<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CORNUCOPIA RESOURCES LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CORNUCOPIA RESOURCES LTD.
SUITE 540, 355 BURRARD STREET
VANCOUVER, BRITISH COLUMBIA
V6C 2G8
NOTICE OF ANNUAL AND EXTRAORDINARY GENERAL MEETING
NOTICE IS HEREBY GIVEN THAT the Annual and extraordinary general meeting (the
"Meeting") of the members ("shareholders") of Cornucopia Resources Ltd. (the
"Company") will be held at The Pan Pacific Hotel, in Governor General Suite
B, Level R, 999 Canada Place in Vancouver, British Columbia, on June 30,
1999, at the hour of 10:00 A.M. (Vancouver time) for the following purposes:
1. To receive and consider the report of the directors and the
consolidated financial statements of the Company together with the
auditor's report thereon for the financial year ended December 31,
1998.
2. To fix the number of directors at five.
3. To elect directors for the ensuing year.
4. To appoint the auditor for the ensuing year.
5. To authorize the directors to fix the remuneration to be paid to the
auditor.
6. To consider and, if thought fit, to pass a special resolution
approving the disposition of substantially the whole of the
undertaking of the Company consequent upon the sale of the Company's
25% interest in the Ivanhoe Venture, through the sale of all of the
issued and outstanding shares of Touchstone Resources Company, on
terms and conditions substantially as set out in the Proxy Statement
accompanying this Notice, subject to approval of all applicable
regulatory authorities, as more fully set forth in the Proxy
Statement accompanying this Notice.
7. To consider and, if thought fit, to pass a special resolution:
(a) consolidating all of the Company's common shares without par value
from TWO HUNDRED MILLION (200,000,000) common shares without par
value into TWENTY MILLION (20,000,000) common shares without par
value, every TEN (10) common shares without par value being
consolidated into ONE (1) common share without par value, as more
fully set forth in the Proxy Statement accompanying this Notice; and
(b) increasing the Company's authorized common share capital to its
pre-consolidation level of TWO HUNDRED MILLION (200,000,000) common
shares without par value and altering the Company's Memorandum
accordingly, as more fully set forth in the Proxy Statement
accompanying this Notice; and
(c) authorizing a change of the name of the Company to "Stockscape
Technologies Ltd." or such other name as decided upon by the directors
and acceptable to the Registrar of Companies for British Columbia and
that the Memorandum of the Company be altered accordingly.
8. To consider and, if thought fit, to pass an ordinary resolution
approving the adoption of a stock option plan, the particulars of which
are more fully set out in the Proxy Statement accompanying this Notice,
to replace the Company's existing stock option plan.
9. To transact such further or other business as may properly come
before the Meeting and any adjournments thereof.
TAKE NOTICE that pursuant to the COMPANY ACT (British Columbia) you may,
until 10:00 a.m. (Vancouver time) on June 28, 1999, give the Company notice
of dissent by registered mail addressed to the Company at Suite 540, 355
Burrard Street, Vancouver, British Columbia, V6C 2G8, with respect to the
special resolution to approve the disposition of the undertaking of the
Company consequent upon the sale of the Company's 25% interest in the Ivanhoe
Venture. As a result of giving a notice of dissent you may, on receiving
notice of intention to act, require the Company to pay you the fair market
value of your shares in accordance with Section 207 of the COMPANY ACT
(British Columbia). Further particulars of your rights of dissent are set out
in the Proxy Statement accompanying this Notice.
The accompanying Proxy Statement provides additional information relating to
the matters to be dealt with at the Meeting and is deemed to form part of
this Notice.
If you are unable to attend the Meeting in person, please complete, sign and
date the enclosed form of proxy and return the same in the enclosed return
envelope provided for that purpose within the time and to the location set
out in the form of proxy accompanying this Notice.
DATED this 26th day of May, 1999.
BY ORDER OF THE BOARD
(SIGNED)
-------------------------------------
ANDREW F. B. MILLIGAN
President and Chief Executive Officer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION...............................................................................................1
Currency Exchange Rates...................................................................................1
AVAILABLE INFORMATION.............................................................................................1
PERSONS MAKING THE SOLICITATION...................................................................................2
VOTING OF PROXIES.................................................................................................2
REVOCABILITY OF PROXY.............................................................................................2
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF.......................................................................2
VOTES NECESSARY TO PASS RESOLUTIONS AT THE MEETING................................................................3
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS..........................................................4
THE COMPANY.......................................................................................................7
SELECTED FINANCIAL INFORMATION....................................................................................8
MANAGEMENT'S DISCUSSION AND ANALYSIS..............................................................................8
Overview..................................................................................................8
Results of Operations.....................................................................................9
Liquidity and Capital Resources...........................................................................9
PROPERTIES.......................................................................................................11
Ivanhoe Property.........................................................................................11
Other Properties.........................................................................................14
Dispositions and Investments in Other Properties.........................................................14
DIRECTORS OF THE COMPANY.........................................................................................15
Business Experience and Principal Occupation of Directors, Executive Officers and Significant Employees..16
Board and Committee Meetings.............................................................................17
Certain Relationships and Transactions...................................................................17
EXECUTIVE COMPENSATION...........................................................................................17
Summary of Executive Compensation........................................................................17
Summary Compensation Table Annual Compensation...........................................................18
Stock Incentive Transactions.............................................................................19
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values........................19
Table of Option and SAR Repricings.......................................................................19
Compensation of Directors................................................................................20
Management Agreements and Termination of Employment and Change-In-Control Arrangements...................20
Compensation Committee Interlocks and Insider Participation..............................................21
Board of Compensation Committee Report on Executive Compensation.........................................21
Stock Incentive Plans....................................................................................21
Comparative Shareholder Return Performance Graph.........................................................21
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS....................................................................22
MANAGEMENT/EMPLOYMENT AGREEMENTS.................................................................................22
INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS.....................................22
APPOINTMENT OF AUDITOR...........................................................................................22
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON....................................................................23
Disposition of Ivanhoe Joint Venture Interest............................................................23
Material Terms of Sale Agreement...................................................................23
Reasons for Disposition of Ivanhoe Joint Venture...................................................23
Sale of Undertaking................................................................................23
Rights of Dissent..................................................................................24
Consolidation and Name Change............................................................................24
Reason for Consolidation and Name Change...........................................................24
STOCKSCAPE TECHNOLOGIES LTD........................................................................25
Adoption of New Stock Incentive Plan.....................................................................37
Share Purchase Plan................................................................................37
Share Option Plan..................................................................................37
Share Bonus Plan...................................................................................37
Other Matters............................................................................................38
SHAREHOLDER PROPOSAL.............................................................................................39
</TABLE>
APPENDIX "A" - RESOLUTIONS
APPENDIX "B" - SECTION 207 OF THE COMPANY ACT
APPENDIX "C" - PRO FORMA FINANCIAL STATEMENTS AT DECEMBER 31, 1998
APPENDIX "D" - STOCKSCAPE TECHNOLOGIES LTD. FINANCIAL STATEMENTS
AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1998
APPENDIX "E" - CORNUCOPIA RESOURCES LTD. FINANCIAL STATEMENTS AT
DECEMBER 31, 1998, COMPARED WITH DECEMBER 31, 1997
APPENDIX "F" - STOCK INCENTIVE PLAN
<PAGE>
- 1 -
CORNUCOPIA RESOURCES LTD.
SUITE #540, THE MARINE BUILDING, 355 BURRARD STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2G8
PROXY STATEMENT
(INFORMATION CIRCULAR)
(As at May 26, 1999, except as otherwise indicated)
GENERAL INFORMATION
This Proxy Statement is furnished to the members ("shareholders") by the
Board of Directors of Cornucopia Resources Ltd. (the "Company") in connection
with the solicitation of proxies to be voted at the Annual and Extraordinary
General Meeting (the "Meeting") of the shareholders to be held at 10:00 a.m.
(Vancouver time) on June 30, 1999, or at any adjournment thereof, for the
purposes set forth in the Notice of Meeting. Advance notice and supplemental
advance notice of the Meeting were published in The Province newspaper in
Vancouver, British Columbia, on March 12, 1999 and May 13, 1999 respectively,
and delivered to the British Columbia Superintendent of Brokers in accordance
with Section 111 of the COMPANY ACT (British Columbia).
This Proxy Statement and the accompanying Proxy Form are being delivered to
Canadian intermediaries holding common shares on behalf of another person or
company and are being mailed to registered shareholders on or about May 26,
1999.
May 14, 1999 has been fixed as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting and at any
adjournment thereof. As at May 14, 1999, there were 2,055 registered
shareholders and 41,591,834 common shares without par value of the Company
(the "Common Shares") outstanding. A registered shareholder is entitled to
one vote for each Common Share that such registered shareholder holds on the
record date on the proposals to be acted upon at the Meeting and any other
matter to come before the Meeting. A registered shareholder's instructions on
his Proxy Form as to the exercise of voting rights will be followed in
casting such shareholder's votes. IN THE ABSENCE OF ANY INSTRUCTIONS, THE
PROXY AGENT NAMED ON THE PROXY FORM WILL CAST THE SHAREHOLDER'S VOTES IN
FAVOR OF THE RESOLUTIONS SET FORTH HEREIN AND IN THE NOTICE OF MEETING. The
enclosed Proxy Form confers discretionary authority upon the persons named
therein with respect to other matters which may properly come before the
Meeting. One of the proposals to be acted upon at the Meeting gives rise to a
statutory right of a registered shareholder to dissent from the proposal. A
registered shareholder wishing to exercise the right to dissent must follow
the procedures outlined under "Particulars of Other Matters to be Acted Upon".
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement in
connection with the solicitation of proxies and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company. This Proxy Statement does not constitute the
solicitation of a proxy by anyone in any jurisdiction in which such
solicitation is not authorized or in which the person making such
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
In order to ensure they will be voted, proxies must be received at the office
of CIBC Mellon Trust Company at Mall Level, 1177 West Hastings Street,
Vancouver, British Columbia, V6E 2K3 not less than 48 hours prior to the time
the Meeting is to be held. However, the chairman of the Meeting has the
discretion to accept proxies filed less than 48 hours prior to the
commencement of the Meeting.
The principal executive offices of the Company are located at Suite #540, 355
Burrard Street, Vancouver, British Columbia, Canada, V6C 2G8.
All references in this Proxy Statement to dollars or $ are to United States
dollars, unless otherwise specified. References to C$ are to Canadian dollars.
CURRENCY EXCHANGE RATES
Unless otherwise indicated, all currency amounts herein are stated in United
States dollars, with the exception of the disclosure contained in this Proxy
Statement regarding Stockscape Technologies Ltd., which is in Canadian
dollars. The following table reflects the rate of exchange of the Bank of
Canada for Canadian dollars per one United States dollar in effect at the end
of the following periods and the average rates of exchange during such
periods.
<TABLE>
<CAPTION>
--------------------------------- ------------- ------------- ------------- ------------- -------------
UNITED STATES DOLLARS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
--------------------------------- ------------- ------------- ------------- ------------- -------------
--------------------------------- ------------- ------------- ------------- ------------- -------------
Rate at December 31, 1.5333 1.4305 1.3706 1.3640 1.4018
--------------------------------- ------------- ------------- ------------- ------------- -------------
Average Annual Rate 1.4831 1.3844 1.3630 1.3724 1.3659
--------------------------------- ------------- ------------- ------------- ------------- -------------
High During Year 1.5845 1.4399 1.3865 1.4267 1.4090
--------------------------------- ------------- ------------- ------------- ------------- -------------
Low During Year 1.4040 1.3345 1.3287 1.3275 1.3085
--------------------------------- ------------- ------------- ------------- ------------- -------------
</TABLE>
The closing rate on April 30, 1999 for United States dollars was 1.4576.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act") and files reports and
other information with the Securities and Exchange Commission (the
"Commission") in accordance therewith. Such reports, proxy
<PAGE>
- 2 -
statements and other information filed by the Company are available for
inspection and copying at the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C., 20549, and at the Commission's
Regional Offices at 7 World Trade Center, Suite 1300, New York, New York,
10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661-2511. Copies of such material may be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C., 20549, at prescribed rates. The Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Company's
Common Shares are quoted on the NASD OTC Bulletin Board (OTCBB) and until
delisting on March 31, 1999, were posted and called for trading on the
Toronto Stock Exchange. Material filed by the Company can be inspected at the
offices of the National Association of Securities Dealers, Inc. Reports
Section, 1735 K Street, N.W., Washington, D.C., 20006.
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the management of the Company on behalf of the Board of Directors
for use at the Meeting and at any adjournments thereof. The solicitation will
be conducted by mail and may be supplemented by telephone or other personal
contact to be made without special compensation by officers and employees of
the Company. The cost of solicitation will be borne by the Company.
VOTING OF PROXIES
The persons named as proxyholders in the enclosed Proxy Form are directors of
the Company.
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING OTHER
THAN THE PERSONS DESIGNATED IN THE ACCOMPANYING FORM OF PROXY. TO EXERCISE
THIS RIGHT, THE SHAREHOLDER MAY INSERT THE NAME OF THE DESIRED PERSON IN THE
BLANK SPACE PROVIDED IN THE PROXY AND STRIKE OUT THE OTHER NAMES OR MAY
SUBMIT ANOTHER PROXY.
THE SHARES REPRESENTED BY PROXIES IN FAVOUR OF MANAGEMENT WILL BE VOTED ON
ANY BALLOT (SUBJECT TO ANY RESTRICTIONS THEY MAY CONTAIN) IN FAVOUR OF THE
MATTERS DESCRIBED IN THE PROXY.
REVOCABILITY OF PROXY
Any shareholder returning the enclosed Proxy Form may revoke the same at any
time insofar it has not been exercised. The COMPANY ACT (British Columbia )
permits the revocation of a proxy by instrument in writing executed by the
shareholder or by his attorney authorized in writing or, if the shareholder
is a corporation, under its corporate seal or by an officer or attorney
thereof duly authorized, and deposited at the registered office of the
Company, at 10th Floor, 595 Howe Street, Vancouver, British Columbia, V6C
2T5, at any time up to and including the last business day preceding the day
of the Meeting, or any adjournment thereof, or with the chairman of the
Meeting on the day of the Meeting. A proxy may also be revoked in any other
manner permitted by law, including by the delivery in the same manner of
another valid proxy bearing a later date or by attendance at the meeting and
voting in person.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company is authorized to issue 200,000,000 Common Shares without par
value and 100,000,000 preferred shares without par value, issuable in series.
No preferred shares have been issued, and only the holders of the Common
Shares will have voting rights at the Meeting. As at April 30, 1999,
41,591,834 Common Shares are issued and outstanding. The Common Shares are
not subject to any future call or assessment and all have equal voting
rights. There are no special rights or restrictions of any nature attached to
any of the Common Shares and they all rank pari passu, each with the other as
to all benefits which might accrue to the holders of the Common Shares. All
registered shareholders are entitled to receive a notice of any general
meeting to be convened by the Company. At any general meeting, subject to the
restrictions on joint registered owners of Common Shares, on a show of hands,
every shareholder who is present in person and entitled to vote has one vote
and on a poll, every shareholder has one vote for each Common Share of which
he is the registered owner and may exercise such vote either in person or by
proxy. Holders of Common Shares of record at the close of business on May 11,
1999 will be entitled to receive notice of and vote at the Meeting.
To the knowledge of the directors and senior officers of the Company, the
following are the only persons who beneficially own, directly or indirectly,
or exercise control or direction over shares carrying more than 5% of the
voting rights attached to all shares of the Company:
<TABLE>
<CAPTION>
- ----------------------------------------------- --------------------------------- ----------------------------------
PRIOR TO TRANSACTIONS AFTER TRANSACTIONS(2)
- ----------------------------------------------- --------------------------------- ----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NO. OF COMMON PERCENTAGE OF NO. OF COMMON PERCENTAGE OF
SHARES CLASS SHARES CLASS
BENEFICIALLY BENEFICIALLY
OWNED OWNER
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ---------------- ----------------- --------------------
Vista Gold Corp.(3), Suite 3000, 370 2,777,777 6.68% 277,778 1.53%
Seventeenth Street, Denver, Colorado, 80202
- ----------------------------------------------- ---------------- ---------------- ----------------- --------------------
A.R. Rule Investments B.C. Ltd.(4), c/o 2900 nil 0% 10,000,000 55.06%
- - 595 Burrard Street, Vancouver, British
Columbia, V7X 1J5
- ----------------------------------------------- ---------------- ---------------- ----------------- --------------------
</TABLE>
<PAGE>
- 3 -
(1) Information in this table is based on information provided to
management by those named.
(2) Following completion of acquisition of Stockscape Technologies Ltd.,
disposition of Ivanhoe Property and private placement financing as
disclosed under "Particulars of Other Matters to be Acted Upon".
(3) Vista Gold Corp. is a publicly traded company the shares of
which are listed on the American Stock Exchange.
(4) A.R. Rule Investments B.C. Ltd. is beneficially owned by Arthur R.
Rule.
The following table sets forth information as of the date of this Proxy
Statement as to shares of the Company beneficially owned by all directors and
nominees, and the directors and executive officers as a group. No executive
officer other than the Chief Executive Officer was entitled to compensation
in excess of $100,000 during the last completed fiscal year of the Company.
<TABLE>
<CAPTION>
- ------------------------------- ------------------------------------------- ------------------------------------------
PRIOR TO TRANSACTIONS AFTER TRANSACTIONS(2)
- ------------------------------- ------------------------------------------- ------------------------------------------
DIRECTOR, OFFICER OR NAMED NO. OF COMMON PERCENTAGE NO. OF COMMON PERCENTAGE OF
EXECUTIVE OFFICER SHARES BENEFICIALLY OF CLASS SHARES BENEFICIALLY CLASS
OWNED (1) OWNED (5)
<S> <C> <C> <C> <C>
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Andrew F.B. Milligan 547,200 (3) 1.32% 604,720 (6) 3.3%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Sargent H. Berner 110,000 (4) < 1% 101,000 (7) < 1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
David R. Williamson 100,000 (4) < 1% 100,000 (7) < 1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Charles Russell 100,000 (4) < 1% 25,000 < 1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Stephen Sopher 145,000 (4) < 1% 29,500 < 1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
A. Murray Sinclair Nil 0% 100,000 (7) < 1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
John J. Brown Nil 0% 200,000 (8) 1.1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Directors and Executive
Officers as a Group 1,037,200 (9) 2.49% 1,360,220 (9) 7.49%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
Reserved for Proposed CEO Nil 0% 200,000 1.1%
- ------------------------------- --------------------- --------------------- --------------------- --------------------
</TABLE>
(1) As at April 30, 1999, based upon information furnished to the Company
by individual directors. Unless otherwise indicated, such shares are
held directly.
(2) Following completion of acquisition of Stockscape Technologies Ltd.,
disposition of Ivanhoe Property and private placement financing as
disclosed under "Particulars of Other Matters to be Acted Upon".
(3) Includes 500,000 shares issuable upon exercise of incentive stock
options granted under the existing Stock Option Plan.
(4) Includes 100,000 shares issuable upon exercise of an incentive stock
option granted under the existing Stock Option Plan.
(5) Based upon shareholder approval of proposed new Stock Option Plan.
Unless otherwise indicated, such shares are held directly.
(6) Includes 200,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval and 400,000 shares issuable upon exercise of
warrants to be issued to Glencoe Management Ltd.
(7) Includes 100,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval.
(8) Includes 200,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval.
(9) 6 persons. Includes 935,000 shares issuable upon exercise of
options granted under existing Stock Option Plan.
See "Share Option Program", "Compensation of Directors" and "Particulars of
Other Matters to be Acted Upon". For information with respect to the holdings
of the directors and officers individually, see "Election of Directors of the
Company" and "Executive Compensation".
VOTES NECESSARY TO PASS RESOLUTIONS
AT THE MEETING
Pursuant to the COMPANY ACT (British Columbia), the quorum for the
transaction of business at the Meeting consists of two persons present and
being, or representing by proxy, registered shareholders holding not less
than one-twentieth of the Company's issued Common Shares. Under the Company's
Articles and the COMPANY ACT (British Columbia), a majority (over 50%) of the
votes cast at the Meeting (in person or by proxy) is required in order to
pass the ordinary resolutions referred to in the accompanying Notice of
Meeting and a 75% majority of the votes cast at the Meeting (in person or by
proxy) is required in order to pass the special resolutions referred to in
the accompanying Notice of Meeting. Abstentions are counted for the purpose
of determining the presence or absence of a quorum at the Meeting but are not
counted in tabulation of votes cast on proposals presented to shareholders.
