UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal year ended December 31, 1999
Commission file number 0-27355
CIGMA METALS CORPORATION
(Exact name of small business issuer as specified in its charter)
Florida 98-0203244
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1505 - 1060 ALBERNI STREET, VANCOUVER B.C. CANADA V6E 4K2
(Address of principal executive offices)
Registrant's telephone number, including area code 604-687-4432
Securities registered under Section 12(b) of the Securities Exchange Act of
1934: None
Securities registered pursuant to Section 12 (g) of the Securities Exchange Act
of 1934:
Name of each exchange on
Title of each class which registered
----------------------------------------- --------------------------
Common stock, par value $0.0001 per share OTC Market - Pink Sheets
----------------------------------------- --------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Security Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part 111 of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
Revenue for the fiscal year ended December 31, 1999 was $Nil
The aggregate market value of the Registrant's voting common Stock held by
non-affiliates was $15,052,800 as of September 18, 2000. There were 14,000,000
shares of the registrant's Common Stock outstanding as of September 18, 2000.
Documents incorporated by reference herein: None
Transitional Small Business disclosure format (check one); YES [_] NO [X]
<PAGE>
CIGMA METALS CORPORATION
This annual report contains statements that plan for or anticipate the
future and are not historical facts. In this Report these forward looking
statements are generally identified by words such as "anticipate", "plan",
"believe", "expect", "estimate", and the like. Because forward-looking
statements involve future risks and uncertainties, these are factors that could
cause actual results to differ materially from the estimated results. The
factors that could cause actual results to differ materially from those
projected in the forward-looking statements include (i) the risks and hazards
inherent in the mining business (including environmental hazards, industrial
accidents, weather or geologically related conditions, (ii) changes in the
market prices of gold and silver, (iii) the uncertainties inherent in the
Company's production, exploratory and development activities, including risks
relating to permitting and regulatory delays, (iv) the uncertainties inherent in
the estimation of gold and silver ore reserves, (v) changes that could result
from the Company's future acquisition of new mining properties or business, (vi)
the effects of environmental and other governmental regulations, and (vii) the
risks inherent in the ownership or operation of or investment in mining
properties or business in foreign countries. These risks and uncertainties are
detailed in Item 1. "Business", Item 2. "Properties", Item 6. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" Item 7
"Financial Statements", Item 12 "Certain Relationships and Related
Transactions".
The Private Securities Litigation Reform Act of 1995, which provides a
"safe harbor" for such statements, may not apply to this Report.
ITEM 1. BUSINESS
(A) GENERAL
Cigma Metals Corporation (the "Company" or "Cigma") was incorporated under
the laws of the State of Florida on January 13, 1998 as Cigma Ventures Corp. On
April 17, 1998 the Company changed its name to Cigma Metals Corporation and is
an exploration stage enterprise. The Company was inactive between January 13,
1989 and April 17, 1998.
Cigma Metals Corporation is engaged through its subsidiary in the
exploration of gold and silver mining properties located primarily in the Kozhim
Region, Komi Republic, Russia. None of the Company's properties contain any
known Mineral Reserves. See "Item 2. Description of Property."
During 1999, the Company conducted initial exploration programs for gold
mineralization on its properties in the Kozhim Region, Komi Republic, Russia.
The Company's common stock is traded on the OTC Market Pink Sheets.
The Company has not declared or paid dividends on its shares since incorporation
and does not anticipate doing so in the near future.
The Company's offices are located at 1505 - 1060 Alberni Street, Vancouver,
British Columbia, Canada, V6E 4K2.
(B) SIGNIFICANT DEVELOPMENTS IN FISCAL 1999 AND SUBSEQUENT EVENTS
In September 1999 the Company voluntarily filed Form 10-SB with the
Securities and Exchange Commission ("SEC") in the United States to register its
common stock.
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The Company conducted initial exploration programs for gold mineralization
on its properties in the Kozhim Region, Komi Republic Russia during the last
half of 1999. Exploration work will continue in 2000 on the most prospective
areas. The extent of the work will be dependent on the outcome of further
reconnaissance.
(C) EXPLORATION AND DEVELOPMENT
The Company conducts exploration activities from its headquarters in
Vancouver, Canada. The Company controls mineral exploration concessions in the
Kozhim Region, Komi Republic Russia. The Company's strategy is to concentrate
its investigations into:
(1) Existing operations where an infrastructure already exists;
(2) Properties presently being developed and/or in advanced stages of
exploration which have potential for additional discoveries; and
(3) Grass-roots exploration opportunities.
The Company is currently concentrating its exploration activities on its
properties in the Kozhim Region, Komi Republic, Russia.
All of the Company's properties are in the exploration stages only and are
without a known body of Mineral Reserves. Development of the properties will
follow only if satisfactory exploration results are obtained. Mineral
exploration and development involves a high degree of risk and few properties
that are explored are ultimately developed into producing mines. There is no
assurance that the Company's mineral exploration and development activities will
result in any discoveries of commercially viable bodies of mineralization. The
long-term profitability of the Company's operations will be, in part, directly
related to the cost and success of its exploration programs, which may be
affected by a number of factors.
(D) EMPLOYEES
As of January 31, 2000 and September 31, 2000 there were two (2) full time
employees and two (2) part time employees.
(E) REGULATION OF MINING ACTIVITY
The Company's interests in its projects will be subject to various laws and
regulations concerning exploration, production, taxes, labor standards,
environmental protection, mine safety and other matters. In addition, new laws
or regulations governing operations and activities could have a material adverse
impact on the Company.
