UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 20-F
(Mark One)
[x] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[ ] ANNUAL REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
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_______________________________________________________
EARTHWORKS INDUSTRIES INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
EARTHWORKS INDUSTRIES INC.
----------------------------------------------
(Translation of Registrant's name into English)
British Columbia, Canada
----------------------------------------------
(Jurisdiction of incorporation or organization)
1608 - 675 West Hastings Street, Vancouver, B.C., Canada V6B 1N2
----------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common voting Canadian Venture Exchange (formerly
Vancouver Stock Exchange)
<PAGE>
Securities registered or to be registered pursuant to Section 12(g) of the Act
Common voting
----------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act
Nil
----------------
(Title of Class)
Indicate the number of outstanding shares of each of the Issuer's classes of
capital or common stock as of the closing of the period covered by the annual
report
Not applicable
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 not applicable
Indicate by check mark which financial statement item the Registrant has elected
to follow
Item 17 x Item 18
NOTE: All references to monies herein are to Canadian dollars unless
otherwise specifically indicated
<PAGE>
PART I
1. DESCRIPTION OF BUSINESS
A. Present Business Structure
The Company was originally incorporated under the laws of the Province of
British Columbia, Canada on March 2, 1984 under the name "Colima Resources
Limited". The name was changed to "Procordia Explorations Ltd." on April 27,
1990 and to its present name effective September 10, 1993. The Company underwent
at least two changes of management prior to Mr. Atkinson essentially assuming
control of management in January of 1993.
The Company is not presently carrying on any business in its own right. The
Company's present business activities are essentially all done by and through
its wholly owned subsidiary, Cortina Integrated Waste Management, Inc.
(hereinafter called "Cortina"), which is incorporated pursuant to the laws of
California, U.S.A. The Company maintains head office facilities in Vancouver,
B.C., Canada for itself and Cortina. The principal director and officer of the
Company, David Atkinson, is also the principal director and officer of Cortina
and works, on a full-time basis, for the Company and Cortina at the Vancouver
office.
The Company also provides all of the funding required by Cortina - by way of
making unsecured demand loans to it.
The Company, until 1991, while under different management, carried on, from time
to time, somewhat minimal mineral exploration work in Canada. In 1991 and 1992
it investigated and negotiated interim agreements (which have since expired) to
become involved in certain waste hauling and disposal projects in California -
including the then proposed project which is now the focus of Cortina's
activities. After the Company came under its present management various business
opportunities were investigated and interim negotiations opened - but none of
these activities resulted in any material business activities or asset
acquisitions other than the Solucorp royalty interest and, earlier this year,
the proposed purchase of 100% of the shares of Pacific Waste Services, Inc.,
described below.
B. Pacific Waste Services, Inc. acquisition
The Issuer entered into a Purchase Agreement dated March 31, 2000 ("the
Agreement") with the owners of 100% of the issued shares of Pacific Waste
Services, Inc., a private company based in San Ramon, California, U.S.A.
("PWS"). The owners with which the Agreement has been signed are:
James A. Wyse, Danville, California, U.S.A.
David S. Brischke, San Ramon, California, U.S.A.
Thomas G. Valentino, Chico, California, U.S.A.
Scott D. Schmidt, Byron, California, U.S.A.
Doana Wyse, Danville, California, U.S.A.
1
<PAGE>
(hereinafter called "Vendors")
The Issuer has agreed to issue to the Vendors, pursuant to the Agreement, for
the purchase of 100% of the issued shares of PWS, 8,000,000 shares in its
capital ("Shares") on three bases, being:
a. 5,000,000 Shares will be issued to the Vendors upon the acceptance for
filing of the Agreement by the Exchange (the date of such acceptance
being hereinafter called the "Acceptance Date"). The Shares will all be
issued but, pursuant to Exchange requirements, 10% of the numbers
issued to each Vendor will be free of escrow restrictions but the
remaining 90% will have to be deposited in an escrow and released at a
rate of 15% at 6 month intervals measured from the Acceptance Date;
b. 2,000,000 "earn-out" Shares will be issued to the Vendors on the basis
of PWS's earnings from certain contracts which PWS did not have
completed and operational at the date of the Agreement but which were
under negotiations or were anticipated and which are believed by the
Vendors to contribute substantially to the value of PWS. One such Share
will be issued to the Vendors for each $1.00 (U.S.) of earnings by PWS
from such contracts calculated on a before interest, taxes,
depreciation and amortization basis ("EBITDA earnings"). PWS's EBITDA
earnings from such contracts will be calculated on a quarterly basis
and Shares will be issued quarterly on the basis of such calculated
earnings. Any of the said Shares which have not become issuable to the
Vendors by September 30, 2003 will cease to be issuable and the number
of Shares to be received by the Vendors pursuant to the Agreement will
be reduced accordingly.