British Columbia law does not recognize broker non-votes (which under U.S.
law result when a broker holding shares for a beneficial holder has not
received timely voting instructions on certain matters from such beneficial
holder and the broker does not have discretionary voting power in such
matters). However, under British Columbia law a broker has the right to vote
on all matters submitted for shareholder vote if the broker (i) provides to
the beneficial holder a copy of all Meeting related materials, and (ii)
provides to the beneficial holder a request for voting instructions, stating
that if voting instructions are not received from the beneficial holder at
least twenty-four (24) hours prior to the time at which all proxies must be
submitted for tabulation, then the broker may, in his or her discretion, vote
the beneficial holder's shares or appoint a proxyholder to vote the shares at
the Meeting.
<PAGE>
- 4 -
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common Shares of the Company were listed and traded in Canada on The
Toronto Stock Exchange (TSE) under the symbol "CNP" until March 31, 1999 and
are quoted in the United States on the OTCBB under the symbol "CNPGF". The
Company's shares traded on the Nasdaq Stock Market's SmallCap Market (Nasdaq)
from October 18, 1988 to October 28, 1998. The minimum bid price of the
Company's shares did not meet the new requirements to remain on Nasdaq and
the Company's shares were moved to the OTCBB on October 29, 1998. In
connection with the reorganization of the Company, application was made to
delist the Company's shares from trading on the TSE and the shares were
delisted effective at the close of trading on March 31, 1999.
The following table sets forth the high and low prices of the Company's
common shares as reported on the TSE and the high and low bid prices of the
Company's common shares on Nasdaq to October, 1998 and thereafter on the
OTCBB:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TSE OTCBB (U.S.)
-------------------------------------- -------------------------------------
YEAR QUARTERLY SUMMARY HIGH LOW HIGH LOW
(CDN.$) (CDN.$) (U.S.$) (U.S.$)
- ---------------- -------------------- ------------------ ------------------- ------------------ ------------------
- ---------------- -------------------- ------------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
1997 First Quarter 1.29 0.90 0.94 0.62
Second Quarter 1.10 0.70 0.81 0.50
Third Quarter 0.85 0.45 0.59 0.31
FourthQuarter 0.79 0.19 0.56 0.16
1998 First Quarter 0.49 0.19 0.37 0.12
Second Quarter 0.33 0.04 0.21 0.03
Third Quarter 0.15 0.05 0.09 0.03
FourthQuarter 0.13 0.035 0.09 0.02
1999 First Quarter (to 0.20 0.035 0.20 0.02
March 29, 1999)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In accordance with British Columbia regulatory requirements, the following
table sets out the market price range of the Company's common shares as
reported on The Toronto Stock Exchange and as quoted on the OTCBB for the
periods indicated:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
TSE OTCBB (U.S.)
------------------------------------------ --------------------------------------
YEAR MONTHLY SUMMARY HIGH LOW VOLUME HIGH LOW VOLUME
(CDN.$) (CDN.$) (#) (U.S.$) (U.S.$) (#)
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 April 0.295 0.16 1,372,300 .219 .125 2,320,300
May 0.20 0.08 1,120,700 .156 .031 3,068,200
June 0.10 0.04 3,205,500 .094 .031 1,902,100
July 0.11 0.05 1,059,000 .094 .031 1,829,300
August 0.15 0.06 654,500 .094 .031 1,323,300
September 0.15 0.08 632,400 .094 .063 1,375,500
October 0.13 0.08 252,100 .094 .030 884,800
November 0.09 0.045 632,600 .055 .030 866,900
December 0.08 0.035 601,480 .062 .020 1,965,313
1999 January 0.05 0.04 313,800 .034 .025 674,500
February 0.065 0.035 244,500 .040 .020 1,251,500
March 0.020 0.06 1,592,909 .115 .030 1,962,600
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
1999 WEEKLY SUMMARY HIGH LOW VOLUME HIGH LOW VOLUME
(CDN.$) (CDN.$) (#) (U.S.$) (U.S.$) (#)
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
- ---------------- ---------------- ------------- ------------- -------------- -------------- ---------- -------------
Mar 29-Apr 1 .115 .080 522,000 .110 .091 522,000
April 5-9 .200 .090 915,500 .120 .091 915,500
April 12-16 .140 .100 588,400 .110 .090 588,400
April 19-23 .110 .090 436,200 .120 .100 436,200
April 26-30 .120 .091 791,700 .200 .090 791,700
May 3-7 .110 .091 244,300 .115 .080 244,300
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The quotes reflected in the foregoing tables reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
<PAGE>
- 5 -
TAX CONSEQUENCES
The discussion under this heading summarizes the principal Canadian federal
income tax consequences of acquiring, holding and disposing of Common Shares
of the Company for a shareholder of the Company who is not resident in Canada
but is resident in the United States and who will acquire and hold Common
Shares of the Company and capital property for the purpose of the Income Tax
Act (Canada) (the "Tax Act"). This summary does not apply to a shareholder
who carries on business in Canada through a "permanent establishment"
situated in Canada or performs independent personal services in Canada if the
shareholder's holding in the Company is effectively connected with such
permanent establishment or fixed base. This summary is based on the
provisions of the Tax Act and the regulations thereunder and on counsel's
understanding of the administrative practices of Revenue Canada, and takes
into account all specific proposals to amend the Tax Act or regulations made
by the Minister of Finance of Canada to March 29, 1999. It has been assumed
that there will be no other relevant amendment of any governing law although
no assurance can be given in this respect. The existing tax treaty between
the United States and Canada essentially calls for taxation of shareholders
by the shareholder's country of residence. In those instances in which a tax
may be assessed by the other country, a corresponding credit against the tax
owed in the country of residence is generally available, subject to
limitations. This discussion is general only and is not a substitute for
independent advice from a shareholder's own Canadian and US tax advisor.
The provisions of the Tax Act are subject to income tax treaties to which
Canada is a party, including the Canada-United States Income Tax Convention
(1980) (the "Convention").
DIVIDENDS
The Company has not, since the date of its amalgamation, declared or paid any
dividends on its Common Shares and currently intends to utilize all of its
funds to finance its business development activities and for the acquisition
of capital assets relating to its business. It does not foresee paying any
dividends on its Common Shares in the near future.
Under the Tax Act, a nonresident of Canada is generally subject to Canadian
withholding tax at the rate of 25% on dividends paid or deemed to have been
paid to him by a corporation resident in Canada. The Convention limits the
rate to 15% if the shareholder is resident in the United States and the
dividends are beneficially owned by and paid to him, and to 6% for 1996 and
to 5% for 1997 and thereafter if the shareholder is also a corporation that
beneficially owns at least 10% of the voting stock of the payor corporation.
The Convention generally exempts from Canadian income tax dividends paid to a
religious, scientific, literary, educational or charitable organization or to
an organization constituted and operated exclusively to administer a pension,
retirement or employee benefit fund or plan, if the organization is resident
in the United States and is exempt from income tax under the laws of the
United States.
DISPOSITION OF COMMON SHARES
Under the Tax Act, a taxpayer's capital gain or capital loss from a
disposition of a Common Share of the Company is the amount, if any, by which
his proceeds of disposition exceed (or are exceeded by, respectively) the
aggregate of his adjusted cost base of the share and reasonable expenses of
disposition. Three-quarters of a capital gain (the "taxable capital gain") is
included in income, and three-quarters of a capital loss in a year (the
"allowable capital loss") is deductible from taxable capital gains realized
in the same year. The amount by which a shareholder's allowable capital loss
exceeds the taxable capital gain in a year may be deducted from a taxable
capital gain realized by the shareholder in the three previous or any
subsequent year, subject to certain restrictions in the case of a corporate
shareholder and subject to adjustment when the capital gains inclusion rate
in the year of disposition differs from the inclusion rate in the year the
deduction is claimed.
If a Common Share of the Company is disposed of to the Company other than in
the open market in the manner in which shares would normally be purchased by
the public, the proceeds of disposition will, in general terms, be considered
as limited to the paid-up capital of the share and the balance of the price
paid will be deemed to be a dividend. In the case of a shareholder that is a
corporation, the amount of any capital loss otherwise determined may be
reduced, in certain circumstances, by the amount of dividends previously
received in respect of the shares disposed of, unless the corporation owned
the shares for at least 365 days prior to sustaining the loss and (together
with corporations, persons and other entities, with whom the corporation was
not dealing at arm's length) did not own more than 5% of the shares of any
class of the corporation from which the dividend was received. These loss
limitation rules may also apply where a corporation is a member of a
partnership or a beneficiary of a trust that owned the shares disposed of.
Under the Tax Act, a nonresident of Canada is subject to Canadian tax on
taxable capital gains and may deduct allowable capital losses, realized on a
disposition of "taxable Canadian property". Common Shares of the Company will
constitute taxable Canadian property of a shareholder at a particular time if
the shareholder used the shares in carrying on business in Canada, or if at
any time in the five years immediately preceding the disposition 25% or more
of the issued shares of any class or series in the capital stock of the
Company belonged to one or more persons with whom the shareholder did not
deal at arm's length and in certain other circumstances.
The Convention relieves United States residents from liability for Canadian
tax on capital gains derived on a disposition of shares unless:
a) The value of the shares is derived principally from "real property"
in Canada, including the right to explore for or exploit natural
resources and rights to amounts computed by reference to production,
b) The shareholder was resident in Canada for 120 months during the
period of 20 consecutive years, preceding, and at any time during
the 10 years immediately preceding, the disposition and the shares
were owned by him when he ceased to be resident in Canada, or
c) The shares formed part of the business property of a "permanent
establishment" that the holder has or had in Canada within the 12
months preceding the disposition.
<PAGE>
- 6 -
UNITED STATES TAX CONSEQUENCES
UNITED STATES SHAREHOLDERS ("US HOLDERS")
As used herein, a "US Holder" includes a holder of Common Shares 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 and any other person or entity whose ownership of Common Shares is
effectively connected with the conduct of a trade or business in the United
States. A US 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 Shares 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.
PASSIVE FOREIGN INVESTMENT COMPANY RULES
For United States federal income tax purposes, a foreign corporation will be
treated as a passive foreign investment company (a "PFIC") if 75% or more of
its gross income constitutes passive income or if 50% or more of its assets
produce passive income or are held for the production of passive income. A US
Holder will be deemed to hold shares of a PFIC if he holds shares in a
foreign corporation and at any time during the holding period of the
shareholder the foreign corporation constituted a PFIC under the above
definition.
Generally, a US Holder of PFIC shares is subject to a special addition to tax
and interest charge with respect to certain dispositions of and "excess
distributions" with respect to shares of stock of a PFIC. (An excess
distribution is defined as the amount of distributions received by a
shareholder in a year with respect to stock in a PFIC which exceeds 125% of
the average amount of the distributions to such shareholder during the three
years prior to the year of the distribution.) This addition to tax is
determined by allocating the amount of the gain on disposition or excess
distribution to each day during the holding period of the shareholder of such
stock. The amount of the gain or excess distribution which is allocated to
taxable years after 1986 and prior to the present year is deemed to generate
an additional tax (computed at the highest rate of federal income tax
applicable to such shareholder in such year) and an interest charge,
calculated at the statutory rate applicable to underpayments of federal
income taxes.
Because the Company may have been a PFIC for its fiscal year ending December
31, 1998, and may have been a PFIC for some of its fiscal years ending before
that date, each US shareholder of the Company should consult a tax advisor
with respect to how the PFIC rules may affect such shareholder's tax
situation. In particular, a US shareholder should determine whether such
shareholder should elect to have the Company be treated as a Qualified
Electing Fund in the event the Company is a PFIC. This might avoid adverse US
federal income tax consequences that may otherwise result from the Company
should it be treated as a PFIC.
DISTRIBUTIONS ON COMMON SHARES
US Holders receiving dividend distributions (including constructive
dividends) with respect to the Company's Common Shares are required to
include in gross income for the United States federal income tax purposes the
gross amount of such distribution 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 (see
above) may be credited, subject to certain limitations, against the US
Holder's United States federal income tax liability or, alternatively, may be
deducted in computing the US Holder's United States federal income tax by
those who itemize deductions. (See more detailed discussion at "Foreign Tax
Credit" Below). To the extent that distributions by the Company exceed
current or accumulated earnings and profits of the Company, they will be
treated first as a return of capital up to the US Holder's adjusted basis in
the Common Shares and thereafter as gain from the sale or exchange of such
shares. Preferential tax rates for long-term capital gains are applicable to
a US Holder which is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a US Holder which is a
corporation.
Dividends paid on the Company's Common Shares will not generally be eligible
for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations. A US 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 if
such US 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 which are beyond the scope of this discussion.
FOREIGN TAX CREDIT
A US Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of the Company's Common Share may be entitled,
at the option of the US Holder, to either a deduction or a tax credit for
such foreign tax paid of withheld. There are extremely complex rules and
limitations which apply to the credit and deduction. The availability of the
foreign tax credit or a deduction for foreign taxes and the application of
the limitations on the credit to a specific taxpayer will be determined based
on the specific circumstances of such shareholder. Accordingly, holders and
prospective holders of Common Shares should consult their own tax advisors
regarding their individual circumstances.
The foregoing discussion is based upon the sections of the Code, Treasury
Regulations, published Internal Revenue Service rulings, published
administrative positions of the Internal Revenue Service and court decisions
that are currently applicable, any or all of which could be materially
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 proposed legislation which, if enacted, could be applied,
possibly on a retroactive basis, at any time. The foregoing discussion is for
general information only and is not intended to be, nor should it be
construed to be, legal or tax advise to any holder or prospective holder of
the Company's Common Shares, and no opinion or representation with respect to
the United States federal income tax consequences to any such prospective
holders of the Company's Common Shares should consult their own tax advisors
about the federal, state, local and foreign tax consequences of purchasing,
owning and disposing of Common Shares of the Company.
<PAGE>
- 7 -
THE COMPANY
ORGANIZATION AND CURRENT STATUS
The Company was organized on November 14, 1985, under the laws of the
Province of British Columbia, Canada by the statutory amalgamation of Cyrano
Resources Inc. and Cornucopia Resources Ltd., two British Columbia companies
which were incorporated in 1980 and 1982, respectively. While historically
the Company has been involved in the exploration and development of precious
metal deposits, the Company is currently undergoing a major reorganization of
its business and capital. See "Particulars of Other Matters to be Acted
Upon". At present the Company's principal and only active mining asset is its
25% interest in the Ivanhoe Venture in Nevada's Carlin Trend, which will be
sold as part of the reorganization. The Company also retains a 100% interest
in certain mineral claims located in southeast Alaska and direct or indirect
interests in other mineral properties. See "Properties of the Company".
The Company conducts its business affairs in the United States through its
wholly-owned subsidiary, Cornucopia Resources Inc., a Nevada corporation, and
through the latter company's wholly-owned subsidiaries: Touchstone Resources
Company ("Touchstone"), a Nevada corporation; and Red Mountain Resources,
Inc. ("Red Mountain"), a Colorado corporation. The following chart sets forth
the organization of the Company and its direct and indirect subsidiaries:
-------------------------------------
CORNUCOPIA RESOURCES LTD.
NASD OTC Bulletin Board
(British Columbia)
-------------------------------------
|
|
-------------------------------------
100%
CORNUCOPIA RESOURCES INC.
(Nevada)
-------------------------------------
|
|
------------------------------------------------
| |
- --------------------------------- ---------------------------------
100% 100%
TOUCHSTONE RESOURCES COMPANY
(Nevada) RED MOUNTAIN RESOURCES, INC.
(Sold on March 2, 1999)
(Colorado)
- --------------------------------- ---------------------------------
HISTORICAL DEVELOPMENT
Since its inception, the Company has been primarily involved in the
exploration and development of precious metal deposits in the United States.
The Company's principal project since 1987 has been the exploration,
development and subsequent production of gold at the Ivanhoe property in the
Carlin Trend, Nevada. In late 1993, the Company expanded its exploration
activities to include West Africa. During 1995 and 1996, the Company's
primary focus was on the Mineral Ridge Mine in Silver Peak, Nevada and
exploration activities on three concessions in West Africa through an
affiliate. After an unsuccessful attempt to acquire mining concessions in
Zaire, the Company decided in late 1996, to concentrate most of its efforts
on North American properties.
On October 21, 1998, the Company sold its interest in the Mineral Ridge Mine
by a sale of all of the shares of Mineral Ridge Resources Inc., a Nevada
corporation wholly-owned by the Company, to Vista Gold Corp., ("Vista Gold")
in exchange for $250,000, by way of private placement by Vista Gold,
1,562,500 shares of Vista Gold, plus the assumption by Vista Gold of all the
liabilities of the Company with respect to the mine. See "Dispositions and
Investments in Other Properties".
In 1992, the Company sold half of its 50% working interest in the Ivanhoe
Venture to Newmont Mining Corporation ("Newmont"), thus leaving the Company
with a 25% interest in the Ivanhoe Venture. Newmont, by separate agreement,
acquired the remaining 50% interest in the Ivanhoe Venture from Galactic
Resources Ltd. by the terms of a letter agreement dated March 26, 1992.
Mining of the Hollister deposit on the Ivanhoe Property ceased in May 1992,
but residual leaching of the heap continued to June 1996, and reclamation
activities continued thereafter. In August, 1997, Newmont's 75% interest in
the Ivanhoe Venture was transferred from Newmont to Great Basin Gold Ltd.
("Great Basin"), and the Company, through Touchstone, entered into a Venture
Agreement with Great Basin. Great Basin is a British Columbia reporting
company the shares of which are listed for trading on the Vancouver Stock
Exchange in Canada and the OTCBB in the United States.
On March 2, 1999, as part of the Company's reorganization, the Company
entered into an agreement with Great Basin pursuant to which the Company
agreed to sell to Great Basin, subject to shareholder approval, all of the
issued and outstanding shares of Touchstone. Because the Company's interest
in the Ivanhoe Venture is its sole remaining active mining asset, the sale of
that asset represents a major change in the status of the Company as a mining
entity and a sale of substantially all of the Company's present undertaking.
Details of the agreement are disclosed under "Particulars of Other Matters to
be Acted Upon".
<PAGE>
- 8 -
NEW BUSINESS
Concurrent with the disposition of its remaining active mining asset the
Company plans to acquire a British Columbia company, "Stockscape Technologies
Ltd"., ("Stockscape") which is a privately-held Internet investment research
provider in its third year of operations. Detailed disclosure on Stockscape
and its business is provided under the heading "Particulars of Other Matters
to be Acted Upon" in this Proxy Statement.
As part of the reorganization, and one of the conditions precedent to
completion of the acquisition by the Company of Stockscape, the Company
proposes to consolidate its issued and outstanding common shares on a
10-for-1 basis. See "Particulars of Other Matters to be Acted Upon".
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information has been derived from
the consolidated financial statements of the Company for the periods
indicated and should be read in conjunction with the consolidated financial
statements and notes in Appendix "C" and in Appendix "E". The unaudited pro
forma consolidated information is as at December 31, 1998, after giving
effect to the proposed acquisition of Stockscape.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
PRO FORMA CONSOLIDATED AS AT
DECEMBER 31, 1998 1998 1997
(UNAUDITED)(1)
----------------------------------
<S> <C> <C> <C>
OPERATING DATA
Revenues 152,949 70,394 71,138
Gross profit (loss) from operations (67,673) -- 19,433
Interest and other income 986 70,394 51,705
Income (loss) (272,131) (707,607) (18,464,625)
Income (loss) per share (.01) (.02) (.49)
Weighted average number of common 18,159,483 39,291,535 37,514,204
shares outstanding
BALANCE SHEET AND OTHER DATA (AT
PERIOD END)
Total assets 3,543,205 2,271,874 18,357,596
Book Value Per Share 0.18 .05 .07
Working capital 1,579,680 284,001 (13,970,445)
Provision for site restoration -- -- 172,908
Capital Lease Obligations -- -- 42,436
Shareholders' Equity 3,340,363 2,170,597 2,588,145
Increase (decrease) in cash 1,412,637 (892,783) (2,873,581)
</TABLE>
(1) The pro forma financial information for the fiscal year ended
December 31, 1998, is prepared on the basis of accounting principles
generally accepted in Canada. Significant differences to accounting
principles generally accepted in the United States of America are
explained in note 7 of the consolidated financial statements of
Cornucopia Resources Ltd. As the proposed transaction will result in
the former shareholders of Stockscape owning greater than 50% of the
Company's common shares, accounting principles applicable to reverse
takeovers have been used in the compilation of the pro forma
consolidated balance sheet to record the acquisition by Stockscape
of Cornucopia using the purchase method, with Cornucopia deemed to
be the purchased entity.