Article 72 of the Russian Constitution (the "Constitution") provides that
the subsoil and other natural resources are a matter of joint jurisdiction
between the federal government and the regional governments of the Russian
Federation. Article 76 of the Constitution states that legislative acts passed
into law by the regions of the Russian Federation may not contradict federal
laws and in the event of a conflict, federal law shall prevail. The State
Committee for Geology and Underground Resources ("Geolkom", currently being
reorganized into the Ministry of Natural Resources and the State Committee on
the Environment) has both a central federal office and regional offices and has
authority to grant licences or amend their terms. It is organized for operations
on two levels in accordance with federal/regional jurisdiction. Consequently,
the regulation of subsoil resources generally, as well as granting of mineral
licences through competitive bids and transferring of mineral licences, depends
to a large extent on federal law.
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(F) FOREIGN COUNTRIES AND REGULATORY REQUIREMENTS
Mineral exploration, development and mining activities on the Company's
properties may be affected in varying degrees by political stability, and the
policies of other nations. Any changes in regulations or shifts in political
conditions are beyond the control of the Company and may adversely affect its
business. Operations may be affected by government laws and regulations or the
interpretations thereof, including those with respect to export controls,
expropriation of property, employment, land use, water use, environmental
legislation and mine safety. Operations may be also affected by political and
economic instability, confiscatory taxation, restriction on currency
conversions, imports and sources of supplies, the expropriation of private
enterprises, economic or other sanctions imposed by other nations, terrorism,
military repression, crime, and extreme fluctuations in currency exchange rates
and high inflation and make it more difficult for the Company to raise funds for
the development of its mineral interests in some countries.
In the Komi Republic, Russia the Company is subject to regulations relating
to business, taxation, mining and the environment. With regard to business
activities and taxation, the Company has a registered branch in Russia and will
comply with commercial and taxation requirements through Russian legal and
accounting services. Generally there is no restriction on the level of foreign
investment. Foreign investors can acquire a 100% interest in a project, although
some tenders may require that the foreign investor participate through a
wholly-owned Russian subsidiary.
(G) COMPETITION
Many companies are engaged in the exploration and development of mineral
properties. The company encounters strong competition from other mining
companies in connection with the acquisition of properties producing or capable
of producing gold, lead, zinc and industrial minerals. Many of these companies
have substantially greater technical and financial resources than Patagonia and
thus the company may be at a disadvantage with respect to some of its
competitors.
The marketing of minerals is affected by numerous factors, many of which
are beyond the control of the company. Such factors include the price of the
mineral in the marketplace, imports of minerals from other nations, the
availability of adequate refining and processing facilities, the price of fuel,
electricity, labor, supplies and reagents and the market price of competitive
minerals. In addition, sale prices for many commodities are determined by world
market forces or are subject to rapid and significant fluctuations that may not
necessarily be related to supply or demand or competitive conditions that in the
past have affected such prices. Significant price movements in mineral prices
over short periods of time may be affected by numerous factors beyond the
control of the Company, including international economic and political trends,
expectations of inflation, currency exchange fluctuations (specifically, the
U.S. dollar relative to other currencies), interest rates and global or regional
consumption patterns, speculative activities and increased production due to
improved mining and production methods. The effect of these factors on the price
of minerals and, therefore, the economic viability of any of the Company's
projects cannot accurately be predicted. As the Company is in the development
stage, the above factors have had no material impact on operations or income.
(H) ENVIRONMENTAL REGULATIONS
All phases of the Company's operations in the Komi Republic, Russia are
subject to environmental regulations (see E - Regulation of Mining Activity).
Environmental legislation in all countries is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. Although the Company believes it is in compliance with
all applicable environmental
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legislation, there is no assurance that future changes in environmental
regulation, if any, will not adversely affect the Company's operations.
(I) MINING RISKS AND INSURANCE
Mineral exploration involves many risks, which even a combination of
experience, knowledge and careful evaluation may not be able to overcome.
Operations in which the Company has a direct or indirect interest will be
subject to all type of hazards and risks or unexpected formations, cave-ins,
pollution, all of which could result in work stoppages, damages to property, and
possible environmental damages. The Company does not have general liability
insurance covering its operations and does not presently intend to obtain
liability insurance as to such hazards and liabilities. Payment of any
liabilities therefore could have a materially adverse effect upon the Company's
financial condition.
While the Company has reviewed and is satisfied with the title for any
claim in which it has a material interest there is no guarantee the title to
such concession will not be challenged or impugned.
ITEM 2. DESCRIPTION OF PROPERTY
All of the Company's properties are in the preliminary exploration stage
and do not contain any known body of ore.
The Company's exploration activities are presently in the Kozhim Region,
Komi Republic, Russia.
The Company owns the following mineral properties located in Kozhim Region,
Komi Republic, Russia:
Area Central Point Co-ordinates
---- --------------------------
Samshitovoye 65 deg 14.7o N. Lat; 60 deg 13.5o E. Lon.
Nesterovskoye 65 deg 13.7o N. Lat; 60 deg 14.8o E. Lon.
Chudnoye 65 deg 14.3o N. Lat; 60 deg 14.2o E. Lon.
Pursuant to an agreement dated April 12, 1998, the Company acquired
these mineral properties by issuing 6,000,000 restricted common shares to
the vendors. The individual who acted as trustee for the vendors is
currently a director of the Company. As the vendors are the controlling
shareholders of the Company after the above-mentioned transactions, the
properties and licenses were valued at equal to the par value of the shares
issued. The amount was treated as an exploration expense in 1998.