c. 1,000,000 Shares, commonly called by the parties "Project Shares" will
be issued to the Vendors in consideration of the value of the interests
already effectively owned by PWS in the Cortina Project. The Project
Shares will be issued to the Vendors in equal quarterly tranches of
125,000 Shares each, the first to be issued on the last day of the
calendar quarter in which the Cortina Project commences operations on a
commercial basis ("Project Commencement Date"); provided however that
Shares will only be issued for a quarter in which the Cortina Project
operates commercially for at least 60 days. Any of the Project Shares
which have not been issued to the Vendors by 5 years after the Project
Commencement Date will cease to be issuable to the Vendors and the
numbers of Shares issuable to the Vendors pursuant to the Agreement
will be reduced accordingly.
2
<PAGE>
Pursuant to the Agreement the principal Vendor, James A. Wyse, was appointed to
the Board of Directors of the Issuer on June 1, 2000. A further nominee of the
Vendors will be appointed to the Issuer's Board and the Board will be
reconstituted to comprise of 5 persons 2 of whom will be Vendors or Nominees of
the Vendors, within 10 days after the Acceptance Date. At that time Wyse will
also be appointed President of the Issuer.
The Agreement is subject to its acceptance for filing by the Exchange. Subject
to the Acceptance Date occurring, and the continuance of the Agreement, the
closing of the transaction contemplated by the Agreement will occur on April
30, 2001.
It is a condition of the closing of the Agreement that the Issuer and or
Cortina will have, prior to that date, raised additional financing, being:
a. at least $5,000,000 (Cdn.) of equity or debt financing will have been
raised by one or both of the Issuer and Cortina, or;
b. at least $3,000,000 (Cdn.) will have been raised by Cortina by
non-equity financing for application to the Cortina project and Cortina
costs.
The Agreement has been submitted to the Exchange but it is still under
consideration by the Exchange.
PWS is an established waste management consultant and contractor with
operations in the area of landfill management, design and waste disposal
throughout the Western United States. It has been expanding the scope of its
operations and anticipates to thereby expand both its gross and net revenues.
It has reported to the Issuer that it has been in business since 1988. PWS has
been providing consulting services to the Issuer and Cortina since 1995 with
respect to the Cortina Project. As a result of supplemental agreements PWS has
accepted part of its remuneration for work done by the accrual of fees which
are convertible into an interest in Cortina Project of up to 25%. In addition,
PWS has accepted portions of it's compensation by way of shares in the Issuer
and presently holds 533,000 shares of the Issuer. This agreement will cease to
be of any effect if and when the acquisition of PWS is completed.
C. Solucorp Royalty Interest
Pursuant to an agreement dated effective August 15, 1994 the Company contracted
with Solucorp Industries Ltd. and its wholly owned subsidiary, ESM Industries
(Canada) Inc. (hereinafter together referred to as "Solucorp"), to settle
certain outstanding financial issues and to receive in consideration thereof
the right to receive royalties equal to $1.00 (Cdn.) for each tonne of soil or
other material remediated or processed in Canada using Solucorp's MBS Process
for the period ending August 15, 2014. The Company also acquired the
non-exclusive right to market usage of the MBS Process in Canada and the United
States, during the period ending August 15, 2014 and to receive $1.00 (Cdn. or
U.S. as may be applicable) for each tonne of material remediated or processed
using the MBS Process as a result of the Company's marketing efforts.
3
<PAGE>
In further consideration of the right to receive the payments the Company
issued Solucorp 50,000 shares in its capital and is obliged to issue to
Solucorp an additional maximum of 200,000 shares in its capital on the basis of
1 share having to be issued for each $1.00 (Cdn.) of royalty payments received,
such shares to be allotted in blocks of not less than 50,000 shares each from
time to time. To this date the Company has received royalties totalling
$113,275 (Cdn.). The Company has not issued any further shares to Solucorp.
Solucorp has reported to the Company that it is engaged in seeking contracts
for the use of its MBS Process in Canada and the U.S. and that it has had minor
agreements for its usage in Canada which has resulted in the royalty payments
that have been paid to the Company. The Company has investigated the
possibility of marketing Solucorp's MBS Process and has had exploratory
negotiations with potential users of it but it has not actively marketed the
Process nor achieved any agreements for the use of the Process.
D. Cortina
The Company, through Cortina, is continuing studies and seeking approvals
relative to the construction, installation and operation of a waste landfill
operation (the "Project") on lands (the "Lands") located approximately 100
kilometers north of the City of Sacramento, in Colusa County, California, U.S.A.
