U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A
Amendment Number 1
General form for registration of securities of
small business issuers Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
White Diamond Spirits, Inc.
---------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
88-0401630
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(I.R.S. Employer Identification No.)
701 North Green Valley Parkway, Suite 200, Henderson, Nevada 89014
------------------------------------------------------------------
Principal Executive Offices
702 990 3050
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(Issuer's Telephone No.)
Securities to be Registered under Section 12(b) of the Act: None
Securities to be Registered under Section 12(g) of the Act: Common Stock (Title
of Stock) ------------
Total number of pages: 66
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Index to Exhibits Appears on Page 36
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Item 1
======
(a) Business Development
- ------------------------
White Diamond Spirits, Inc. (the Company) was incorporated in July 1998 under
the laws of the State of Nevada for the purpose of acquiring and carrying on the
business of White Diamond Importers, LLC, a Nevada Limited Liability Company. In
April 1999, the Company acquired 100% of the Member Interest of White Diamond
Importers, LLC, in exchange for 2,400,000 shares of the Company's common stock.
White Diamond Importers LLC was formed in 1997 to be the primary importer of the
"Brilliant" line of Ultra-Premium vodka into North America manufactured by
Brilliant Spirit Ltd. of Dublin , Ireland. The Company's Officers and Directors
are the founders of both the Company and White Diamond Importers, LLC.
On April 14, 1999, the Company entered into a Marketing Agreement with Brilliant
Spirit, Ltd. The agreement has a five year term with automatic renewal for
successive five year periods so long as the Company meets minimum purchase
requirements. Pursuant to the Marketing Agreement, the Company has a license to
import, promote and sell the Brilliant Spirit products in the United States and
Canada, except the State of New Jersey.
In August 1999, the Company received its basic Import Permit from the U.S.
Bureau of Alcohol, Tobacco and Firearms and as a result is able to import and
distribute its products in all fifty states. Typically, the Company will enter
into a Wholesale Distributor Agreement with a company already licensed to
distribute alcoholic products in a State and then the Company will file
applications to be registered as an importer to that State. As of November 1999,
the Company has entered into Wholesale Distributor Agreements which have
resulted in purchase orders and delivery of product to Arizona, California,
Illinois, Kansas, Missouri, Nevada and Texas. The Company is also approved for
distribution in British Columbia, Canada.
(b) Narrative Description of Business
- -------------------------------------
Principal Products: The Company imports and supplies wholesalers with the
following Brilliant Spirit Ltd. products:
Vodka Brilliant Clear 750ml
Vodka Brilliant Clear 100ml
Vodka Brilliant Clear 50ml
Vodka Brilliant Deluxe Black Onyx 750ml
Each product is contained in perfume quality hexagonal glass bottles complete
with "stopka" (attached shot glass). Packaging of the products includes a
fascinating and romantic product history based in Russian folklore, which
describes how the product derives from a Russian recipe which is associated with
quality vodka. The Brilliant Spirit products are protected under registered
trademarks and use proprietary product recipes.
The first product developed by Brilliant Spirit was Brilliant clear vodka, and
was introduced in 1995 in order to establish an identity as a premier producer
of first quality vodka. The Company also intends to import and distribute
Brilliant Deluxe, a series of six flavored vodkas, special souvenir sets, the
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Sabbath drink series, Russian Diplomat premium vodka and Millennium 2000 vodka.
Brilliant vodka has also been an award winner in both design and quality by Wine
and Spirit International, London, England and Interdrink, Moscow, Russia.
The Company has not engaged in research and development and does not anticipate
doing so.
Production and Delivery:
The Brilliant Product Line is distilled at Clyde Bonding, Scotland pursuant to a
manufacturing agreement with Brilliant Spirit, Ltd. The production line is able
to produce 150,000 bottles per 24 hour period. Raw materials are readily
available from a variety of sources. Delivery will be by ocean freight in twenty
foot containers (1100cs 12 x 750ml) directly into major U.S. ports. Customs
Brokers and warehousing have been arranged.
Marketing:
The Company's marketing strategy is to initially focus on a select group of
cities such as Los Angeles, Las Vegas and Chicago in selected states including
California, Nevada and Illinois. The Company plans to promote brand recognition
and choice in individual state by state markets by agreements with wholesale
distributors. The Company will provide point of sale promotional material to its
wholesalers and use permissible media advertising such as print ads and
billboards in selected urban markets. As of November 1999, the Company's
products have stocked in Las Vegas casino bars in prominent hotels and casinos
such as Mandalay Bay, Stratosphere, Rio and Mirage.
Competition:
Competition for sales of vodka is intense and the market is mature. The Company
is aware of at least six other premium vodka brands, which control the current
market for premium vodka. These competitors are much larger and have much
greater financial resources than the Company. Competition among the premium
brands is driven largely by advertising with brand recognition being more
important than pricing. The Company also competes against discount and private
label brands of vodka as well as other spirits, beer and wine.
Regulation:
The importation and distribution of alcoholic spirits is subject to extensive
regulation by the U.S. Bureau of Alcohol, Tobacco and Firearms as well as by
State alcoholic beverage control agencies. Typically, the Company will enter
into a Wholesale Distributor Agreement with a company already licensed to
distribute alcoholic products in a State and then the Company will file
applications to be registered as an importer to that State. The Company has
received its B.A.T.F. Import Permit as well as licensing permits from the States
of California and Nevada. State and Federal regulation on importers such as the
Company focuses on product purity, consistence, ownership of the regulated
companies and advertising.
Employees:
The company employs five persons on a full time basis.
Item 2 - Management Discussion & Analysis or Plan of Operation
==============================================================
This section contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not guarantees of our future
performance. They are subject to risks and uncertainties related to business
operations, some of which are beyond our control. Our actual results may differ
materially from those anticipated in these forward-looking statements.
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The Registrant was incorporated in July, 1998 for the purpose of a
reorganization with its subsidiary which was established in November, 1997.
Prior to April, 1999 reorganization with the subsidiary, the Registrant was
inactive. The discussion below relates to the results of operations on a
consolidated basis for the year ending October31, 1999.
Results of Operations
- ---------------------
Sales from liquor sales were $51,600 and the cost of goods sold was $25,993
resulting in revenue of $25,607 prior to the allowance for operating expenses.
Operating expenses resulted in loss for the period of $195,805. The Company
incurred initial non-recurring or extraordinary costs of $86,000 in connecting
with finalizing contracts with Brilliant Spirits Ltd. of Dublin, Ireland for the
supply of vodka exclusively to the North American market and regulatory
compliance to import products into United States under the jurisdiction of the
U.S. Bureau of Alcohol, Tobacco and Firearms.
Plan of Operations
- ------------------
During the current fiscal year the Company intends to continue its plans for
entering into contracts with wholesale distributors, filing its state compliance
documents and opening new markets. As of December 1999 the Company is selling
and shipping product in Arizona, California, Illinois, Kansas, Missouri, Nevada
and Texas. The Company is also approved for distribution in British Columbia,
Canada. The Company is presently negotiating wholesale distributor agreements
which allow the products to be distributed into most other U.S. States. The
Company has ordered the production of 6,000 cases of product for its anticipated
inventory needs.
Liquidity and Capital Resources
- -------------------------------
The Registrant and its subsidiary have initially relied upon capital
contributions from the Directors and cash flow from operations to meet working
capital requirements. As of October 31, 1999 contributions amounted to $278,593
in addition to $98,732 in connection with the subsidiary. For the fiscal period
2000, working capital requirements will be provided by cash flow from existing
inventory sales, continuing contributions of capital by the Directors and new
purchases of liquor. The arrangement with the supplier, Brilliant Spirits Ltd.
is 60 day terms of payment for inventory purchases and 30 day settlement with
sales to distributor. The company anticipates no further extraordinary start up
costs.
Effect of Inflation:
- --------------------
The Company believes that inflation does not have a material affect on its
business.
Item 3. Description of Property
===============================
The Company leases it's 300 square foot office facility in Vancouver, British
Columbia from an unaffiliated third party at $350 USD per month pursuant to a
two year lease expiring in January 2002.
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The Company also leases approximately 200 square feet of office space in
Henderson, Nevada from an unaffiliated third party at $1,613 per month pursuant
to a twelve month lease expiring January 31, 2001. The Company pays a per case
inventory and re-distribution charge to bonded warehouse in Napa, California
from which the Company maintains and distributes its inventory.
Item 4. Security Ownership of Certain Beneficial Owners and Management
=======================================================================
(a) Security Ownership of Certain Beneficial Owners holding five percent or
greater of the 12,400,000 shares of common stock outstanding as of January
31, 2000.
Title Name and Address Amount and Nature % of
of Class of Beneficial Owner of Beneficial Owner Class
- ------------------------------------------------------------------------------
Common Gordon Witt 900,000 (D) 7.3%
121 Algoma Rd.
Wellington, New Zealand
Bruce Adams 800,000 (D) 6.5%
22 Dear Leap Rd.
Hamilton, New Zealand
Robert Shiviji 900,000 (D) 7.3%
81-4276 Hazelwood St.
Wellington, New Zealand
James Connelly 900,000 (D) 7.3%
36 Valley Dr.
Auckland, New Zealand
Victor Hicks 800,000 (D) 6.5%
13 Simpson Rd.
Sydney, Australia
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(b) Security Ownership of Management
Title Name and Address Amount and Nature % of
of Class of Beneficial Owner of Beneficial Owner Class
- ------------------------------------------------------------------------------
Common Michael Marleau 1,932,250 (D) 15.6%
1505-1383 Marinaside Crescent
Vancouver, B.C.
Canada V6V 2W9
Edwin E. Savage 690,250 (D) 5.6%
1324 Sunnyside Drive
North Vancouver, B.C.
Canada V7R 1B1
Igor Petrov 648,000 (D) 5.2%
1505-1383 Marinaside Crescent
Vancouver, B.C.
Canada V6V 2W9
Greg McCartney 486,000 (D) 3.9%
2089 - 134th Street
Surrey, B.C.
Canada V4A 9N8
Lawrence Pasemko 486,000 (D) 3.9%
14084 - 28th Avenue
Surrey, B.C.
Canada V4P 2C8
All officers and Directors
as a Group (5 persons) 4,242,500 34.2%
Item 5. Directors, Executive Officers, Promoters and Control Persons
====================================================================
(a) Directors and Executive Officers
- -------------------------------------
MICHAEL MARLEAU - Age 42. President, CEO and Director, 1997 to present, founding
member of White Diamond Importers LLC. Mr. Marleau has extensive experience in
the public markets in the areas of securities brokerage, tax shelter and mutual
funds. From 1989 - 1995 he lived in Russia and established import-export trading
ventures in spirits, commodities and food products. 1990 - 1993 Commercial
Director of British / Russian joint venture of Intershelf. A solid network of
contacts in the distribution of vodka has been maintained and has assisted in
the creation of White Diamond Importers LLC. Education - 1985 Coast Guard
Navigation, Georgian College, Owen, Ontario. 1987 Investment Funds, Institute of
Canada.
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EDWIN E. SAVAGE - Age 45. Vice-President & Director. 1997 to present founding
member of White Diamond Importers LLC. 1976 - 1996, Managing Director of
Continental Importers located in Vancouver, B.C., Canada. The company is engaged
in the import-export business dealing primarily with specialty gourmet-foods,
wines and spirits to and from Europe and North America. Direct trade experience
includes management, sales, marketing, purchasing logistics and national
distribution. Education - Salesian College, London, England. University Prep.
