financing
had been arranged.
6. INVESTMENT IN SECURITIES
1999 1998 1997
$ $ $
Short-term investment 3,437,100 - -
Long-term investment 2,291,400 - -
5,728,500 - -
The recorded value of securities received upon the sale of Maseva
was discounted from the quoted market price of US$2.00 per share
as the shares received are subject to a regulatory hold period.
All shares received are subject to a one year hold with a phased
release under S.E.C. regulatory policy 144(e)(1).
It is estimated that approximately 1,500,000 shares will be
released for trading by January 31, 2000. Accordingly a pro rata
portion of the investment is recorded as a current asset. All
remaining shares will be released after two years from the date
of the transaction.
As at the audit report date, the quoted market value of shares
had declined significantly to approximately $2,500,000 U.S.
($3,750,000 Cdn.). The recoverable value of the shares will be
dependant on the market value and liquidity at the dates of
release and sale.
7. ADVANCES
On May 1, 1998, the Company entered into a Memorandum of
Understanding with Vista Developments Ltd., a company
incorporated in the Turks and Caicos Islands, British West
Indies. Vista is in the process of obtaining certain rights in
Eastern Europe for acquisitions of oil and gas concessions.
Pursuant to the memorandum, Belmont and Vista will enter into a
joint venture agreement, the terms of which are to be finalized.
As at the year end, Belmont had advanced $55,000 to Vista in
respect of the memorandum.
8. INCOME TAXES
Future income tax expense results from temporary differences
between the recognition of expenses for tax and financial
statement purposes as explained in Note 1(g)). The sources of
these differences are as follows:
1999 1998 1997
$ $ $
Excess of accounting cost
over tax cost of investments
in securities 1,796,440
Excess of amortization over
tax allowance claimed (2,600)
Tax loss carryforward applied (489,690)
Current deduction of
capitalized resource
expenditures (195,710)
1,108,440
The actual tax rate differs from the expected tax rate as
follows:
Effective 1999 1998 1997
Rate $ $ $
Tax at statutory rate %
(combined Canadian Federal
and Provincial rates) 44.62 2,329,980
Deduct the effect of:
Non-taxable portion of capital
gain on Maseva project (11.73) (612,380)
Tax loss carry
forward applied (7.87) (410,850)
Others ( 3.80) (198,310)
21.22 1,108,440
Temporary differences which give rise to future income tax assets
and liabilities are comprised of the following:
1999 1998
$ $
Future income tax assets
Income tax losses available
for carryforward 489,690 405,150
Excess of amortization over tax allowanc 2,600 1,890
Current deduction of capitalized resource
expenditures 195,710 65,760
688,000 472,800
Valuation allowance 472,800 688,000
Future income tax liabilities
Excess of book value over tax
basis of assets 1,796,440
Net future income tax liabilities 1,108,440
Current portion 568,603
539,837
9. SHARE CAPITAL
a) Authorized
50,000,000 common shares at no par value
b) Issued 1999 1998
$ $
Number Amount Number Amount
Balance, beginning of year 19,223,012 13,309,305 18,133,012 12,326,605
Issued during the year for:
Stock options exercised 377,000 211,040 1,090,000 982,700
Balance, end of year 19,600,012 13,520,345 19,223,012 13,309,305
c) Stock Options (Note 13(a))
At the year end, the Company had share purchase options
outstanding to directors and employees as follows:
Number of Exercise Expiry
Shares Price Date
30,000 0.56 August 9, 1999
918,000 0.56 February 24, 2000
948,000
c) Escrow and pooled shares
There are no shares held in escrow or subject to pooling
agreements.
10. RELATED PARTY TRANSACTIONS
a) During the year the Company incurred:
i) $55,350 (1998 - $39,830 and 1997 - $50,954) for
administrative services charged by a company controlled by a
director, and $18,000 (1998 - $17,500 and 1997 - Nil) for rent to
another company controlled by a director.
ii) $54,000 (1998 - $50,000 and 1997 - $17,500) in management
and consulting fees were charged by a director of the Company
iii) Nil (1998 - $9,000 and 1997 - $1,000) in geological
consulting fees to directors of the subsidiary company.
b) Included in accounts receivable at January 31, 1999 are:
i) an amount of $2,742 (1998 - $841 and 1997 - $1,454) owing
by a corporation controlled by two directors of the Company.
ii) an amount of $798 (1998 - $846 and 1997 - $289) owing by a
corporation controlled by a director of the Company.
c) Included in accounts payable at January 31, 1999 is an
amount of $1,280 (1998 - $22,500 and 1997 - $2,500) due two
directors and a company controlled by a director.
d) Related party transactions have been recorded at their
dollar exchange amount.
11. COMMITMENT
a) In January 1997, the Company entered into a two year
management agreement, renewable for a further two years, with a
director to provide management and consulting services. The
agreement provides for compensation of $4,500 per month.
b) The Company entered into an office rental agreement with a
company controlled by a director. The Company pays $1,500 per
month renewable on a monthly basis.
12. SEGMENTED INFORMATION
Identifiable assets by geographic location:
1999 1998
$ $
Canada 6,026,997 665,511
Slovakia 5,568,742 5,504,594
11,595,739 6,170,105
13. SUBSEQUENT EVENTS
Subsequent to the year end:
a) 54,000 shares were issued for stock options exercised for
proceeds of $30,240.
b) The Company entered into an agreement dated March 5, 1999
for the right to acquire a 100% interest in 67 mineral claims
located in the Lac Rocher Area, Quebec ("property"). The
agreement provides the Company the right to acquire a 100%
interest in the property by payment of $55,000 and issuance of
100,000 common shares at a deemed price of $0.50 per share.
The property is subject to a 2% NSR with a 1% buy-out for
$1,000,000. A production bonus of 50,000 common shares is
payable within 60 days following commencement of commercial
production. The buy-out and the bonus will be subject to further
regulatory review and acceptance.
As at the audit report date, 100,000 shares subject to a hold
period until July 5, 1999 have been issued and $55,000 has been
paid to the vendor. The Company also paid $5,500 and issued
10,000 common shares as a finder's fee in respect of the
acquisition.
Regulatory approval was received March 12, 1999.
On March 16, 1999, the Company entered into an agreement with
Montoro Resources Inc. ("Montoro") whereby Montoro has been
granted an option to acquire 50% of Belmont's 100% interest in
the 67 mineral claims located in the La Rocher area of Quebec.
In consideration, Montoro will pay Belmont $30,000 over a 2 month
period, issue 50,000 common shares subject to a one year hold
period (received) and incur $35,000 in exploration expenditures
on the property by September 30, 1999.
c) Subsequent to the year end and up to the audit report date
the quoted market value of the Company's investment in securities
declined to approximately $2,500,000 U.S. ($3,750,000 Cdn).
