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FORM 20-F/A1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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TO
[X] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number __________
ACHIEVA DEVELOPMENT CORP.
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(Exact name of Registrant as specified in its charter)
ACHIEVA DEVELOPMENT CORP.
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(Translation of Registrant's name into English)
British Columbia, Canada
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(Jurisdiction of incorporation or organization)
905 West Pender Street, Suite 201,
Vancouver, British Columbia V6C 3L6
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(Address of principal executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock par value $0.00
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
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Class Stock Outstanding
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Common Stock 12,280,683
Class A Preferred Stock 0
Class B Preferred Stock 0
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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Indicate by check mark which financial statement item the registrant has elected
to follow: Item 17 X Item 18
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TABLE OF CONTENTS
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Part I
Item 1. Description of Business 3
Business Development 3
Plan of Operation for Remainder of Fiscal Year 2000 and First Six
Months of Fiscal Year 2001 5
Sales Revenue and Capital 5
Risk Factors Relating to Mineral Properties and Development 5
Item 2. Description of Properties 7
Shaw Creek Project 7
Location and Access 7
Property Interest 7
History and Exploration Stage 8
Ladue Mineral Claims 9
Location and Access 9
Property Interest 10
History and Exploration Stage 10
Mac & Dall Mineral Claims 11
Location and Access 11
Property Interest 11
History and Exploration Stage 12
Item 3. Legal Proceeding 12
Item 4. Control of the Company 12
Item 5. Nature of the Trading Market 12
Item 6. Exchange Controls and Other Limitations Affecting Security Holders 13
Item 7. Taxation 13
Certain Canadian Federal Income Tax Considerations 14
Dividend Distribution on Shares 14
Disposition of Shares 14
Certain United States Income Tax Considerations 14
U.S. Holders 15
Dividend Distribution on Shares of the Company 15
Foreign Tax Credit 15
Disposition of Common Shares 16
Passive Foreign Investment Company Considerations 16
Item 8. Selected Financial Data 18
Six Month Analysis 18
Five Year Analysis 19
Exchange Rates 20
Item 9. Management Discussion and Analysis of Financial Conditions and Results
of Operations 20
Liquidity and Capital Resources 20
Results of Operations 22
Six Months Ended April 30, 1999 and 2000 22
Fiscal Years Ended October 31, 1998 and 1999 22
Fiscal Years Ended October 31, 1997 and 1998 23
Item 9A. Risk Factors 23
Exploration State Company; History of Losses 23
Projections and Estimates 23
Government Regulations 23
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Competition 24
Risks of Mining Exploration Development 24
Volatility of Stock and Mineral Prices 24
Environmental Matters 24
Property Interests 25
Item 10. Directors and Officers of the Registrant 26
Item 11. Compensation of Directors and Officers 27
Item 12. Options to Purchase Securities from the Registrant or its
Subsidiaries 28
Common Share 28
Common Share Purchase Warrants 28
Item 13. Interest of Management in Certain Transactions 28
Part II
Item 14. Description of Securities to be Registered 29
Common Shares 29
Certain Corporate Law Considerations 29
Part III
Item 15. Default upon Senior Securities 30
Item 16. Changes in Securities and Changes in Securities for Registered
Securities 30
Part IV
Item 17. Financial Statements 30
Item 18. Financial Statements 30
Item 19. Financial Statements and Exhibits 30
Signatures 31
Exhibits Index 32
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Unless otherwise indicated herein, all dollar amounts in this
Registration Statement are expressed in Canadian dollars. For a history of the
exchange rates in effect between the Canadian dollar and the United States
dollar, see Item 8. "Selected Financial Data - Exchange Rates."
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
BUSINESS DEVELOPMENT
Achieva Development Corp. (the "Company" or the "Registrant"), was
incorporated on January 10, 1986, pursuant to the laws of the Province of
British Columbia under the name Inn-House Video by registration of its
Memorandum and Articles of Association. On June 29, 1988 the Company changed its
name to Sleeping Gold Ltd., and subsequently to Achieva Development Corp. on
September 14, 1992. The Company's executive offices are located at 905 West
Pender Street, Suite 201, Vancouver, British Columbia, Canada V6C 3L6, and its
telephone number at that address is (604) 682-8628.
The Company has never declared bankruptcy, has not been placed into
receivership for any reason including financial difficulties and has made no
material change in its mode of conducting business.
Since 1988, the Company has been engaged principally in the
acquisition, exploration and development of mineral properties located in North
and South America. To date, the Company has not discovered an economically
viable mineral deposit on any of the mineral properties in which it has an
interest, and there is no assurance that the Company will discover one. The
Company is currently focused on three properties located in North America for
exploration and development: the Shaw Creek Project, the Ladue Mineral Claims
and the Mac & Dall Claims, which are more fully discussed below.
History of Operation
In 1995 the Company entered into a joint venture agreement with North
American Resources, Incorporated Limited ("North American") for the joint
exploration and development of 20.96 square miles of property located in Guyana,
South America. The Company was obligated to and did contribute 100,000 shares of
common stock, and a combined $600,000.00 in capital and mining equipment to the
exploration and development efforts. In exchange the Company acquired a 50%
interest in the property, except for a 3% net smelter return, and options to
acquire up to a 75% interest in the property and the 3% net smelter return.
North American previously tested the property known as the Tamakay Property with
positive results -26 test holes produced 355 ounces of gold.
In 1996 South American Minerals, Inc., ("South American") acquired
North American. Immediately thereafter, in 1997, South American initiated
proceedings to become a public company and sought to purchase the fifty percent
interest held by the Company in the joint venture. After arms length
negotiations, the Company sold its entire interest for 300,000 shares of common
stock in North American on January 5, 1998. The sale was conditioned upon the
agreement that no shares be released to the Company for 1 year from the date of
the agreement and that thereafter 50,000 shares be released every three months
up to the amount of 300,000 shares.
To date, South American has released all 300,000 shares of common stock
to the Company pursuant to the agreement. The Company has in turn sold 206,000
of these shares to generate working capital of approximately $400,000.00. The
Company retains the remaining 94,000 shares of common stock, and intends to sell
these shares to generate additional working capital. The stock currently trades
on the OTC Bulletin Board in the range of US$0.65-$1.25.
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In 1996 the Company began exploring the possibility of acquiring
certain mineral and other rights in Idaho Springs, Colorado, in exchange for
3,000,000 shares of the Company's common stock. The Company intended to acquire
22 acres of surface rights, including 340,000 net haulable tons of tailings
estimated by Wiley Engineering, Inc., of Colorado, to contain approximately
150,000 ounces of silver and between 10,000-17,000 ounces of gold, and certain
development options. The Company's plans included the recovery of precious
minerals from the tailings and development of an existing tunnel on the property
to support transport between Idaho Springs and the commercially attractive
Central City, where gaming is permitted. However, due to environmental and
historical site concerns the project was abandoned.
In July 1998, the Company entered into an agreement with Mini-Consult,
Inc., to acquire a 70% option on the Silver Ridge property located near
Revelstoke, British Columbia, in consideration for payment by the Company of
$13,800.00 in cash and 50,000 shares of the Company's common stock valued at
$0.25/share. The Company immediately commenced exploration, including an NQ wire
line core drilling program. The results of the drilling indicated that sulfide
mineralizations within the portion of the vein were sparse and in May 1999,
management acted on geologist recommendations that the Company discontinue
further work on the property, and permitted its option on the property to
expire.
In 1998, the Company began exploration programs on the three properties
in which it has an interest: the Shaw Creek Project, the Ladue Mineral Claims
and the Mac & Dall Claims. The Company's significant interest in each of these
properties is not a 100% ownership interest, but is limited as noted in the
separate descriptions of each property.
The Shaw Creek Project, which is the current focus of the Company, is
made up of 96 contiguous prospecting sites covering 24 square miles and is
located within an area known as the Tintina Gold Belt or the Big Delta
Quadrangle in the eastern-interior of Alaska. While the Shaw Creek Project has
produced no precious minerals to date and has no known mineral reserves, it is
located between two significant gold deposits currently being mined: the Fort
Knox and Pogo gold deposits. Oxhead Exploration Ltd., which conducted the Phase
I and II exploration of the Shaw Creek Project and prepared geologic reports on
its findings, reviewed publicly available government and geologist reports of
the history of the area, and found that this region had relatively little gold
exploration up until the early 1990s when significant deposits such as Fort
Knox, True North, Ryan Lode and Pogo created a staking rush and a considerable
increase in grass-roots exploration. These deposits, along with others in the
region, have produced hundreds of tons of gold and current resources are
estimated in excess of 40 million ounces of gold. The recently discovered
"intrusive related" high-grade Pogo gold deposit located approximately 15 miles
east-northeast of the Knob zone of the Shaw Creek Project has a conservative
geologic resource of 9.98 million tons at an average grade of 0.52 oz/t, for a
total of 5.2 million ounces contained.
According to Oxhead Exploration, Ltd.'s research findings, the first
gold discovered in the eastern-interior of Alaska was discovered in the Circle
Mining District in 1863 by the Hudson Bay Company. Subsequently, a number of
other mining districts were found to contain significant amounts of gold
deposits. The vast majority of gold produced was from placer deposits. Mining
efforts in the Fairbanks District, located within the Big Delta Quadrangle, is
estimated to have produced 250 tons of placer gold. Historic gold production
from the Big Delta Quadrangle is estimated at approximately 150,000 ounces.
Although the Shaw Creek drainage and its tributaries have had no documented gold
production, current resources for the region are estimated in excess of 40
million ounces of gold.
The Company believes that the location of the Shaw Creek Project and
the history of the region support its efforts to explore for precious minerals
in economic quantities. As a result of the Company's Phase I and Phase II
explorations of the Shaw Creek Project (see, Item 2. "Description of
Properties"), one area, the Knob zone, appears to have mineral deposits, which
may or may not be commercially viable. Accordingly, the Company is now
commencing Phase III of its exploration program of the Shaw Creek Project.
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PLAN OF OPERATION FOR REMAINDER OF FISCAL YEAR 2000 AND FIRST SIX MONTHS OF
FISCAL YEAR 2001
Achieva's employees are comprised solely of its officers who also serve
as directors. Independent contractors hired by the Company conduct the Company's
entire exploration efforts. The Company does not anticipate hiring additional
employees because it does not engage in hands-on project management, but
requires its independent contractors to plan and execute the testing and
exploration, including obtaining all required equipment. As a result, the
Company does not own or lease any plant, machines or equipment related to
exploration. The Company's independent contractors prepare reports on the
exploration and testing programs, which the Company uses to direct the project.
The Company's Plan of Operation for the remainder of fiscal year 2000
and the first six months of fiscal year 2001 is to continue to focus on the
exploration and development of the Shaw Creek Project by implementing Phase III
of the exploration and development program. Results of Phase II of the Shaw
Creek Project indicate that the Knob zone, located in the center of the
property, may have mineral deposits of gold (Au), arsenic (As), antimony (Sb)
and zinc (Zn).
Phase III of the mineral exploration program for the Shaw Creek Project
will be drilling by diamond or auger drill to determine if values increase at
depth or in soil-covered areas. The drilling plans are intended to test the
width and depth of the mineral deposit. Testing the subsurface targets by soil
auger drilling will involve use of a track mounted drill capable of drilling 30
meter deep holes to auger through the thicker soil horizons within the adjacent
valley floor. This method allows the exploration team to further define the
extent of the mineral deposits and the placement of additional holes. The
alternative diamond drilling program would require a three to six hole program
that would include 300 core samples and 20 surface rock samples by geologists
over a 20-day period.
The independent contractors hired to execute Phase III would be
responsible for obtaining the drilling equipment and machinery, engaging the
required manpower, including geologists and technicians, and arranging for
helicopter and field transportation and sample analyses. The estimated cost of
the program is a minimum of US$60,000.00 for auger drilling or between
US$80,000.00-$120,000.00 for a diamond drilling program.
SALES, REVENUE AND CAPITAL
The Company has had no sales and generated no revenue from its
operations for the last three fiscal years, and the capital required to fund
Phase III of the exploration and development project will come from proceeds
from earlier sales of shares of common stock in South American, from the sales
of additional shares of South American held by the Company, and from funds
generated through sales of securities. Liquid working capital currently
available is approximately $533,331.00, and the Company retains 94,000 shares of
South American common stock available to generate additional working capital, if
needed. The stock currently trades on the OTC Bulletin Board in the range of
US$0.65-$1.25. On April 30, 2000, the Company completed a private placement of
2,333,333 units. Each unit costs $0.15 and is comprised of one share of common
stock and one non-transferable warrant entitling the purchaser to acquire an
additional share of common stock for $0.15 within one year from the unit
purchase date or for $0.175 within two years from the purchase date. The private
placement generated immediate proceeds of approximately $350,000.00, to be
available as additional working capital.
RISK FACTORS RELATING TO MINERAL PROPERTY EXPLORATION AND DEVELOPMENT
Investment in the securities of the Company must be considered
speculative due to the nature of the Issuer's business and its present stage of
development. In particular, a prospective purchaser should consider carefully
the risk factors associated with mineral property exploration and development
including, but without limitation, significant factors detailed in Item 9A and
below set forth.
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1. The business of exploration for minerals and mining involves a high
degree of risk. Few properties that are explored are ultimately
developed into producing mines. At present, none of the mineral
properties in which the Company has an interest contains a known body
of commercial ore.
