U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
UNDER SECTION 12(B) OR (G) OF THE SECURITIES AND EXCHANGE ACT OF 1934.
VANADIUM INTERNATIONAL, INC.
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(Name of Small Business Issuer in its charter)
NEVADA 88-0402908
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5466 CANVASBACK ROAD, BLAINE, WASHINGTON 98230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (360) 371-5061
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
NONE
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NONE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK
- --------------------------------------------------------------------------------
(TITLE OF CLASS)
NONE
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(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock, $0.01 par value per share, of the registrant
outstanding as of December 31, 1999: 20,883,000.
DOCUMENTS INCORPORATED BY REFERENCE
A description of any "Documents Incorporated by Reference" is contained in Item
6 of this report.
Transitional Small Business Issuer Format Yes No X
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EXHIBIT INDEX IS ON PAGE 16
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VANADIUM INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I
ITEM 1. Business 4
ITEM 2. Properties 9
ITEM 3. Legal Proceedings 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Shareholder Matters 11
ITEM 6. Selected Financial Data 12
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
ITEM 8. Financial Statements and Supplementary Data 13
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 13
PART III
ITEM 10. Directors and Executive Officers of the Registrant 13
ITEM 11. Executive Compensation 14
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 14
ITEM 13. Certain Relationships and Related Transactions 15
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 15
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS.
FORWARD-LOOKING STATEMENTS
This Registration Statement contains certain forward-looking statements
that involve risks and uncertainties. The actual results of the Company could
differ materially from those anticipated in these forward-looking statements as
a result of factors including those set forth in Risk Factors and elsewhere in
this Registration Statement.
GLOSSARY OF MINING TERMS
The following terms used in this registration statement shall have the meaning
set forth in this glossary.
Biological Leaching Ores which contain low valency metal oxides require
lengthy microbial biologic activity to completely
oxidize and solubilize the metals for chemical leaching.
Breccia A rock in which angular fragments are surrounded by a
mass of fine-grained minerals.
Deposit A "mineralized material" or "vanadium deposit" as used
herein, means a mineralized body, which has been
delineated by appropriate drilling and/or underground
sampling to support a sufficient tonnage and average
grade of metal(s). Under Securities Exchange Commission
standards, such a deposit does not qualify as a reserve
until a comprehensive evaluation, based upon unit cost,
grade, recoveries and other such material factors,
concludes economic feasibility.
Diamond Drill A rotary type of rock drill that cuts a core of rock that
is recovered in long cylindrical sections, two
centimeters or more in diameter.
Dilution (mining) Rock that is, by necessity, removed along
with the ore in the mining process, subsequently lowering
the grade of the ore.
Drift A horizontal underground opening that follows along the
length of a vein or rock formation as opposed to a cross-
cut which crosses the rock formation.
Exploration Work involved in searching for ore, usually by drilling
or driving a drift.
Facies An association of rocks each consisting of minerals, most
commonly three or four, that exist together and have been
formed within a relatively limited range of temperature
and pressure.
Heap Leaching A process involving the percolation of a cyanide solution
through crushed ore heaped on an impervious pad or base
to dissolve minerals or metals out of the ore.
Pregnant Solution A solvent solution which has been applied to ores or
concentrates and contains the valuable metals in ionic
form. A solvent solution, which has not acted upon the
ores or concentrates and contains no metal values, is
called Barren Solution.
Reverse Circulation A drilling method, utilizing compressed air and a dual
walled string of drilling tools wherein the compressed
air travels to the drill bit through the outer pipe and
returns, with the drill cuttings, through the inner
pipe, avoiding contamination of the samples.
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Transition Zone A zone in an orebody situated between the upper oxidized
zone and the lower sulphide zone, containing partially
oxidized minerals.
Trend The direction, in the horizontal plane, or a linear
geological feature (for example, an ore zone), measured
from true north.
Unpatented Mining
Claim A parcel of property located on federal lands pursuant
to the General Mining Law and the requirements of the
state in which the unpatented claim is located, the
paramount title of which remains with the federal
government. The holder of a valid, unpatented lode
mining claim is granted certain rights including the
right to explore and mine such claim under the General
Mining Law.
THE COMPANY
Vanadium International, Inc. (the Company) is a natural resource company engaged
in the acquisition, exploration, and, if warranted, development of its resource
properties in the state of Nevada. The Company was originally incorporated on
August 24, 1998 as U.S. Vanadium, Inc., and commenced its operation at that
date. The Company changed its name to Vanadium International, Inc. on February
24, 1999.
The Company is in the exploration stage and is in the process of
demonstrating the feasibility of exploiting vanadium deposits on its properties.
The Company's success will be dependent upon the feasibility of economically
recovering vanadium from its properties, obtaining the necessary financing to
develop its properties, and the profitable production of vanadium or the sale of
its properties at a profit. It has not yet determined whether these properties
contain vanadium deposits that are economically recoverable. The Company's
current focus is to have one of the Company's properties move from the
exploration stage and, if warranted, to the development and production stages
within the next two years. See Description of Property.
By a purchase agreement dated September 18, 1998, the Company acquired a
100% interest in three mineral claims properties located in Nevada comprising 36
unpatented lode-mining claims. The Bisoni and Gibellini claims are located in
Eureka County and the Bisoni-McKay is located in Nye County. To acquire the
properties, the Company delivered 15,000,000 of the Company's common shares
(deemed value $50,000) and agreed to pay $50,000 cash. At June 30,1999, the
Company has paid $34,000 and accrued $16,000 in accounts payable.
The properties, the Gibellini, Bisoni and Bisoni-McKay contain
approximately 19 to 21 million tons of 0.42% vanadium pentoxide hosted within
Devonian black shale facies. Further drilling in the three deposits will be
necessary to determine if there is an increase in tonnage and to ascertain the
average grade of the mineral deposit. The Company intends to first complete
exploration drilling and metallurgical testing of the Bisoni-McKay deposit to
determine whether the vanadium deposits are economically recoverable.
Phase I of the exploration program would consist of: installation of survey
control, aerial photography and production of 1 inch equals 40 feet topographic
maps; detailed geologic mapping of the property in general and mapping and
sampling of the mineralized zone; backhoe cleanout of existing trenches, bulk
sampling and metallurgical column leach testing. This phase would take
approximately 12 months to complete.
Phase II of the exploration program would consist of a 7,500 ft. reverse
circulation drilling campaign. Drilling would take place in the late spring and
would continue for three months, assaying and evaluation of the results would
take another six months.