There have been no changes in accounting methods over the five year period
prior to the Company's most recent year end.
The Company uses the U.S. dollar as its reporting currency. Monetary assets
and liabilities are translated at the exchange rate in effect at the date of
the balance sheet and non-monetary assets and liabilities at the rate in
effect on the dates of the related transactions. Revenue and expenses are
translated at rates approximating exchange rates at the time of transactions.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Since its incorporation the Company's primary focus has been the exploration,
development and mining of precious metal deposits. On March 2, 1999 a major
reorganization was announced which, if approved by shareholders, will result
in a change in the Company's business focus and a restructuring of the
Company's remaining active mining property interest into an investment in an
arm's length entity.
On October 21, 1998, the Company sold its 100% interest in the Mineral Ridge
mine by a sale of all of the shares of Mineral Ridge, a Nevada corporation
wholly-owned by the Company, to Vista Gold. As consideration, the Company
received 1,562,500 Vista Gold common shares, Vista Gold subscribed to a
private placement of 2,777,777 common shares of the Company for a deemed
value of $250,000 and assumed all of the liabilities of the Company with
respect to the mine. See "The Company - Historical Development".
At present, the Company's principal and only active mining asset is its
interest in the Ivanhoe property in Nevada's Carlin Trend. As part of the
reorganization of the Company an agreement dated March 2, 1999 was entered
into with Great Basin pursuant to which the Company will
<PAGE>
- 9 -
sell its wholly-owned subsidiary Touchstone, which holds the Ivanhoe
property, to Great Basin, in exchange for 2,750,000 common shares and 250,000
share purchase warrants of Great Basin.
As part of its proposed reorganization the Company plans to complete
acquisition of Stockscape, a British Columbia company, a privately-held
Internet investment research provider with an established website at
Stockscape.com. As a condition precedent to the Stockscape acquisition the
Company will be required to consolidate its issued and outstanding Common
Shares on a 10-for-1 basis. At the annual general meeting shareholders will
be asked to pass a special resolution approving the consolidation. This
resolution must be passed by a majority of 75% of the votes cast on the
resolution: See "The Company" and "Particulars of Other Matters to be Acted
Upon".
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998, COMPARED TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Revenues from interest and other income were $70,394 and $51,705 in the years
ended December 31, 1998 and 1997, respectively. $19,433 in operating income
was derived from the reversal, in the second quarter of 1997, of accrued
reclamation costs reported as operating costs in previous periods. The
increase was due to an accrual of investment income on the reclamation bond
for Mineral Ridge. Revenues in the form of interest income are expected to
occur to the extent that excess cash from any future financings is
temporarily invested. No future revenues are anticipated from mining
investments.
During the year ended December 31, 1998, revenues from dore shipments from
the Mineral Ridge mine were $3.1 million. These amounts continued to be
recorded as an offset to capital expenditures as the Mineral Ridge mine had
not yet met tests that qualified the project as being in full commercial
production for accounting purposes. As a result, no amounts from the sale of
gold and silver from the Mineral Ridge mine have been included under revenue
on the Consolidated Statement of Loss and Deficit.
EXPENSES
General and administrative expenses declined to $968,455 in the year ended
December 31, 1998, from $1,987,525 for the year ended December 31, 1997. The
decrease was due to reduction in the Vancouver, British Columbia, office
staff costs and reductions in other expense areas such as investor relations,
rent, insurance and travel. Significant reductions were made in 1998 in the
general and administrative expenses of Mineral Ridge but, as discussed above,
these items were capitalized and are therefore not reported on the
Consolidated Statement of Loss and Deficit.
During the year 1997, the Company recorded an expense of $476,341 due to the
write down of its investment in Carlin Resources Corp. ("Carlin") shares. In
1998 the Company sold all of its share holdings in Carlin and recorded a gain
thereon of $25,177. At December 31, 1998, the Company recorded a $15,695
write down of its investment in Vista Gold shares to adjust to year end
market value.
In October 1998, the Company sold Mineral Ridge and realized a $180,972 gain
on sale. At December 31, 1997, the Company recorded a write down of $16
million against the Mineral Ridge mine calculated using an undiscounted cash
flow analysis based on gold price assumptions prevailing at the time.
The equity method of accounting for the investment in Carlin Resources was
applicable for a portion of the period ended December 31, 1997, and a loss of
$71,897 was recorded thereunder. No corresponding loss was applicable to the
year ended December 31, 1998.
LOSS PER COMMON SHARE
The Company's net loss for the year ended December 31, 1998, was $707,607
compared to a net loss of $18,464,625 in 1997 and a net loss of $2,610,635 in
1996. The net profit for the fourth quarter 1998, was $64,127 compared to net
loss of $17,662,514 for the fourth quarter 1997.
The weighted average number of common shares for the year ended December 31,
1998, was 39.3 million which results in a loss of $0.02 per share compared to
a loss of $0.49 per share for the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
A low gold price and problems originating in 1997 with construction delays
and water supply at Mineral Ridge led to covenant breaches and repayment
defaults under the Company's mine debt financing facility and the
reclassification of the entire loan as a current liability. These events led
the Company to report a significant working capital deficiency since
September 1997.
The agreement with Vista Gold completing the sale of the Company's
wholly-owned subsidiary Mineral Ridge included agreements for the release of
all of the Company's obligations under the $14.4 million Mine Debt Financing
Facility, the $1.3 million account payable to its mining contractor and $0.6
million holdback payable to its construction contractor.
The Company had positive working capital of $284,101 at December 31, 1998
compared to a $13,970,445 working capital deficiency at December 31, 1997. As
a result of its withdrawal from active mining and exploration occasioned by
the sale of the Mineral Ridge and Ivanhoe properties, the Company has no
material commitments for capital expenditures. See "Risks and Uncertainties".
Cash and cash equivalents decreased by a net amount of $892,783 in the year
ended December 31, 1998. Significant uses of cash were to fund accounts
payable reductions, net capital expenditures on resource assets at the
Mineral Ridge mine, and for operations, primarily general and
<PAGE>
- 10 -
administrative expenses and staff costs. These expenditures were financed by
a reduction in accounts receivable, the private placement by Vista Gold and
by drawing down cash balances.
If, for any reason, the acquisition of Stockscape and the associated
C$2,000,000 private placement financing do not complete, the Company has up
to six months of capital resources to fund general and administrative
expenses. If the Company is unsuccessful in completing all proposals which
require approval by shareholders and if the acquisition of Stockscape and
associated C$2,000,000 private placement financing do not complete, general
and administrative activity will be curtailed to conserve funds and
management will pursue all other financing possibilities and evaluate other
prospects for business development. If alternative financing cannot be
obtained the Company may be forced to liquidate assets and could be forced
into receivership.
IVANHOE JOINT VENTURE
Since the sale of Mineral Ridge, the Company has focused its activities on
the Ivanhoe property where its joint venture partner Great Basin has earned a
75% interest under the Venture Agreement. After the earn-in by Great Basin
the Company would be expected to commit to exploration budgets set by Great
Basin which would have resulted in cash calls. Provisions in the Venture
Agreement would allow the Company the option of not participating in
exploration program budgets but at the cost of dilution of its interest. For
example, by opting out of the proposed programs for exploration and
reclamation for 1999, the Company would have suffered dilution from a 25%
interest to a 19% interest. The Company has entered into a Sale Agreement
dated March 2, 1999, with Great Basin pursuant to which the Company will sell
its wholly-owned subsidiary, Touchstone, to Great Basin in exchange for
shares of Great Basin. See "Particulars of Other Matters to be Acted Upon".
ACQUISITION OF STOCKSCAPE
Under the terms of a Share Exchange Agreement entered into between the
Company and the shareholders of Stockscape, the Company will acquire all of
the issued and outstanding shares of Stockscape by issuing 10,000,000
post-consolidation Common Shares of the Company (the "Payment Shares"). The
parties have agreed that the Payment Shares will be issued for a deemed value
of C$0.50 per share making the overall deemed value of the transaction C$5
million. Both the shareholders of Stockscape and Stockscape are entirely at
arm's length to the Company. The acquisition of Stockscape is conditional
upon the completion of due diligence by both parties and the execution and
delivery of definitive documentation. The Payment Shares will be subject to
trading restrictions under U.S. securities legislation for a minimum of two
years.
In its third year of operation, Stockscape has financed its development and
operations by equity financing and a loan payable to one of its shareholders.
As Stockscape's policy is to expense business and software development costs,
a deficit of C$813,043 has accumulated as at December 31, 1998. Business and
software development costs over the upcoming twenty four months are expected
to be financed from revenues and from equity financing issued by the combined
entity. The acquisition of Stockscape is also subject to conditions
precedent, one of which is the commitment for a financing of up to
C$2,000,000 and representing 4,000,000 units (the "Units"), each Unit
consisting of one Common Share and two share purchase warrants of the
Company, to be completed at the time of closing of the acquisition of
Stockscape. More detailed information on Stockscape and its business is
provided under "Particulars of Other Matters to be Acted Upon".
RISKS AND UNCERTAINTIES
There can be no certainty that the Company could successfully pursue
financing options or rely on joint venture partners to supply the funds
required to explore and develop its properties. There can be no assurance
that the Company will be successful in obtaining approvals for the proposed
major reorganization or that the terms of any financing obtained will be
favorable. The Company has no unused banking commitments or lines of credit
which could provide significant increases in its working capital.
In the event that the sale of Touchstone is not approved, certain obligations
to reclaim the Ivanhoe property will continue to be the responsibility of the
Company. However, the Ivanhoe Venture agreement provides for these
obligations to be met by Great Basin through the progressive dilution of the
Company's interest in the Ivanhoe Joint Venture. Reclamation of the Ivanhoe
property is being carried out by Newmont pursuant to a current budget
totaling $5,893,512 through to completion in 2004. The reclamation program
was substantially complete as at March 31, 1999, with total expenditures of
$5,707,585. Budgeted expenditures for the years 2000 to 2004 relate to
monitoring.
If the sale of the Company's interest in the Ivanhoe property to Great Basin
is not ratified by the shareholders, the Company's interest in the Ivanhoe
Venture will be diluted from 25% to 19% effective March 31, 1999. Management
considers it unlikely that the Company will be able to raise the funds
required to continue to participate in the Ivanhoe Venture or to meet any
reclamation obligations given the current unfavourable market conditions
faced by resource companies and the depressed price of the Company's shares.
In these circumstances, the Company's interest could ultimately be reduced to
a 5% Net Profits Interest or a 2 1/2% Net Smelter Royalty.
"Reclamation" is the term used to describe the process of remediating land
which has been disturbed in the course of exploration, development and mining
activities on any property. Standards for reclamation may be set and
reclamation programs approved by both Federal and State authorities and
usually require that the disturbance be restored to environmental standards
compatible with the condition of the property prior to the commencement of
operations. Frequently cash is deposited or bonds put in place by the
operator prior to the granting of permits by the authorities in order to
ensure that subsequent reclamation work is adequately funded.
NEW BUSINESS
For risk factors relating to and the effect of the acquisition of Stockscape
on shareholder liquidity reference should be made to "Risk Factors" and
"Liquidity and Capital Resources" under "Particulars of Other Matters to be
Acted Upon - Consolidation and Name Change".
MARKET FOR SECURITIES
<PAGE>
- 11 -
The Common Shares of the Company commenced trading on the OTCBB (Symbol
CNPGF) effective October 29, 1998. Cornucopia remains a reporting company
under the United States SEC rules. The Company applied to the Toronto Stock
Exchange (TSE) to delist its Common Shares because after giving effect to the
reorganization the Company would not have met the continued listing
requirements. The shares were delisted following the close of business on
March 31, 1999.
YEAR 2000 COMPUTER RISK
The Year 2000 issue has resulted from computer programs coded to accept two
digits rather than four to define the applicable year. The effects of the
problem, if any, would occur on or about January 1, 2000, and could result in
internal system failure in, among other things, local area network,
accounting and other administrative functions. Externally, the problem could
result in system failure by third party providers or suppliers. It is not
possible to be certain that all aspects of the Year 2000 issue which may
arise from third party providers and suppliers will be resolved. In early
1998, the Company began assessment of the potential impact of the Year 2000
issue. Internally, the Company uses current or near current versions of
software by major developers for office productivity, accounting, internet
and database applications. To gain further certainty as to Year 2000
compliance, the Company will either purchase upgrades which are currently
available or obtain published statements by these software developers
assuring that these programs are Year 2000 compliant. The software developers
have suggested that three of the software programs currently in use will need
upgrades and it is expected that these upgrades will be obtained by the end
of the second quarter of 1999. The cost of obtaining these upgrades is not
expected to be material. As the Company currently is not heavily reliant on
software now in use, even a worst case scenario would not significantly
impede the conduct of the business of the Company. In the event that the
Company acquires other businesses, the software and hardware acquired in
connection with those business combinations may be Year 2000 non-compliant.
PROPERTIES
IVANHOE PROPERTY
OWNERSHIP, AND LOCATION
On December 31, 1998, the Company owned a 25% interest in the Ivanhoe
Property through its wholly-owned subsidiary, Touchstone. On March 2, 1999,
the Company entered into an agreement with Great Basin whereby Great Basin
agreed to acquire all of the outstanding shares of Touchstone in exchange for
shares and share purchase warrants of Great Basin. The transaction is subject
to regulatory approval and shareholder approval and upon such approvals the
Company will have no further direct interest in the Ivanhoe Property. See
"Particulars of Other Matters to be Acted Upon".
The Ivanhoe Property, which is approximately 50 miles northeast of Battle
Mountain, Nevada, is located at the northwestern end of the Carlin Trend in
an area between Little Antelope Creek on the south to the Midas Trough on the
north. See Figure 1. The property currently consists of 510 unpatented mining
claims and covers approximately 9,231 acres. Access to the property is
available either via an eleven mile road from Midas, a county road from
Battle Mountain, or a road from the Dee Mine six miles southeast of the
property. The Ivanhoe Venture's interest in the property is by way of option
agreements, mining leases, operating rights agreements and staked mining
claims. Pursuant to an agreement dated August 13, 1997, Great Basin has
earned a 75% interest in the property by incurring expenditures totaling $5
million.
An unpatented mining claim comprises an area which has been staked and may
have been surveyed but title to which has not been granted by the federal
government and remains in the public domain. A patented mining claim is a
claim for which title or 'patent' has been granted by the federal government.
Patented mining claims are privately owned and, as a general matter, have
been surveyed.
PROPERTY HISTORY
In early 1995, Newmont completed an in-house pre-feasibility analysis of the
Hollister gold deposit and concluded that the known deposits did not meet
Newmont's size and investment criteria for near-term development.
As a result of the above, on July 11, 1995, Newmont advised the Company of
its decision to withdraw from the Ivanhoe Venture. Upon notification by
Newmont of its decision to withdraw, the Company entered into an option
agreement with Newmont on the same date to acquire Newmont's interest in the
Ivanhoe Property. Thereafter, the Company entered into an agreement dated
August 13, 1997 with Great Basin Gold Inc. whereby Great Basin may earn up to
a 75% interest in the Ivanhoe Property by paying $1 million to Newmont (paid)
as a contribution to the reclamation fund, spending $2.8 million by August
12, 1999, on exploration and related costs (which has been expended) and by
purchasing 1.1 million units in the capital stock of Cornucopia Resources
Ltd. for C$1.00 per unit (completed). The reclamation fund consisted of $4.5
million of which $3,000,000 has been contributed by Newmont, $500,000 by the
Company and $1,000,000 by Great Basin. Any eventual reclamation costs
incurred on the Ivanhoe Property greater than $4,500,000 are to be funded as
to $500,000 each by Newmont, Great Basin and the Company. Further overruns,
if any, are to be funded as to 75% by Newmont, 18.75% by Great Basin and
6.25% by the Company. Under the terms of the agreement with Great Basin dated
March 2, 1999, Great Basin will now meet all reclamation costs attributed to
Touchstone in excess of the original contribution of $500,000.
<PAGE>
- 12 -
GEOLOGY
The Carlin Trend, which includes the Ivanhoe Project at its northern end, is
a northwest-trending, 50 mile long metallogenic corridor. The key ore
controls for Carlin-type gold deposits are a combination of favorable
structural preparation of favorable host rocks. In addition, because of the
postulated role of magmatic activity as a heat and/or metal source, the
occurrence of associated intrusive rocks is another important geologic factor
for the Carlin Trend gold deposits.
Favorable Carlin Trend geologic conditions are observed at the Ivanhoe
Property. The Ivanhoe Property geologic units include Lower Paleozoic
sedimentary and mid-Tertiary intrusive rocks covered by a thin veneer of
Tertiary volcanic and volcano-sedimentary rocks. At Ivanhoe and on the rest
of the Carlin Trend, the best host rocks for gold mineralization occur in the
Lower Paleozoic stratigraphy below the Tertiary rocks. Structure is an
important ore control, and typically occurs at the Ivanhoe Property as
high-angle faults with east-west, north-northwest and northeast trends. The
intersection zones of these faults are especially critical controls for gold
mineralization.
<PAGE>
- 13 -
[Location Map of the Ivanhoe Property]
<PAGE>
- 14 -
Ivanhoe contains at least two areas known to host significant gold
mineralization. The Hollister mine area has a large low-grade gold system
associated with the Tertiary volcanic rocks and underlying upper plate
Ordovician Valmy Formation quartzites and cherts. This mineralization is
interpreted to be a near surface leakage from a deeper high grade gold system
below. A 1994 core intercept in the west Hollister area by Newmont of 2.4
feet grading 33.541 oz. Au/ton, is a high grade feeder vein to the overlying
volcanic hosted disseminated gold mineralization. There are at least 34 such
historic high grade intercepts in the Valmy Formation requiring follow-up
drilling to delineate the Hollister feeder vein system.
The 40 mg Hatter Stock represents the second target area and has another
significant, although less well studied, leakage anomaly associated with it
and the surrounding Valmy Formation. Assays from younger cross cutting veins
in the Hatter intrusive include 10 feet of 0.731 oz. Au/ton and 20 feet of
0.736 Au/ton and Valmy rocks low-grade intercepts such as 525 feet at 0.012
oz. Au/ton in brittle shear or Fault zones on the west flank of the stock
host.
IVANHOE EXPLORATION PROGRAM
The primary goal of the exploration program at Ivanhoe is to locate high
grade gold deposits amenable to mining by underground methods. Great Basin
has identified two primary exploration targets, the Hollister and Hatter
areas, to explore for modest depth feeder veins in the Valmy Formation below
the Hollister deposit and deeper, lower plate targets below both the
Hollister and Hatter target areas. To date, Great Basin has completed new,
detailed surface mapping, and extensive new cross section construction that
has defined key ore controlling vein structures beneath Hollister.
An initial drilling program at Hollister in 1998 tested one of these vein
systems containing a 1994 Newmont core intercept of (+) 30 Opt gold. Using a
N40E oriented fence of six vertical core holes on 25 foot spacings, the
drilling cross-cut high-grade intercepts in the northern Clementine area of
the deposit. Hole IH-004 pierced a very high grade vein zone of 4.6 feet
grading 11.129 ounces gold per ton and 103.4 ounces silver per ton within a
thicker interval of 10.6 feet assaying 4.964 Opt gold per ton and 47.8 ounces
silver per ton. Another intercept of 12.6 feet grading 1.635 ounces gold and
39.0 ounces silver was discovered downhole.
The early-1998 discovery of Ken Snyder-style veining in the Valmy Formation
at Hollister has made this target a high priority for the upcoming
exploration program. The continuing Ivanhoe exploration program will focus on
testing this high grade gold-silver system in upper plate Valmy Formation in
the Hollister area. Drilling will build on relogging of drill holes and
geocompilation of the vein system geometry.