Boston University, Massachusetts, U.S.A.
IGOR PETROV - Age 39. Secretary, Treasurer, C.F.O. & Director. 1983 - 1990
Russian Foreign Trade Association, Senior Sales Manager, Moscow. 1990 - 1994
Commercial Director of Ost - West Corporation, Moscow, Russia. 1994 - 1997
Director of Operations for Clorinda Trading Ltd. Limassol, Cyprus. 1997 -
Present, C.F.O. and founding member of White Diamond Importers LLC. Education -
graduated from Moscow University, degree in Economics.
E. GREG McCARTNEY - Age 48. Chairman of the Board of Directors. Since 1995,
owner and Director of Aspenwood Holdings Corporation, a business consulting firm
specializing in financial and public relations and venture capital. The firm
specializes in developing companies in the technology and manufacturing
industries. Mr. McCartney has over 20 years experience serving as officer and
director of both private and public companies in various manufacturing and
technology industries. Education - University of Saskatchewan, Business
Administration.
LAWRENCE J. PASEMKO - Age 62. Director. Since 1989, owner and Director of
Tynehead Capital Corporation, a management and consulting firm specializing in
assisting start-up and development stage businesses, manage and achieve their
venture capital requirements. Mr. Pasemko has over 30 years experience in
business management, marketing and administration, including extensive knowledge
of financial analysis and inventory controls. Education - University of Alberta,
Industrial Registered Accounting.
(b) Significant Employees:
- --------------------------
ROGER BAER - 52- Vice President of Sales and Marketing. Mr. Baer joined White
Diamond Importers, LLC in May 1998. From June 1996 to May 1998, he was the
General Manager-Director of Sales and Marketing for California Beverage
Publications, Los Angeles, California, a state wide trade journal for the
alcoholic and non-alcoholic beverage industry. From August 1994 to June 1996 Mr.
Baer was the Western Regional Manager for Gaetano Specialties, Ltd., Beverly
Hills, California. Mr. Baer has over twenty years experience in the marketing
and distribution of alcoholic beverages.
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Item 6. Executive Compensation Table
====================================
(a) Name & Position FYE 10/31/ Salary Paid(1)
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Michael Marleau, (2)
President, Chief Executive Officer 1998(3) $18,975
1999(4) $30,795
(1) No other cash compensation or bonuses paid or accrued
(2) No other officer received a salary greater than $100,000 during the past
fiscal year.
(3) August 1, 1998 to December 31, 1998
(4) January 1, 1999 to October 31, 1999
(b) Option/SAR Grants in Last Fiscal Year (Individual Grants)
- --------------------------------------------------------------
No options have been granted to date.
The Company has a Stock Option Plan, entitled the "White Diamond Spirits, Inc.,
1998 Directors and Officers. Stock Option Plan" (the "Plan"). Its purpose is to
advance the business and development of the Company and its shareholders by
affording to the employees, directors and officers of the Company the
opportunity to acquire a proprietary interest in the Company by the grant of
Options to such persons under the Plan's terms. By doing so the Company seeks to
motivate, retain and attract highly competent, motivated employees, executive
Officers and Directors to lead the Company. The effective date of the Plan is
July 22, 1998. Article 4 of the Plan provides that the Board shall exercise its
discretion in awarding Options under the Plan, not to exceed a total of
1,000,000 shares. The per share Option price for the stock subject to each
Option shall be as the Board may determine. All Options must be granted within
ten years from the effective date of the Plan. There is no express termination
date for the Options, although the Board may vote to terminate the Plan. Under
the Plan, there have been no Options granted.
(c) Aggregated Option/SAR Exercises and Option/SAR Values for last fiscal year:
None
- --------------------------------------------------------------------------------
(d) Long-term Incentive Plans -- Awards in last fiscal year: None
- ------------------------------------------------------------------
The Company has not otherwise awarded any stock options, stock appreciation
rights or other form of derivative security or common stock or cash bonuses to
its executive officers and directors.
(e) Compensation of Directors
- -------------------------------
1. Standard Arrangements: The members of the Company's Board of Directors
are reimbursed for actual expenses incurred in attending Board
meetings.
2. Other Arrangements: There are no other arrangements.
(f) Employment Contracts, Termination of Employment, and Change-in-control
Arrangements
- --------------------------------------------------------------------------------
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The Company's executive officers do not work pursuant to written employment
agreements and draw salaries which were determined by the Board of Directors and
are reviewed annually. Edwin Savage, Vice President is paid $3,795 per month.
Igor Petrov, Chief Financial Officer is paid $2,920 per month. Roger Baer, Vice
President of Sales and Marketing is paid $7,500 per month.
Item 7. Certain Relationships and Related Transactions
======================================================
The Company's Directors are the Company's Founders and Promoters. The Company's
By-Laws include a provision regarding Related Party Transactions which requires
that each participant to such transaction identify all direct and indirect
interests to be derived as a result of the Company's entering into the related
transaction. A majority of the disinterested members of the board of directors
must approve any Related Party Transaction. However at the present time, the
sole director is only accountable to the shareholders for any related party
transaction he may enter into.
In April 1999, the Company acquired 100% of the Member Interest of White Diamond
Importers, LLC, in exchange for 2,400,000 shares of the Company's common stock.
White Diamond Importers LLC was formed in 1997 to be the primary importer of the
"Brilliant" line of Ultra-Premium vodka into North America manufactured by
Brilliant Spirit Ltd. of Dublin , Ireland. The Company's Officers and Directors
are the founders of both the Company and White Diamond Importers, LLC.
In March and April, 1999, the Company's directors purchased 1,842,500 at $0.05
per share for a total of $92,125 from several unaffiliated shareholders. Mr.
Marleau acquired 1,092,250 shares, Mr. Savage acquired 402,250 shares, Mr.
Petrov acquired 360,000, Mr. McCartney acquired 270,000 shares and Mr. Pasemko
acquired 270,000 shares.
Item 8. Description of Securities
=================================
The authorized capital stock of Company consists of 200,000,000 shares of common
stock. No warrants to acquire common stock have been authorized. There are no
outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any shares of the Company's common stock.
The common stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The common stock
affords the holders no cumulative voting rights, and the holders of a majority
of the shares voting for the election of the directors can elect all of the
directors if they should choose to do so.
PART II
=======
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters
================================================================================
(a) Market Information
- -----------------------
The Company's stock is not listed for sale on any exchange or trading medium.
The Company intends to seek the listing of its Common Stock on the OTC
Electronic Bulletin Board upon the
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effectiveness of this Form 10-SB. Until such time, there is no public market for
the Company's Common Stock. In July 1998, the Company sold 10,000,000 shares for
$100,000 to twenty investors in a private placement of securities exempt from
registration pursuant to Rule 504 of Regulation D. The Company then sold
2,400,000 shares in exchange for the shares of White Diamond Importers, LLC.
There are ten holders of restricted securities as defined by Rule 144, which
have not been held in excess of one year. The 8,157,500 shares held by
non-affiliates may be traded in market transactions without restriction. The
shares held by the affiliates may only be sold pursuant to Rule 144. The Company
has not agreed to file any registration statements for its existing
shareholders.
(b) Holders
- ------------
There are 120 holders of the Company's Common Stock as of January 31, 2000.
(c) Dividends
- -------------
The Company has paid no dividends to date on its Common Stock. The Company
reserves the right to declare a dividend when operations merit.
Item 2. Legal Proceedings
=========================
The Company is the Defendant is an action filed in August, 1999 by Dr. Werner F.
Greider in the Supreme Court of British Columbia in Vancouver. The action
alleges commissions and expenses due to Dr. Greider in the amount of
approximately $25,000 arising from a verbal agreement to assist the Company in
obtaining financing. The Company has denied the allegations and intends to
vigorously defend the action. The Company does not believe there would be a
materially adverse effect upon the Company even in the unlikely event of
judgment in favor of Dr. Greider.
Item 3. Changes in and Disagreements with Accountants: None
===========================================================
Item 4. Recent Sales of Unregistered Securities
==============================================
During the past three years, the Company sold securities which were not
registered under the Securities Act of 1933, as amended, as set forth below.
Date Name # of shares Consideration
issued (U.S. $)
- --------------------------------------------------------------------------------
072198 Eric Harris 350,000 3,500
072198 Krystyna Kieeberger 250,000 2,500
072198 John Hou 100,000 1,000
072198 Warren Ennis 600,000 6,000
072198 Les Ennis 300,000 3,000
072198 Barry Dunn 50,000 500
072198 Steven Hill 175,000 1,750
072198 Norman Ickert 300,000 3,000
072198 Allen Hackstep 700,000 7,000
072198 Linda Taylor 500,000 5,000
072198 Sharon Wainwright 500,000 5,000
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072198 Michael Paul 900,000 9,000
072198 Helen Scott 225,000 2,250
072198 Gorden Witt 900,000 9,000
072198 Bruce Adams 800,000 8,000
072198 Robert Shivji 900,000 9,000
0721/98 James Connelly 900,000 9,000
072198 Victor Hicks 800,000 8,000
072198 Gary Stewart 450,000 4,500
0721/98 Bud Losing 300,000 3,000
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Total 10,000,000 $100,000
041999 Michael Marleau 840,000 exchange
041999 Edwin Savage 288,000 exchange
041999 Igor Petrov 288,000 exchange
041999 Greg McCartney 216,000 exchange
041999 Larry Pasemko 216,000 exchange
041999 Ruth Marleau 216,000 exchange
041999 Victoria Creighton 96,000 exchange
041999 Alex de Haydu 96,000 exchange
041999 Ken Shaw 24,000 exchange
041999 Roger Baer 120,000 exchange
-------
Total 2,400,000
The Company was not a reporting company pursuant to the Securities Exchange Act
of 1934 nor was it a development stage company with no business plan. Thus it
was eligible to rely upon Rule 504 as a safe harbor exemption from the
registration requirements of the Securities Act of 1933. Moreover, Rule 504 was
available in that the Company sold less than$1,000,000.00 worth of securities in
the previous 12 month period and except for the Company's officers and
directors, the purchasers were unaffiliated investors. The Company relied upon
the Rule 504 safe harbor exemption for the sales of securities for cash. These
sales were entirely private transactions pursuant to which all material
information as specified in Rule 502(b)(2) was made available to the purchasers.
On all transactions depicted, no sales commission was paid by the Company to
Pacific Rim Investment Inc. pursuant to the July 21, 1998, Offering Sales Agency
Agreement. (See Exhibit 10(ii)). Pacific Rim Investment Inc. is a corporation
organized under the law of the Pacific island nation of Vanuatu. Pacific Rim has
two principals. They are Geoffrey Robert Gee and John Caldwell Malcolm.
The Company relied upon the exemption from registration set forth in section
4(2) of the Securities Act of 1933 for its sale of shares pursuant to the
exchange of shares for White Diamond Importers, LLC. The purchasers in this sale
are sophisticated investors who were provided all material information regarding
the Company. In addition, the Company placed a restrictive legend upon the
certificates issued to the purchasers denoting the securities are "restricted
securities" or held by a control person of the Company and may only be sold in
compliance with Rule 144. Thus the exemptions from registration afforded by Rule
4(2) and Rule 3(b) were available to the issuer.
