SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) DECEMBER 31, 1999
SAN JOAQUIN RESOURCES INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-26321 98-0204105
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
53 STRATFORD PLACE, S.W., CALGARY, ALBERTA T3H 1H7 CANADA
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (403) 242-9703
LEK INTERNATIONAL, INC.
SUITE 106, 1460 PANDOSY STREET, KELOWNA, BRITISH COLUMBIA, CANADA V1Y 1P3
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On December 31, 1999, a change in control of the Company occurred, in
conjunction with closing under an Agreement and Plan of Reorganization.
Prior to closing under the Agreement and Plan of Reorganization, the
Company had a total of 3,700,000 shares issued and outstanding.
The Company issued 8,069,000 shares of its common stock in exchange for
all of the issued and outstanding common stock of San Joaquin Oil & Gas
Ltd., a Nevada corporation ("San Joaquin"). As a result of that
transaction, San Joaquin became a wholly-owned subsidiary of the
Company.
As a result of these transactions, the Company now has 11,769,000 issued
and outstanding shares of common stock, of which 8,069,000 shares, or
approximately 68.56%, are owned by persons who were previously
shareholders of San Joaquin. Persons who were previously shareholders of
the Company own a total of 3,700,000 shares or approximately 31.44% of
the issued and outstanding common stock.
Prior to closing, shareholders of the Company adopted Restated and
Amended Articles of Incorporation to be effective as of January 17,
2000. Among the amendments was a change in the name of the Company to
"San Joaquin Resources Inc."
In conjunction with the change in ownership of a controlling interest in
the stock of the registrant, the previous officers and directors of the
registrant resigned and appointed as new directors J. Timothy Bowes,
Nick DeMare, and Colin S. McNeil. The new directors elected J. Timothy
Bowes as the President and Assistant Secretary and Nick DeMare as
Secretary and Treasurer of the Company.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
See Item 1. above.
BUSINESS OF SAN JOAQUIN. San Joaquin was incorporated in Nevada on
September 14, 1999 to acquire interests in oil and gas properties in the
San Joaquin Basin of California. San Joaquin completed private
placements of its common stock in 1999, selling a total 1,920,000 shares
of common stock for gross proceeds of $960,000. A portion of these
proceeds were used to acquire four membership interests in Hilton
Petroleum Greater San Joaquin Basin Joint Venture LLC, a Colorado
limited liability company ("Hilton LLC"), for an initial investment of
$390,000. As a member of Hilton LLC, San Joaquin will be subject to cash
calls for additional contributions. The remainder of the proceeds from
the private placements will be used to generate new prospects for San
Joaquin and to fund working capital.
2
<PAGE>
Mr. Nick DeMare, an officer and director of San Joaquin, is also a
director of Hilton Petroleum Ltd., the manager of Hilton LLC. However,
the terms upon which San Joaquin acquired its membership interests in
Hilton LLC were the same as those offered to non- affiliated purchasers.
Hilton LLC owns a 2.25% working interest in various oil and gas
prospects (the "San Joaquin Joint Venture") in the San Joaquin Basin and
is required to pay 4% of the costs to drill the initial wells on each of
the initial three prospects in the San Joaquin Joint Venture, as
discussed below. As a member of Hilton LLC, San Joaquin is required to
fund its pro-rata share of all the capital requirements of Hilton LLC.
In the event that San Joaquin were to fail to pay its additional cash
call capital contributions, within a specified time period, then, San
Joaquin, as a defaulting member, would lose its interest in Hilton LLC
to Hilton Petroleum Ltd. (the manager of the Hilton LLC). If the default
were to occur within 24 months of the initial capital contribution, San
Joaquin would, no sooner than 12 months if the default occurred before
12 months, receive common shares of Hilton Petroleum Ltd. at the then
prevailing prices, for its investment cost. If such failure were to
occur after 24 months then Hilton Petroleum Ltd. would fund the capital
contribution of San Joaquin (the defaulting member) and retain San
Joaquin's share of cash flow until 300% of the defaulted cash call is
repaid to Hilton Petroleum Ltd.
The operator commenced drilling the initial exploratory well on the
first of the three initial prospects, Cal Canal in July 1999. As at
December 31, 1999, the well had been drilled to a total depth of 18,100
feet and a production liner had been run to total depth. Production
testing of potential pay zones is scheduled for January 2000, but may
change depending upon the availability of personnel and equipment. The
total budgeted costs to drill the Cal Canal well were estimated at
approximately $9.5 million, however based on the costs incurred to
December 31, 1999, the drilling costs will now be in the range of $11.5
million, of which $9.6 million had been incurred through December 31,
1999. The operator has announced that Cal Canal is a potential gas well
and that production testing will commence by late January 2000. Hilton
LLC's share of the remaining drilling and completion costs is estimated
at $216,000, making San Joaquin's share approximately $43,200.
The next prospect to be drilled by the San Joaquin Joint Venture is
Lucky Dog, which had an anticipated drilling commencement date of early
December 1999. The drilling commencement date was changed to February
2000 and may be delayed further. The commencement of drilling on this
prospect is contingent upon completion of drilling at Cal Canal. After
the Lucky Dog Prospect the next location to be drilled is Pyramid Power
with an anticipated drilling commencement date of early May 2000. Prior
to initiating this drill program it is anticipated that additional
seismic work will be completed at Pyramid Power.
The anticipated costs to be incurred by the San Joaquin Joint Venture,
between January 2000 and December 2000, are $31.5 million. Hilton LLC's
share of these costs is estimated at $1.3 million, making San Joaquin's
share approximately $260,000. This estimate includes
3
<PAGE>
completion of the drill program at Cal Canal, acquiring additional
seismic data for Pyramid Power, drilling the two additional prospects
and completing all three wells. The assumption is that all wells will be
successful and will require completion. If certain wells are dry holes
then completion costs will not be required and costs to be incurred will
be less.
These first three prospects are not the only possible prospects in the
San Joaquin Joint Venture lands. Work is ongoing to identify more
prospects. As of December 31, 1999, no additional prospects had been
identified. The above budget does not include any additional costs which
could be incurred when such prospects are identified.
MANAGEMENT OF SAN JOAQUIN. The officers and directors of San Joaquin are
as follows:
J. Timothy Bowes President, Assistant Secretary and director
Nick DeMare Secretary, Treasurer and director
Colin S. McNeil Director
J. TIMOTHY BOWES (AGE 44): Mr. Bowes holds a Bachelor of Commerce degree
and a Masters of Business Administration degree, both from the
University of British Columbia. On October 26, 1999, Mr. Bowes became
the President, Chief Executive Officer, and a director of Lucre Ventures
Ltd., a public oil and gas company listed on the Canadian Venture
Exchange. Since April 1999, he has been primarily engaged as a
self-employed consultant involved in the structuring of mergers and
acquisitions of oil and gas companies. Prior to starting his own
consulting business, Mr. Bowes was employed by Yorkton Securities Inc.
He began working for Yorkton in October 1994 as a Senior Analyst for oil
and gas properties. Mr. Bowes held several positions at Yorkton in which
he was responsible for, among other things, reviewing, structuring and
approving all initial public offerings generated from Yorkton's Calgary
Office during the period from June 1995 to April 1997. From April 1997
to March 1999, Mr. Bowes was the Vice President Corporate Finance in the
Natural Resources section of the Calgary office of Yorkton Securities.
Prior to Mr. Bowes' employment with Yorkton, he was employed as the Land
Manager of Numac Energy Inc., which was created as a result of the 1993
merger of Westcoast Petroleum Ltd. and Numac Oil & Gas Ltd. Prior to the
merger, Mr. Bowes was the Land Manager for Westcoast Petroleum Ltd.
NICK DEMARE (AGE 45): Mr. DeMare holds a Bachelor of Commerce degree
from the University of British Columbia and is a member in good standing
of the Institute of Chartered Accountants of British Columbia. He is the
President of Chase Management Ltd., a private British Columbia company
which provides a broad range of administrative, management and financial
services to private and public companies with varied interests in
mineral exploration and development, gold and silver production, oil and
gas and venture capital.
4
<PAGE>
COLIN S. MCNEIL (AGE 52): Mr. McNeil holds a Bachelor of Science
(Geology) degree from the University of Calgary. Since 1996 he has been
the President of C. McNeil and Associates Inc., a private company which
provides geological consulting services to clients for domestic and
international exploration and development projects. Mr. McNeil is a
member of the board of directors of Pilot Energy Corp. and Mount Dakota
Energy Corp. From June 1996 to March 1997, Mr. McNeil was the Vice
President, Chief Financial Officer and a director of Briggand Energy
Corp., where he assisted in the formation, financing and listing of
Briggand on the Alberta Stock Exchange. In addition, Mr. McNeil assisted
with a reverse- takeover between Briggand and Canop Worldwide Corp.
During 1995, Mr. McNeil was the President of Hyenergy Corp., a private
corporation formed to evaluate and purchase production assets. From 1993
to 1994, Mr. McNeil was the Manager of International Exploration for
Numac Energy Inc. Mr. McNeil was responsible for managing and directing
an exploration budget of approximately $10 million. Mr. McNeil also
participated in and managed exploration programs in Libya and Indonesia,
evaluated exploration, development and enhanced oil recovery projects in
Africa, South America, the Middle East, and South- East Asia for Numac.
While with Numac, Mr. McNeil managed and participated in a worldwide
"scoping" study to determine the future direction of Numac.
Mr. McNeil is a member of the Association of Professional Engineers,
Geologists and Geophysicists of Alberta, the Society of Exploration
Geophysicists, the Canadian Society of Exploration Geophysicists, the
American Association of Petroleum Geologists, and the Canadian Society
of Petroleum Geologists.
PRINCIPAL SHAREHOLDERS OF THE COMPANY. The following table provides
certain information as to the officers and directors individually and as
a group, and the holders of more than 5% of the Common Stock of the
Company, as of December 31, 1999:
<TABLE>
<CAPTION>
AMOUNT OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS (1)<F1>
<S> <C> <C>
J. Timothy Bowes (2)<F2> 1,533,000 13.03%
53 Stratford Place, S.W.
Calgary, Alberta, Canada T3H 1H7
Nick DeMare (3)<F3> 135,000 1.15%
Suite 1305, 1090 W. Georgia Street
Vancouver, British Columbia, Canada V6E 3V7
Colin McNeil 0 --
340B, 630 - 6th Avenue, S.W.
Calgary, Alberta, Canada T2P 0S8
Officers and Directors as a group (3 persons) 1,668,000 14.17%
----------
<FN>
<F1>
(1) This table is based on 11,769,000 shares of Common Stock
outstanding on December 31, 1999. If a person listed on this
table has the right to obtain additional shares of Common Stock
within sixty (60) days from December 31, 1999, the additional
shares are deemed to be outstanding for the
5
<PAGE>
purpose of computing the percentage of class owned by such
person, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person.
<F2>
(2) These shares are held of record by Bowesco Incorporated a company
owned and controlled by Mr. Bowes
<F3>
(3) These shares are held of record by DNG Capital Corp., a company
owned and controlled by Mr. DeMare.