The Company entered into a Memorandum of Agreement dated June 10, 1993, as
amended November 30, 1993, March 4, 1994 and August 23, 1994 (the "Agreement"),
with the owner of the Lands, being an Indian Band known as "Cortina Indian
Rancheria" (the "Band"). Subsequently, the Company entered into a lease
agreement on the Lands dated October 31, 1995 with the Band (the "Business
Lease") for the purpose of facilitating the Project. The Business Lease is
subject to the formal approval of the Secretary of State for the Interior of the
United States of America ("Interior Secretary") - which has been applied for but
not yet received.
Cortina has paid the Band $33,000 (U.S.) pursuant to the Agreement. The
Agreement, and the payments made thereunder, were to secure for the Company the
exclusive rights to deal with the Band and to negotiate and sign the Business
Lease.
The Business Lease is for a term of 25 years running from the date of its
approval by the Interior Secretary and will be renewable, at the option of
Cortina for a further 25 years. A minimum rental of $15,000 (U.S.) per month
will have to be paid commencing upon the commencement of the operation of the
Project, and a $10,000 (U.S.) one-time payment must be made within 21 days of
the approval of the Interior Secretary. Throughout the term of the Business
Lease a percentage of the gross revenues from the Project will have to be paid,
being 3% of the gross revenues received for the first 150,000 tons of waste
dumped each year and 5% thereafter, subject to the monthly minimums noted above.
During the period since the execution of the Agreement, the Company has, through
the efforts of its Management, and with advice from consultants and other
sources, investigated the feasibility and the potential economic viability of a
waste landfill on the Lands. The conclusion of Management is that the Project is
feasible and economically viable. Accordingly, the Company and Cortina are
continuing with the proposal to develop the Project.
4
<PAGE>
The approval of the Business Lease by the Interior Secretary is subject to
extensive reviews being conducted on behalf of Cortina of virtually all aspects
of the Project including environmental impact, interference with archeological
sites, seismic stability of the underlying rock structure and other incidental
aspects. The approval is also subject to various reviews and local public
hearings. To date all such requirements have been successfully conducted and
concluded. Approval by the Interior Secretary will also effectively, under the
Solid Waste Regulations applicable, constitute a permit to proceed with the
building and operation of the Project facilities. After approximately 4 years of
working on satisfying all the requirements to obtain the approval of the
Interior Secretary the Company is presently anticipating, if no further
difficulties arise, that the approval will be received not later than November
30, 2000.
The Project is to be an integrated waste management facility and landfill on the
443 acre Lands. The operation of the facility will offer landfilling, recycling,
composting, bioremediation, and treatment of contaminated soils, sludge and
green waste. If permitted to accept 1,500 tons of waste per day - which is what
has been applied for - the facility is projected to have a capacity of accepting
close to 30,000,000 tons of waste and landfill and to have an operational life
of more than 40 years. The various approval processes which have been pursued by
the Company and Cortina have required that they develop detailed plans for the
Project and the Project facilities. However, pending the receipt of the approval
from the Interior Secretary - and the permitting of the Project - Cortina has
not commenced construction of any Project facilities. Nor has Cortina signed any
contracts for the receipt and handling of waste, nor any of the other incidental
agreements that will be necessary to negotiate and settle to construct and then
operate the Project facilities. Cortina and the Company have not yet realized
any revenues from the proposed Project.
The Company has conducted studies to determine the potential amounts of waste
available within the area which is within economic distances of the Project
("Project Area"). This has included reviewing the existing waste handling and
landfill facilities in the area - essentially within approximately 150 miles of
the Project site. As virtually 100% of the waste moved to the site will have to
be by truck the hauling costs will be a factor in determining the distances from
which waste can be economically hauled to the site. The Company's reviews have
also been as to the remaining potential operational periods for other waste
facilities within the Project Area and other potentially new waste handling or
disposal facilities that have been announced or brought to the attention of the
Company within the Project Area. However, due to the uncertainty of the various
governmental authorities which would have jurisdiction over other waste handling
facilities in the Project Area - which would not be on Federal lands - no final
determination can be made of whether or not other competing facilities may be
licensed within the Project Area, or if extensions will be granted of the
permits for existing facilities. Management is aware of the fact that waste
handling - particularly waste that has any level of contamination - is an
environmentally and politically sensitive subject. Management also recognizes
that notwithstanding that the Project is to be located on U.S. Federal Indian
lands, and therefore not fully subject to the rules and regulations of local or
state governments, local public opposition - of which there has been some -
could become so aggressive and vocal that the Interior Secretary could further
delay the required approval or impose further requirements as a condition of the
final approval.