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Phase III of the exploration program would consist of an Environmental
Impact Study and a Preliminary Feasibility Study. This is expected to take at
least 12 months to complete. Environmental background data collection could
begin concurrent with Phase II.
Subsequent to the acquisition of the properties, the Company has issued
5,901,000 common shares through private offerings under Rule 504 of Regulation
D and for services rendered. (see Part II, Item 5). An offering memorandum
dated November 23, 1998 for the issuance of up to 600,000 common shares at $0.50
per share was undertaken by the Company. The Company has received $59,500 as
subscriptions pursuant to this offering, issuing 119,000 shares. Total shares
issued to October 1999 are 20,901,000 common shares. There have been no
preferred shares issued.
The Company intends to raise additional funds through private financings,
or joint ventures to permit further property exploration and, if warranted,
development of various properties, and to move one of its properties into the
development and production stages within the next two years. No assurance can
be given that the Company will be able to raise the needed capital to develop
its properties. Failure to raise such financing could be detrimental to the
success of the Company. See Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
The Company's executive office is located at 5466 Canvasback Road, Blaine,
Washington 98230. Its telephone number is (360) 371-5061.
VANADIUM
Vanadium is one of the less well know of the chemical elements; however, it
is found throughout nature and has many important uses, both for industry and
consumers.
In industry, vanadium is primarily used as an alloying agent for iron and
steel. It acts as a carbide stabilizer and, as such, it can improve the
strength and toughness as well as the rust-resistance of steel. This quality
makes it useful for producing steel to be used in manufacturing such things as
high-speed tools. Scientists have also found that the structural strength and
low-fission neutron cross section of vanadium makes it extremely useful in
nuclear applications.
Approximately 80% of vanadium in the marketplace is found in the form of a
vanadium derivative, ferrovanadium, used primarily in metallurgical
applications. Another derivative, pentoxide, is used primarily in ceramics and
as a catalyst. Vanadium and its derivatives are also used in dyeing and
printing fabrics and in the production of the chemical agent, aniline black.
Worldwide, there are seven countries (including the United States) that
produce vanadium. This production occurs mainly through the recovery of
vanadium from ores, concentrates, slag, or petroleum residues. The largest
vanadium-producing nations are South Africa, Russia, and China. The production
of vanadium has continued to increase as the worldwide economy has improved.
This has been especially true in countries with growing construction and
automobile industries. There currently exists a reserve base of more than 27
million metric tons of vanadium that by itself could satisfy world demand for
some time given the present rate of consumption.
U.S. production of vanadium has come mainly from implementing recovery
processes on industrial waste such as vanadium-bearing ferrophosophorus slag,
iron slag, fly ash, petroleum residues, and spent catalysts. There are
currently eight U.S. firms, located in Arkansas, Idaho, Louisiana, Texas and
Utah, that recover vanadium and produce the vanadium derivatives described above
as well as vanadium-bearing chemicals or specialty alloys. There is only a
negligible amount of vanadium recovered from recycling and this mostly from
small amounts of vanadium-based catalysts and vanadium-aluminum alloy.
South Africa has traditionally been the leading supplier of vanadium slag
and pentoxide. However, South Africa began recently to process more and more of
its supply for various internal applications, especially the production of
ferrovanadium. Consequently, economists expect that in the future there will be
less vanadium available for export from South Africa than in the recent past.
This development could have a wide-range effect on vanadium supply around the
world and may cause, for example, European ferrovanadium converters to
increasingly consider other sources of vanadium such as petroleum coke, recycled
catalysts and ashes.
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In the near term, economists expect that the vanadium market will continue
to follow the cyclical pattern of the steel industry. Another impact on the
worldwide supply of vanadium could come from a lower demand for carbon steel,
especially in the industrialized countries. The carbon steel sector is the
largest single economic sector for the consumption of vanadium. Economists
believe that this sector faces slower rates of growth as steel usage declines in
industrialized countries as a result of falling manufacturing output and
increased production efficiency in all industries. In addition, carbon steels
are increasingly being replaced with alloy steels in many applications.
Columbium, manganese, molybdenum, titanium and tungsten are metals that are to
some degree interchangeable with vanadium as alloying elements in steel. And
platinum and nickel are replacements for vanadium compounds as catalysts in some
chemical processes.
RISK FACTORS
NO OPERATING HISTORY AND NO REVENUES. The Company is in its initial stages
of exploration with no revenues or income and is subject to all the risks
inherent in the creation of a new business. Since the Company's principal
activities to date have been limited to organizational activities, prospect
development, and acquisition of leasehold interests, it has no record of any
revenue-producing operations. Consequently, there is no operating history upon
which to base an assumption that the Company will be able to achieve its
business plans.
NEED FOR ADDITIONAL FUNDING TO IMPLEMENT BUSINESS PLAN. The Company
believes it will need to raise additional funds in order to implement its
business plan. The Company's continued operations therefore will depend upon
its ability to raise additional funds through bank borrowings, equity or debt
financing, or asset sales. There is no assurance that the Company will be able
to obtain additional funding when needed, or that such funding, if available,
can be obtained on terms acceptable to the Company. If the Company cannot
obtain needed funds, it may be forced to curtail or cease its activities. The
sale of additional securities could result in a substantial dilution of the
present equity interests of the Company's shareholders.
VOLATILITY OF MINERAL MARKETS. The Company's revenues, profitability and
future rate of growth are substantially dependent upon prevailing market prices
for vanadium, which can be extremely volatile. In addition to market factors,
actions of governmental agencies can affect mineral prices. All of these factors
are beyond the control of the Company. These external factors and the volatile
nature of the commodity markets make it difficult to estimate future prices of
vanadium. There is no assurance that current price levels can be sustained or
that the Company will be able to produce vanadium on an economic basis in light
of prevailing market prices. Any substantial or extended decline in the price of
vanadium would have a material adverse effect on the Company's financial
condition and results of operations, including reduced cash flow and borrowing
capacity and could reduce both the value and the amount of the Company's
vanadium deposits.
UNINSURED RISKS. The Company may not be insured against losses or
liabilities that may arise from operations, either because such insurance is
unavailable or because the Company has elected not to purchase such insurance
due to high premium costs or other reasons.
GOVERNMENT REGULATION. Mining operations are subject to federal, state and
local laws relating to the protection of the environment, including laws
regulating removal of natural resources from the ground and the discharge of
materials into the environment. Mining operations are also subject to federal,
state, and local laws and regulations which seek to maintain health and safety
standards by regulating the design and use of mining methods and equipment.