</FN>
</TABLE>
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
In connection with the change of control described above, in January
2000, the Company plans to engage Wheeler Wasoff, P.C., Denver,
Colorado, to audit its financial statements for the fiscal year ended
December 31, 1999. Wheeler Wasoff, P.C. audited the financial statements
for San Joaquin Oil & Gas Ltd.
During the last two years, the Company did not consult Wheeler Wasoff,
P.C. with regard to any matters.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired: Filed with this
report.
(b) Pro forma financial information: Filed with this report.
<TABLE>
(c) Exhibits:
<CAPTION>
REGULATION CONSECUTIVE
S-K NUMBER DOCUMENT PAGE NUMBER
<S> <C> <C>
2.1 Agreement and Plan of Reorganization
3.1 Restated and Amended Articles of Incorporation
16 Letter from Kish, Leake & Associates, P.C.
27 Financial Data Schedule
</TABLE>
6
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
As a result of the acquisition of San Joaquin Oil & Gas Ltd., the
Company's fiscal year end will be changed to December 31.
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 hereunto duly authorized.
LEK INTERNATIONAL, INC.
January 18, 2000 By: /S/ J. TIMOTHY BOWES
---------------------
J. Timothy Bowes, President
7
<PAGE>
- --------------------------------------------------------------------------------
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS FOR THE
PERIOD FROM INCEPTION (SEPTEMBER 14, 1999)
TO OCTOBER 31, 1999
- --------------------------------------------------------------------------------
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
I N D E X
Independent Auditor's Report F-2
Balance Sheet
October 31, 1999 F-3
Statement of Operations
Period from inception (September 14, 1999) to October 31, 1999 F-4
Statement of Stockholders' Equity
Period from Inception (September 14, 1999) to October 31, 1999 F-5
Statement of Cash Flows
Period from Inception (September 14, 1999) to October 31, 1999 F-6
Notes to Financial Statements F-7 - F-13
F - 1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
San Joaquin Oil & Gas Ltd.
We have audited the accompanying balance sheet of San Joaquin Oil & Gas Ltd. (a
development stage company) as of October 31, 1999 and the related statements of
operations, stockholders' equity and cash flows for the period from inception
(September 14, 1999) to October 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of San Joaquin Oil & Gas Ltd. as
of October 31, 1999 and the results of its operations and its cash flows for the
period from inception (September 14, 1999) to October 31, 1999 are in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the company has incurred losses from its initial
operations and has not earned revenues from its principal operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/WHEELER WASOFF, P.C.
WHEELER WASOFF, P.C.
Denver, Colorado
December 14, 1999
F - 2
<PAGE>
<TABLE>
<CAPTION>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 31, 1999
<S> <C>
A S S E T S
CURRENT ASSETS
Cash $ 548,160
Advance for exploration costs 10,000
-------------
Total current assets 558,160
INVESTMENT IN OIL AND GAS VENTURE (NOTE 3) 389,720
OI L & GAS PROPERTIES (NOTE 2) 38,924
-------------
$ 986,804
=============
L I A B I L I T I E S & S T O C K H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 25,328
-------------
Total current liabilities 25,328
-------------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND 8)
STOCKHOLDERS' EQUITY (NOTE 4)
Preferred stock, $0.01 par value
Authorized - 1,000,000 shares
Issued - none -
Common stock, $0.001 par value
Authorized - 100,000,000 shares
Issued and outstanding - 8,069,000 shares 8,069
Additional paid-in capital 977,943
(Deficit) accumulated during the development stage (24,536)
961,476
-------------
$ 986,804
=============
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 3
<PAGE>
<TABLE>
<CAPTION>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
<S> <C>
REVENUE
Interest $ 1,398
------------
OPERATING EXPENSES
Administration and accounting 2,233
Audit and legal 9,663
Filing 283
Office and miscellaneous 477
Professional fees 6,000
Travel 6,998
------------
25,654
------------
(LOSS) FROM OPERATIONS (24,256)
EQUITY IN (LOSS) OF AFFILIATE (280)
------------
NET (LOSS) $ (24,536)
============
NET (LOSS) PER COMMON SHARE - BASIC
AND DILUTED $ (0.003)
============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 7,047,667
============
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 4
<PAGE>
<TABLE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
<CAPTION>
DEFICIT
PREFERRED STOCK COMMON STOCK ACCUMULATED
----------------------------- ---------------------------- ADDITIONAL DURING THE
PAID-IN DEVELOPMENTAL
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
----------- -------------- -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 14, 1999 - $ - - $ - $ - $ -
Sale of Series A Preferred
Shares at $0.50 per share 61,490 615 - - 30,130 -
Conversion of Series A
Preferred Shares into (61,490) (615) 6,149,000 6,149 (5,534) -
common stock
Sale of common stock at
$0.50 per share - - 1,920,000 1,920 958,080 -
Costs of offerings - - - - (4,733)
Net (loss) - - - - - (24,536)
----------- -------------- -------------- ------------ --------------- ---------------
Balance, October 31, 1999 - $ - 8,069,000 $ 8,069 $ 977,943 $ (24,536)
=========== ============== ============== ============ =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
F - 5
<PAGE>
<TABLE>
<CAPTION>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (24,536)
Adjustments to reconcile net (loss) to net cash (used)
by operating activities
Equity in (loss) of affiliate 280
Changes in assets and liabilities
Increase in advance (10,000)
Increase in accounts payable and accrued liabilities 25,328
Net cash (used) by operating activities (8,928)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for investment in oil and gas venture (390,000)
Additions to oil and gas properties (38,924)
Net cash (used) by investing activities (428,924)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock 30,745
Proceeds from sale of common stock 960,000
Cash paid for offering costs (4,733)
Net cash provided by financing activities 986,012
------------
NET INCREASE IN CASH 548,160
CASH - BEGINNING OF PERIOD -
------------
CASH - END OF PERIOD $ 548,160
============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the period from inception to October 31, 1999, the Company did not incur
any short-term borrowings.
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
In October 1999, 6,149,000 shares of common stock were issued on the conversion
of 61,490 Series A Preferred Shares.
The accompanying notes are an integral part of these financial statements
F - 6
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
1. ORGANIZATION AND NATURE OF BUSINESS
San Joaquin Oil & Gas Ltd. (the "Company") was incorporated on September
14, 1999 under the laws of the State of Nevada. The Company is an
independent energy company engaged in the exploration, development and
acquisition of crude oil and natural gas reserves in the western United
States and is considered a development stage company as defined by
Statement of Financial Accounting Standards (SFAS) No. 7.
The Company is an exploration stage oil and gas company and as of
October 31, 1999, has not earned any production revenue nor found proved
resources on any of its properties. To date, the Company's principal
activities have been raising capital through the sale of its securities
and acquiring an interest in a limited liability company. See Note 3.
The Company's fiscal year end is December 31.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OIL AND GAS PROPERTIES
CAPITALIZED COSTS
The Company follows the full cost method of accounting for oil and gas
operations. Under this method all costs related to the exploration for
and development of oil and gas reserves are capitalized on a
country-by-country basis. Costs include lease acquisition costs,
geological and geophysical expenses, overhead directly related to
exploration and development activities and costs of drilling both
productive and non-productive wells. Proceeds from the sale of
properties are applied against capitalized costs, without any gain or
loss being recognized, unless such a sale would significantly alter the
rate of depletion and depreciation.
DEPLETION AND DEPRECIATION
Depletion of exploration and development costs and depreciation of
production equipment is provided using the unit-of-production method
based upon estimated proven oil and gas reserves. The costs of
significant unevaluated properties are excluded from costs subject to
depletion. For depletion and depreciation purposes, relative volumes of
oil and gas production and reserves are converted at the energy
equivalent conversion rate of six thousand cubic feet of natural gas to
one barrel of crude oil.
F - 7
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CEILING TEST
In applying the full cost method, the Company performs a ceiling test
whereby the carrying value of oil and gas properties and production
equipment, net of recorded future income taxes and the accumulated
provision for site restoration and abandonment costs, is compared
annually to an estimate of future net cash flow from the production of
proven reserves. Net cash flow is estimated using year end prices, less
estimated future general and administrative expenses, financing costs
and income taxes. Should this comparison indicate an excess carrying
value, the excess is charged against earnings.
As at October 31, 1999, the Company has not acquired any direct
interests in oil and gas properties. For the period ended October 31,
1999, it has incurred $38,924 costs relating to identifying potential
property acquisitions.
INVESTMENTS
Investments in affiliated companies (20% to 50% owned), over which the
Company has significant influence, are accounted for by the equity
method. Where, in the opinion of management, there has been a loss in
value of long-term investments, which is other than a temporary decline,
the carrying value is reduced to estimated realizable value.
INCOME TAXES
The Company has adopted the provisions of SFAS No. 109, "Accounting for
Income Taxes". SFAS 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
At October 31, 1999, the Company had a net operating loss carryforward
of approximately $23,000 that may be offset against future taxable
income through 2019.
The Company has fully reserved the tax benefits of these operating
losses because the likelihood of realization of the tax benefits cannot
be determined.
The tax benefit of the loss carryforward of $3,500 has been offset by a
valuation allowance of the same amount.
Temporary differences between the time of reporting certain items for
financial and tax reporting purposes consist primarily of exploration
costs on oil and gas properties, and equity income (loss) in affiliated
companies.
F - 8
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
The oil and gas industry is subject, by its nature, to environmental
hazards and clean-up costs. At this time, management knows of no
substantial costs from environmental accidents or events for which it
may be currently liable. In addition, the Company's oil and gas business
makes it vulnerable to changes in wellhead prices of crude oil and
natural gas. Such prices have been volatile in the past and can be
expected to be volatile in the future. By definition, proved reserves
are based on current oil and gas prices and estimated reserves. Price
declines reduce the estimated quantity of proved reserves and increase
annual amortization expense (which is based on proved reserves).
(LOSS) PER COMMON SHARE
(Loss) per common share is computed based on the weighted average number
of common shares outstanding during the period. Common shares issued
upon conversion of Series A convertible preferred stock (Note 4) are
considered outstanding for all periods presented.
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers as cash
equivalents all highly liquid investments with a maturity of three
months or less at the time of purchase. On occasion, the Company has
cash in banks in excess of federally insured amounts.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist of cash. The Company maintains
cash accounts at one financial institution. The Company periodically
evaluates the credit worthiness of financial institutions, and maintains
cash accounts only in large high quality financial institutions.
FAIR VALUE
The carrying amount reported in the balance sheet for cash, advances,
accounts payable and accrued liabilities approximates fair value because
of the immediate or short-term maturity of these financial instruments.
F - 9
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
NEW TECHNICAL PRONOUNCEMENTS
In June 1998 SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" was issued for fiscal years beginning after June 15,
1999. Adoption of SFAS No. 133 does not have an impact on the Company's
financial statements.
In October 1998 SFAS No. 134 "Accounting for Mortgage Broker Securities"
was issued for fiscal years beginning after December 15, 1998. Adoption
of SFAS No. 134 does not have an impact on the Company's financial
statements.