Reviews and studies done on behalf of the Company to date satisfy Management
that there is available within the Project Area not less than the projected
1,500 tons of waste per day that will require disposal and which can potentially
be made the subject of disposal contracts in the Project facilities. The
development and the requirement to dispose of waste is not seasonal.
5
<PAGE>
The Company calculates that it and Cortina have to November 30, 1999 expended
approximately $2,248,000 on the development of the Project - both in direct
costs and indirect general and administrative costs. Of this, $353,746 was
expended in the fiscal year ended November 30, 1999. Management anticipates that
further costs will be incurred - for which funding will have to be obtained -
until Project is financially self-sufficient as follows:
For the period until approval is obtained from Interior
Secretary - projected to be November 30, 2000.............$ 50,000 (U.S.)
For the period following approval for the development of
the final engineering and construction plans -
estimated to be for a period of 4 months -.................$ 300,000 (U.S.)
Capital costs for the construction of the Project
facilities.................................................$ 5,000,000 (U.S.)
Management is anticipating that it will be able to raise, by equity funding, all
of the costs required prior to the commencement of construction. Management is
anticipating being able to borrow, on acceptable terms, 100% of the capital cost
requirements for the Project.
Neither the Company or Cortina have any employees - other than its President,
David Atkinson, who is engaged under a Service Contract on a full-time basis.
All other efforts on behalf of the Company and Cortina are done by consultants
and contractors under contract. The Company does not anticipate engaging any
employees until the Project facility is near completion - and then all employees
will be engaged as employees of Cortina.
The Company has entered into a Memorandum of Understanding ("MOU") dated
September 25, 1996 with Pacific Waste Services Inc. (formerly named James A.
Wyse, Inc.) ("PWS"), of San Ramon, California, U.S.A., whereby PWS has been
granted an option to acquire a maximum of 10% equity interest in Cortina. That
Agreement will cease to be effective when the Company completes the acquisition
of PWS.
E. Funding Agreement with Solucorp Industries Ltd. ("Solucorp")
The Company entered into an Agreement dated September 5, 1995 and incidental
supplemental agreements (hereinafter together called the "Agreement") with
Solucorp, pursuant to which Solucorp was granted the right to provide funding of
up to $1,000,000 (U.S.) to be applied to the costs of the development of the
Cortina Landfill Project. The Agreement provided for the funding to be advanced
in portions from time to time as required by Cortina to pay specific costs or
invoices. Solucorp has provided a total of $304,712.
The Agreement provided that Solucorp had the right, at any time after supplying
$400,000 (U.S.), to convert the advances to the acquisition of an interest in
the Project on the basis of each $40,000 (U.S.) advanced being convertible to a
1% participating interest in the Project - and various additional optional
rights, none of which were earned or exercised by Solucorp.
6
<PAGE>
Due to defaults by Solucorp the Company gave it notice in November 1998
terminating Solucorp's rights to advance further monies. As a result, the monies
that have been advanced are repayable by the Company with interest at a rate of
15% per annum provided that such repayment will only be by way of Solucorp
setting off 25% of the various royalty payments which become due from it to the
Company under the agreements described in sub-clause C above.
F. Company's Plan of Operations
The Company does not anticipate undertaking any activities during the balance of
its fiscal year ending November 30, 2000 other than to support and fund the
ongoing activities of Cortina and working toward the closing of the Pacific
Waste Agreement. The Company does not have a firm budget or a projection of it
and Cortina's financial requirements for the balance of the fiscal year. The
Company is anticipating that it will be able to secure the necessary funding
from one of a number of sources, being the exercise of various outstanding
options and share purchase warrants and the private sale of shares in its
capital. The Company is not in a position to depend on the securing of
additional funding and if additional funding is not secured the operations and
activities of Cortina will have to be reduced to whatever level will be
compatible with the funding that it is able to secure. The Company does not
anticipate that it or Cortina will receive any sales or business revenues during
the current fiscal year or that they will achieve the sale of any products or
services.
The company recognizes that Cortina's proposed landfill project is still
subject to certain approvals by various levels of government and that it is not
necessarily in a position to assure that such approvals will be received. The
Company and Cortina also recognize that the landfill project is environmentally
sensitive and that it therefore faces objections and delays caused by persons
living in the area of the proposed site of the Project and environmental
advocacy and vested interest groups and organizations.
2. DESCRIPTION OF PROPERTY
The principal assets of the Company are:
(a) the ownership of 100% of the issued shares of Cortina;
(b) the Pacific Waste Agreement described in Item 1B above.