14. LOSS CARRY FORWARD
The Company has available non capital losses which may be carried
forward to apply against future income for tax purposes as
follows:
Amount
Available to ___$___
2000 166,945
2001 94,776
2002 64,238
2003 37,715
2004 245,827
2005 255,447
2006 218,599
1,083,547
The future potential benefit of the above losses has been applied
in the current year against future income taxes. (Note 8).
15. COMPARATIVE FIGURES
Certain of the 1998 and 1997 comparative figures have been
reclassified to conform with current presentation.
16. RECONCILIATION OF CANADIAN TO UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
These financial statements are prepared using Canadian Generally
Accepted Accounting Principles (GAAP) which do not differ
materially from United States Generally Accepted Accounting
Principles with respect to the accounting policies and
disclosures in these financial statements except as set out
below:
i) Consolidated statement of cash flows
Under U.S. GAAP non cash transactions are excluded from the
statement of cash flows and reported separately as supplemental
information. Significant non-cash transactions in these
financial statements are as follows:
During the 1999 year, the Company sold 90% ownership interest in
Maseva property in exchange of 2,500,000 common shares and
2,500,000 share purchase warrants of EuroGas, Inc. (Note 5(a)).
During the 1997 year, the Company acquired a subsidiary by
issuance of 5,775,000 common shares (Note 3).
ii) Investment in securities
Under U.S. GAAP the Company's investment in securities would be
classified as "available for sale" or "trading" securities. The
Company acquired 2,500,000 shares of EuroGas, Inc. through
disposition of the Maseva project at an assigned value of
$5,728,500 ($1.49 U.S. per share) (Note 5(a)). EuroGas, Inc.
shares would be accounted for as investment in securities
available for sale and be carried at market value. As at the
year end the quoted market price of the EuroGas, Inc. shares was
US$2.50 per share. Had the shares been free trading an
unrealized gain would be reported as a component of other
comprehensive income in shareholders equity. As the shares were
not free trading at the year end and as a result of the
subsequent decline in the market value (Note 13(c)) no gain has
been reported for this purpose.
iii) Accounts receivable
U.S. GAAP requires disclosure of the amount of any allowance for
doubtful accounts receivable.
The Company's allowance is not material, accordingly no
disclosure is provided.
iv) Stock based compensation
The Company has elected to follow Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" (APB
25) in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's options for common
shares granted to employees is not less than the fair market
value of the underlying stock on the date of grant, no
compensation expense has been recognized.
v) Recent Pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standard No. 130 "Comprehensive Income"
("SFAS 130"), No. 131 ("Disclosures About Segments of an
Enterprise and Related Information") ("SFAS 131"), No.132
("Employers' Disclosures About Pensions and Other Post Retirement
Benefits ("SFAS 132") and No.133 ("Accounting for Derivative
Instruments and hedging Activities" ("SFAS 133"). The new
pronouncements have no material impact on these consolidated
financial statements.
EXHIBIT INDEX
Exhibit No. Description
3.1 Acquisition Agreement between Belmont Resources Inc.,
EuroGas Inc. and EuroGas Resources Inc., dated October 9, 1998.
3.2 Acquisition Agreement between Belmont Resources Inc. and
Mike Lavoie, dated March 5, 1999.
Option Agreement Assignment between Belmont Resources Inc. and
Montoro Resources Inc., dated March 16, 1999.
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement") is
entered into as of the 9th day of October, 1998, by and among
EUROGAS, INC., a Utah corporation ("EuroGas"), EUROGAS RESOURCES
INC., a British Columbia corporation ("Eurosub"), and BELMONT
RESOURCES, INC., a British Columbia corporation ("Belmont"),
based on the following:
Premises
A. EuroGas is a publicly-held corporation that owns an
interest in mineral deposits in Slovakia through a wholly-owned
subsidiary.
B. Eurosub is a wholly-owned subsidiary of EuroGas.
C. Belmont is a publicly-held corporation traded on the
Vancouver Stock Exchange.
D. Maseva, s.r.o. ("Maseva") is a privately-held entity
organized under the laws of the Slovak Republic. Maseva was
awarded the rights to the exploration territory known as
"Kralovsky Chlmec" pursuant to a decision (the "Initial
Decision") of the Slovak Republic Ministry of Environment located
in Bratislava dated March 10, 1998, File No. 464/359/98-3.3 that
gave Maseva the exclusive right to explore in the area covered by
the Initial Decision.
E. Belmont and Maseva formed a new company in the Slovak
Republic under the name of Maseva Gas, spol, s.r.o. ("Maseva
Gas") and the exploration rights covered by the Initial Decision
were transferred from Maseva to Maseva Gas. Belmont now owns 90%
of Maseva Gas.
F. EuroGas, through Eurosub, wishes to acquire, and
Belmont desires to sell, the right to explore for and exploit
crude oil and natural gas in the territory covered by the Initial
Decision by the transfer of ownership of its 90% interest in
Maseva Gas to Eurosub.
G. Belmont will transfer its 90% interest in Maseva Gas to
Eurosub on a tax-deferred basis pursuant to subsection 85(1) of
the Income Tax Act (Canada).
Agreement
NOW, THEREFORE, based on the foregoing premises, which are
incorporated herein by this reference, and for and in
consideration of the mutual covenants and the agreements
hereinafter set forth and the mutual benefit to the parties to be
derived therefrom, it is hereby agreed as follows:
Article I
Definitions
In this Agreement, the following terms shall have the
meanings specified in this Article I. Such definition shall be
equally applicable to both the singular and the plural forms.
Any agreement referred to below shall mean such agreement as
amended, supplemented, or modified from time to time to the
extent permitted by the applicable provisions thereof and by this
Agreement.
"Assumed Obligations" means the obligations under the
contracts and agreements which are assumed by Eurosub, all as
more particularly described in Section 2.03.
"Closing" has the meaning set forth in Section 2.05.
"Closing Date" has the meaning set forth in Section 2.05.
"Common Stock of EuroGas" means the authorized common stock
of EuroGas, par value $0.001 per share.
"Decision" means the decision of the Ministry of Environment
of the Slovak Republic in Bratislava dated July 30, 1998, File
No. 1944/941/98-3.3 granting Maseva Gas the exclusive right to
explore for oil and flammable natural gas in the territory
described which covers 849.7 square kilometers.
"Due Diligence" means the 30 days after the date of delivery
of the Belmont Schedules during which time EuroGas may inspect
such Belmont Schedules.
"Environmental Laws" means the central government,
provincial, and local laws and regulations governing the
generation, marketing, refining, recycling, treatment, handling,
use, storage, transportation, disposal, and clean up of
hazardous, radio active, reactive, flammable, infectious, toxic,
or dangerous materials, or the protection of public health or the
environment, including, without limitation, all laws and
regulation governing water resources, water management
structures, and other environmental features protected pursuant
to the Slovakian Gazette on the Protection of Nature and the
Countryside and compliance with the regulations governing
forestry land reserves, national nature reserves, and the
Ministry of Environment, including all permits and regulatory
approvals required or issued thereunder.
