U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(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, 2000
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
----------------------------------- -----------------------------------
(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 [ ].
Indicate by check mark which financials statement item the Company has elected
to follow.
Item 17 X Item 18
--------- ---------
This Form 20-F consists of 27 pages. Exhibit Index begins on page 28.
<PAGE>
Page 2
TABLE OF CONTENTS
PART I PAGE
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. DESCRIPTION OF PROPERTY 11
ITEM 3. LEGAL PROCEEDINGS 13
ITEM 4. CONTROL OF REGISTRANT 13
ITEM 5. NATURE OF TRADING MARKET 14
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY HOLDERS 15
ITEM 7. TAXATION 17
ITEM 8. SELECTED FINANCIAL DATA 19
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 20
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT 22
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS 24
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM
REGISTRANT OR SUBSIDIARIES 24
ITEM 13. INTEREST OF MANAGEMENT IN
CERTAIN TRANSACTIONS 25
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED 25
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES 25
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR
REGISTERED SECURITIES AND USE OF PROCEEDS 25
PART IV
ITEM 17. FINANCIAL STATEMENTS AND EXHIBITS 25
SIGNATURE 27
<PAGE>
Page 3
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).
Cu: Symbol for Copper
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.
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.
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.
Grassroots Property: Property at an early exploration stage, with no established
mineral reserves, which is of indeterminate value.
Mafic: Igneous rocks composed mostly of dark, iron- and magnesium-rich minerals.
Metallurgy: The process of extracting metals from their ores. Science of ore
processing and metals.
Mineral Deposits: Implication that the rocks contain sulfide minerals and that
these could be related to ore.
Mining Claim: A portion of the public lands claimed for the valuable minerals
occurring in those lands; obtaining mineral rights under mining law.
Ni: Symbol for Nickle
<PAGE>
Page 4
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.
Ore Zones: Zones or areas within a rock mass in which ore is known to exist.
Platinum: A heavy, grayish-white metallic element, malleable and ductile and
resistant to most chemicals; used for jewelry and scientific apparatus. Symbol,
Pt.
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.
Talc: A magnesian laminated mineral, unctuous to the touch, of a shining luster,
translucent, and usually white, apple-green, or yellow, differing from mica in
being flexible but not elastic.
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 the Slovak Republic
("Slovakia") and in the Province of Quebec, Canada. 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 projects 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.
<PAGE>
Page 5
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, 2000, 19,764,012 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.
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.
In 1995, the Company began a long-term strategy to acquire and develop natural
resource properties in 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 Slovak Republic is now an independent
nation, commonly known as "Slovakia".
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.
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. 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, through an agreement with Rudne
Bane, s.p., dated May 1, 1996, owns a 100% interest in the Pezinok II mining
<PAGE>
Page 6
concession, a gold/antimony mine property. There are no minimum development
requirements, royalty arrangements, local labor requirements, or local ownership
requirements.
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 Slovakia including a lease
for the mill/concentrator land and buildings (generator building, compressor
building, 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. 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. This transaction was completed in April 1997. Since the SSSRO
acquisition, the Company has completed registration of its interest in the
Pezinok II mining concession. Additionally, the Slovakian purchase provided the
Company with access to experienced mining management within the Slovak Republic.
The Company gained approval for the Slovakian property transaction from the
Vancouver Stock Exchange on July 30, 1996.
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 Cdn. for 100% of
the mineral rights owned by SSSRO (or $7,324,620 Cdn. 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 Cdn. per share or
$6,820,000 Cdn. 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, 2000.
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. Should the Company be unable to find a joint venture partner for the
Pezinok property, the project may have to be abandoned. A write-down of the
value of the combined concession and dedicated capital assets to an estimated
recoverable value of $500,000 Cdn. has been recorded in the current year.
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
<PAGE>
Page 7
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 were that the Company receive 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 retained 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. For more information
concerning the Kralovsky Chlmec property, see "Item 2: Description of Property".
On March 5, 1999 the Company entered into an agreement 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 Cdn. (which was paid) and issuance of 100,000
common shares (which were issued) at a deemed price of $0.50 Cdn. per share.
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
the Company's 100% interest in Lac Rocher. Montoro paid the Company $30,000
Cdn.; issued 50,000 restricted shares of common stock and will incur $35,000
Cdn. in exploration expenditures on the Lac Rocher by September 30, 2000.
On January 4, 2000, the Company entered into an option assignment agreement with
Montoro Resources Inc. to acquire a 50% interest in an exploration permit in the
Ungava region of Quebec.
Consideration for this acquisition is as follows:
i) cash payments of $55,000 Cdn. (which was paid)
ii) issuance of 50,000 common shares of the Company to Montoro subject to
regulatory approval (which were issued)
iii) completion of a Phase 1 exploration program in the amount of $30,000 Cdn.
by September 30, 2000.
For more information concerning the two preceding Quebec properties, see "Item
2: Description of Property".
The Company signed an agreement dated February 26, 2000 to acquire a 57%
interest in Rozmin s.r.o., a private Slovakia mining company that controls a
talc deposit in the eastern Slovakia. The total cash consideration for the
transaction in 2,850,000 German marks ($2.061 million Cdn.). A finder's fee of
150,000 German marks ($104,240 Cdn.) was paid in connection with the agreement.
Regulatory approval was received April 3, 2000 and the acquisition was completed
in April 2000. As of January 31, 2000, $16,040 Cdn. in costs had been incurred
in connection with due diligence and legal services.
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
<PAGE>
Page 8
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 the fiscal year ended January 31, 1998, the
Company raised $982,700 Cdn. 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 these offerings were used primarily to fund property
acquisitions and to pay operating costs. During the fiscal year ended January
31, 1999, the Company raised $211,120 Cdn. through the exercise of
directors/employees incentive stock options (377,000 shares issued at $0.56 per
share). During the fiscal year ended January 31, 2000, the Company raised
$30,240 Cdn. through the exercise of directors/employees incentive stock options
(54,000 shares issued at $0.56 per share). The Company also liquidated 870,000
shares of common stock of EuroGas, Inc. and realized approximately $674,000 Cdn.
($465,140 USD).
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 and Province of Quebec, Canada. 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 and the
Province of Quebec, Canada. The Company currently believes its operations in
Slovakia and Quebec 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.
<PAGE>
Page 9
Employees.
As of January 31, 2000, the Company and its subsidiary, SSSRO, had two
employees. The Company also 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.
<PAGE>
Page 10
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 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.
<PAGE>
Page 11
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 these acquisitions
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.