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Item 5. Indemnification of Directors and Officers
=================================================
Article 11 of the Company's By-laws provides that every person who was or is a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or a person for whom he is the legal representative
is or was a director or officer of the corporation or is or was serving at the
request of the corporation or for its benefit as a director or officer of
another corporation, or as its representative in a partnership, joint venture,
trust or other enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the General Corporation Law of the State of
Nevada against all expenses, liability and loss (including attorney's fees,
judgments, fines and amounts paid or to be paid in settlement) reasonably
incurred or suffered by him in connection therewith. The expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Such right of indemnification
shall be a contract right which may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other right
which such directors, officers or representatives may have or hereafter acquire
and, without limiting the generality of such statement, they shall be entitled
to their respective rights of indemnification under any bylaw, agreement, vote
of stockholders, provision of law or otherwise, as well as their rights under
Article 11.
Nevada Revised Statutes Section 78.7502 provides for discretionary and mandatory
indemnification of officers, directors, employees and agents as follows:
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed legal
proceeding, except by or in the right of the corporation, by reason of the
fact that the person is or was a director, officer, employee or agent of
the corporation, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
the person in connection with the action, suit or proceeding if the person
acted in good faith and in a manner which was reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
the conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, against expenses, including
amounts paid in settlement and attorneys' fees actually and reasonably
incurred by the person in connection with the defense or settlement of the
action or suit if the person acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the
extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines
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upon application that in view of all the circumstances of the case, the
person is fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections 1 and 2, or in defense of any
claim, issue or matter therein, the corporation shall indemnify the person
against expenses, including attorneys' fees, actually and reasonably
incurred in connection with the defense.
Nevada Revised Statutes Section 78.751 requires authorization for discretionary
indemnification; advancement of expenses and limitation on indemnification and
advancement of expenses as follows:
1. Any discretionary indemnification under NRS 78.7502 unless ordered by a
court or advanced pursuant to subsection 2, may be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
PART F/S
========
The following financial statements are filed as part of this registration
statement:
Consolidated Financial Statements of White Diamond Spirits, Inc.
Independent Auditors Report
Consolidated Balance Sheets
Consolidated Statements Of Operations
Consolidated Statements Of Changes In Stockholders' Equity
Consolidated Statements Of Cash Flows
Notes To The Consolidated Financial Statements
Financial Statements of White Diamond Importers, LLC.
Independent Auditors Report
Balance Sheets
Statements Of Operations and Deficit
Statements Of Cash Flows
Notes To The Consolidated Financial Statements
Pro-Forma Unaudited Consolidated Financial Statements
White Diamond Spirits Inc. And White Diamond Importers, LLC.
Pro-Forma Consolidated Statement Of Operations
Notes To The Pro-Forma Consolidated Financial Statements
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((Letterhead))
DAVIDSON & COMPANY-Chartered Accountants---A Partnership of Incorporated
Professionals
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
White Diamond Spirits Inc.
We have audited the accompanying consolidated balance sheets of White Diamond
Spirits Inc. as at October 31, 1999 and 1998 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for the
year ended October 31, 1999 and the period from incorporation on July 20, 1998
to October 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as at
October 31, 1999 and 1998 and the results of its operations, changes in its
stockholders' equity and its cash flows for the year ended October 31, 1999 and
the period from incorporation on July 20, 1998 to October 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, unless the Company attains future profitable
operations and/or obtains additional financing, there is substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
"/s/ DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
December 2, 1999
((Letterhead))
A Member of Accounting Group International
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Center, Vancouver, B.C., Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
14
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
AS AT OCTOBER 31
1999 1998
- --------------------------------------------------------------------------------
ASSETS
Current
Cash $ 19,727 $ 149
Accounts receivable 69,667 -
Inventory 127,427 -
Prepaid expenses 368 -
-------------- ------------
217,189 149
Capital assets (Note 4) 4,070 -
-------------- ------------
$ 221,259 $ 149
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable $ 29,093 $ -
Due to related parties 278,593 149
-------------- ------------
307,686 149
-------------- ------------
Stockholders' equity
Capital stock
Authorized
200,000,000 common shares with
a par value of $0.001
Issued
12,400,000 common shares
(1998 - 10,000,000) 12,400 10,000
Additional paid-in capital 186,978 80,000
Deficit (285,805) (90,000)
-------------- ------------
(86,427) -
-------------- ------------
$ 221,259 $ 149
============== ============
Contingency (Note 9)
The accompanying notes are an integral part of these
consolidated financial statements.
15
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
Period From
Incorporation
on July 20,
Year Ended 1998 to
October 31, October 31,
1999 1998
- --------------------------------------------------------------------------------
SALES $ 51,600 $ -
COST OF SALES (25,993) -
-------------- -----------
25,607 -
-------------- -----------
EXPENSES
Accounting 20,502 -
Amortization 241 -
Bank charges and interest 2,685 -
Consulting 61,758 90,000
Duties and taxes 18,977 -
Filing fees 16,713 -
Freight 8,005 -
Legal 3,975 -
Office 23,582 -
Promotion and shareholder
information 26,113 -
Samples 9,244 -
Telephone and utilities 6,161 -
Transfer agent 975 -
Travel and entertainment 31,249 -
-------------- -----------
230,180 90,000
-------------- -----------
Loss before other item (204,573) (90,000)
OTHER ITEM
Foreign exchange gain 8,768 -
-------------- -----------
Net loss for the period $ (195,805) $ (90,000)
============== ===========
Basic and diluted loss
per share $ (0.02) $ (0.01)
============== ===========
Weighted average number
of common shares
outstanding 11,308,493 10,000,000
============== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
16
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Common Stock
-------------------------------- Additional
Number of Paid-in
Shares Amount Capital Deficit Total
--------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, July 20, 1998 - $ - $ - $ - $ -
Issued for cash (net of share
issuance costs) 10,000,000 10,000 80,000 - 90,000
Net loss for the period - - - (90,000) (90,000)
--------------- -------------- -------------- --------------- ---------------
Balance, October 31, 1998 10,000,000 10,000 80,000 (90,000) -
Shares issued for acquisition of subsidiary 2,400,000 2,400 106,978 - 109,378
Net loss for the year - - - (195,805) (195,805)
--------------- -------------- -------------- --------------- ---------------
Balance, October 31, 1999 12,400,000 $ 12,400 $ 186,978 $ (285,805) $ (86,427)
=============== ============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
17
<PAGE>
WHITE DIAMOND SPIRITS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Period From
Incorporation
on July 20,
Year Ended 1998 to
October 31, October 31,
1999 1998
--------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss for the period $ (195,805) $ (90,000)
Item not involving an outlay of cash:
Amortization 241 -
Net changes in non-cash working capital items
Increase in accounts receivable (63,577) -
Increase in inventory (52,427) -
Decrease in prepaid expenses 12 -
Increase in accounts payable 24,058 -
--------------- -----------------
Net cash used in operating activities (287,498) (90,000)
--------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in due to related parties 305,765 149
Share issuance costs - (10,000)
Issuance of capital stock - 100,000
--------------- -----------------
Net cash provided by financing activities 305,765 90,149
--------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash from acquisition of subsidiary 1,311 -
--------------- -----------------
Net cash provided by investing activities 1,311 -
--------------- -----------------
Change in cash position for the period 19,578 149
Cash, beginning of period 149 -
--------------- -----------------
Cash, end of period $ 19,727 $ 149
=============== =================
Supplemental disclosure with respect to cash flows
Cash paid during the period for interest $ - $ -
Cash paid during the period for income taxes - -
Non-cash investing activities
Issuance of common stock to acquire subsidiary 109,378 -
=============== =================
</TABLE>
There were no non-cash transactions for the period ended October 31, 1998.
The accompanying notes are an integral part of these
consolidated financial statements.
18
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated on July 20, 1998 under the laws of the
State of Nevada and is in the business of importing spirits and alcohol
for sale and distribution in North America.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern. It is management's plan to seek additional capital through
short-term loans from directors and equity financings.
1999 1998
-------------- ------------
Deficit $ (285,805) $ (90,000)
Working capital deficiency (90,497) -
============== ============
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Principles of consolidation
---------------------------
These financial statements have been prepared on a consolidated basis and
include the operations of the Company and its wholly-owned subsidiary,
White Diamond Importers, LLC ("Importers") (Note 3). All inter-company
transactions have been eliminated upon consolidation.
Cash and cash equivalents
-------------------------
Cash and cash equivalents include highly liquid investments with a maturity
of three months or less.
Inventory
---------
Inventory is valued at the lower of cost and net realizable value.
Capital assets
--------------
Capital assets are recorded at cost and amortization is provided for on the
following basis:
Computers 30% declining balance
19
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Foreign currency translation
----------------------------
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non-monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Revenues
and expenses are translated at the rates of exchange prevailing on the
dates such items are recognized in earnings. Gains and losses from
restatement of foreign currency monetary and non-monetary assets and
liabilities are included in income.
Accounting for derivative instruments and hedging activities
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. In June 1999, FASB issued SFAS 137 to
defer the effective date of SFAS No. 133 to all fiscal quarters of all
fiscal years beginning after June 15, 2004. The Company does not anticipate
that the adoption of the statement will have a significant impact on its
financial statements.
Disclosure about segments of an enterprise and related information
------------------------------------------------------------------
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," ("SFAS 131") requires
the use of the "management approach" model for segment reporting.. The
management approach model is based on the way a company's management
organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other
manner in which management dissaggregates a company. Currently, SFAS 131
has no effect on the Company's financial statements.
Reporting on costs of start-up activities
-----------------------------------------
In April 1998, the American Institute of Certified Public Accountant's
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company has adopted the requirements of SOP 98-5 during the
current period.
Stock-based compensation
------------------------
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock. Because the Company does not have any outstanding stock
options issued, there is no impact on its financial statements.
20
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Comprehensive income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total stockholders' equity as at
October 31, 1999.
Earnings (loss) per share
-------------------------
Earnings (loss) per share is computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
Under SFAS 128, basic and diluted earnings (loss) per share are to be
presented. Basic earnings (loss) per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares.
Revenue recognition
-------------------
Revenue from operations is recognized when the product is shipped and
collection of revenue is reasonably assured.
Income taxes
------------
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". A deferred tax
asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss carryforwards. Deferred
tax expenses (benefit) result from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
3. BUSINESS COMBINATION
Pursuant to an acquisition agreement, effective April 15, 1999, the Company
acquired a 100% ownership interest in White Diamond Importers, LLC
("Importers") with the issuance of 2,400,000 common shares at a deemed
value of $0.001 per share.
The cost of an acquisition should be based on the fair value of the
consideration given, except where the fair value of the consideration given
is not clearly evident. In such a case, the fair value of the net assets
acquired is used.
The acquisition of Importers has been accounted for using the purchase
method and accordingly, these financial statements include the results of
operations of Importers from the date of acquisition.
On April 15, 1999, the company's shares were not listed on any market
making it impossible to estimate the actual market value of the 2,400,000
common shares. Therefore, the cost of the acquisition, $109,378 has been
determined by the fair value of Importer's net assets.
21
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
3. BUSINESS COMBINATION (cont'd.....)
The total purchase price of $109,378 was allocated as follows:
Current assets $ 110,102
Capital assets 4,311
Accounts payable and accrued liabilities (5,035)
-----------
$ 109,378
4. CAPITAL ASSETS
Net Book Value
---------------------------
Accumulated
Cost Amortization 1999 1998
---------- ------------- ---------- ------------
Computers $ 4,311 $ 241 $ 4,070 $ -
========= =========== ========== ============
5. 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 incorrectly
recognize the year 2000 as some other date, resulting in errors. 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. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
6. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, and due to related parties. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted.