Various permits from government bodies are required for mining operations to be
conducted; no assurance can be given that such permits will be received. No
assurance can be given that environmental standards imposed by federal, state,
or local authorities will not be changed or that any such changes would not have
material adverse effects on the Company's activities. Moreover, compliance with
such laws may cause substantial delays or require capital outlays in excess of
those anticipated, thus causing an adverse effect on the Company. Additionally,
the Company may be subject to liability for pollution or other environmental
damages that it may elect not to insure against due to prohibitive premium costs
and other reasons.
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NEED FOR ADDITIONAL KEY PERSONNEL. At present, the Company has no
full-time employees. The success of the Company's proposed business will depend,
in part, upon the Company's ability to attract and retain additional qualified
employees, consultants, and third party service providers. The Company believes
that it will be able to attract competent employees, but no assurance can be
given that the Company will be successful in this regard. If the Company were
unable to engage and retain the necessary personnel, its business would be
materially and adversely affected.
RELIANCE UPON DIRECTORS AND OFFICERS. The Company is wholly dependent, at
the present, upon the personal efforts and abilities of its Officers who will
exercise control over the day to day affairs of the Company, and upon its
Directors, some of whom are engaged in other activities, and will devote limited
time to the Company's activities. Currently several employees of the Company
are not employed by the Company on a full-time basis and are serving in their
respective capacities as consultants. This situation will continue until the
Company's business warrants and the Company is able to afford an expanded staff.
There can be no assurance given that the volume of business necessary to employ
all essential personnel on a full time basis will be obtained nor that the
Company's proposed operations will prove to be profitable. The Company will
continue to be highly dependent on the continued services of its executive
officers, and a limited number of other senior management and technical
personnel. Loss of the services of one or more of these individuals could have a
material adverse effect on the Company's operations.
INDEMNIFICATION OF OFFICERS AND DIRECTORS FOR SECURITIES LIABILITIES. The
Bylaws of the Company provide that the Company may indemnify any director,
officer, agent and/or employee as to those liabilities and on those terms and
conditions as are specified in the Nevada Business Corporation Act. Further,
the Company may purchase and maintain insurance on behalf of any such persons
whether or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such officers,
directors, agents and employees for losses incurred by the Company as a result
of their actions. Further, the Company has been advised that in the opinion of
the Securities and Exchange Commission, indemnification is against public policy
as expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
COMPETITION. The mining industry is an intensely competitive industry.
The Company will compete against established companies with significantly
greater financial, marketing, personnel, and other resources than the Company.
Accordingly, there is a high degree of competition for desirable mining leases,
suitable prospects for drilling operations and necessary mining equipment, as
well as for access to funds. There can be no assurance that the necessary funds
can be raised or that any projected work will be completed. Such competition
could have a material adverse effect on the Company's ability to execute its
business plan as well as profitability.
LIMITED MARKET FOR SECURITIES. At present, no market exists for the
Company's Common Stock. Upon the filing of this Registration Statement, the
Company intends to commence trading on the Nasdaq Over-the-Counter Bulletin
Board (OTC/BB). There can be no assurance that trading will commence on the
OTC/BB or that the OTC/BB will provide adequate liquidity or that a trading
market will be sustained. A purchaser of stock may, therefore, be unable to
resell shares purchased should the purchaser desire to do so. Furthermore, it
is unlikely that a lending institution will accept the Company's securities as
pledged collateral for loans unless a trading market develops providing
necessary and adequate liquidity for the trading of shares.
CUMULATIVE VOTING, PREEMPTIVE RIGHTS AND CONTROL. There are no preemptive
rights in connection with the Company's Common Stock. The stockholders may be
further diluted in their percentage ownership of the Company in the event
additional shares are issued by the Company in the future. Cumulative voting in
the election of Directors is not provided for in the Company's Bylaws or under
Nevada law. Accordingly, the holders of a majority of the shares of Common
Stock, present in person or by proxy, will be able to elect all of the Company's
Board of Directors.
NO DIVIDENDS ANTICIPATED. At the present time, the Company does not
anticipate paying dividends, cash or otherwise, on its Common Stock in the
foreseeable future. Future dividends will depend on earnings, if any, of the
Company, its financial requirements and other factors. Investors who anticipate
the need of an immediate income from their investment in the Company's Common
Stock should refrain from the purchase thereof.
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OPERATING HAZARDS. The mining business involves certain operating hazards
such as unusual or unexpected geological formations, power outages, labor
disruptions, flooding, explosions, rock-bursts, cave-ins, landslides, inability
to obtain suitable or adequate machinery, pollution, and other environmental
hazards and risks, any of which could result in substantial losses to the
Company. In addition, the Company may be liable for environmental damage to the
property purchased or leased by the Company. As a result, substantial
liabilities to third parties or governmental entities may be incurred, the
payment of which could reduce or eliminate the funds available for exploration,
development or acquisitions or result in losses to the Company. In accordance
with customary industry practices, the Company maintains insurance against some,
but not all, of such risks and losses. The Company may elect to self-insure if
management believes that the cost of insurance, although available, is excessive
relative to the risks presented. The occurrence of an event that is not covered,
or not fully covered, by insurance could have a material adverse effect on the
Company's financial condition and results of operations. In addition, pollution
and environmental risks generally are not fully insurable.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. This document contains
forward-looking statements, including statements regarding, among other items,
the Company's business strategies, continued growth in the Company's markets,
projections, and anticipated trends in the Company's business and the industry
in which it operates. The words believe, expect, anticipate, intends, forecast,
project, and similar expressions identify forward-looking statements. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, certain of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements, as a result of the factors described under Risk
Factors and elsewhere herein, including among others, regulatory or economic
influences. In light of these risks and uncertainties, there can be no assurance
that the forward-looking information contained in this document will in fact
transpire or prove to be accurate. All subsequent written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by this section.
GOVERNMENTAL APPROVAL
The Company is in the process of obtaining all necessary governmental
approvals for exploration of its properties in Nevada. If additional approvals
are necessary for any development in the future, the Company intends to provide
all the necessary information to regulatory authorities and adjust its
exploration plans to enable it to obtain any requisite approvals. In the event
the Company is not able to obtain the necessary approvals, the Company's
development plans and operations could be negatively impacted.
GOVERNMENTAL REGULATION
The mining industry is regulated in both on a federal and state level in
the United States. The Company currently believes its operations on all of its
properties are in compliance with all governmental regulations, and it intends
to comply with all governmental regulations as it continues to explore, develop,
and exploit its properties.