In February 1999 SFAS No. 135 "Rescission of FASB Statement No. 75 and
Technical Corrections" was issued for fiscal years beginning after
February 15, 1999. Adoption of SFAS No. 135 does not have an impact on
the Company's financial statements.
In June 1999 SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statements
No. 133" was issued. Adoption of SFAS No. 137 is not expected to have an
impact on the Company's financial statements.
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates
the realization of assets and extinguishment of liabilities in the
normal course of business.
The Company is in the development stage and has not realized revenues
from its planned operations. Additional funding will be required to
complete the Company's planned funding contributions in its investment,
participate in the acquisition, exploration and development of interests
in oil and gas properties. In order to meet the Company's continuing
financing needs, management of the Company intends to raise working
capital through the sale of common stock or other securities, or through
other financing.
The Company's financial statements do not include any adjustments
related to the realization of the carrying value of assets or the
amounts and classification of liabilities that might be necessary should
the Company be unable to continue in existence.
The ability of the Company to continue operations as a going concern is
dependent upon its success in obtaining capital through sale of common
stock or other securities and ultimately achieving profitable
operations.
F - 10
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
3. INVESTMENT IN OIL AND GAS VENTURE
During the period ended October 31, 1999, the Company purchased four
units, representing a 20% ownership interest, in Hilton Petroleum
Greater San Joaquin Basin LLC ("Hilton LLC") for $390,000. Hilton LLC, a
Colorado limited liability company organized on June 4, 1999, is a
development stage company as defined by SFAS No. 7. As of October 31,
1999, Hilton LLC has paid Hilton Petroleum Ltd. ("Hilton") $1,550,000
for a 2.25% working interest in the San Joaquin Joint Venture and will
pay 4% of the costs to drill the initial wells on each of the initial
three prospects in the San Joaquin Basin.
As a member of Hilton LLC, the Company will be required to provide its
pro-rata share of all capital requirements of Hilton LLC. In the event
that a member fails to pay its additional cash call capital
contributions within a specified time period, then, that defaulting
member's interest in Hilton LLC shall revert to Hilton. If the default
occurs within 24 months of the initial capital contribution the member
will, no sooner than 12 months, if the default occurs before 12 months,
receive common stock of Hilton, at the then prevailing prices, for the
defaulting member's investment cost. If such failure occurs after 24
months, then Hilton will fund the capital contribution of the defaulting
member and retain that member's share of cash flow until 300% of the
defaulted cash is repaid to Hilton.
Hilton is the manager of Hilton LLC. A director of the Company is also a
director of Hilton.
The Company's investment in Hilton LLC is accounted for using the equity
method. Equity loss in Hilton LLC was $280. Summarized unaudited
financial information of Hilton LLC, as of October 31, 1999, is as
follows:
Cash $ 85,490
Due from operator 221,819
Oil and gas properties 1,641,291
--------------
Total Assets $ 1,948,600
==============
Members' Equity $ 1,948,600
==============
Net (Loss) $ (1,401)
==============
F - 11
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
4. STOCKHOLDERS' EQUITY
In September 1999, the Company designated 70,000 shares of the 1,000,000
authorized preferred stock, as Series A convertible preferred stock (the
"Series A Preferred Shares"). In September 1999, the Company sold 61,490
Series A Preferred Shares at $0.50 per share for cash proceeds of
$30,745. In October 1999, the Series A Preferred Shares were converted by
the holders into 6,149,000 common shares of the Company.
In October 1999, the Company completed the sale of an aggregate of
1,920,000 shares of common stock, at a price of $0.50 per common share,
for cash proceeds of $960,000 pursuant to three private placements. The
shares of common stock were sold pursuant to the exemption from
registration
contained in Sections 3(b) and 4(2) of the Securities Act of 1933 and
Rule 504 of Regulation D promulgation thereunder.
Cost of the preferred and common stock offerings was an aggregate
$4,733.
5. RELATED PARTY TRANSACTIONS
During the period ended October 31, 1999, the Company was charged $2,233
for accounting services rendered by a company owned by a director of the
Company, $6,000 for professional fees rendered by the President of the
Company, and $5,128 for services related to exploration of oil and gas
properties by a director of the Company. As at October 31, 1999, $7,128
remained unpaid and has been included in accounts payable and accrued
liabilities.
See also Note 3.
6. SEGMENT REPORTING
The Company has one reportable segment, the exploration and development
of oil and gas properties. The Company has concentrated its oil and gas
exploration and development activities in the western United States,
primarily California. All activities in this segment have been with
industry partners and have been substantially conducted through the
Company's investment in Hilton LLC.
7. COMPREHENSIVE INCOME
There are no adjustments necessary to net (loss) as presented in the
accompanying statement of operations to derive comprehensive income in
accordance with SFAS No. 130, "Reporting Comprehensive Income".
F - 12
<PAGE>
SAN JOAQUIN OIL & GAS LTD.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION
(SEPTEMBER 14, 1999) TO OCTOBER 31, 1999
8. COMMITMENTS AND CONTINGENCIES
The Company may be subject to various possible contingencies which are
derived primarily from interpretations of federal and state laws and
regulations affecting the oil and gas industry. Although management
believes it has complied with the various laws and regulations, new
rulings and interpretations may require the Company to make adjustments.
F - 13
<PAGE>
LEK INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma consolidated financial statements present the
historical financial information of LEK International, Inc. (LEK), as adjusted
for the acquisition of San Joaquin Oil & Gas Ltd. (San Joaquin), pursuant to an
Agreement and Plan of Reorganization entered into between LEK and San Joaquin
effective as of December 31, 1999. Upon completion of the acquisition of San
Joaquin by LEK, San Joaquin will continue to exist as a wholly owned subsidiary
of LEK. For financial reporting purposes, the business combination is to be
accounted for as an additional capitalization of LEK (a reverse acquisition with
San Joaquin as the acquirer). The operations of San Joaquin will be the only
continuing operations of the Company.
The accompanying pro forma consolidated balance sheet presents the historical
financial information of LEK as of October 31, 1999, as adjusted for the
acquisition of San Joaquin, accounted for as a reverse acquisition. The
historical financial information of LEK is as of September 30, 1999 and the
historical financial information of San Joaquin is as of October 31, 1999.
The accompanying pro forma consolidated statement of operations for the period
ended October 31, 1999 combines the historical financial information of LEK for
the six months ended September 30, 1999 with the historical financial
information of San Joaquin for the period from its inception (September 14,
1999) to October 31, 1999, as if the acquisition had occurred at the beginning
of the period.
Management has determined that no activity occurred during October 1999 that
would impact the pro forma consolidated financial statements or effect the
comparability of LEK's financial information from September 30, 1999.
The pro forma consolidated financial statements have been prepared by
management, based on the historical financial statements of LEK and San Joaquin.
These pro forma consolidated financial statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
consolidated financial statements should be read in conjunction with the
historical financial statements of LEK for the six months ended September 30,
1999 included in LEK's Form 10-QSB for the six months ended September 30, 1999,
and with the historical financial statements of San Joaquin as of October 31,
1999 and for the initial period then ended, included elsewhere in this filing on
Form 8K.
<PAGE>
<TABLE>
LEK INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
INITIAL PERIOD ENDED OCTOBER 31, 1999
<CAPTION>
LEK SAN JOAQUIN PROFORMA PRO FORMA
(HISTORICAL) ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C>
REVENUE
Interest $ - $ 1,398 $ 1,398
------------- ---------------- -------------------
OPERATING EXPENSES
General and administrative 17,256 25,654 42,910
------------- ---------------- -------------------
17,256 25,654 42,910
------------- ---------------- -------------------
EQUITY IN (LOSS) OF INVESTEE - (280) (280)
------------- ---------------- -------------------
NET (LOSS) $ (17,256) $ (24,536) $ (41,792)
============= ================ ===================
NET (LOSS) PER COMMON SHARE-
BASIC AND DILUTED
$ (0.004)
===================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-
BASIS AND DILUTED 10,747,667
===================
</TABLE>
See notes to the proforma consolidated financial statements.
<PAGE>
<TABLE>
LEK INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1999
<CAPTION>
LEK SAN JOAQUIN PROFORMA PRO FORMA
(HISTORICAL) ADJUSTMENTS COMBINED
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ - $ 548,160 $ - $ 548,160
Advance for exploration costs - 10,000 10,000
-------------- ---------------- -----------------
Total Current Assets 558,160 558,160
INVESTMENT IN OIL AND GAS VENTURE - 389,720 389,720
OIL AND GAS PROPERTIES - 38,924 - 38,924
-------------- ---------------- ------------- -----------------
$ - $ 986,804 $ - $ 986,804
============== ================ ============= =================
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ - $ 25,328 $ 25,328
Due to related entity 17,257 - (17,257) (a) -
-------------- ---------------- ------------- -----------------
Total Current Liabilities 17,257 25,328 (17,257) 25,328
-------------- ---------------- ------------- -----------------
STOCKHOLDERS' EQUITY
Common stock 100 8,069 (100) (a) 11,769
3,700 (b)
Additional paid in capital 977,943 (3,700) (b) 974,243
Deficit accumulated during the 17,257 (a)
development stage (17,357) (24,536) 100 (b) (24,536)
-------------- ---------------- ------------- -----------------
(17,257) 961,476 17,257 961,476
-------------- ---------------- ------------- -----------------
$ - $ 986,804 $ - $ 986,804
============== ================ ============= =================
</TABLE>
See notes to the proforma consolidated financial statements.
<PAGE>
LEK INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying pro forma consolidated financial statements are presented to
reflect the acquisition of San Joaquin by LEK, accounted for as a reverse
acquisition, with the operations of San Joaquin being the continuing operations
of the combined entities.
The accompanying pro forma consolidated balance sheet as of October 31, 1999 has
been prepared to give effect to the acquisition of San Joaquin by LEK as if the
acquisition occurred on October 31, 1999. The accompanying pro forma
consolidated statement of operations combines the historical operations of LEK
for the six months ended September 30, 1999 with the historical operations of
San Joaquin for the period from its inception (September 14, 1999) to October
31, 1999, and is presented as if the acquisition had occurred at the beginning
of the period.
Management has determined that no activity occurred during October 1999 that
would impact the historical financial information of LEK.
LEK was incorporated on April 21, 1997 and had no operations or revenue
producing activities during its fiscal years ended March 31, 1998 and 1999 other
than initial startup costs. During the six months ended September 30, 1999 LEK
had no revenue producing activities and the only costs incurred were related to
legal, accounting and filings with the Securities and Exchange Commission.
NOTE 2 - PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect the following
pro forma adjustments:
(a) Record forgiveness of related party liability as of the date of
reorganization.
(b) Reflect the recapitalization of the 3,700,000 shares of LEK common stock
issued and outstanding as of the date of the reverse acquisition of LEK by
San Joaquin.
NOTE 3 - (LOSS) PER COMMON SHARE
Pro forma loss per common share for the period ended October 31, 1999 is
computed based on the weighted average number of common shares outstanding
during the period, assuming that the 3,700,000 shares of LEK outstanding (as
adjusted for a 3.7 to 1.0 forward stock split) as of the date of the reverse
acquisition were outstanding as of the beginning of the period presented.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
LEK INTERNATIONAL, INC.