"EuroGas Shares" means 2,500,000 shares of restricted Common
Stock of EuroGas to be held by Eurosub pursuant to the terms of
this Agreement.
"EuroGas Warrant" means the transferable warrant to be held
by Eurosub pursuant to the terms of this Agreement which warrant
gives the holder the right, at the holder's election, to acquire
up to 2,500,000 shares of restricted Common Stock of EuroGas, at
an exercise price of $2.50 per share, at any time prior to
October 1, 2000, a copy of which is attached hereto as
Exhibit "A" and forms a part of this Agreement.
"Eurosub Shares" means 2,500,000 Exchangeable Preferred
Shares in the capital of Eurosub to be delivered to Belmont as
part of the purchase price for the shares of Maseva Gas, each
such Eurosub Share retractable by the holder in exchange for one
EuroGas Share. A copy of the special rights and restrictions
attached to the Eurosub Shares is attached hereto as Exhibit "B"
and forms a part of this Agreement.
"Eurosub Warrant" means a warrant to be delivered to Belmont
as part of the purchase price for the shares of Maseva Gas, which
gives Belmont the right, at its election, to acquire the EuroGas
Warrant, in whole or in part, at any time and from time to time
until October 1, 2000, for aggregate consideration of $25.00, a
copy of which is attached as Exhibit "C" and forms a part of this
Agreement.
"Excluded Liabilities" has the meaning set forth in Section
2.04.
"Initial Decision" means the decision of the Slovak Republic
Ministry of Environment in Bratislava dated March 10, 1998, File
No. 464/359/98-3.3 granting Maseva the exclusive right to
prospect for crude oil and natural gas in the exploration
territory identified in the Initial Decision covering 849.7
square kilometers.
"Maseva" means Maseva, s.r.o., an entity organized under the
laws of the Slovak Republic located in Kosice.
"Maseva Concession" means the rights granted under the
Decision and now held by Maseva Gas, including the exclusive
right to prospect for crude oil and flammable natural gas in the
territory identified in the Decision and, on the identification
and location of exploitable minerals, the pre-emptive right to
determine the mining area and exploit the minerals.
"Maseva Gas" means Maseva Gas, Spol, s r.o., an entity
formed under the laws of the Slovak Republic.
"Tax Act" means the Income Tax Act (Canada).
"Voting Trust Agreement" means the voting trust agreement to
be entered into among EuroGas, Eurosub and Pacific Corporate
Trust Company, a form of which is attached to this Agreement as
Exhibit "D".
"Working Interest Agreement" means the working interest
agreement to be entered into between Maseva Gas and Belmont at
the time of Closing, a form of which is attached to this
Agreement as Exhibit "E".
Article II
Purchase of Shares and Assets
Section 2.01 The Purchase. On the terms and conditions
set forth in this Agreement, Eurosub shall purchase from Belmont
90% of the record and equity ownership interest in and to Maseva
Gas in exchange for the delivery to Belmont of the Eurosub Shares
and the Eurosub Warrant. In addition, at the time of Closing,
Belmont shall be assigned a 22.5% working interest in the Maseva
Concession, provided that Maseva Gas will pay the costs
associated with the 22.5% working interest in connection with the
drilling of the initial two new wells on the Maseva Concession in
accordance with the terms of the Working Interest Agreement. At
the Closing, EuroGas shall deliver the EuroGas Shares and the
EuroGas Warrant to Eurosub, c/o Pacific Corporate Trust Company,
Suite 830 - 625 Howe Street, Vancouver, British Columbia,
V6C 3B8, pending retraction of the Eurosub Shares and exercise of
the Eurosub Warrant, to be held by Pacific Corporate Trust
Company in accordance with the Voting Trust Agreement.
Section 2.02 Eurosub and Belmont will jointly elect in the
prescribed manner and within the prescribed time, pursuant to the
provisions of subsection 85(1) of the Tax Act, to effect the
transfer of the shares of Maseva Gas from Belmont to Eurosub at
amounts, determined by Belmont, equal to Belmont's "cost amount",
as defined in the Tax Act of the transferred assets.
Section 2.03 Assumed Obligations. On the Closing Date,
Eurosub and EuroGas shall assume and agree to discharge the
obligations of Belmont under the terms of the agreements
governing Maseva Gas and the Maseva Concession that are set forth
on Schedule 3.07 and that are incurred or related to any time
subsequent to the Closing Date. All costs attributable to any
period of time that encompasses the time both before and after
the Closing Date shall be pro rated between Eurosub and Belmont
as of the Closing Date.
Section 2.04 Excluded Liabilities. EuroGas and Eurosub
shall not assume, be obligated to pay, be obligated to perform,
or otherwise be required to discharge any liability or obligation
of Belmont, Maseva, or Maseva Gas, direct or indirect, known or
unknown, absolute or contingent, not expressly assumed by EuroGas
and Eurosub, including any liability or obligation attributable
to any time prior to the Closing Date.
Section 2.05 Closing; Closing Date. Subject to the terms
and conditions of this Agreement, the consummation of the sale
and purchase of Maseva Gas as contemplated hereby (the "Closing")
shall take place at the offices of Kruse, Landa & Maycock,
L.L.C., or such other place as mutually acceptable to the parties
hereto as soon as practicable, but in any event on or before
September 30, 1998. The date on which the Closing takes place
shall be the "Closing Date."
Section 2.06 Closing Events. At the Closing, Belmont
shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) (i) the bills of sale,
assignments, and other documents and instruments of conveyance
and transfer, all in form and substance reasonably satisfactory
to EuroGas and Eurosub and their counsel, necessary to vest free
and clear title in Eurosub to 90% of the equity and record
ownership of Maseva Gas; (ii) originals or copies of all of
Maseva Gas's agreements, contracts, and commitments; (iii)
originals or copies of all science related to the Maseva
Concession, including surveys, reports, feasibility studies,
testing reports, seismic information, drill logs, etc.; (iv) all
certificates, opinions, schedules, agreements, resolutions, or
other instruments required by this Agreement to be so delivered
prior to the Closing; (v) a representation letter acknowledging
the restricted nature of the securities delivered to Belmont as
part of the purchase price and setting forth Belmont's investment
intent in form and substance as set forth on Exhibit "F" attached
hereto and incorporated herein by this reference; and (vi) such
other items as may be reasonably requested by the parties hereto
and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. Eurosub shall
deliver to Belmont the certificates representing the Eurosub
Shares and the Eurosub Warrant and a form T2057 election signed
by Eurosub as a transferor and a letter to Belmont authorizing it
to complete the form and file it with Revenue Canada.