2. The Company has limited financial resources, has no source of operating
cash flow and has no assurance that additional funding will be
available to it for further exploration and development of its projects
or to fulfil its obligations under any applicable agreements.
3. In the course of exploration, development and production of mineral
properties, certain risks, and in particular, unexpected or unusual
geological operating conditions including rock bursts, cave-ins, fires,
flooding and earthquakes may occur. It is not always possible to fully
insure against such risks and the Issuer may decide not to take out
insurance against such risks as a result of high premiums or other
reasons. Should such liabilities arise, they could reduce or eliminate
any future profitability and result in increasing costs and a decline
in the value of the securities of the Company. The Company does not
maintain insurance against environmental risks.
4. Any of the properties in which the Company has or is acquiring an
interest may be subject to prior unregistered agreements or transfers
or native land claims and title may be affected by undetected defects.
The Company has not conducted surveys on any of its properties and
there is a risk that the boundaries thereof could be challenged or
impugned.
5. The operations of the Company may require licenses and permits from
various governmental authorities. There can be no assurance that the
Company will be able to obtain all necessary licenses and permits that
may be required to carry out exploration, development and mining
operations at its projects.
6. Factors beyond the control of the Company may affect the marketability
of any minerals discovered. Metal prices have fluctuated widely,
particularly in recent years. The effect of these factors cannot
accurately be predicted.
7. The Company's operations may be subject to environmental regulations
promulgated by government agencies from time to time. Environmental
legislation provides for restrictions and prohibitions on spills,
release or emissions of various substances produced in association with
certain mining industry operations, such as seepage from tailings
disposal areas, which would result in environmental pollution. A breach
of such legislation may result in imposition of fines and penalties. In
addition, certain types of operations require the submission and
approval of environmental impact assessments. Environmental legislation
is evolving in a manner, which means stricter standards, enforcement,
fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a heightened
degree of responsibility for companies and directors, officers and
employees. The cost of compliance with changes in governmental
regulations has a potential to reduce the profitability of operations.
The Company does not maintain environmental liability insurance.
8. The mineral industry is intensely competitive in all its phases. The
Company competes with many companies possessing greater financial
resources and technical facilities than itself for the acquisition of
mineral concessions, claims, leases and other mineral interests as well
as for the recruitment and retention of qualified employees. However,
due to the currently depressed market for base and precious metals, the
Company does not believe that competition will be a factor which
confines its ability to retain qualified geologists and consultants, or
to acquire interests in mineral properties with significant potential.
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ITEM 2. DESCRIPTION OF PROPERTIES
Shaw Creek Project
Location and Access
The Shaw Creek Project, located within the Big Delta Quadrangle, lies
within the south-central portion of the Yukon-Tanana geologic terrain. The
quadrangle is comprised dominantly of complex green schist to amphibole facies
metamorphic rocks intruded by Mesozoic and Tertiary granitic rocks near the
northeast boundary. The metamorphic protoliths (parental rocks) are mostly
sedimentary with some igneous origins and may be as old as Precambrian.
This complex terrain lies sandwiched between two major continental
faults which lie outside the quadrangle: the Denali fault to the south and the
Tintina fault to the north. It has been suggested that this terrain has been
transported as an allocthonous continental fragment, which moved over oceanic
crust along an ancient continental margin, which is located at the Tintina
fault. The region has a strong northeast structural trend with the most
prominent feature being the Shaw Creek fault, which is theorized to be the path
of the Shaw Creek Valley.
The Shaw Creek Project is made up of 96 contiguous prospecting sites
covering 24 square miles and is located within an area known as the Tintina Gold
Belt or the Big Delta Quadrangle, Fairbanks Recording District, in the
eastern-interior of Alaska. The Shaw Creek property is approximately 10 miles in
length with its long axis running northeast. It is parallel to Shaw Creek, with
the majority of the property southeast of the creek.
The property is centered approximately at 64 degrees 25'20" N latitude
and 145 degrees 18'46" W longitude. The property is approximately 80 air miles
east-southeast of Fairbanks and 30 miles northeast of the city of Delta
Junction. Additional technical information on the property may be reviewed in
the report (the "Shaw Creek Report") prepared by Douglas G. Baker, B.Sc., dated
July 21, 1999. Mr. Baker is at arm's length to the Company.
Access to the property is via helicopter. The majority of available
helicopters in the area are located in Fairbanks. Delta Junction, located 90
miles west of Fairbanks, is used as a staging area and has airport facilities.
The Richardson Highway is the primary route connecting the cities of Fairbanks
and Delta Junction. Delta Junction is the closest community and provides local
services such as lodging, groceries and hardware, while Fairbanks, the largest
city in the interior of Alaska, serves as an industrial supply center and is
serviced by the Alaska railroad. The Company anticipates that the energy source
to be utilized to conduct mining operation will be a gas-powered generator that
would be hauled onto the property.
Property Interest
Pursuant to a staking agreement between David Johnson, Michael Raible
and James Snell (the "Vendors") and the Company, the Company acquired an
undivided 50% interest in the Shaw Creek Project comprised of 24 prospecting
sites known as the Stick claims, and 72 prospecting sites known as the Ton, Bank
and Kelt claims, in September 1998 for a total cost of US$30,000.00. In
September of 1999, prior to the first anniversary, extensions were filed for all
claims within the Shaw Creek Project. In order to maintain its right to explore
the property, the Company must convert each prospecting site to a claim by way
of a recording with the Alaska Department of Natural Resources ("ADNR") by
September 7, 2000. Thereafter, the Company is subject to an annual labor
requirement wherein the Company must spend $100.00 per claim per year in
drilling, excavation or geological work to maintain its exploration rights on
the property. Upon recording a claim, the Company is also subject to an annual
rental fee imposed by the ADNR of $20.00 per claim per year for the first five
years, $40.00 per claim per year for the next five years, and $100.00 per claim
per year for every subsequent year. In the event the Company begins mining
activities that result in mineral
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production there is an additional royalty to be paid to the ADNR, which
currently averages 3% of the Company's mineral reserve production net income.
History and Exploration Stage
The Tintina gold belt region in which the Shaw Creek Project is found
consists of broad valleys, rolling hills, and low mountains with a sub-artic,
semi-arid climate and appearance which form a metallogenic belt. Modern day lode
gold exploration had been conducted on a limited basis in this region until the
early 1990's when the discovery of significant precious mineral deposits such as
Fort Knox and the Pogo created an increase in grass-roots exploration. Oxhead
Exploration Ltd. reports in its Phase I and Phase II geologic reports that
historic gold production from the Big Delta quadrangle is estimated to have
produced approximately 150,000 ounces.
Historically, the Shaw Creek drainage area and its tributaries have had
no documented gold production and the property is without known reserves.
Pre-1999 exploration is unknown, but certainly was conducted in the past for
placer gold deposits. The Company's programs outlined below are exploratory in
nature.
Phase I
In May and June, 1999, the Company contracted Mr. Doug G. Baker of
Oxhead Exploration Ltd., to conduct an initial Phase I reconnaissance
exploration program on the Shaw Creek property. The program included data
compilation, general prospecting, geologic mapping, photographing and the
collection of rock chip, soil and stream sediment samples. Field work performed
for 42 man days resulted in the collection of a total of 206 samples that the
Company shipped directly to a preparation laboratory in Fairbanks, Alaska. The
laboratory, Bondar Clegg, performed industry standard analytical procedures on
the samples.
Geological field observations and sampling resulted in the discovery of
two anomalous zones: the SWM zone, centered near the northeast corner of Stick
claim #13, and the Knob zone, centered near the northeast corner of Kelt claim
#14. Oxhead Exploration found one anomalous soil sample in the SWM zone that
contained 921 ppb of Au. The Knob zone consists of quartz altered gneiss
containing areas of micro-veinlets, which often impart a box-work appearance.
During initial reconnaissance of the Knob zone, eight rock chip samples were
taken over an area measuring approximately 60 by 30 meters were anomalous in
gold, silver arsenic and antimony. The Knob zone samples with the highest values
contained 373 ppb Au, 3.1 ppm Ag, 6557 ppm As and 2000 ppm Sb.
In addition to the two zones, several weakly anomalous samples were
collected within the property boundaries, including an arsenic anomaly located
in the northeast portion of the property. The SWM zone is believed to be a
weathered or hydrothermally altered augen gneiss. Of the 19 samples taken in the
SWM zone, one sample contained 921 parts per billion ("ppb") gold. An additional
sample contained 106 parts per million ("ppm") arsenic and 85 ppm antimony. The
highly anomalous sample warranted additional exploration. Accordingly, Phase II
exploration of the Shaw Creek Project was recommended to further evaluate the
anomalous findings.
Phase II
As a result of the anomalous findings in Phase I of the exploration of
the Shaw Creek Project, the Company contracted with Oxhead Exploration Ltd., to
perform Phase II of the exploration that focused on soil surveys and follow-up
exploration of the SWM and Knob zones.
The SWM zone is located in the southwest portion of the property and
consists of a weathered bedrock with a bleached and somewhat gossanous
appearance. The SWM zone was identified in 1998 and initial reconnaissance and
exploration in June of 1999 found one anomalous soil sample containing 921 ppb
of gold. However, the follow-up results of Phase II determined that the sample
was taken from the top of a
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loess horizon and re-sampling resulted in no anomalous values. Accordingly, the
SWM zone anomaly was declared invalid, precluding further exploration of the
area.
The Knob zone, located in the approximate center of the property, also
showed anomalous results in the initial June 1999 exploration and
reconnaissance. Phase II involved the collection of 235 soil samples from an
area of approximately 1.2 km by 2.5 km, testing the region adjacent to the
mineralized outcrop exposure. The soil samples confirmed the anomalous findings
and identified a significant gold , arsenic, antimony and zinc anomaly with a
northeast trend, which correlated with an anomalous quartz altered gneiss.
Phase II exploration of the Shaw Creek Project was limited to soil
sampling and reconnaissance of the SWM and Knob zones, costed approximately
US$16,000.00 and required 28 man days to file prospecting site extensions, plan
exploration, conduct field work and prepare the Phase II final report. The
exploration was comprised of the following: the establishment of a grid with cut
lines over both the SWM and Knob zones; systematic soil sampling over both
zones; ground magnetic and VLF geophysical surveys over both zones; detailed
geologic mapping within the Knob zone; digging test pits to outline surface
expression of the Knob zone; and geologic mapping and prospecting of the arsenic
anomaly in the northern area of the property.
Phase III
Phase III of the mineral exploration program for the Shaw Creek Project
will be drilling by diamond or auger drill to determine if values increase at
depth or in soil covered areas. The drilling plans are intended to test the
width and depth of the mineral deposit. Testing the subsurface targets by soil
auger drilling will involve use of a track mounted drill capable of drilling 30
meter deep holes to auger through the thicker soil horizons within the adjacent
valley floor. This method allows the exploration team to further define the
extent of the mineral deposits and the placement of additional holes. The
alternative diamond drilling program would require a three to six hole program
that would include 300 core samples and 20 surface rock samples by geologists
over a 20-day period.
Ladue Mineral Claims
Location and Access
The Ladue Mineral Claims are situated near Alaska's southeastern border
with Canada approximately 350 kilometers southeast of Fairbanks. They are
located in the Tanacross Quadrangle which also lies within the Tintina gold
belt, between the Tintina and Denali faults. The claims are centered at about 63
degrees 26'20"N latitude and 141 degrees 19'25"W longitude. The Ladue Mineral
Claims are the subject of a report prepared by Gary L. Wesa, B.Sc., F.G.A.C.,
dated December 1998 (the "Ladue Report"). Mr. Wesa is at arm's length to the
Company.
The area of the Ladue Mineral Claims has experienced limited
prospecting and study. The United States Geological Survey completed some scale
mapping of the area, however, regional mapping is not detailed enough to fully
describe the geology of the Ladue Mineral Claims. Geographic information that is
known identifies a copper-molybdenum deposit containing disseminated
chalcopyrite with pyrite and molybdenite within a Paleozoic quartz-biotite
gneiss and schist unit located eight kilometers north of the claims. The deposit
occurs between Tertiary mafic volcanic and felsic tuff units. The extent of
development of this resource is unknown. In addition, there are two individual
lode gold occurrences located 11.2 kilometers northeast and 9.6 kilometers east
of the claims.
Specific geologic information regarding the Ladue Mineral Claims
indicated that the primary lithologies underlying the Ladue Mineral Claims as a
Paleozoic mica schist package comprised of quartz-muscovite-chlorite schist,
quartz-sericite-chlorite-epidote schist, quartz-actinolite schist and
feldspar-quartz-sericite schist with minor chlorite schist and biotite schist.
Also, a subcrop of quartz-feldspar
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porphyry was identified within the metasedimentary-metavolcanic sequence. This
intrusion probably is Cretaceous to Tertiary in age and is characterized by very
low iron content. Similar low iron granitic plutons occur four kilometers to the
east and west of the claims.
Access to the claims is via helicopter from the city of Tok, Alaska or
by four-wheel drive vehicle along an old unmaintained track that begins five
kilometers north of Tok on the Taylor Highway and extends northeast to within
one kilometer of the claims.