1999 1998 1997
---- ---- ----
Rate at end of Period .6883 .6507 .6969
Average Rate During Period .6731 .6748 .7229
High Rate .6917 .7121 .7472
Low Rate .6463 .6307 .6969
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
<PAGE>
Page 12
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 2000/01.
(c) Lac Rocher Property, Province of Quebec, Canada
The following is a summary taken from a geological report by Terrence Coyle,
Geologist dated April 1999. The Company believes that this summary of the report
is far and accurate.
The claim group consists of 67 mineral claims located within NTS region 32K/09
east of the north end of Lac Rocher and 15-km northeast of the Nuinsco Resources
discovery. The area has not been logged off and thus, there are no roads in the
vicinity. At present access is by helicopter from Matagami, Chibougamau, or Camp
115 - Quebec located on the Matagami - Radission Road.
<PAGE>
Page 13
The claims were acquired during the Lac Rocher staking rush, which was provoked
by the announcements of a rich nickel/copper intersection in the area.
There is no record of any work having been done on the property other than a
traverse by government geologists in 1972/74. The claims are underlain by
geology similar to that of the discovery property. There is no information
concerning the presence of mafic to ultramafic intrusions around or on the
claims.
The Company will await the results of several exploration programs being
conducted in the area before proceeding with a initial grass roots exploration
program so that informed decisions can be made concerning its mineral potential.
(d) Ungava Prospect, Province of Quebec, Canada.
The following is a summary taken from a geological report prepared for Montoro
Resources Inc. by Anglaumaque Explorations Inc. in December 1998. The Company
believes that this summary of the report is fair and accurate.
The Ungava Prospect (P.E.M. 1388) covering 50 Km2 is located in the central part
of the Circum-Ungava-Belt. It is about 100 kilometers west of Kangirsujuak, a
local community on the shore of Wakeham Bay which provides direct access to the
Hudson Strait, northern Quebec. Other surface infrastructures in the vicinity of
the prospect include the Donaldson Airport operated by Falconbridge Limited and
the Kattinik Mine road which passes within 2 km of the north property boundary.
Access to the property is by helicopter from either Igaluit, Kuujjuag, Salluitor
or Kangirsujuak. Both Kuujjuag and Igaluit can be by air from Montreal.
The prospect is adjacent to a series of well known Cu-Ni-Platinum Group Elements
("PGE") deposits of the Raglan Camp-Falconbridge production area.
An examination of assessment work and known geology shows the prospect to be a
pure grass-roots property, although some outcrop zones are already known from
regional mapping.
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, 2000 by (i) all stockholders
<PAGE>
Page 14
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)
CDS & Co. (4) 14,704,708 71.2%
CEDE & Co. (4) 3,678,694 17.8%
All officers and
Directors(5) 2,301,200 11.1%
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 20,653,012 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 owners of CDS & Co. and CEDE & Co. are unknown to the
Company and its Officers and Directors.
(5) 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 Canadian Venture Exchange
(formerly Vancouver Stock Exchange) under the symbol "BEO." The following table
sets forth, for the period from January 1, 1998 through December 31, 1999, 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)
----------------- -----------------------------
1999 (Cdn$) 1998 (Cdn$)
---------- ----------
High Low High Low
---- --- ---- ---
First 0.75 0.35 1.10 0.44
Second 0.77 0.35 1.14 0.70
Third 0.41 0.25 1.19 0.55
Fourth 0.30 0.11 0.75 0.46
<PAGE>
Page 15
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, 1999, the trades ranged from a low of $0.10 USD and a high
of $0.53 USD per share.
The Company's securities are recorded on the books of its transfer agent in
registered form. As of June 16, 2000 the approximate number of record holders of
the Company's Common stock was 1,098, 1,041 of which are United States
shareholders of record holding a total of 4,799,193 shares, or approximately
23.2% 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.
<PAGE>
Page 16
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),
<PAGE>
Page 17
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 is 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.
<PAGE>
Page 18
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
<PAGE>
Page 19
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, 2000, 1999, 1998, 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 2000, 1999, and 1998, 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 17 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 2000, 1999, and 1998.
Year Year Year
Ended Ended Ended
1/31/2000 1/31/99 1/31/98
--------- ------- -------
Cdn.$ Cdn.$ Cdn.$
Canadian GAAP
--------------
Revenue $7,753 $5,458,032 $5,562
Net Income (Loss) $(6,396,320) $4,113,376 $(437,456)
Per Share $(0.32) $0.20 $(0.02)
Actual Outst. Shrs. 19,764,012 19,600,012 19,223,012
Dividends nil nil nil
Total Assets $4,150,274 $11,595,739 $6,170,105
Shareholder Equity $4,121,502 $10,432,662 $6,108,166
U.S. GAAP
----------
Weighted Ave Shares 19,729,722 *20,345,920 19,223,012
Net Income (Loss) $(6,772,360) $4,113,376 $(437,456)
Per Share $(0.34) $0.25 $(0.02)
Total Assets $3,774,234 $11,595,739 $6,170,105
Shareholder Equity $3,745,462 $10,432,662 $6,108,166
* 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.
<PAGE>
Page 20
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 fiscal years ended
January 31, 1997 and 1998 upon the SSSRO acquisition. 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.
As a result of depressed gold prices and weak resource sectors world-wide the
Company has been unable, to date, to find a joint venture partner or commit
further resources to fund the reopening of the Pezinok mine as planned.
Management feels that based on current gold prices the project is not currently
viable. A write-down of the value of the combined development and capital
acquisition costs to an estimated recoverable value of $500,000 Cdn. has been
recorded in the fiscal year ended January 31, 2000.
To date, including fiscal 2000 and 1999, the Company has not generated any
operating income. Revenues for past years relate solely to interest revenues on
the Company's term deposits, and a gain on sale of the oil/gas interest to
EuroGas, Inc.
The Company anticipates expending approximately $5,000 Cdn. throughout fiscal
year 2001 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
<PAGE>
Page 21
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 2000 Compared with Fiscal Year 1999. During fiscal year 2000, general
and administrative costs were $299,204 compared to $236,216 for the comparable
period last year, an increase of $62,988 or 26.7%. The net increase is
comprised primarily of increases and decreases in certain categories as follows:
a decrease of $2,869 in audit and accounting expenses, a decrease of 14,206 in
legal fees, an increase of $30,678 in project investigation charges, an increase
of $14,973 in office and sundry and other line item increases and decreases
under $10,000. Each of the line item changes are attributable to the Slovakian
acquisitions which required a significant amount of travel during the year for
due diligence and the subsequent follow through items conducted during 1999.