Section 2.07 Registration of Common Stock. At the
Closing, the parties will execute and deliver a Registration
Rights Agreement in the form and substance as set forth on
Exhibit "G" giving Belmont the right to have any EuroGas Shares
acquired upon retraction of the Eurosub Shares and the restricted
Common Stock of EuroGas issuable on exercise of the EuroGas
Warrants which may be acquired by Belmont on exercise of the
Eurosub Warrant included in any appropriate registration
statement that may be filed by EuroGas within one year of the
date of Closing.
Article III
Representations, Covenants, and Warranties of Belmont
Belmont hereby represents, covenants, and warrants to
EuroGas and to Eurosub, such representations, covenants, and
warranties to be made as of the date hereof and at and as of the
Closing Date and to survive the Closing and continue in
accordance with the terms hereof, as follows:
Section 3.01 Organization of Belmont. Belmont is a
corporation duly organized, validly existing, and in good
standing under the laws of British Columbia and has the corporate
power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and public
authorities to own its properties and assets and to carry on its
business in all material respects as it is now being conducted.
There is no jurisdiction in which it is not so qualified in which
the character and location of the assets owned by it or the
nature of the business transacted by it requires qualification,
except when the failure to do so would not have a material
adverse affect on the business and properties of Belmont. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement
in accordance with the terms hereof will not, violate any
provision of Belmont's articles of incorporation or bylaws.
Section 3.02 Organization of Maseva Gas. Maseva Gas is an
entity duly organized, validly existing, and in good standing
under the laws of the Slovak Republic, with the power and duly
authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and public authorities
to own its properties and assets, including the Maseva
Concession, and to carry on its proposed business of exploring
for natural gas and crude oil on the Maseva Concession. There is
no jurisdiction in which it is not so qualified in which the
character and location of the assets owned by it or the nature of
the business transacted or proposed by it, requires
qualification. The consummation of the transactions contemplated
by this Agreement in accordance with the terms hereof will not
violate any provision of Maseva Gas's governing instruments.
Section 3.03 Approval of this Agreement. The board of
directors of Belmont has authorized the execution and delivery of
this Agreement and has approved the transactions contemplated
hereby. There is no requirement that the shareholders of Belmont
approve this Agreement or the transactions contemplated hereby.
This Agreement is the legal, valid, and binding agreement of
Belmont enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, or other
laws effecting the enforcement of creditor's rights generally and
by general principles of equity.
Section 3.04 Capitalization of Maseva Gas. The authorized
capital of Maseva Gas is as set forth in the provided copy of the
Maseva Articles of Organization. All such issued and outstanding
shares have been legally issued, and are fully paid, and
nonassessable, and not issued in violation of the rights of any
other person or entity. No shares of the authorized capital of
Maseva Gas are subject to any right held by any other person or
entity to require the issuance of additional shares or acquire
the issued and outstanding shares on the exercise or conversion
of options, warrants, convertible debentures, contract rights, or
other such instruments.
Section 3.05 Ownership of Maseva Gas. Belmont hereby
represents and warrants that, as of the Closing Date, it will be
the sole beneficial and record owner of 90% of the issued and
outstanding record and equity ownership of Maseva Gas. Belmont's
ownership interest in Maseva Gas is held solely by Belmont, free
and clear of any and all liens, encumbrances, claims, or rights
of any other person or entity.
Section 3.06 Ownership of Maseva Concession. As of the
Closing, Maseva Gas will be the sole and exclusive holder of the
Maseva Concession and all of the rights granted under the
Decision. Such ownership and the right to exploit the Maseva
Concession shall not be subject to the approval or consent of any
governmental agency or third party. No other person or entity
will have any lien, encumbrance, claim, or right with respect to
the Maseva Concession.
Section 3.07 No Liabilities or Contingencies. As of the
Closing, Maseva Gas will not have and will not be liable for, any
liabilities or contingencies, whether known or unknown, except
for those obligations listed on Schedule 3.07 which have accrued
but which are not yet due.
Section 3.08 Material Contract Defaults. As of the
Closing, Maseva Gas will not be in default in any respect under
the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations,
properties, assets, or condition of Maseva Gas, and there will be
no event of default or other event which would with the notice or
lapse of time or both would constitute a default in any material
respect under any such contract, agreement, lease, or other
commitment.
Section 3.09 Taxes. All tax returns, tax reports, and
taxes with respect to the formation or operation of Maseva Gas or
which might be a lien or encumbrance against Maseva Gas or its
assets that is due prior to the Closing Date will be filed on or
before the Closing Date and the underlying tax obligations paid
in full.
Section 3.10 Third-Party Consents. No contract,
agreement, lease, or other commitment, written or oral, to which
Belmont or Maseva Gas is, or as of the Closing Date, will be a
party, or to which any of Maseva Gas's properties or assets are
subject, require the consent of the other party in order to
consummate the transactions herein contemplated.
Section 3.11 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in
the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust,
or other material contract, agreement, or instrument to which
Belmont or Maseva Gas is a party or to which any of their
properties or operations are subject.
Section 3.12 Compliance With Laws and Regulations.
Belmont and Maseva Gas have complied with all applicable statutes
and regulations of any governmental agency with respect to the
Maseva Concession. The Maseva Concession, including all of the
rights under the terms of the Decision, is in good standing and
can be fully exploited by Maseva Gas. Any and all consents
required from any governmental agency to permit Maseva Gas to
exploit the Maseva Concession will have been obtained by the
Closing Date.
Section 3.13 Environmental Concerns. The Maseva
Concession and Maseva Gas are in full compliance with all
Environmental Laws, including the regulations adopted under the
Gazette on Geological Operations, the Slovak Geological Bureau,
the Gazette on the Protection of Nature and Countryside, the
Forestry Land Reserves, the Protection of Agricultural Land
Reserves, the Ministry of Environment, and all local rules and
regulations, and are not subject to any environmental
liabilities.
Section 3.14 Brokers' Fees. Belmont has not engaged or
entered into any agreement with any broker or finder in
connection with any of the transactions contemplated by this
Agreement requiring the payment of any fee or compensation.
Section 3.15 Belmont Schedules. Belmont will deliver to
EuroGas and Eurosub within ten (10) days of the execution of this
Agreement, unless delivered previously, the following disclosure
schedules that are collectively referred to as the "Belmont
Schedules":
(a) A complete copy, including all exhibits, of the
Decision;
(b) A complete copy, including all exhibits, of the
Contract of Mandate between Belmont and Maseva;
(c) A complete copy, including all exhibits, of the
Contract to enter into a Future Contract between Belmont and
Maseva;
(d) A copy of any other agreement, contract, or
commitment to which Maseva Gas is a party or the Maseva
Concession is subject to;
(e) A schedule including all geological information
with respect to the Maseva Concession, including feasibility
studies, geological surveys, reports, development plans, seismic
information, analysis, test results, or similar matters;
(f) A copy of the complete financial records of the
costs associated with obtaining the Maseva Concession, forming
Maseva and Maseva Gas, and the negotiation and execution of the
agreements between Belmont and Maseva.