Property Interest
Pursuant to a prospecting agreement (the "Harman Agreement") with
Andrew G. Harman ("Harman") dated June 23, 1998, the Company agreed to fund a
one month mineral property prospecting program in the Tanana Uplands region of
Alaska. In exchange, Mr. Harman granted the Company a 40 day option (the
"Option") to acquire a 100% interest in any properties staked by Harman during
the prospecting program, subject to 1% net smelter returns royalty, and payment
of $10,000.00 and delivery to Mr. Harman of 50,000 common shares of the
Company's capital stock. In the event the option was not exercised, Mr. Harman
and the Company would be required to jointly negotiate the sale of the property
to a third person, the proceeds of such sale being divided equally between Mr.
Harman and the Company.
On November 10, 1998, the Company exercised the above-described option
with respect to 62 Mineral Claims units which Harman staked in the Tanana
Uplands, known as the Ladue Mineral Claims. At such time the Company paid
$10,000.00 and issued 50,000 common shares of the Company's stock to Mr. Harman.
On November 23, 1999, the Company entered into an agreement with
Luminex Ventures, Inc., a British Columbia corporation ("Luminex"), whereby the
Company granted Luminex an option to acquire a 50% interest in the Ladue Mineral
Claims, subject to a 1% net smelter returns royalty, in consideration of
Luminex's payment of US$2,000.00, issuance of 100,000 shares of Luminex common
stock in two tranches, and complete US$50,000.00 in two phases of exploration
work on the claims by September 30, 2001. To date, Luminex has paid the
US$2,000.00 and issued 50,000 shares of its common stock, in anticipation of
acquiring the above-described interest in the Ladue Mineral Claims.
The Company has timely converted each prospecting site to a claim by
way of a recording with the ADNR. The Company is subject to an annual labor
requirement wherein the Company must spend $100.00 per claim per year in
drilling, excavation or geological work to maintain its exploration rights on
the property. The Company is also subject to an annual rental fee imposed by the
ADNR of $20.00 per claim per year for the first five years, $40.00 per claim per
year for the next five years, and $100.00 per claim per year for every
subsequent year. In the event the Company begins mining activities that result
in mineral production there is an additional royalty to be paid to the ADNR,
which currently averages 3% of the Company's mineral reserve production net
income.
History and Exploration Stage
A portion of the property covering the Ladue Mineral Claims was
previously staked by an independent placer miner in the late 1960's. To the best
of the Company's knowledge, the results of such staking were unremarkable.
Available information indicates that the area has experienced little
exploration, likely due to the remoteness of the area. However, many of the
creeks in the immediate area have been placer mined for gold. No other previous
work is documented within the claims area. The property is without known
reserves and any future program would be exploratory in nature.
In 1998, the Company retained consultants to conduct preliminary
helicopter reconnaissance prospecting, geological mapping, and sampling of the
Ladue Mineral Claims with the objective of evaluating the claims' potential for
hosting an economic gold deposit. Approximately 60% of the claims were examined
by reconnaissance geological mapping and prospecting. The majority of this
effort focused on Chicken Creek and slopes to the east in the eastern half of
the claims area.
10
<PAGE> 13
A total of 11 rock grab, float and chip samples, one soil sample and
three stream silt samples were collected during the work program. All
geochemical samples were shipped to Acme Analytical Labs in Vancouver, British
Columbia for analysis. Anomalous gold values recorded from two rock samples (66
ppb and 22 ppb) and two stream silt samples (70 ppb and 8 ppb) suggest that the
potential exists for the discovery of economically viable gold deposits in an
area centered in the south-central portion of the claims.
An evaluation of the results from the Company's 1998 exploration
program indicates that a large area of anomalous gold-in-rock and stream silt
values, measuring approximately 1,000 by 1,000 meters is worthy of further
exploration. Additional work is recommended to fully assess the potential of the
Ladue Mineral Claims to host a large tonnage, economic ore body. The exploration
program with an estimated cost of $67,000.00 would include creation of a grid
followed by grid-controlled soil geochemistry sampling covering the area of
anomalous gold-in-rock and stream silt values on the eastern side of Chicken
Creek, stream silt sampling. Soil samples should be collected, using soil
augers, at depths below any pale coloured ash or clay layers, and anomalous
target areas within the grid, outlined by grid soil sampling, should be exposed
to bedrock by blasting or hand trenching. The exploration would also focus on
detailed geological mapping, prospecting and lithogeochemical sampling of
incised drainages, gullies and bedrock exposures which yield anomalous gold
values to determine their significance regarding controls on mineralization.
Due to the Company's current efforts to explore the Shaw Creek
property, it does not presently intend to engage in additional exploration of
the Ladue Mineral Claims for the remainder of fiscal year 2000 or fiscal year
2001.
Mac & Dall Mineral Claims
Location and Access
The Mac & Dall Mineral Claims are associated with the Ladue Mineral
Claims and are also situated near Alaska's southeastern border with Canada
approximately 350 kilometers southeast of Fairbanks. The claim is located in the
Tanacross Quadrangle which also lies within the Tintina gold belt, between the
Tintina and Denali faults. Regional geographic and access information provided
regarding the Ladue Mineral Claims is similarly applicable.
Property Interest
Pursuant to terms of the Harman Agreement, on November 10, 1998, the
Company also exercised its option to acquire a 50% undivided interest in an
additional 20 Mineral Claims and four prospecting sites staked by Mr. Harman,
known as the Mac & Dall Mineral Claims in exchange for payment by the Company of
US$12,000.00 to Mr. Harman. The Company is not obligated to pay any net smelter
returns royalty on this property.
In order to maintain its right to explore the property, the Company
must convert each prospecting site to a claim by way of a recording with the
ADNR by November 10, 2000. Thereafter, the Company is subject to an annual labor
requirement wherein the Company must spend $100.00 per claim per year in
drilling, excavation or geological work to maintain its exploration rights on
the property. Upon recording a claim the Company is also subject to an annual
rental fee imposed by the ADNR of $20.00 per claim per year for the first five
years, $40.00 per claim per year for the next five years, and $100.00 per claim
per year for every subsequent year. In the event the Company begins mining
activities that result in mineral production there is an additional royalty to
be paid to the ADNR, which currently averages 3% of the Company's mineral
reserve production net income.
11
<PAGE> 14
History and Exploration Stage
The Company is unaware of any previous exploration of the Mac & Dall
Claims and has no current plans for development of the claims. The property is
without any known reserves, and the Company is unaware of any rock formations
and mineralizations of economic significance.
THE SHAW CREEK PROJECT, THE LADUE MINERAL CLAIMS AND THE MAC & DALL MINERAL
CLAIMS ARE WITHOUT A KNOWN BODY OF COMMERCIAL ORE AND ANY FUTURE EXPLORATION
PROGRAMS CONDUCTED BY THE COMPANY ARE AN EXPLORATORY SEARCH FOR ORE.
ITEM 3. LEGAL PROCEEDINGS
The Company is unaware of any material action or pending legal
proceedings against it, nor is the Company involved as a plaintiff in any other
material proceeding. Further, the Company is unaware of any proceeding
contemplated or instituted by any governmental authority and knows of no active
or pending proceedings against any third parties that may materially adversely
affect any interest of the Company.
ITEM 4. CONTROL OF COMPANY
To the best of the Company's knowledge, the Company is not directly or
indirectly controlled by any other corporation or corporations or any foreign
government or any person or persons. The Company is unaware of any arrangement
the operation of which would at a subsequent date result in a change of control
of the Company. As of June 30, 2000, the amount and percentages of voting
securities held by registered shareholders or shareholders believed by the
Company to be: the owners of more than 10% of the Company's outstanding voting
common shares; and the total amount of voting common shares owned directly or
indirectly by the officers and directors as a group, is as follows:
<TABLE>
<CAPTION>
COMMON SHARES (in thousands)
IDENTITY OF
PERSON & GROUP QUANTITY %
-------------- -------- ---
<S> <C> <C>
James Bryce 2,135,167 17.39
Directors & Officers (n1) 2,348,142 19.12
Total outstanding (at 6/30/2000) 12,280,683 100%
</TABLE>
---------------
n1 Includes James Bryce
ITEM 5. NATURE OF TRADING MARKET
The Company's common shares have traded on the Canadian Venture
Exchange ("CDNX"), formerly known as the Vancouver Stock Exchange, in Vancouver,
British Columbia, Canada, since 1987 and currently trade under the symbol "AHE"
with CUSIP number 00447B106.
The table below lists the high and low sales prices on the CDNX for
shares of the Company's common stock for each quarter in each of the Company's
last two completed fiscal years, and for the two quarters of the Company's
current fiscal year 2000. The high, low and closing of the Company's stock on
the CDNX on July 4, 2000, was $0.63, $0.63, and $0.63 per share, respectively.
12
<PAGE> 15
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
<S> <C> <C>
4/30/00 .80 .36
1/31/00 .50 .11
10/31/99 .20 9/64
7/31/99 .71 9/64
04/30/99 .55 .30
01/31/99 .65 .36
10/31/98 .33 .19
07/31/98 .32 .16
04/30/98 .45 .15
01/31/98 .26 .10
</TABLE>
The Company's common stock is not listed and does not trade in the
United States, but upon registration and compliance with the rules and
regulations of the Securities and Exchange Commission, the Company anticipates
listing on the NASD Over-The-Counter Bulletin Board (the "OTC Bulletin Board").
As of April 14, 2000, 423,965 common shares of the Company's stock were
registered in the names of 11 shareholders resident in the United States. No
shares of the class A or class B preferred shares have been issued. Accordingly,
none is registered in the name of any shareholders resident in the United
States.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no government laws, decrees or regulations in Canada which
restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to nonresident holders of the Company's
common shares. However, any such remittance to a resident of the United States
is generally subject to non-resident tax pursuant to Article X of the 1980
Canada-United States Income Tax Convention. See "Item 7. Taxation."
There are no limitations under the laws of Canada, the province of
British Columbia, or in the Articles of Incorporation of the Company with
respect to the right of non-resident or foreign owners to hold or vote the
common shares of the Company. However, under the Investment Canada Act, ("ICA"),
the acquisition or control (as defined) of a corporation carrying on a business
in Canada by a non-Canadian (as defined) is subject to review by Investment
Canada, an agency of the Canadian Federal Government, in order to determine
whether such acquisition is likely to be of benefit to Canada. ICA exempts
certain small acquisitions (as defined) from the review procedure.
ITEM 7. TAXATION
The following discussion is for general information only and it is not
intended to be, nor should it be construed to be, legal or tax advice to any
holder or prospective holder of common stock of the Company and no opinion or
representation with respect to the United States or Canadian Federal Income tax
consequences to any such holder or prospective holder is made. Accordingly,
holders and prospective holders of Common stock of the Company should consult
their own tax advisors about the federal, state, local and foreign tax
consequences of purchasing, owning and disposing of Common stock of the Company.
13
<PAGE> 16
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
DIVIDEND DISTRIBUTIONS ON SHARES
The Income Tax Act (Canada) ("ITA") provides that dividends and other
distributions deemed to be dividends paid or deemed to be paid by a Canadian
resident corporation (such as the Company) to a non-resident of Canada shall be
subject to a non-resident withholding tax equal to 25% of the gross amount of
the dividend or deemed dividend.
Provisions in the ITA relating to dividend and deemed dividend payments
to and gains realized by non-residents of Canada who are residents of the United
States are subject to the 1980 Canada-United States Income Tax Convention (the
"Treaty").
Article X of the Treaty provides that the rate of Canadian non-resident
withholding tax on dividends or deemed dividends paid to a United States
corporation that beneficially owns at least 10% of the voting stock of the
corporation paying the dividend shall not exceed 10% of the dividend or deemed
dividend, otherwise, the rate of non-resident withholding tax shall not exceed
15% of the dividend or deemed dividend.
DISPOSITION OF SHARES
The ITA provides that a non-resident person is subject to tax in Canada
at the rates generally applicable to the residents of Canada on any "taxable
capital gain" arising on the disposition of the shares of a Canadian public
corporation if such non-resident, together with persons with whom he or she does
not deal at arm's length, owned 25% or more of the issued shares of any class of
the capital stock of the Canadian corporation at any time in the five years
immediately proceeding the date of disposition of the shares. For Canadian
income tax purposes, the "taxable capital gain" is equal to three quarters of
the capital gain.
Article XIII of the Treaty provides that gains realized by a United
States resident on the disposition of shares of a Canadian corporation may not
generally be taxed in Canada unless the value of the Canadian corporation is
derived principally from real property situated in Canada.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain possible United States
Federal income tax consequences, under current law, generally applicable to a
U.S. Holder (as defined below) of common stock of the Company who holds such
shares as capital assets. This discussion does not address all potentially
relevant Federal income tax matters and it does not address consequences
peculiar to persons subject to special provisions of Federal income tax law,
such as those described below as excluded from the definition of a U.S. Holder.
In addition, this discussion does not cover any state, local or foreign tax
consequences. (See "Certain Canadian Federal Income Tax Considerations" above.)
The following discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury Regulations, published Internal Revenue
Service ("IRS") rulings, published administrative positions of the IRS and court
decisions that are currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time. In
addition, this discussion does not consider the potential effects, both adverse
and beneficial, of any recently proposed legislation that, if enacted, could be
applied, possibly on a retroactive basis, at any time.