During the 1999 exploration season Great Basin plans a $1.5 to 2.5 million
exploration program to build on reinterpretation of the multiple vein
intercepts in the Hollister area, by drilling angled core holes to establish
the presence and continuity of this high-grade gold-silver system. Drill
holes will test projected intersections of major ore-controlling northeast,
east and north trending fault zones. Depending on results, 15 to 25 angled
core holes with an average length of 1,000 feet are planned for 1999.
OTHER PROPERTIES
YAKOBI ISLAND PROPERTY
The Yakobi Island property is located approximately 70 miles west of Juneau
in the Sitka Recording District, at the northernmost end of the Alexander
Archipelago of Southeast Alaska. Access to the property is by helicopter or
by boat to the dock at Bohemia Basin. The property consisted of 39 unpatented
federal claims and 11 patented federal claims at Bohemia Basin. It also
includes a 1.95 acre Alaska Tidelands Lease which covers a 200-foot dock at
the Lower Camp access to Bohemia Basin. The Company held an undivided 100
percent interest in certain patented and unpatented mineral claims on the
Yakobi Island property. In August 1997, all rental payments on the unpatented
claims held by the Company on this property were allowed to lapse. The
Company intends to hold its interest in the patented claims and maintain the
tideland lease for use of the dock at Bohemia Basin.
The Company is in discussions with a Land Trust for the sale of the Yakobi
Island properties. If concluded, the agreement would provide for clean up
activities on the site and proceeds to the Company for the 155 acre property
at appraised value, less an administrative fee payable to the Land Trust.
DISPOSITIONS AND INVESTMENTS IN OTHER PROPERTIES
SOUTH MONITOR PROPERTY
The South Monitor property, which consisted of 147 unpatented mining claims,
is located in west-central Nevada between the Ellendale and Hannapah Mining
Districts at the southern end of the Monitor Range, Nye County. The property,
which was held by the Company and Gold Exploration General Partnership, the
general partner of which is Nassau Ltd., has been abandoned. The South
Monitor property is without a known body of commercial ore and the Company's
activities on the property to date were exploratory in nature. No reclamation
liabilities are anticipated.
RED MOUNTAIN PROPERTY
The Company acquired this property as a result of the amalgamation of
Cornucopia Resources Ltd. and Cyrano Resources Inc. in November 1985 and
sold it in September, 1989.
The Red Mountain property, situated approximately 13 miles from Silverton and
Ouray, Colorado, consisted of 48 patented mining claims and 51 unpatented
lode claims in Ouray and San Juan Counties in Southwestern Colorado. The
Company determined that it was not interested in
<PAGE>
- 15 -
retaining the property and executed a quit-claim effective September 27,
1989, which reconveyed its interest in the property to Frank W. Baumgartner
and Sial Exploration Inc.
The Division of Minerals and Geology (previously the Colorado Mined Land
Reclamation Division) inspected the property in 1992 and 1993 and concluded
that a full release of funds in trust of $60,000 was dependent on further
evaluation of the revegetation on the property. In 1994, weather conditions
prohibited inspection by the authorities. Another inspection was performed in
1995 when it was determined that further monitoring of vegetation was
required prior to full release of the reclamation bond. In 1996, the Company
received a release from Baumgartner for $50,000 of the funds held in trust.
No inspection was performed in 1997 or 1998 and the $10,000 balance will be
held in trust by the Forestry Department until restoration of the land is
considered complete.
MINERAL RIDGE MINE
The Mineral Ridge Mine was 100% owned by the Company until its sale to Vista
Gold Corp. ("Vista Gold") on October 21, 1998, for consideration of $250,000
and 1,562,500 common shares of Vista at a deemed value of $250,000, plus the
assumption by Vista Gold of all of the liabilities of the Company with
respect to the mine. Vista Gold is a public company, the shares of which are
listed for trading on the American Stock Exchange, and which is a reporting
issuer under the U.S. Exchange Act of 1934 (the "Exchange Act"). The Mineral
Ridge properties are located near the town of Silver Peak, approximately 35
miles (56.35 kilometers) southwest of Tonopah, in Esmeralda County, Nevada.
The 3,130 acre (1,266 hectares) land package consists of a total of 195
claims on four contiguous parcels of land in Esmeralda County (collectively
referred to as the "Mineral Ridge Mine").
CARLIN RESOURCES CORP.
As at January 1, 1997 the Company held an aggregate of 3,635,639 common
shares of Carlin Resources Corp.,("Carlin") a Vancouver Stock Exchange listed
company. Effective April 29, 1997, the Company sold 2,100,000 shares of
Carlin through a broker for net proceeds of C $0.59 per share. As at December
31, 1997, the Company held 14.6% or 1,561,139 shares of Carlin . After a
writedown of $476,341 in 1997, the carrying value of the investment in Carlin
was reduced to nil. An outstanding inter-company advance of approximately
$202,700 (C $290,000) included in accounts receivable on the balance sheet at
its estimated realizable value as at December 31, 1997, was recovered in 1998
together with 1,000,000 Carlin shares. During the first and second quarters
of 1998, the Company endeavored unsuccessfully to find a buyer for its block
of 2,561,139 Carlin shares. In order to raise funds for working capital, the
shares were sold to two directors of the Company in September, 1998.
DIRECTORS OF THE COMPANY
The directors of the Company are elected at each annual general meeting and
hold office until the next annual general meeting or until their successors
are appointed. It is proposed that the number of directors be fixed at five
for the ensuing year. In the absence of instructions to the contrary, the
enclosed proxy will be voted for the foregoing proposal and for the nominees
herein listed.
The Company has a Compensation Committee and is required to have an Audit
Committee. Members of these committees are as set out below: See "Board and
Committee Meetings."
Management of the Company proposes to nominate each of the following persons
for election as a director. Information concerning such persons, as furnished
by the individual nominees, is as follows:
<TABLE>
<CAPTION>
- -------------------------- ------------- ------ ----------- ---------------------------- ------------------------------
PRIOR TO TRANSACTIONS AFTER TRANSACTIONS
- -------------------------- ------------- ------ ----------- ---------------------------- ------------------------------
NUMBER OF NUMBER OF
COMMON SHARES COMMON SHARES
NAME AND COUNTRY OF POSITION DATE OF BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE
ORDINARY RESIDENCE WITH COMPANY AGE APPOINTMENT OWNED OR, OF CLASS OWNED OR, OF CLASS
DIRECTLY OR DIRECTLY OR
INDIRECTLY, INDIRECTLY,
CONTROLLED(1) CONTROLLED(4)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
Sargent H. Berner Director 58 Oct 12, 110,000(3) < 1% 101,000 (6) < 1%
Vancouver, B.C., 1990
Canada
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
Andrew F.B. Milligan Director, 74 Nov 17, 547,200(2) 1.32% 604,720 (5) 3.3%
Vancouver, B.C., President 1986
Canada and Chief
Executive
Officer(4)
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
David R. Williamson Director 57 Oct 16, Nil 0% 100,000 (6) < 1%
London, England 1989
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
John J. Brown Proposed 66 N/A Nil 0% 200,000 (7) < 1%
Vancouver, B.C., Director
Canada
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
</TABLE>
<PAGE>
- 16 -
<TABLE>
<CAPTION>
- -------------------------- ------------- ------ ----------- ---------------------------- ------------------------------
PRIOR TO TRANSACTIONS AFTER TRANSACTIONS
- -------------------------- ------------- ------ ----------- ---------------------------- ------------------------------
NUMBER OF NUMBER OF
COMMON SHARES COMMON SHARES
NAME AND COUNTRY OF POSITION DATE OF BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENTAGE
ORDINARY RESIDENCE WITH COMPANY AGE APPOINTMENT OWNED OR, OF CLASS OWNED OR, OF CLASS
DIRECTLY OR DIRECTLY OR
INDIRECTLY, INDIRECTLY,
CONTROLLED(1) CONTROLLED(4)
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
A. Murray Sinclair Proposed 37 N/A Nil 0% 100,000(6) < 1%
Vancouver, B.C., Director
Canada
- -------------------------- ------------- ------ ----------- ----------------- ------------ ----------------- ------------
</TABLE>
(1) Based upon information furnished to the Company by individual
directors. Unless otherwise indicated, such shares are held directly.
(2) Includes 500,000 shares issuable upon exercise of incentive stock
options granted under the existing Stock Option Plan and 400,000
shares issuable upon exercise of warrants by Glencoe Management Ltd.
(3) Includes 100,000 shares issuable upon exercise of an incentive stock
option granted under the existing Stock Option Plan.
(4) Based upon shareholder approval of proposed new Stock Option Plan and
completion of acquisition of Stockscape, disposition of Ivanhoe
Property and private placement financing, as disclosed under
"Particulars of Other Matters to be Acted Upon". Unless otherwise
indicated, such shares are held directly.
(5) Includes 200,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval.
(6) Includes 100,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval.
(7) Includes 200,000 shares issuable upon exercise of an incentive stock
option allocated under the new Stock Option Plan, subject to
shareholder approval.
BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION OF DIRECTORS,
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The present and principal occupations during the last five years of the
Company's directors and executive officers are set forth below.
SARGENT H. BERNER is a partner of DuMoulin Black, a law firm in Vancouver,
British Columbia. Mr. Berner is also a director of Aurizon Mines Ltd.,
Cream Minerals Ltd., Emperor Gold Corporation, Valerie Gold Resources Ltd.
and Sultan Minerals Inc. which are Vancouver-based companies listed on the
Vancouver Stock Exchange. Aurizon Mines Ltd. is also listed on the Toronto
and Montreal Stock Exchanges.
ANDREW F.B. MILLIGAN, a business executive, has been President and Chief
Executive Officer of the Company since September, 1991. Mr. Milligan was
Chairman of the Company from April, 1987 to June, 1989 and was President of
the Company from November, 1986 to April, 1987. Mr. Milligan was Chairman of
Carlin Resources Corp. from November, 1994 to June, 1997 and was a director
of Carlin Resources Corp. from November, 1994 to January, 1999 and he is also
a director of Advanced Projects Limited and Lysander Gold Corporation, all of
which are Vancouver-based mining companies with shares listed on the
Vancouver Stock Exchange.
A. MURRAY SINCLAIR is a partner of Quest Management Corp., a private
management company and of Quest Ventures., a private merchant banking
company, both of which positions he has held since 1996. Previously, Mr.
Sinclair was managing director of Quest Oil & Gas Inc., an oil and gas
company the shares of which are listed on the Toronto Stock Exchange. He
holds a Bachelor of Commerce degree from Queen's University (1984). Mr.
Sinclair is also a director of the following reporting companies: Arapaho
Capital Corp., Arlington Ventures Ltd., Belvedere Resources Ltd., Brandale
Food Services Inc., Breakwater Resources Ltd., Brimstone Gold Corp., Can West
Exploration Inc., Magnifoam Technology Inc., Marchwell Capital Corp., New
Inca Gold Ltd., Pickle Crow Resources Inc., Transatlantic Petroleum Corp.
(formerly Profco Resources Corp.), Rhodelta Software Inc., Roseland Resources
Ltd., RTO Enterprises Inc., Santa Cruz Minerals Inc., Ventel, Inc.
JOHN J. BROWN, is the President and sole director of Stockscape Technologies
Ltd. A chartered accountant with a Bachelor of Commerce degree, Mr. Brown is
also a Director and the President of Pacific Opportunity Company Ltd., a
financial consulting and merchant banking firm in Vancouver, Canada. He is a
director and chief financial officer of KeyWest Energy Corporation, a
director of United States Lime & Minerals, Inc., director and chief financial
officer of Rio Amarillo Mining Ltd. and President and director of
International Mahogany Corp. and Golden Sitka Resources Ltd. Mr. Brown was an
investment advisor with a Canadian brokerage firm, was a senior partner with
the public auditing firm of Deloitte & Touche, Chartered Accountants, in
Vancouver, and for many years was a Director of the British Columbia
Automobile Association and the Canadian Automobile Association and is a past
Chairman of BCAA.
DAVID R. WILLIAMSON, a mining engineer and business executive, is principal
of his own business, David Williamson Associates Limited, financial
consultants to the mining industry and publishers of International Mining
Review, based in London, England. In 1982 Mr. Williamson joined Shearson
Lehman Hutton and formed their metals and mining research team. From 1987 to
1989 he held the positions of Executive Director of Shearson Lehman Hutton
and director of Metals and Mining Research for Shearson Lehman Hutton
Commodities. He is also a former governor of the Camborne School of Mines in
England. Mr. Williamson is a director of Crown Resources Corporation, Asia
Pacific Resources Ltd. and Crew Development Corporation, which are publicly
traded mining companies listed on Nasdaq and on The Toronto Stock Exchange.
<PAGE>
- 17 -
GLENN H. FRIESEN (age 42) is a Certified General Accountant and has been
Chief Financial Officer of the Company since February, 1998 and Corporate
Controller from May, 1997 to February, 1998. Mr. Friesen was Chief Financial
Officer of Power Smart Inc. from 1991 to 1996 and Controller of Skyline Gold
Corp. from 1989 to 1991. He was also employed in various corporate accounting
positions from 1981 to 1886 at Westar Mining Ltd.
KARYN E. BACHERT (age 47) has been Corporate Secretary of the Company
since June, 1992 and was Assistant Secretary of the Company from
November, 1988 to June, 1992. Ms. Bachert has been employed by the
Company since January, 1987. Ms. Bachert was Corporate Secretary of Carlin
Resources Corp. from November, 1994 to June, 1997.
Sargent H. Berner is a director of Aurizon Mines Ltd., and John F. Brown is a
director of United States Lime & Minerals, Inc., companies which have a class
of securities registered pursuant to Section 12 of the United States
Securities Exchange Act of 1934 (the "Exchange Act"), or subject to the
requirements of Section 15(d) of the Exchange Act.
Section 16(a) of the Exchange Act requires the officers and directors, and
persons who own more than 10% of a registered class of equity securities of a
reporting company to file reports of ownership and changes in ownership with
the Securities and Exchange Commission ("SEC"). Officers, directors and
shareholders owning greater than 10% of the common stock of such a company
are required by SEC regulation to furnish the Company with copies of all
reports filed pursuant to Section 16(a). Based solely upon a review of the
reports furnished to the Company, the Company is not aware of any
transactions that were not reported on a timely basis or any failure to file
any required form.
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company held three meetings during the year
ended December 31, 1998. All other proceedings of the Board of Directors were
conducted by resolutions consented to in writing by all the directors and
filed with the minutes of the proceedings of the directors. Such resolutions
consented to in writing by all the directors are, according to the COMPANY
ACT (British Columbia) and the Articles of the Company, as valid and
effectual as if they had been passed at a meeting of the directors duly
called and held.
The Company had an Executive Committee of its Board of Directors for the 1996
- - 1997 term but did not appoint an Executive Committee for the 1997 - 1998 or
1998 - 1999 terms. The function of the Executive Committee is to deal with
matters requiring approval by the Company's directors during the intervals
between meetings of the Board of Directors. The board of Directors determined
in June, 1997, that an Executive Committee was not required in light of the
frequency of Board meetings.
Pursuant to the requirements of the COMPANY ACT (British Columbia), the
Company also has an Audit Committee of its Board of Directors presently
consisting of Charles J. G. Russell, Sargent H. Berner and Andrew F.
B. Milligan. Mr. Russell has indicated his intention not to stand for
nomination to the Board of Directors of the Company for the upcoming year and
accordingly the Board of Directors elected at the Annual General Meeting
will appoint a replacement director to the Audit Committee. The
function of the Audit Committee is to review financial statements with
the auditors and to report thereon to the Board of Directors. During 1998,
one meeting of the Audit Committee was held.
The Company has a Compensation Committee which, during the past year, was
made up of Stephen R. Sopher, Sargent H. Berner and Charles J.G. Russell.
Mr. Sopher and Mr. Russell have indicated their intention not to stand for
nomination to the Board of Directors of the Company for the upcoming year
and accordingly the Board of Directors elected at the Annual General
Meeting will appoint replacement directors to the Compensation
Committee. The function of the Compensation Committee is to investigate
and recommend to the directors appropriate levels and types of compensation
for directors and officers of the Company. During 1998, there was one
meeting held by this Committee.
The Company does not have a standing Nominating Committee.
During 1998, each incumbent director attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of Directors held during the
period for which he was a director and (ii) the total number of meetings held
by all committees of the Board of Directors during the period on which he
served. The total number of all regular and committee meetings of the Board
of Directors in 1998 was five.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The services of Andrew F.B. Milligan, a director, President and Chief
Executive Officer of the Company, are provided to the Company pursuant to
a Consultant/Management Agreement with Glencoe Management Ltd. dated
December 1, 1991 and amended on December 19, 1992, June 29, 1994, June 1,
1995 and May 20, 1998. Mr. Milligan is the principal shareholder of
Glencoe Management Ltd. which receives management fees from the Company.
See "Summary of Executive Compensation".
David S. Jennings, a former director of the Company, is the principal
shareholder of 7557 Management Group Ltd., ("7557"), a management company
which received fees for providing the services of Dr. Jennings. During the
year ended December 31, 1998, no fees were paid to 7557.
James A. Currie, formerly Executive Vice President and Chief Operating
Officer of the Company until February 6, 1998, and a director of Touchstone
Resources Company from May 1998, to November 1998, is the principal
shareholder of Anacortes Management Ltd., which received fees of $14,192
during 1998 fiscal year and $23,041 for the period November 17, 1997, to
December 31, 1997, (nil in prior years) for providing consulting services for
the Company.
Sargent H. Berner, a director of the Company, is a partner in the Vancouver
law firm of DuMoulin Black, which received fees for legal services provided
to the Company for the year ended December 31, 1998 of $60,570.
<PAGE>
- 18 -
In respect of each of the foregoing arrangements the terms upon which
services are provided are, in the opinion of management, at least comparable
and in some cases are more favourable to the Company than would have been
obtainable from arm's length parties.
EXECUTIVE COMPENSATION
The Company's executive and employee compensation program is administered by
the Compensation and/or Executive Committees. The Compensation Committee
establishes or recommends general compensation levels and policies for
executive officers and employees of the Company. The Stock Incentive Plan is
administered by the Executive Committee or, in the absence of this committee,
by executive officers of the Company on behalf of the Board of Directors. The
Company's Board designates the members of each committee on an annual basis.
SUMMARY OF EXECUTIVE COMPENSATION
Between 1996 and 1998, there were five executive officers of the Company:
Andrew F.B. Milligan, James A. Currie, Bobbi-Jo Gordon, Glenn H. Friesen and
James Carter. The following table sets forth certain summary information
concerning the compensation awarded to, earned by, or paid to the Chief
Executive Officer and those officers of the Company whose combined salary and
bonuses for 1998 exceeded C$100,000 for services in all capacities to the
Company during the years ended December 31, 1998, 1997 and 1996
(collectively, the "Named Executive Officers"). The aggregate value of other
annual compensation paid to the Named Executive Officers during 1998 did not
exceed 10% of the aggregate cash compensation set forth in the table below.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
SALARY BONUS(1) SECURITIES UNDER ALL OTHER
NAME AND PRINCIPAL POSITION YEAR $ $ OPTIONS COMPENSATION(2)
- ---------------------------------- ---------- --------------- ------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
Andrew F.B. Milligan(3) 1998 145,488 -- 500,000 --
President and Chief Executive 1997 155,530 -- 500,000(4) --
Officer 1996 158,474 47,542 450,000 --
James A. Currie(5) 1998 14,192 -- -- --
Executive Vice President 1997 112,448 -- 400,000 --
and Chief Operating Officer 1996 107,850 18,332 50,000
Bobbi-Jo Gordon(7) 1998 10,416 -- $84,237
Vice President, Finance and 1997 88,604 -- -- --
Chief Financial Officer 1996 -- -- 150,000 --
James A. Carter(6) 1998 -- -- -- --
former Executive Vice President 1997 5,400 -- -- --
and Chief Financial Officer 1996 132,062 39,168 240,000 --
</TABLE>
(1) Granted in respect of performance in the previous year.
(2) Represents amounts paid or accrued under termination agreement.