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 fiscal year ended January 31, 1998, the Company
issued 1,090,000 shares upon the exercise of incentive stock options which
netted the Company treasury $982,700 Cdn.
During the fiscal year ended January 31, 1999, the Company issued 377,000 shares
upon the exercising of incentive stock options which netted the Company treasury
$211,120 Cdn.
During the fiscal year ended January 31, 2000, the Company issued 54,000 shares
upon the exercise of incentive stock options which netted the Company
$30,240(Cdn.). The Company liquidated 870,000 shares of common stock of EuroGas,
Inc. to net $674,000 Cdn. ($465,140 USD).
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 will be able to sell 1,630,000 shares of common stock of
EuroGas, Inc. during the fiscal year ending January 31, 2001. 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.
<PAGE>
Page 22
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.
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, 2000 are listed below:
Name Age Position with the Nationality First Elected
Company
Vojtech Agyagos 56 President, Director Canadian 1996
Gary Musil 49 Secretary, Director Canadian 1992
Kenneth B. Liebscher 57 Director Canadian 1992
Peter John 45 Director German 1996
Peter E. Serck 64 Director Canadian 1996
Nicolo Bellanca 42 Director Italian 1996
Vojtech Agyagos has served as the President and a Director of the Company 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
<PAGE>
Page 23
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 was self-employed from 1991 - 1999. Since December 1999 Mr. Musil has
been employed as Chief Financial Officer and provides accounting and bookkeeping
services to the Company. 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.
Kenneth B. Liebscher has served as a Director of the Company 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. Since December 1998 to present Mr. Liebscher has served on
the board of directors of Direction Technologies Inc., trading on the O.T.C.
Bulletin Board. 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 of the Company 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 of the Company 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 of the Company 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 13 meetings in fiscal year 2000 with an average attendance of
over 74%. 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.
<PAGE>
Page 24
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 2000 54,000(2) -0- -0- -0- 75,000 -0- -0-
President 1999 54,000(2) -0- -0- -0- 300,000 -0- -0-
1998 50,000(2) -0- -0- -0- -0- -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 Canadian
Venture Exchange ("CDNX") formerly (Vancouver Stock Exchange), 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 CDNX within the ten
(10) trading days immediately preceding the day on which the options are granted
and publicly announced.
As of January 31, 2000, there were a total of 889,000 outstanding share options
exercisable at $0.32 per share with an expiration date of February 24, 2000, a
total of 850,000 outstanding share options exercisable at $0.32 with expiration
date of September 17, 2001 and a total of 230,000 outstanding share options
exercisable at $0.32 with an expiration date of January 13, 2002. A total of
1,739,000 outstanding options are held by officers and directors of the Company.
<PAGE>
Page 25
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 2000 were
granted at the then current market value.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
During the most recently completed fiscal year ended on January 31, 2000, the
following transactions took place with related parties:
Management fees totalling $54,000 Cdn. 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 totalling $18,000 Cdn. 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 $58,420 Cdn. 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 continued with an office
services contract paid on an hourly basis until November 30, 1999. 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.
<PAGE>
Page 26
(a) Index to Financial Statements and Schedules Page
----------------------------------------------- ----
Report of Independent Auditor F-1
Balance Sheets of the Company as of January 31, 2000
and January 31, 1999 F-2
Statements of Deficit for the year ended January 31, 2000, 1999 and
the year ended January 31, 1998 F-4
Statements of Operations for the year ended January 31, 2000, 1999 and
the year ended January 31, 1998 F-5
Statements of Cash Flow for the year ended January 31, 2000, 1999 and
the year ended January 31, 1998 F-6
Notes to Financial Statements F-7
(b) Exhibits included or incorporated by reference herein: See Exhibit Index
<PAGE>
Page 27
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 31, 2000 By: /s/ Gary Musil
---------------------
Gary Musil, Secretary
<PAGE>
Page 28
EXHIBIT INDEX
Exhibit
Number Title of Document Location
------ ----------------- --------
1.1 Memorandum of Incorporation. Report with Form 20-FR
dated September 19, 1998
and incorporated herein
by reference.
1.2 Articles. Report with Form 20-FR
dated September 19, 1998
and incorporated herein
by reference.
2.1 Sample Director Option Agreement between Report with Form 20-FR
the Company and Mr. Agyagos, Mr. John, dated September 19, 1998
Mr. Bellanca, Mr. Serck, Mr. Musil, and and incorporated herein
Mr. Liebscher by reference.
2.2 Warrant Agreement between the Company and Report with Form 20-FR
Oxbridge Limited dated May 13, 1996. dated September 19, 1998
and incorporated herein
by reference.
3.1 Purchase Agreement dated June 7, 1996 Report with Form 20-FR
between the Company, Slovgold A.G., dated September 19, 1998
and SSSRO. and incorporated herein
by reference.
3.2 Mineral Right Contract between SSSRO and Report with Form 20-FR
Rudne Bane dated June 5, 1996 (translated). dated September 19, 1998
and incorporated herein
by reference.
3.3 Vancouver Stock Exchange approval of SSSRO Report with Form 20-FR
purchase dated July 30, 1996. dated September 19, 1998
and incorporated herein
by reference.
3.4 Agreement dated July 1, 1996 between SSSRO Report with Form 20-FR
and Rudne Bane concerning land and building dated September 19, 1998
purchase (translated). and incorporated herein
by reference.
3.5 Management Agreement between the Company Report with Form 20-FR
and Mr. Agyagos dated January 1, 1997. dated September 19, 1998
and incorporated herein
by reference.
<PAGE>
Exhibit
Number Title of Document Location
------ ----------------- --------
3.6 Lease and office services agreement Report with Form 20-FR
between the Company and 311180 British dated September 19, 1998
Columbia Ltd. including August 1, 1996 and incorporated herein
amendments. by reference.
3.7 Residential Tenancy Agreement between Report with Form 20-FR
the Company and Dusan Berka dated April dated September 19, 1998
1, 1997. and incorporated herein
by reference.
3.8 Letter of Termination to Panos Canadian Report with Form 20-FR
Investments Inc. concerning Nevada dated September 19, 1998
Property Options. and incorporated herein
by reference.
3.9 Deleted as an Exhibit. Report with Form 20-FR
dated September 19, 1998
and incorporated herein
by reference.
3.10 Purchase Agreement dated May 14, 1996 Report with Form 20-FR
between SSSRO and Rudne Bane concerning dated September 19, 1998
underground and surface mine equipment and incorporated herein
(translated). by reference.