14
<PAGE> 17
U.S. HOLDERS
As used herein, a "U.S. Holder" includes a holder of common stock who
is a citizen or resident of the United States, a corporation created or
organized in or under the laws of the United States or of any political
subdivision thereof, any entity which is taxable as a corporation for U.S. tax
purposes and any other person or entity whose ownership of common stock of the
Company is effectively connected with the conduct of a trade or business in the
United States. A U.S. Holder does not include persons subject to special
provisions of Federal income tax law, such as tax-exempt organizations,
qualified retirement plans, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
nonresident alien individuals or foreign corporations whose ownership of common
stock is not effectively connected with the conduct of a trade or business in
the United States and shareholders who acquired their stock through the exercise
of employee stock options or otherwise as compensation.
DIVIDEND DISTRIBUTIONS ON SHARES OF THE COMPANY
Except as otherwise discussed below under "Passive Foreign Investment
Company Considerations", U.S. Holders receiving dividend distributions
(including constructive dividends) with respect to common stock are required to
include in gross income for United States Federal income tax purposes the gross
amount of such distributions to the extent that the Company has current or
accumulated earnings and profits, without reduction for any Canadian income tax
withheld from such distributions. Such Canadian tax withheld may be deducted or
may be credited against actual tax payable, subject to certain limitations,
against the U.S. Holder's United States Federal taxable income by those who
itemize deductions. See "Foreign Tax Credit." To the extent that distributions
exceed current or accumulated earnings and profits of the Company, they will be
treated first as a return of capital up to the U.S. Holder's adjusted basis in
the common stock and thereafter as a gain from the sale or exchange of the
common stock. Preferential tax rates for net capital gains are applicable to a
U.S. Holder that is an individual, estate or trust.
In general, dividends paid on common stock will not be eligible for the
dividends received deduction provided to corporations receiving dividends from
certain United States corporations. A U.S. Holder which is a corporation may,
under certain circumstances, be entitled to a 70% deduction of the United States
source portion of dividends received from the Company (unless the Company is a
"foreign personal holding company" as defined in Code Section 552, or a "passive
foreign investment company" as defined below) if such U.S. Holder owns shares
representing at least 10% of the voting power and value of the Company. The
availability of this deduction is subject to several complex limitations that
are beyond the scope of this discussion.
FOREIGN TAX CREDIT
A U.S. Holder who pays (or who has had withheld from distributions)
Canadian income tax with respect to the ownership of common stock may be
entitled, at the election of the U.S. Holder, to either a deduction or a tax
credit for such foreign tax paid or withheld. This election is made on a
year-by-year basis and generally applies to all foreign income taxes paid by (or
withheld from) the U.S. Holder during that year. There are significant and
complex limitations that apply to the credit, among which is the general
limitation that the credit cannot exceed the proportionate share of the U.S.
Holder's United States income tax liability that the U.S. Holder's foreign
source income bears to his or its worldwide taxable income. In the determination
of the application of this limitation, the various items of income and deduction
must be classified into foreign and domestic sources. Complex rules govern
income such as "passive income", "high withholding tax interest", "financial
services income", "shipping income" and certain other classifications of income.
The availability of the foreign tax credit and the application of the
limitations on the foreign tax credit are fact specific and holders and
prospective holders of common stock should consult their own tax advisors
regarding their individual circumstances.
15
<PAGE> 18
DISPOSITION OF COMMON SHARES
Except as otherwise discussed below under "Passive Foreign Investment
Company Considerations", gain or loss realized on a sale of common stock will
generally be capital gain or loss, and will be long-term if the shareholder has
a holding period of more than one year. However, gain realized upon a sale of
common stock may under certain circumstances be treated as ordinary income, if
the Company were determined to be a "collapsible corporation" within the meaning
of Code Section 341 based on the facts in existence on the date of the sale. The
amount of gain or loss recognized by a selling U.S. Holder will be measured by
the difference between (i) the amount realized on the sale and (ii) his or its
tax basis in the common stock. Individual U.S. Holders may carryover unused
capital losses to offset capital gains realized in subsequent years. For U.S.
Holders that are corporations (other than corporations subject to Subchapter S
of the Code), any unused capital losses may only be carried back three and
forward five years from the year in which such losses are realized.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
If the Company is a "passive foreign investment company" as defined in
Code Section 1296 (a "PFIC"), U.S. Holders will be subject to U.S. federal
income taxation under one of two alternative tax regimes at the election of each
such U.S. Holder. Code Section 1296 defines a PFIC as a corporation that is not
formed in the United States and either (i) 75% or more of its gross income for
the taxable year is "passive income", which includes interest, dividends and
certain rents and royalties or (ii) the average percentage, by fair market value
(or, if the Company elects, adjusted tax basis), of its assets that produce or
are held for the production of "passive income" is 50% or more. The Company
currently qualifies as a PFIC and may have been a PFIC in prior years. The rules
applicable to a PFIC that is also a "controlled foreign corporation", as defined
in Code Section 957, are more complex and are beyond the scope of this
discussion.
A U.S. Holder who elects in a timely manner to treat the Company as a
"qualified electing fund" (an "Electing U.S. Holder") will be subject to current
federal income tax under Code Section 1293 for any taxable year in which the
Company is a PFIC (or is treated as such with respect to the Electing U.S.
Holder) on his or its pro-rata share of the Company's (i) "net capital gain"
(the excess of net long-term capital gain over net short-term capital loss),
which will be taxed as long-term capital gain to the Electing U.S. Holder; and
(ii) "ordinary earnings" (the excess of earnings and profits over net capital
gain), which will be taxed as ordinary income to the Electing U.S. Holder, in
each case, for the shareholder's taxable year in which (or with which) the
Company's taxable year ends, regardless of whether such amounts are actually
distributed.
The qualified electing fund ("QEF") election generally also allows the
Electing U.S. Holder to (i) treat any gain realized on the disposition of his or
its common stock (or deemed to be realized on the pledge of his or its common
stock) as capital gain; (ii) treat his share of the Company's net capital gain,
if any, as long-term capital gain instead of ordinary income; and (iii) either
avoid interest charges resulting from PFIC status altogether, or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his share of the Company's annual realized net capital gain and ordinary
earnings subject, however, to an interest charge on such deferred taxes.
The procedure a U.S. Holder must comply with in making an effective QEF
election will depend upon whether the year of the election is the first year in
the U.S. Holder's holding period. If the U.S. Holder makes a QEF election in
such first year, then the U.S. Holder may make a QEF election by filing the
appropriate documents at the time the U.S. Holder files its tax return for such
first year.
When a timely QEF election is made in the first year of the U.S.
Holders' holding period for which the Company qualifies as a PFIC, if the
Company no longer qualifies as a PFIC in the subsequent year, normal Code rules
will apply. It is unclear whether a new QEF election would be necessary if the
Company thereafter re-qualifies as a PFIC.
16
<PAGE> 19
If a U.S. Holder does not make a QEF election for the first year during
which he or it holds (or is deemed to have held) the common stock in question
and the Company is a PFIC (a "Non-electing U.S. Shareholder"), then special
taxation rules under Code Section 1291 will apply to (i) gains realized on the
disposition (or deemed to be realized by reason of a pledge) of his or its
common stock and (ii) certain "excess distributions", as specifically defined by
the Company.
A non-electing U.S. shareholder generally will be required to pro-rate
all gains realized on the disposition of his or its common stock and all excess
distributions over the entire holding period of the common stock. All gains or
excess distributions allocated to prior years of the U.S. Holder (provided that
such years are not prior to the first day of the first taxable year of the
Company during such U.S. shareholder's holding period and beginning after
January 1, 1987 for which it was a PFIC) will be taxed at the highest tax rate
applicable to ordinary income for each such prior year. A non-electing U.S.
Holder also will be liable for interest on the foregoing tax liability for each
such prior year calculated as if such liability had been due with respect to
each such prior year. The balance of the gain or the excess distribution will be
treated as ordinary income in the year of the disposition or distribution, and
no interest charge will be incurred with respect to such balance.
If the Company is a PFIC for any taxable year during which a
non-electing U.S. Holder holds common stock, then the Company will continue to
be treated as a PFIC with respect to such common stock, even if it is no longer
definitionally a PFIC. A non-electing U.S. Holder may terminate this deemed PFIC
status while the Company is still a PFIC by filing a QEF election and electing
to recognize a gain (which will be taxed under the rules discussed above for
non-electing U.S. Holders) as if such common stock had been sold on the first
day of the U.S. Holder's taxable year for which the U.S. Holder files the QEF
election. If the Company is no longer a PFIC, a U.S. Holder may terminate the
Company's deemed PFIC status by electing to recognize gain as if the common
stock had been sold on the last day of the last taxable year for which the
Company was a PFIC.
Once a U.S. Holder has filed a QEF election, he or it will thereafter
be required to submit certain information regarding the Company to the Internal
Revenue Service each year. The Company intends to comply with such
record-keeping, reporting, and other requirements as necessary to enable its
U.S. Holders to make a QEF election; provided, that if regulations are issued
that contain exceedingly onerous reporting and record-keeping requirements, the
Company may decide that compliance is impracticable and will so notify its U.S.
Holders.
Certain special, generally adverse, rules will apply with respect to
the common stock of the Company while the Company is a PFIC whether or not it is
treated as a QEF. For example under Code Section 1297(b)(6) a U.S. Holder who
uses PFIC stock as security for a loan (including a margin loan) will, except as
may be provided in regulations, be treated as having made a taxable disposition
of such stock. Moreover, under Code Section 1291(f) the Department of the
Treasury has authority to issue regulations, and has issued proposed
regulations, that would treat as taxable certain transfers that are generally
not otherwise taxed, such as gifts, exchanges pursuant to corporate
reorganizations, and transfers at death, although it is not clear that such
authority extends to transfers by Electing U.S. Holders.
The foregoing discussion is based on existing provisions of the Code,
existing and proposed regulations thereunder, and current administrative rulings
and court decisions, all of which are subject to change. Any such changes could
affect the validity of the discussion. In addition, the implementation of
certain aspects of the PFIC rules requires the issuance of regulations which in
many instances have not yet been promulgated and which may have retroactive
effect. There can be no assurances that any of these proposals will be enacted
or promulgated, and if so, the form they will take or the effect that they may
have on this discussion. Accordingly, and due to the complexity of the PFIC
rules, U.S. persons who are shareholders or prospective shareholders of the
Company are strongly urged to consult their own tax advisors concerning the
impact of these rules on their investment in the Company.
17
<PAGE> 20
ITEM 8. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial
information with respect to the Company for the periods indicated. It should be
read in conjunction with Item 9. "Management's Discussion and Analysis of
Financial Condition -Results of Operations" and the Company's consolidated
financial statements. The information for the six months ended April 30, 2000
and 1999 is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the results of the interim
periods presented. The selected financial data is not necessarily indicative of
the Company's future results of operations or financial condition, and should be
read in conjunction with Item 9. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
The Company's 1999 and 1998 consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles. Information presented below for the fiscal years 1995-1997 have been
prepared in accordance with generally accepted accounting principals in Canada.
Had they been prepared in accordance with accounting principles generally
accepted in the United States, no significant difference in measurement of
income, results or operation or shareholders' equity would have resulted.
6 MONTH ANALYSIS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
2000 1999
---- ----
<S> <C> <C>
INCOME STATEMENT
Operating Revenues 6,716 (1) --
Operating Expense (47,385) (40,985)
Gain on Sale of Investments 114,581 66,144
Property Write Offs -- --
Net Income $73,912 $25,159
Net income per share .01 .01
BALANCE SHEET DATA
Mineral property investments $106,343 $160,530
Other assets 674,444 336,393
Total Assets $780,787 $496,923
Long Term Debt -- --
Shareholders' Equity $767,719 $396,923
Common Shares
Outstanding 12,280,683 9,947,350
</TABLE>
---------------
(1) Reflects interest income only. The Company generated no revenue from
operations.
18
<PAGE> 21
5 YEAR ANALYSIS
<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 31,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Operating Revenues -- -- -- -- --
Operating Expense $(142,099) $(156,749) $(52,502) $(133,850) $(114,250)
Gain on Sale of
Investments 140,442
Property (write-offs)/
recovery (26,300) -- -- 7,440 (157,440)
Loss on Sale of
Mineral property -- (308,310) -- -- --
Net Income (Loss) $(27,957) $(465,059) $(52,502) $(126,410) $(271,690)
Net (Loss) per share (.01) (.04) (.01) (.01) (.04)
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Mineral property
investments 134,230 26,300 630,060 667,811 667,811
Other assets 309,885 364,071 63,630 19,568 34,511
Total Assets 444,115 390,371 693,690 687,379 702,322
Long Term Debt -- -- -- 17,202 30,685
Shareholders' Equity $343,807 $345,064 $547,623 $600,125 $490,304
Common Shares
Outstanding 9,947,350 9,877,350 8,160,683 8,160,683 7,787,683
</TABLE>
19
<PAGE> 22
Under United States generally accepted accounting principles, the
Company would be considered a development stage company since its inception.
Throughout the periods indicated, the Company had no redeemable preferred shares
outstanding and declared no cash dividends on its common shares.
EXCHANGE RATES
Unless otherwise indicated herein, all dollar amounts in this
Registration Statement are expressed in Canadian dollars. Since June 1, 1970,
the government of Canada has permitted a floating exchange rate to determine the
value of the Canadian dollar as compared to the United States dollar. At July 5,
2000, one United States dollar was equal to approximately 1.4909 Canadian
dollars. The rate of exchange reflects the noon buying rate in New York City on
May 23, 2000, for cable transfers in Canadian dollars, as certified for customs
purposes by the Federal Reserve Bank of New York. The table below sets forth the
rate of exchange for the Canadian dollar at the three months ended January 31,
2000 and at the end of each of the five most recent fiscal years ended January
31, the average rates for the year, and the range of high and low rates for each
year, and the number of Canadian Dollars required under that formula to buy one
United States Dollar.