A NEVADA CORPORATION
AND
SAN JOAQUIN OIL & GAS LTD.
A NEVADA CORPORATION
Effective as of December 31, 1999
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, made and entered into this
15th day of December, 1999, by and between LEK INTERNATIONAL, INC., a Nevada
corporation ("LEK"), and SAN JOAQUIN OIL & GAS LTD., a Nevada corporation, ("San
Joaquin").
P R E M I S E S
A. This Agreement provides for the reorganization of San
Joaquin with and into LEK, with San Joaquin becoming a wholly-owned subsidiary
of LEK, and in connection therewith, the exchange of the outstanding common
stock of San Joaquin for shares of common voting stock of LEK, all for the
purpose of effecting a tax-free reorganization pursuant to sections 354 and
368(a) of the Internal Revenue Code of 1986, as amended.
B. The boards of directors of San Joaquin and LEK have
determined, subject to the terms and conditions set forth in this Agreement,
that the exchange contemplated hereby, as a result of which San Joaquin would
become a wholly-owned subsidiary of LEK, is desirable and in the best interests
of their stockholders. This Agreement is being entered into for the purpose of
setting forth the terms and conditions of the proposed exchange.
A G R E E M E N T
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF SAN JOAQUIN
As an inducement to and to obtain the reliance of LEK, San Joaquin
represents and warrants as follows:
SECTION 1.1 ORGANIZATION. San Joaquin is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Nevada and
has the corporate power and is duly authorized, qualified, franchised and
licensed under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the jurisdiction in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification. Included
1
<PAGE>
in the San Joaquin Schedules (as hereinafter defined) are complete and correct
copies of the articles of incorporation, bylaws and amendments thereto of San
Joaquin as in effect on the date hereof. The execution and delivery of this
Agreement do not and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not violate any provision of
San Joaquin's articles of incorporation or bylaws. San Joaquin has full power,
authority and legal right and has taken all action required by law, its articles
of incorporation, its bylaws or otherwise to authorize the execution and
delivery of this Agreement.
SECTION 1.2 CAPITALIZATION. The authorized capitalization of San
Joaquin consists of 100,000,000 Common Shares, par value $0.001 per share and
1,000,000 shares of Preferred Shares, of which 70,000 shares of Preferred Stock
have been designated as Series A Convertible Preferred, $0.50 stated value. As
of the Closing Date hereof, San Joaquin will have no more than 8,069,000 common
shares issued and outstanding. All issued and outstanding shares are legally
issued, fully paid and nonassessable and are not issued in violation of the
preemptive or other rights of any person. San Joaquin has no other securities,
warrants or options authorized or issued.
SECTION 1.3 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except as
otherwise set forth in the San Joaquin Schedules or as previously provided to
LEK, San Joaquin does not have any other subsidiaries and does not own,
beneficially or of record, any shares of any other corporation.
SECTION 1.4 FINANCIAL STATEMENTS. Included in the San Joaquin Schedules
is San Joaquin's audited financial statements (including any predecessor
companies) including a balance sheet, statement of operations, shareholder
equity and cash flows and notes thereto, dated as of October 31, 1999. Relevant
thereto:
(a) the San Joaquin balance sheet presents fairly as of its
date the financial condition of San Joaquin; San Joaquin does not have,
as of the date of such balance sheet, except as noted and to the extent
reflected or reserved against therein, any liabilities or obligations
(absolute or contingent) which should be reflected in a balance sheet
or the notes thereto and all material assets reflected therein are
properly reported and present fairly the value of the assets of San
Joaquin, in accordance with generally accepted accounting principles;
(b) San Joaquin has no material liabilities with respect to
the payment of any provincial, federal, state, county, local or other
taxes (including any deficiencies, interest or penalties), except for
taxes accrued but not yet due and payable;
(c) San Joaquin has filed all provincial, state, federal and
local income tax returns required to be filed by it from inception to
the date hereof, if any;
2
<PAGE>
(d) the books and records, financial and others, of San
Joaquin are in all material respects complete and correct and have been
maintained in accordance with good business accounting practices; and
(e) except as and to the extent disclosed in the most recent
San Joaquin balance sheet and the San Joaquin Schedules, San Joaquin
has no material contingent liabilities, direct or indirect, matured or
unmatured.
SECTION 1.5 INFORMATION. The information concerning San Joaquin set
forth in this Agreement and in the San Joaquin Schedules is complete and
accurate in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact required to make the statements
made, in light of the circumstances under which they were made, not misleading.
SECTION 1.6 OPTIONS AND WARRANTS. Except as set forth in the San
Joaquin Schedules, there are no existing options, warrants, calls or commitments
of any character to which San Joaquin is a party and by which it is bound.
SECTION 1.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in this Agreement, the San Joaquin Schedules, or as otherwise disclosed to LEK,
since October 31, 1999:
(a) there has not been: (i) any material adverse change in the
business, operations, properties, assets or condition of San Joaquin;
or (ii) any damage, destruction or loss to San Joaquin (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets or condition of San Joaquin;
(b) San Joaquin has not: (i) amended its articles of
incorporation or bylaws; (ii) declared or made, or agreed to declare or
make, any payment of dividends or distributions of any assets of any
kind whatsoever to stockholders or purchased or redeemed or agreed to
purchase or redeem any of its capital stock; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering
the business of San Joaquin; (iv) made any material change in its
method of management, operation or accounting; (v) entered into any
other material transaction; (vi) made any accrual or arrangement for or
payment of bonuses or special compensation of any kind or any severance
or termination pay to any present or former officer or employee; (vii)
increased the rate of compensation payable or to become payable by it
to any of its officers or directors or any of its employees whose
monthly compensation exceeds $5,000; or (viii) made any increase in any
profit sharing, bonus, deferred compensation, insurance, pension,
retirement or other employee benefit plan, payment or arrangement made
to, for, or with its officers, directors or employees;
(c) San Joaquin has not: (i) granted or agreed to grant any
options, warrants or other rights for its stocks, bonds or other
corporate securities calling for the issuance
3
<PAGE>
thereof; (ii) borrowed or agreed to borrow any funds or incurred or
become subject to, any material obligation or liability (absolute or
contingent) except liabilities incurred in the ordinary course of
business; (iii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent San Joaquin balance sheet and current liabilities incurred
since that date in the ordinary course of business; (iv) sold or
transferred, or agreed to sell or transfer, any of its assets,
properties or rights (except assets, properties or rights not used or
useful in its business which, in the aggregate have a value of less
than $10,000); (v) made or permitted any amendment or termination of
any contract, agreement or license to which it is a party if such
amendment or termination is material, considering the business of San
Joaquin; or (vi) issued, delivered or agreed to issue or deliver any
stock, bonds or other corporate securities, including debentures
(whether authorized and unissued or held as treasury stock); and
(d) to the best knowledge of San Joaquin, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets or condition of San Joaquin.
SECTION 1.8 TITLE AND RELATED MATTERS. San Joaquin has good and
marketable title to and is the sole and exclusive owner of all of its
properties, inventory, interests in properties and assets, real and personal
(collectively, the "Assets") which are reflected in the San Joaquin audited
balance sheet and the San Joaquin Schedules or acquired after that date (except
properties, interests in properties and assets sold or otherwise disposed of
since such date in the ordinary course of business), free and clear of all
liens, pledges, charges or encumbrances except: (a) statutory liens or claims
not yet delinquent; (b) such imperfections of title and easements as do not and
will not, materially detract from or interfere with the present or proposed use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and (c) as described in
the San Joaquin Schedules. Except as set forth in the San Joaquin Schedules, San
Joaquin owns free and clear of any liens, claims, encumbrances, royalty
interests or other restrictions or limitations of any nature whatsoever any and
all procedures, techniques, marketing plans, business plans, methods of
management or other information utilized in connection with San Joaquin's
business. Except as set forth in the San Joaquin Schedules, no third party has
any right to, and San Joaquin has not received any notice of infringement of or
conflict with asserted rights of others with respect to any product, technology,
data, trade secrets, know-how, proprietary techniques, trademarks, service
marks, trade names or copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a materially
adverse effect on the business, operations, financial conditions or income of
San Joaquin or any material portion of its properties, assets or rights.
SECTION 1.9 LITIGATION AND PROCEEDINGS. To the best of San Joaquin's
knowledge and belief, there are no actions, suits, proceedings or investigations
pending or threatened by or against San Joaquin or affecting San Joaquin or its
properties, at law or in equity, before any
4
<PAGE>
court or other governmental agency or instrumentality, domestic or foreign or
before any arbitrator of any kind that would have a material adverse effect on
the business, operations, financial condition or income of San Joaquin. San
Joaquin does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, award, rule or regulation of any
court, arbitrator or governmental agency or instrumentality or of any
circumstances which, after reasonable investigation, would result in the
discovery of such a default.
SECTION 1.10 CONTRACTS.
(a) Except as included or described in the San Joaquin
Schedules, there are no material contracts, agreements, franchises,
license agreements or other commitments to which San Joaquin is a party
or by which it or any of its assets, products, technology or properties
are bound;
(b) except as included or described in the San Joaquin
Schedules or reflected in the most recent San Joaquin balance sheet,
San Joaquin is not a party to any oral or written: (i) contract for the
employment of any officer or employee which is not terminable on thirty
(30) days or less notice; (ii) profit sharing, bonus, deferred
compensation, stock option, severance pay, pension benefit or
retirement plan, agreement or arrangement covered by Title IV of the
Employee Retirement Income Security Act, as amended; (iii) agreement,
contract or indenture relating to the borrowing of money; (iv) guaranty
of any obligation, other than one on which San Joaquin is a primary
obligor, for collection and other guaranties of obligations, which, in
the aggregate do not exceed more than one year or providing for
payments in excess of $10,000 in the aggregate; (v) consulting or other
similar contracts with an unexpired term of more than one year or
providing for payments in excess of $10,000 in the aggregate; (vi)
collective bargaining agreements; (vii) agreement with any present or
former officer or director of San Joaquin; or (viii) contract,
agreement or other commitment involving payments by it of more than
$10,000 in the aggregate; and
(c) to San Joaquin's knowledge, all contracts, agreements,
franchises, license agreements and other commitments to which San
Joaquin is a party or by which its properties are bound and which are
material to the operations of San Joaquin taken as a whole, are valid
and enforceable by San Joaquin in all respects, except as limited by
bankruptcy and insolvency laws and by other laws affecting the rights
of creditors generally.
SECTION 1.11 MATERIAL CONTRACT DEFAULTS. Except as set forth in the San
Joaquin Schedules, to the best of San Joaquin's knowledge and belief, San
Joaquin is not in default in any material respect under the terms of any
outstanding contract, agreement, lease or other commitment which is material to
the business, operations, properties, assets or condition of San Joaquin, and
there is no event of default in any material respect under any such contract,
agreement, lease or other commitment in respect of which San Joaquin has not
taken adequate steps to prevent such a default from occurring.