3.11 Purchase Agreement dated October 14, 1996 Report with Form 20-FR
between SSSRO and Rudne Bane concerning dated September 19, 1998
concentrator buildings and land and incorporated herein
(translated). by reference
3.12 Mining permit dated September 30, 1996 Report with Form 20-FR
issued to SSSRO (translated). dated September 19, 1998
and incorporated herein
by reference
3.13 Decision of the Ministry Environment Report with Form 20-FR
of the Slovak Republic dated March 10, dated September 19, 1998
1998 designating the oil and gas and incorporated herein
exploration territory To Maseva, s.r.o. by reference
(translated).
3.14 Contract of Mandate dated March 16, Report with Form 20-FR
1998 between the Company and Maseva, dated September 19, 1998
s.r.o. (translated). and incorporated herein
by reference
3.15 Letter of Intent between the Company Report with Form 20-FR
and EuroGas dated May 8, 1998. dated September 19, 1998
and incorporated herein
by reference
<PAGE>
Exhibit
Number Title of Document Location
------ ----------------- --------
3.16 Acquisition Agreement and Warrant dated Report with Form 20-FR
July 22, 1998 between the Company and dated September 19, 1998
EuroGas, Inc. and incorporated herein
by reference
4.1 Acquisition Agreement between Belmont Report with Form 20-F
Resources Inc., EuroGas Inc. and EuroGas dated July 28, 1999
Resources Inc., dated October 9, 1998. and incorporated herein
by reference
4.2 Acquisition Agreement between Belmont Report with Form 20-F
Resources Inc. and Mike Lavoie, dated dated July 28, 1999
March 5, 1999. and incorporated herein
by reference
4.3 Option Agreement Assignment between Report with Form 20-F
Belmont Resources Inc. and Montoro dated July 28, 1999
Resources Inc., dated March 16, 1999. and incorporated herein
by reference
5.1 Consolidated unaudited financial Report with Form 6-K
statements for three months ended dated October 6, 1999
April 30, 1999 and incorporated herein
by reference.
5.2 Consolidated unaudited financial Report with Form 6-K
statements for six months ended July dated October 7, 1999
31, 1999 and incorporated herein
by reference.
5.3 Form 27 Material Change Report; Form Report with Form 6-K
20 Report of Exempt Distribution, and dated October 26, 1999
Amended Form 20 Report of Exempt and incorporated herein
Distribution. by reference.
5.4 Form 27 Material Change Report. Report with Form 6-K
dated December 20, 1999
and incorporated herein
by reference.
5.5 Consolidated unaudited financial Report with Form 6-K
statements for nine months ended dated January 11, 2000
October 31, 1999. and incorporated herein
by reference.
<PAGE>
Exhibit
Number Title of Document Location
------ ----------------- --------
5.6 Form 27 Material Change Report dated Report with Form 6-K
January 6, 2000; dated April 3, 2000
and incorporated herein
by reference.
5.7 January 11, 2000 Notice of Minor Asset Report with Form 6-K
Transaction c/w the McCallan Oil & Gas dated April 3, 2000
agreement dated Dec. 13/99; and incorporated herein
by reference.
5.8 January 12, 2000 Notice of Minor Asset Report with Form 6-K
Transaction c/w the Montoro Option dated April 3, 2000
Assignment Agreement dated January 4, 2000; and incorporated herein
by reference.
5.9 January 13, 2000 Form 27 Material Change Report with Form 6-K
Report re Incentive Stock Options Granted; dated April 3, 2000
and incorporated herein
by reference.
5.10 January 27, 2000 CDNX letter c/w stock Report with Form 6-K
option agreements and Appendix 23B, 23C, dated April 3, 2000
23D; and incorporated herein
by reference.
5.11 January 31, 2000 Form 27 Material Report with Form 6-K
Change Report re proposed Private Placement dated April 3, 2000
and incorporated herein
by reference.
5.12 Form 27 Material Change Report dated Report with Form 6-K
February 8, 2000 dated April 4, 2000
and incorporated herein
by reference.
5.13 Form 27 Material Change Report dated Report with Form 6-K
February 18, 2000 dated April 4, 2000
and incorporated herein
by reference.
5.14 February 21, 2000 Stock Option filing Report with Form 6-K
documentation c/w Agreements dated April 4, 2000
and incorporated herein
by reference.
5.15 Form 27 Material Change Report dated Report with Form 6-K
February 24, 2000 dated April 4, 2000
and incorporated herein
by reference.
<PAGE>
Exhibit
Number Title of Document Location
------ ----------------- --------
5.16 Form 27 Material Change Report dated Report with Form 6-K
March 1, 2000 dated April 11, 2000
and incorporated herein
by reference.
5.17 Form 27 Material Change Report dated Report with Form 6-K
March 3, 2000 dated April 11, 2000
and incorporated herein
by reference.
5.18 Notice of acquisition c/w Form 5C Report with Form 6-K
Transaction Summary dated March 7, 2000 dated April 11, 2000
and incorporated herein
by reference.
5.19 Agreement on the Assignment of shares Report with Form 6-K
in Rozmin s.r.o. Corp. between Belmont dated April 11, 2000
Resources Inc. and Gebruder Dorfner GmbH and incorporated herein
& Co. ("Dorfner") for 32.5% of Rozmin by reference.
dated February 24, 2000
5.20 Agreement on the Assignment of shares in Report with Form 6-K
Rozmin s.r.o. Corp. between Belmont dated April 11, 2000
Resources Inc. and OSTU Industriemineral and incorporated herein
Consult GmbH Co. Ltd. ("OIMC") for 24.5% by reference.
of Rozmin dated February 24, 2000.
5.21 Finders Fee Agreement between Belmont Report with Form 6-K
Resources Inc. and Tradetech gmbH dated dated April 11, 2000
February 26, 2000 and incorporated herein
by reference.
5.22 Form 27 Material Change Report dated Report with Form 6-K
April 24, 2000 dated June 27, 2000
and incorporated herein
by reference.
5.23 Notice of Annual General Meeting, Report with Form 6-K
Information Circular, and Proxy Related dated July 7, 2000
Materials dated June 16, 2000 and incorporated herein
by reference.
5.24 Form 27 Material Change Report dated Report with Form 6-K
June 28, 2000 dated July 7, 2000
and incorporated herein
by reference.
5.25 Form 27 Material Change Report dated Report with Form 6-K
June 29, 2000 dated July 7, 2000
and incorporated herein
by reference.
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
<PAGE>
DALE Partnership of:
MATHESON James F. Carr-Hilton, Ltd. Peter J. Donaldson, Inc.
CARR-HILTON Fraser G. Ross, Ltd. Robert J, Burkart, Inc.