US. DOLLAR/CANADIAN DOLLAR
<TABLE>
<CAPTION>
Average High Low Close
------- ---- --- -----
<S> <C> <C> <C> <C>
1999 1.4858 1.5302 1.4440 1.4400
1998 1.4836 1.5770 1.4113 1.5375
1997 1.3849 1.4364 1.3357 1.4288
1996 1.3638 1.3815 1.3310 1.3697
1995 1.3725 1.4217 1.3285 1.3655
</TABLE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's 1999 and 1998 consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles. Information presented below for the fiscal years 1995-1997 have been
prepared in accordance with generally accepted accounting principals in Canada.
Had they been prepared in accordance with accounting principles generally
accepted in the United States, no significant difference in measurement of
income, results or operation or shareholders' equity would have resulted.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the exploration stage and has realized no revenues
from mining operations. The Company's sole source of cash flow is realized from
its earlier sales of common stock in South American, sales in its interests in
mineral properties and the recent completion of a private placement of 2,333,333
units at $0.15/per unit, each unit consisting of one common share and one
non-transferable share purchase warrant for the purchase of an additional common
share at $0.15 per share for one year, or at $0.175 per share during the second
year. The private placement generated approximately $350,000.00 to be available
as working capital. Accordingly, over the next two years warrants from the
private placement may generate an additional $350,000.00 to $408,333.00. The
Company expects that warrants will be exercised only if the publicly traded
value of the shares on the respective expiration dates is significantly greater
than the respective warrant exercise prices.
20
<PAGE> 23
At April 30, 2000, the Company has liquid working capital of
approximately $533,331.00. The Company also retains 94,000 shares of South
American which currently trade in the range of US$0.65-$1.25 available for
immediate liquidation to be used as working capital.
On November 23, 1999, the Company entered into an agreement with
Luminex Ventures, Inc., whereby the Company granted Luminex an option to acquire
a 50% interest in the Ladue Mineral Claims, subject to a 1% net smelter returns
royalty, in consideration of Luminex's payment of US$2,000.00, issuance of
100,000 shares of Luminex common stock in two tranches, and complete
US$50,000.00 in two phases of exploration work on the claims by September 30,
2001. To date, Luminex has paid the US$2,000.00 and issued 50,000 shares of its
common stock, in anticipation of acquiring the above-described interest in the
Ladue Mineral Claims. The Company has granted a private investor an option
(expiring in late June) to buy the first 50,000 Luminex shares at $0.50 per
share and, upon issuance of the remaining 50,000 Luminex shares, to buy such
shares at $0.50 per share. In the event that the option is exercised, the
Company may have additional working capital of between $25,000.00 and
$50,000.00.
Other than the current liquid working capital, the private placement
funds and the South American common stock, there is no additional source of
funds to sustain continued or planned capital expenditures. Management believes
that the information set forth in Item 1. regarding the description of the
business and plan of operations for the remainder of fiscal year 2000 and first
six months of fiscal year 2001 describes the Company's projected operations and
capital expenditures, which includes the implementation of the Company's Phase
III plan for the Shaw Creek Project.
The Company believes that its current liquid working capital, the
private placement funds, and the access to additional funds through the sale of
its South American stock are sufficient to secure its cash requirements through
the completion of Phase III of the Shaw Creek Project. In the event the Company
commences mining operations, it may attempt to raise additional working capital
through long-term debt instruments collateralized by mineral production and/or
the sale of additional securities, but no assurance can be given that such
financing will be available on acceptable terms, or at all, or that the
placement of additional securities will raise sufficient working capital, if
any.
The following table sets forth the consideration received for the
issuance of equity securities for cash, property and services during the years
ended October 31, 1998 and 1999, and the six months ended April 30, 2000.
<TABLE>
<CAPTION>
(dollars in thousands)
Year ended
October 31,
Six Months Ended -------------------------------
April 30, 2000 1999 1998
---------------- -------- --------
<S> <C> <C> <C>
Cash $350,000(1) -- $5,200
Debt Conversion -- -- --
Property -- $21,500(2) $12,500(3)
Finder's Fees -- -- --
Debt Settlement -- -- --
</TABLE>
--------------------
(1) Cash received pursuant to the above-referenced private placement of
2,333,333 units.
21
<PAGE> 24
(2) Includes issuance of 50,000 shares (with voting rights) for deemed
consideration of $0.43 per share as part consideration in the acquisition
of the Ladue Mineral Claims.
(3) Includes issuance of 50,000 shares (with voting rights) for deemed
consideration of $0.25 per share as part consideration in the acquisition
of the Silver Ridge mineral property.
RESULTS OF OPERATIONS
All Company operations are in connection with mineral resource
exploration.
SIX MONTHS ENDED APRIL 30, 1999 AND 2000
The Company's income statement shows a positive net income of
$73,912.00 for the six months ended April 30, 2000 and net income of $25,159.00
for the comparable period of 1999. The Company also reported an increase in
operating expenses of 6,400.00 to $47,385.00 for the six months ended April 30,
2000 compared with operating expense of $40,985.00 for the comparable period of
1999. These figures do not represent any significant change in operations, but
are the result of the Company's sale of South American common stock. For the six
months ended April 30, 2000 the Company sold South American stock realizing a
gain of $114,581.00, and for the comparable period in 1999 sold stock realizing
a gain of $66,144.00. The Company wrote off no property during these periods.
On November 23, 1999, the Company entered into an agreement with
Luminex Ventures, Inc., a British Columbia corporation ("Luminex"), whereby the
Company granted Luminex an option to acquire a 50% interest in the Ladue Mineral
Claims, subject to a 1% net smelter returns royalty, in consideration of
Luminex's payment of US$2,000.00, issuance of 100,000 shares of Luminex common
stock in two tranches, and complete US$50,000.00 in two phases of exploration
work on the claims by September 30, 2001. To date, Luminex has paid the
US$2,000.00 and issued 50,000 shares of its common stock, in anticipation of
acquiring the above-described interest in the Ladue Mineral Claims.
FISCAL YEARS ENDED OCTOBER 31, 1998 AND 1999
The Company incurred a net loss of $27,957.00 ($0.01 per share loss)
for the fiscal year ended October 31, 1999, compared with $465,059.00 ($0.04 per
share loss) in fiscal 1998. Loss per share was calculated on the basis of
9,947,350 shares outstanding for fiscal 1999 and 9,877,350 shares outstanding
for fiscal 1998. The Company also reported an operating expense decrease of
$14,650.00 to $142,099.00 for fiscal year 1999 compared with operating expense
of $156,749.00 for fiscal year 1998. These figures do not represent any
significant change in operations, but are the result of lower mineral
exploration costs in the Phase I and Phase II exploration of the Shaw Creek
property in 1999, the Company's sale of South American common stock in 1999 and
significant property write-offs in 1998. For fiscal year 1999, the Company sold
South American stock realizing a gain of $140,442.00, and for fiscal year 1998
wrote off $308,310.00 loss on the sale of mineral property.
In fiscal year 1998 the Company's sole mineral property investment
consisted of an option to conduct exploration on the Silver Ridge property in
consideration of the Company's payment of $13,800.00 in cash and issuance of
50,000 in shares valued at $0.25 per share. The Company's $308,310.00 loss on
the sales of mineral property related to the sale of its interest in the
Tamakay, Guyana property in consideration for 300,000 shares of South American
common stock. In fiscal year 1999 the Company wrote off the Silver Ridge
property as an abandonment and acquired certain interests in the Shaw Creek
Claims, the Ladue Mineral Claims and the Mac & Dall Mineral Claims for an
initial investment of $134,230.00. See Item 2. "Description of Properties" for a
more comprehensive explanation of the property interest held by the Company as
well as the conditions required to maintain exploration rights to the
properties.
22
<PAGE> 25
FISCAL YEARS ENDED OCTOBER 31, 1998 AND 1997
The Company incurred a net loss of $465,059.00 ($0.04 per share loss)
for the fiscal year ended October 31, 1998, compared with $52,502.00 ($0.01 per
share loss) in fiscal 1997. Loss per share was calculated on the basis of
9,877,350 shares outstanding for fiscal 1998 and 8,160,683 shares outstanding
for fiscal 1997. During 1997 the Company incurred minimal exploration costs as
it did not engage in any significant mineral property exploration. In fiscal
1998 the Company significantly increased its mineral exploration program and
also had significant property write-offs of $308,310.00 for the loss on the sale
of mineral property. Accordingly, the Company reported an increase in operating
expenses of $104,247.00 to $156,749.00 for fiscal year 1998 compared with
operating expense of $52,502.00 for fiscal year 1997.
In fiscal year 1998 the Company's sole mineral property investment
consisted of an option to conduct exploration on the Silver Ridge property in
consideration of the Company's payment of $13,800.00 in cash and issuance of
50,000 in shares valued at $0.25 per share. The Company's $308,310.00 loss on
the sales of mineral property in fiscal year 1998 related to the sale of its
interest in the Tamakay, Guyana property in consideration for 300,000 shares of
South American common stock. In fiscal year 1997 the Company held mineral
property investments of $630,060.00 consisting of the consideration paid through
fiscal year 1997 and the expenditures (net of recovery) on the Tamakay, Guyana
property pursuant to the joint venture agreement with South American.
ITEM 9A. RISK FACTORS
EXPLORATION STAGE COMPANY; HISTORY OF LOSSES
The Company is an exploration stage company focusing on mineral
recovery with limited financial resources and no source of operating cash flow.
The Company can give no assurance that additional funding will be available for
further exploration or mineral recovery. The Company has had no sales and
generated no revenue from its operations and, since its inception, has incurred
significant losses. None of the Company's investment properties are known to
have any economically viable mineral deposits, and there is no assurance that
the Company will discover one.
PROJECTIONS AND ESTIMATES
The Company's anticipated costs of exploration of the mineral
properties may change significantly once exploration commences, including Phase
III of the Shaw Creek property. Moreover, given the competitive environment and
the start-up and other risks associated with the Company's proposed mining, the
Company's future operating results are highly conditional and could fluctuate
significantly.
GOVERNMENT REGULATIONS
The operations of the Company may require licenses and permits from
various governmental authorities. There can be no assurance that the Company
will be able to obtain all necessary licenses and permits that may be required
to carry out exploration, development and mining operations at its projects.
The Company's operations may be subject to environmental regulations
promulgated by government agencies from time to time. Environmental legislation
provides for restrictions and prohibitions on spills, release or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailings disposal areas, which would result in
environmental pollution. A breach of such legislation may result in imposition
of fines and penalties. In addition, certain types of operations require the
submission and approval of environmental impact assessments. Environmental
legislation is evolving in a manner, which means stricter standards,
enforcement, fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a heightened degree of
responsibility for
23
<PAGE> 26
companies and directors, officers and employees. The cost of compliance with
changes in governmental regulations has a potential to reduce the profitability
of operations. The Company does not maintain environmental liability insurance.
The current or future operations of the Company, including development
activities and commencement of production on its properties, require permits
from various federal, state and local governmental authorities and such
operations are and will be governed by laws and regulations regarding waste
disposal, toxic substances, land use, environmental protection, development,
labor standards, occupational health, mine safety and other matters. Companies
engaged in the development and operation of mines or related facilities may
experience increased costs, delays in production and shut down of operations as
a result of compliance requirements under applicable laws, regulations and
permits. Additional permits or agency approvals may be necessary prior to
completing certain operations on the Company's mining properties. There can be
no guarantee that the Company will be able to obtain or maintain all necessary
permits or approvals that may be required for development or operation of the
mining facilities on terms which enable operations to be conducted at
economically justifiable costs.
COMPETITION
The mineral industry is intensely competitive in all its phases. The
Company competes with many companies possessing greater financial resources and
technical facilities than itself for the acquisition of mineral concessions,
claims, leases and other mineral interests as well as for the recruitment and
retention of qualified employees. However, due to the currently depressed market
for base and precious metals, the Company does not believe that competition will
be a factor which confines its ability to retain qualified geologists and
consultants, or to acquire interests in mineral properties with significant
potential.
RISKS OF MINING EXPLORATION DEVELOPMENT
In the course of exploration, development and production of mineral
properties, certain risks, and in particular, unexpected or unusual geological
operating conditions including rock bursts, cave-ins, fires, flooding and
earthquakes may occur. It is not always possible to fully insure against such
risks and the Issuer may decide not to take out insurance against such risks as
a result of high premiums or other reasons. Should such liabilities arise, they
could reduce or eliminate any future profitability and result in increasing
costs and a decline in the value of the securities of the Issuer. The Issuer
does not maintain insurance against environmental risks.
VOLATILITY OF STOCK AND MINERAL PRICES
The market prices of securities of companies whose future operating
results are highly dependent on specific developments, such as locating and
recovering economically viable mineral deposits are often highly volatile.
Announcements concerning exploration or mining progress or delays, or related
governmental actions, developments in the mining industry generally,
announcements by the Company or by competitors, results of the Company's
operations and stock market conditions generally may have a significant impact
on the market price of the Company's common stock.