5
<PAGE>
SECTION 1.12 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which San Joaquin
is a party or to which any of its properties or operations are subject.
SECTION 1.13 GOVERNMENTAL AUTHORIZATIONS. To the best of San Joaquin's
knowledge, San Joaquin has all licenses, franchises, permits or other
governmental authorizations legally required to enable San Joaquin to conduct
its business in all material respects as conducted on the date hereof. Except
for compliance with provincial, federal and state securities and corporation
laws, as hereinafter provided, no authorization, approval, consent or order of,
or registration, declaration or filing with, any court or other governmental
body is required in connection with the execution and delivery by San Joaquin of
this Agreement and the consummation by San Joaquin of the transactions
contemplated hereby.
SECTION 1.14 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of San
Joaquin's knowledge, except as disclosed in the San Joaquin Schedules, San
Joaquin has complied with all applicable statutes and regulations of any
provincial, federal, state or other governmental entity or agency thereof,
except to the extent that noncompliance would not materially and adversely
affect the business, operations, properties, assets or condition of San Joaquin
or would not result in San Joaquin's incurring any material liability.
SECTION 1.15 INSURANCE. All of the insurable properties owned either
directly or indirectly of San Joaquin are insured for San Joaquin's benefit in
accordance with the insurance policies disclosed in the San Joaquin Schedules
under valid and enforceable policies issued by insurers of recognized
responsibility. Such policy or policies containing substantially equivalent
coverage will be outstanding and in full force at the Closing Date.
SECTION 1.16 APPROVAL OF AGREEMENT. The board of directors and
shareholders of San Joaquin have authorized the execution and delivery of this
Agreement by San Joaquin and have approved the transactions contemplated hereby.
SECTION 1.17 MATERIAL TRANSACTIONS OR AFFILIATIONS. Except as disclosed
herein and in the San Joaquin Schedules, there exists no material contract,
agreement or arrangement between San Joaquin and any predecessor and any person
who was at the time of such contract, agreement or arrangement an officer,
director or person owning of record, or known by San Joaquin to own
beneficially, ten percent (10%) or more of the issued and outstanding San
Joaquin Common Shares and which is to be performed in whole or in part after the
date hereof. In all of such transactions, the amount paid or received, whether
in cash, in services or in kind, has been during the full term thereof, and is
required to be during the unexpired portion of the term thereof, no less
favorable to San Joaquin than terms available from otherwise unrelated parties
in arms-length transactions. There are no commitments by San Joaquin, whether
written or oral, to lend any funds to, borrow any money from or enter into any
other material transactions with, any such affiliated person.
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SECTION 1.18 LABOR RELATIONS. San Joaquin has never had a work stoppage
resulting from labor problems. To the best knowledge of San Joaquin, no union or
other collective bargaining organization is organizing or attempting to organize
any employee of San Joaquin.
SECTION 1.19 PREVIOUS SALES OF SECURITIES. Since inception, San Joaquin
has sold San Joaquin Common Shares to investors in reliance upon applicable
exemptions from the registration requirements under the laws of the Province of
Alberta, Canada and the United States and all such sales (the "Sales") were made
in accordance with the laws of said jurisdictions.
SECTION 1.20 SAN JOAQUIN SCHEDULES. Upon execution hereof, San Joaquin
will deliver to LEK the following schedules, which are collectively referred to
as the "San Joaquin Schedules" and which consist of separate schedules dated as
of the date of this Agreement and instruments and data as of such date, all
certified by the chief executive officer of San Joaquin as complete, true and
correct in all material respects:
(a) copies of the articles of incorporation, bylaws and all
minutes of shareholders' and directors' meetings of San Joaquin or such
other corporate documentation and records required to maintain San
Joaquin in good standing in the State of Nevada;
(b) the financial statements of San Joaquin referenced
hereinabove in Section 1.4;
(c) a list indicating the names and addresses of the
stockholders of San Joaquin, together with the number of shares owned
by them;
(d) copies of all licenses, permits and other governmental
authorizations, requests or applications therefor, pursuant to which
San Joaquin carries on or proposes to carry on its business (except
those which in the aggregate, are immaterial to the present or proposed
business of San Joaquin);
(e) a list of every debt, mortgage, security interest, pledge,
lien, encumbrance or claim of any nature whatsoever in excess of
$10,000 as may affect San Joaquin, its properties or assets;
(f) a list of all executive employees of San Joaquin,
including current compensation, with notation as to job description and
whether or not such employee is subject to a written contract;
(g) a description of all real and personal property owned by
San Joaquin, together with a description of every mortgage, deed of
trust, pledge, lien, agreement, encumbrance, claim or equity interest
of any nature whatsoever in such real and personal property;
(h) copies of all material contracts, leases, agreements or
other instruments to which San Joaquin is a party or by which it or its
properties are bound;
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(i) the name and location of each bank or other institution
with which San Joaquin has an account or safety deposit box and the
names of all persons authorized to draw thereon or having access
thereto;
(j) a copy of all material documentation relating to the sale
of San Joaquin Common Shares by San Joaquin to its present
stockholders;
(k) a list of insurance policies referred to in Section 1.15;
(l) a description of any material adverse change in the
business operations, property, inventory, assets or condition of San
Joaquin since the most recent San Joaquin balance sheet required to be
provided pursuant to Section 1.4; and
(m) any other information, together with any required copies
of documents required to be disclosed in the San Joaquin Schedules by
Sections 1.1 through 1.19.
San Joaquin shall cause the San Joaquin Schedules and the instruments
and data delivered to LEK hereunder to be updated after the date hereof up to
and including the Closing Date, as hereinafter defined.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES OF LEK
As an inducement to, and to obtain the reliance of San Joaquin, LEK
represents and warrants as follows:
SECTION 2.1 ORGANIZATION. LEK is a corporation duly organized, validly
existing and in good standing under the laws of the state of Nevada and has the
corporate power and is duly authorized, qualified, franchised and licensed under
all applicable laws, regulations, ordinances and orders of public authorities to
own all of its properties and assets and to carry on its business in all
material respects as it are now being conducted, including qualification to do
business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the LEK Schedules (as hereinafter
defined) are complete and correct copies of the articles of incorporation and
bylaws of LEK as in effect on the date hereof. The execution and delivery of
this Agreement does not and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not, violate any
provision of LEK's articles of incorporation or bylaws. LEK has taken all action
required by law, its articles of incorporation, its bylaws or otherwise to
authorize the execution and delivery of this Agreement. LEK has full power,
authority and legal right and has taken all action required by law, its articles
of incorporation, bylaws or otherwise to consummate the transactions herein
contemplate.
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SECTION 2.2 CAPITALIZATION. The authorized capitalization of LEK
consists of 1,000,000,000 shares of Common Stock, par value $0.0001 per share.
As of the date hereof there are 1,000,000 Common Shares of LEK issued and
outstanding. As of the Closing Date (as defined herein), there will be no more
than 1,000,000 shares of LEK's common stock issued or outstanding, pre-forward
split.
Simultaneous with the Closing Date, as defined hereinbelow, the Board
of Directors of LEK has undertaken a forward split of its issued and outstanding
Common Stock, whereby 3.7 shares of Common Stock shall be issued in exchange for
each share of Common Stock presently issued and outstanding, in order to
establish the number of issued and outstanding Common Shares of LEK at the
Closing Date to be 3,700,000 shares (the "LEK Common Shares") held by the then
existing security holders of LEK. All issued and outstanding LEK Common Shares
have been legally issued, fully paid and are nonassessable.
SECTION 2.3 SUBSIDIARIES. LEK has no subsidiary companies.
SECTION 2.4 FINANCIAL STATEMENTS.
(a) Included in the LEK Schedules are the audited balance
sheet of LEK for the fiscal years ended March 31, 1999 and 1998, and
the related statements of operations, stockholders' equity and cash
flows for the years then ended, and the unaudited balance sheet and
related statement of operations, stockholders' equity and cash flow for
the six month period ended September 30, 1999, which are included in
the schedules identified in Section 2.19(b).
(b) All such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved. The LEK balance sheets present
fairly as of their respective dates the financial condition of LEK. LEK
did not have as of the date of any of such LEK balance sheets, any
liabilities or obligations (absolute or contingent) which should be
reflected in a balance sheet or the notes thereto prepared in
accordance with generally accepted accounting principles, and all
assets reflected therein are properly reported and present fairly the
value of the assets of LEK, in accordance with generally accepted
accounting principles. The statements of operations, stockholders'
equity and changes in financial position reflect fairly the information
required to be set forth therein by generally accepted accounting
principles.
(c) The books and records, financial and others, of LEK are in
all material respects complete and correct and have been maintained in
accordance with good business accounting practices.
(d) LEK has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any
deficiencies, interest or penalties).
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(e) As of the Closing Date, as defined herein, the LEK balance
sheets and the notes thereto, shall reflect that LEK has: (i) no
receivables; (ii) no accounts payable; and (iii) no contingent
liabilities, direct or indirect, matured or unmatured.
SECTION 2.5 INFORMATION. The information concerning LEK as set forth in
this Agreement and in the LEK Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
SECTION 2.6 OPTIONS AND WARRANTS. Other than as previously disclosed by
LEK to San Joaquin and as otherwise included in the LEK Schedules, there are no
existing options, warrants, calls or commitments of any character to which LEK
is a party and by which it is bound.
SECTION 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described
herein or in the LEK Schedules, since September 30, 1999:
(a) LEK has not: (i) amended its articles of incorporation or
bylaws; (ii) waived any rights of value which in the aggregate are
extraordinary or material considering the business of LEK; (iii) made
any material change in its method of management, operation or
accounting; or (iv) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or
termination pay to any present or former officer or employee;
(b) LEK has not: (i) granted or agreed to grant any options,
warrants or other rights for its stocks, bonds or other corporate
securities calling for the issuance thereof, which option, warrant or
other right has not been cancelled as of the Closing Date; or (ii)
borrowed or agreed to borrow any funds or incurred or become subject
to, any material obligation or liability (absolute or contingent)
except liabilities incurred in the ordinary course of business; and
(c) to the best knowledge of LEK, it has not become subject to
any law or regulation which materially and adversely affects, or in the
future may adversely affect, the business, operations, properties,
assets or condition of LEK.
SECTION 2.8 TITLE AND RELATED MATTERS. As of the Closing Date, LEK will
own no real, personal or intangible property.
SECTION 2.9 LITIGATION AND PROCEEDINGS. There are no actions, suits or
proceedings pending or, to the best of LEK's knowledge and belief, threatened by
or against or affecting LEK, at law or in equity, before any court or other
governmental agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind that would have a material adverse effect on the
business, operations, financial condition, income or business prospects of LEK.
LEK does not have any knowledge of any default on its part with respect to any
judgment, order, writ,
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injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality.