(g) A schedule setting forth the information required
by Section 3.07.
Article IV
Representations, Covenants, and Warranties of EuroGas and Eurosub
Section 4.01 Organization of EuroGas. EuroGas is a
corporation duly organized, validly existing, and in good
standing under the laws of the state of Utah and has the
corporate power and is duly authorized, qualified, franchised,
and licensed under all applicable laws, regulations, ordinances,
and public authorities to own its properties and assets and to
carry on its business in all material respects as it is now being
conducted. There is no jurisdiction in which it is not so
qualified in which the character and location of the assets owned
by it or the nature of the business transacted by it requires
qualification, except when the failure to do so would not have a
material adverse affect on the business and properties of
EuroGas. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate
any provision of EuroGas' articles of incorporation or bylaws.
Section 4.02 Organization of Eurosub. Eurosub is a
corporation duly organized, validly existing, and in good
standing under the laws of the Province of British Columbia and
has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations,
ordinances, and public authorities to own its properties and
assets and to carry on its business in all material respects as
it is now being conducted. There is no jurisdiction in which it
is not so qualified in which the character and location of the
assets owned by it or the nature of the business transacted by it
requires qualification, except when the failure to do so would
not have a material adverse affect on the business and properties
of Eurosub. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not,
violate any provision of Eurosub's articles of incorporation or
bylaws.
Section 4.03 Approval of this Agreement. The board of
directors of EuroGas and Eurosub have authorized the execution
and delivery of this Agreement and have approved the transactions
contemplated hereby. There is no requirement that the
shareholders of EuroGas or Eurosub approve this Agreement or the
transactions contemplated hereby. This Agreement is the legal,
valid, and binding agreement of EuroGas and Eurosub enforceable
in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, or other laws effecting the
enforcement of creditor's rights generally and by general
principles of equity.
Section 4.04 No Conflict With Other Instruments. The
execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in
the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust,
or other material contract, agreement, or instrument to which
EuroGas or Eurosub is a party or to which any of their properties
or operations are subject.
Section 4.05 EuroGas Disclosure. The information
concerning EuroGas and its business and operations set forth in
its reports on Form 10-K for the year ended December 31, 1997,
and Form 10-Q for the quarters ended March 31, 1998 and June 30,
1998, does not contain any untrue statement of a material fact or
omit a material fact required to be stated therein or necessary
to make the statements contained therein not misleading. Eurosub
has no material assets except the EuroGas Shares and EuroGas
Warrants and has no material liabilities.
Section 4.06 Brokers' Fees. EuroGas and Eurosub have not
engaged or entered into any agreement with any broker or finder
in connection with any of the transactions contemplated by this
Agreement requiring the payment of any fee or compensation.
Section 4.07 EuroGas Schedules. EuroGas will deliver to
Belmont within ten (10) days of the execution of the Agreement,
unless provided previously, the following disclosure schedules
which are collectively referred to as the "EuroGas Schedules":
(a) Annual report on Form 10-K for the year ended December
31, 1997; and
(b) Quarterly reports on Form 10-Q for the quarters ended
March 31, 1998 and June 30, 1998.
Article V
Conditions Precedent to the Obligations of EuroGas and Eurosub
The obligations of EuroGas to purchase the equity ownership
of Maseva Gas is subject to the satisfaction, at or before the
Closing, of each of the conditions set forth below.
Section 5.01 Performance by Belmont. Belmont shall have
substantially performed all conditions of this Agreement unless
the requirement has been waived in writing by EuroGas and
Eurosub.
Section 5.02 Formation of Maseva Gas. Maseva Gas shall be
duly and lawfully formed and in existence as a legally recognized
entity in the Slovak Republic.
Section 5.03 Transfer of Decision. The Maseva Concession,
including all rights under the Decision, shall have been
transferred to Maseva Gas and Maseva and Maseva Gas shall have
obtained any necessary consent of the Slovak Republic Ministry of
Environment as to such transfer and as to the ownership of Maseva
Gas by EuroGas.
Section 5.04 Payment of Existing Obligations. Belmont
shall have provided the necessary funding to Maseva or Maseva Gas
to permit the payment of all obligations which are due prior to
the Closing Date, including the obligation of Belmont to
reimburse Maseva for the initial work and organizational costs in
investigating and obtaining the Maseva Concession.
Section 5.05 Due Diligence Review. EuroGas shall have
favorably completed its due diligence of the Maseva Concession
and the ownership of all rights with respect thereto by Maseva
Gas.
Section 5.06 No Material Adverse Change. There shall not
have been any material change to Maseva Gas or the Maseva
Concession prior to the Closing Date.
Section 5.07 Absence of Litigation. No action, suit, or
proceeding before any court or any governmental body or authority
pertaining to the consummation of the transactions contemplated
by this Agreement shall have been instituted or threatened on or
before the Closing Date.
Section 5.08 Closing Date Pro Rations. Eurosub and
Belmont shall pro rate as of the Closing Date, all charges and
items of expense with respect to the Maseva Concession with
Belmont bearing the proportionate expense attributable to the
period prior to the Closing Date in accordance with the terms of
this Agreement and, and Eurosub bearing the proportion expense
attributable to the period subsequent to the Closing Date.
Section 5.09 Third-Party Consents. Belmont shall have
obtained the consents of all third-parties whose consent is
required to consummate the transactions contemplated by this
Agreement, including any consents reasonably requested by EuroGas
and Eurosub.
Section 5.10 Other Agreements. The execution of a
Registration Rights Agreement, Working Interest Agreement,
Warrant, and Voting Trust Agreement in the form substantially
similar to the drafts attached to this Agreement.
Section 5.11 Agreement with Maseva. The obtaining of any
agreements with Maseva (the owner of the other 10% of Maseva Gas)
as Belmont and EuroGas deem mutually advisable.
Article VI
Conditions Precedent to the Obligations of Belmont
The obligation of Belmont to sell its interest in Maseva Gas
is subject to EuroGas' and Eurosub's satisfaction, at the time of
Closing, of the conditions set out below, except for any
condition which has been waived in writing by Belmont at or prior
to the Closing.
Section 6.01 Performance by EuroGas. EuroGas and Eurosub
shall have substantially performed all the conditions of this
Agreement, unless the requirement has been waived in writing by
Belmont.