The properties and assets of Cortina and Pacific Waste are described in Item 1.
3. LEGAL PROCEEDINGS
There are no material legal proceedings existing, pending or threatened to which
the Company, Cortina, Pacific Waste or their properties are a party or are
subject.
7
<PAGE>
4. CONTROL OF REGISTRANT
(a) The Company is not, to the best of the knowledge of the Company and its
Directors and Officers, directly or indirectly owned or controlled by
another corporation or by any foreign government.
(b) The Company's outstanding shares are in registered form but it is known
to the Company and its management that the registered holders of the
outstanding shares are, in large part, not the beneficial owners of the
outstanding shares and that significant numbers of the outstanding
shares are held registered in the names of various nominees on behalf
of the beneficial owners of such shares. As a result it is not possible
for the Company or its management to know who are all of the beneficial
owners of its outstanding shares or how many outstanding shares may be
beneficially owned by any single shareholder. The Company's authorized
capital consists of 100,000,000 common shares without par value, all of
which are voting, with each share having one non-cumulative vote. Based
on information that the Company has been able to assemble, Management
believes that there are no shareholders beneficially holding more than
10% of the Company's issued shares.
(c) There are no arrangements known to the Company, the operation of which
may at a subsequent date result in a change in the control of the
Company; provided that when 5,000,000 shares of the Company are issued
pursuant to the Pacific Waste Agreement described in Item 1B above,
James A. Wyse will receive a number of shares of the Company which will
result in him then holding more than 10% of the issued shares of the
Company. It is also assumed that the 5,000,000 shares that the vendors
will receive under the Pacific Waste Agreement will create
shareholdings which will have the potential of changing the control of
the Company.
5. NATURE OF TRADING MARKET
(a) The only principal market for the shares of the Company is the Canadian
Venture Exchange and its predecessor the Vancouver Stock Exchange
("Exchange") in Vancouver, British Columbia, Canada on which the shares
are listed for trading. There is no trading market for the Company's
shares in the United States.
(b) On a quarterly basis the high and low sales prices for the shares of
the Company on the Exchange during the two most recent completed fiscal
years, and the period since then, were as follows - expressed in
Canadian funds:
Quarter Low High
$ $
Dec. 01/97 - Feb. 29/98 0.50 1.70
Mar. 01/98 - May 31/98 0.59 0.90
June 01/98 - Aug. 31/98 0.60 0.98
Sept. 01/98 - Nov. 30/98 0.26 0.45
Dec. 01/98 - Feb. 28/99 0.27 0.48
Mar. 01/99 - May 31/99 0.39 0.75
June 01/99 - Aug. 31/99 0.20 0.63
Sept. 01/99 - Nov. 30/99 0.21 0.44
Dec. 01/99 - Feb. 01/00 0.34 1.40
Mar. 01/00 - May 31/00 0.91 2.06
June 01/00 - Aug. 31/00 1.04 1.79
8
<PAGE>
(c) It is not possible for the Company to identify exactly how many of its
issued shares are held by United States residents nor the number of
United States residents who hold shares of the Company. However, an
examination of the records of the Company's registered shareholdings,
prepared as at August 31, 2000, showed a total of 199,630 shares being
held by 9 U.S. residents. The Company has polled various brokerage
firms and nominees and has received advice that a further 40
unregistered shareholders are the beneficial owners of 1,259,963
shares. It is not possible for the Company to accurately determine how
many different beneficial holders own the shares held by such nominees
nor how many other U.S. resident shareholders may beneficially own
shares which are registered in the names of other agents or nominees.
6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no laws, decrees or regulations in Canada, in which the Company is
incorporated, that restrict the export or import of capital or which constitute
foreign exchange controls or which affect the remittance of dividends, interest
or other payments to non-resident holders of the Company's securities. There are
also no limitations created by any governmental laws, decrees or regulations in
Canada creating any limitations on the right of non-resident or foreign owners
to hold or vote shares of the Company, nor are any such limitations created by
the Company's Charter, Articles or constating documents.
7. TAXATION
To the best of the Company's knowledge there are no taxes or similar levies to
which holders of the Company's shares resident in the United States are subject.
However, the Company understands that pursuant to a Canada-U.S. tax treaty any
dividends which the Company might declare in favour of shareholders who are
resident in the United States will be subject to such Canadian withholding taxes
as the then current provisions of the treaty may require.
9
<PAGE>
8. SELECTED FINANCIAL DATA
(a) The Company has not at any point during its existence carried on an
active business from which it generated income or incurred business
operation expenses. The Company does not have any long-term obligations
except those described in Item 1 hereof. The Company has not, in its
existence, generated any profits or taxable earnings. No dividends have
ever been declared or paid. Reference is made to the financial
statements attached as an Exhibit hereto for information with respect
to the Company's Balance Sheet asset values and other financial
information details for the two fiscal years covered thereby, namely
the period between December 1, 1997 and November 30, 1999.