Pursuant to another agreement, the Company has entered into a joint
venture agreement with Poliarural Geologia ("PUG") to jointly explore the
properties. PUG is a Russian stated-owned geological exploration and
development company which owns the exploration, development and production
licences for the properties owned by the Company.
The Company will own 49% of the joint venture, but it has the option
to increase its stake to 75% by expending US$400,000 on the properties.
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Chudnoye
The Chudnoye prospect consists of gold mineralization in steeply
dipping, fuchsite bearing shear zones hosted by rhyolites. The rhyolites
generally are a massive, quartz prophyritic, syn-volcanic intrusive unit.
It is in intrusive contact with the overlying basalt flow units.
The mineralized shear zones occur in the rhyolites unit only,
sub-parallel to the rhyolite-basalt contact and in similar sub-parallel
structured zones well within the rhyolite unit. The shear zones are
strongly foliated and brecciated, and characterized by moderate to intense
fuchsite mineralization. The fuchsite occurs as mica-rich anastomosing
vein-like networks.
Gold mineralization occurs as native gold, commonly visible, within
the fuchsite-rich foliated layers or bands. The gold at Chudnoye is found
with measurable palladium values.
The rhyolite outside the shear zones contain no fuchsite or gold
mineralization. Alteration is not observed in the rhyolitic or basaltic
material outside the shear zones.
Evaluation of the Chudnoye mineralization comprises numerous trenches
and diamond drilling. Geophysics is being continually tested as a tool to
better guide the trench and drill work.
Nesterovskoye
The Nesterovskoye prospect consists of gold mineralization in and
around fuchsitic zones within a "gravelite" unit. This unit lies below the
main conglomerate on the property and contains the same constituents as the
main conglomerate unit. It is quart / siliceous pebble rich with a veriable
hematite + quartz groundmass. The main difference with the main
conglomerate unit is in its much smaller overall grain size. The ore
hosting units are in intrusive contact with the underlying rhyolites (which
can be fuchsite bearing in structural zones but contain minimal to no
concentrations of gold).
The gold mineralization at Nesterovskoye occurs as native gold,
occasionally visible. It is associated with disseminated fuchsite bearing
zones, either occurring within the fuchsite mineralized areas or adjacent
to it. The gold in this region is relatively pure. When found with another
element, it is usually copper.
The units are not altered or mineralized outside the fuchsite bearing
zones. The sedimentary units in this area however are deformed by the tight
to near isoclinal folding and steeply dipping sheared zones.
Evaluation of the Nesterovskoye mineralization comprises trenches and
diamond drilling. Geophysics is being also tested as a tool to better guide
the trench and drill work.
Samshitovoye
The showing is located approximately one kilometer northwest of
Chudnoe. It was identified during the 1980's as a result of a prominent
gold anomaly and later investigated by six drill holes. To date, 6 drill
holes totaling 565 meters have been completed, revealing a 17-metre
overburden underlain by Ordovician sandstones, shales and conglomerates.
Mineralization occurs as layers of quartz-fuchsite-goldhosted in
Ordovician sandstones and conglomerates. Given the stratigraphic location
of the mineralization, it appears likely to be similar to Nesterovskoye.
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ITEM 3. LEGAL PROCEEDINGS
The company is not party to any litigation, and has no knowledge of any
pending or threatened litigation against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART 11
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock of the Company has been quoted on the OTC Market Pink
Sheets since October 8, 1999. Between March 24, 1998 and October 7,
1999 the Common Stock of the Company was quoted on the NASD OTC
Bulletin Board. The following table sets forth the high and low bid
prices for the Common Stock for the calendar quarters indicated as
reported by the OTC Market Pink Sheets for the last two years. These
prices represent quotations between dealers without adjustment for
retail markup, markdown or commission and may not represent actual
transactions.
---------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------
1999 - High $0.3125 $2.5000 $2.3120 $2.5000
---------------------------------------------------------------------------
1999 - Low $0.3125 $0.3120 $1.7500 $1.7500
---------------------------------------------------------------------------
1998 - High N/A $0.5312 $0.5312 $1.0625
---------------------------------------------------------------------------
1998 - Low N/A $0.5000 $0.5000 $1.0000
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(b) As of September 18, 2000, there were 28 holders of record of the
Common Stock.
(c) There were no Common Stock cash dividends paid in 1999, 1998 or 1997.
The amount and frequency of cash dividends are significantly
influenced by metal prices, operating results and the Company's cash
requirements.
RECENT SALES OF UNREGISTERED SECURITIES
During 1999 and 1998 the Registrant has sold securities in the manner
set forth below without registration under the Securities Act of 1933, as
amended (the "Act").
(1) In March 1999, the Company issued 7,000,000 shares at a price of $0.10
per share for an aggregate consideration of $700,000 pursuant to Rule
504 of Regulation D.
(2) In April 1998 the Company issued 6,000,000 shares at a price of
$0.0001 per share in connection with its acquisition of certain
exploration, development and production licenses in the Russian
Federation.
Except for 8,000,000 shares issued pursuant to Rule 504, such shares are
"restricted securities," as that term is defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended, subject to certain
restrictions regarding resale. Certificates evidencing all of the
above-referenced securities have been stamped with a restrictive legend and will
be subject to stop transfer orders.
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The Registrant believes that each of the above-referenced
transaction was exempt from registration under the Act, pursuant to
Section 4(2) of the Act and the rules and regulations promulgated
thereunder as a transaction by an issuer not involving any public
offering.