ITEM 2. PROPERTIES
The Company owns the mineral rights and surface rights to three properties
on which it believes are located commercially minable vanadium deposits. The
three properties are referred to as the Gibellini, Bisoni, and Bisoni-McKay
properties. The Company believes, based on a Pre-Feasibility Report and Pro
Forma Cash Flow Study for the Gibellini-Bisoni-Bisoni Mckay Vanadium Deposits in
Eureka and Nye Counties, Nevada for the Company by Jules Pierre LaPrairie, P.E.,
that the three properties contain approximately 19 to 21 million tons of 0.42%
vanadium pentoxide hosted within Devonian black shale facies of the Woodruff
formation (vanadium mineralization).
The Gibellini, Bisoni and Bisoni-McKay deposits are within a kerogen-rich
sequence of black shales. The sequence is variably oxidized to 100 feet below
the surface. A partially oxidized transition zone overlies unoxidized hard
black shales. The main vanadiferous zone (0.35% V2O5) occurs immediately below
the transition zone.
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The Gibellini and Bisoni deposits are flat lying and fault bounded and
additional mineralization is not likely to be easily discovered. At the
Bisoni-McKay deposit, this sequence of black shales outcrops and dips steeply to
the east showing additional potential mineralization in that direction.
Drilling, to date, has only probed this bedded structure to a depth of 150'.
The full extent of the structure, to depth, is unknown and could provide for
additional mineralization, especially if folding occurs at depth.
These additional deposits would be significant to the company's future
business in that the life of the project would be extended bringing in
additional cash flow. With additional deposits, a larger operation could be
undertaken resulting in lower production costs and thus increased cash flow.
Each additional 1,000,000 tons would extend the project life by 1.4 years. If
the deposit continues to a depth of 300', an additional 6,000,000 tons may be
found, extending the project life by 8.5 years. There is no assurance that these
additional deposits will be found.
To date, $23,719 has been spent by the company on exploration and
development expenses, including title research, claim staking and filing fees
with the State of Nevada and Counties, annual rental payments to the Bureau of
Land Management ($100 per claim), travel expenses for site visits to the
property, library research and acquisition of reports, data and investigations
from previous owners of the project.
The Company intends to continue with exploration and, if warranted,
development of its properties; although, the Company's focus for the next two
years will be to have one of its properties move into the production stage.
VANADIUM DEPOSITS
The following deposits* have been reported by Noranda and Hecla Mining
Corporations:
---------------------------------------------
PROPERTY TONS GRADE
---------------------------------------------
Gibellini 12,000,000 0.43
---------------------------------------------
Bisoni 260,000 0.41
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Bisoni-McKay 6,100,000 0.39
---------------------------------------------
* These deposit size estimates do not represent mineable reserves as
defined by the Securities and Exchange Commission, but are estimates of
mineralized material for which tonnage continuity and grade are not well
defined.
The Bisoni-McKay property is the first deposit scheduled for exploration.
The Bisoni-Mckay deposit measures 60 feet by 8,000 feet and averages 144 feet
thick covering 390 acres. The vanadium mineralization reported for the
Bisoni-McKay were based on a deposit estimate calculated in the 1970's by Hecla
Mining Corp. based on 19 reverse circulation drill holes. The estimate and drill
logs were subsequently reviewed by James Askew and Associates (1989) during
their sampling evaluation of the property. Vanadium mineralization has been
drilled over a distance of 8,000 feet with widths up to 95 feet. The oxidized
zone is 144 feet thick and the orebody dips 40 degrees to 85 degrees to the
east. This is considered to be an indicated resource.
The Gibellini property claims are located in Eureka County, Nevada, and are
estimated to contain ore deposits of 12 million tons. The Gibellini deposit
measures approximately 2,400 feet by 1,200 feet and is approximately 200 feet
thick covering some 66 acres. Ore deposits were calculated by Noranda based on
52 reverse circulation drill holes. An additional 19 holes were drilled by
InterGlobe for metallurgical testing This is considered to be a measured
resource.
The Bisoni property ore deposits were calculated by Noranda based on 47 drill
holes. The ore deposit calculations are available and were reviewed by D.R.
Morgan, P.E. (Askew, 1989). The Bisoni deposit measures 1,500' X 500' and
averages 20' thick, covering 15 acres. This is considered to be a measured
resource.
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Neither Noranda nor Hecla Mining Corporations is involved in the further
exploration of these ore deposits. At the time of their exploration efforts,
the price of vanadium was not sufficient to put the properties into production
at a level of profitability to meet corporate objectives.
See "Glossary" for a definition of deposit or vanadium mineralization.
METALLURGY
Extensive metallurgical tests have been undertaken in the past. Studies to
determine the optimum extractive process for the ores have not been completed.
Early tests concentrated on roasting and high temperature acid leaching while
later studies concentrated on acid heap or dump leaching.
Initial studies by B.C. Research indicate that acceptable recoveries may be
possible by heap or dump leaching with lower reagent consumption. Three column
tests were performed on +3 mesh and +1/2 inch screen fractions from a 45kg
sample. The -3 mesh fraction underwent a vat leach test. The leaching took
place rapidly, with final recoveries completed in about 90 days. Acid
consumption was approximately 150 lb/ton. The use of excess acid did not
increase overall recovery or rate of recovery. The calculated acid requirement
for a head grade of .607% V2O5 would be 136 lb/ton at 80% extraction. It was
suggested that enrichment of the Vanadium content of pregnant solutions would be
enhanced by applying pregnant solutions from mid-process heaps to new heaps.
Often, when excess acid is used, the solution not needed to attack the metal is
consumed by the clay minerals; often a lower acid concentration will be more
effective in improving recoveries.
Further metallurgical studies will be undertaken as soon as possible. The
success of the whole project is dependent upon being able to achieve reasonable
recoveries without excessive reagent consumption. Excessive reagent consumption
could lead to high operating costs, which could adversely affect the
profitability of the project.
All of these factors can materially affect the financial performance of the
Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings and,
to the best of its knowledge, no such action by or against the Company has been
threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
The authorized capital of the Company consists of 80,000,000 shares of
Common Stock, par value $.01, of which 20,883,000 are outstanding. The material
terms of the securities are as follows:
All of the authorized common shares of the Company are of the same class
and, once issued, rank equally as to dividends, voting powers and participation
in assets. Holders of common shares are entitled to one vote for each share held
of record on all matters to be acted upon by the shareholders. Holders of common
shares are entitled to receive such dividends as may be declared from time to
time by the Board of Directors, in its discretion, out of funds legally
available therefrom. No shares have been issued subject to call or assessment.