7. RELATED PARTY TRANSACTIONS
The following transactions were entered into with related parties:
a) The Company acquired a wholly-owned subsidiary, White Diamond
Importers, LLC of which certain members of this company are also
directors of the Company (Note 3).
b) Paid or accrued $27,272 (1998 - $Nil) to a director of the Company for
consulting fees.
22
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
8. DEFERRED INCOME TAXES
The Company's total deferred tax asset is as follows:
1999 1998
---------------- ----------------
Net operating loss carryforward $ 91,458 $ 28,800
Valuation allowance (91,458) (28,800)
---------------- ----------------
$ - $ -
================ ================
The Company has a net operating loss carryforward of approximately $324,509
which expires between the years 2018 and 2019. The Company provided a full
valuation allowance on the deferred tax asset because of the uncertainty
regarding realizability.
9. CONTINGENCY
A lawsuit has been commenced against the Company in which the plaintiff is
seeking commissions and expense reimbursements allegedly owing. Management
has denied the allegations and has commenced a counter claim against the
plaintiff. The outcome of these claims cannot be determined at this time,
therefore any amounts relating to the claims will be reflected in the year
of settlement.
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Members of
White Diamond Importers, LLC
We have audited the accompanying balance sheets of White Diamond Importers, LLC
as at October 31, 1999 and 1998 and the related statements of operations and
deficit and cash flows for the year ended October 31, 1999 and the period from
date of organization on November 11, 1997 to October 31, 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 about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as at October 31,
1999 and 1998 and the results of its operations and its cash flows for the year
ended October 31, 1999 and the period from date of organization on November 11,
1997 to October 31, 1998, in accordance with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, unless the Company attains future profitable operations and/or
obtains additional funding, there is substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
"/s/ DAVIDSON & COMPANY"
Vancouver, Canada Chartered Accountants
December 2, 1999
24
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
BALANCE SHEETS
(Expressed in U.S. Dollars)
AS AT OCTOBER 31
1999 1998
--------------- ---------------
ASSETS
Current
Cash $ 5,788 $ 992
Accounts receivable 6,868 4,350
Inventory 75,000 -
Prepaid expenses 368 -
--------------- ---------------
88,024 5,342
Due from related party - 149
Capital assets (Note 3) 4,311 2,088
--------------- ---------------
$ 92,335 $ 7,579
=============== ===============
LIABILITIES AND MEMBERS' EQUITY
Current
Accounts payable $ 2,893 $ 2,000
Due to related party (Note 4) 98,732 -
--------------- ---------------
101,625 2,000
--------------- ---------------
Members' equity
Members' capital (Note 5) 572,595 310,570
Deficit (581,885) (304,991)
--------------- ---------------
(9,290) 5,579
--------------- ---------------
$ 92,335 $ 7,579
=============== ===============
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
STATEMENTS OF OPERATIONS AND DEFICIT
(Expressed in U.S. Dollars)
Period From
Date of
Organization on
November 11,
Year Ended 1997 to
October 31, October 31,
1999 1998
--------------- ---------------
SALES $ 38,904 $ -
COST OF SALES (21,238) -
--------------- ---------------
17,666 -
--------------- ---------------
EXPENSES
Accounting and legal 3,233 10,791
Amortization 1,107 369
Bank charges 2,176 529
Commissions 1,174 -
Consulting 143,625 75,000
Dues and subscriptions 3,796 -
Office 23,480 10,130
Printing 3,776 -
Promotion 6,223 37,278
Rent 4,412 26,730
Salaries and wages 17,812 -
Shipping 15,869 -
Telephone 16,217 21,416
Travel 60,127 128,929
--------------- ---------------
303,027 311,172
--------------- ---------------
Loss before other item (285,361) (311,172)
OTHER ITEM
Foreign exchange gain 8,467 6,181
--------------- ---------------
Loss for the period (276,894) (304,991)
Deficit, beginning of period (304,991) -
--------------- ---------------
Deficit, end of period $ (581,885) $ (304,991)
=============== ===============
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
Period From
Date of
Organization
on
November 11,
Year Ended 1997 to
October 31, October 31,
1999 1998
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Loss for the period $ (276,894) $ (304,991)
Item not affecting cash
Amortization 1,107 369
Changes in non-cash working capital items:
Increase in accounts receivable (2,518) (4,350)
Increase in inventory (75,000) -
Increase in prepaid expenses (368) -
Increase in accounts payable 893 2,000
----------- -----------
Net cash used in operating activities (352,780) (306,972)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Due from related party 149 (149)
Purchase of capital assets (3,330) (2,457)
----------- -----------
Net cash used in investing activities (3,181) (2,606)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to related party 98,732 -
Contributions from members 262,025 310,570
----------- -----------
Net cash provided by financing activities 360,757 310,570
----------- -----------
Change in cash position for the period 4,796 992
Cash, beginning of period 992 -
----------- -----------
Cash, end of period $ 5,788 $ 992
=========== ===========
Supplemental disclosure with respect to cash flows
Cash paid during the period for interest $ - $ -
Cash paid during the period for income taxes - -
=========== ===========
There were no non-cash transactions for the periods ended October 31, 1999 and
1998.
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
1. ORGANIZATION OF THE COMPANY
The Company was organized on November 11, 1997 under the Laws of the State
of Nevada and is in the business of importing spirits and alcohol for sale
and distribution in North America.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. Without realization of additional capital,
it would be unlikely for the Company to continue as a going concern. It is
management's plan to seek additional capital through short-term loans from
directors and equity financings.
1999 1998
------------------------------
Deficit $ (581,885) $ (304,991)
Working capital 85,131 3,342
============ =============
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the period. Actual results could differ from these estimates.
Foreign currency translation
----------------------------
Transaction amounts denominated in foreign currencies are translated at
exchange rates prevailing at transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect
the exchange rate at that date. Non-monetary assets and liabilities are
translated at the exchange rate on the original transaction date. Revenues
and expenses are translated at the rates of exchange prevailing on the
dates such items are recognized in earnings. Gains and losses from
restatement of foreign currency monetary and non-monetary assets and
liabilities are included in income.
Cash and equivalents
--------------------
Cash and equivalents include highly liquid investments with a maturity of
three months or less.
Inventory
---------
Inventory is valued at the lower of cost and net realizable value.
Capital assets and amortization
-------------------------------
Capital assets, being computer equipment, are recorded at cost less
accumulated amortization. The Company provides for amortization using the
declining balance method at a rate of 30% per annum.
28
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Revenue recognition
-------------------
Revenue from operations is recognized when the product is shipped and
collection of revenue is reasonably assured.
Comprehensive income
--------------------
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
rules for the reporting of comprehensive income and its components. The
adoption of SFAS 130 had no impact on total members' equity as of October
31, 1999.
Disclosure about segments of an enterprise and related information
------------------------------------------------------------------
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," ("SFAS 131") requires
the use of the "management approach" model for segment reporting. The
management approach model is based on the way a company's management
organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and
services, geography, legal structure, management structure, or any other
manner in which management disaggregates a company.
Accounting for derivative instruments and hedging activities
------------------------------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133") which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. In June 1999, FASB issued SFAS 137 to defer the
effective date of SFAS 133 to fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company does not anticipate that the adoption of
the statement will have a significant impact on its financial statements.
Reporting on costs of start-up activities
-----------------------------------------
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") which provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. SOP 98-5 is
effective for fiscal years beginning after December 15, 1998 with initial
adoption reported as the cumulative effect of a change in accounting
principle. The Company has adopted the requirements of SOP 98-5 during the
current period.
3. CAPITAL ASSETS
Net Book Value
-----------------------------
Accumulated
Cost Amortization 1999 1998
--------- ------------- ------------- --------------
Computers $ 5,787 $ 1,476 $ 4,311 $ 2,088
========= ============= ============= ==============
4. DUE TO RELATED PARTY
The amount due to related party is to a company of which the directors are
also members of the Company. The amount is non-interest bearing and has no
specified terms of repayment.
29
<PAGE>
WHITE DIAMOND IMPORTERS, LLC
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
OCTOBER 31, 1999
5. MEMBERS' CAPITAL
1999 1998
------------ ------------
Members' capital, opening balance $ 310,570 $ -
Contributions 1,007,750 514,126
Drawings (745,725) (203,556)
------------ ------------
Members' capital, closing balance $ 572,595 $ 310,570
============ ============
6. RELATED PARTY TRANSACTIONS
The Company paid or accrued consulting fees in the amount of $71,524 (1998
- $30,000) to a member of the Company.
7. FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts receivable,
due to related party and accounts payable. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of these financial instruments approximate
their carrying values, unless otherwise noted.
8. 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 incorrectly
recognize the year 2000 as some other date, resulting in errors. 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. It is not possible to be certain that all aspects of the Year
2000 Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
30
<PAGE>
((Letterhead))
DAVIDSON & COMPANY-Chartered Accountants---A Partnership of Incorporated
Professionals
WHITE DIAMOND SPIRITS INC.
AND
WHITE DIAMOND IMPORTERS, LLC
PRO-FORMA UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro-forma consolidated statements of operations for the
year ended October 31, 1999 and the period from incorporation on July 20, 1998
to October 31, 1998 (the "pro-forma financial statements") of White Diamond
Spirits Inc. (the "Company") give effect to the following transaction as of the
beginning of the periods indicated for purposes of the statement of operations:
i) The acquisition by the Company of 100% ownership of White Diamond
Importers, LLC on April 15, 1999.
Pro-forma adjustments to the statements of operations reflect adjustments only
for dates prior to the date the transaction was consummated.
The pro-forma financial statements have been prepared by the Company based upon
the financial statements of the Company and White Diamond Importers, LLC. The
pro-forma financial statements give effect to the acquisition under the purchase
method of accounting and to certain assumptions and adjustments described more
fully in the accompanying notes. These pro-forma financial statements may not be
indicative of the results that actually would have occurred if the transactions
had been completed on the dates indicated or of the results which may be
obtained in the future. The pro-forma financial statements should be read in
conjunction with the financial statements and notes thereto of the Company and
White Diamond Importers, LLC included elsewhere in this Form 10-SB.