CHARTERED ACCOUNTANTS Alvin F. Dale, Ltd. Robert J. Matheson, Inc.
--------------------------------------------------------------------------------
AUDITORS' REPORT
To the Directors of
Belmont Resources Inc.
We have audited the consolidated balance sheets of Belmont Resources Inc. as at
January 31, 2000 and 1999 and the consolidated statements of deficit,
operations, and cash flows for each of the years ended January 31, 2000, 1999
and 1998. 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, 2000 and 1999 and the results of its operations and cash flows for
each of the years ended January 31, 2000, 1999 and 1998 in accordance with
Canadian generally accepted accounting principles. 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
CHARTERED ACCOUNTANTS
Vancouver, B.C.
June 15, 2000
A MEMBER OF MMGI INTERNATIONAL, A WORLDWIDE NETWORK OF INDEPENDENT ACCOUNTANTS
AND BUSINESS ADVISORS
Vancouver Office: Suite 1700 - 1140 West Pender Street, Vancouver, B.C., Canada
V6E 4G1, Tel: 604 687-4747 * Fax: 604 687-4216 * E-mail: [email protected]
Surrey Office: Suite 303-7337-137th Street, Surrey, B.C., Canada
V3W 1A4, Tel: 604 572-4586 * Fax: 604 572-4587 * [email protected]
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED BALANCE SHEETS - JANUARY 31, 2000 AND 1999
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2000 1999
$ $
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash 906,785 29,809
Term deposit 370,296 200,000
Marketable securities (Note 3) 2,100,149 3,437,100
Accounts receivable (Note 10) 11,266 17,436
Refundable deposit (Note 4) 100,000 -
Prepaid expenses 6,129 3,486
--------- ---------
3,494,625 3,687,831
MARKETABLE SECURITIES (Note 3) - 2,291,400
ADVANCES (Note 5) 1 55,000
DEFERRED ACQUISITION COSTS (Note 13(a)) 16,040 -
CAPITAL ASSETS (Note 6) 5,451 3,662
RESOURCE INTERESTS (Note 7) 634,157 5,557,846
--------------------------------------------------------------------------------
4,150,274 11,595,739
================================================================================
APPROVED ON BEHALF OF THE BOARD
/s/ Kenneth B. Liebscher Director
----------------------------
/s/ Gary Musil Director
----------------------------
- See Accompanying Notes -
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED BALANCE SHEETS - JANUARY 31, 2000 AND 1999
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2000 1999
$ $
--------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 28,772 45,744
Future income taxes (Note 8) - 568,603
--------- ---------
28,772 614,347
DUE TO SHAREHOLDERS - 220
NON-CONTROLLING INTEREST (Note 2(a)) - 8,673
FUTURE INCOME TAXES (Note 8) - 539,837
--------- ---------
28,772 1,163,077
--------- ---------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 9) 13,605,585 13,520,425
DEFICIT (9,484,083) (3,087,763)
--------- ---------
4,121,502 10,432,662
--------------------------------------------------------------------------------
4,150,274 11,595,739
================================================================================
COMMITMENTS (Note 11)
- See Accompanying Notes -
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF DEFICIT
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2000 1999 1998
$ $ $
--------------------------------------------------------------------------------
BALANCE, beginning of year (3,087,763) (7,201,139) (6,763,683)
NET (LOSS) INCOME FOR THE YEAR (6,396,320) 4,113,376 (437,456)
--------------------------------------------------------------------------------
BALANCE, end of year (9,484,083) (3,087,763) (7,201,139)
================================================================================
- See Accompanying Notes -
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2000 1999 1998
$ $ $
--------------------------------------------------------------------------------
REVENUE
Interest income 7,753 14,282 5,562
Gain on sale of oil and gas
property (Note 7(d)) - 5,443,750 -
---------- ---------- ----------
7,753 5,458,032 5,562
---------- ---------- ----------
EXPENSES
Amortization 14,626 916 1,297
Audit and accounting 10,199 13,068 16,723
Foreign exchange loss 10,346 2,419 4,241
Interest and bank charges 596 1,075 718
Legal 3,625 17,831 22,112
Management fees 54,000 54,000 50,000
Office and sundry 24,873 9,900 6,502
Project investigation 31,755 1,077 45,000
Regulatory and filing fees 6,877 5,811 7,841
Rent 18,000 18,000 17,500
Telephone and facsimile 5,555 6,909 4,750
Transfer agent fees 12,458 12,154 12,631
Travel and promotion 25,539 22,650 30,675
Secretarial and administration services 66,715 57,995 39,830
Shareholder relations 14,040 12,411 6,727
---------- ---------- ----------
299,204 236,216 266,547
---------- ---------- ----------
LOSS BEFORE OTHER ITEMS (291,451) (5,221,816) (260,985)
---------- ---------- ----------
OTHER ITEMS
Write-down of resource interests (5,017,439) - (176,471)
Recovery of minority interest 8,673 - -
Loss on marketable securities
(Note 3) - disposals (1,502,354) - -
- write-downs (647,407) - -
Write-down of advances (54,999) - -
Gain on disposal of capital assets 217 - -
---------- ---------- ----------
(7,213,309) - (176,471)
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (7,504,760) 5,221,816 (437,456)
FUTURE INCOME TAX PROVISION (RECOVERY) (1,108,440) 1,108,440 -
--------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE YEAR (6,396,320) 4,113,376 (437,456)
================================================================================
(LOSS) EARNINGS PER SHARE (Note 2(f))
- basic (0.32) 0.21 (0.02)
- fully diluted n/a 0.20 -
================================================================================
- See Accompanying Notes -
<PAGE>
BELMONT RESOURCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2000 1999 1998
$ $ $
--------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss) income for the year (6,396,320) 4,113,376 (437,456)
Add non-cash items:
Amortization 14,626 916 1,297
Gain on disposal of capital assets (217) - -
Future income tax provision (recovery) (1,108,440) 1,108,440 -
Loss on marketable securities 2,149,761 - -
Gain on sale of oil and gas property - (5,443,750) -
Write-down of resource interests 5,017,439 - 176,471
Recovery of minority interest (8,673) - -
Write-down of advances 54,999 - -
---------- ---------- ----------
(276,825) (221,018) (259,688)
Net changes in non-cash working
capital items
Accounts receivable 6,170 (6,883) 40,924
Advances from related parties - - 2,000
Refundable deposit (100,000) - -
Prepaid expenses (2,643) 5,250 (4,665)
Accounts payable and accrued
liabilities (16,972) (7,302) 26,260
---------- ---------- ----------
(390,270) (229,953) (195,169)
---------- ---------- ----------
INVESTING ACTIVITIES
Mineral property expenditures (84,201) (333,801) (199,569)
Proceeds on sale of marketable
securities 1,486,090 - -
Advances - (55,000) -
Proceeds on sale of capital assets 24,474 - -
Acquisition of capital assets (2,801) - (114,648)
Deferred acquisition costs (16,040) - -
---------- ---------- ----------
1,407,522 (388,801) (314,217)
---------- ---------- ----------
FINANCING ACTIVITIES
Issuance of share capital 30,240 211,040 982,700
Due to shareholders (220) - 220
---------- ---------- ----------
30,020 211,040 982,920
---------- ---------- ----------
INCREASE (DECREASE) IN CASH 1,047,272 (407,714) 473,534
CASH, beginning of year 229,809 637,523 163,989
--------------------------------------------------------------------------------
CASH, end of year 1,277,081 229,809 637,523
================================================================================
CASH REPRESENTED BY
Cash 906,785 29,809 37,523
Term deposit 370,296 200,000 600,000
--------------------------------------------------------------------------------
1,277,081 229,809 637,523
================================================================================
- See Accompanying Notes -
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
1. OPERATIONS
--------------------------------------------------------------------------------
The Company's primary business is acquisition exploration and development of
resource interests. 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 7(a)).