There are no preemptive or conversion rights and no provisions for redemption or
purchase for cancellation, surrender, or sinking or purchase funds, nor any
cumulative voting rights. The Directors of the Company may from time to time
declare and authorize payment of dividends, as they deem advisable. Subject to
the rights of members, all dividends on shares shall be declared and paid
according to the number of shares held. No dividends have been declared since
incorporation. The outstanding shares are fully paid and non-assessable.
<PAGE>
Page 13
A class of preferred stock has been authorized with a par value of $0.01.
No shares of preferred stock have been authorized for issuance by the Board of
Directors as of the date of this statement. The rights, privileges and
preferences of any series of preferred stock shall be determined by the Board of
Directors at the time of issuance.
The Company's securities are not currently traded on any market, although
the Company intends to commence trading on the OTC/BB during the first quarter
of 2000.
The Company has not paid any cash dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, earnings, if
any, will continue to be retained for use in its business. As of December 31,
1999, the approximate number of record holders of the Company's Common Stock
was 46.
ITEM 6. SELECTED FINANCIAL DATA
An audited Report and Financial Statement, as of December 31, 1999 (the end
of the second fiscal year of the Company), is set forth in Exhibit 99.1 to this
Form 10-K. A Financial Data Schedule on the Company is set forth in Exhibit 27
to this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The Company has not yet had revenues from operations. Accordingly, the
following information centers upon the Company's plan of operation.
LIQUIDITY AND CAPITAL RESOURCES
To date the Company's activities have been financed primarily through the
sale of equity securities. No assurance can be given that the proceeds of the
private offering of the Company's securities or any other source of funding
described above will provide sufficient funds to undertake all of the Company's
planned project expansion for the next twelve months. It is anticipated that
significant additional funds will be required to complete the development of any
commercially viable project. There can be no assurance that the Company will be
able to obtain such additional financing, and whether the terms of such
financing would be favorable to the Company. Failure to obtain such financing
could be detrimental to the success of the project. No contracts or commitments
have been entered into at this time.
A summary of financing activities during the past year includes the items
and matter outlined in Part II, Item 4, Recent Sales of Unregistered Securities.
The Company will need to obtain additional funding to pursue its business
strategy during the next fiscal year. At the present time, the Company
anticipates seeking additional funding through additional private placements,
joint venture agreements, production financing, and/or pre-sale loans. The
Company's inability to raise additional capital to fund operations through the
remainder of this year and through the next fiscal year could have a detrimental
effect on the Company's ability to pursue its business plan and its viability.
RESULTS OF OPERATIONS
The Company's financial performance is dependent on many external factors.
World prices and markets for metals and minerals are cyclical, difficult to
predict, volatile, subject to government fixing, pegging and/or controls, and
respond to changes in domestic and international political, social and economic
environments. Additionally the availability and costs of funds for production
and other costs are increasingly difficult to project. All of these factors can
materially affect the financial performance of the Company.
<PAGE>
Page 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14, for the Financial Statement Schedules filed with Form
10-K Report. An index to the financial statement schedules required to be filed
by Part II, Item 8 of this Form 10-K is set forth immediately before the
attached financial statement schedule in Exhibit 99.1. of this filing.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the Company's first fiscal year and up to the present time, the
principal independent accountant for the Company has neither resigned (or
declined to stand for reelection) nor been dismissed. The independent
accountant for the Company is Amisano Hanson, Chartered Accountants. This firm
was engaged on or about December 15, 1998. There have been no disagreements on
accounting or financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of the Company's Directors and executive
officers as of December 31, 1999 are listed below:
NAME AGE POSITION WITH FIRST ELECTED
THE COMPANY
Kenneth B. Liebscher 57 President, C.E.O, Director 1998
George Weinstein 73 Vice President 1998
Moshe C. Zefrani 50 Director 1998
Dennis S. LaPrairie 46 Secretary, Treasurer, 1998
and Director
Kenneth B. Liebscher serves as a member of the Board of Directors and
President of the Company since its formation in August 1998. Mr. Liebscher has
been an international businessman with 28 years of securities and executive
management experience. From 1968 to 1990, Mr. Liebscher was actively involved
with Dentsply International, Inc., the world's largest dental products
manufacturer. Mr. Liebscher also serves on the Board of Directors of Belmont
Resources Inc., E.T.C. Industries Ltd., and Montoro Resources Inc. listed on the
Canadian Venture Exchange; all involved with development of mineral resources.
George Weinstein has been the Vice President of the Company since its
formation in August 1998. Mr. Weinstein is self-employed as owner of Assistant
Manager of Allied Salvage & Metals, Ltd., for 45 years until his semi-retirement
in 1990. He remains active on a consulting basis.
Moshe C. Zefrani has been a member of the Board of Directors of the
Company since its formation in August 1998. He was born in Egypt where he
trained in electrical engineering. Since moving to Canada over 20 years ago,
Mr. Zefrani has been a self-employed electrical contractor.
Dennis S. LaPrairie has been a member of the Board of Directors and as
Secretary/Treasurer of the Company since its formation in August 1998. Mr.
LaPrairie is a registered professional engineer and has been employed with the
State of Nevada as an Environmental Engineer for the past five years. Prior to
that time, Mr. LaPrairie was self-employed as a consulting engineer for 10
years. Mr. LaPrairie graduated from Mackay School of Mines with a Bachelor of
Science degree in 1977. Dennis LaPrairie is the son of Jules P. LaPrairie, the
mining consultant who prepared the pre-feasibility study on the company's
property. Jules has represented that his relationship to Dennis did not impair
his ability to perform an objective evaluation for purposes of the
pre-feasibility study; however, the relationship of Jules to Dennis may present
a potential conflict of interest.
<PAGE>
Page 14
BOARD OF DIRECTORS COMMITTEES AND COMPENSATION
The Board of Directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
However, in accordance with corporate legal principles, it is not involved in
day-to-day operating details. Members of the Board are kept informed of the
Company's business through discussions with the Chairman and other officers, by
reviewing analyses and reports sent to them, and by participating in Board and
committee meetings.
Board members are not presently compensated, but are reimbursed for their
expenses associated with attending Board meetings. The Company has no standing
committees at this time.
ITEM 11. EXECUTIVE COMPENSATION
The Company currently has two executive officers, Mr. Ken Liebscher and Mr.
Dennis LaPrairie. Mr. Liebscher, the Company's Chief Executive Officer, had a
one-year employment agreement with the Company providing for compensation at the
rate of $48,000 per year. The Company's agreement with Mr. Liebscher terminated
on October 1, 1999 and has been renewed on a month to month basis.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of the Company's shares as of March 31, 1999 for (i) each current
Director and each nominee for Director (ii) each officer of the Company, (iii)
all persons known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's shares, and (iv) all officers and Directors
of the Company as a group.