Moreover, factors beyond the control of the Company may affect the
marketability of any minerals discovered. Metal prices have fluctuated widely,
particularly in recent years. The effect of these factors cannot accurately be
predicted.
ENVIRONMENTAL MATTERS
Upon commencing mining operations in the U.S., the Company may become
subject to the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended ("CERCLA"). CERCLA requires cleanup of sites from which
there has been a release or threatened release of hazardous substances and
authorizes the EPA to take any necessary actions, including ordering potentially
responsible parties ("PRPs") to clean up or contribute to the cleanup of a
Superfund site. PRPs are broadly defined under CERCLA, and include past and
present owners and operators of a
24
<PAGE> 27
site. Courts have interpreted CERCLA to impose strict, joint and several
liability upon all persons liable for response costs.
Releases from any of the Company's properties due to past or current or
future activities could form the basis for liability under CERCLA and its state
analogs. In addition, off-site disposal of hazardous substances, including
hazardous mining wastes, may subject the Company to CERCLA liability.
Amendments to current laws, regulations and permits governing mining
activities could have a material adverse impact on the Company and cause
increases in capital expenditures or production costs or reduction in levels of
production at producing properties or require abandonment or delays in
development of mining properties.
Upon completion of mining activities the Company may be responsible for
reclamation of any mill tailings. Reclamation will include one of two
approaches. The first approach is closure in place and involves recontouring the
tailings pile, capping with a dirt cap and revegetation. The second approach
would assume future redevelopment of the area and could require the removal of
any historic mill tailings to an approved hazardous waste site. As the Company
has discovered no economically viable mineral deposits to date and has engaged
in no mining operations, the Company has no basis for estimating the possible
costs of reclamation.
Failure to comply with applicable laws, regulations, and permitting
requirements may result in enforcement actions thereunder including orders
issued by regulatory or judicial authorities causing operations to cease or be
curtailed and may include corrective measures requiring capital expenditures,
installation of additional equipment, or remedial actions.
The Company's mining and processing operations may produce quantities
of fugitive dust and other air pollutants. In November of 1990 the U.S. Congress
passed the Clean Air Act Amendments that created an entirely new statutory
scheme for the regulation of air pollution. Since passage of the statutory
amendments, the EPA has been promulgating new regulations to implement a
comprehensive nationwide air permit program, an air toxics regulatory program
and expanded enforcement authority. It will be several years before final EPA
and state programs for air toxics and permitting are fully in place and the
direction of enforcement under these programs is evident. At the present time,
the impact of these rulemakings and of subsequent regulation of mining and
mineral processing under the Clean Air Act Amendments upon the Company cannot
reasonably be estimated. Potential impacts could include limitations on
production or additional capital expenditures to comply.
PROPERTY INTERESTS
Any of the properties in which the Company has or is acquiring an
interest may be subject to prior unregistered agreements or transfers or native
land claims and title may be affected by undetected defects. The Company has not
conducted surveys on any of its properties and there is a risk that the
boundaries thereof could be challenged or impugned.
25
<PAGE> 28
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
All of the Company's directors were elected at the annual general
meeting of the shareholders on April 28, 2000 and will serve until the next
Annual General Meeting or until a successor is duly elected, unless the office
is vacated in accordance with the Articles (By-Laws) of the Company. The names
of each director and dates from which each has served as such, are set forth
below.
Name Served Since
---- ------------
Arnold Miller(1) September 1993
Colin N. Beveridge(1) April 1993
James P. Bryce(1) September 1996
George Anagnost July 1998
-----------------
(1) audit committee member.
The names of each of the Company's executive officers, who serve at the
discretion of the Company's board of directors, and the dates from each has
served the Company, are set forth:
<TABLE>
<CAPTION>
Name Served Since
---- ------------
<S> <C> <C>
James P. Bryce President and Chief Executive Officer Sept. 1996
George Anagnost Secretary April 2000
Colin Beveridge Treasurer April 1996
</TABLE>
ARNOLD MILLER, member of the board of directors of the Company since
1993, is a resident of British Columbia, Canada. Mr. Miller has been a member of
the audit committee since his appointment to the board of directors. Prior to
overseeing the development of Achieva, Mr. Miller gained extensive experience as
a real estate agent. Mr. Miller retired from real estate in 1992 and now spends
90% of his time on the affairs of the Company.
COLIN N. BEVERIDGE, member of the board of directors of the Company, is
a resident of British Columbia, Canada. For the past 20 years Mr. Beveridge has
been involved in the corporate affairs of Chevron Canada Ltd. where he is
employed in refinery operations. Since 1993, Mr. Beveridge has served on the
board of directors of the Company and its audit committee. For fiscal year 2000,
Mr. Beveridge serves as an officer of the Company holding the position of
Treasurer. He spends 65% of his time on the affairs of the Company.
JAMES P. BRYCE, currently serving a one-year term as president and
chief executive officer and a member of the board of directors of the Company
since 1996, is a resident of British Columbia, Canada. Mr. Bryce has served as
president and chief executive officer, and has been a member of the audit
committee since his appointment to the board of directors. Between 1965 and
1995, Mr. Bryce developed substantial expertise in management as an owner and
operator of private golf courses in Canada and the United States. Mr. Bryce is
currently retired from golf course development and spends 90% of his time on the
affairs of the Company.
GEORGE ANAGNOST, a member of the board of directors of the Company
since 1998, is a resident of Colorado, United States. Mr. Anagnost has over 20
years experience in the business of finance. He has also served as an officer
and director of Environmental Construction Products International, Inc., a
publicly traded company engaged in manufacturing home construction material. Mr.
Anagnost presently serves as an officer of the Company holding the position of
Secretary. He spends approximately 10% of his time on the affairs of the Company
There are no family relationships between any two or more directors or
executive officers. There are no other arrangements or understandings between
any two or more directors or executive officers.
26
<PAGE> 29
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
The Company has no formal plan for compensating its directors for their
service in such capacity other than the granting of stock options. The Company
also grants stock options to officers and employees. See Item 12. "Options to
Purchase Securities from Registrant or Its Subsidiaries."
The total compensation paid or accrued directly or indirectly by the
Company to its directors and officers during the Company's last three fiscal
year for services rendered is as follows:
<TABLE>
<CAPTION>
SALARY SALARY LONG-TERM COMPENSATION ALL OTHER
NAME AND POSITION YEAR ($) ($) OPTIONS/SARS GRANTED (#) COMPENSATION
<S> <C> <C> <C> <C> <C>
James Bryce, 1999 Nil Nil Nil Nil
President & Director 1998 Nil Nil 275,000 @ $0.26 by 7/2003 Nil
1997 Nil Nil Nil Nil
Arnold Miller, 1999 Nil Nil Nil Nil
Director 1998 Nil Nil 250,000 @ $0.26 by 7/2003 Nil
1997 Nil Nil Nil Nil
Colin Beveridge, 1999 Nil Nil Nil Nil
Treasurer & Director 1998 Nil Nil 270,000 @ $0.26 by 7/2003 Nil
1997 Nil Nil Nil Nil
George Anagnost, 1999 Nil Nil Nil Nil
Secretary & Director 1998 Nil Nil 172,000 @ $0.26 by 7/2003 Nil
1997 Nil Nil Nil Nil
</TABLE>
All of the foregoing options/SARs were exercisable at fiscal year end
1999.
The Company does not have a long-term incentive plan for its directors
or officers. No funds were set aside or accrued by the Company during its last
fiscal year to provide pension, retirement or similar benefits for directors or
executive officers. In addition, the Company has no written plans or
arrangements in respect of remuneration received or that may be received by
executive officers of the Company to compensate such officers in the event of
termination of employment (as a result of resignation, retirement, change of
control) or a change of responsibilities following a change of control.
During Fiscal Year 1999 the directors of the Company did not receive
fees for attendance of board meetings or other cash compensation in their
capacity as directors. The directors may be reimbursed for actual expenses
reasonably incurred in connection with the performance of their duties as
directors. Directors are also eligible to receive incentive stock options to
purchase shares of the Company.
No Stock Appreciation Rights ("SARs") were granted during fiscal year
1999. However, the Company intends to reserve 10% of the issued treasury shares
of the Company for issuance to Directors and Key Employees pursuant to Stock
Option Agreements entered into with them or to be entered into with them subject
to regulatory approval and subject to member approval being obtained with
respect to options granted to insiders of the Company. The purpose of the
options is to provide an incentive to the principals to act in the best
interests of the Company.
27
<PAGE> 30
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM THE REGISTRANT OR ITS SUBSIDIARIES
The Company has three classes of stock: common stock, preferred stock
class A and preferred stock class B. The Company has issued no shares or options
in the preferred stocks class A or B. All common stock options issued by the
Company are set forth below.
COMMON SHARE OPTIONS
COMMON SHARE
The names and titles of the directors and executive officers of the
Company to whom stock options remain outstanding as of May 30, 2000 is as
follows:
<TABLE>
<CAPTION>
EXERCISE
NAME TITLE NUMBER OF SHARES PRICE ($) EXPIRATION DATE
---- ----- ---------------- --------- ---------------
<S> <C> <C> <C> <C>
James Bryce President, Chief 275,000 $0.26 July 2003
Executive Officer and
Board Member
Arnold Miller Board Member 250,000 $0.26 July 2003
Colin Beveridge Treasurer and Board 270,000 $0.26 July 2003
Member
George Anagnost Secretary and Board 172,000 $0.26 July 2003
Member
</TABLE>
COMMON SHARE PURCHASE WARRANTS
Common share purchase warrants outstanding at April 30, 2000 are as
follows:
<TABLE>
<CAPTION>
TITLE ISSUE NUMBER OF SHARES EXERCISE PRICE ($) EXPIRATION DATE
----------- ---------------- ------------------ -----------------
<S> <C> <C> <C>
1999 private placement issue for 2,333,333 $0.15 year 1 2 years from unit
2,333,333 Units $0.175 year 2 purchase date
1997 private placement issue of 1,666,667 $0.15 year 1 2 years from unit
1,666,667 Units $0.175 year 2 purchase date
</TABLE>
A Unit as defined in each of the above private placements consists of a
one share of the Company's common stock and one warrant entitling the investor
to purchase one share of common stock at a specified price within a specified
time period. If all of the outstanding warrants were exercised prior to December
31, 2001 the maximum aggregate cash consideration the Company could receive
would amount to $556,250.00.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
The Company is not engaged in any material transactions in which any
director or officer or any relative, spouse, or relative of such spouse of any
director or officer of the Company has a direct or indirect material interest,
and has not engaged in any such transactions in the three year period prior to
the filing herein. No officer, director or any associate of such officer or
director is indebted to the Company, and none has been indebted to the Company
in the three-year period preceding this filing.
28
<PAGE> 31
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
The authorized capital of the Company consists of 100,000,000 common
shares, without par value; 100,000,000 Class "A" Preference shares, par value of
$10.00; and 100,000,000 Class "B" Preference shares, par value of $50.00.
COMMON SHARES
All common shares issued by the Company rank equally as to dividends,
voting rights and as to any distribution of assets on winding-up or liquidation.
There are no indentures or agreements limiting the payment of dividends and
there are no conversion rights, special liquidation rights, preemptive rights or
subscription rights, and there are no provisions for redemption or purchase for
cancellation or surrender, or sinking fund provisions. The presently outstanding
share capital is not subject to any call or assessment. As of May 31, 2000 there
were 12,280,683 common shares of the Company issued and outstanding.
Holders of common shares are entitled to one vote for each share held
of record on all matters to be acted upon by the shareholders. Holders of common
shares are entitled to receive such dividends as may be declared from time to
time by the Company's Board of Directors, in its discretion, out of funds
legally available therefor.
Upon the liquidation, dissolution or winding-up of the Company, holders
of common shares will be entitled to receive pro rata the assets of the Company,
if any, remaining after payment of all debts and liabilities, including amounts,
if any, payable to holders of the Company's Class "A" Preference shares and
Class "B" Preference shares.
There are no restrictions on the repurchase or redemption of the common
shares of the Company while there is any arrearage in the payment of dividends
or sinking fund installments.
CERTAIN CORPORATE LAW CONSIDERATIONS
Under the Company Act (British Columbia) any modification, amendment or
variation of shareholder rights or provisions must be approved by way of
"special resolution" which requires approval of at least 75% of the votes cast
in person or by proxy at a shareholders' meeting or class meeting. The principal
corporate actions that require such a "special resolution" include: (a)
transferring a corporation's jurisdiction of incorporation from British Columbia
to another jurisdiction; (b) giving financial assistance under certain
circumstances; (c) disposing of all or substantially all of a corporation's
assets; (d) removing a director before the expiration of his term of office; (e)
certain alterations to share capital; (f) changing a corporation's name; (g)
altering any restrictions on a corporation's business; and (h) certain
reorganizations of a corporation.
Pursuant to the Company's Articles, a quorum for a shareholders meeting
shall be one shareholder represented in person, by proxy or, being a
corporation, represented in accordance with Section 33 of the Company Act,
holding not less than one voting share, in the case of a general meeting, and
holding not less than one-third of the shares affected, in the case of a class
or series meeting of the Company.