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
These 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 7(a)). All significant
intercompany transactions and balances have been eliminated. The non-
controlling interest was recorded at historical cost within the
subsidiary. As a result of the write-down of the resource interests
(Note 7(a)), a substantial deficit exists within the subsidiary. Under
GAAP a minority interest is not recognized in a deficit. Accordingly the
non-controlling interest has been reversed in the current year.
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 and 1998.
b) Capital assets
Capital assets not directly associated with resource interests are
recorded at cost. Amortization is provided at 20% per annum on a
declining balance basis. Amortization of capital assets directly related
to resource interests is capitalized in mineral interests where they
relate to direct exploration expenditures.
c) Resource interests
Costs incurred in respect of resource 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 resource interests, as reported on the balance
sheet, is dependant upon future commercial success or proceeds from
disposition.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
c) Resource interests - Cont'd
The Company reviews its resource interests whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable in relation to expected future cash flows. Should an
impairment in carrying amount be indicated, a write-down to estimated
recoverable value would be recorded at that time. (Note 7(a))
Proceeds on dispositions of partial resource 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 based on units of production or depletion.
d) Administrative costs
Administrative costs not directly associated with resource interests 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 1999 year,
however, the effect for 2000 is anti-dilutive and no adjustment has been
made.
g) Income taxes
The Company has adopted 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.
Future income taxes recorded for the 1999 fiscal year resulted from the
recognition of a gain on sale of a resource interest where share
consideration was received as proceeds. The tax payable on the
disposition was deferred for income tax purposes. Current year losses
and available tax loss carryforwards, have been recognized only to the
extent they can be utilized to offset current and expected taxable
capital gains on the sale of the shares received.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
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 was based on the estimated
value of the share consideration paid. The Slovakian property has been
written-down to estimated recoverable value in the current year. This
value represents an estimate only. Actual recoverable value may be
materially different than the carrying amount. (Note 7(a)).
i) Financial instruments
The Company holds short-term interest bearing deposits with maturity
dates under 30 days bearing interest at current market rates.
Accordingly, the fair market value of these investments are approximately
equal to cost.
Other financial instruments include marketable securities (Note 3),
accounts receivable, refundable deposit 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 at the balance sheet date are the resource
interests in Slovakia held by a Slovakian subsidiary (Notes 7(a)) and the
investment in securities resulting from the sale of an oil and gas
interest (Note 3). The Company could accordingly, be at risk for foreign
currency fluctuations, 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 Slovakian interests and for legal and accounting
matters.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES - CONT'D
--------------------------------------------------------------------------------
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. Date-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. MARKETABLE SECURITIES
--------------------------------------------------------------------------------
2000 1999
$ $
---- ----
Cost 2,747,556 3,437,100
Long-term portion - 2,291,400
--------- ---------
2,747,556 5,728,500
Less: write-down to market value 647,407 -
--------- ---------
2,100,149 5,728,500
========= =========
Marketable securities are recorded at the lower of cost or market value.
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.
As at the audit report date, the quoted market value of shares had declined
significantly from the year end carrying value to approximately $1,430,500
Cdn. The recoverable value of the shares will be dependant on the market
value and liquidity upon sale.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
4. REFUNDABLE DEPOSIT
--------------------------------------------------------------------------------
During the year, the Company entered into an initial option agreement to acquire
a 25% interest in EnviGeo Trade s.r.o., a private Slovakian company that owns an
oil and gas exploration license in north-eastern Slovakia. Terms of the
agreement included payment by Belmont of a refundable deposit of $100,000 (paid)
and an additional $400,000 payable within 90 days, subject to Belmont completing
a due diligence assessment of the exploration license.
After completing its due diligence, the Company decided not to exercise its
option under this agreement and requested return of the deposit on May 29, 2000.
As at June 15, 2000 the deposit had not been refunded.
--------------------------------------------------------------------------------
5. 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 was in the process of obtaining certain rights in
Eastern Europe for acquisitions of oil and gas concessions.
Pursuant to the memorandum, the Company and Vista would enter into a joint
venture agreement, the terms of which have not been specified. The Company
advanced $55,000 to Vista in respect of the memorandum.
As at the year end, no acquisitions or business ventures have resulted from the
arrangement. Vista has acknowledged the indebtedness, however there are no
specified terms of repayment.
Due to uncertainty over the ability of the company to recover the advance or
realize the value through future acquisitions, the amount advanced has been
written down to a nominal value of $1.