((Letterhead))
A Member of Accounting Group International
Suite 1200, Stock Exchange Tower, 609 Granville Street, P.O. Box 10372,
Pacific Center, Vancouver, B.C., Canada, V7Y 1G6
Telephone (604) 687-0947 Fax (604) 687-6172
31
<PAGE>
WHITE DIAMOND SPIRITS INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
White
White Diamond
Diamond Importers,
Spirits Inc. LLC
Year Ended Year Ended Pro-forma
October 31, October 31, Adjustments Pro-forma
1999 1999 (Note 2) Consolidated
-------------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
SALES $ 51,600 $ 38,904 $ - $ 90,504
COST OF GOODS SOLD (25,993) (21,238) - (47,231)
-------------- -------------- ---------- --------------
25,607 17,666 - 43,273
-------------- -------------- ---------- --------------
OPERATING EXPENSES
Accounting 20,000 2,012 - 22,012
Amortization - 1,107 - 1,107
Bank charges and interest 1,929 2,176 - 4,105
Commissions - 1,174 - 1,174
Consulting fees 3,000 143,625 - 146,625
Duties 18,977 - - 18,977
Filing and printing 16,713 3,776 - 20,489
Freight 115 15,869 - 15,984
Legal 2,754 1,221 - 3,975
Office 590 45,088 - 45,678
Promotion and shareholder information 19,705 6,223 - 25,928
Rent - 4,412 - 4,412
Samples 9,244 - - 9,244
Telephone and utilities - 16,217 - 16,217
Transfer agent 975 - - 975
Travel and entertainment 7,673 60,127 - 67,800
-------------- -------------- ---------- --------------
101,675 303,027 - 404,702
-------------- -------------- ---------- --------------
OTHER ITEM
Foreign exchange gain - 8,467 - 8,467
-------------- -------------- ---------- --------------
- 8,467 - 8,467
-------------- -------------- ---------- --------------
Loss for the period $ (76,068) $ (276,894) $ - $ (352,962)
============== ============== ========== ==============
Basic and diluted loss per share $ (0.01) $ n/a $ n/a $ (0.03)
============== ============== ========== ==============
Weighted average number of shares outstanding 11,308,493 n/a 1,091,507 12,400,000
============== ============== ========== ==============
</TABLE>
See notes to the pro-forma consolidated financial statements.
32
<PAGE>
WHITE DIAMOND SPIRITS INC.
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
White White
Diamond Diamond
Spirits Inc. Importers,
Period From LLC
Incorporation Period From
on July 20, July 20,
1998 to 1998 to Pro-forma
October 31, October 31, Adjustments Pro-forma
1998 1998 (Note 2) Consolidated
-------------- -------------- ---------- --------------
OPERATING EXPENSES
<S> <C> <C> <C> <C>
Accounting $ - $ 1,420 $ - $ 1,420
Amortization - 369 - 369
Bank charges - 291 - 291
Consulting fees 90,000 75,000 - 165,000
Legal - 9,371 - 9,371
Office - 10,130 - 10,130
Promotion and shareholder information - 37,278 - 37,278
Rent - 26,730 - 26,730
Telephone and utilities - 21,416 - 21,416
Travel and entertainment - 128,929 - 128,929
-------------- -------------- ------- --------------
90,000 310,934 - 400,934
OTHER ITEM
Foreign exchange loss - 9,201 - 9,201
-------------- -------------- ------- --------------
Loss for the period $ (90,000) $ (320,135) $ - $ (410,135)
============== ============== ========== ==============
Basic and diluted loss per share $ (0.01) $ n/a $ n/a $ (0.03)
============== ============== ========== ==============
Weighted average number of shares outstanding 10,000,000 n/a 2,400,000 12,400,000
============== ============== ========== ==============
</TABLE>
See notes to the pro-forma consolidated financial statements.
33
<PAGE>
WHITE DIAMOND SPIRITS INC.
NOTES TO THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 1999
1. BASIS OF PRESENTATION
Business combination of White Diamond Spirits Inc. ("Spirits") and White
Diamond Importers, LLC ("Importers")
Effective April 15, 1999, a business combination occurred between Spirits
and Importers, whereby Spirits legally acquired Importers as a wholly-owned
subsidiary. The terms of the combination provided that the Company acquired
all of the assets and liabilities of Importers by the issuance of 2,400,000
common shares at a deemed value of $109,378.
2. PRO-FORMA FINANCIAL INFORMATION
Management has prepared and provided certain pro-forma interim consolidated
financial information to assist readers to understand the nature and effect
of the combination on the audited financial statements of Spirits and
Importers.
The pro-forma financial information is unaudited and has been prepared from
the audited financial statements of Spirits for the year ended October 31,
1999 and the audited financial statements of Importers for the year ended
October 31, 1999 and the audited financial statements of Spirits for the
period from incorporation on July 20, 1998 to October 31, 1998 and
Importers for the period from July 20, 1998 to October 31, 1998.
Pro-forma statements of operations and loss per share:
------------------------------------------------------
The pro-forma statements of operations reflect a simple combination of the
results of operations of Spirits and Importers for the year ended October
31, 1999 and the period from July 20, 1998 to October 31, 1998.
a) The impact of the calculation on pro-forma basic loss per share is
based on the number of shares that would have been outstanding for the
period had the business combination taken place at the beginning of
the fiscal period.
The calculation of pro-forma weighted average shares outstanding at
October 31, 1999 and October 31, 1998 are as follows:
Weighted average shares outstanding
as at October 31, 1998 10,000,000
Shares issued for acquisition of Importers 2,400,000
----------
12,400,000
==========
Weighted average shares outstanding
as at October 31, 1999 11,308,493
Shares issued for acquisition of Importers 1,091,507
----------
12,400,000
==========
34
<PAGE>
Signatures
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this Amendment No. 1 to the registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
WHITE DIAMOND SPIRITS, INC.
(Company)
By: /s/MICHAEL MARLEAU
------------------
Michael Marleau, President, Chief Executive Officer, Director
February 23, 2000
/s/ EDWIN SAVAGE
----------------
Edwin Savage, Director
February 23, 2000
/s/ IGOR PETROV
---------------
Igor Petrov, Secretary, Treasurer (Chief Financial Officer), Director
February 23, 2000
/s/ GREG McCARTNEY
------------------
Greg McCartney, Director
February 23, 2000
/s/ LARRY PASEMKO
------------------
Larry Pasemko, Director
February 23, 2000
35
<PAGE>
PART III
========
Item 1. Index to Exhibits
- -------------------------
3. (i) Articles of Incorporation
(ii) By-laws
10.1 Share Purchase Agreement dated April 19, 1999
10.2 Marketing Agreement
27 Financial Data Schedule
36
ARTICLES OF INCORPORATION
OF
WHITE DIAMOND SPIRITS INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, has this day is voluntarily forming a corporation under
the laws of the State of Nevada and does hereby certify:
ARTICLE ONE
The name of this corporation is WHITE DIAMOND SPIRITS INC.
ARTICLE TWO
The resident agent of said corporation shall be Pacific Corporate Services Inc.,
7631 Bermuda Road, Las Vegas, NV., 89123 and such other offices as may be
determined by the By-Laws in and outside the State of Nevada.
ARTICLE THREE
The objects to be transacted, business and pursuit and nature of the business,
promoted or carried on by this corporation are and shall continue to be engaged
in any lawful activity.
ARTICLE FOUR
The members of the governing board shall be styled Directors and the first Board
of Directors shall consist of one (1). The number of stockholders of said
corporation shall consist of one (1). The number of directors and shareholders
of this corporation may, from time to time, be increased or decreased by an
amendment to the By-Laws of this corporation in that regard, and without the
necessity of amending these Articles of Incorporation. The name and address of
the first Board of Directors and of the Incorporator signing these Articles as
follows:
STACEY MCGRILLEN 307-19533 FRASER HWY.
SURREY, B.C. CANADA
V3S 6K7
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
The total authorized capitalization of this Corporation shall be and is the sum
of 200,000,000 shares of Common Stock at $0.001 par value, said stock to carry
full voting power and the said shares shall be issued fully paid at such time as
the Board of Directors may designate in exchange for cash, property, or
services, the stock of other corporation
37
<PAGE>
or other values, rights, or things, and the judgement of the Board of Directors
as to the value thereof shall be conclusive.
ARTICLE SEVEN
The capital stock shall be and remain non-assessable. The private property of
the stockholders shall not be liable for the debts or liabilities of the
Corporation.
IN WITNESS WHEREOF, I have set my hand this 14th day of July, 1998.
/s/ STACEY MCGRILLEN
- --------------------
Stacey McGrillen
Providence of British Columbia )
)
Canada )
On this 14TH day of July, 1998 before me, a Notary Public in and for said,
Providence of British Columbia, Canada. Personally appeared, Stacey McGrillen
known to me to be the person whose name is subscribed to the foregoing
instrument, and he duly acknowledged to me that he executed the same for the
purpose therein mentioned.
IN WITNESS WHEREOF, I have set my hand and offered by official seal in,
The City of Vancouver, Providence of British Columbia, Canada, the day and year
in this Certificate first above written.
/s/NOTARY PUBLIC
- ----------------
Notary Public
[[NOTARY STAMP]]
38
EXHIBIT 3. (ii) Bylaws
BYLAWS
OF
WHITE DIAMOND SPIRITS INC.
A Nevada Corporation
ARTICLE 1
Offices
Section 1. The registered office of this corporation shall be in the County of
Clark, State of Nevada.
Section 2. The corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE 2
Meetings of Stockholders
Section 1. All annual meetings of the stockholders shall be held at the
registered office of the corporation or at such other place within or
without the State of Nevada as the Directors shall determine. Special
meetings of the stockholders may be held at such time and place within or
without the State of Nevada as shall be stated in the notice of the
meeting, or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders, commencing with the year 1999
shall be held on the 21nd of July, each year if not a legal holiday and, if
a legal holiday, then on the next secular day following, or at such other
time as may be set by the Board of Directors from time to time, at which
the stockholders shall elect by vote a Board of Directors and transact such
other business as may properly be brought before the meeting.
Section 3. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation,
may be called by the President or the Secretary by resolution of the Board
of Directors or at the request in writing of stockholders owning a majority
in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose of
the proposed meeting.
Section 4. Notices of meetings shall be in writing and signed by the President
or Vice-President or the Secretary or an Assistant Secretary or by such
other person or persons as the Directors shall designate. Such notice shall
state the purpose or purposes for which the meeting is called and the time
and the place, which may be within or without this State, where it is to be
held. A copy of such notice shall be either delivered personally to or
shall be mailed, postage prepaid, to each stockholder of record entitled to
vote at such meeting not less than ten nor more than sixty days before such
meeting. If mailed, it shall be directed to a stockholder at his address as
it appears upon the records of the corporation and upon such mailing of any
such notice, the service thereof shall be complete and the time of the
notice shall begin to run from the date upon which such notice is deposited
in the mail for transmission to such stockholder. Personal delivery of any
such notice to any officer of a corporation or association, or to any
member of a partnership shall constitute delivery of such notice to such
corporation, association or partnership. In the event of the transfer of
stock after delivery of such notice of and prior to the holding of the
meeting it shall not be necessary to deliver or mail notice of the meeting
to the transferee.
39
<PAGE>
Section 5. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 6. The holders of a 10% of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction
of business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum shall not be present or represented
at any meeting of the stockholders, the stockholders entitled to vote there
at, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting
as originally notified. The Company may have more than one shareholder.
Section 7. When a quorum is present or represented at any meeting, the vote of
the holders of a 10% of the stock having voting power present in person or
represented by proxy shall be sufficient to elect directors or to decide
any question brought before such meeting, unless the question is one upon
which by express provision of the statutes or of the Articles of
Incorporation, a different vote shall govern and control the decision of
such question.
Section 8. Each stockholder of record of the corporation shall be entitled at
each meeting of stockholders to one vote for each share of stock standing
in his name of the books of the corporation. Upon the demand of any
stockholder, the vote for Directors and the vote upon any question before
the meeting shall be by ballot.
Section 9. At any meeting of the stockholders any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing. In
the event that any such instrument in writing shall designate two or more
persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred by such written instrument upon all of
the persons so designated unless the instrument shall otherwise provide. No
proxy or power of attorney to vote shall be used to vote at a meeting of
the stockholders unless it shall have been filed with the secretary of the
meeting when required by the inspectors of election. All questions
regarding the qualifications of voters, the validity of proxies and the
acceptance of or rejection of votes shall be decided by the inspectors of
election who shall be appointed by the Board of Directors, or if not so
appointed, then by the presiding officer of the meeting.