SECTION 2.10 CONTRACTS. On the Closing Date:
(a) there are no material contracts, agreements, franchises,
license agreements, or other commitments to which LEK is a party or by
which it or any of its properties are bound, except for those
agreements between LEK and Corporate Stock Transfer, Inc., its transfer
agent and the agreement between LEK and Andrew I. Telsey, P.C., its
legal counsel;
(b) LEK is not a party to any contract, agreement, commitment
or instrument or subject to any charter or other corporate restriction
or any judgment, order, writ, injunction, decree or award which
materially and adversely affects, or in the future may (as far as LEK
can now foresee) materially and adversely affect, the business,
operations, properties, assets or conditions of LEK; and
(c) LEK is not a party to any material oral or written: (i)
contract for the employment of any officer or employee; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension, benefit or retirement plan, agreement or arrangement covered
by Title IV of the Employee Retirement Income Security Act, as amended;
(iii) agreement, contract or indenture relating to the borrowing of
money; (iv) guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and other
guaranties of obligations, which, in the aggregate exceeds $1,000; (v)
consulting or other similar contract with an unexpired term of more
than one year or providing for payments in excess of $1,000 in the
aggregate; (vi) collective bargaining agreement; (vii) agreement with
any present or former officer or director of LEK; or (viii) contract,
agreement, or other commitment involving payments by it of more than
$1,000 in the aggregate.
SECTION 2.11 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which LEK is a
party or to which any of its properties or operations are subject.
SECTION 2.12 MATERIAL CONTRACT DEFAULTS. To the best of LEK's knowledge
and belief, LEK is not in default in any material respect under the terms of any
outstanding contract, agreement, lease or other commitment which is material to
the business, operations, properties, assets or condition of LEK, and there is
no event of default in any material respect under any such contract, agreement,
lease or other commitment in respect of which LEK has not taken adequate steps
to prevent such a default from occurring.
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SECTION 2.13 GOVERNMENTAL AUTHORIZATIONS. To the best of LEK's
knowledge, LEK has all licenses, franchises, permits and other governmental
authorizations that are legally required to enable it to conduct its business
operations in all material respects as conducted on the date hereof. Except for
compliance with federal and state securities or corporation laws, no
authorization, approval, consent or order of, or registration, declaration or
filing with, any court or other governmental body is required in connection with
the execution and delivery by LEK of the transactions contemplated hereby.
SECTION 2.14 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of LEK's
knowledge and belief, LEK has complied with all applicable statutes and
regulations of any federal, state or other governmental entity or agency
thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
LEK or would not result in LEK's incurring any material liability. Further, LEK
is, as of the date of this Agreement, a "reporting company" under Section 12 of
the Securities Exchange Act of 1934, as amended, and is current in filing all
reports required to be filed pursuant to said Act.
SECTION 2.15 INSURANCE. LEK has no insurable properties and no
insurance policies will be in effect at the Closing Date, as hereinafter
defined.
SECTION 2.16 APPROVAL OF AGREEMENT. The board of directors and
shareholders of LEK have authorized the execution and delivery of this Agreement
by LEK and have approved the transactions contemplated hereby.
SECTION 2.17 MATERIAL TRANSACTIONS OR AFFILIATIONS. As of the Closing
Date, there will exist no material contract, agreement or arrangement between
LEK and any person who was at the time of such contract, agreement or
arrangement an officer, director or person owning of record, or known by LEK to
own beneficially, ten percent (10%) or more of the issued and outstanding common
stock of LEK and which is to be performed in whole or in part after the date
hereof. LEK has no commitment, whether written or oral, to lend any funds to,
borrow any money from or enter into any other material transactions with, any
such affiliated person.
SECTION 2.18 LABOR RELATIONS. LEK has never had a work stoppage
resulting from labor problems. LEK has no employees other than its officers and
directors.
SECTION 2.19 PREVIOUS SALES OF SECURITIES. Since inception, LEK has
sold LEK Common Shares to investors in reliance upon applicable exemptions from
the registration requirements under the laws of the State of Nevad and the
United States and all such sales were made in accordance with the laws of said
jurisdictions.
SECTION 2.20 LEK SCHEDULES. Upon execution hereof, LEK shall deliver to
San Joaquin the following schedules, which are collectively referred to as the
"LEK Schedules" which are dated the date of this Agreement, all certified by an
officer of LEK to be complete, true and accurate:
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(a) complete and correct copies of the articles of
incorporation and bylaws of LEK as in effect as of the date of this
Agreement;
(b) copies of all financial statements of LEK identified in
Section 2.4(a);
(c) a list indicating the names and addresses of the
stockholders of LEK, together with the number of shares owned by them;
(d) the description of any material adverse change in the
business, operations, property, assets, or condition of LEK since
September 30, 1999, required to be provided pursuant to Section 2.7;
(e) a list of all executive employees of LEK, including
current compensation, with notation as to job description and whether
or not such employee is subject to a written contract; and
(f) any other information, together with any required copies
of documents, required to be disclosed in the LEK Schedules by Sections
2.1 through 2.18.
LEK shall cause the LEK Schedules and the instruments to be
delivered to San Joaquin hereunder to be updated after the date hereof up to and
including the Closing Date. It is specifically acknowledged by LEK that it has
no licenses, permits or other governmental authorizations relevant to its
business, nor any debts, material contracts, bank accounts or documentation
relating to the sale of LEK' Common Shares.
ARTICLE III
EXCHANGE PROCEDURE
SECTION 3.1 SHARE EXCHANGE/DELIVERY OF SAN JOAQUIN SECURITIES. On the
Closing Date, the holders of the San Joaquin Common Shares shall deliver to LEK
(i) certificates or other documents evidencing all of the issued and outstanding
San Joaquin Common Shares, duly endorsed in blank or with executed stock power
attached thereto in transferrable form; and (ii) investment letters, the form of
which is attached hereto as Exhibit "B". On the Closing Date, all previously
issued and outstanding shares of common stock of San Joaquin shall be canceled
and all rights in respect thereof shall cease.
SECTION 3.2 ISSUANCE OF LEK COMMON SHARES. In exchange for all of the
San Joaquin Common Shares tendered pursuant to Section 3.1, LEK shall issue an
aggregate of 8,069,000 "restricted" LEK Common Shares to the San Joaquin
shareholders on a share-for-share basis to their existing ownership in San
Joaquin.
SECTION 3.3 EVENTS PRIOR TO CLOSING. Upon execution hereof or as soon
thereafter as practical, management of LEK and San Joaquin shall execute,
acknowledge and deliver (or shall
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cause to be executed, acknowledged and delivered) any and all certificates,
opinions, financial statements, schedules, agreements, resolutions, rulings or
other instruments required by this Agreement to be so delivered, together with
such other items as may be reasonably requested by the parties hereto and their
respective legal counsel in order to effectuate or evidence the transactions
contemplated hereby, subject only to the conditions to Closing referenced
hereinbelow.
SECTION 3.4 CLOSING. The closing of the transaction contemplated by
this Agreement shall be as of the date in which (i) each party hereto has
executed this Agreement; and (ii) all of the shareholders of San Joaquin have
approved the terms of this Agreement; and (iii) all conditions to Closing
referenced hereinabove, as well as in Articles V and VI below, have been
satisfied or waived by the appropriate party and all documentation referenced
herein is delivered to the respective party herein, unless a different date is
mutually agreed to in writing by the parties hereto (the "Closing Date").
SECTION 3.5 TERMINATION.
(a) This Agreement may be terminated by the board of directors
of either LEK or San Joaquin at any time prior to the Closing Date if:
(i) there shall be any action or proceeding before
any court or any governmental body which shall seek to
restrain, prohibit or invalidate the transactions contemplated
by this Agreement and which, in the judgment of such board of
directors, made in good faith and based on the advice of its
legal counsel, makes it inadvisable to proceed with the
exchange contemplated by this Agreement; or
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is
required to consummate such transactions; or
(iii) the conditions described in Articles V or VI,
below, as applicable, have not been satisfied in full.
In the event of termination pursuant to this subparagraph (a) of this
Section 3.5, no obligation, right, or liability shall arise hereunder
and each party shall bear all of the expenses incurred by it in
connection with the negotiation, drafting and execution of this
Agreement and the transactions herein contemplated.
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of LEK if San Joaquin
shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the
representations or warranties of San Joaquin contained herein shall be
inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days'
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written notice thereof is given to San Joaquin. If this Agreement is
terminated pursuant to this subparagraph (b) of this Section 3.5, this
Agreement shall be of no further force or effect and no obligation,
right or liability shall arise hereunder.
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of San Joaquin if LEK
shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the
representations or warranties of LEK contained herein shall be
inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days written notice thereof is given to LEK. If
this Agreement is terminated pursuant to this subparagraph (c) of
Section 3.5, this Agreement shall be of no further force or effect and
no obligation, right or liability shall arise hereunder.
SECTION 3.6 DIRECTORS OF LEK. Upon the Closing, the present members of
LEK's Board of Directors shall tender their resignations seriatim so that the
following persons are appointed directors of LEK in accordance with procedures
set forth in the LEK bylaws: J. Timothy Bowes, Nick DeMare and Colin S. McNeil.
Each director shall hold office until his successor shall have been duly elected
and shall have qualified or until his or her earlier death, resignation or
removal.
SECTION 3.7 OFFICERS OF LEK. Upon the Closing, the present officers of
LEK shall tender their resignations and simultaneous therewith, the following
persons shall be elected as officers of LEK in accordance with procedures set
forth in the LEK bylaws:
NAME OFFICE
J. Timothy Bowes President, Assistant Secretary
Nick DeMare Secretary, Treasurer
ARTICLE IV
SPECIAL COVENANTS
SECTION 4.1 ACCESS TO PROPERTIES AND RECORDS. LEK and San Joaquin will
each afford to the officers and authorized representatives of the other full
access to the properties, books and records of LEK and San Joaquin, as the case
may be, in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of LEK and San Joaquin, as
the case may be, as the other shall from time to time reasonably request.
SECTION 4.2 AVAILABILITY OF RULE 144. Each of the parties acknowledge
that the stock of LEK to be issued pursuant to this Agreement will be
"restricted securities," as that term is defined in Rule 144 and/or Regulation S
as promulgated pursuant to the Securities Act. LEK is under
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no obligation to register such shares under the Securities Act, or otherwise.
Notwithstanding the foregoing, however, following the Closing Date, LEK will use
its best efforts to: (a) make publicly available on a regular basis not less
than semi-annually, business and financial information regarding LEK so as to
make available to the shareholders of LEK the provisions of Rule 144 pursuant to
subparagraph (c)(2) thereof; and (b) within ten (10) days of any written request
of any stockholder of LEK, LEK will provide to such stockholder written
confirmation of compliance with such of the foregoing subparagraph as may then
be applicable. The stockholders of LEK holding restricted securities of LEK as
of the date of this Agreement and their respective heirs, administrators,
personal representatives, successors and assigns, are intended third party
beneficiaries of the provisions set forth herein. The covenants set forth in
this Section 4.2 shall survive the Closing and the consummation of the
transactions herein contemplated.