(b) The history of Canada-United States exchange rates are presented on the
basis of the amount of Canadian funds required to purchase $1.00
(U.S.). The rates of exchange used are the noon buying rate in the City
of New York for cable transfers of foreign currencies as certified by
the Federal Reserve Bank of New York - presented on a calendar year
basis.
<TABLE>
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Rate at period end 1.4722 1.5433 1.4288 1.3697 1.3655
Average rate during period 1.4858 1.4837 1.3849 1.3644 1.3689
High rate during each period 1.5194 1.5433 1.4398 1.3822 1.4238
Low rate during each period 1.4611 1.4168 1.3357 1.3310 1.3285
</TABLE>
9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
Because the Company has not carried on any business operations and has had no
income generating activities no meaningful discussion and analysis can be done
of the Company's operations. As is noted in Item 1 hereof, in describing the
business activities of the Company's subsidiary, Cortina, it is involved in
attempts to develop a new business. Unfortunately, it is subject to high degrees
of government regulation and environmental sensitivity over which the Company
has no control. The management of Cortina and the Company have verified, to
their satisfaction, that there is a current and potential long-term increasing
demand for waste disposal facilities, contaminated materials remediation and
recycling facilities. Management has also concluded to its satisfaction that
there is at least an unofficial policy prevalent in the BIA to support projects
on Indian lands which provide economic benefits for the tribes or bands
involved, and that the Cortina Band is, due to a lack of any other significant
industrial or economic activities on its lands, strongly in favour, in
principle, of Cortina's proposed project. Management has accordingly concluded
that in this favourable potential marketplace the proposed landfill project of
Cortina should be actively developed, subject to the availability of funding.
10
<PAGE>
10. DIRECTORS AND OFFICERS OF REGISTRANT
Particulars of the Directors and Officers of the Company are as follows:
Name and countries
of residence Offices held
------------------------- ----------------------------------------------------
David Brent Atkinson Director since November 10, 1992 and President and
British Columbia, Canada Chief Executive Officer since November 12, 1992
Director, President and Chief Executive Officers of
Cortina Integrated Waste Management, Inc. since its
incorporation on July 19, 1994
David Francis Andrews Director of the Company since January 20, 1993 and
British Columbia, Canada Secretary since November 9, 1994
Director and Chief Financial Officer of Cortina
Integrated Waste Management, Inc. since July 20,
1994
Danny L. Atkinson
British Columbia, Canada Director since February 28, 1997
Deirdre A. Lydon
British Columbia, Canada Director since May 5, 1998
James A. Wyse
California, U.S.A. Director since June 1, 2000
The Directors all hold their positions as directors for an indefinite term
subject to re-election at each Annual General Meeting of the shareholders of the
Company. All positions held with the subsidiaries and all offices held with the
Company are subject to termination by the Board of Directors of the Company. To
the best of the knowledge of the Company there are no arrangements or
understandings between any of the Directors and any other persons pursuant to
which such director was appointed a director or officer. David B. Atkinson and
Danny L. Atkinson are brothers. Deirdre A. Lydon is the wife of David B.
Atkinson.
11. COMPENSATION OF DIRECTORS AND OFFICERS
(a) The aggregate compensation paid by the Company to its Directors and
Officers during the fiscal year ended November 30, 1999 was $88,448
(Cdn.).
11
<PAGE>
(b) Cortina, the Company's subsidiary, does not pay or accrue, directly or
indirectly, any compensation or provide any benefits to any of its
directors or officers. The Company does not provide any other
remuneration or benefits to its Directors or Officers other than by way
of options as described in Item 12 below.
12. OPTIONS AND WARRANTS TO PURCHASE SECURITIES FROM THE CORPORATION OR ITS
AFFILIATES
(a) During the period since the beginning of the last completed fiscal
year, namely December 1, 1999, options have been held, received and
exercised by Directors and Officers of the Company as follows:
<TABLE>
No. Shares optioned, No. Share No. optioned
exercise price and options shares
Names date of grant exercised outstanding
---------------------------- ------------------------------ ---------- ----------
<S> <C> <C> <C>
David B. Atkinson August 10, 1995 optioned 150,000 150,000
Director, President and shares exercisable
CEO at $0.75 per share until
August 10, 2000.
August 8, 1997 optioned 105,500 63,500
169,000 shares exercisable
at $0.40 until August 7, 2002.