ITEM 6. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
(A) GENERAL
The Company is a mineral exploration company based in Vancouver,
Canada and Moscow, Russia and is engaged in the exploration for precious
metals. The Company was incorporated under the laws of the State of Florida
on January 13, 1989, under the name "Cigma Ventures Corporation". On April
17, 1998 the Company changed its name to Cigma Metals Corporation and is an
exploration stage enterprise. The company was inactive between January 13,
1989 and April 17, 1998.
SFAS 121 Impairment Reviews; Write-down of Mining Properties
In accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Dispossed Of" ("SFAS 121"), the Company reviews the carrying
value of its assets whenever events or changes in the circumstances
indicate that the carrying amount of its assets may not be fully
recoverable. Generally, SFAS 121 provides that an asset impairment exists
if the total amount of the estimated future undiscounted cash flows of the
assert are less than the carrying value of the asset. If it is determined
that impairment exists, the amount of the impairment loss that should be
recorded, if any, is the amount by which the carrying value of the asset
exceeds its fair value. As of December 31, 1999 the Company reviewed the
carrying value of its Long-Lived Assets and determined a reduction in the
carrying value was not necessary.
None of the Company's properties contain any known Mineral Reserves.
The Company's common stock is traded on the OTC Market Pink Sheets.
(B) FINANCING
In Fiscal 1999, the Company raised $700,000 (1998 - $0, 1997 - $0)
through the issuance of 7,000,000 (1998 - 0, 1997 - 0) common shares at
$0.10 (1998 - $0, 1997 - $0) per share pursuant to Rule 504 of Regulation
D.
Pursuant to an agreement dated April 12, 1998, the Company acquired
three mineral property rights in the Kozhim Region, Komi Republic Russia by
issuing 6,000,000 restricted common shares. The shares were valued at equal
to the par value of the shares issued. The amount was treated as an
exploration expense in 1998.
(C) Results of Operations
(a) Twelve-Month Period Ended December 31, 1999 versus Twelve-Month Period
Ended December 31, 1998
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Net Loss:
For the twelve-month period ended December 31, 1999 the Company
recorded a loss of $141,392 or $0.01 per share, compared to a loss of $600
or $0.00 per share in 1998. The Company was inactive between April 17, 1998
and January 13, 1989.
Revenues:
The Company had no operating revenues for the twelve-month period
ended December 31, 1999 (1998 - $0).
Costs and Expenses:
General and administrative expenses - For the twelve-month period
ended December 31, 1999 the Company recorded general and administrative
expenses of $26,866 compared to $0 in 1998.
Professional fees - accounting and legal - For the twelve-month period
ended December 31, 1999 the Company recorded accounting fees of $20,568
(1998 - $0) and legal fees of $39,685 (1998 - $0). $9,100 of the accounting
fees relate to the filing of the Registration Statement on Form 10-SB.
$33,710 of the legal expenses relate to a due diligence examination of the
Russian properties and the setup of the Russian subsidiary.
Exploration expenditures - For the twelve-month period ended December
31, 1999 the Company recorded exploration expenses of $40,350 (1998 -
$600).
(b) Twelve-Month Period Ended December 31, 1998 versus Twelve-Month Period
Ended December 31, 1997
Between January 13, 1989 and December 31, 1998 the Company had limited
financial activity other than as related to organizational expenses of
$1,000.
(D) Financial Condition and liquidity
At December 31, 1999 the Company had cash of $534,108 (1998 - $0) and
working capital of $558,608 (1999 - $0) respectively. Total liabilities as
of December 31, 1999 were $8,500 (1998 - $0).
Net cash used in operating activities in the twelve-month period ended
December 31, 1999 was $165,892 compared to $0 in the twelve-month period
ended December 31, 1998. Net cash used in investing activities in the
twelve-month period ended December 31, 1999 was $0 compared to net cash
used in investing activities of $0 in the prior year's comparable period.
Net cash received from financing activities in the twelve-month period
ended December 31, 1999 was $700,000 compared to net cash received from
financing activities of $0 in the prior year's comparable period.
The Company has sufficient working capital to (i) pay its
administrative and general operating expenses through December 31, 2000 and
(ii) to conduct preliminary exploration programs. However, without cash
flow from operations, it may need to obtain additional funds (presumably
through equity offerings and/or debt borrowing) in order, if warranted, to
implement additional exploration programs on its properties. Failure to
obtain such additional financing may result in a reduction of the Company's
interest in certain properties or an actual foreclosure of its interest.
The Company has no agreements or understandings with any person as to such
additional financing.
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None of the Company's properties has commenced commercial production
and the Company has no history of earnings or cash flow from its
operations. While the Company may attempt to generate additional working
capital through the operation, development, sale or possible joint venture
development of its properties, there is no assurance that any such activity
will generate funds that will be available for operations.
The Company has not declared or paid dividends on its shares since
incorporation and does not anticipate doing so in the foreseeable future.
(E) YEAR 2000 ISSUES.
The "Year 2000 problem", as it has come to be known, refers to the
fact that many computer programs use only the last two digits to refer to a
year, and therefore recognize a year that begins with "20" as instead
beginning with "19". For example, the year 2000 would be read as being the
year 1900. If not corrected, this problem could cause many computer
applications to fail or create erroneous results.