--------------------------------------------------------------------------------
6. CAPITAL ASSETS
--------------------------------------------------------------------------------
2000 1999
$ $
------------------------------- ----
Accumulated
Cost Amortization Net Net
---- ------------ --- ---
Office furniture and
equipment 9,388 3,937 5,451 3,662
===== ===== ===== =====
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
7. RESOURCE INTERESTS
--------------------------------------------------------------------------------
2000 1999
$ $
---- ----
a) Pezinok II
Acquisition costs 4,918,817 4,918,817
--------- ---------
Exploration costs:
Balance, beginning of year 420,309 342,846
Administration - 2,033
Amortization - 28,412
Building & equipment rentals - 23,614
Consulting 1,500 353
Guard services - 6,939
Legal and accounting - 4,698
Mining supplies - 43
Report and maps - 692
Travel and accommodation 3,545 10,679
--------- ---------
425,354 420,309
--------- ---------
Capital assets 173,268 218,720
--------- ---------
Balance, end of year 5,517,439 5,557,846
Less: write-down (5,017,439) -
--------- ---------
500,000 5,557,846
--------- ---------
b) Lac Rocher # of
Shares Price
------ ------
Acquisition costs Cash 55,000 -
Acquisition costs Shares 100,000 0.50 50,000 -
Finder's fee Cash 5,500 -
Finder's fee Shares 10,000 0.50 5,000 -
Less recoveries (37,500) -
--------- ---------
78,000 -
--------- ---------
Exploration costs
Geological report 1,157 -
--------- ---------
79,157 -
--------- ---------
c) Ungava
Acquisition costs Cash 55,000 -
--------- ---------
d) Maseva
Acquisition costs - 72,030
Exploration costs - 212,720
--------- ---------
- 284,750
Less: disposal of mineral property - (284,750)
--------- ---------
- -
--------- ---------
634,157 5,557,846
========= =========
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
7. RESOURCE INTERESTS - CONT'D
--------------------------------------------------------------------------------
a) 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 world-
wide, 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 current gold prices the project is not
currently viable. The mining and environmental permits for reopening the
project expired at the end of 1999. The Company continues to hold the
rights to the concessions, however to reopen the mining operation new
permits will be required. The Company has not abandoned its interests in
the concessions, however due to uncertainty over the viability of the
mining operation at current gold prices management has determined that a
write-down of the carrying value of the concessions is appropriate.
The ultimate recoverable value will be dependant on future gold prices,
the company's ability to finance a reopening or proceeds of disposition
if sold. Additional write-down's may be required in future. Carrying
values will be reviewed on a periodic basis and appropriate adjustments
will be made if required.
Should the Company be unable to find a joint venture partner or raise
funds to complete the planned program and reinstate its permits, the
project may have to be abandoned.
A write-down of the value of the combined concessions and dedicated
capital assets to estimated recoverable value of $500,000 Cdn. has been
recorded in the current year.
b) Lac Rocher
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 (paid)
and issuance of 100,000 common shares (issued) 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.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
7. RESOURCE INTERESTS - CONT'D
--------------------------------------------------------------------------------
b) Lac Rocher - cont'd
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 paid Belmont
$30,000 and issued 50,000 common shares subject to a one year hold period
(received). In addition, Montoro was required to expend $35,000 on
exploration on the property by September 30, 1999. This has been
extended by subsequent agreement to September 30, 2000.
c) Ungava
On January 4, 2000, the Company entered into an option assignment
agreement with Montoro Resources Inc. to acquire a 50% interest in an
exploration permit in the Ungava region of Quebec.
Consideration for this acquisition is as follows:
i) cash payments of $55,000 (paid)
ii) issuance of 50,000 common shares of the Company to Montoro subject
to regulatory approval
iii) completion of a Phase I exploration program in the amount of $30,000
by September 30, 2000.
d) Maseva Property
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. No contribution is required by
the company under the working interest on the first two wells drilled.
All costs incurred up to the date of disposition have been reversed in
the accounts against the sale proceeds. The gain on disposition was
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 marketable securities.
(Note 3).
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
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 2(g)). The sources of these differences are as follows:
2000 1999
$ $
---- ----
Excess of accounting cost over tax cost of
marketable securities 211,867 1,796,440
Excess of amortization over tax allowance claimed (8,877) (2,600)
Tax loss carryforward applied - (489,690)
Current deduction of capitalized resource
expenditures (202,990) (195,710)
---------- ----------
- 1,108,440
Less: current - 568,603
---------- ----------
- 539,837
========== ==========
As the criteria for recording the future income tax benefits resulting from
available unutilized tax losses carried forward have not been satisfied. No
future income tax benefit has been recorded for the current year.
--------------------------------------------------------------------------------
9. SHARE CAPITAL
--------------------------------------------------------------------------------
a) Authorized
50,000,000 common shares at
no par value
b) Issued 2000 1999
------------------- --------------------
$ $
Number Amount Number Amount
------ ------ ------ ------
Balance, beginning
of year 19,600,012 13,520,345 19,223,012 13,309,305
Issued during the
year for:
Property acquisitions
i) 110,000 55,000 - -
Stock options
exercised ii) 54,000 30,240 377,000 211,040
---------- ---------- ---------- ----------
Balance, end of year 19,764,012 13,605,585 19,600,012 13,520,345
========== ========== ========== ==========
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
9. SHARE CAPITAL - CONT'D
--------------------------------------------------------------------------------
i) During the year, 100,000 common shares were issued for a resource
acquisition and 10,000 common shares were issued for a finder's
fee. The shares were issued at a deemed price of $0.50 per share.
ii) During the year, 54,000 stock options were exercised at a price of
$0.56 per shares.
c) Stock Options (Note 13(d))
At the year end, the Company had share purchase options outstanding to
directors and employees as follows:
Number of Exercise Expiry
Shares Price Date
-------- ------- ------
889,000 0.32 February 24, 2000
(exercised)
850,000 0.32 September 17, 2001
230,000 0.32 January 13, 2002
----------
1,969,000
==========
d) Escrow and pooled shares
There are no shares held in escrow or subject to pooling agreements as at
the year end.
--------------------------------------------------------------------------------
10. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------
a) During the year the Company incurred:
i) $58,420 (1999 - $55,350) for administrative services charged by a
company controlled by a director, and $18,000 (1999 - $18,000) for
rent to another company controlled by a director.
ii) $54,000 (1999 - $54,000) in management and consulting fees were
charged by a director of the Company
b) Included in accounts receivable are:
i) an amount of $2,367 (1999 - $2,742) owing by a corporation
controlled by two directors of the Company.
ii) an amount of $Nil (1999 - $798) owing by a corporation controlled by
a director of the Company.
c) Included in accounts payable at January 31, 2000 is an amount of $4,745
(1999 - $1,280) due to two directors and a company controlled by a
director.
d) Related party transactions have been recorded at their dollar exchange
amount.
(See Notes 11 and 13).
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
11. COMMITMENTS
--------------------------------------------------------------------------------
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.
c) Acquisition (Note 13(a)).
--------------------------------------------------------------------------------
12. SEGMENTED INFORMATION
--------------------------------------------------------------------------------
Identifiable assets by geographic location:
2000 1999
$ $
---- ----
Canada 3,504,538 6,026,997
Slovakia 645,736 5,568,742
---------- ----------
4,150,274 11,595,739
========== ==========
--------------------------------------------------------------------------------
13. SUBSEQUENT EVENTS
--------------------------------------------------------------------------------
a) The Company signed an agreement on February 26, 2000 with vendors to
acquire a 57% interest in Rozmin s.r.o., a private Slovakian mining
company which controls a talc deposit in the eastern Slovak Republic.