Section 10. Any action which may be taken by the vote of the stockholders at a
meeting may be taken without a meeting if authorised by the written consent
of stockholders holding at least a majority of the voting power, unless the
provisions of the statutes or of the Articles of Incorporation require a
greater proportion of voting power to authorise such action in which case
such greater proportion of written consents shall be required.
ARTICLE 3
Directors
Section 1. The business of the corporation shall be managed by it's Board of
Directors which may exercise all such powers of the corporation and do all
such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or
done by the stockholders.
40
<PAGE>
Section 2. The number of Directors which shall constitute the whole board shall
be One. The number of Directors may from time to time be increased or
decreased to not less than one nor more than fifteen by action of the Board
of Directors. The Directors shall be elected at the annual meeting of the
stockholders and except as provided in section 2 of this Article, each
Director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 3. Vacancies in the Board of Directors including those caused by an
increase in the number of directors, may be filled by a majority of the
remaining Directors, though less than a quorum, or by a sole remaining
Director, and each Director so elected shall hold office until his
successor is elected at an annual or a special meeting of the stockholders.
The holders of a two-thirds of the outstanding shares of stock entitled to
vote may at any time peremptorily terminate the term of office of all or
any of the Directors by vote at a meeting called for such purpose or by a
written statement filed with the secretary or , in his absence, with any
other officer. Such removal shall be effective immediately, even if
successors are not elected simultaneously and the vacancies on the Board of
Directors resulting therefrom shall only be filled from the stockholders.
A vacancy or vacancies in the Board of Directors shall be deemed to exist
in case of the death, resignation or removal of any Directors, or if the
authorised number of Directors be increased, or if the stockholders fail at
any annual or special meeting of stockholders at which any Director or
Directors are elected to elect the full authorised number of Directors to
be voted for at that meeting.
The stockholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors. If the Board of Directors
accepts the resignation of a Director tendered to take effect at a future
time, the Board or the stockholders shall have power to elect a successor
to take office when the resignation is to become effective.
No reduction of the authorised number of Directors shall have the effect of
removing any Director prior to the expiration of his term of office.
ARTICLE 4
Meetings of the Board of Directors
Section 1. Regular meetings of the Board of Directors shall be held at any place
within or without the State which has been designated from time to time by
resolution of the Board or by written consent of all members of the Board.
In the absence of such designation regular meeting shall be held at the
registered office of the corporation. Special meetings of the Board may be
held either at a place so designated or at the registered office.
Section 2. The first meeting of each newly elected Board of Directors shall be
held immediately following the adjournment of the meeting of stockholders
and at the place thereof. No notice of such meeting shall be necessary to
the directors in order legally to constitute the meeting, provided a quorum
be present. In the event such meeting is not so held, the meeting may be
held at such time and place as shall be specified in a notice given
hereinafter provided for special meetings of the Board of Directors.
Section 3. Regular meetings of the Board of Directors may be held without call
or notice at such time and at such place as shall from time to time be
fixed and determined by the Board of Directors.
Section 4. Special meetings of the Board of Directors may be called by the
Chairman or the President or by the Vice-President or by any two directors.
41
<PAGE>
Written notice of the time and place of special meetings shall be delivered
personally to each director, or sent to each director by mail or by other
form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records or if not readily ascertainable, at
the place in which the meetings of the directors are regularly held. In
case such notice is mailed or telegraphed, it shall be deposited in the
United States mail or delivered to the telegraph company at least
forty-eight (48) hours prior to the time of the holding of the meeting. In
case such notice is delivered as above provided, it shall be so delivered
at least twenty-four (24) hours prior to the time of the holding of the
meeting. Such mailing, telegraphing or delivery as above provided shall be
due, legal and personal notice to such director.
Section 5. Notice of the time and place of holding an adjourned meeting need not
be given to the absent directors if the time and place be fixed at the
meeting adjourned.
Section 6. The transaction of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present,
and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, or a consent to holding such
meeting, or approvals of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 7. A majority of the authorised number of directors shall be necessary
to constitute a quorum for the transaction of business, except to adjourn
as hereinafter provided. Every act or decision done or made by a majority
of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a
greater number be required by law or by the Articles of Incorporation. Any
action of a majority, although not at a regularly called meeting, and the
record thereof, if assented to in writing by all of the other members of
the Board shall be as valid and effective in all respects as if passed by
the Board in regular meeting.
Section 8. A quorum of the directors may adjourn any directors meeting to meet
again at stated day and hour; provided, however, that in the absence of a
quorum, a majority of the directors present at any directors meeting,
either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the Board.
ARTICLE 5
Committees of Directors
Section 1. The Board of Directors may, by resolution adopted by a majority of
the whole Board, designate one or more committees of the Board of
Directors, each committee to consist of two or more of the directors of the
corporation which, to the extent provided in the resolution, shall and may
exercise the power of the Board of Directors in the management of the
business and affairs of the corporation and may have power to authorise the
seal of the corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be
determined from time to time by the Board of Directors. The members of any
such committee present at any meeting and not disqualified from voting may,
whether or not they constitute a quorum, unanimously appoint another member
of the Board of Directors to act at the meeting in the place of any absent
or disqualified member. At meetings of such committees, a majority of the
members or alternate members at any meeting at which there is a quorum
shall be the act of the committee.
Section 2. The committee shall keep regular minutes of their proceedings and
report the same to the Board of Directors.
Section 3. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all members of the Board
of Directors or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
42
<PAGE>
ARTICLE 6
Compensation of Directors
Section 1. The directors may be paid their expenses of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like reimbursement
and compensation for attending committee meetings.
ARTICLE 7
Notices
Section 1. Notices to directors and stockholders shall be in writing and
delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 2. Whenever all parties entitled to vote at any meeting, whether of
directors or stockholders, consent, either by a writing on the records of
the meeting or filed with the secretary, or by presence at such meeting and
oral consent entered on the minutes, or by taking part in the deliberations
at such meeting without objection, the doings of such meeting shall be as
valid as if had at a meeting regularly called and noticed, and at such
meeting any business may be transacted which is not excepted from the
written consent to the consideration of which no object for want of notice
is made at the time, and if any meeting be irregular for want of notice or
of such consent, provided a quorum was present at such meeting, the
proceedings of said meeting may be ratified and approved and rendered
likewise valid and the irregularity or defect therein waived by a writing
signed by all parties having the right to vote at such meeting; and such
consent or approval of stockholders may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
Section 3. Whenever any notice whatever is required to be given under the
provisions of the statutes, of the Articles of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
ARTICLE 8
Officers
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. Any person
may hold two or more officers.
Section 2. The Board of Directors at it's first meeting after each annual
meeting of stockholders shall choose a Chairman of the Board who shall be a
director, and shall choose a President, a Secretary and a Treasurer, none
of whom need be directors.
Section 3. The Board of Directors may appoint a Vice-Chairman of the Board,
Vice-Presidents and one or more Assistant Secretaries and Assistant
Treasurers and such other officers and agents as it shall deem necessary
who shall hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time by the
Board of Directors.
43
<PAGE>
Section 4. The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office at the pleasure of
the Board of Directors. Any officer elected or appointed by the Board of
Directors may be removed any time by the Board of Directors. Any vacancy
occurring in any office of the corporation by death, resignation, removal
or otherwise shall be filled by the Board of Directors.
Section 6. The Chairman of the Board shall, preside at meetings of the
stockholders and the Board of Directors, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
Section 7. The Vice-Chairman shall, in the absence or disability of the Chairman
of the Board, perform the duties and exercise the powers of the Chairman of
the Board and shall perform other such duties as the Board of Directors may
from time to time prescribe.
Section 8. The President shall be the chief executive officer of the corporation
and shall have active management of the business of the corporation. He
shall execute on behalf of the corporation all instruments requiring such
execution except to the extent the signing and execution thereof shall be
expressly designated by the Board of Directors to some other officer or
agent of the corporation.
Section 9. The Vice-President shall act under the direction of the President and
in the absence or disability of the President shall perform the duties and
exercise the powers of the President. They shall perform such other duties
and have such other powers as the President or the Board of Directors may
from time to time prescribe. The Board of Directors may designate one or
more Executive Vice-Presidents or may otherwise specify the order of
seniority of the Vice-Presidents. The duties and powers of the President
shall descend to the Vice-Presidents in such specified order of seniority.
Section 10. The Secretary shall act under the direction of the President.
Subject to the direction of the President he shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and will
perform other such duties as may be prescribed by the President or the
Board of Directors.
Section 11. The Assistant Secretaries shall act under the direction of the
President. In order of their seniority, unless otherwise determined by the
President or the Board of Directors, they shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of
the Secretary. They shall perform other such duties and have such other
powers as the President or the Board of Directors may from time to time
prescribe.
Section 12. The Treasurer shall act under the direction of the President.
Subject to the direction of the President he shall have custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit
of the corporation in such depositories as may be designated by the Board
of Directors. He shall disburse the funds of the corporation as may be
ordered by the President or the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the President and the Board of
Directors, at it's regular meetings, or when the Board of Directors so
requires, an account of all his transactions as Treasurer and of the
financial condition of the corporation.
Section 13. If required by the Board of Directors, he shall give the corporation
a bond in such sum and with such surety as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or
under his control belonging to the corporation.
44
<PAGE>
Section 14. The Assistant Treasurer in the order of their seniority, unless
other wise determined by the President or the Board of Directors, shall, in
the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer. They shall perform such other duties and have
such other powers as the President or the Board of Directors may from time
to time prescribe.
ARTICLE 9
Certificates of Stock
Section 1. Every stockholder shall be entitled to have a certificate signed by
the President or a Vice-President and the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him in the corporation. If the
corporation shall be authorised to issue more than one class of stock or
more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of the various
classes of stock or series thereof and the qualifications, limitations or
restrictions of such rights, shall be set forth in full or summarised on
the face or back of the certificate which the corporation shall issue to
represent such stock.
Section 2. If a certificate is signed (a) by a transfer agent other than the
corporation or it's employees or (b) by a registrar other than the
corporation or it's employees, the signatures of the officers of the
corporation may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be
such officer before such certificate is issued, such certificate may be
issued with the same effect as though the person had not ceased to be such
officer. The seal of the corporation, or a facsimile thereof, may, but need
not be, affixed to certificates of stock.
Section 3. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued
by the corporation alleged to have been lost or destroyed upon the making
of an affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorising such issue of a new
certificate or certificates, the Board of Directors may, in it's discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require
and/or give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost or destroyed.
Section 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it
shall be the duty of the corporation, if it is satisfied that all
provisions of the laws and regulations applicable to the corporation
regarding transfer and ownership of shares have been complied with, to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon it's books.
Section 5. The Board of Directors may fix in advance a date not exceeding sixty
(60) days nor less than ten (10) days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for
the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection
with obtaining the consent of stockholders for any purpose, as a record
date for the termination of the stockholders entitled to notice of and to
vote at any such meeting, and any adjournment thereof, or entitled to
receive payment of any such dividend, or to give such consent, and in such
case, such stockholders, and only such stockholders as shall be
stockholders of record on the date so fixed, shall be entitled to notice of
and to vote at such meeting, or any adjournment thereof, or to receive such
payment of dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding
any transfer of any stock on the books of the corporation after any such
record date fixed as aforesaid.