Section 6.02 Corporate Approval. The board of directors
of EuroGas and Eurosub shall have approved the transactions
described in this Agreement and resolutions setting forth those
approvals shall have been certified to Belmont by an officer of
EuroGas and Eurosub.
Section 6.03 Other Agreements. The execution of a
Registration Rights Agreement, Working Interest Agreement,
Warrant, and Voting Trust Agreement in the form substantially
similar to the drafts attached to this Agreement.
Section 6.04 Agreement with Maseva. The obtaining of any
agreements with Maseva (the owner of the other 10% of Maseva Gas)
as Belmont and EuroGas deem mutually advisable.
Article VII
Survival of Representations and Warranties
All representations and warranties made in Articles IV and V
shall be continuing and shall survive the Closing, but shall
expire 24 months after the Closing Date; provided, however, that
if a claim for indemnification has been asserted pursuant to
Article VII prior to or as of the expiration date of such 24-
month period, such representations and warranties shall remain in
full force and effect until full and complete resolution of such
claim. Notwithstanding the foregoing, however, the time for
making a claim based upon such representation or warranty shall
expire 24 months after the Closing Date.
Article VIII
Indemnification
Section 8.01 By EuroGas, Eurosub, and Belmont. EuroGas
and Eurosub, on the one hand, and Belmont on the other hand, each
hereby agrees to indemnify and hold harmless the other against
all claims, damages, losses, liabilities, costs, and expenses
(including settlement costs and any legal, accounting, or other
expenses for investigating or defending any actions or threatened
actions) reasonably incurred by the indemnified party in
connection with each and all of the following:
(a) any breach by the indemnifying party of any
representation or warranty in this Agreement;
(b) any breach of any covenant, agreement, or
obligation of the indemnifying party contained in this Agreement
or any other agreement, instrument, or document contemplated by
this Agreement; and
(c) any misrepresentation contained in any statement,
exhibit, certificate, or schedule furnished by the indemnifying
party pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement.
Section 8.02 By Belmont. Belmont agrees to indemnify and
hold harmless EuroGas and Eurosub from any and all claims,
damages, liabilities, costs, and expenses (including settlement
costs and any legal, accounting, or other expenses for
investigating or defending any actions or threatened actions)
reasonably incurred by the indemnified party in connection with
each and all of the following:
(a) any claims against, or liabilities or obligations of,
Maseva Gas, the Maseva concession, or the business or assets of
Maseva Gas related to any period of time prior to the Closing
Date.
(b) any and all claims, damages, losses, liabilities,
costs, and expenses including settlement costs and any legal,
accounting, or other expenses for investigating or defending any
actions or threatened actions reasonably incurred by EuroGas or
Eurosub in connection with any claim relating to Maseva Gas's
business or operations prior to the Closing Date.
Section 8.03 Claims for Indemnification. Whenever any
claim shall arise for indemnification hereunder, the party
seeking indemnification (the "Indemnified Party"), shall promptly
notify, in writing, the party from whom indemnification is sought
(the "Indemnifying Party") of the claim and, when known, the
facts constituting the basis for such claim. In the event of any
such claim for indemnification hereunder resulting from or in
connection with any claim or legal proceedings by any party, the
notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Party shall not settle or compromise
any claim by a third party for which it is entitled to
indemnification hereunder without the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit
after notification thereof as provided in section 8.04 hereof.
Section 8.04 Defense by Indemnifying Party. In connection
with any claim giving rise to indemnity hereunder resulting from
or arising out of any claim or legal proceeding by a person who
is not a party to this Agreement, the Indemnifying Party, at its
sole cost and expense may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding
if it acknowledges to the Indemnified Party in writing its
obligations to indemnify the Indemnified Party with respect to
all elements of such claim. The Indemnified Party shall be
entitled to participate (but not control) the defense of any such
action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim
or litigation resulting therefrom within 30 days after the date
such claim is made:
(a) the Indemnified Party may defend against such claim or
litigation in such manner as it may deem appropriate, including,
but not limited to, settling such claim or litigation, after
giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate; and
(b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with
its counsel and at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified
Party defended such third party claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden
to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third party claim in a
reasonably prudent manner.
The parties hereto agree the failure of any party to perform
any obligation or duty which each has agreed to perform shall
cause irreparable harm to the parties willing to perform the
obligations and duties herein, which harm cannot be adequately
compensated for by money damages. It is further agreed by the
parties hereto an order of specific performance against a party
in default under the terms of this Agreement would be equitable
and would not work a hardship on the defaulting party.
Accordingly, in the event of default by any party hereto, the non-
defaulting party, in addition to whatever other remedies are
available at law or in equity, shall have the right to compel
specific performance by the defaulting party of any obligation or
duty herein.
Article IX
Specific Performance
The parties hereto agree the failure of any party to perform
any obligation or duty which each has agreed to perform shall
cause irreparable harm to the parties willing to perform the
obligations and duties herein, which harm cannot be adequately
compensated for by money damages. It is further agreed by the
parties hereto an order of specific performance against a party
in default under the terms of this Agreement would be equitable
and would not work a hardship on the defaulting party.
Accordingly, in the event of default by any party hereto, the non-
defaulting party, in addition to whatever other remedies are
available at law or in equity, shall have the right to compel
specific performance by the defaulting party of any obligation or
duty herein.
Article X
Miscellaneous Provisions
Section 10.01 Costs. EuroGas, Eurosub, and Belmont shall
each pay all of their own costs and expenses incurred or to be
incurred by each in negotiating and preparing this Agreement and
in closing and carrying out the transactions contemplated by this
Agreement.
Section 10.02 Notices. Any notice, demand, request, or
other communication under this Agreement shall be in writing and
shall be deemed to have been given on the date of service if
personally served or by facsimile transmission (if receipt is
confirmed by the facsimile operator of the recipient), or
delivered by overnight courier service or on the third day after
mailing if mailed by certified mail, return receipt requested,
addressed as follows:
If to EuroGas or Eurosub, to:
Hank Blankenstein, Vice-President
EuroGas, Inc.
942 East 7145 South, #101A
Midvale, Utah 84047
Fax: (801) 255-2005
Confirmation: (801) 255-0862
With copies to: Howard S. Landa, Esq.
Kruse, Landa & Maycock, L.L.C.
50 West Broadway, Eighth Floor
Salt Lake City, Utah 84101
Fax: (801) 531-7091
Confirmation: (801) 531-7090
If to Belmont, to: Vojtech Agyagos
Belmont Resources, Inc.
Suite 1180 - 666 Burrard St.
Vancouver, British Columbia
Canada V6C 2X8
Fax: (604) 683-1350
Confirmation: (604) 683-6648
With copies to: David Anfield, Esq.