(3) The services of Mr. Milligan are provided under an Agreement dated
December 1, 1991, as subsequently amended, between the Company and
Glencoe Management Ltd., a company owned and controlled by Mr.
Milligan.
(4) This represents the repricing of the stock options of Mr. Milligan
granted in 1995 and 1996. See "Table of Option and SAR Repricings"
below.
(5) The services of Mr. Currie were provided under an Agreement dated
November 17, 1997, between the Company and Anacortes Management Ltd.
and terminated on February 6, 1998. Mr. Currie resigned his position
as Executive Vice-President of the Company in February, 1998, and
remained a director of the Company's subsidiary Touchstone Resources
Company until November, 1998.
(6) The services of Mr. Carter were provided under an agreement with the
Company dated June 1, 1993 and amended June 1, 1995, which terminated
January 31, 1997. All options held by Mr. Carter expired on June 30,
1997, pursuant to his termination agreement.
(7) The services of Ms. Gordon were provided under an agreement with the
Company dated February 1, 1997. Ms. Gordon resigned her position as
Vice-President, Finance and Chief Financial Officer of the Company in
January, 1998, and the stock option granted to her in 1997 expired on
March 2, 1998.
<PAGE>
- 19 -
STOCK INCENTIVE TRANSACTIONS DURING 1998
The following table sets out the details of all stock option grants to the
Named Executive Officers during the most recently completed financial year.
These stock options were granted outside of the Company's Stock Incentive
Plan.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL POTENTIAL POTENTIAL
UNDERLYING OPTIONS GRANTED TO REALIZABLE REALIZABLE VALUE
OPTIONS GRANTED EMPLOYEES IN EXERCISE EXPIRATION VALUE 10%
NAME FISCAL YEAR PRICE DATE 5%
- ------------------ ----------------- -------------------- ------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Andrew F.B. 500,000 39% C$0.15 Sept. 9, 2003 C$20,721 C$45,788
Milligan
</TABLE>
Note: During 1998 a total of 150,000 options were granted under the
Company's Stock Incentive Plan. These options were granted at an
exercise price equal to the closing price of the Company's
common shares on the Toronto Stock Exchange on the trading day
immediately preceding the date of grant. It is expected that, as
part of the corporate reorganization described below,
outstanding directors' and employees' options granted both under
and outside of the Company's Stock Incentive Plan will be
cancelled and replaced by new incentive options to purchase
post-consolidation shares at a price of $0.50 (Cdn.) per Share
under the new Stock Incentive Plan for which shareholder
approval will be sought: See "Share Option Program",
"Compensation of Directors" and "Particulars of Other Matters to be
Acted Upon".
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES
The following table sets out the details of all stock options exercised
during the most recently completed financial year by the Named Executive
Officers and the financial year end values of the stock options held by the
Named Executive Officers.
<TABLE>
<CAPTION>
SHARES
ACQUIRED
ON NUMBER OF SECURITIES VALUE OF UNEXERCISED VALUE OF UNEXERCISED
EXERCISE VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME (#) REALIZED OPTIONS AT 12/31/98(1) 12/31/98 04/30/99 (4)
- --------------- ----------- ----------- ---------------------------- ------------------------- -------------------------
EXERCISABLE UNEXERCIS EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
ABLE ABLE ABLE ABLE ABLE
------------- ------------ ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew F.B. -- -- 500,000(3) 500,000 Nil -- Nil Nil
Milligan
James A. -- -- 400,000(2)(3) -- Nil -- Nil Nil
Currie
</TABLE>
(1) During 1998 a total of 630,000 options either expired or were
surrendered.
(2) Option exercisable until May 19, 1999.
(3) It is anticipated that, as part of the corporate reorganization
described below, outstanding directors' and employees' options granted
both under and outside of the Company's Stock Incentive Plan will be
cancelled, and replaced by new incentive options to purchase
post-consolidation shares at a price of $0.50 (Cdn.) per Share granted
under the new Stock Incentive Plan for which shareholder approval will
be sought: See "Share Option Program", "Compensation of Directors" and
"Particulars of Other Matters to be Acted Upon".
(4) Based on a closing bid of $0.091 on the OTCBB on April 30, 1999.
TABLE OF OPTION AND SAR REPRICINGS
The following table sets forth stock options of Named Executive Officers
which were repriced under the Company's Stock Option Plan (the "Stock Option
Plan") or otherwise during the ten year period preceding the date of this
Proxy Statement.
<PAGE>
- 20 -
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE ORIGINAL OPTION
SECURITIES OF SECURITIES EXERCISE PRICE TERM REMAINING
UNDER AT TIME OF AT TIME OF NEW AT DATE OF
OPTIONS/SARS REPRICING OR REPRICING OR EXERCISE REPRICING OR
DATE OF REPRICED OR AMENDMENT AMENDMENT PRICE AMENDMENT
NAME REPRICING AMENDED (#) (C$/SECURITY) (C$/SECURITY) (C$/SECURITY)
- ---------------- ------------- ----------------- ---------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Andrew F.B. Oct 21-97 500,000 0.68 1.75/ 0.68 2 1/4 years/
Milligan 1.69(1) 3 1/4 years(1)
James A. Currie Oct 21-97 400,000 0.68 1.06/ 0.68 4 1/2 years(2)
0.80(2)
Bobbi-Jo Gordon Oct 21-97 150,000 0.68 1.08 0.68 4 1/4 years
</TABLE>
(1) Two stock options were repriced, one exercisable for 50,000 shares at
C$1.75 per share expiring on January 4, 2000 and one exercisable for
450,000 shares at C$1.69 per share expiring on January 4, 2001.
(2) Two stock options were repriced, one exercisable for 150,000 shares at
C$1.06 per share expiring on February 27, 2002 and one exercisable for
250,000 shares at C$0.80 per share expiring on June 19, 2002.
Stock options are a significant component of the compensation received by the
Named Executive Officers and serve to provide incentive to such individuals
to act in the best interests of the Company and its shareholders. Since the
market price of the Company's shares was well below the exercise price, the
stock options ceased to offer the desired incentive and were repriced.
COMPENSATION OF DIRECTORS
The Company pays outside directors a fee of C$650 for each meeting attended,
in person or by telephone and an additional C$350 for outside directors who
chair committee or board meetings. These fees were waived in 1998. In
addition, the directors may be reimbursed for actual expenses reasonably
incurred by them in connection with attending meetings of the board.
Directors are also eligible to receive bonus shares or options to purchase
Common shares of the Company.
MANAGEMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL
1. The services of Andrew F.B. Milligan, a director, President and
Chief Executive Officer of the Company, are provided to the Company
pursuant to a Consultant/Management Agreement with Glencoe
Management Ltd. dated December 1, 1991, and amended on December 19,
1992, June 29, 1994, June 1, 1995 and May 20, 1998. Mr. Milligan
is the principal shareholder of Glencoe Management Ltd. The
agreement includes provisions by which Mr. Milligan is entitled
to receive an amount equal to three years' management fees, and
to participate in all employee insurance and benefit plans in
place for a period of up to three years if the Company should
terminate the agreement or the employment of Mr. Milligan without
cause. In order to facilitate the reorganization contemplated
herein, Mr. Milligan has agreed that in the event the
reorganization receives all required approvals, effective June 1,
1999, Glencoe Management Ltd. will accept a 44.4% reduction in
salary and the substitution of a 3 year fixed term employment
contract in lieu of the three year severance provisions of
the current Consultant/Management Agreement. As consideration,
for relinquishing these benefits, Glencoe Management Ltd. will
be granted warrants to purchase 400,000 Common Shares of the
Company on a post-consolidation basis at a price of C$0.50, in
addition to any other options to which Mr. Milligan may be
entitled in his continuing capacity as a director and officer of
the Company.
2. Until February 6, 1998, the services of James A. Currie, who was
Executive Vice President and Chief Operating Officer of the Company
since June, 1997 and Vice-President, Mining of the Company from
December, 1994 to June, 1997, were provided to the Company pursuant
to a Consulting Agreement between the Company and Anacortes
Management Ltd. dated November 17, 1997. This Agreement was
terminated on February 6, 1998.
3. Until February 1, 1998, the services of Bobbi-Jo (B.J.) Gordon,
who was Vice-President, Finance and Chief Financial Officer of
the Company since February 1, 1997, were provided to the Company
pursuant to an Employment Agreement dated February 1, 1997. This
agreement included provisions by which Ms. Gordon was entitled to
receive an amount equal to one years salary, and was also entitled
to participate in all employee health, insurance and benefit plans
in place for a one year period should the Company terminate the
agreement or her employment without cause. The Company and Ms.
Gordon entered into an agreement on January 31, 1998 under which a
total of C$100,948 was paid and an additional C$28,523 was settled
by way of issuance on May 4, 1998 of 150,517 shares. Ms. Gordon's
stock option expired on March 3, 1998.
4. David S. Jennings, a former director of the Company, is the principal
shareholder of 7557 Management Group Ltd., a management company which
received fees for providing the services of Dr. Jennings. No fees were
paid to Dr. Jennings or to 7557 during 1998.
<PAGE>
- 21 -
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since June, 1997, the Compensation Committee has been made up of
non-executive directors of the Company.
BOARD OF COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for its executive officers is administered
and reviewed by the Compensation Committee (the "Committee") of the Board of
Directors. In 1995, the Committee used information relating to comparable
companies in determining appropriate executive compensation practices for the
most senior executive officers. The Committee concluded that the base
salaries and benefits provided to the Company's senior officers were
comparable to those provided by similar companies. However, it was determined
that the Company was deficient, in relation to comparable companies, in not
providing short-term incentives such as a bonus plan. Thus, the Committee
recommended and the Board of Directors approved additional potential annual
compensation through short term incentive awards through a bonus plan. The
award of a bonus is based on the performance of the executive reaching
strategic goals of the company, such as achieving recognition in the
market-place, development of ore reserves, securing additional financing,
accomplishing significant acquisitions, etc. The objectives for the
individual are intended to be specific, measurable, achievable, relevant and
timely.
In 1998, the Committee reviewed and concluded that the annual salary and
benefits for the executive officers remained in line with salaries and
benefits offered by comparable companies. The Committee did not recommend any
increase in base salaries or benefits or the award of any bonuses for 1998.
The change in direction and business of the Company resulting from the
disposition of its remaining active mining asset and acquisition of
Stockscape will require a re-evaluation of the Company's compensation
arrangements and the basis for them. It is expected that a newly constituted
Compensation Committee will review such matters following the Company's
upcoming annual general meeting.
STOCK INCENTIVE PLANS
The Company grants, and has in the past granted, to directors, officers and
employees of the Company, options to purchase Common Shares subject to and in
accordance with the prevailing policies of the regulatory authorities having
jurisdiction with respect to the Company and the stock exchanges on which the
Company's shares are listed for trading at the time of such grants. Options
are granted based on the assessment by the Company's Board of Directors of
the optionee's past and present contribution to the success of the Company.
While the Company's shares were listed for trading on The Toronto Stock
Exchange the exercise price of options was subject to the approval by The
Toronto Stock Exchange and was generally not less than the market price of
the shares at the time the options were granted. During the past year the
Company granted incentive options to directors and employees for the purchase
of an aggregate 1,290,000 shares under the Share Option Program of which
1,140,000 were subject to regulatory and shareholder approval. In connection
with the Company's proposed reorganization, it is anticipated that these
options will be cancelled and be replaced by new incentive options for the
purchase of post-consolidation shares under a new Stock Incentive Plan, as
described under "Particulars of Other Matters to be Acted Upon".
COMPARATIVE SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph below (as required by the Regulation) compares the yearly
percentage change in the cumulative total shareholder return on the Company's
shares against the cumulative total shareholder return on the TSE Gold &
Precious Minerals Sub-Index and TSE 300 Stock Index for the five fiscal years
immediately prior to the beginning of the present financial year, assuming a
$100 initial investment with all dividends reinvested to the cumulative
returns.
<PAGE>
- 22 -
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN ("CSR") ON COMMON SHARES
OF THE CORPORATION AND THE TSE 300 STOCK INDEX
1993 1994 1995 1996 1997 1998
TSE 300 $129 $126 $141 $177 $200 $175
Gold Index $204 $183 $198 $215 $122 $90
Cornucopia $159 $97 $109 $61 $35 $16
Yearly % Change in CSR Total Dividends & (End Price - Opening Price)
(for a given period) == ---------------------------------------------
Opening Price
*Assumes that the initial value of investment on The Toronto Stock
Exchange in the Corporation's common shares and in each of the indices
was $100 on commencement of the 5 year period and that all dividends
were reinvested.
<TABLE>
<CAPTION>
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
TSE 300 GOLD & MINERAL
STOCK PRICE STOCK PRICE CORNUCOPIA CLOSING PRICE
YEAR INDEX VALUES INDEX VALUE C$
<S> <C> <C> <C>
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1993 4,321.43 10,698.96 2.55
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1994 4,213.61 9,586.36 1.55
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1995 4,713.54 10,413.61 1.75
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1996 5,927.03 11,302.64 0.97
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1997 6,699.44 6,378.87 0.26
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
1998 6,485.94 5,921.27 0.045
- ------------- ---------------------------------- ---------------------------------- ----------------------------------
</TABLE>
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Save and except as set out elsewhere herein, no insider or proposed nominee
for election as a director of the Company and no associate or affiliate of
the foregoing persons has or has had any material interest, direct or
indirect, in any transaction since the commencement of the Company's last
completed financial year or in any proposed transaction which in either such
case has materially affected or will materially affect the Company.
MANAGEMENT/EMPLOYMENT AGREEMENTS
No management functions of the Company are performed to any substantial
degree by a person other than the directors or senior officers of the
Company. The services of Andrew F.B. Milligan, a director, President and
Chief Executive Officer of the Company, are provided to the Company pursuant
to a Consultant/Management Agreement with Glencoe Management Ltd. dated
December 1, 1991 as amended on December 19, 1992, June 29, 1994, June 1, 1995
and May 20, 1998. Mr. Milligan is the principal shareholder of Glencoe
Management Ltd. (see "Executive Compensation"). The services of James A.
Currie, a former executive officer of the Company and B.J. Gordon, a former
executive officer of the Company also were provided pursuant to Management
and Employment Agreements (see "Executive Compensation" and "Management
Agreements and Termination of Employment and Change-In-Control Agreements").
INDEBTEDNESS TO COMPANY OF DIRECTORS,
EXECUTIVE OFFICERS AND SENIOR OFFICERS
Save and except as set out elsewhere herein, there is no indebtedness of any
director, executive officer, senior officer, proposed nominee for election as
a director or associate of them, to or guaranteed or supported by the Company
or any of its subsidiaries either pursuant to an employee stock purchase
program of the Company or otherwise, during the most recently completed
financial year.
APPOINTMENT OF AUDITOR
Unless otherwise instructed, the proxies given pursuant to this solicitation
will be voted for the appointment of KPMG LLP, Chartered Accountants, of 777
Dunsmuir Street, Vancouver, British Columbia, V7Y 1K3, as the auditor of the
Company to hold office for the ensuing year at a remuneration to be fixed by
the directors. KPMG LLP have been auditors of the Company since October 28,
1991.
A representative of KPMG LLP is expected to attend the Meeting and will have
the opportunity to make any statement such representative may desire to make
and to respond to any appropriate questions of shareholders.
<PAGE>
- 23 -
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
1. DISPOSITION OF IVANHOE JOINT VENTURE INTEREST
The Company has entered into an agreement dated March 2, 1999 (the "Sale
Agreement"), subject to shareholder approval, pursuant to which the Company
will sell its wholly-owned subsidiary, Touchstone Resources Company,
("Touchstone") to Great Basin Gold Ltd., ("Great Basin") its joint venture
partner in the Ivanhoe project, in exchange for C2,750,000 common shares (the
"Great Basin Shares") at a price of C$1.25 per share (total C$3,437,500) and
250,000 share purchase warrants of Great Basin. The share purchase warrants
will entitle the Company to purchase additional shares of Great Basin at
C$2.00 per share for one year. Touchstone holds the Company's 25% joint
venture interest in the Ivanhoe project, which is its only asset, and is
party to a joint venture agreement dated August 13, 1997 with Great Basin
Gold Inc., a subsidiary of Great Basin Gold Ltd. of Vancouver, British
Columbia. The closing market price of Great Basin's Shares on the Vancouver
Stock Exchange on March 2, 1999 was C$1.25. The transaction represents a
disposition of substantially the whole of the Company's present undertaking,
and accordingly requires shareholder approval by way of special resolution:
See "Sale of Undertaking" and "Rights of Dissent" below.
MATERIAL TERMS OF SALE AGREEMENT
1. Resale of the Great Basin Shares and any shares issued upon exercise
of the share purchase warrants issued in consideration ("Warrant
Shares") will be restricted, by agreement, for a period of six
months (the "Prohibition Period").
2. Following the Prohibition Period the Company is entitled to sell,
without restriction or notice to Great Basin, up to 25,000 of the
Great Basin Shares and the Warrant Shares (collectively, the
"Shares") in any 30 calendar day period or to carry over any or all
of that number of Shares to the next 30 calendar day period and
thereafter for up to four such periods, so that, in effect, the
Company may sell up to 100,000 Great Basin Shares during the last 30
days of a 120 calendar day period.
3. Notwithstanding the foregoing, the Company is entitled to sell up to
100,000 Great Basin Shares in any 30 calendar day period provided
that it first gives to Great Basin the right to cause such Shares to
be acquired by a person designated by Great Basin at a price at
least equal to the five day average closing price of Great Basin's
Shares on the five trading days before it received such notice, less
a 10% discount. If Great Basin does not exercise that right, the
Company is free to sell up to 100,000 Great Basin Shares by private
sale or on the market for a period of 45 days.
4. Under the terms of the agreement, Great Basin has an assignable right
to purchase any shares in Great Basin in excess of 2,000,000
(fully-diluted) held from time to time by the Company at a price based
on the 5 day average closing price of Great Basin's Shares, plus 10%,
subject to a minimum price of $1.00 per share. The agreement provides
for adjustments to the price in the event that the five day average
closing price post-sale is more than a specified percentage of the
price paid.
5. The Company has agreed to a voting trust in favour of Great Basin
management for a period of two years and will be given representation
on the board of directors of Great Basin.
6. The Company will have the right to participate in future financings of
Great Basin in order to maintain its equity interest if so desired.
7. Completion of the purchase and sale is subject to conditions precedent
in favour of both parties which include the requisite regulatory and
shareholder approvals, satisfactory due diligence review of and
favorable opinions on matters material to the transaction. No
regulatory approval of the transaction is required by the Company.
Great Basin requires approval of the Vancouver Stock Exchange, which
has been sought.
REASONS FOR DISPOSITION OF IVANHOE JOINT VENTURE INTEREST
As a result of the unfavorable market conditions for junior resource issuers
in the past twenty-four months the Company has been unable to raise the
necessary capital to fund its share of the reclamation costs for the
Hollister area of the Ivanhoe property as contemplated under the Purchase
Agreement between the Company, Great Basin and Newmont Mining Company, or to
enable it to participate in the current drilling program proposed by Great
Basin. In those circumstances, the Company faced an inevitable dilution of
its 25% interest in the Ivanhoe project, pursuant to the terms of its
agreements with Great Basin. The Board of Directors continues to be of the
view, based on exploration results to date, that the Ivanhoe property is
highly prospective for hosting a Carlin-type mineral deposit. Nevertheless,
taking into account the present state of the capital markets for an issuer in
the Company's position, the Board decided that it was in the best interests
of the Company to sell its interest in the Ivanhoe property before suffering
material dilution and a further loss of negotiating strength. A sale of the
Company's joint venture interest to Great Basin will result in 100% of the
project being held by Great Basin, which is expected to assist Great Basin in
financing further exploration and development of the property. At the same
time, the Company, by virtue of its shareholding in Great Basin, will still
be in a position to realize a benefit from any discovery on the project, or
any other projects which Great Basin may undertake.
Coupled with the Company's holding of 1.57 million shares of Vista Gold Corp.
acquired by the Company on sale of Mineral Ridge, the shares in Great Basin
will represent a continued stake in the two projects which formed the
foundation of the Company in earlier days and which the Board believes could
be valuable investments if and when the price of gold recovers from present
levels. If the transaction with Great Basin completes, the Company will own
2,750,000 shares of the then outstanding 19,786,771 shares of Great Basin, or
14%. The Company owns 1,562,500 shares of the outstanding 90,715,040 shares
of Vista Gold, or 1.7%.