February 15, 2000 optioned
204,500 shares exercisable Nil 201,500
at $0.56 until February 14, 2005.
David F. Andrews August 10, 1995 optioned
Director and Secretary 80,000 shares exercisable 80,000 Nil
at $0.75 per share until
August 10, 2000.
June 12, 2000 optioned
55,000 shares exercisable Nil 55,000
at $0.90 until June 12, 2005
Danny L. Atkinson March 7, 1997 optioned
Director 100,000 shares exercisable Nil 100,000
at $0.40 per share until
March 6, 2002
Deirdre A. Lydon May 5, 1998 optioned
Director 175,500 shares exercisable Nil 175,500
at $0.40 per share until
May 5, 2003
12
<PAGE>
James A. Wyse June 12, 2000 optioned
Director 140,000 shares exercisable Nil 140,000
at $0.90 per share until
June 12, 2005
(b) The Company, in addition to the options granted to Directors and
Officers described above, has granted share purchase options to one
person who is not a Director or Officer of the Company, the details of
which are:
<CAPTION>
No. Shares optioned, No. Share No. optioned
exercise price and options shares
Names date of grant exercised outstanding
--------------------- -------------------------- --------- ------------
<S> <C> <C> <C>
Robert Sundberg February 15, 2000 optioned Nil 50,000
Consultant to the 50,000 shares exercisable
Company, of Delta, at $0.56 per share until
British Columbia, February 14, 2005
Canada
(c) The Company has granted and has outstanding share purchase warrants
entitling the holders to purchase shares in other securities of the
Company as follows:
<CAPTION>
Security No. Share Exercise Expiry
Purchasable Price Date
--------------------------------- ---------- ---------------- --------------
<S> <C> <C> <C>
Common shares * 123,500 $0.30 per share November 24/00
Common shares 472,500 $1.20 per share January 24/01
Units - each consisting of 1
share of the
Company and 1 "B"
Warrant ** 45,000 $1.00 per unit July 25/01
Common shares 45,000 $1.25 per share Earlier of
July 24/01
or 6 months
after date of
"B" Warrant **
</TABLE>
* Held by a private company wholly owned by the Company's President,
David B. Atkinson.
13
<PAGE>
** When a Unit is purchased it will include a "B" Warrant which will
entitle the holder to purchase another common voting share of the
Company exercisable at a price of $1.25 per share on or before the
earlier of July 24, 2001 or 6 months after the date of the exercise of
the Unit.
13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
(a) During the past 3 years no Director, Officer, holder of more than 10%
of the issued shares of the Company or any spouse of any such persons
had any interests in any material transactions with the Company, except
with respect to securing compensation for services rendered or being
granted and exercising share purchase incentive options, except as
follows:
David B. Atkinson -
Effective February 5, 1998 purchased 10,000 Units at $0.60 per
Unit, as part of a private placement by the Company, each Unit
consisting of 1 share of the Company and a warrant entitling
the purchase of an additional share exercisable within 1 year
at $0.60 per share. Mr. Atkinson subsequently exercised the
warrants to purchase a total of 10,000 shares at a cost of
$0.60 each.
Wholly owned company, 446980 B.C. Ltd., purchased 140,000
Units at a price of $0.60 per Unit, each Unit consisting of 1
share and 1 1-year warrant entitling the purchase of an
additional share at $0.60 each. 446980 B.C. Ltd. subsequently
exercised the warrants to purchase an additional 140,000
shares at a cost of $0.60 per share.
On August 13, 1998 446980 B.C. Ltd. accepted 15,000 shares at
a deemed price of $0.75 per share to settle Company
indebtedness to it of $11,250.
April 23, 1999 446980 B.C. Ltd. purchased by way of private
placement from the Company 155,000 Units at a price of $0.30
per Unit, each Unit consisting of 1 share of the Company and
one 1-year warrant entitling the purchase of an additional
share at an exercise price of $0.40 per share. 446980
subsequently exercised the warrants to purchase an additional
155,000 shares at $0.40 per share.
September 2, 1999 purchased 75,000 shares of the Company as a
private placement by the Company at a price of $0.50 per
share. December 6, 1999 446980 purchased as a private
placement 345,000 Units, each Unit consisting of 1 share of
the Company and one 1-year warrant entitling the purchase of
an additional 345,000 shares exercisable at $0.30 per share.
446980 has exercised 198,500 of the warrants to purchase
198,500 shares of the Company at a price of $0.30 per share
and still holds unexercised warrants to purchase 146,500
shares of the Company at $0.30 per share.