Anfield, Sujir, Kennedy & Durno
16th Floor - Stock Exchange Tower
609 Granville Street
P.O. Box 10068 - Pacific Centre
Vancouver, British Columbia
Canada V7Y 1C3
Fax: (604) 669-3877
Confirmation: (604) 669-1322
or such other addresses and facsimile numbers as shall be
furnished in writing by any party in the manner for giving
notices hereunder, and any such notice, demand, request, or other
communication shall be deemed to have been given as of the date
so delivered or sent by facsimile transmission (if receipt is
confirmed by the facsimile operator of the recipient), three days
after the date so mailed, or one day after the date so sent by
overnight delivery.
Section 10.03 Governing Law. This Agreement shall be
governed by, enforced and construed under and in accordance with
the laws of the United States of America and, with respect to
matters of state law, with the laws of the state of Utah. Venue
for all actions regarding this Agreement shall be in Salt Lake
County, Utah. The parties hereby submit to the personal
jurisdiction of such court for the purpose of resolving any
dispute arising under this Agreement.
Section 10.04 Attorneys' Fees. In the event that any party
institutes any action or suit to enforce this Agreement or to
secure relief from any default hereunder or breach hereof, the
breaching party or parties shall reimburse the nonbreaching party
or parties for all costs, including reasonable attorneys' fees,
incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 10.05 Schedules and Exhibits; Knowledge. Whenever
in any section of this Agreement reference is made to information
set forth in the exhibits or the Belmont Schedules, such
reference is to information specifically set forth in such
exhibits or schedules and clearly marked* to identify the section
of this Agreement to which the information relates. Whenever any
representation is made to the "knowledge" of any party, it shall
be deemed to be a representation that no officer or director of
such party, after reasonable investigation, has any knowledge of
such matters.
Section 10.06 Entire Agreement. This Agreement, together
with the documents to be delivered pursuant hereto, represent the
entire agreement between the parties relating to the subject
matter hereof. There are no other courses of dealing,
understanding, agreements, representations, or warranties,
written or oral, except as set forth herein.
Section 10.07 Survival; Termination. The representations,
warranties, and covenants of the respective parties shall survive
the Closing.
Section 10.08 Form of Execution; Counterparts. A valid and
binding signature hereto or any notice or demand hereunder may be
in the form of a manual execution or a true copy made by
photographic, xerographic, or other electronic process that
provides similar copy accuracy of a document that has been
executed. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall be but a single instrument.
Section 10.09 Amendment or Waiver. Every right and remedy
provided herein shall be cumulative with every other right and
remedy, whether conferred herein, at law, or in equity, and may
be enforced concurrently herewith, and no waiver by any party of
the performance of any obligation by the other shall be construed
as a waiver of the same or any other default then, theretofore,
or thereafter occurring or existing. At any time prior to the
Closing Date, this Agreement may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained
herein, and any term or condition of this Agreement may be waived
or the time for performance thereof may be extended by a writing
signed by the party or parties for whose benefit the provision is
intended.
Section 10.10 Waiver of Jury Trial. Each party hereby (a)
knowingly, voluntarily, intentionally, and irrevocably waives, to
the maximum extent not prohibited by law, any right it may have
to a trial by jury in respect of any litigation based hereon, or
directly or indirectly at any time arising out of, under, or in
connection with this Agreement or any transaction contemplated
hereby or associated herewith; and (b) acknowledges that it has
been induced to enter into this Agreement and the transactions
contemplated hereby by, among other things, the mutual waivers
and certifications contained in this section.
DATED as of the date first above written.
EUROGAS, INC.
By
EUROGAS RESOURCES INC.
By
BELMONT RESOURCES, INC.
By
AGREEMENT
THIS AGREEMENT is made as of the 5th day of March
, 1999.
BETWEEN:
BELMONT RESOURCES INC., a company duly incorporated pursuant
to the laws of the Province of British Columbia and having
an office at 1180 - 666 Burrard Street, Vancouver, British
Columbia, V6C 2X8.
("BEO")
OF THE FIRST PART AND:
MIKE LAVOIE, of Box 386 Val d'Or, Quebec, J9P 4P4.
("LAVOIE")
OF THE SECOND PART
WHEREAS:
I. LAVOIE is the legal and beneficial owner of a 100% interest
in certain claims located in the Lac Rocher Area, Quebec,
(the "Property") as further described in Schedule "A"
attached.
II. LAVOIE wishes to grant and BEO wishes to acquire a 100%
interest in LAVOIE's right, title and interest in the Property on
the terms and conditions set out in this Agreement.
NOW THEREFORE WITNESSETH that in consideration of the premises
and mutual promises, covenants, conditions, representations and
warranties herein set out, the parties agree as follows:
1. ACQUISITION
(a) LAVOIE hereby grants to BEO the sole and exclusive right and
option (the "Option") to acquire a 100% interest in LAVOIE's
interest in and to the Property, free and clear of all liens,
charges, encumbrances, claims rights or interest of any person
and such option shall be deemed to have been exercised upon the
completion of the following:
(i) Paying LAVOIE $30,000 Cdn. within two days of signing of
this Agreement;
(ii) Paying LAVOIE $25,000 Cdn. upon Vancouver Stock Exchange
("VSE") approval of this Agreement;
(iii) Payment of 50,000 shares of BEO to LAVOIE within 15
days of VSE approval, which shares shall be subject to a one (1)
year hold period;
(iv) Payment of an additional 50,000 shares of BEO to LAVOIE
within 15 days of VSE approval of a Geological Report which
outlines geological merit and a recommendation for specific
exploration on the property;
(b) All payments shall be made by certified cheque or wire
transfer to LAVOIE to such address as LAVOIE will instruct BEO.
2. DUTIES AND OBLIGATIONS
BEO shall have full right, power and authority to do
everything necessary or desirable to explore, develop, put
the Property into commercial production and to operate the
Property subject to a two percent (2%) Net Smelter Return
payable to LAVOIE with a one percent (1%) buy-out for $1
million dollars. In addition to the Net Smelter a
Prospectors Production Bonus of 50,000 shares of BEO shall
be paid to LAVOIE within 60 days following commencement of
commercial production.
"Net Smelter Return" shall mean the net sum in dollars
received or to be received by BEO for the ores, minerals,
metals, or other saleable products sold to an "arm's length"
Purchaser (as that term is defined in the Income Tax Act of
Canada) after deductions for all of the following:
(i) custom smelting costs, treatment charges and penalties
including, but without being limited to, metal losses, and
penalties for impurities;
(ii) all costs of transporting such ores, minerals or metals from
such lands to places of treatment; and
(iii) taxes of any kind, including sales taxes, levied on
such ores, minerals or metals or on their production or sale but
excluding income taxes.