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<PAGE>
Section 6. The corporation shall be entitled to recognise the person registered
on it's books as the owner of shares to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be
bound to recognise any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the
laws of Nevada.
ARTICLE 10
General Provisions
Section 1. Dividends upon the capital stock of the corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the Articles of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as
a reserve or reserves to meet contingencies, or for equalising dividends or
for repairing or maintaining any property of the corporation or for such
other purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 3. All checks or demands for money and notes of the corporation shall be
signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Section 4. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
Section 5. The corporation may or may not have a corporate seal, as may be from
time to time be determined by resolution of the Board of Directors. If a
corporate seal is adopted, it shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" and "Nevada". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in
any manner reproduced.
ARTICLE 11
Indemnification
Every person who was or is a party or is a threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation or for it's
benefit as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest extent legally permissible under
General Corporation Law of the State of Nevada time to time against all
expenses, liability and loss (including attorney's fees, judgements, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking
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<PAGE>
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Such right of indemnification
shall be a contract right which may be enforced in any manner desired by such
person. Such right of indemnification shall not be exclusive of any other right
which such directors, officers or representatives may have or hereafter acquire
and, without limiting the generality of such statement, they shall be entitled
to their respective rights of indemnification under any bylaw, agreement, vote
of stockholders, provision of law or otherwise, as well as their rights under
this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, or as it's representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may from time to time adopt further Bylaws with respect
to indemnification and amend these and such Bylaws to provide at all times the
fullest indemnification permitted by the General Corporation Law of the State of
Nevada.
ARTICLE 12
Amendments
Section 1. The Bylaws may be amended by a majority vote of all the stock issued
and outstanding and entitled to vote at any annual or special meeting of
the stockholders, provided notice of intention to amend shall have been
contained in the notice of the meeting.
Section 2. The Board of Directors by a majority vote of the whole Board at any
meeting may amend these Bylaws, including Bylaws adopted by the
stockholders, but the stockholders may from time to time specify particular
provisions of the Bylaws which shall not be amended by the Board of
Directors.
APPROVED AND ADOPTED this 21st day of July, 1998.
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<PAGE>
CERTIFICATE OF SECRETARY
I, Stacey McGrillen, Hereby certify that I am the Secretary of White
Diamond Spirits, Inc. and the foregoing Bylaws, consisting of 9 pages,
constitute the code by Bylaws of White Diamonds Spirits Inc., as duly adopted at
a regular meeting of the Board of Directors of the Corporation held July 21,
1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 21st day of
July, 1998.
((CORPORATE SEAL))
48
SHARE PURCHASE AGREEMENT
(Page 4 is attached separately with signatures)
MEMORANDUM OF AGREEMENT made as of the 15th day of April, 1999.
BETWEEN:
Michael Marleau, Edwin E. Savage, Igor Petrov, Greg McCartney, Larry Pasemko,
Ruth Marleau, Victoria Creighton, Alex de Haydu, Ken Shaw and Roger Baer C/o
#210 - 475 Howe Street Vancouver, B.C. CANADA V5C 2B3 (hereinafter referred to
as the "Vendors")
OF THE FIRST PART
AND:
White Diamond Spirits, Inc., a corporation incorporated pursuant to the laws of
the State of Nevada with its records office at 7631 Bermuda Road, Las Vegas,
Nevada, U.S.A., 89123 (hereinafter referred to as the "Purchaser")
OF THE SECOND PART
AND:
White Diamond Importers LLC, a corporation incorporated pursuant to the laws of
the State of Nevada with its records office at 3525 East Harmon Avenue, Las
Vegas, Nevada, U.S.A., 89121 (hereinafter referred to as the "Importers")
OF THE THIRD PART
WHEREAS:
A. The Vendors are the owners of the entire one hundred percentage ownership
in Importers.
B. The Purchaser has agreed with the Vendors to purchase one hundred
percentage ownership in Importers exchange for shares in the Purchaser.
THIS AGREEMENT WITNESSETH that in consideration of the covenants, agreement,
warranties and payments herein set out and provided for, the parties hereby
respectively covenant and agree as follows:
1. Purchased Shares
Subject to the terms and conditions hereof, the Vendors covenant and agree
to sell, assign, and transfer to the Purchaser, and the Purchaser covenants
and agrees to purchase from the Vendors all (and not less than all) of the
one hundred percentage ownership (the "Percentage Ownership") in Importers
for the purchase price (the "Purchase Price") payable as set out in Article
2 hereof.
49
<PAGE>
- 2 -
2. Purchase Price
(1) The Purchase Price shall be 2,400,000 Class A Common voting shares of
the Purchaser at $0.13 U.S. per share.
(2) The Purchase Price shall be transferred to the Vendors at the Closing.
(3) The Closing of this transaction shall take place on April 15th, 1999
(the "Closing Date").
3. Representations and Warranties of the Vendors
The Vendors covenant, represent and warrant as follows:
(1) As of the date hereof, and as of the Closing date, and the Vendors
acknowledge that the Purchaser is relying upon such covenants,
representations and warranties in connection with the purchase by the
Purchaser of the Percentage Ownership.
(2) The Percentage Ownership in Importers that has been duly issued for
valuable consideration is 100%.
(3) (a) The Percentage Ownership of record are as follows:
Michael Marleau 35%, Edwin E. Savage 12%, Igor Petrov 12%, Greg
McCartney 9%, Larry Pasemko 9%, Ruth Marleau 9%, Roger Baer 5%,
Victoria Creighton 4%, Alex de Haydu 4%, and Ken Shaw 1% = 100%
(b) The shareholders of the Purchaser after the exchange of the
Percentage Ownership are as follows:
Michael Marleau 840,000; Edwin E. Savage 288,000; Igor Petrov
288,000; Greg McCartney 216,000; Larry Pasemko 216,000; Ruth
Marleau 216,000; Roger Baer 120,000; Victoria Creighton 96,000;
Alex de Haydu 96,000; and Ken Shaw 24,000 = 2,400,000
(4) No person, firm or corporation has any agreement or option or any
right (whether by law, pre-emptive or contractual and including
convertible securities, warrants or convertible obligations of any
nature) for the purchase or the issue of either the Percentage
Ownership or any unissued percentage interest of Importers.
(5) The entering into of this agreement and the transactions contemplated
hereby will not result in the violation of any of the terms and
provisions of the constating document or by-laws of the Vendors or of
any indenture or other agreement, written or oral, to which the
Vendors may be a party.
(6) This agreement has been duly executed and delivered by the Vendors and
is a valid and binding obligation of the Vendors enforceable in
accordance with its terms.
(7) The Vendors are non-resident within the meaning of the International
Revenue Code of the United States.
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<PAGE>
- 3 -
(8) To the Vendor's knowledge, there are no existing or threatened legal
actions or claims against White Diamond.
(9) The audited financial statements of Importers dated February 28th,
1999, a copy of which is attached hereto as "Schedule A", fairly
represent the financial position of Importers as at the dates
indicated.
6. Covenants of the Vendors
The Vendors covenant and agree that on or before the Closing Date, it will
do, or will cause to be done, all necessary steps and proceedings to permit
all of the Percentage Ownership to be duly and regularly transferred to the
Purchaser.
7. Covenants of the Purchaser
The Purchaser covenants and agrees that on or before the Closing Date, it
will do, or will cause to be done, all necessary steps and proceedings to
permit all of the shares of the Purchaser being given to the Vendors to be
duly and regularly transferred to the Vendors.
8. Survival of Representations and Warranties
The representations and warranties of the Vendors and Purchaser contained
in this agreement, and contained in any document or certificate given
pursuant hereto, shall survive the closing of the purchase and sale of the
Percentage Ownership herein provided for, for a period of two years from
the Closing Date.
9. Entire Agreement
This agreement constitutes the entire agreement between the parties hereto.
There are not, and shall not be, any verbal statements, representations,
warranties, undertakings or agreements between the parties hereto, and this
agreement may not be amended or modified in any respect except by written
instrument signed by the parties hereto.
10. Proper Law of Contract
This agreement shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of
Nevada.
11. Benefit and Binding Nature of the Agreement
This agreement shall enure to the benefit of , and be binding upon, the
parties hereto and their respective successors and assigns.
51
<PAGE>
- 4 -
WHITE DIAMOND SPIRITS INC. WHITE DIAMOND IMPORTERS LLC
/s/ Michael Marleau /s/ Michael Marleau
Michael Marleau Michael Marleau
/s/ Edwin E. Savage /s/ Edwin E. Savage
Edwin E. Savage Edwin E. Savage
/s/ Igor Petrov /s/ Igor Petrov
Igor Petrov Igor Petrov
/s/ Greg McCartney /s/ Greg McCartney
Greg McCartney Greg McCartney
/s/ Larry Pasemko /s/ Larry Pasemko
Larry Pasemko Larry Pasemko
/s/ Ruth Marleau
Ruth Marleau
/s/ Roger Baer
Roger Baer
/s/ Victoria Creighton
Victoria Creighton
/s/ Alex de Haydu
Alex de Haydu
/s/ Ken Shaw
Ken Shaw
52
1
MARKETING AGREEMENT
Agreement made on the 14 day of April, 1999, between Brilliant Spirit LTD., a
corporation organized and established under the laws of the Republic of Ireland,
registration number 235507, having its principal place of business at 56 St.
Margarets Avenue, City of Dublin, Republic of Ireland herein referred to as "the
Manufacturer" and White Diamond Spirits Inc., having its principal place of
business at 3525 Harmon Avenue, City of Las Vegas, State of Nevada, USA herein
referred to as "White Diamond".
Recitals
A. The Manufacturer is engaged in the manufacture, production and sale of
"Brilliant" label Vodka (all sizes and flavors), wines, liqueurs and
brandies and will in the future manufacture, produce and sell other lines
including (but not limited to) "Russian Diplomat" and "Brilliant Star 2000"
Vodka. (a portfolio of products both current and future is attached hereto
and incorporated herein by reference in Exhibit A).
B. White Diamond possesses the facilities and ability to distribute and
promote the sale of the products manufactured by the Manufacturer.
C. White Diamond desires to obtain from the Manufacturer and the Manufacturer
desires to grant to White Diamond the right to sell and promote the sale of
part or all of the Manufacturer's products, including but not limited to,
vodkas, wines, liqueurs and brandies. During the initial term of this
agreement and subject to the right and license to import, promote and sell
the Manufacturer's products as specified in (Appendix 1) it is the
intention of the parties to grant further product authorizations, including
but not limited to vodkas, wines, liqueurs and brandies. The Manufacturer
further agrees to bring to White Diamond's attention any and all new
products being developed for the Export Market.
/s/ MM
/s/ IT
53
<PAGE>
2
D. White Diamond is hereby granted the rights to distribute, promote and sell
the authorized Manufacturer's products as specifically described in
Appendix 2 hereinafter referred to as the "Territory".
In consideration of the mutual benefit to be derived, the parties agree as
follows:
1. Appointment.
The Manufacturer appoints White Diamond as the state primary importer with
the authority and right to appoint wholesale agents with the mutual
approval of Brilliant Spirit LTD. The Manufacturer also grants White
Diamond the right to register itself as the primary importer in the
territories and to register all label certification in the territories. We,
Brilliant Spirit Ltd. are the sole owners of the Brilliant brand. We hereby
appoint White Diamond Spirits Inc., of 3525 Harmon Avenue, City of Las
Vegas, State of Nevada, as our agent for our products in all the States of
the United States, as laid out in Appendix 2 (with exclusion of New
Jersey), with full authority to act on our behalf in appointing, with the
approval of Brilliant Spirits LTD, distributors, brokers; registering
products, and posting prices as may be required by law.