The Company has modified and tested all the critical applications of
its information technology ("IT"), the result of which is that all such
critical applications are now Year 2000 compliant. The Company believes
that virtually all of the non-critical applications of its IT are Year 2000
compliant. The Company is using independent consultants to oversee the Year
2000 project as well, as to perform certain remediation efforts. In
addition, progress on the Year 2000 project is also monitored by senior
management, and reported to the Board of Directors. The total amount of the
payments made to date and to be made hereafter to such independent
consultant are not expected to be material. New equipment and software was
installed during the third and fourth quarters of 1999. Based on the
Company's analysis to date, the Company believes that its material non-IT
systems are either Year 2000 compliant, or do not need to be made Year 2000
compliant in order to continue to function in substantially the same manner
in the Year 2000. The Company's Year 2000 compliance work has not caused,
nor does the Company expect that it will cause, a deferral on the part of
the Company of any material IT or non-IT projects.
However, there can be no assurance that any of the Company's vendors
or others, with whom it transacts business, will be Year 2000 compliant
prior to such date. The company is unable to predict the ultimate effect
that the Year 2000 problem may have upon the Company, in that there is no
way to predict the impact that the problem will have nation-wide or
world-wide and how the Company will in turn be affected, and, in addition,
the company cannot predict the number and nature of its vendors and
customers who will fail to become Year 2000 compliant prior to January 1,
2000. Significant Year 2000 difficulties on the part of vendors or
customers could have a material adverse impact upon the Company. The
Company intends to monitor the progress of its vendors and customers in
becoming Year 2000 compliant. The Company has formulated a contingency plan
to deal with the potential non-compliance of vendors and customers.
As of September 18, 2000 the Company has not experienced any year 2000
problems nor has any of the Company's vendors or others with whom it
transacts business.
(F) NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS 133
requires companies to recognize all derivative contracts as either assets
or liabilities on the balance sheet and to measure them at fair value. If
certain conditions are met, a derivative may be specifically designated as
a hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition (i) the changes
in the fair value of the hedged asset or the liability that are
attributable to the hedged risk or (ii) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the
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period of change. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes. Accordingly,
the Company does not expect adoption of the new standards on January 1,
2001 to affect its financial statements.
ITEM 7. FINANCIAL STATEMENTS
See ITEM 13 of this Report for information with respect to the
financial statements filed as a part hereof, including financial statements
filed pursuant to the requirements of this ITEM 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
PART 111.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
The following table lists the names and positions of the executive
officers and directors of the Company as of December 31, 1999 and September
18, 2000. All executive officers and directors have been elected and
appointed to serve until their successors are elected and qualified.
Additional information regarding the business experience, length of time
served in each capacity and other matters relevant to each individual are
set forth below the table.
Name Position
---- --------
Agustin Gomez de Segura Age 51, President and Director since April 17,
1998. 1994 to 1998 Vice President of the Russian
investment bank Alina-Moscow.
Jorge L. Lacasa Age 62, Director since April 17, 1998. 1984 to
current, President of Alanco Development Inc., a
project finance company. Between 1993 and 1997
advisor to United States gas company Enron in the
Commonwealth of Independent States ("CIS").
There are no family relationships between any of the executive officers.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE, OF THE EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act 10 1934 requires the
Company's officers and director, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports
of ownership and changes to ownership with the Securities and Exchange
commission (the "SEC"). Officers, directors and greater than ten percent
shareholders are required by the SEC to furnish the Company with copies of
all Section 16 (a) forms they file.
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Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company
believes that during the fiscal year ended December 31, 1999 all filings
requirements applicable to its officers, directors and greater than ten
percent beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
(A) General
The following table sets forth information concerning the compensation
of the named executive officers for each of the registrant's last three
completed fiscal year:
<TABLE>
<CAPTION>
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Annual Compensation Long-Term Compensation
-----------------------------------------------------------------------------------
Awards Payments
-----------------------------------------------
Securities
Other Under- All
Annual Restricted Lying other
Name And Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonuses Sation Award(s) SARs Payouts sation
($) ($) ($) ($) (=) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Agustin Gomez de Segura 1999 -0- -0- -0- None None None -0-
----------------------------------------------------------------------------------------------
President and 1998 -0- -0- -0- None None None -0-
----------------------------------------------------------------------------------------------
Director 1997 -0- -0- -0- None None None -0-
-------------------------------------------------------------------------------------------------------------------------
Jorge L. Lacasa 1999 -0- -0- -0- None None None -0-
----------------------------------------------------------------------------------------------
Director 1998 -0- -0- -0- None None None -0-
----------------------------------------------------------------------------------------------
1997 -0- -0- -0- None None None -0-
=========================================================================================================================
</TABLE>
None of the Company's officers or directors was party to an employment
agreement with the Company. Directors and/or officers receive expense
reimbursement for expenses reasonably incurred on behalf of the Company.
During the fiscal year ending December 31, 1999 the entire board of
directors acted as the Company's compensation committee.
(B) Options/SAR Grants Table
No options have been awarded to Agustin Gomez de Segura or Jorge L.
Lacasa.
(C) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
No options have been awarded to Agustin Gomez de Segura or Jorge L.
Lacasa.
(D) Long-Term Incentive Plans ("LTIP") Awards Table
The Company does not have a Long-term Incentive Plan.
(E) Compensation of Directors
The Company does not pay a fee to its outside, non-officer directors.
The Company reimburses its directors for reasonable expenses incurred by
them in attending meetings of
12
<PAGE>
the Board of Directors. During fiscal 1999 non-officers directors received
a total of $0 in consulting fees.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of September 18, 2000
by (i) each person who is known by the Company to own beneficially more
than five percent (5%) of the Company's outstanding Common Stock; (ii) each
of the Company's directors and officers; and (iii) all directors and
officers of the Company as a group. As at September 18, 2000, there were
14,000,000 shares of Common Stock issued and outstanding.