"Commercial Production" means the operation of the Property
or any portion thereof as a producing mine and the
production of mineral products therefrom (excluding bulk
sampling, pilot plant or test operations);
3. TRANSFER OF PROPERTY
(i) Upon the payment of monies and issue of shares described in
Section 1, LAVOIE shall execute all such effectual and valid
transfers of the Property and such other documents as BEO may
deem necessary to transfer to BEO a 100% undivided interest in
and to the Property free and clear of all encumbrances save and
except the royalties described in Section 2 and shall deliver
the same to BEO.
(ii) BEO may at any time sell, transfer or otherwise dispose of
all or any portion of its interest in and to the Property and
this Agreement, except that its obligations hereunder shall
continue unless released in writing by LAVOIE.
4. WHOLE AGREEMENT
This Agreement constitutes and contains the entire agreement
and understanding between the parties and supersedes all
prior agreements, memoranda, correspondence, communications,
negotiations and representations, whether oral or written,
express or implied, statutory or otherwise between the
parties or any of them with respect to the subject matter
hereof. This Agreement may not be changed orally but only by
an agreement in writing, signed by the party against which
enforcement, waiver, change, modification or discharge is
sought.
5. FURTHER DOCUMENTS
The parties shall execute such other documents and do such
other things that may be reasonably necessary to give full
effect to the transactions contemplated hereby.
6. GOVERNING LAW
This Agreement shall be subject to and governed in
accordance with the laws of the Province of British
Columbia, Canada, and the parties hereto do attorn to the
exclusive jurisdiction of the Courts of the Province of
British Columbia.
7. ENUREMENT
The agreement formed by acceptance of the terms and
conditions set out herein shall enure to the benefit of and
be binding upon the parties, their respective heirs,
successors and permitted assigns.
8. TIME
Time is of the essence.
9. COUNTERPARTS AND FACSIMILE SIGNATURE
This Agreement may be signed in counterpart, which
counterparts taken together shall constitute one and the
same agreement and any facsimile together shall be taken as
an original.
IN WITNESS WHEREOF the parties have executed this Agreement as of
the day, month and year first above written.
The Corporate Seal of
BELMONT RESOURCES INC.
was hereunto affixed in the presence of:
/s/____________________________
Director
/s/____________________________
Director
SIGNED, SEALED AND DELIVERED
by MIKE LAVOIE, in the presence of:
_________________________
Name
/s/_________________________
______________________________ MIKE LAVOIE
Address
______________________________
Occupation
OPTION AGREEMENT ASSIGNMENT
This Option Agreement Assignment made this 16th day of
March , 1999.
BETWEEN:
BELMONT RESOURCES INC., a company incorporated under the laws of
British Columbia.
("BELMONT")
AND:
MONTORO RESOURCES INC., a company incorporated under
the laws of British Columbia.
("MONTORO")
WHEREAS:
BELMONT holds under an Option Agreement, sixty-seven mineral
claims (the "Property") located in the Lac Rocher Area, Quebec
and more specifically described in Schedule "A" attached hereto.
AND WHEREAS:
BELMONT wishes to assign, bargain or sell FIFTY percent (50%)
interest in the attached Schedule "A" Agreement, and in
consideration of the sum of Ten Dollars ($10.00), the receipt of
which is hereby acknowledged, the parties hereto agree to the
following terms and conditions:
NOW THEREFORE WITNESSETH that in consideration of the premises
and mutual promises, covenants, conditions, representations and
warranties herein set out, the parties agree as follows:
REPRESENTATIONS AND WARRANTIES:
Each party represents and warrants to the other that:
it is a company duly incorporated, validly subsisting and in good
standing with respect to filing of annual reports under the laws
of the jurisdiction of its incorporation and is or will be
qualified to do business and to hold an interest in the Property
in the jurisdiction in which the Property is located;
it has full power and authority to carry on business and to enter
into this Agreement and any agreement or instrument referred to
in or contemplated by this Agreement and to carry out and perform
all of its obligations and duties hereunder;
it has duly obtained all internal corporate authorizations for
the execution, delivery and performance of this Agreement and the
execution and delivery of this Agreement will not conflict with,
or accelerate the performance required by or result in any breach
of any covenants or agreements contained in or constitute a
default under, or result in the creation of any encumbrance, lien
or charge under the provisions of its constraining or initiating
documents or any indenture, agreement or other instruments
whatsoever to which it is a party or by which it is bound or to
which it may be subject and will not contravene any applicable
laws;
BELMONT represents and warrants to MONTORO that to the best of
its knowledge:
the Property is in good standing under the laws of the
jurisdiction in which the Property is located up to and including
the date of this Agreement;
the Property is free and clear of all liens, charges and
encumbrances and is not subject to any right , claim or interest
of any other person;
there are no adverse claims or challenges against or to the
ownership of or title to the Property, or any portion thereof nor
is there any basis therefor and no person has any royalty or
interest whatsoever in production of profits from the Property or
any portion thereof other than a 2% Net Smelter Return in respect
of all claims comprising the Property.
TERMS AND CONDITIONS:
MONTORO will pay BELMONT fifteen thousand dollars ($15,000) Cdn.
within thirty days of signing of this Agreement;
MONTORO will pay BELMONT an additional fifteen thousand dollars
($15,000) Cdn. within sixty days of signing of this Agreement;
MONTORO will issue fifty thousand (50,000) common shares of its
stock to BELMONT within fifteen (15) days of VSE approval, which
shares shall be subject to a one (1) year hold period.
MONTORO will complete a PHASE I exploration and development
program of the said property in the amount of $35,000. Such work
to include line cutting, geological mapping, prospecting,
sampling and to be completed by September 30, 1999.
On completion of PHASE I, BELMONT and MONTORO will form a Joint
Venture to allow for further exploration and development of the
said property. Such work to include airborne and ground
geophysical surveys (mag / max - min / induce polarization) and
diamond drilling. BELMONT will be the operator in the joint
venture exploration.
All terms and conditions are subject to regulatory approvals.
Except as amended herein the other clauses in the Option
Agreement shall remain in full force and effect.
This Agreement is an Assignment of an Option Agreement and should
MONTORO fail to comply with the conditions, terms and provisions
described herein, this Agreement will terminate without penalty
or blame to either party.
The parties hereto shall promptly execute or cause to be executed
all documents, deeds, conveyances and other instruments of
further assurance which may be reasonably necessary or advisable
to carry out fully the intent of the agreement herein.
IN WITNESS WHEREOF this Agreement has been executed by BELMONT
RESOURCES INC. and MONTORO RESOURCES INC. as of the date first
above written.
THE CORPORATE SEAL OF
BELMONT RESOURCES INC.
was hereunto affixed in the presence of:
C/S
/s/
Director
/s/
Director
THE CORPORATE SEAL OF
MONTORO RESOURCES INC.
was hereunto affixed in the presence of:
C/S
/s/
Director
/s/
Director