In the event that the sale of Touchstone does not receive shareholder
approval, management expects the Company's interest in the Ivanhoe Property
will be further diluted due to its anticipated inability to fund both ongoing
exploration and reclamation costs due to market conditions generally in the
resource sector. See "Management Discussion and Analysis - Risks and
Uncertainties".
<PAGE>
- 24 -
SALE OF UNDERTAKING
Because the Company's interest in the Ivanhoe venture is its sole remaining
active mining asset, the sale of that asset represents a major change in the
status of the Company as a mining entity and a sale of substantially all of
the Company's undertaking. Such a sale requires special approval of the
shareholders of the Company, which management will seek in the form of a
special resolution approving the transaction. The text of the resolution to
be approved (the "Disposition Resolution") is set out as item 2 in Appendix
"A" to this Proxy Statement.
RIGHTS OF DISSENT
Pursuant to the COMPANY ACT (British Columbia), a registered shareholder has
until two days before the Meeting to exercise its right to dissent to the
disposition by the Company of its 25% interest in the Ivanhoe Project by
delivering to the Company by registered mail a notice of dissent addressed to
the Company at its registered office at 10th Floor, 595 Howe Street,
Vancouver, British Columbia, V6C 2T5. As a result of giving a notice of
dissent, a registered shareholder may, upon passage of the Disposition
Resolution and receipt from the Company of a notice of its intention to act
thereupon, require the Company to purchase all of his or her shares in
respect of which the notice of dissent was given.
A registered shareholder of the Company has the right to give a notice of
dissent with respect to the Disposition Resolution pursuant to Section 126(5)
of the COMPANY ACT (British Columbia.). If a registered shareholder gives
such notice of dissent, then Section 207 of the COMPANY ACT (British
Columbia) applies. The essence of these provisions is that a dissenting,
registered shareholder can require the Company to purchase all of his or her
shares in respect of which he or she gives notice of dissent. The price to be
paid for such shares is their fair value as of the day before the date on
which the Disposition Resolution is passed.
A shareholder's right to give a notice of dissent with respect to the
Disposition Resolution will lapse if not exercised 2 days before the meeting
at which such resolution is to be passed. This right may only be exercised by
the registered holder of shares. Further, a notice of dissent ceases to be
effective if the shareholder giving it votes in favour of the resolution. Any
shareholder who is uncertain of his or her rights under Sections 126(5) and
207 of the COMPANY ACT (British Columbia) and who wishes to exercise any of
those rights should consult legal counsel in British Columbia. A copy of
Section 207 of the COMPANY ACT is attached as Appendix "B" to this Proxy
Statement.
The directors of the Company may elect not to proceed with the transactions
contemplated in the Disposition Resolution if notices of dissent are
received, which would require an expenditure by the Company in excess of
$200,000.
2. CONSOLIDATION AND NAME CHANGE
At the Meeting shareholders will be asked to consider and, if thought fit, to
pass a special resolution approving:
1. The consolidation of the Company's authorized and issued common
share capital from TWO HUNDRED MILLION (200,000,000) common shares
to TWENTY MILLION (20,000,000) common shares, (i.e.) one (1) new
common share for ten (10) pre-consolidation common shares without
par value;
2. An increase in the Company's authorized common share capital to its
pre-consolidation level of Two Hundred Million (200,000,000) common
shares without par value; and
3. A change of the Company's name to "STOCKSCAPE TECHNOLOGIES LTD." or
another similar name acceptable to the Vendor.
The text of the resolution to be approved is set out as item 2 in Appendix "A"
to this Proxy Statement.
REASON FOR CONSOLIDATION AND NAME CHANGE
During 1998, when the Company was seeking purchasers or joint venture
partners for the Mineral Ridge project, it became apparent that, because of
the state of the gold mining industry, there were very few opportunities
which would support traditional operations. All of the potential transactions
proposed to the Company at that time were, in management's view, detrimental
to the shareholders. It became clear that after the disposition of the mining
projects, future opportunities for growth would most probably have to be
found in other industries.
In January 1999, while the Company was in the process of negotiating the
Great Basin agreement, the Company was approached by A. R. Rule Investments
Ltd., which was familiar with the Company and its management. Management was
invited to discuss a proposal which has since developed into the
reorganization plan. This timely approach, related to an industry which is
currently enjoying substantial investor interest, immediately received a
favorable response from the Board of Directors of the Company. In view of the
urgent and critical need for fresh investment, coupled with the fact that
many other excellent corporate vehicles were available to Stockscape, the
opportunity was followed up vigorously and no other strategies were
considered up to the present time.
<PAGE>
- 25 -
The common share consolidation and name change are fundamental to the
Company's reorganization and are conditions precedent to completion of the
acquisition by the Company of Stockscape . The consolidation and the
consolidation ratio were the subject of negotiation between the Company and
Stockscape. Both the consolidation and the ratio were agreed to be necessary
steps to improving the Company's ability to attract and maintain investors. A
reduction of the number of outstanding shares may be expected to result in a
corresponding increase in market price, which should allow the Company to
secure future equity financing on terms more advantageous to existing
shareholders. The proposed consolidation will have the effect of reducing the
Company's authorized common share capital to 20,000,000. The increase in
share capital to the pre-consolidation level of 200,000,000 is necessary, in
the opinion of management, for the future capital requirements of the Company.
Stockscape is an Internet investment research provider and, after acquisition
of Stockscape, the business of Stockscape will become the Company's primary
business. The following detailed disclosure on Stockscape and its business is
based upon information provided to the Company by Stockscape. Specific
reference should be made to information under "Risk Factors" and "Liquidity
and Capital Resources".
STOCKSCAPE TECHNOLOGIES LTD.
Stockscape Technologies Ltd. ("Stockscape" or "Stockscape.com") was
incorporated on July 9, 1996 as "523833 B.C. Ltd.." by registration of a
memorandum and articles with the Registrar of Companies under the COMPANY ACT
(British Columbia) and changed its name to "Stockscape Technologies Ltd." on
October 17, 1996. It commenced operations as an Internet investment research
provider in October, 1996. The registered and records office of Stockscape is
located at Suite 2900, 595 Burrard Street, Vancouver, British Columbia, V7X
1J5, Canada and its head office and principal place of business is located at
Suite 410, 325 Howe Street, Vancouver, British Columbia, V6C 1Z7, Canada.
Stockscape is a private British Columbia company wholly owned by A.R. Rule
Investments B.C. Ltd. (the "Vendor"). A.R. Rule Investments B.C. Ltd. is a
privately-held British Columbia company controlled by Arthur R. (Rick)
Rule. Both Vendor and Stockscape are entirely at arm's length to the Company.
Stockscape has no subsidiaries.
BUSINESS OF STOCKSCAPE
DESCRIPTION AND GENERAL DEVELOPMENT
Since its inception Stockscape has been engaged in providing Internet
investment research and web-site design services. It has established and
maintains a web site at www.stockscape.com with links to other web sites that
contain up-to-date information on financial markets, including information on
specific sectors of the market, and new developments concerning public
companies. Stockscape's customer base comprises publicly traded companies
which subscribe for Stockscape's various services.
Stockscape offers access to all of its web pages free of charge to Internet
users and derives its revenue primarily from fees paid by sponsoring
companies for services including the design, construction and maintenance of
web-sites for sponsor companies and Internet marketing campaigns such as its
"Investor Harvest Program" and "Investor Email Blast": (See "Products").
Stockscape also receives revenue from commissions it receives from the sale
of newsletter subscriptions over the Internet. A third and growing source of
revenue is from the sales of advertising space in its e-mail publications.
Stockscape offers companies three categories of charter sponsorship as follows:
Charter Sponsor A: for companies that do not already have a website,
for a fee which varies depending upon the size
and complexity of the site, Stockscape will create the
site, register the site with all major search engines
and create a hyper-link under Sponsor Companies on the
Stockscape.com website. A flat fee is charged monthly
for maintenance. The maintenance fee includes two hours
of programming time per month which is bankable, and
advice from Stockscape sales team and programmers
regarding managing a successful site;
Charter Sponsor B: for companies with an existing website, Stockscape
will update the website and move it to the
Stockscape.com web server, register the site with
all major search engines and create a hyper-link to
the Sponsor Companies' section of the Stockscape
website;
Charter Sponsor C: for companies with a website who do not wish to have
Stockscape.com host their website, Stockscape
will create and maintain a "microsite" for the company
with a full link under Sponsor Companies on the
Stockscape.com site for a monthly fee.
Each category of service also includes a marketing option. Sponsor Companies
can elect to apply a flat fee payable monthly to lead generation and/or
e-mail advertising sponsorship.
The Investor Harvest Program (NewsStand Express) is a lead generation
program. When internet users subscribe for NewsStand Express they are
presented with the name of the sponsor company (at the same time the fees
paid by the company to Stockscape are disclosed) and are asked whether they
would like to receive more information on the company. If the user answers
yes, its contact information is provided to the Sponsor Company to follow up.
The Sponsor Company is charged a flat fee for each lead generated.
<PAGE>
- 26 -
In the e-mail advertising sponsorship program Stockscape.com's registered
users receive, at their request, regular e-mail dispatches from the
Stockscape.com editorial team or the Stockscape newsletter partners.
Sponsoring Companies can advertise in the e-mail program. The Sponsor Company
is charged a flat rate for each e-mail dispatch which includes information on
the Sponsoring Company.
Stockscape currently has a dedicated user community (users who have visited
the Stockscape.com website) of approximately 40,000, comprised largely of
individual investors. Some users scan the site for free; others sign-up for
web-based services and/or request information through the mail. Stockscape
acts as the aggregator and disseminator of financial information, organized
and presented in a user friendly format, for this investor community. To
provide the range of financial information required by its diverse investor
community Stockscape has established and maintains web pages organized by
market sector, has established a newsletter marketing network, "NewsStand
Express", which matches segments of its investor communities with financial
publications focussed on their areas of interest, provides its users with
live market data through its own quote servers and communicates proactively
with its members through the use of e-mail communications.
Currently approximately 50 companies are charter sponsors of Stockscape.com.
SUMMARY AND ANALYSIS OF FINANCIAL OPERATIONS
SELECTED FINANCIAL INFORMATION
The following table sets out selected financial information for the periods
indicated and should be considered in conjunction with the more complete
information contained in the financial statements and related notes attached
as Appendix D to this Proxy Statement. Unless otherwise indicated, all
currency amounts herein are stated in Canadian dollars.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
DECEMBER 31 SEPTEMBER 30
--------------------------------------- ---------------------------------------
1998 1997 1998 1997
- ------------------------------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Sales $ 68,946 $ 11,740 $ 170,157 $ 15,250
Gross profit (5,419) (72,914) (167,337) (169,508)
Sales and Marketing
Expenses 27,176 43,057 140,141 27,791
General and Administrative
Expenses 50,210 35,451 178,095 60,257
Net Income (Loss) (83,329) (156,993) (499,355) (257,556)
Working Capital (13,336) 18,206 (27,845) 11,890
Property, Plant and
Equipment 95,314 93,259 100,753 75,805
Other Intangibles 8,270 2,889 6,992 3,081
Long Term Liabilities 672,988 271,403 579,311 90,832
Share Capital
Dollar Amount 157,500 157,500 157,500 157,500
Number of Securities 950,000 950,000 950,000 950,000
</TABLE>
RESULTS OF OPERATIONS
This discussion and analysis of the results of operations and financial
condition of Stockscape should be read in conjunction with the accompanying
financial statements and the related notes.
THREE MONTHS ENDED DECEMBER, 1998 COMPARED WITH THREE MONTHS ENDED DECEMBER,
1997
The results shown for the year ended September and the first quarter ended
December 1997 are the results during the early stages or start up of the
Company. During the year ended September, 1997, the Company's focus was on
the development of the Stockscape.com web site and positioning itself to
offer more extensive services to users, newsletter writers and publishers.
The loss during the three months ended December 31, 1998 was $83,329 compared
to the loss in the quarter ended December 31, 1997 of $151,422. Revenues for
the quarter were $68,946, an increase of 482% over the same quarter in the
prior year of $11,740. Stockscape's expenses also increased as the growth
continued, but not as much as the revenues. The gross loss decreased to
$5,943 for the quarter, compared to a loss of $72,914 in the same quarter of
the prior year. Marketing and sales costs were lower in the current quarter
by 37% as an advertising program which was undertaken in the prior year was
absent in the current year. The general and administrative costs were
increased by 41%, from $35,451 in the quarter ended December 31, 1997 to
$50,210 in the quarter ended December 31, 1998.
SEPTEMBER 30, 1998 COMPARED WITH SEPTEMBER 30, 1997
The Company's focus during the fiscal year ended September 1998 shifted to
marketing, with the goal of expanding the revenue base. There was a
significant amount of spending during the early quarters to promote the site
and the services available. Revenues increased for the three months ended
December 31 from $11,740 in 1997 to $68,946 for the same three months ended
December 31, 1998. This resulted primarily from hosting new client web sites
and from newsletter writer commissions. All of which was a result of this
marketing campaign. This marketing campaign is largely responsible for the
increase in sales and marketing expenses from $27,791 at September, 1997 to
$140,141 at
<PAGE>
- 27 -
September 1998. Significant time and effort on site development and services
continued during this time, which is reflected in the increase in general and
administrative costs from $60,257 at September, 1997 to $178,095 at
September, 1998. During the latter part of the fiscal year ended September,
1998, and especially the quarter ended December 31, 1998, the Company
continued to complete the set up of the new newsletter writer and publishers'
websites and was still incurring heavy start up costs for new clients.
The Company incurred losses from operations by initially establishing its
site and encouraging viewers to contact the site. It did this by building and
maintaining websites for writers/publishers on Stockscape.com and bore the
heavy costs of setup and maintenance. Some revenue was realized, on a
commission basis, for publications sales attributed to the sites. The
commission revenues will eventually grow to support these sites. It also
built and maintained web sites for public natural resource companies, often
bearing the total cost of set up, to encourage a larger client base. Much of
revenue to date has been from the ongoing maintenance of these sites. As the
client base increases, so does Stockscape's ability to charge market value
for set up services. The losses from operations were anticipated in that the
company was required to hire experienced programmers to develop and maintain
not only the Stockscape.com website, but also the initial client sites.
During the second full year of operations of Stockscape, the year ended
September 30, 1998, the revenue base was increased from $15,250 in 1997 to
$170,157 in 1998. This growth was the result of increased marketing efforts.
Stockscape charges monthly fees for maintenance, after a set up has been
completed and paid for at the beginning of a relationship with a new client,
such that the monthly maintenance income grows on a cumulative basis. During
the year ended 1998, $140,141 was spent on sales and marketing efforts,
compared to $27,791 spent in 1997. The main portion of these expenses was for
staff and contract sales people engaged in a direct selling effort.
The general and administrative costs increased from $60,257 in 1997 to
$190,877 in 1998. The increase in revenues was 1,016%, the increase in sales
and marketing was 404% and the increase in the administrative costs was 216%.
These numbers are high due to the start up phase that Stockscape was going
through. However, it is considered that they also reflect the growth of
Stockscape towards a profitable level.
SEPTEMBER 30, 1997 COMPARED WITH SEPTEMBER 30, 1996
Stockscape was incorporated on July 9, 1996 and up to the first year ended
September 30, 1996 the only costs incurred were those associated with setting
up the company and planning for operations. By the year ended September 30,
1997, the first full year of operations, Stockscape had revenue of $15,250
and an operating loss of $257,556. The costs were mainly comprised of
salaries and wages of the employees. Marketing costs of $27,791 were incurred
in the year and were focused on visiting companies who were in need of a
website, primarily in the resources industry. General and administrative
costs of $60,257 included costs of management and administration of the
company.
LIQUIDITY AND CAPITAL RESOURCES
As a private company, Stockscape has been funded from inception by its sole
shareholder through a mix of debt and equity. As at the end of the fiscal
year (September 30, 1998), Stockscape had received funding of $579,311 in
loans and $257,500 through common share subscriptions. At that time, the
Company had current assets of $135,762 and current liabilities of $163,607,
for a working capital deficiency of $27,845. Included in the current
liabilities was $82,247 of unearned revenue to be earned by September 30,
1999.
By December 31, 1998, the shareholder had agreed to increase the loan amount
outstanding by $93,677 to a total loan amount of $672,988, and the working
capital deficiency had decreased to $13,330.
The shareholder has agreed to fund at least an additional $152,012 to
maintain the future operations of the company until a further financing has
been completed or the company achieves positive cash flows from operations.
In addition, the shareholder has agreed to convert $825,000 of the total
amount of this loan into common shares of Stockscape.
Capital expenditure commitments are nominal. The major commitment is for
monthly lease costs of approximately $2,000 for leased computer equipment.
Stockscape will maintain and upgrade its facilities as new and improved
equipment is made available.
Future funding for the operations and growth of Stockscape is planned to be
from a financing contemplated concurrently with the transaction with
Cornucopia of $2 million, and from the operations of Stockscape.
All of the shares of Stockscape are held by A. R. Rule Investments (B.C.) Ltd.,
a private company owned and controlled by Arthur R. ("Rick") Rule, of Carlsbad,
California. There has been no public market for its common stock and there can
be no assurance that an active trading market for the shares of the combined
entity will develop or be sustained following the acquisition of Stockscape by
Cornucopia or that the market price of Cornucopia's common shares will not
decline below any price that may develop initially after the closing of the
transaction. The stock market in general and the technology and Internet sectors
in particular have experienced extreme price and volume fluctuations which have
affected the market price for many companies in those sectors and which have
been unrelated to the operating performance of these companies. These market
fluctuations, as well as general economic, political and market conditions, may
have a material adverse effect on the market price of the Cornucopia shares.
Other trends, demands, commitments, events or uncertainties that could have a
material effect include all of those usual to any ongoing business. A major
shift in the industry and the usual competitive pressures are nominal matters
that management will monitor and adapt to from time to time.
STATED BUSINESS OBJECTIVES
The proceeds of the $2 million private placement financing to be undertaken
following acquisition by the Company will be used to fund a portion of the
Company's stated business objectives. Additional capital will be required for
the Company to achieve all of its stated business
<PAGE>
- 28 -
objectives and there is no assurance that such funding will be available when
required, on acceptable terms, or at all. See "Risk Factors - Future Capital
Needs".
The basis of Stockscape's business plan is to continue to expand and organize
the financial content available through its web-site, Stockscape.com, with a
view to attracting additional users. Increasing the volume of traffic on its
site, combined with its ability to communicate with its investor community
and to identify segments of that community in a way that is relevant for its
current and potential public company customer base will, it is intended, make
the Stockscape.com web-site and marketing products more attractive to
advertisers and sponsor companies, thereby generating additional revenue. In
furtherance of its plan, one of Stockscape's primary objectives and the focus
of its resources in the near term will be the expansion of its dedicated
investor user base from its current approximately 40,000 to a target of
1,000,000, within the next two years. Contingent upon a successful marketing
campaign it is anticipated that advertising commitments could be obtained,
based on a dedicated user base of 1,000,000, which would generate sufficient
revenues on a monthly basis to meet monthly operating expenses. Achievement
of that goal is dependent upon the Company obtaining the financing necessary
to mount a concerted marketing campaign. A secondary objective and one which
Stockscape considers will, to a large extent, follow upon increasing its user
base and expanding the financial content available through its web site, is
to expand its public company customer base to cover a broad range of industry
sectors.
Stockscape is at a start-up stage in its development, has not generated
operating profits to date and the development costs it has incurred are
carried in its deficit account. It is not expected that cash flow from sales
of its services and products will be sufficient to pay its operating costs in
the foreseeable future.
MILESTONES
The following events must occur to achieve the objective of increasing
revenues:
1. Appointment to the board of directors of the Company of at least one
additional person with related industry background. This is expected
to be completed by the end of the second quarter of 1999. The five
individuals nominated for election as directors of the Company at
the Meeting include three present directors of the Company, all of
whom have extensive business experience outside the mining industry,
and two new nominees with industry-related business professional
backgrounds. Nevertheless, the plans for Stockscape's growth will
require the addition of a seasoned Chief Executive Officer with
experience compatible with the nature of Stockscape's core business
and areas into which Stockscape might logically expand. Informal
steps have been taken to seek out such an individual.