29
<PAGE> 32
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
PART IV
ITEM 17. FINANCIAL STATEMENTS
The Company has furnished the following financial statements pursuant
to the filing requirements herein: Audited Balance Sheets of the Company as at
October 31, 1998 and October 31, 1999: Audited Statements of Operations and
Deficit for Fiscal Years Ended October 31, 1997, 1998 and 1999; Audited
Statement of Stockholders' Equity for Fiscal Years Ended October 31, 1997, 1998
and 1999; and Audited Statement of Cash Flows Fiscal Years Ended October 31,
1997, 1998 and 1999. The Company has also furnished the following unaudited
financial statements for the six months ended April 30, 1999 and 2000: Balance
Sheets; Statement of Operations and Deficit; and Statement of Cash Flows.
These financial statements are expressed in Canadian dollars and were
prepared in accordance with United States generally accepted accounting
principles.
ITEM 18. FINANCIAL STATEMENTS
Not applicable. See Item 17. "Financial Statements."
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
The Company has furnished the following financial statements pursuant
to the filing requirements herein: Audited Balance Sheets of the Company as at
October 31, 1998 and October 31, 1999: Audited Statements of Operations and
Deficit for Fiscal Years Ended October 31, 1997, 1998 and 1999; Audited
Statement of Stockholders' Equity for Fiscal Years Ended October 31, 1997, 1998
and 1999; and Audited Statement of Cash Flows Fiscal Years Ended October 31,
1997, 1998 and 1999. The Company has also furnished the following unaudited
financial statements for the six months ended April 30, 1999 and 2000: Balance
Sheets; Statement of Operations and Deficit; and Statement of Cash Flows.
These financial statements are expressed in Canadian dollars and were
prepared in accordance with United States generally accepted accounting
principles.
(b) EXHIBITS
1.1* Certificate of Incorporation, as amended, and related Memorandum
1.2* Articles (Bylaws)
2.1 Instruments defining the rights of holders of equity securities being
registered (included within Exhibit 1.2)
3.1* Agreement between Andrew G. Harman and Achieva Development Corp.
dated June 23, 1998
3.2* Ladue Mineral Claims Agreement
30
<PAGE> 33
3.3* Certificate of Authority to Transact Business in Alaska
3.4* Agreement between Luminex Ventures, Inc., and Achieva Development Corp.
Dated November 23, 1999
* Previously filed.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated this 26th day of July 2000. ACHIEVA DEVELOPMENT CORP.
By /s/ JAMES BRYCE
-------------------------------
James Bryce, President, Chief
Executive Officer and Director
By /s/ ARNOLD MILLER
-------------------------------
Arnold Miller, Director
By /s/ COLIN N. BEVERIDGE
-------------------------------
Colin N. Beveridge, Director
By /s/ GEORGE ANAGNOST
-------------------------------
George Anagnost, Director
31
<PAGE> 34
EXHIBITS INDEX
1.1* Certificate of Incorporation, as amended, and related Memorandum
1.2* Articles (Bylaws)
2.1 Instruments defining the rights of holders of equity securities being
registered (included within Exhibit 1.2)
3.1* Agreement between Andrew G. Harman and Achieva Development Corp.
dated June 23, 1998
3.2* Ladue Mineral Claims Agreement
3.3* Certificate of Authority to Transact Business in Alaska
3.4* Agreement between Luminex Ventures, Inc., and Achieva Development Corp.
Dated November 23, 1999
* Previously filed.
32
<PAGE> 35
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
<PAGE> 36
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 545,300 $ 65,531
Goods and Services Tax recoverable 1,099 1,106
----------- -----------
546,399 66,691
OFFICE FURNITURE, at cost less accumulated depreciation 2,231 1,577
INVESTMENTS (Note 2) 125,814 268,125
MINERAL PROPERTIES (Note 3) 106,343 160,530
----------- -----------
$ 780,787 $ 496,923
=========== ===========
LIABILITIES
CURRENT
Accounts payable $ 13,068 $ 2,813
Loans payable (Note 4) -- 97,187
----------- -----------
13,068 100,000
----------- -----------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5)
Authorized:
100,000,000 Common voting shares, no par value
100,000,000 Class A preference non-voting shares, par
value $10 each
100,000,000 Class B preference non-voting shares, par
value $50 each
Issued and Outstanding:
12,280,683 (of which 140,626 shares are held in escrow) at April 30,
2000, and 9,947,350 (of which 140,626
shares are held in escrow) at April 30, 1999 3,151,209 2,801,209
DEFICIT (2,383,490) (2,404,286)
----------- -----------
767,719 396,923
----------- -----------
$ 780,787 $ 496,923
=========== ===========
</TABLE>
<PAGE> 37
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF OPERATIONS AND DEFICIT
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
REVENUE
Interest income $ 6,716 $ --
----------- -----------
EXPENSES
Depreciation 311 176
Interest and exchange (5,035) 730
Mineral property exploration expenditures 10,024 3,906
Office rent, telephone and sundry 23,041 19,790
Professional fees 14,358 12,361
Regulatory authorities and transfer agent 4,686 4,022
----------- -----------
47,385 40,985
----------- -----------
LOSS BEFORE THE FOLLOWING (40,669) (40,985)
GAIN ON SALE OF INVESTMENTS 114,581 66,144
----------- -----------
NET INCOME FOR THE PERIOD 73,912 25,159
DEFICIT, BEGINNING OF PERIOD (2,457,402) (2,318,461)
----------- -----------
DEFICIT, END OF PERIOD $(2,383,490) $(2,289,396)
=========== ===========
NET INCOME PER SHARE $ 0.01 $ 0.01
=========== ===========
</TABLE>
<PAGE> 38
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF CASH FLOWS
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30
----------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income for the period $ 73,912 $ 25,159
Adjustments for:
Depreciation 311 176
Gain on sale of investment (114,581) (66,144)
--------- ---------
(40,358) (40,809)
Changes in non-cash working capital
(Increase) Decrease in receivables (536) (780)
Increase (Decrease) in accounts payable 9,948 (13,300)
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES (30,946) (54,889)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of investment 227,194 119,769
Reclamation bond -- 2,100
Mineral properties -- (112,730)
Exploration advance -- 34,735
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES 227,194 43,874
--------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Shares issued for cash 350,000 5,200
Option payment received 2,887 --
Increase (Decrease) in loans payable (97,188) 67,993
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES 255,699 73,193
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 451,947 62,178
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 93,353 3,353
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 545,300 $ 65,531
========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
During the period ended April 30, 2000, the Company received 50,000 shares of
Luminex Ventuers Inc. at an ascribed value of $25,000 as part consideration
under an option agreement described in Note 3(a).
During the period ended April 30, 1999, the Company issued 50,000 common shares
at a deemed value of $0.43 per share as part consideration in the acquisition of
the Ladue mineral claims in Alaska.
<PAGE> 39
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
1. NATURE OF OPERATIONS
a) Exploration State Activities
The Company is in the process of exploring its mineral property and has
not yet determined whether the property contains ore reserves that are
economically recoverable.
The recoverability of amounts shown as mineral property and related
deferred exploration expenditures is dependent upon the discovery of
economically recoverable reserves, confirmation of the Company's
interest in the underlying mineral claims, the ability of the Company
to obtain profitable production or proceeds from the disposition
thereof.
b) Significant Accounting Policies
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities
is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
The financial statements have, in management's opinion, been proprerly
prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
i) Mineral Property Costs
The Company capitalizes the acquisition costs of mineral
properties in which it has a continuing interest to be amortized
over the recoverable reserves when a property reaches commercial
production. On abandonment of any property, applicable acquisition
costs will be written off. To date, the Company has not
established the commercial feasibility of its mineral property,
therefore, all exploration expenditures are being expensed.
ii) Depreciation
Office furniture is depreciated at the rate of 20% on the
declining balance basis.
iii) Investments
The Company records portfolio investments at cost. The cost of
portfolio investments is written down to market value when a
decline in value is other than temporary.
<PAGE> 40
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
1. NATURE OF OPERATIONS (Continued)
b) Significant Accounting Policies (Continued)
iv) Loss per Share
Loss per share is based on the weighted over number of common
shares outstanding during the year. Since the Company's stock
options, warrants and escrow shares are anti-dilutive, they have
not been included in the calculation.
v) 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 the
reported amounts of revenues and expenses for the reporting
period. Actual results could differ from these estimates.
vi) Financial Instruments
The Company's financial instruments consist of cash and accounts
payable.
Unless otherwise noted, it is management's opinion that this
Company is not exposed to significant interest or credit risks
arising from these financial instruments. The fair value of these
financial instruments approximate their carrying values, unless
otherwise noted.
vii) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary
consideration are valued at the quoted market price per share at
the close of trading on the day of completion of the transaction,
except for those circumstances where, in the opinion of the
Company and due to the nature of the transaction, the trading
price does not fairly represent the value of the transaction. In
such circumstances, the value of the shares is determined based on
the estimated fair value of the consideration received.
<PAGE> 41
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
1. NATURE OF OPERATIONS (Continued)
b) Significant Accounting Policies (Continued)
viii) Foreign Currency Translation
Transactions recorded in United States dollars have been
translated into Canadian dollars using the Temporal Method as
follows:
i) monetary items at the rate prevailing at the balance
sheet date;
ii) non-monetary items at the historical exchange rate;
iii) revenue and expense at the average rate in effect during
the applicable accounting period.
Gains or losses arising on translation are included in the results
of operations.
ix) Income Taxes
During 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 - "Accounting for Income Taxes" (SFAS 109). This
standard requires the use of an asset and liability approach for
financial accounting and reporting on income taxes. If it is more
likely than not that some portion of all of a deferred tax asset
will not be realized, a valuation allowance is recognized.
2. INVESTMENTS
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C> <C>
a) South American Minerals Inc., 94,000 common shares with a market
value at April 30, 2000 of $173,912; 250,000 common shares with
a market value of $875,000 at April 30, 1999 $100,815 $268,125
b) Luminex Ventures Inc., 50,000 common shares 25,000 --
-------- --------
$125,815 $268,125
======== ========
</TABLE>
<PAGE> 42
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
3. MINERAL PROPERTIES
<TABLE>
<CAPTION>
2000 1999
-------- -----------
<S> <C> <C> <C>
a) Ladue Mineral Claims, Alaska
The Company has entered into an agreement to acquire, subject to a 1%
net smelter return, a 100% interest in 62 claim blocks in the Tanana
Uplands area of southern Alaska. The agreement, provides for a cash
payment of $10,000 and the issuance of 50,000 as consideration for the
acquisition of the claims
Paid to date
Cash $ 10,000 $ --
Shares (50,000 common shares) 21,500 --
-------- -----------
31,500 --
Option payment received - cash (2,887) --
- 50,000 common shares (25,000) --
-------- -----------
3,613 --
-------- -----------
The Company has granted a company, related by a common director, the
option to acquire 50% of its interest in the Ladue mineral claims. In
order to earn its interest in the claims, the optionee must make a cash
payment of $2,000 U.S. (paid), issue up to 100,000 common shares
(50,000 common shares issued), and expend $50,000 U.S. on the property
by September 30, 2001
b) Mac and Dall Mineral Claims, Alaska
The Company has acquired, by staking, a 50% interest in two claim
groups, each consisting of 20 mineral claims and 4 prospecting sites in
the Tanana Uplands area of southern Alaska -- --
-------- -----------
</TABLE>
<PAGE> 43
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
3. MINERAL PROPERTIES (Continued)
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C> <C>
c) Shaw Creek - Big Delta Quadrangle, Alaska
The Company acquired, by staking, a 50% interest in 4 blocks of 24
prospecting sites located on Shaw Creek-Big Delta Quadrangle, Alaska
- Staking costs $ 57,400 $ 57,400
In addition, the Company has signed a letter of intent, subject to
regulatory approval, to acquire, subject to a 1.5% net smelter royalty,
the other 50% interest in the above noted prospecting sites for the
following consideration:
- U.S. $30,000 on signing
- 200,000 shares
Paid to date (U.S. $30,000) 45,330 45,330
-------- --------
102,730 102,730
-------- --------
d) Silver Ridge, B.C.
The Company has entered into an option agreement for the acquisition of
a 70% interest in certain mineral claims located in the Revelstoke
Mining District of B.C. In order to earn this interest, the Company
must make cash payments totalling $107,800 at set intervals over three
years, must incur exploration expenditures totalling $490,000 at set
intervals over four years, and must issue 200,000 shares in 50,000
share increments as work progresses on the property
Consideration paid to date
Cash $ 13,800 $ 13,800
Shares (50,000 shares at $0.25) 12,500 12,500
-------- --------
26,300 26,300
Written off on abandonment 26,300 26,300
-------- --------
-- --
-------- --------
$106,343 $129,030
======== ========
</TABLE>
<PAGE> 44
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
(STATED IN CANADIAN DOLLARS)
(UNAUDITED)
3. LOANS PAYABLE
<TABLE>
<CAPTION>
2000 1999
-------- -------
<S> <C> <C>
These loans are interest free and payable on demand $ -- $97,187
======== =======
</TABLE>
5. SHARE CAPITAL
a) During the period ended April 30, 2000, the Company completed the private
placement of 2,333,333 units at $0.15 per unit, each unit consisting of one
common share and one non-transferable share purchase warrant for the
purchase of an additional common share at $0.15 per share for one year, or
at $0.175 per share during the second year.
b) In connection with a private placement of treasury shares, the Company
issued non-transferable share purchase warrants for the purchase of up to
1,666,667 share at $0.17 per share to June 24, 2000.
c) Of the issued shares, 140,626 are held in escrow subject to approval for
release by the regulatory authorities.
d) As at April 30, 2000, the Company had outstanding incentive stock options
for the purchase of up to 967,000 shares at $0.26 per share to July 16,
2003.