NAME AND ADDRESS OF
BENEFICIAL OWNER (1) BENEFICIALLY NUMBER PERCENT
OWNED(2) OF SHARES OF TOTAL (3)
-------------------- ------------ --------- ------------
Kenneth B. Liebscher(4) -0- 0%
George Weinstein (5) -0- 0%
Moshe C. Zefrani (6) -0- 0%
Dennis S. LaPrairie (7) 100,000 *
Medan Management Corp. (8) 15,000,000 72%
Admiral House Ltd. (9) 1,500,000 7%
All officers and directors 100,000 *
as a group
* less than one percent
- ------------------------
(1) Unless otherwise noted, the Company believes that all shares are
beneficially owned and that all persons named in the table or family
members have sole voting and investment power with respect to all shares
owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are
held by such person (but not those held by any other person) and which
are exercisable within 60 days from the date hereof have been exercised.
As of the date of this Registration Statement, no options, warrants or
rights to acquire shares have been granted.
(3) Assumes 20,883,000 shares outstanding.
(4) Mr. Liebscher's address is 5466 Canvasback Road, Blaine, Washington 98230.
(5) Mr. Weinstein's address is 11651 Twigg Place, Richmond, British Colombia
V6Y 3N3.
(6) Mr. Zefrani's address is 5501 Adalbert, Suite 1404, Cote St. Luc, Quebec,
Canada H4W 2B1.
(7) Mr. LaPrairie's address is 2525 Sharon Way, Reno, Nevada 89509. The
address for Medan Management Corp. is c/o S.A. Mann, F.C.A. Chartered
Accountant, 241 Maida Vale, London, England W9-1QJ. The address for
Admiral House Ltd. is 94 Dowdeswell Street, P.O. #N-7521 Nassau, Bahamas.
<PAGE>
Page 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dennis S. LaPrairie has been a member of the Board of Directors and has
been Secretary/Treasurer of the Company since its formation in August 1998. (See
Item 5, Directors and Executive Officers). Dennis LaPrairie is the son of Jules
P. LaPrairie, the mining consultant who prepared the pre-feasibility study on
the company's property. Jules has represented that his relationship to Dennis
did not impair his ability to perform an objective evaluation for purposes of
the pre-feasibility study; however, the relationship of Jules to Dennis may
present a potential conflict of interest.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K.
None
(c) Financial data Schedule
See schedule 27 Below
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned; thereunto duly
authorized, in the City of Blaine, State of Washington, on March 26, 2000.
By:
------------------------------------
Kenneth B. Liebscher,
Chief Executive Officer, President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
President & Chief Executive Officer March 26, 2000.
- -------------------------
Kenneth B. Liebscher
Treasurer (Principal Accounting March 26, 2000.
- -------------------------
Dennis S. LaPrairie Officer) and Director
Director March 26, 2000.
- -------------------------
Moshe C. Zefrani
<PAGE>
Page 16
INDEX TO EXHIBITS
The following exhibits are filed herewith as part of this Registration
statement:
3.1 Articles of Incorporation, as amended (1)
3.2 Certificate of Amendment of Articles of Incorporation (1)
3.3 Bylaws (1)
10.1 Employment Agreement with Kenneth Liebscher (1)
10.2 Purchase Agreement with Medan Management Corp. (1)
27 Financial Data Schedule See Below
99.1 Report and Financial Statements dated December 31, 1999 See Below
(1) Filed with the Company's registration statement on Form 10SB12G/A
dated 9/14/99 and incorporated by reference.
<PAGE>
Page 17
EXHIBIT 99.1
REPORT AND FINANCIAL STATEMENT DATED DECEMBER 31, 1999
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
REPORT AND FINANCIAL STATEMENTS
December 31, 1999 and 1998
(Stated in US Dollars)
--------------------
<PAGE>
TERRY AMISANO LTD. AMISANO HANSON
KEVIN HANSON, C.A. CHARTERED ACCOUNTANTS
AUDITORS' REPORT
To the Stockholders,
Vanadium International, Inc.
(formerly US Vanadium Corp.)
We have audited the balance sheets of Vanadium International, Inc. (formerly US
Vanadium Corp.) (An Exploration Stage Company) as at December 31, 1999 and 1998
and the statements of loss and deficit accumulated during the exploration stage,
stockholders' equity and cash flows for the year ended December 31, 1999 and the
period August 24, 1998 (Date of Incorporation) to December 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 whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at December 31, 1999 and 1998
and the results of its operations and its cash flows for the year ended December
31, 1999 and for the period August 24, 1998 (Date of Incorporation) to December
31, 1998, in accordance with generally accepted accounting principles in the
United States.
Vancouver, Canada /s/ AMISANO HANSON
April 7, 2000 Chartered Accountants
Comments by Auditors for U.S. Readers on Canada - U.S. Reporting Conflict
- -------------------------------------------------------------------------
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when there is
substantial doubt about a company's ability to continue as a going concern. The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern which assumes the realization of
assets and discharge of liabilities in the normal course of business. As
discussed in Note 1 to the accompanying financial statements in respect of the
company's working capital deficiency and recurring losses from operations,
substantial doubt about the company's ability to continue as a going concern
exists. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Our report to the stockholders dated April 7, 2000 is expressed in accordance
with Canadian reporting standards which do not permit a reference to such
uncertainty in the auditors' report when the uncertainty is adequately disclosed
in the financial statements.