2. Implementation of a marketing campaign aimed at expanding the
financial content of the Stockscape.com web site (targeting
independent financial newsletters). The estimated cost of this
campaign is approximately $30,000 to $50,000. It is expected that
this will be completed, contingent upon obtaining the necessary
financing, by the end of the third quarter of 1999.
3. The implementation of a major marketing campaign aimed at expanding
dedicated investor user base. The cost and extent of the campaign
will be contingent upon obtaining the necessary financing and is
intended to be completed by the end of the third quarter of 2001.
4. Hiring of additional sales and programming personnel to accommodate
anticipated increased advertising commitments, client company base,
and newsletter base. Costs will be dependent upon degree of success
obtained in achieving prior milestones. Timing will be contingent on
availability of financing.
ACQUISITIONS AND DISPOSITIONS
Stockscape has made no material acquisitions or dispositions since its
incorporation and has no present intention to make any material acquisition
or disposition relating to its current business.
MANAGEMENT
The following directors, officers, employees and contractors are those whose
expertise may be considered most important to Stockscape's ability to achieve
its stated business objectives:
John J. Brown is the President of Stockscape and oversees its administration.
Mr. Brown is also President of Pacific Opportunity Company Ltd. which
controls the financial administration of Stockscape. As the sole director and
officer of Stockscape, Mr. Brown is involved in all significant decisions
relating to the Stockscape business.
Trevor Newton oversees the operations of Stockscape, including marketing,
content and product development.
Arthur R. ("Rick") Rule, through A. R. Rule Investments (B.C.) Ltd., is the
sole shareholder and financier of Stockscape. Mr. Rule is the President of
Global Resource Investments Ltd., a brokerage firm located in California and
specializing in resources-based investments. Mr. Rule's financial assistance
and business connections and experience have allowed Stockscape to continue
to grow towards profitability. Mr. Rule also assists in the marketing area by
introducing potential new clients to Stockscape.
<PAGE>
- 29 -
ORGANIZATIONAL STRUCTURE
----------------------------------------
John J. Brown
Director
President
----------------------------------------
|
----------------------------------------
Trevor Newton
Manager
----------------------------------------
|
|
<TABLE>
------------------ ------------------- ------------------ ------------------- ------------------
| | | | | |
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Senior Programmer Senior Programmer Senior Programmer Senior Programmer Administration Marketing Manager
Manager
- --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
</TABLE>
PRODUCTS
In its first two years of operations Stockscape has developed three important
marketing products particularly suited to the e-commerce environment:
"NewsStand Express", "Investor Harvest Program", and "Investor Email Blast".
"NewsStand Express" is a financial newsletter marketing network, whereby,
through various proprietary web-based marketing methodologies Stockscape
introduces potential subscribers to publishers by matching investors with
high-profile financial publications on a trial program basis. Investors
wishing to continue to receive the information after the trial program ends
then subscribe for the publication.
"Investor Harvest Program" is a web-based marketing campaign and lead
generation program offered by Stockscape. Companies interested in increasing
their shareholder base or expanding their consumer audience can contract with
Stockscape to design and place a series of advertisements in association with
the information Stockscape provides to its investment communities.
Stockscape's demographic and other information about its investor community
permits it to provide a specifically targeted, cost-effective, campaign.
Through its "Investor Email Blast" program Stockscape can disseminate
corporate announcements, news releases and information about special
promotions to thousands of potential investors.
Research and development of the foregoing products was conducted in part by
outside contractors, all of whom are now employed by Stockscape. Development
costs consist primarily of salaries and are not capitalized. Stockscape plans
to continue to refine and enhance its current publishing and marketing
products and, contingent upon adequate funding, to research and develop new
products based on evolving publishing and marketing models.
PROPRIETARY PROTECTION
Trademarks have been registered in Canada and the United States for the name
"STOCKSCAPE". The Canadian trademark was registered on July 2, 1998 under
registration number TMA 496,924. The US trademark is in the final stages of
being approved. These trademarks are intended to protect the use of the name
of the Company and it's website. Stockscape asserts common law trademark
rights in respect of its various program names and has no present intention
to register those trademarks. Because of the rapidly evolving nature of
e-commerce and web-based marketing, current methodologies must be continually
refined or become obsolete. As a result Stockscape does not consider
protection of its current proprietary methodogies and programs a priority.
See "Risk Factors".
OPERATIONS
Stockscape's operations are based in Vancouver, British Columbia, Canada. The
company leases office space for its technical group, marketing team and
management staff all of whom are directly employed by Stockscape. Four of the
company's eight employees are programmers involved in the research and
development of the programs required to implement the Stockscape marketing
and publishing products.
MARKET
The market for the investment research services provided by Stockscape.com
consists of specific niches within the investment community. Examples of such
niches include the mining investment community, the oil and gas investment
community, the information technology investment community, the offshore
investment community, and other defined segments. Stockscape.com focuses on
microcap investments as opposed to blue chip or more conservative stocks. It
is not the intention of the company to expand its content to compete with
broad-focus, mainstream, investment sites.
While the population of investors with some exposure in the microcap
investment community is limited and not all of these investors have internet
access, this population is anticipated to continue growing in future. The
company's primary audience is North American, with 60% originating from the
United States, 10% from Canada, and 30% from overseas. All of the
Stockscape.com users are English speaking, and the Stockscape.com site and
web pages are presented in English. Stockscape.com has no current plans to
expand beyond this market.
The Stockscape.com client (revenue) market presently consists of all microcap
companies in North America (although Stockscape does not intend to limit its
client base to companies in this geographical region). While there are more
than 10,000 public companies in North America that fall into the microcap
category, Stockscape estimates that no more than approximately 20% of these
companies would make suitable candidates for its products or services. The
number may be further reduced by the fact that Stockscape.com. targets only
those client companies which it considers to be characterized by strong
management teams and sufficient working capital.
<PAGE>
- 30 -
Stockscape.com faces significant competition in the on-line financial
publishing business and also in the delivery of web-based services to public
companies. Some of its competitors on the webservices side include Stock
Research Group, Stockhouse, and Gigweb. On the financial publishing side, the
same three companies are also competitors, as are financial sites including
Yahoo Finance, MarketWatch, Silicon Investor, and several others.
Stockscape.com's competitive advantage lies in its unique relationships with
traditional publishers and independent newsletter writers. Stockscape.com
hosts and maintains the websites of more than 20 publishers and independent
newsletter writers who specialize in investment-related content. These
relationships are structured such that Stockscape.com builds, hosts and
maintains their websites in return for 25% of all future revenue generated to
the publishers and independent newsletter writers from their own website.
Usually 50% of that revenue is in the form of advertising. In this way,
newsletter writers are able to have a substantial and professional web
presence at no cost other than a share of future revenue. This relationship
is unique. Stockscape.com management is unaware of any other service like
this available to newsletter writers on the web. Stockscape plans to
capitalize on this competitive advantage to increase the usership of its
site, and thereby indirectly attract more public companies as clients.
MARKETING PLAN AND STRATEGIES
Usership of the Stockscape.com community will be increased through the
marketing of Newsstand Express and various other features of the company's
site(s). For each internet user who signs up for more information or for
web-based services on the Stockscape.com website, the management of
Stockscape.com has determined that it costs Stockscape.com anywhere from
4-5$US in advertising costs. This is what is meant by 'average cost of
acquisition per user'. These users have signed up for more information from
Stockscape.com usually after they have viewed Newsstand Express -
www.newsstandexpress.com - a free service offered through Stockscape.com
where investors can get free trial subscriptions to any one of several
email-based investment publications. Therefore these Internet users have
'opted-in' to receive these publications via email. This is what is known as
an 'opt-in' list. An opt-in list is the opposite of "spam" (unsolicited
commercial email) where the users voluntarily supply their information and
request direct communication from Stockscape.com.
It has historically been the case that a large portion of the cost of
acquisition is offset by Newsstand Express sponsor companies, who derive
value from the sponsorship based on the generation of opt-in qualified leads.
The marketing campaign for Newsstand Express will take the form of
traditional and nontraditional advertising, but will be primarily direct mail
based and web-based.
Simultaneously a sales campaign will be undertaken to increase the number of
client companies whose sites are hosted and maintained, and to sell the
increased advertising inventory which results from the marketing of Newsstand
Express. This campaign will be a combination of direct marketing, trade show
appearances, and affiliate programs.
DIVIDEND RECORD
Stockscape has not, since the date of its incorporation, declared or paid any
dividends on its Common Shares and does not currently intend to pay
dividends. Earnings will be retained to finance further development of its
business.
DIRECTORS AND OFFICERS
The name and municipality of residence of the sole director and officer of
Stockscape, the position held by him with Stockscape, his principal
occupation for the past five years and other reporting issuers in which he
holds positions as a director or officer are set forth below:
<TABLE>
<CAPTION>
---------------------------------------- --------------------------------------- --------------------------------------
Name and Municipality of Residence Principal Occupation During The Past Other Reporting Issuers
Five Years
---------------------------------------- --------------------------------------- --------------------------------------
<S> <C> <C>
John J. Brown A Chartered Accountant since 1959, United States Lime & Minerals, Inc.
Vancouver, British Columbia Mr. Brown is President of Pacific (Director)
Director, President Opportunity Company Ltd., a private International Mahogany Corp.
financial services and merchant (President and Director)
banking company, which also manages Golden Sitka Resources Ltd.
Stockscape. Mr. Brown does not hold (President and Director)
any securities of Stockscape. Rio Amarillo Mining Ltd. (Director
and CFO)
Key West Energy Ltd. (Director)
---------------------------------------- --------------------------------------- --------------------------------------
</TABLE>
<PAGE>
- 31 -
CORPORATE CEASE TRADE ORDERS AND SANCTIONS
To the best of the knowledge of Stockscape, no director, officer or promoter
of Stockscape was a director, officer or promoter of any reporting company
during the past five years that was struck off the register of companies by
the British Columbia Registrar of Companies or other similar authority or was
the subject of a cease trade or suspension order for a period of more than 30
consecutive days.
To the best of the knowledge of Stockscape, no director, officer or promoter
of Stockscape during the past ten years has been the subject of any penalties
or sanctions by a court or securities regulatory authority related to the
trading in securities, the promotion, formation or management of a publicly
traded company or involving theft or fraud.
EXECUTIVE COMPENSATION
During each of 1997 and 1998 there were no employees of Stockscape whose
combined salary and bonuses exceeded $100,000. In 1997 and 1998 Stockscape
paid $50,899 and $54,051 to Pacific Opportunity Company Ltd. ("Pacific"), a
private British Columbia company controlled by John J. Brown, the sole
director and officer of Stockscape, for office administration, accounting,
secretarial and management services. During the first quarter ended December
31, 1998, $15,051 was paid to Pacific for such services.
EMPLOYMENT CONTRACTS
Stockscape has no employment contracts with any of its directors, officers or
employees. Stockscape has no compensatory plan or arrangement in respect of
compensation received or that may be received by the executive officers to
compensate such executive officer in the event of the termination of
employment (resignation, retirement, change of control), or in the event of a
change in responsibilities following a change in control, where in respect of
any of the executive officers the value of such compensation exceeds $100,000.
Stockscape does not have a long-term incentive plan or "LTIP", pursuant to
which cash or non-cash compensation intended to serve as an incentive for
performance (whereby performance is measured by reference to financial
performance or the price of Stockscape's securities), was paid or distributed
to the Named Executive Officers during the most recently completed financial
year.
COMPENSATION OF DIRECTORS
Stockscape has no arrangements, standard or otherwise, pursuant to which
directors are compensated by Stockscape for their services in their capacity
as directors, or for committee participation, involvement in special
assignments or for services as consultant or expert during the most recently
completed financial year or subsequently, up to and including the date hereof.
INDEBTEDNESS TO STOCKSCAPE OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
There is no indebtedness of any director, executive officer, senior officer,
or associate of them, to or guaranteed or supported by Stockscape either
pursuant to an employee stock purchase program of Stockscape or otherwise,
during the most recently completed financial year.
OPTIONS TO PURCHASE SECURITIES
Stockscape has no outstanding options, warrants or other rights to purchase
shares.
RISK FACTORS
The acquisition of Stockscape by the Company is considered speculative due to
the nature of Stockscape's business and the present stage of its development.
Shareholders should consider carefully the risk factors set out below.
EARLY DEVELOPMENT STAGE AND Stockscape is in the early stage of developing
HISTORY OF LOSSES. its business. Stockscape has realized relatively
insignificant revenues to date. From
inception in October, 1996 through September
30, 1998, its total revenues were $185,407 of
which 85% is attributable to its operations in
fiscal 1998. As at December 31, 1998, it has
accumulated losses of approximately $840,240.
Stockscape has not achieved profitability on a
quarterly or annual basis to date, and it
anticipates that it may continue to incur net
losses for the foreseeable future. The extent
of these losses will be dependent, in part, on
Stockscape's net revenues, if any, from
advertisers and e-commerce transactions.
Stockscape expects its operating expenses to
increase significantly, especially in the
areas of customer generation, brand marketing
and e-commerce promotion. If net revenue does
not increase or increases in operating
expenses precede or are not immediately
followed by commensurate increases in net
revenue, Stockscape's business, results of
operations and financial condition will be
materially and adversely affected. At its
present stage of development period-to-period
comparisons of Stockscape's operating results
will not be meaningful and the results for any
period should not be relied upon as an
indication of future performance. There can be
no assurance that Stockscape's operating
losses will not increase in the future or that
Stockscape will ever achieve or sustain
profitability.
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LIMITED OPERATING HISTORY. Stockscape has had a very limited operating
history upon which an evaluation of its
current business plan and its prospects can
be based. Stockscape began operations in July
1996. As at December 31, 1998 the Company
had only been in operation for 30 months.
Much of the first two years was spent solely
on the development of its own site and the
sites of the publishers and newsletter
writers. Neither of these activities
produced revenues but was essential to the
business plan in making Stockscape.com's
site unique. Once this development work was
completed some companies were invited to
locate on the site and the setup fees
were waived in some circumstances. This
start up period does not accurately
reflect normal ongoing operations. There
are a number of risks, expenses and
problems frequently encountered by
companies in the early stages of
development, and particularly by companies
entering new and rapidly developing markets
like the Internet. Such risks include,
without limitation, the possibility that the
Internet will fail to achieve broad
acceptance as a commercial medium, lack
of acceptance by consumers of e-commerce,
possible failure to generate sufficient
e-commerce-based revenues from its Website,
failure or inadequacy of network
infrastructure (including its server,
hardware and software), changes in laws
that adversely affect the Internet and
e-commerce generally and Stockscape's
business in particular, direct and indirect
competition for investor communities and
advertisers by entities with greater
financial, technical and marketing resources,
failure to attract, retain and motivate
qualified personnel, failure to properly
manage the amount and timing of operating
costs and capital expenditures in the
development of Stockscape's business,
operations and infrastructure. There can be
no assurance that Stockscape will be
successful in addressing such risks, and
any failure to do so could have a material
adverse effect on Stockscape's business,
results of operations and financial
condition.
FUTURE CAPITAL Stockscape does not currently have available
NEEDS/LIQUIDITY to it the funds necessary to meet its
DEFICIENCIES/POTENTIAL LACK anticipated capital needs. However,
OF FINANCING. Stockscape anticipates that the net proceeds
from a financing intended to be completed
contemporaneously with the proposed
acquisition of Stockscape by Cornucopia
Resources Ltd. (the "Company" or
"Cornucopia") will be sufficient to meet its
working capital requirements and planned
capital expenditures for the next 18 months.
The Company will need to raise additional
funds to fund further development of its
business and to implement its business plan.
There can be no assurance that any additional
financing, including the funds intended to be
raised in the announced financing, will be
available on terms favourable to Stockscape
and the Company, or at all. If adequate funds
are not available or are not available on
acceptable terms, the Company may not be able
to fund expansion of the Stockscape business
or to implement its business plan, which would
have a material adverse effect on the
Company's business, results of operations and
financial condition. Additional funds raised
through the issuance of equity or convertible
debt securities of the Company will reduce the
percentage ownership of the Company's current
stockholders. Stockholders may experience
additional dilution and securities issued in
any future financings may have rights,
preferences or privileges senior to those of
current shareholders of the Company.
POTENTIAL FLUCTUATIONS IN The Company expects operating results of
QUARTERLY RESULTS. the Stockscape business to fluctuate
significantly in the future as a result of a
variety of factors, many of which are beyond
Stockscape's control. These factors include
fluctuating demand for the advertising
products Stockscape offers relative to the
state of the capital markets, consumers'
acceptance of e-commerce, the level of traffic
on the Stockscape.com site, the introduction
of new or enhanced services by its
competitors, changing personnel requirements
to address changes in technology, competition
and promotional campaigns by Stockscape or any
of its competitors, engineering or development
fees required to be paid in connection with
adding new Website development and publishing
tools, general economic conditions, and
economic conditions specific to the Internet
or all or a portion of the technology market.
As a strategic response to changes in the
competitive environment, Stockscape may from
time to time make certain pricing, service or
marketing decisions or business combinations
that could have a material adverse effect on
Stockscape's business, results of operations
and financial condition. Stockscape expects to
experience seasonality in its business, with
user traffic on the Stockscape.com site
potentially being lower during the summer and
year-end vacation and holiday periods when
overall usage of the Web is lower. Because
Web-based e-commerce is an emerging market,
additional seasonal and other patterns may
develop in the future as the market matures.
Any seasonality is likely to cause quarterly
fluctuations in Stockscape's operating results.
DEPENDENCE ON KEY PERSONNEL. Competition for senior management,
experienced sales and marketing personnel,
qualified Web engineers and other
employees is and is expected to continue to
be intense, and there can be no assurance
that Stockscape will be successful in
attracting and retaining such personnel.
Success of the Stockscape business is
dependent on the contacts, abilities and
performance of its executive officers and
other key employees. The loss of the
services of any of its executive officers or
other key employees could have a material
adverse effect on the prospects, business
development, and results of operations and
financial condition of Stockscape.
INTENSE COMPETITION. The market for community based e-commerce
on the Internet is new and rapidly
evolving and competition for visitors,
advertisers, strategic partners and
E-Providers is intense and is expected to
increase significantly in the future.
Barriers to entry are relatively
insubstantial. Some of the other companies
who are primarily focused on creating a
Web-based investor community on the
Internet are Stock Research Group, Gigweb
and Stockhouse. Some of these
competitors are significantly larger than
Stockscape and more established and known in
the Internet industry. Stockscape will
likely also face competition in the
future from Web directories, search engines,
shareware archives, content sites,
commercial online service providers ("OSPs"),
sites maintained by Internet service
providers ("ISPs") and other entities.
There can
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be no assurance that Stockscape's
competitors and potential competitors will
not develop investor communities that are
equal or superior to those of Stockscape
or that achieve greater market acceptance
than Stockscape's community. Accordingly,
Stockscape will likely face increased
competition, resulting in pressure on its and
advertising revenues. Stockscape also
competes, to some degree, with other
information service providers which have
established major financial sites, such as
Quicken, Yahoo Finance, MarketWatch and
others, although Stockscape focuses on
publication of niche (as opposed to
broad-focus) investment content. Many of
Stockscape's existing and potential
competitors have longer operating
histories, greater name recognition, larger
customer bases and significantly greater
financial, technical and marketing resources
than Stockscape. Entities with which
Stockscape might in future seek to enter
into a strategic relationship may have
already established collaborative
relationships with Stockscape's competitors
or potential competitors, and other
high-traffic Websites. There can be no
assurance that Stockscape will be able to
compete successfully in the Internet or
that competition will not have a material
adverse effect on Stockscape's business,
results of operations and financial condition.