Name of Shares of Common
Beneficial Stock Beneficially Percentage
Owner Owned Owned
---------- ------------------ ----------
Agustin Gomez de Segura (as Trustee) 6,000,000 42.9%
Suite 1505 - 1060 Alberni Street
Vancouver, BC Canada V6E 4K2
Thibaud a.r.l. (1) 700,000 5.0%
Broadcasring House,
Rouge Bouillon St.
Channel Island
Boavista Securities Ltd. (1) 700,000 5.0%
2402 Bank of America Tower,
12 Harcourt, Central Hong Kong
Officers and Directors
----------------------
Augustin Gomez de Segura 80,000 *
Raimundo F. Villaverde 26,
E-28003 Madrid, Spain
Jorge L. Lacasa 80,000 *
Valle de Laciana 31
D-28034 Madrid, Spain
Officers and Directors (2 persons) 160,000 0.01%
(1) To the best of the Company's knowledge, none of the above companies are
affiliated to the officers and directors of the Company.
* Less than 1%.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The proposed business of the Company raises potential conflicts of
interests between the Company and certain of its officers and directors.
13
<PAGE>
None of the current directors of the Company are directors of other mineral
resource companies. However if certain of the directors of the Company were
directors of other mineral resource companies and, to the extent that such other
companies may participate in ventures in which the Company may participate, the
directors of the Company may have a conflict of interest in negotiating and
concluding terms regarding the extent of such participation. In the event that
such a conflict of interest arises at a meeting of the directors of the Company,
a director who has such a conflict will abstain from voting for or against the
approval of such participation or such terms. In appropriate cases, the Company
will establish a special committee of independent directors to review a matter
in which several directors, or Management, may have a conflict. From time to
time, several companies may participate in the acquisition, exploration and
development of natural resource properties thereby allowing for their
participation in larger programs, involvement in a greater number of programs
and reduction of the financial exposure with respect to any one program. It may
also occur that a particular company will assign all or a portion of its
interest in a particular program to another of these companies due to the
financial position of the company making the assignment. In determining whether
the Company will participate in a particular program and the interest therein to
be acquired by it, the directors will primarily consider the potential benefits
to the Company, the degree of risk to which the Company may be exposed and its
financial position at that time. Other than as indicated, the Company has no
other procedures or mechanisms to deal with conflicts of interest. The Company
is not aware of the existence of any conflict of interest as described herein.
Directors and/or officers will receive expense reimbursement for expenses
reasonably incurred on behalf of the Company.
Included in accounts payable at December 31, 1999 is $0 (1998 - $0) due to
directors and corporations controlled by directors in respect of salaries,
consulting fees and reimbursement for operating expenses.
The Company does not pay a fee to its outside, non-officer directors. The
Company believes that consulting fees and reimbursement for operating expenses
paid to corporations owned by directors are comparable to amounts that would
have been paid to at arms length third party providers of such services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(1) FINANCIAL STATEMENTS - Reference is made to the Financial Statements
appearing on pages F-1, through F-12
(2) EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
1.1 Articles of Incorporation of Cigma Ventures Corporation *
1.2 Company By-laws Cigma Ventures Corporation *
1.3 Consent action of the Board of Directors of Cigma Ventures Corporation *
to reinstate the corporation in the State of Florida
1.4 Articles of Amendment to Cigma Ventures Corporation changing *
the name of the Corporation to Cigma Metals Corporation.
3.1 Agreement dated April 12, 1998 between The Company and Delta Capital; *
Oil-Impex Limited; Gasinvest Ltd; Lloydinvest and Landa Ltd.
14
<PAGE>
21.1 Subsidiaries of the Company *
27.1 Financial Data Schedule
--------
* Previously Filed
(b) Reports on Form 8-K
None
--------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
Date: September 19, 2000 BY: /s/ Agustin Gomez de Segura
---------------------------
Agustin Gomez de Segura
Director and President
Date: September 19, 2000 BY: /s/ Jorge L. Lacasa
---------------------------
Jorge L. Lacasa
Director
15
<PAGE>
EXHIBIT (1) THE FOLLOWING FINANCIAL STATEMENTS REQUIRED TO BE
INCLUDED IN ITEM 8 ARE LISTED BELOW
INDEX TO FINANCIAL STATEMENTS
Financial Statements Page
-------------------- ----
Report of Independent Accountants F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statement of Operations F-5
Consolidated Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-12
Financial Statement Schedules *
*Financial Statement Schedules have been omitted as not applicable
16
<PAGE>
CIGMA METALS CORPORATION &
SUBSIDIARIES
(An exploration stage enterprise)
Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
Index
-----
Report of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F1
<PAGE>
[LETTERHEAD OF MOORE STEPHENS ELLIS FOSTER LTD.]
MOORE STEPHENS
ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS
1650 West 1st Avenue
Vancouver, BC Canada V6J 1G1
Telephone: (604) 734-1112 Facsimile: (604) 714-5916
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
CIGMA METALS COPORATION & SUBSIDIARIES
(An exploration stage enterprise)
We have audited the consolidated balance sheets of Cigma Metals Corporation &
Subsidiaries ("the Company") (an exploration stage enterprise) as at December
31, 1999 and 1998, the consolidated statement of stockholders' equity for the
period from January 13, 1989 (inception) to December 31, 1999, the consolidated
statements of operations and cash flows for the period from January 13, 1989
(inception) to December 31, 1999 and for the years ended December 31, 1999 and
1998. These consolidated 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these consolidated 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 cash flows for the period from
January 13, 1989 (inception) to December 31, 1999 and for the years ended
December 31, 1999 and 1998 in conformity with generally accepted accounting
principles in the United States.