Vancouver, Canada /s/ AMISANO HANSON
April 7, 2000 Chartered Accountants
SUITE 604 - 750 WEST PENDER STREET, VANCOUVER, TELEPHONE: (604) 689-0188
BC, CANADA, V6C 2T7 FACSIMILE: (604) 689-9773
E-MAIL: [email protected]
<PAGE>
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
BALANCE SHEETS
December 31, 1999 and 1998
(Stated in US Dollars)
--------------------
ASSETS
------
1999 1998
---- ----
Current
Cash $ 90 $ 17,455
Mineral property - Note 3 100,000 100,000
-------- --------
$ 100,090 $ 117,455
======== ========
LIABILITIES
-----------
Current
Accounts payable - Note 3 $ 40,099 $ 25,821
Due to related parties - Note 5 42,885 4,671
-------- --------
82,984 30,492
-------- --------
STOCKHOLDERS' EQUITY
--------------------
Share capital
Authorized:
80,000,000 common shares, $0.01 par value
20,000,000 preferred shares, $0.01 par value
Issued:
20,901,000 common shares - Note 4 149,500 149,500
Deficit accumulated during the exploration stage ( 132,394) (53,537)
-------- --------
17,106 86,963
-------- --------
$ 100,090 $ 117,455
======== ========
Nature and Continuance of Operations - Note 1
Commitments - Note 4
APPROVED BY THE DIRECTORS:
/s/ Kenneth B. Liebscher, Director /s/ Dennis S. LaPrairie, Director
- ------------------------ -----------------------
SEE ACCOMPANYING NOTES
<PAGE>
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
STATEMENTS OF LOSS AND DEFICIT
ACCUMULATED DURING THE EXPLORATION STAGE
for the year ended December 31, 1999,
for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
August 24, 1998 August 24, 1998
Year (Date of (Date of
Ended Incorporation) to Incorporation) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
Expenses
Consulting fees $ 1,969 $ - $ 1,969
Exploration and
development expenses
- Note 5 4,775 18,944 23,719
Filing fees 709 - 709
Interest and bank charges 235 59 294
Legal and accounting 16,851 18,992 35,843
Management fees - Note 5 48,000 12,000 60,000
Office 5,087 1,952 7,039
Travel 136 1,590 1,726
Transfer agent 1,095 - 1,095
---------- ---------- ---------
Net loss for the period 78,857 53,537 132,394
Deficit, beginning of the period 53,537 - -
---------- ---------- ---------
Deficit, end of the period $ 132,394 $ 53,537 $ 132,394
========== ========== =========
Loss per share $ - $ -
========== ==========
Weighted average number
of shares outstanding 20,895,329 13,594,713
========== ==========
SEE ACCOMPANYING NOTES
<PAGE>
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
for the year ended December 31, 1999,
for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
August 24, 1998 August 24, 1998
Year (Date of (Date of
Ended Incorporation) to Incorporation) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
Cash Flows from Operating
Activities
Net loss for the period $ (78,857) $ (53,537) $ (132,394)
Add: adjustment to
reconcile net loss
to net cash used
in operations:
Common stock issued in
consideration for
exploration and
exploration expenses - 10,000 10,000
---------- ---------- ---------
(78,857) (43,537) (122,394)
Changes in non-cash
working capital balances
related to operations:
Accounts payable 14,278 25,821 40,099
Due to related parties 38,214 4,671 42,885
---------- ---------- ---------
(26,365) (13,045) (39,410)
Cash Flows from Financing
Activity
Issue of common stock for cash 9,000 80,500 89,500
Cash Flows used in Investing
Activity
Mineral property acquisition - (50,000) (50,000)
Net increase in cash during
the period (17,365) 17,455 90
Cash, beginning of the period 17,455 - -
---------- ---------- ---------
Cash, end of the period $ 90 $ 17,455 $ 90
========= ========== =========
Supplemental Disclosure
- -----------------------
Non-cash Transactions
- ---------------------
- On September 23, 1998, the company issued 1,500,000 shares and on October
7, 1998 issued an additional 13,500,000 shares as stock dividends to total
15,000,000 shares at a deemed price of $0.00333. These shares were issued
to acquire mineral properties located in Nevada at a value of $50,000.
- On October 2, 1998, the company issued 100,000 shares at $0.25 in
consideration for exploration and development expenses valued at $10,000.
$15,000 was charged to additional paid-in capital.
SEE ACCOMPANYING NOTES
<PAGE>
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
for the period August 24, 1998 (Date of Incorporation) to December 31, 1999
(Stated in US Dollars)
--------------------
Deficit
Accumulated
Additional During the
Common Shares Paid-in Development
# Par Value Capital Stage Total
------ --------- ------- ----- -----
Shares issued
for seed capital
- at $0.025 560,000 $ 5,600 $ 8,400 $ - $ 14,000
Shares issued
for property -
at $0.0333 1,500,000 15,000 35,000 - 50,000
9:1 stock
dividend 18,540,000 - - - -
Shares issued
pursuant to
offering
memorandum
- at $0.50 83,000 830 40,670 - 41,500
Shares issued
for services
- at $0.25 100,000 1,000 24,000 - 25,000
Shares issued
for less than
cost - - (15,000) - (15,000)
Shares issued
for cash
- at $0.25 100,000 1,000 24,000 - 25,000
Net loss for
the period - - - (53,537) (53,537)
---------- -------- -------- --------- ---------
Balance, as
at December
31, 1998 20,883,000 23,430 117,070 (53,537) 86,963
Shares issued
for cash
pursuant to
an offering
memorandum -
at $0.50 18,000 180 8,820 - 9,000
Net loss for
the year - - - (78,857) (78,857)
---------- -------- -------- --------- ---------
Balance, as
at December
31, 1999 20,901,000 $ 23,610 $ 125,890 $ (132,394) $ 17,106
========== ========= ======== ========= =========
SEE ACCOMPANYING NOTES
<PAGE>
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 1 Nature and Continuance of Operations
------------------------------------
The company currently is in the exploration stage and is in the business of
exploration and development of mineral properties in Nevada and has not yet
determined whether these properties contain reserves that are economically
recoverable. The recoverability of amounts shown for mineral properties is
dependent upon the discovery of economically recoverable reserves, the ability
of the company to obtain necessary financing to develop the properties, and upon
future profitable production or proceeds from the sale thereof.
These financial statements have been prepared on a going concern basis. At
December 31, 1999, the company has a working capital deficiency of $81,894 and
accumulated losses of $132,394 since incorporation. Its ability to continue as
a going concern is dependent upon the ability of the company to generate
profitable operations in the future and/or to obtain the necessary financing to
meet its obligations and repay its liabilities arising from normal business
operations when they come due.
The company was incorporated in Nevada on August 24, 1998, as US Vanadium Corp.
and commenced operations at that time. The company changed its name to Vanadium
International, Inc. on February 24, 1999.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
The financial statements of the company have been prepared in accordance with
generally accepted accounting principles in the United States. Because a
precise determination of many assets and liabilities is dependent upon future
events, the preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful judgement.
Actual results could differ from these estimates.
The financial statements have, in management's opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
Exchange Act Guide 7
- --------------------
The Securities and Exchange Commission's Exchange Act Guide 7 "Description of
property by issuers engaged or to be engaged in significant mining operations"
requires that mining companies in the exploration stage should not refer to
themselves as development stage companies in the financial statements, even
though such companies should comply with Financial Accounting Standard Board
Statement No. 7, if applicable. Accordingly, the company has not been referred
to as being a development stage company.