<PAGE> 45
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
<PAGE> 46
AUDITORS' REPORT
To the Shareholders of
Achieva Development Corp.
We have audited the balance sheets of Achieva Development Corp. (an exploration
stage company) as at October 31, 1999 and 1998, and the statements of operations
and deficit accumulated during the exploration stage, cash flows, and
stockholders' equity for the years ended October 31, 1999, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with United States and Canadian generally
accepted auditing standards. Those standards require that we plan and perform an
audit to obtain reasonable assurance whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 1999 and 1998,
and the results of its operations and cash flows for the years ended October 31,
1999, 1998 and 1997 in accordance with United States generally accepted
accounting principles applied on a consistent basis.
Vancouver, B.C. "Morgan & Company"
March 10, 2000 Chartered Accountants
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS
ON CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as those described in
Note 1(a) of the financial statements. Our report to the shareholders dated May
16, 2000 is expressed in accordance with Canadian reporting standards which do
not permit a reference to such an uncertainty in the Auditors' Report when the
uncertainty is adequately disclosed in the financial statements.
Vancouver, B.C. "Morgan & Company"
March 10, 2000 Chartered Accountants
F-1
<PAGE> 47
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
(STATED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 31
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $ 93,353 $ 3,353
Goods and Services Tax recoverable 563 380
------------ ------------
93,916 3,733
OFFICE FURNITURE, at cost less accumulated depreciation 2,542 1,753
INVESTMENTS (Note 2) 213,427 321,750
EXPLORATION ADVANCE -- 34,735
RECLAMATION BOND -- 2,100
MINERAL PROPERTIES (Note 3) 134,230 26,300
------------ ------------
$ 444,115 $ 390,371
============ ============
LIABILITIES
CURRENT
Accounts payable $ 3,120 $ 16,113
Loans payable (Note 4) 97,188 29,194
------------ ------------
100,308 45,307
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5)
Authorized:
100,000,000 Common voting shares, no par value
100,000,000 Class A preference non-voting shares,
par value $10 each
100,000,000 Class B preference non-voting shares,
par value $50 each
Issued and Outstanding:
9,947,350 (of which 140,626 shares are held in escrow)
at October 31, 1999, and 9,877,350 (of which 140,626 shares
are held in escrow) at October 31, 1998 2,801,209 2,774,509
DEFICIT (2,457,402) (2,429,445)
------------ ------------
343,807 345,064
------------ ------------
$ 444,115 $ 390,361
============ ============
</TABLE>
Approved by the Board of Directors:
------------------------------------- -----------------------------------
F-2
<PAGE> 48
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
(STATED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
EXPENSES
Depreciation $ 553 $ 440 $ 600
Interest 1,385 635 1,281
Mineral property exploration costs 75,782 110,984 --
Office, telephone, rent and sundry 38,517 24,867 19,468
Professional fees 16,241 8,275 17,452
Regulatory authorities and transfer agent 9,621 11,548 13,701
------------ ------------ ------------
LOSS BEFORE THE FOLLOWING (142,099) (156,749) (52,502)
Gain on sale of investments 140,442 -- --
Loss on sale of mineral property -- (308,310) --
Write-off of abandoned mineral property (26,300) -- --
------------ ------------ ------------
LOSS FOR THE YEAR (27,957) (465,059) (52,502)
DEFICIT, BEGINNING OF YEAR (2,429,445) (1,964,386) (1,911,884)
------------ ------------ ------------
DEFICIT, END OF YEAR $ (2,457,402) $ (2,429,445) $ (1,964,386)
============ ============ ============
LOSS PER SHARE $ (0.01) $ (0.04) $ (0.01)
============ ============ ============
</TABLE>
F-3
<PAGE> 49
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(STATED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
NUMBER
OF SHARES AMOUNT DEFICIT TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1996 8,160,683 $ 2,512,009 $ (1,911,884) $ 600,125
Net loss (52,502) (52,502)
------------ ------------ ------------ ------------
BALANCE, OCTOBER 31, 1997 8,160,683 2,512,009 (1,964,386) 547,623
Shares issued for cash 1,666,667 250,000 250,000
Shares issued for mineral property 50,000 12,500 12,500
Net loss (465,059) (465,059)
------------ ------------ ------------ ------------
BALANCE, OCTOBER 31, 1998 9,877,350 2,774,509 (2,429,445) 345,064
Shares issued for cash 20,000 5,200 5,200
Shares issued for mineral property 50,000 21,500 21,500
Net loss (27,957) (27,957)
------------ ------------ ------------ ------------
BALANCE, OCTOBER 31, 1999 9,947,350 $ 2,801,209 $ (2,457,402) $ 343,807
============ ============ ============ ============
</TABLE>
F-4
<PAGE> 50
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(STATED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Loss for the year $ (27,957) $ (465,059) $ (52,502)
---------- ---------- ----------
ADJUSTMENTS TO RECONCILE LOSS TO NET CASH USED BY OPERATING
ACTIVITIES
Depreciation 553 440 600
Gain on sale of investment (140,442) -- --
Loss on sale of mineral property -- 308,310 --
Write off of abandoned mineral property 26,300 -- --
Change in Goods and Services Tax recoverable (183) 4,328 6,417
Change in prepaid expenses -- -- 1,912
Change in accounts receivable -- -- 3,597
Change in accounts payable (12,993) (35,835) 1,108
---------- ---------- ----------
TOTAL ADJUSTMENTS (126,765) 277,243 13,634
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (154,722) (187,816) (38,868)
---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Mineral properties (112,730) (13,800) --
Office furniture (1,342) -- --
Reclamation bond 2,100 (2,100) --
Exploration advance 34,735 (34,735) --
Mineral property costs recovered -- -- 37,751
Investments -- (321,750) --
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (77,237) (372,385) 37,751
---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Issue of shares for cash 5,200 250,000 --
Loans payable 67,994 (64,925) 94,119
Long term debt -- -- (36,414)
Proceeds on sale of investment 248,765 -- --
Proceeds on sale of mineral property -- 321,750 --
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 321,959 506,825 57,705
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 90,000 (53,376) 56,588
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,353 56,729 141
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 93,353 $ 3,353 $ 56,729
========== ========== ==========
</TABLE>
F-5
<PAGE> 51
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(STATED IN CANADIAN DOLLARS)
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
During the year ended October 31, 1999, the Company issued 50,000 common shares
at a deemed value of $0.43 per share as part consideration in the acquisition of
the Ladue mineral claims in Alaska.
During the year ended October 31, 1998, the Company issued 50,000 shares at a
deemed value of $0.25 per share as part consideration in the acquisition of the
Silver Ridge mineral property.
F-6
<PAGE> 52
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS
a) Exploration Stage Activities
The Company is in the process of exploring its mineral properties and
has not yet determined whether the properties contain ore reserves that
are economically recoverable.
The recoverability of amounts shown as mineral properties and related
deferred exploration expenditures is dependent upon the discovery of
economically recoverable reserves, confirmation of the Company's
interest in the underlying mineral claims, the ability of the Company
to obtain profitable production or proceeds from the disposition
thereof.
b) Significant Accounting Policies
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the United
States. Because a precise determination of many assets and liabilities
is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
The financial statements have, in management's opinion, been properly
prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
i) Mineral Property Costs
The Company capitalizes the acquisition costs of mineral
properties in which it has a continuing interest to be amortized
over the recoverable reserves when a property reaches commercial
production. On abandonment of any property, applicable acquisition
costs will be written off. To date, the Company has not
established the commercial feasibility of its mineral property,
therefore, all exploration expenditures are being expensed.
ii) Depreciation
Office furniture is depreciated at the rate of 20% on the
declining balance basis.
iii) Investments
The Company records investments at cost. The cost of investments
is written down to market value when a declining in value is other
than temporary.
F-7
<PAGE> 53
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS (Continued)
b) Significant Accounting Policies (Continued)
iv) Loss per Share
Loss per share is based on the weighted aver number of common
shares outstanding during the year. Since the Company's stock
options, warrants and escrow shares are anti-dilutive, they have
not been included in the calculation.
v) 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 the
reported amounts of revenues and expenses for the reporting
period. Actual results could differ from these estimates.
vi) Financial Instruments
The Company's financial instruments consist of cash and accounts
payable.
Unless otherwise noted, it is management's opinion that this
Company is not exposed to significant interest or credit risks
arising from these financial instruments. The fair value of these
financial instruments approximate their carrying values, unless
otherwise noted.
vii) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary
consideration are valued at the quoted market price per share at
the close of trading on the day of completion of the transaction,
except for those circumstances where, in the opinion of the
Company and due to the nature of the transaction, the trading
price does not fairly represent the value of the transaction. In
such circumstances, the value of the shares is determined based
on the estimated fair value of the consideration received.
F-8
<PAGE> 54
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
1. NATURE OF OPERATIONS (Continued)
b) Significant Accounting Policies (Continued)
viii) Foreign Currency Translation
Transactions recorded in United States dollars have been
translated into Canadian dollars using the Temporal Method as
follows:
i) monetary items at the rate prevailing at the balance sheet
date;
ii) non-monetary items at the historical exchange rate;
iii) revenue and expense at the average rate in effect during the
applicable accounting period.
Gains or losses arising on translation are included in the
results of operations.
2. INVESTMENTS
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
South American Minerals Inc., 199,000 common shares with a market value at
October 31, 1999 of $439,183 (1998 - 300,000 common shares with a market
value of $376,000) $213,427 $321,750
======== ========
</TABLE>
3. MINERAL PROPERTIES
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
a) Ladue Mineral Claims, Alaska
The Company has entered into an agreement to acquire, subject to a 1%
net smelter return, a 100% interest in 62 claim blocks in the Tanana
Uplands area of southern Alaska. The agreement, which is subject to
regulatory approval, provides for a cash payment of $10,000 and the
issuance of 50,000 as consideration for the acquisition of the claims.
Paid to date
Cash $ 10,000 $ --
Shares (50,000 common shares) 21,500 --
-------- --------
31,500 --
-------- --------
</TABLE>
F-9
<PAGE> 55
ACHIEVA DEVELOPMENT CORP.
(A EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
3. MINERAL PROPERTIES (Continued)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
b) Mac and Dall Mineral Claims, Alaska
The Company has acquired, by staking, a 50% interest in two claim
groups, each consisting of 20 mineral claims and 4 prospecting sites in
the Tanana Uplands area of southern Alaska. $ -- $ --
-------- --------
c) Shaw Creek - Big Delta Quadrangle, Alaska
The Company acquired, by staking, a 50% interest in 4 blocks of 24
prospecting sites located on Shaw Creek-Big Delta Quadrangle, Alaska.
- Staking costs 57,400 --
In addition, the Company has signed a letter of intent, subject to
regulatory approval, to acquire, subject to a 1.5% net smelter royalty,
the other 50% interest in the above noted prospecting sites for the
following consideration:
- U.S. $30,000 on signing
- 200,000 shares
Paid to date (U.S. $30,000) 45,330 --
-------- --------
102,730 --
-------- --------
</TABLE>
F-10
<PAGE> 56
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
3. MINERAL PROPERTIES (Continued)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
d) Silver Ridge, B.C.
The Company has entered into an option agreement for the acquisition of
a 70% interest in certain mineral claims located in the Revelstoke
Mining District of B.C. In order to earn this interest, the Company
must make cash payments totalling $107,800 at set intervals over three
years, must incur exploration expenditures totalling $490,000 at set
intervals over four years, and must issue 200,000 shares in 50,000
share increments as work progresses on the property.
Consideration paid to date
Cash $ 13,800 $ 13,800
Shares (50,000 shares at $0.25) 12,500 12,500
-------- --------
26,300 26,300
Written off on abandonment (26,300) --
-------- --------
$134,230 $ 26,300
======== ========
</TABLE>
4. LOANS PAYABLE
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
These loans are interest free and payable on demand $ 97,187 $ 29,194
======== ========
</TABLE>
5. SHARE CAPITAL
a) The Company has arranged, subject to regulatory approval, the private
placement of 2,000,000 units at $0.15 per unit, each unit consisting
of one common share and one non-transferable share purchase warrant
for the purchase of an additional common share at $0.15 per share for
one year, or at $0.175 per share during the second year.
b) In connection with a private placement of treasury shares, the Company
issued non-transferable share purchase warrants for the purchase of up
to 1,666,667 shares at $0.17 per share to June 24, 2000.
F-11
<PAGE> 57
ACHIEVA DEVELOPMENT CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
(STATED IN CANADIAN DOLLARS)
5. SHARE CAPITAL (Continued)
c) Of the issued shares, 140,626 are held in escrow, subject to approval
for release by the regulatory authorities.
d) As at October 31, 1999, the Company had outstanding incentive stock
options for the purchase of up to 967,000 shares at $0.26 per share to
July 16, 2003.
6. SUBSEQUENT EVENTS
a) Subsequent to October 31, 1999, the Company amended the private
placement referred to in Note 5(c) increasing it to 2,333,333 units
with all other terms and conditions unchanged.
b) Subsequent to October 31, 1999, the Company granted a second company
the option to acquire 50% of its interest in the Ladue mineral claims.
In order to earn its interest, the optionee must make a cash payment
of $2,000 U.S., issue up to 100,000 common shares and expend $50,000
U.S. on the property by September 30, 2001.
F-12