14
<PAGE>
David F. Andrews -
Effective February 5, 1998 purchased 15,000 Units at $0.60 per
Unit, as part of a private placement by the Company, each Unit
consisting of 1 share of the Company and a warrant entitling
the purchase of an additional share exercisable within 1 year
at $0.60 per share. Mr. Atkinson subsequently exercised the
warrants to purchase a total of 16,000 shares at a cost of
$0.60 each.
On March 2, 1999 accepted 30,000 shares at $0.40 per share to
settle Company indebtedness to it of $12,000. In April 1998
Andrews purchased from the Company its 100% of the issued
shares of a private Canadian company, CPC Cascade Power
Corporation ("CPC") in consideration of his assumption of
obligations the Company had outstanding to the original
previous owners of such shares and to pay certain potential
royalties to the Company if CPC or its successors and assigns
succeeded in developing and selling electricity from a
hydroelectric project on which CPC had done preliminary
research and planning.
Danny L. Atkinson -
On August 13, 1998 accepted 14,000 shares at a deemed price of
$0.75 per share to settle Company indebtedness to it of
$10,500. On March 2, 1999 accepted 15,000 shares at $0.40 per
share to settle Company indebtedness to him of $6,000.
Deirdre A. Lydon -
Wholly owned DAL Consulting Ltd. on March 2, 1999 accepted
15,000 shares at a deemed price of $0.40 per share to settle
Company indebtedness to it of $6,000.
(b) During the past 3 years no Director or Officer, or associate of any
Director or Officer, has been indebted to the Company or any of its
subsidiaries.
15
<PAGE>
PART II
(a) Particulars of capital shares to be registered. The Company's
authorized and issued shares are all fully participating common shares,
none of which have priority over any of the others. The holder of each
share is entitled to 1 non-cumulative vote for each share held. None of
the shares, whether issued or unissued, have any preferential rights or
restrictions applicable to them and none are subject to having any
rights or restrictions added to or imposed on them.
(b) No debt securities of the Company or American Depository Receipts, or
any other securities are being registered.
PART III
15. DEFAULTS UPON SENIOR SECURITIES
The Company has never had any senior securities issued or outstanding and
accordingly has not defaulted with respect to any senior securities.
16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
There have been no changes in the securities of the Company, or the rights of
holders of the securities of the Company, since its incorporation except that,
effective September 10, 1993, all of the Company's authorized and issued shares
were consolidated on the basis of each 5 existing authorized or issued shares
being consolidated into 1 fully participating voting common share. This share
consolidation was applicable to all of the issued shares of the Company and was
effected after it was approved by the appropriate and required Special
Resolution of the shareholders duly passed at a duly convened general meeting of
the shareholders.
PART IV
17. FINANCIAL STATEMENTS
The financial statements of the Company which are exhibited hereto are prepared
according to Canadian Generally Accepted Accounting Principles and in the
Accountant's Report attached thereto, and in the Notes thereto reference is made
to the material variations in accounting principles, practices and methods used
in preparing financial statements pursuant to Canadian Generally Accepted
Accounting Principles in comparison to United States Generally Accepted
Accounting Principles and the instructions contained in this Item17.
16
<PAGE>
18. FINANCIAL STATEMENTS
The financial statements exhibited hereto are prepared pursuant to the
instructions contained in Item 17 and not in this Item 18.
19. FINANCIAL STATEMENTS AND EXHIBITS
Index of Exhibits attached:
Exhibit 1 - Articles of Incorporation of the Company; Certificate of Name
Change issued September 10, 1993; Special Resolution dated June 7, 2000
with attached amended Memorandum
Exhibit 2 - Funding Agreement dated September 5, 1995 between the Company,
Cortina and Solucorp Industries Ltd., and Amendments thereto dated
October 20, 1995, January 12, 1996, and October 15, 1996 - referred to
in Item 1.C.
Exhibit 3 - Lease dated October 31, 1995 between Cortina and Cortina Band of
Wintun Indians - referred to in Item 1.D.
Exhibit 4 - Agreement dated March 31, 2000 between the Company and the owners
of Pacific Waste Services, Inc. - referred to in Item 1.B.
Exhibit 5 - Specimen Share Purchase Option Agreement - being between the
Company and David B. Atkinson dated February 15, 2000
Exhibit 6 - Consolidated audited financial statements of the Company prepared
as at November 30, 1999
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 a
Form 20-F and has duly caused the Registration Statement to be signed on its
behalf by the Undersigned, thereunto duly authorized.
DATED at Vancouver, British Columbia, Canada, on the 31st day of August, 2000.
EARTHWORKS INDUSTRIES INC.
Per: /s/ David B. Atkinson
-----------------------------------------
David B. Atkinson, Director and President
17