SECTION 4.3 INFORMATION FOR LEK PUBLIC REPORTS. San Joaquin will
furnish LEK with all information concerning San Joaquin and the San Joaquin
Stockholders, including all financial statements, required for inclusion in any
registration statement or public report intended to be filed by LEK pursuant to
the Securities Act, the Exchange Act, or any other applicable federal or state
law. San Joaquin covenants that all information so furnished for either such
registration statement or other public release by LEK, including the financial
statements described in Section 1.4, shall be true and correct in all material
respects without omission of any material fact required to make the information
stated not misleading.
SECTION 4.4 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE LEK
COMMON SHARES TO BE ISSUED IN THE EXCHANGE. The consummation of this Agreement,
including the issuance of the LEK Common Shares to the stockholders of San
Joaquin as contemplated hereby, constitutes the offer and sale of securities
under the Securities Act, and applicable state statutes. Such transaction shall
be consummated in reliance on exemptions from the registration and prospectus
delivery requirements of such statutes which depend, INTER ALIA, upon the
circumstances under which the San Joaquin stockholders acquire such securities.
In connection with reliance upon exemptions from the registration and prospectus
delivery requirements for such transactions, at the Closing, San Joaquin shall
cause to be delivered, and the San Joaquin stockholders shall deliver to LEK,
the investment letter referenced in Section 3.1.
SECTION 4.5 THIRD PARTY CONSENTS. LEK and San Joaquin agree to
cooperate with each other in order to obtain any required third party consents
to this Agreement and the transactions herein contemplated.
SECTION 4.6 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the LEK or San Joaquin
Schedules or as permitted or contemplated by this Agreement, the
parties hereto will each use its best efforts to:
(i) carry on its business in substantially the same
manner as it has heretofore;
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(ii) maintain and keep its properties in states of
good repair and condition as at present, except for
depreciation due to ordinary wear and tear and damage due to
casualty;
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligations under material contracts, leases and instruments
relating to or affecting its assets, properties and business;
(v) maintain and preserve its business organization
intact, retain its key employees and maintain its relationship
with its material suppliers and customers; and
(vi) fully comply with and perform in all material
respects all obligations and duties imposed on it by all
provincial, federal and state laws and all rules, regulations
and orders imposed by provincial, federal or state
governmental authorities.
(vii) utilize its best efforts in order to establish
a trading market for LEK's Common Stock on a US over the
counter market.
(b) From and after the date of this Agreement until the
Closing Date, neither LEK nor San Joaquin will, without the prior
consent of the other party:
(i) except as otherwise specifically set forth
herein, make any change in their respective articles of
incorporation or bylaws;
(ii) declare or pay any dividend on its outstanding
shares of capital stock, except as may otherwise be required
by law, or effect any stock split or otherwise change its
capitalization, except as provided herein;
(iii) enter into or amend any employment, severance
or similar agreements or arrangements with any directors or
officers;
(iv) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date
hereof to acquire any shares of its capital stock; or
(v) purchase or redeem any shares of its capital
stock, except as disclosed herein.
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SECTION 4.9 INDEMNIFICATION.
(a) San Joaquin hereby agrees to indemnify LEK and each of the
officers, agents and directors of LEK as of the date of execution of
this Agreement against any loss, liability, claim, damage or expense
(including, but not limited to, any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened or any claim whatsoever), to
which it or they may become subject arising out of or based on any
inaccuracy by San Joaquin appearing in or misrepresentation made in
this Agreement. The indemnification provided for in this paragraph
shall survive the Closing and consummation of the transactions
contemplated hereby and termination of this Agreement for a period of
18 months.
(b) LEK and its officers and directors hereby agree to
indemnify San Joaquin and each of the officers, agents, directors and
current shareholders of San Joaquin as of the Closing Date against any
loss, liability, claim, damage or expense (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced
or threatened or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made in this Agreement and particularly the
representation regarding no liabilities referred to in Section 2.4(b).
The indemnification provided for in this Section shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement for a period of 18 months.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF LEK
The obligations of LEK under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 5.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by San Joaquin in this Agreement were true when made and shall
be true at the Closing Date with the same force and effect as if such
representations and warranties were made at the Closing Date (except for changes
therein permitted by this Agreement), and San Joaquin shall have performed or
complied with all covenants and conditions required by this Agreement to be
performed or complied with by San Joaquin prior to or at the Closing. LEK shall
be furnished with a certificate, signed by a duly authorized officer of San
Joaquin and dated the Closing Date, to the foregoing effect.
SECTION 5.2 STOCKHOLDER APPROVAL. The stockholders of San Joaquin shall
have approved this Agreement and the transactions contemplated thereby.
18
<PAGE>
SECTION 5.3 OFFICER'S CERTIFICATE. LEK shall have been furnished with a
certificate dated the Closing Date and signed by a duly authorized officer of
San Joaquin to the effect that: (a) the representations and warranties of San
Joaquin set forth in the Agreement and in all Exhibits, Schedules and other
documents furnished in connection herewith are in all material respects true and
correct as if made on the Closing Date; (b) San Joaquin has performed all
covenants, satisfied all conditions, and complied with all other terms and
provisions of this Agreement to be performed, satisfied or complied with by it
as of the Closing Date; (c) since the date of San Joaquin's audited Balance
Sheet of October 31, 1999, there has not been any materially adverse change in
the business, prospects, properties or financial condition of San Joaquin; (d)
since such date and other than as previously disclosed to LEK, San Joaquin has
not entered into any material transaction other than transactions which are
usual and in the ordinary course of its business; and (e) no litigation,
proceeding, investigation or inquiry is pending or, to the best knowledge of San
Joaquin, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the San Joaquin Schedules, by or against San Joaquin
which might result in any material adverse change in any of the assets,
properties, business or operations of San Joaquin.
SECTION 5.4 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business or operations of nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business or operations of San
Joaquin.
SECTION 5.5 OTHER ITEMS. LEK shall have received such further
documents, certificates or instruments relating to the transactions contemplated
hereby as LEK may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF SAN JOAQUIN
The obligations of San Joaquin under this Agreement are subject to the
satisfaction, at or before the Closing Date (unless otherwise indicated herein),
of the following conditions:
SECTION 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by LEK in this Agreement were true when made and shall be true
as of the Closing Date (except for changes therein permitted by this Agreement)
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and LEK shall have performed and complied
with all covenants and conditions required by this Agreement to be performed or
complied with by LEK prior to or at the Closing. San Joaquin shall have been
furnished with a certificate, signed by a duly authorized executive officer of
LEK and dated the Closing Date, to the foregoing effect.
SECTION 6.2 OFFICER'S CERTIFICATE. San Joaquin shall be furnished with
a certificate dated the Closing Date and signed by a duly authorized officer of
LEK to the effect that: (a) the
19
<PAGE>
representations and warranties of LEK set forth in the Agreement and in all
Exhibits, Schedules and other documents furnished in connection herewith are in
all material respects true and correct as if made on the Closing Date; (b) LEK
has performed all covenants, satisfied all conditions, and complied with all
other terms and provisions of the Agreement to be performed, satisfied or
complied with by it as of the Closing Date; (c) since the date of LEK's
unaudited Balance Sheet of September 30, 1999, there has not been any materially
adverse change in the business, prospects, properties or financial condition of
LEK; (d) since such date, LEK has not entered into any material transaction
other than transactions which are usual and in the ordinary course of its
business; and (e) no litigation, proceeding, investigation or inquiry is pending
or, to the best knowledge of LEK, threatened, which might result in an action to
enjoin or prevent the consummation of the transactions contemplated by this
Agreement or, to the extent not disclosed in the LEK Schedules, by or against
LEK which might result in any material adverse change in any of the assets,
properties, business or operations of LEK.
SECTION 6.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
there shall not have occurred any material adverse change in the financial
condition, business or operations of nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business or operations of LEK.
SECTION 6.4 ADDITIONAL CONDITIONS TO CLOSING. In addition to the
obligations contained herein, LEK's shareholders shall adopt and approve
amendments to the LEK Articles of Incorporation, changing the name of LEK to
"San Joaquin Resources Inc." (or such other name as may be available and
acceptable to management of San Joaquin).
SECTION 6.5 COMPLIANCE WITH REPORTING REQUIREMENTS. As of the Closing
Date, LEK shall be current in and in compliance with all requirements of all
filings required to be tendered to the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
SECTION 6.6 OTHER ITEMS. San Joaquin shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as San Joaquin may reasonably request.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 BROKERS AND FINDERS. Except as stated in Schedule 7.1, each
party hereto hereby represents and warrants that it is under no obligation,
express or implied, to pay certain finders in connection with the bringing of
the parties together in the negotiation, execution, or consummation of this
Agreement. The parties each agree to indemnify the other against any claim by
any third person not listed in Schedule 7.1 for any commission, brokerage or
finder's fee or other payment with respect to this Agreement or the transactions
contemplated hereby
20
<PAGE>
based on any alleged agreement or understanding between the indemnifying party
and such third person, whether express or implied from the actions of the
indemnifying party.
SECTION 7.2 LAW, FORUM AND JURISDICTION. This Agreement shall be
construed and interpreted in accordance with the laws of the State of Nevada.
SECTION 7.3 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to LEK: David Ward, President
LEK International, Inc.
Suite 106
1460 Pandosy Street
Kelowna, British Columbia, Canada V14 1P3
If to San Joaquin: J. Timothy Bowes, President
San Joaquin Oil & Gas Ltd.
c/o Fay Matsukage
455 Sherman St.
Suite 300
Denver, CO 80203
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
SECTION 7.4 ATTORNEYS' FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
SECTION 7.5 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the reorganization contemplated by this Agreement
has been consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director or employee,
or from any books or records or from personal inspection, of such other party,
and shall not use such data or information or disclose the same to others,
except: (i) to the extent such data is a matter of public knowledge or is
required by law to be published; and (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement.
21
<PAGE>
SECTION 7.6 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's Schedules delivered
pursuant to this Agreement.
SECTION 7.7 THIRD PARTY BENEFICIARIES. This contract is solely among
LEK and San Joaquin and, except as specifically provided, no director, officer,
stockholder, employee, agent, independent contractor or any other person or
entity shall be deemed to be a third party beneficiary of this Agreement.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations or warranties, written or oral,
except as set forth herein. This Agreement may not be amended or modified,
except by a written agreement signed by all parties hereto.
SECTION 7.9 SURVIVAL; TERMINATION. Except as otherwise provided herein,
the representations, warranties and covenants of the respective parties shall
survive the Closing Date and the consummation of the transactions herein
contemplated.
SECTION 7.10 COUNTERPARTS FACSIMILE EXECUTION. For purposes of this
Agreement, a document (or signature page thereto) signed and transmitted by
facsimile machine or telecopier is to be treated as an original document. The
signature of any party thereon, for purposes hereof, is to be considered as an
original signature, and the document transmitted is to be considered to have the
same binding effect as an original signature on an original document. At the
request of any party, a facsimile or telecopy document is to be re-executed in
original form by the parties who executed the facsimile or telecopy document. No
party may raise the use of a facsimile machine or telecopier machine as a
defense to the enforcement of the Agreement or any amendment or other document
executed in compliance with this Section.
SECTION 7.11 AMENDMENT OR WAIVER. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
SECTION 7.12 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth at
length herein.