Vancouver, Canada /s/ MOORE STEPHENS ELLIS FOSTER LTD.
January 31, 2000 Chartered Accountants
--------------------------------------------------------------------------------
MS An independently owned and operated member of Moore Stephens North America,
Inc. Members in principal cities throughout North America. Moore Stephens
North America, Inc. is a member of Moore Stephens International Limited,
members in principal cities throughout the world.
F2
<PAGE>
CIGMA METALS COPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Consolidated Balance Sheets
December 31, 1999 and 1998
(Expressed in US Dollars)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 534,108 $ --
Note receivable - related parties 33,000 --
------------------------------------------------------------------------------------------
567,108 --
Mineral property rights -- --
------------------------------------------------------------------------------------------
Total assets $ 567,108 $ --
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current
Accounts payable and accrued liabilities $ 8,500 $ --
------------------------------------------------------------------------------------------
Stockholders' Equity
Share capital
Authorized:
100,000,000 common shares, with par value of $0.0001 each
Issued and outstanding:
14,000,000 common shares (1998 - 7,000,000) 1,400 700
Additional paid-in capital 700,200 900
Accumulated deficit during exploration stage (142,992) (1,600)
------------------------------------------------------------------------------------------
Stockholders' equity 558,608 --
------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 567,108 $ --
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Approved by the Directors:
------------------------- --------------------------
Director Director
F3
<PAGE>
CIGMA METALS COPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Consolidated Statements of Stockholders' Equity
Period from January 13, 1989 (inception) to December 31, 1999
(Expressed in US Dollars)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Total
Common stock Additional Stock-
-------------------------- paid-in Accumulated holders'
Shares Amount capital Deficit equity
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock for
administrative services provided
on August 2, 1991 1,000,000 $ 100 $ 900 $ -- $ 1,000
Net (loss) for the period -- -- -- (1,000) (1,000)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 to 1997 1,000,000 100 900 (1,000) --
Issuance of common stock for
mineral property rights on
April 2, 1998 6,000,000 600 -- -- 600
Net (loss) for the period -- -- -- (600) (600)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 7,000,000 700 900 (1,600) --
Issuance of common stock for
cash on March 31, 1999 7,000,000 700 699,300 -- 700,000
Net (loss) for the period -- -- -- (141,392) (141,392)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 14,000,000 $ 1,400 $ 700,200 $ (142,992) $ 558,608
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F4
<PAGE>
CIGMA METALS COPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Consolidated Statement of Operations
(Expressed in US Dollars)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
January 13 Year Year
1989 (inception) Ended Ended
to December 31 December 31 December 31
1999 1999 1998
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
General and administrative expenses
Administrative and general $ 27,866 $ 26,866 $ --
Professional fees - accounting and legal 60,253 60,253 --
Salaries and consulting fees 31,528 31,528 --
-----------------------------------------------------------------------------------------------
119,647 118,647 --
-----------------------------------------------------------------------------------------------
Exploration expenses 40,950 40,350 600
-----------------------------------------------------------------------------------------------
Less:
Interest income 18,706 18,706 --
Interest expense (431) (431) --
Foreign exchange loss (670) (670) --
-----------------------------------------------------------------------------------------------
17,605 17,605 --
-----------------------------------------------------------------------------------------------
Net (loss) for the period $ (142,992) $ (141,392) $ (600)
===============================================================================================
(Loss) per share, basic and diluted 0 (0.01) 0.00
===============================================================================================
Weighted average shares outstanding 0 10,799,451 3,633,333
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F5
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Consolidated Statement of Cash Flows
(Expressed in US Dollars)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
January 13 Year Year
1989 (inception) Ended Ended
to December 31 December 31 December 31
1999 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from (used in)
operating activities
Net loss for the period $(142,992) $(141,392) $ (600)
Adjustments to reconcile net loss to net
cash used in operating activities:
- issuance of shares for mineral
property rights 600 -- 600
- issuance of shares for administrative
services rendered 1,000 -- --
---------------------------------------------------------------------------------------
(141,392) (141,392) --
Changes in assets and liabilities:
- note receivable - related parties (33,000) (33,000) --
- accounts payable 8,500 8,500 --
---------------------------------------------------------------------------------------
(165,892) (165,892) --
---------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from issuance of common stocks 700,000 700,000 --
---------------------------------------------------------------------------------------
Increase in cash and cash equivalents 534,108 534,108 --
Cash and cash equivalents,
beginning of period -- -- --
---------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 534,108 $ 534,108 $ --
=======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F6
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
1. Nature of Business and Going Concern
The Company was formed on January 13, 1989 as Cigma Ventures Corp. under
the laws of the State of Florida. The Company changed its name to Cigma
Metals Corporation on April 17, 1998.
The Company was inactive until August 2, 1991, when it issued 1,000,000
common shares for administrative services provided. The Company then
remained inactive until April 12, 1998, when it issued 6,000,000 restricted
common shares to acquire certain mineral property rights in Russia.