2. Term.
This agreement shall be for a term of five (5) years based upon successive
periods of five (5) years subject to the following provisions. The term is
valid only under the conditions of performance by White Diamond as laid out
in Appendix 4.
(a) Provided both parties hereto are in compliance with the terms of this
agreement and neither party has given to the other party written
notice of its election to terminate this agreement pursuant to the
provisions contained herein at least one hundred and twenty (120) days
prior to the end of the initial term. This agreement shall continue
for successive periods of five (5) years each. Both parties understand
that all negotiated changes in provisions will be effected in writing
prior to the end of each successive term.
(b) If in the case that neither party defaults in performing any of the
terms, conditions or promises of this agreement and continues in
default for a period of forty-five (45) days after written notice
thereof, either party shall have the right at the expiration of the
forty-five (45) days notice of default, to terminate this agreement
upon giving written notice of the termination at the end of the said
forty-five (45) day period.
/s/ MM
/s/ IT
54
<PAGE>
3
(c) If either party becomes insolvent, enters into a composition with its
creditors, or if a receiver is appointed for it or if it is
adjudicated a bankrupt, then either party shall have the right to
terminate this agreement upon giving notice at least fifteen (15) days
before the time when such termination is to take effect, and at the
expiration of the fifteen (15) days, this agreement shall become null
and void, but without prejudice to the right of either party to moneys
due or to become due under this agreement.
Purchase price and payment. All pricing of products by the
Manufacturer will be pre-established and disclosed to White Diamond
before White Diamond orders products from the Manufacturer for
distribution. The Manufacturer's purchase price under each order will
be the price effective at the time of acceptance of that order. The
price list in effect from the date of this agreement until the expiry
of the initial term of this agreement is set forth in Appendix 3
attached hereto and incorporated by reference herein. The parties
agree to meet and discuss pricing relationships in the United States
market every six months. (Further, White Diamond agrees that the
product pricing detailed on Appendix 3 requires White Diamond to
provide its own advertising within the territories).
3. The parties agree to cooperate in developing suitable advertising materials
and the Manufacturer agrees to provide White Diamond with access to all
graphic standards, artwork and other in-house or commercially prepared
advertising materials.
4. This agreement will become active upon placement of an initial order and
payment of not less than 100,000 US dollars for said order.
5. White Diamond shall pay the Manufacturer by irrevocable transferable letter
of credit for all deliveries payable against shipping documents FOB port
UK. Letter of credit will be opened upon placing order and be valid for 120
days. Direct wire transfer initiated from White Diamond to the Manufacturer
will also initiate production & shipment of product.
6. Minimum purchase requirements. White Diamond agrees to purchase during the
initial term of this agreement authorized product volumes in accordance
with Appendix 4.
/s/ MM
/s/ IT
55
<PAGE>
4
7. Orders and deliveries. Orders shall be placed with the Manufacturer at the
address set forth above and the Manufacturer shall supply White Diamond
with the products covered by this agreement in the regular course of its
business. The Manufacturer will use best efforts to supply product at the
Manufacturers designated supply point provided in paragraph 6 within 60
days of placing order.
8. Transportation. The Manufacturer shall deliver its products by any method
of transportation specified by White Diamond, at the designated supply
point in the UK.
9. Purchase of products. White Diamond shall maintain an inventory of the
Manufacturer's products at all times adequate to satisfy the demand of
White Diamond's customer for such products. The determination of such
quantities shall be at White Diamonds sole discretion. All customs
clearance expenses and customs import duty in the Territory is the
responsibility of White Diamond and the present National Importer.
10. Title and risk of loss. Title to all products sold hereunder, and the risk
of loss, shall pass to White Diamond FOB, White Diamond designated carrier.
11. Selling Effort. White Diamond shall use its best efforts to market and sell
at wholesale the products covered by this agreement in the territories
specified.
12. Obligations on termination. Upon the termination of this agreement as
provided herein the Manufacturer shall have the option to repurchase the
products then in possession of White Diamond, and available for sale, at
prices originally billed to White Diamond, and with deductions from moneys
due or to become due to the Manufacturer under this agreement. As to any of
the Manufacturer's products not repurchased by it within 30 days of such
termination, White Diamond shall have the right to dispose of such products
in the regular course of its business.
13. Notices. All notices, requests, demands, and other communications under
this agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom
notice is to be given or on the third day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and unless either party should notify the other
of a change of address.
/s/ MM
/s/ IT
56
<PAGE>
5
TO: THE MANUFACTURER
Brilliant Spirit Ltd.
56 St. Margarets Ave.
Dublin 5, Ireland
TO: WHITE DIAMOND
White Diamond Spirits Inc.
3525 Harmon Avenue
Las Vegas, Nevada
USA, 89121
14. Independent contractor. White Diamond is in a business independent from
that of the Manufacturer and is to be regarded as an independent
contractor. Neither party is in any sense to be regarded as the principal
or agent, or employer or employee, of the other.
15. Assignment. This agreement shall not be transferred, assigned or any rights
granted thereunder without the prior written consent of the parties hereto.
16. Governing law; Entire agreement. The laws of the State of Nevada shall
govern this agreement. The agreement constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations and
understandings of the parties. Any future modification or addendum to this
agreement is invalid unless in writing signed by all parties.
In witness whereof, the parties have executed this agreement in counterpart on
the 14 day of April, 1999.
BRILLIANT SPIRIT LTD.
((Company Stamp))
/s/ Igor Trakhtenberg
- ----------------------
Igor Trakhtenberg - General Manager
MARK L. TWEED
Barrister and Solicitos
3100 Vancouver Center -- West Georgia Street
Vancouver, B.C. V6B 4P3
57
<PAGE>
WHITE DIAMOND SPIRITS INC.
((Company Stamp))
/s/ Michael Marleau
- -------------------
Michael Marleau - President CE
58
<PAGE>
EXHIBIT A
The "Brilliant Spirit" product line includes the following products:
VODKA"BRILLIANT"- Hexagonal Glass Bottles with Detachable Shot Glass 750 ml -
40% Alcohol
VODKA "BRILLIANT"- Hexagonal Deluxe Vodka Special Edition 750 ml - 40% Alcohol
VODKA "BRILLIANT"- Hexagonal Plastic Bottles 50 ml - 40% Alcohol
VODKA "BRILLIANT"- Hexagonal Glass Bottles 100 ml - 40% Alcohol
VODKA "BRILLIANT"- Flavored in Hexagonal Glass Bottles 750 ml - 40% Alcohol
VODKA "BRILLIANT"- Flavored in Six Sided Glass Bottles 100 ml-40% Alcohol
(Flavors include: Cranberry, Blackcurrant, Cherry, Lemon, Almond and Tarragon)
VODKA "BRILLIANT"- Flavored Gift Set 7x 100 ml/box (Clear and Assorted Flavors)
VODKA "RUSSIAN DIPLOMAT-BRILLIANT STAR 2000
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
59
<PAGE>
APPENDIX 1
The "Brilliant Spirit" product line authorized for sale to White Diamond include
the following products:
VODKA"BRILLIANT"- Clear Hexagonal Glass Bottles with Detachable Shot Glass 750
ml - 40% Alcohol
VODKA"BRILLIANT"- Deluxe Vodka Special Edition Hexagonal Glass Bottles with
Detachable Shot Glass 750 ml - 40% Alcohol
VODKA"BRILLIANT"- Promotional / Sample Size Hexagonal Plastic Bottles 50 ml -
40% Alcohol
VODKA"BRILLIANT"- Promotional / Sample Size Hexagonal Glass Bottles 100 ml -
40% Alcohol
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
60
<PAGE>
APPENDIX 2
The "Territory" as referred to in the Agreement includes the following:
All of the United States of America, & Canada with the exception of the State of
New Jersey.
The Manufacturer grants approval to White Diamond Inc. to initiate and conclude
agreements with any "Multi-State" wholesale distributor for and including all
states within the Multi-State Distributors jurisdictional control.
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
61
<PAGE>
APPENDIX 3
Pricing as established:
BRILLIANT CLEAR 12 x 750ml, 40% alc/vol. Ex-Works, Scotland, UK
$60.00 USD (Sixty)
BRILLIANT Deluxe Special Edition 12 x 750ml, 40% alc/vol Ex-Works, Scotland, UK
$78.00 USD (Seventy-eight)
BRILLIANT - Hexagonal Plastic Bottles - 50ml, 40% alc/vol Ex-Works, Scotland, UK
$0.60 USD (sixty cents) per bottle
BRILLIANT - Hexagonal Glass Bottles - 100ml, 40% alc/vol Ex-Works, Scotland, UK
$1.10 USD (one dollar and ten cents) per bottle
Pricing as established subject to revision after the initial 18 month period.
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
62
<PAGE>
APPENDIX 4 Page 1
During the term of the agreement White Diamond agrees to purchase the following
minimum amounts in the following schedule:
For the first 18 months 60 000 (sixty thousand) cases including mixed sizes:
Increments of cases to be ordered shall be estimated quarterly and adjusted up
or down depending on the timing of distributorship appointments, trend of
market, premium vodka growth and overall economic growth in the consumer index.
1st Quarter - (3 months) cases to be purchased through Brilliant Spirit Ltd.
7,000 - 7,500 cases
2nd Quarter - (3 months) cases to be purchased through Brilliant Spirit Ltd.
7,000 - 8,000 cases
3rd Quarter - (3 months) cases to be purchased through Brilliant Spirit Ltd.
7,500 - 8,000 cases
4th Quarter - (3 months) cases to be purchased through Brilliant Spirit Ltd.
10,000 - 12,000 cases
*12 month cases to be purchased
31,500 cases
5th Quarter - (3 months) cases to be purchased through Brilliant Spirit Ltd.
15,000 - 18,000 cases
**18 month cases to be purchased
61,500 cases
/s/ M M
--------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
63
<PAGE>
APPENDIX 4 Page 2
Thereafter
for the next 12 - months 90 000 (ninety thousand) cases including mixed sizes
(minimum purchases being 22 500 cases per quarter)
and the next 30 months 300 000 (three hundred thousand) including mixed sizes
(minimum purchases being 30 000 cases per quarter)
If the minimum purchases and payments are not made within three months of the
agreement taking effect as in para 4 of the agreement, para 2 (b) comes into
effect and the agreement terminates at the end of the forty five day notice.
Default in minimum quantity targets are subject to notices in para 2 (b) of the
agreement.
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
64
<PAGE>
APPENDIX 6
It is further agreed that a royalty payment shall be made by WDS Inc. to
Brilliant Spirit US Inc. of 14 Woodbridge Place, Langhorne, PA, 19053, USA.
The said royalty payment shall be the amount of $0.17 USD for each unit of 750
ml "Brilliant" vodka sold in the U.S.A. only.
The said royalty payment shall be payable within thirty (30) days of clearance
of receivables for relevant product units sold in the U.S.A. only and shall
remain at the sole discretion of WDS Inc.
/s/ Igor Trakhtenberg /s/ Michael Marleau
- --------------------- -------------------
((Company Stamp)) ((Company Stamp))
BRILLIANT SPIRIT LTD WHITE DIAMOND SPIRITS INC
65
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