22
<PAGE>
SECTION 7.13 EXPENSES. Each party herein shall bear all of their
respective costs and expenses incurred in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for herein
and the preparation therefor.
SECTION 7.14 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only and
do not form a part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
SECTION 7.15 BENEFIT. This Agreement shall be binding upon and shall
inure only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the prior
written consent of the other party.
SECTION 7.16 PUBLIC ANNOUNCEMENTS. Except as may be required by law,
neither party shall make any public announcement or filing with respect to the
transactions provided for herein without the prior consent of the other party
hereto.
SECTION 7.17 SEVERABILITY. In the event that any particular provision
or provisions of this Agreement or the other agreements contained herein shall
for any reason hereafter be determined to be unenforceable, or in violation of
any law, governmental order or regulation, such unenforceability or violation
shall not affect the remaining provisions of such agreements, which shall
continue in full force and effect and be binding upon the respective parties
hereto.
SECTION 7.18 FAILURE OF CONDITIONS; TERMINATION. In the event any of
the conditions specified in this Agreement shall not be fulfilled on or before
the Closing Date, either of the parties have the right either to proceed or,
upon prompt written notice to the other, to terminate and rescind this Agreement
without liability to any other party. The election to proceed shall not affect
the right of such electing party reasonably to require the other party to
continue to use its efforts to fulfill the unmet conditions.
SECTION 7.19 NO STRICT CONSTRUCTION. The language of this Agreement
shall be construed as a whole, according to its fair meaning and intendment, and
not strictly for or against either party hereto, regardless of who drafted or
was principally responsible for drafting the Agreement or terms or conditions
hereof.
SECTION 7.20 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a) has
fully and carefully read and considered this Agreement; (b) has been or has had
the opportunity to be fully apprised by its attorneys of the legal effect and
meaning of this document and all terms and conditions hereof; and (c) is
executing this Agreement voluntarily, free from any influence, coercion or
duress of any kind.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, hereunto duly authorized, and entered
into as of the date first above written.
LEK INTERNATIONAL, INC.
ATTEST:
/s/ROBERT HEMMERLING By:/s/DAVID WARD
Secretary David Ward, President
ATTEST: SAN JOAQUIN OIL & GAS LTD.
/s/NICK DEMARE By:/s/J. TIMOTHY BOWES
Secretary or Assistant Secretary J. Timothy Bowes, President
24
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
LEK INTERNATIONAL, INC.
The undersigned, being the President and Secretary of LEK International, Inc., a
Nevada corporation (hereinafter referred to as the "Corporation"), having been
authorized to execute these Amended and Restated Articles of Incorporation,
hereby certifies to the Secretary of State of the State of Nevada that:
FIRST: The Corporation desires to amend and restate its Articles of
Incorporation as currently in effect as hereinafter provided.
SECOND: The provisions set forth in these Amended and Restated Articles of
Incorporation supersede the original Articles of Incorporation and all
amendments thereto. These Amended and Restated Articles of Incorporation
correctly set forth the provisions of the Articles of Incorporation, as
amended to the date hereof.
THIRD: The Board of Directors duly adopted and declared the advisability of
the Amended and Restated Articles of Incorporation.
FOURTH: Shareholders of the Corporation holding 608,000 of the 1,000,000
outstanding shares (60.8%) of the Corporation's common stock approved and
adopted the amendments contained in the Amended and Restated Articles of
Incorporation by written consent dated December 15, 1999.
FIFTH: The Articles of Incorporation of the Corporation, as amended and
restated, are set forth on Exhibit A attached hereto.
/S/ DAVID WARD /S/ ROBERT HEMMERLING
David Ward, President Robert Hemmerling, Secretary
ACKNOWLEDGMENT
Province of British Columbia )
) ss
City of Richmond )
On December 20, 1999, personally appeared before me, a Notary Public, David
Ward, who acknowledged that he executed the above instrument.
(Notary Stamp or Seal) /S/ FRED NGAN
Notary Public
<PAGE>
Exhibit A
These amended and restated articles of incorporation shall be deemed effective
as of January 17, 2000.
ARTICLE I
NAME
The name of this Corporation is San Joaquin Resources Inc.
ARTICLE II
PURPOSES AND POWERS
The Corporation is organized to engage in any and all lawful acts and/or
activities for which corporations may be organized under the laws of the State
of Nevada.
ARTICLE III
AUTHORIZED CAPITAL STOCK
The amount of total authorized capital stock which the Corporation shall have
authority to issue is 100,000,000 shares of common stock, each with $0.0001 par
value, and 5,000,000 shares of preferred stock, each with $0.001 par value. To
the fullest extent permitted by the laws of the State of Nevada (currently set
forth in NRS 78.195), as the same now exists or may hereafter be amended or
supplemented, the Board of Directors may fix and determine the designations,
rights, preferences or other variations of each class or series within each
class of capital stock of the Corporation.
No cumulative voting, on any matter to which shareholders shall be entitled to
vote, shall be allowed for any purpose.
The authorized stock of this Corporation may be issued at such time, upon such
terms and conditions and for such consideration as the Board of Directors shall,
from time to time, determine. Shareholders shall not have pre-emptive rights to
acquire unissued shares of the stock of this Corporation.
ARTICLE IV
DIRECTORS
The Governing Board shall be styled as Directors. The Directors are hereby
granted the authority to do any act on behalf of the Corporation as may be
allowed by law. Any action taken in good faith, shall be deemed appropriate and
in each instance where the Nevada General Corporation Law provides that the
Directors may act in certain instances where the Articles of Incorporation so
authorize, such action by the Directors, shall be deemed to exist in these
Articles and the authority granted by said Act shall be imputed hereto without
the same specifically having been enumerated herein.
A-1
<PAGE>
The Board of Directors may consist of from one (1) to nine (9) directors, as
determined, from time to time, by the then existing Board of Directors.
ARTICLE V
NON-ASSESSABLE STOCK
The capital stock, after the amount of the subscription price has been paid in,
shall not be subject to assessment to pay the debts of said Corporation, whether
issued for money, services, property or otherwise. The private property of the
stockholders shall not be subject to the payment of corporate debts to any
extent whatever.
ARTICLE VI
PERSONAL LIABILITY
Pursuant to NRS 78.037, neither the Directors, the Officers, nor the
Stockholders of the Corporation shall have any personal liability for damages or
for breach of fiduciary duty except for acts or omissions which include
misconduct or fraud.
ARTICLE VII
INCORPORATOR
The name and address of the incorporator of this Corporation is as follows:
NAME ADDRESS
---- -------
Robert Seligman 2533 North Carson Street
Carson City, Nevada 89706
ARTICLE VIII
COMMON DIRECTORS
As provided by Nevada Revised Statutes 78.140, without repeating the
section in full here, the same is adopted and no contract or other transaction
between this Corporation and any of its officers, agents, or directors shall be
deemed void or voidable solely for that reason. The balance of the provisions of
the code section cited, as it now exists, allowing such transactions, is hereby
incorporated into this Article as though more fully set forth, and such Article
shall be read and interpreted to provide the greatest latitude in its
application.
A-2
<PAGE>
ARTICLE IX
LIABILITY OF DIRECTORS AND OFFICERS
No Director, Officer, or Agent, to include counsel, shall be personally
liable to the Corporation or its stockholders for monetary damages for any
breach or alleged breach of fiduciary or professional duty by such person acting
in such capacity. It shall be presumed that in accepting the position as an
Officer, Director, Agent, or Counsel, said individual relied upon and acted in
reliance upon the terms and protections provided for by this Article.
Notwithstanding the foregoing sentences, a person specifically covered by this
Article, shall be liable to the extent provided by applicable law, for acts or
omissions which involve intentional misconduct, fraud, or a knowing violation of
law, or for the payment of dividends in violation of NRS 78.300.
ARTICLE X
ELECTION REGARDING NRS 78.378-78.3793 AND 78.411-78.444
This Corporation shall NOT be governed by nor shall the provisions of
NRS 78.378 through and including 78.3793 and NRS 78.411 through and including
78.444 in any way whatsoever affect the management, operation or be applied in
this Corporation.
ARTICLE XI
INDEMNIFICATION
The Corporation shall indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person against all liability and
expense (including attorneys' fees) incurred by reason of the fact that he is or
was a director or officer of the Corporation, he is or was serving at the
request of the Corporation as a director, officer, employee, or agent of, or in
any similar managerial or fiduciary position of, another corporation,
partnership, joint venture, trust or other enterprise. The Corporation shall
also indemnify any person who is serving or has served the Corporation as a
director, officer, employee, or agent of the Corporation to the extent and in
the manner provided in any bylaw, resolution of the shareholders or directors,
contract, or otherwise, so long as such provision is legally permissible.
ARTICLE XII
REGISTERED AGENT AND OFFICE
The Corporation's registered agent and its address, which is the
Corporation's registered office in the State of Nevada, shall be Corporation
Trust Company of Nevada, 6100 Neil Road, Suite 500, Reno, Nevada 89511.
/S/ DAVID WARD /S/ ROBERT HEMMERLING
David Ward, President Robert Hemmerling, Secretary
A-3
<PAGE>
ACKNOWLEDGMENT
Province of British Columbia )
)ss.
City of Richmond )
On December 20, 1999, personally appeared before me, a Notary Public,
David Ward, who acknowledged that he executed the above instrument.
(Notary Stamp or Seal) /S/ FRED NGAN
Notary Public
A-4
<PAGE>
Kish * Leake & Associates, P.C.
Certified Public Accountants
J.D. Kish, C.P.A., M.B.A. 7901 E. Belleview Ave., Suite 220
James D. Leake, C.P.A., M.T. Englewood, Colorado 80111
- ---------------------------- Telephone: (303) 779-5006
Arleen R. Brogan, C.P.A. Fax: (303) 779-5724
www.klacpa.com
January 19, 2000
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
We would like to inform you that we have read the disclosures provided by LEK
International, Inc. (commission file #0-26321) in its filing on form 8-K dated
December 31, 1999 and that there are no disagreements regarding the statements
made under Item 4-Changes in Registrant's Certifying Accountant.
Sincerely,
/s/Kish, Leake & Associates, P.C.
Kish, Leake & Associates, P.C.
Members of the American Institute of Certified Public Accountants * Colorado
Society of Certified Public Accountants * Private Companies Practice Section *
SEC Practice Section * Web Trust (SM) Certified
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND PRO FORMA CONSOLIDATED
BALANCE SHEET, AND THE NOTES THERETO, FOUND ELSEWHERE IN THE COMPANY'S FORM 8-K
DATED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1
<CASH> 548,160
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 558,160
<PP&E> 38,924
<DEPRECIATION> 0
<TOTAL-ASSETS> 986,804
<CURRENT-LIABILITIES> 25,328
<BONDS> 0
0
0
<COMMON> 11,769
<OTHER-SE> 949,707
<TOTAL-LIABILITY-AND-EQUITY> 986,804
<SALES> 0
<TOTAL-REVENUES> 1,398
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,910
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (41,792)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,792)
<EPS-BASIC> (0.004)
<EPS-DILUTED> (0.004)
</TABLE>