The continued operations of the Company is dependent upon the discovery of
economically recoverable reserves or proceeds from the dispositions
thereof, the ability of the Company to obtain financing to complete
development of the properties and on future profitable operations
2. Significant Accounting Policies
(a) Basis of Consolidation
These consolidated financial statements, prepared in accordance with
accounting principles generally accepted in the United States, include
the accounts of the parent company and its wholly-owned Russian
subsidiary, Northgold Company. Significant inter-company accounts and
transactions have been eliminated.
(b) Cash and Cash Equivalents
Cash equivalents are comprised of certain highly liquid instruments
with a maturity of three months or less when purchased. As at December
31, 1999, cash and cash equivalents consist of cash only.
(c) Mineral Properties and Exploration Expenses
Exploration costs are charged to operations as incurred as are normal
development costs until such time that proven reserves are discovered.
From that time forward, the Company will capitalize all costs to the
extent that future cash flow from reserves equals or exceeds the costs
deferred.
F7
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(d) Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit
quality financial institutions. The Company routinely maintains
balances in a financial institution beyond the insured amount. As of
December 31, 1999 the Company had approximately $494,000 in a bank
beyond insured limits.
(e) Foreign Currency Transactions
The Company maintains its accounting records in U.S. Dollars.
At the transaction date, each asset, liability, revenue and expense is
translated into U.S. dollars by the use of the exchange rate in effect
at that date. At the period end, monetary assets and liabilities are
translated into U.S. dollars by using the exchange rate in effect at
that date. The resulting foreign exchange gains and losses are
included in operations.
(f) Advertising Expenses
The Company expenses advertising costs as incurred. There were no
advertising expenses incurred by the Company for the years ended
December 31, 1999 and 1998.
(g) Impairment
Certain long-term assets of the Company are reviewed when changes in
circumstances require as to whether their carrying value has become
impaired, pursuant to guidance established in Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations
(undiscounted and without interest charges). If impairment is deemed
to exist, the assets will be written down to fair value.
(h) Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates and assumptions.
F8
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(i) Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial
instruments include cash, receivables, and accounts payable and
accrued liabilities. Fair values were assumed to approximate carrying
values for these financial instruments, except where noted, since they
are short term in nature and their carrying amounts approximate fair
values or they are receivable or payable on demand. Management is of
the opinion that the Company is not exposed to significant interest,
credit or currency risks arising from these financial instruments.
(j) Income Taxes
The Company has adopted Statement of Financial Accounting Standards
(SFAS") No. 109, "Accounting for Income Taxes", which requires the
Company to recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns using the
liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse.
(k) Loss Per Share
Loss per share is computed using the weighted average number of shares
outstanding during the year. Effective for the year ended December 31,
1997, the Company adopted SFAS No. 128, "Earnings Per Share".
F9
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
2. Significant Accounting Policies (continued)
(l) New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 requires companies to recognize all derivatives contracts
as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June
15, 2000.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new standards
on January 1, 2000 to affect its financial statements.
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-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. Adoption of this standard has no
material effect on the financial statements.
3. Note Receivable
The note receivable is unsecured, non-interest bearing and due on demand.
It is due from a company related by common management.
F10
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
4. Mineral Properties and Exploration Licences
The Company owns the following mineral properties located in Kozhim Region,
Komi Republic, Russia, as follows:
Area Central Point Co-ordinates
---- --------------------------
Samshitovoye 65 deg 14.7o N. Lat; 60 deg 13.5o E. Lon.
Nesterovskoye 65 deg 13.7o N. Lat; 60 deg 14.8o E. Lon.
Chudnoye 65 deg 14.3o N. Lat; 60 deg 14.2o E. Lon.
Pursuant to an agreement dated April 12, 1998, the Company acquired these
mineral property rights by issuing 6,000,000 restricted common shares to
the vendors. The individual who acted as trustee for the vendors is
currently a director of the Company. As the vendors are the controlling
shareholders of the Company after the above-mentioned transactions, the
properties and licences were valued at equal to the par value of the shares
issued. The amount was treated as exploration expense in 1998.
Pursuant to another agreement, the Company has entered into an agreement
with Poliarural Geologia ("PUG") to jointly explore the properties. PUG is
a Russian state-owned geological exploration and development company which
owns the exploration, development and production licences for the
properties owned by the Company.
The Company currently earns a 49% interest in these mineral properties and
has the option to increase its stake to 75% by expending US$400,000 on the
properties.
5. Non-Cash Investing and Financing Activities
In 1998, the Company issued 6,000,000 common shares to acquire the mineral
properties as described in Note 4.
F11
<PAGE>
CIGMA METALS CORPORATION & SUBSIDIARIES
(An exploration stage enterprise)
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(Expressed in US Dollars)
--------------------------------------------------------------------------------
6. Income Taxes
(a) The Company has estimated net losses for tax purposes to December 31,
1999, totalling approximately $143,000 which may be applied against
future taxable income. Accordingly, there is no tax expense charged to
the Statement of Operations for the years ended December 31, 1999 and
1998. The Company evaluates its valuation allowance requirements on an
annual basis based on projected future operations. When circumstances
change and this causes a change in management's judgement about the
realizability of deferred tax assets, the impact of the change on the
valuation allowance is generally reflected in current income.
The right to claim these losses is expected to expire as follows:
2011 1,000
2019 142,000
-------------------------------------------
$143,000
===========================================
(b) The tax effects of temporary differences that give rise to the
Company's deferred tax asset (liability) are as follows:
1999 1998
------------------------------------------------------------------
Tax loss carryforwards $ 49,000 $ 200
Valuation allowance (49,000) (200)
------------------------------------------------------------------
$ -- $ --
==================================================================
F12