The total cash consideration for the transaction is 2,850,000 German marks
($2.061 million Cdn.).
A finder's fee of 150,000 German marks ($104,240 Cdn.) has been paid.
Regulatory approval was received April 3, 2000 and the acquisition
completed in two stages in mid April, 2000.
As at the year end, $16,040 in costs had been incurred in connection with
due diligence and legal services.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
13. SUBSEQUENT EVENTS - CONT'D
--------------------------------------------------------------------------------
The acquisition will be accounted for using the purchase method. Unaudited
pro-forma information at April 30, 2000 relating to the acquisition is as
follows:
Tangible assets to be acquired (book value): $
-----
Cash 120,863
Other current assets 53,871
Mineral interests 2,039,568
Capital assets 30,624
-----------
2,244,926
-----------
Direct liabilities to be acquired:
Accounts payable and other 243,551
Minority interest 860,591
-----------
1,104,142
-----------
Net assets to be acquired 1,140,784
Purchase consideration 2,181,293
-----------
Excess consideration to be allocated
to mineral interests 1,040,509
===========
Transactions between the acquisition date of April 14, 2000 and April 30,
2000 are not material.
b) 889,000 shares were issued for stock options exercised for proceeds of
$284,480.
c) The Company sold 565,800 EuroGas, Inc. shares for net proceeds of
$882,653.
d) 75,000 stock options were granted to directors and employees at a price
of $0.50 per share expiring in February 18, 2002.
e) On April 24, 2000, the Company, through one of its directors, advanced a
refundable deposit of $150,000 in respect of an oil concession in Eastern
Europe. After completing due diligence, the Company decided not to
proceed. The deposit was refunded plus interest in May 2000.
f) In April 2000, the Company received short-term loans totalling $100,000
from a director and a company controlled by a person related to the
director. The loans were repaid in May 2000.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
14. NON-CASH TRANSACTIONS
--------------------------------------------------------------------------------
During the year the Company had the following non-cash transactions:
a) Issuance of share capital for resource interest
acquisition. $55,000
b) Receipt of marketable securities for recovery of
mineral interest acquisition costs 7,500
--------------------------------------------------------------------------------
15. 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 $
------------ ------
2001 94,776
2002 64,238
2003 37,715
2004 245,827
2005 255,447
2006 218,599
2007 259,655
---------
1,176,257
=========
The future potential income tax benefits of these losses has not been recorded
in these financial statements.
--------------------------------------------------------------------------------
16. COMPARATIVE FIGURES
--------------------------------------------------------------------------------
Certain of the 1999 comparative figures have been reclassified to conform with
current presentation.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
17. 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:
a) Under U.S. GAAP deferred exploration costs which have been deferred in
the accounts under Canadian GAAP would be recorded as period expenses.
Where full unrestricted exploitation or extraction rights are not
established or have been relinquished any capitalized acquisition or
development costs must also be expensed under U.S. GAAP.
The Company did not renew its extraction permits during the current year.
Accordingly, for U.S. GAAP purposes all costs deferred under Canadian
GAAP are written-down to the net recoverable value of remaining capital
assets.
b) Under U.S. GAAP deferred acquisition costs which have been deferred in
the accounts under Canadian GAAP would be recorded as period expenses.
i) If accounting principles generally accepted in the United States
were followed, the effect on the consolidated statement of
operations, shareholders' equity, balance sheet and cash flows would
be:
2000 1999 1998
$ $ $
---- ---- ----
Consolidated Statement of Operations
Net income (loss) - Canadian GAAP (6,396,320) 4,113,376 (437,456)
Adjustment for resource
interests a) (360,000) - -
Adjustment for deferred
acquisitions costs b) (16,040) - -
--------------------------------------
(6,772,360) 4,113,376 (437,456)
======================================
Weighted average number of
shares outstanding:
Canadian GAAP and U.S. GAAP 19,729,722 20,345,920 19,223,012
======================================
Earnings (loss) per share -
U.S. GAAP (0.34) 0.20 (0.02)
======================================
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
17. RECONCILIATION OF CANADIAN TO UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES - CONT'D
--------------------------------------------------------------------------------
i) Cont'd
2000 1999
$ $
---- ----
Assets:
Deferred acquisitions costs - Canadian GAAP 16,040 -
Less adjustment - U.S. GAAP (16,040) -
----------------------
- -
======================
Resource interests - Canadian GAAP 634,157 5,557,846
Less adjustment - U.S. GAAP (360,000) -
----------------------
Resource interests - U.S. GAAP 274,157 5,557,846
======================
Shareholders' equity - Canadian GAAP 4,121,502 10,432,662
Less adjustment for deferred acquisitions costs
and resource interests (376,040) -
----------------------
Shareholders' equity - U.S. GAAP 3,745,462 10,432,662
======================
Total assets - Canadian GAAP 4,150,274 11,595,739
Less adjustment for deferred acquisitions costs
and resource interests (376,040) -
----------------------
Total assets - U.S. GAAP 3,774,234 11,595,739
======================
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
17. RECONCILIATION OF CANADIAN TO UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES - CONT'D
--------------------------------------------------------------------------------
ii) Consolidated Statement of Cash Flows:
2000 1999 1998
$ $ $
---- ---- ----
Operating and investing activities
under U.S.
GAAP would be restated as follows:
Operating activities - Canadian GAAP (390,270) (299,953) (195,169)
Adjustment for deferred acquisitions
costs (16,040) - -
------------------------------------
Operating activities - U.S. GAAP (406,310) (299,953) (195,169)
====================================
Investing activities - Canadian GAAP 1,407,522 (388,801) (314,217)
Adjustment for deferred acquisitions
costs 16,040 - -
------------------------------------
Investing activities - U.S. GAAP 1,423,562 (388,801) (314,217)
====================================
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:
2000 1999 1998
$ $ $
---- ---- ----
a) Issuances of share capital for
resource interest acquisition 55,000 - -
b) Receipt of marketable securities
for recovery of mineral interest
acquisitions costs 7,500 - -
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.
<PAGE>
BELMONT RESOURCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2000, 1999 AND 1998
(IN CANADIAN DOLLARS)
--------------------------------------------------------------------------------
17. RECONCILIATION OF CANADIAN TO UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES - CONT'D
--------------------------------------------------------------------------------
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 the 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.
<PAGE>