<PAGE>
Page 2
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Mineral Properties
- ------------------
The acquisition of mineral properties is initially recorded at cost. Producing
mineral properties are depleted over their estimated useful lives based upon a
method relating recoverable mineral reserves to production. Non-producing
mineral properties that the company abandons interest in are written-off in the
year of abandonment.
Exploration and development costs are expensed.
Environmental Costs
- -------------------
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can be reasonably
estimated. Generally, the timing of these accruals coincides with the earlier
of completion of a feasibility study or the company's commitments to a plan of
action based on the then known facts.
Income Taxes
- ------------
The company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards, No. 109 "Accounting for Income
Taxes".
Loss Per Share
- --------------
Loss per share has been calculated upon the weighted average number of shares
outstanding during the period.
Fair Value of Financial Instruments
- -----------------------------------
The carrying value of cash, accounts payable and due to related parties
approximate fair value because of the short maturity of those instruments.
<PAGE>
Page 3
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 3 Mineral Property
----------------
By a purchase agreement dated September 18, 1998, the company acquired a 100%
interest in three mineral claims located in Nevada comprising 36 units. The
Bisoni and Gibellini claims are located in Eureka County and the Bisoni-McKay
claim is located in Nye County. To acquire the property, the company must
deliver 15,000,000 common shares (deemed value $50,000) and pay $50,000 cash.
At December 31, 1999, the company has issued 15,000,000 common shares, paid
$34,000 in cash and accrued $16,000 in accounts payable.
Note 4 Share Capital
-------------
Additional
Paid-in
a) Issued common shares: # Par Value Capital Total
------ --------- ------- -----
September 2, 1998,
Initial founders stock
for cash - at $0.025 560,000 $ 5,600 $ 8,400 $ 14,000
September 2, 1998,
Issue of stock for
property - at $0.03333 1,500,000 15,000 35,000 50,000
October 7, 1998,
9:1 stock dividend 18,540,000 - - -
October 7, 1998,
Issue of stock for
services - at $0.25 100,000 1,000 24,000 25,000
October 7, 1998
Stock issued for less
than cost - - (15,000) (15,000)
October 12, 1998,
Issue of stock for cash
- at $0.25 100,000 1,000 24,000 25,000
November 15, 1998,
Issue of stock for cash
pursuant to offering
memorandum
- at $0.50 83,000 830 40,670 41,500
---------- ------- ------- -------
<PAGE>
Page 4
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 4 Share Capital - (cont'd)
-------------
Additional
Paid-in
a) Issued: (cont'd) # Par Value Capital Total
------ --------- ------- -----
Balance,
December 31, 1998 20,883,000 $ 23,430 $ 117,070 $ 140,500
Issued of stock
for cash pursuant
to offering
memorandum
- at $0.50 18,000 180 8,820 9,000
---------- --------- -------- --------
Balance,
December 31, 1999 20,901,000 $ 23,610 $ 125,890 $ 149,500
========== ========= ======== ========
b) Commitments:
Offering Memorandum
The company has undertaken to complete an offering memorandum dated November 23,
1998 for the issuance of up to 600,000 common shares at $0.50 per share. The
company has received $50,500 as subscriptions pursuant to this offering.
Note 5 Related Party Transactions
--------------------------
The company was charged the following management fees and exploration and
development expenses by two directors of the company:
August 24, 1998 August 24, 1998
Year (Date of (Date of
Ended Incorporation) to Incorporation) to
December 31, December 31, December 31,
1999 1998 1999
---- ---- ----
Exploration and development
expenses $ 1,174 $ 16,819 $ 17,993
Management fees 48,000 12,000 60,000
------- ------- -------
$ 49,174 $ 28,819 $ 77,993
======= ======= =======
Due to related parties as at December 31,1999 includes $40,000 (1998: $4,000)
for unpaid management fees and $2,885 (1998: $671) for unpaid exploration and
development expenses.
<PAGE>
Page 5
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 6 Deferred Tax Assets
-------------------
The Financial Accounting Standards Board issued Statement Number 109 in
Accounting for Income Taxes ("FAS 109") which is effective for fiscal years
beginning after December 15, 1992. FAS 109 requires the use of the asset and
liability method of accounting of income taxes. Under the assets and liability
method of FAS 109, deferred tax assts and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statements carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
The following table summarizes the significant components of the company's
deferred tax assets:
Total
-----
Deferred Tax Assets
Non-capital loss carryforwards $ 132,394
========
Gross deferred tax assets $ 66,197
Valuation allowance for deferred tax asset (66,197)
--------
$ -
========
The amount taken into income as deferred tax assets must reflect that portion of
the income tax loss carryforwards which is likely to be realized from future
operations. The company has chosen to provide an allowance of 100% against all
available income tax loss carryforwards, regardless of their time of expiry.
Note 7 Income Taxes
------------
No provision for income taxes has been provided in these financial statements
due to the net loss. At December 31, 1999, the company has net operating loss
carryforwards, which expire commencing in 2018 totalling approximately $132,394,
the tax benefit of which has not been recorded in the financial statements.
<PAGE>
Page 6
VANADIUM INTERNATIONAL, INC.
(formerly US Vanadium Corp.)
(An Exploration Stage Company)
Notes to the Financial Statements
for the year ended December 31, 1999
and for the period August 24, 1998 (Date of Incorporation) to December 31, 1998
(Stated in US Dollars)
--------------------
Note 8 New Accounting Standards
------------------------
In December 1997, the Accounting Standard Board Issued statement 3465, "Income
Taxes", which establishes standards for the recognition, measurement,
presentation and disclosure of income and refundable taxes. This statement is
effective for fiscal years beginning on or after January 1, 2000. Adopting this
standard will not have a material impact on the company's financial position,
results of operations or cash flows.
In April 1998, the Accounting Standards Executive committee issued SOP 98-5,
"Reporting on the cost of start-up activities". This statement is effective for
fiscal years beginning after December 15, 1998. Adopting this standard does not
have a material impact on the company's financial position, results of
operations or cash flows.
In June 1998, the Financial Accounting Standards board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
standardized the accounting for derivative instruments. SFAS is effective for
all fiscal quarters of all fiscal years beginning after June 15, 1999. Adopting
this standard will not have a significant impact on the company's financial
positions, results of operations or cash flows.
Note 9 Uncertainty Due to the Year 2000 Issue
--------------------------------------
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
the year 2000 date is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent something other than a
date. Although the change in date has occurred, it is not possible to conclude
that all aspects of the Year 2000 Issue that may affect the company, including
those related to customers, suppliers or other third parties, have been fully
resolved.
<PAGE>
EXHIBIT 27
FINANCIAL DATA SCHEDULE