TECHNOLOGICAL RISKS. The performance of Stockscape's server
and networking hardware and software
infrastructure is critical to Stockscape's
business and its ability to attract Web users
and advertisers to its website. Any system
failure that causes an interruption in service
or a decrease in responsiveness or failure
of Stockscape's server and networking
systems to handle the volume of traffic of
Stockscape's website could impair the
attractiveness of its website, thereby
reducing Stockscape's marketing and
e-commerce revenues. It is expected that as
the business develops the Company will need
to purchase additional servers and
networking equipment to maintain adequate
data transmission speeds, the availability
of which may be limited or the cost of which
may be significant. The successful delivery
of Stockscape's services is also dependent,
in substantial part, upon the ability of
Stockscape to protect its server and network
infrastructure against damage from human
error, power loss, telecommunications
failure, sabotage, intentional acts of
vandalism and similar events. The market in
which Stockscape competes is characterized by
rapidly changing technology, evolving
industry standards, frequent new
product and service announcements and
enhancements and changing customer demands.
Stockscape's success will depend on its
ability to adapt to rapidly changing
technologies and industry standards, and
its ability to continually improve the speed,
performance, features, ease of use and
reliability of its server and networking
system. Any failure to rapidly adapt in a
changing environment would have a material
adverse effect on Stockscape's
competitiveness. Introducing new technology
into Stockscape's systems will require
significant amounts of capital,
substantial amounts of personnel resources
and will take time to complete. There can be
no assurance that Stockscape will be
successful at integrating such technology
into its Website on a timely basis or without
degrading the responsiveness and speed of
its website or that, once integrated, such
technology will function as expected.
GOVERNMENT REGULATION AND Stockscape is not currently subject to direct
LEGAL UNCERTAINTIES. regulation by any government agency,
other than regulations applicable to
businesses generally, and there are
currently few laws or regulations directly
applicable to access to or commerce on the
Internet. However, due to the increasing
popularity and use of the Internet, a number
of legislative and regulatory proposals are
under consideration by U.S. and Canadian
federal, state, provincial, local and foreign
governmental organizations, and it is possible
that a number of laws or regulations may be
adopted with respect to the Internet on
matters including user privacy, user
screening, taxation, infringement, pricing,
content regulation and intellectual property
ownership and infringement. The adoption of
any such laws or regulations could slow or
reverse the rate of growth in the use of the
Internet, which could, in turn, decrease the
demand for Stockscape's services, and increase
Stockscape's cost of doing business. The
applicability to the Internet of existing laws
governing issues such as property ownership,
copyright, trademark, trade secret, obscenity,
libel and personal privacy is uncertain and
developing. Any new legislation or regulation,
or application or interpretation of existing
laws, could have a material adverse effect on
Stockscape's business, results of operations
and financial condition.
A number of legislative proposals have been made
at the U.S. and Canadian federal, state,
provincial and local level that would impose
additional taxes on the sale of goods and
services over the Internet and certain
jurisdictions have taken measures to tax
Internet-related activities. It is possible that
some type of taxes will be imposed upon Internet
commerce in the future, and there can be no
assurance that such legislation or other attempts
at regulating commerce over the Internet will not
substantially impair the growth of commerce on
the Internet and, as a result, adversely affect
Stockscape's opportunity to derive financial
benefit from such activities. Due to the global
nature of the Web, it is possible that, although
transmissions by Stockscape over the Internet
originate primarily in British Columbia, Canada,
the governments of various states in the United
States and foreign countries might claim
jurisdiction over Stockscape or its
transmissions. There can be no assurance that
violations of local laws will not be alleged or
charged by state or foreign governments, that
Stockscape might not unintentionally violate such
laws or that such laws will not be modified, or
new laws enacted, in the future. Stockscape is
qualified to do business only in British
Columbia, and failure by Stockscape to qualify as
a foreign corporation in a jurisdiction where it
is required to do so could subject Stockscape to
taxes and penalties and could result in the
inability of Stockscape to enforce contracts in
such jurisdictions. Any of the foregoing
developments could have a material adverse effect
on Stockscape's business, results of operations
and financial condition.
LIABILITY FOR INFORMATION Because materials may be downloaded by users of
RETRIEVED FROM THE WEB. Stockscape's Website and subsequently
distributed to others, there is a
possibility that claims will be made
against Stockscape for defamation, negligence,
copyright or trademark infringement, personal
injury or other theories based on the nature,
content,
<PAGE>
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publication and distribution of such
materials. Such claims have been brought, and
sometimes successfully pressed, against OSPs
in the past. Stockscape could be exposed to
liability with respect to third party content
accessible through Stockscape's Website. If
any third party content provided on
Stockscape's Website contains errors, a claim
could be brought against Stockscape for losses
incurred in reliance on such information.
Stockscape could incur significant costs in
investigating and defending against such
claims, regardless of the outcome. Stockscape
does not carry general liability insurance
intended to protect Stockscape from any
liability arising out of the foregoing and
insurance may not be available to cover all
such potential claims or may not be adequate
to indemnify Stockscape for all liability that
may be imposed. Any imposition of liability
that is not covered by insurance or is in
excess of insurance coverage would have a
material adverse effect on Stockscape's
business, results of operations and financial
condition.
SECURITY RISKS. There can be no assurance that experienced
programmers or "hackers" may not from time to
time attempt to penetrate Stockscape's
network security. To date, none of this
activity has occurred. A party who is
able to penetrate Stockscape's network
security could misappropriate proprietary
information or cause interruptions in
Stockscape's Website. Concerns over the
security of Internet transactions and the
privacy of users may also inhibit the growth
of the Internet generally, particularly as
a means of conducting commercial
transactions. Security breaches or the
inadvertent transmission of computer
viruses could expose Stockscape to loss,
litigation and possible third party
liability. There can be no assurance that
any contractual provisions or legal
disclaimers intended to limit Stockscape's
liability in such areas will be successful or
enforceable.
RELIANCE ON INTELLECTUAL Stockscape regards certain of its technology and
PROPERTY AND PROPRIETARY certain advertising programs, including E-mail
RIGHTS. Blaster, Investor Harvest Program and NewsStand
Express as proprietary and relies on common law
trademark, service mark, copyright and trade
secret laws and restrictions on disclosure for
protection. The Stockscape name is the subject
of a registered trademark in Canada and a
pending trademark registration in the United
States. Apart from the Stockscape trademark
the company has no other registered trademarks
and has no present plans to seek registration
of any of its trademarks. Stockscape's
programs have been developed by its employees
and contractors. These contractors are now
employed by the company. While it considers
its current programs and methodologies
proprietary, the nature of the Internet and
marketing on the Internet, necessitates
ongoing modification, updating and evolution
of all proprietary technology. Accordingly,
Stockscape does not generally require those
involved to enter into confidentiality or
technology transfer agreements but controls
access to and distribution of its
documentation and other proprietary
information.
Despite these precautions, it may be possible
for a third party to copy or otherwise obtain
and use Stockscape's proprietary information
without authorization or to develop similar
technology independently. Effective trademark,
service mark, copyright and trade secret
protection may not be available in every
country in which Stockscape's services are
distributed or made available through the
Internet, and policing unauthorized use of
proprietary information is difficult. Legal
standards relating to the validity,
enforceability and scope of protection of
certain proprietary rights in Internet-related
businesses are uncertain and still evolving,
and no assurance can be given as to the future
viability or value of any proprietary rights
of Stockscape. There can be no assurance that
Stockscape's business activities will not
infringe upon the proprietary rights of
others, or that other parties will not assert
infringement claims against Stockscape.
Stockscape may be subjected to claims of
alleged infringement of the trademarks,
service marks and other intellectual property
rights of third parties by Stockscape.
Although no such claims have been made to
date, such claims and any resultant litigation
could be time consuming and expensive to
defend. Stockscape currently licenses from
third parties certain technologies
incorporated into Stockscape's Website. As
Stockscape continues to introduce new services
that incorporate new technologies, it may be
required to license additional technology from
others. There can be no assurance that these
third party technology licenses will continue
to be available to Stockscape on commercially
reasonable terms, if at all.
DEPENDENCE ON CONTINUED Stockscape's future success is dependent upon
GROWTH IN USE OF INTERNET. continued growth in the use of the Internet and
the Web. There can be no assurance that the
number of Internet users will continue to
grow or that e-commerce over the Internet will
become more widespread. Further, there can be
no assurance that the Web infrastructure will
continue to be able to support the demands
placed on it by continued growth or that the
performance or reliability of the Web will not
be adversely affected by continued growth.
CONTROL BY A.R. RULE Upon completion of the acquisition of
INVESTMENTS (B.C.) LTD. Stockscape by the Company, A.R. Rule
Investments (B.C.) Ltd. will, in the
aggregate, beneficially own approximately 55%
of the outstanding Common Stock of the
Company. As a result, this shareholder will
possess significant influence over the
Company, giving it the ability, among other
things, to elect a majority of the Company's
Board of Directors and approve significant
corporate transactions. Such share ownership
and control may also have the effect of
delaying or preventing a change in control of
the Company, impeding a merger, consolidation,
takeover or other business combination
involving the Company, or discourage a
potential acquiror from making a tender offer
or otherwise attempting to obtain control of
the Company and could have a material adverse
effect on the market price of the Company's
Common Stock.
YEAR 2000 COMPLIANCE. Stockscape is addressing the potential impact
of the Year 2000 ("Y2K") issue on its
operations. The Y2K problem arises because of
computer programs which use two digits rather
than four digits to define a year. This
may result in miscalculations or complete
system failures in processing data with
programs using date
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sensitive information.
Stockscape has inventoried its information
technology ("IT") and non-IT systems,
including embedded systems in its
operating equipment, in an effort to
identify potential Y2K problems. Stockscape
is in the process of assessing and
quantifying the extent of potential
problems. After prioritizing the problems
uncovered, Stockscape will move to the
remediation and testing phases of its Y2K
compliance program, which it expects to
complete by the third quarter of 1999.
Stockscape currently uses certain software
which may not be Y2K compliant. To
address this problem, Stockscape is
consulting with an independent contractor as
to how best to address any problems. The
cost of this report will be approximately
$10,000. In addition, the software used in
Stockscape's site maintenance operations has
either already been warranted by the
suppliers or publishers to be Y2K compliant,
or the suppliers and publishers have
represented that such software will be
compliant through upgrades that Stockscape
will receive in 1999 under software
maintenance agreements. Stockscape has not
taken any steps to independently verify the
truth of such warranties and
representations, but also has no reason to
believe that the software is not, or will
not be compliant. Stockscape does not
currently believe that the amount of
non-compliant IT and non-IT equipment used
in other systems will be found to be
significant, nor will the cost to modify or
replace such equipment be material.
Stockscape also intends to obtain
confirmation from its suppliers and customers
that they are or will be Y2K compliant.
The costs of seeking such third-party
confirmation are minimal. Stockscape
believes that it will not be practical to
independently verify the responses
received because it does not believe
that Stockscape would be given access to
carry out such verification or that the costs
of doing so would be justifiable given the
fact that no single supplier or distributor
is material to Stockscape and its
operations. The cost of replacing, or of
implementing alternative means of
communication with, non-compliant or
non-responsive suppliers will not be
possible to determine until the review
process has been completed.
Assuming that there are no serious systemic
failures in external services, such as power
or telephone outages, banking disruptions,
interruptions of the U.S. mail or private
delivery services, or air, rail, or trucking
transportation difficulties, Stockscape
believes that its most reasonably likely
worst case scenario is that it will experience
a number of minor system malfunctions,
errors, and delays during the early weeks of
the Year 2000. Such problems could include
communications disruptions and
inefficiencies, difficulties in updating
sites and invoicing customers, and delays
in ordering supplies and paying suppliers.
Although it is less likely, as a result of
Y2K problems, Stockscape could also
experience delays and disruptions in
completing the planned marketing programs
and the subsequent site developments project
in a timely fashion which could create cost
overruns. Lastly, Stockscape could,
depending upon the response to Y2K problems by
its customers and their industries, experience
a temporary decline in customer demand.
While Stockscape will not complete its
contingency planning until specific Y2K
problems are fully identified, quantified,
and prioritized, it has begun to identify the
types of actions that it may have to
consider in order to ensure continuity of
operations and service to customers. These
include making sure that manual override
systems are fully functional, reverting to
paper process to handle information
storage, transmission, and retrieval,
stockpiling certain supplies and spare parts
and acquiring and installing additional
computer and mechanical components and
systems. Each such response could require
additional manpower and supervision, may
involve increased costs to Stockscape, and
could result in a decrease in revenues and
profits. As to the potential for a decline in
customer demand, Stockscape believes that,
although it markets and sells its products on
a regional basis, its customer base is
widely diversified among various
industries, and among various purchasers
within a given industry, and Stockscape
intends to continue during 1999 to seek to
strengthen and diversify further its
customer base. Other than as a result of an
inadequate response to the Y2K problem
by Stockscape's customers and their
industries, Stockscape does not expect the
Y2K challenge to have material adverse
effect on its financial condition, results of
operations, or cash flows.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
The only material transactions of Stockscape during the past three years or
proposed transactions in which any director or senior officer, or any
principal shareholder of Stockscape has or had an interest, direct or
indirect, are as follows:
1. Arthur. R. Rule subscribed for common shares of Stockscape as follows:
a) 750,000 shares at $0.01 per share on July 17, 1996;
b) 200,000 shares at $0.25 per share on July 17, 1996.
These shares were subsequently transferred to A.R. Rule Investments
(B.C.) Ltd. ("Rule Investments").
2. Rule Investments subscribed for a further 800,000 shares at $0.25 per
share on March 26, 1999.
<PAGE>
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3. Rule Investments has advanced a total of C$608,704 in principal amount
to Stockscape for working capital purposes to December 31, 1998. As at
December 31, 1998 principal and accrued interest totalled C$672,988.
The loans are interest-bearing at the rate of 12% per annum and are
repayable on demand. Rule Investments has agreed to continue to fund
the working capital requirements of Stockscape on the same terms,
pending completion of the acquisition of the company by Cornucopia
Resources Ltd.
4. Subsequent to December 31, 1998, Rule Investments agreed to accept
shares of Stockscape in satisfaction of up to $825,000 of any
outstanding indebtedness. The shares to be issued will form part of
the shares to be acquired by Cornucopia.
MATERIAL CONTRACTS
Except as otherwise disclosed herein, within the two years prior to the date
hereof Stockscape has not entered into any material contracts other than in
the ordinary course of business.
LEGAL PROCEEDINGS
To the knowledge of Stockscape, there are no material pending legal
proceedings to which Stockscape is or is likely to be a party or of which any
of its assets are or are likely to be subject. However the company is aware
of a claim by an employee which, if not resolved, could result in litigation
involving Stockscape. It is not presently anticipated that such litigation
would have a material affect on the business or operations of Stockscape.
AUDITORS
The auditors of Stockscape are Ellis Foster, Chartered Accountants, at their
principal offices at 1650 First Avenue, Vancouver, British Columbia, Canada,
V6J 1G1.
SHARE EXCHANGE AGREEMENT
Under the terms of the agreement (the "Share Exchange Agreement") between
the Company and A. R. Rule Investments B.C. Ltd. dated March 1, 1999, the
Company will acquire all of the issued and outstanding shares of Stockscape
by issuing 10,000,000 post-consolidation Common Shares of the Company (the
"Payment Shares").
The parties have agreed that the Payment Shares will be issued for a deemed
value of Cdn. $0.50 per share making the overall deemed value of the
transaction C$5 million . The high and low sale prices of the Common Shares
of the Company on The Toronto Stock Exchange on March 1, 1999, the day
preceding the date of the issue of the news release announcing the
transaction, were C$0.06 and C$0.06, respectively.
The Company presently has 41,591,834 Common Shares issued and
outstanding and assuming no exercises of outstanding options and
warrants prior to consolidation, will have 4,159,183 Common shares
outstanding post-consolidation. The issuance of the 10,000,000 Common
Shares to A. R. Rule Investments B. C. Ltd. will result in the creation
of a control block to be held by A. R. Rule Investments B.C. Ltd.
representing approximately 55% of the issued and outstanding shares of the
Company upon completion of this transaction. It is a term of the Share
Exchange Agreement that management nominate as directors of the Company
those persons named in this proxy circular as management nominees. If
such nominees are elected the board will be comprised of Andrew F.B.
Milligan, Sargent H. Berner, David R. Williamson, A. Murray Sinclair,
and John J. Brown. It is anticipated that at least one additional new
director will be added to the Board subsequent to the Meeting.
The Agreement includes representations and warranties of both parties which
are typical for a transaction of this nature. Under the Agreement, the Vendor
has agreed:
(a) to carry on the business of Stockscape in the ordinary course and not
enter into any transactions out of the ordinary course of business
without the consent of the Company prior to Closing; and
(b) to arrange a private placement financing for the Company of up to
four million (4,000,000) units of the Company at $0.50 per unit,
each unit to consist of one post-consolidation common share of the
Company and two common share purchase warrants each entitling the
holder to acquire one additional common share in the capital of the
Company (referred to herein as the "Financing").
The Shares to be issued in the private placement will represent 22% of the
issued and outstanding share capital of the Company on a post-consolidation
basis.
Under the Agreement, the Company has agreed:
(a) to take all steps as may be reasonably required to obtain all
necessary consents and approvals to the acquisition, share
consolidation and name change; and
(b) to cause certain individuals to be named as management nominees in
this Proxy Statement.
In addition to the usual conditions precedent in a transaction of this
nature, the Vendor's obligations under the Agreement are conditional on the
common share capital of the Company having been consolidated on a ten (10)
old for one (1) new basis and the name of the Company having been changed to
"Stockscape.com, Inc." or other name satisfactory to the Vendor. The Vendor
has agreed that the name "Stockscape Technologies Ltd." is satisfactory.
<PAGE>
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Similarly, the Company's obligations under the Agreement are conditional on
the usual conditions precedent in a transaction of this nature and the
following:
(a) the receipt by the Company of an independent fairness opinion
satisfactory to the Company respecting the acquisition. The fairness
opinion has been commissioned but, as at the date of this Proxy
Statement, has not been received;
(b) shareholder approval of those aspects of the transaction requiring
such approval;
(c) conversion into shares or forgiveness of all outstanding indebtedness
of Stockscape to its shareholders or affiliates;
(d) the Company shall have obtained irrevocable commitments respecting
the Financing; and
(e) approval of the Board of Directors following completion of the
Company's due diligence investigations.
Attached hereto as Appendix "C" to this Proxy Statement is a copy of the
pro-forma financial statements of the Company as at December 31, 1998, which
present the financial situation of the Company at such date assuming
completion of the acquisition of Stockscape and related matters. Financial
statements of Stockscape at September 30 and December 31, 1998 appear in
Appendix "D" and financial statements of the Company at December 31, 1998
compared with December 31, 1997, are incorporated in the Annual Report
accompanying this Proxy Statement.
(f) ADOPTION OF NEW STOCK INCENTIVE PLAN
As a result of the Company's shares being delisted from the TSE the Company's
former Stock Incentive Plan, and in particular the mechanism specific therein
for pricing of options, was considered to be no longer appropriate, and a new
Stock Incentive Plan has been adopted by the Board of Directors, subject to
approval by the Company's shareholders.
The new Stock Incentive Plan is intended to replace the Stock Incentive Plan
adopted by the Company's shareholders on June 24, 1988, and approved by the
stock exchanges upon which the Company's shares were then listed. As with the
previous Stock Incentive Plan, the new Plan approved by the Directors
consists of a Share Purchase Plan, a Share Option Plan and a Share Bonus Plan
for directors, executive officers and employees of the Company. As in the
past, the purpose of the Stock Incentive Plan is to advance the interest of
the Company by encouraging equity participation in the Company by directors,
executive officers and employees of the Company through acquisition of the
Common Shares. Subject to certain limits stated in the Share Option Plan and
the Share Bonus Plan, the number of Common Shares available or made available
for the Share Purchase Plan, the Share Option Plan and the Share Bonus Plan,
individually and collectively, will be determined from time to time by the
Company's Board of Directors. In contrast to the previous Stock Incentive
Plan, however, there will be no maximum number of Common Shares which the
Company may at any time reserve for issuance under the Stock Incentive Plan.
The setting of a limit on the number of shares which could be reserved for
issuance under a stock option plan was a requirement imposed by stock
exchanges on which the Company's shares were previously listed and which no
longer applies to the Company.
The Stock Incentive Plan will be administered by the Company's Board of
Directors as before. The Board has the right to amend, modify or terminate
the Stock Incentive Plan, in whole or in part, if and when it is advisable in
the absolute discretion of the Board of Directors. However, amendments of the
Stock Incentive Plan which would materially modify the requirements as to
eligibility for participation in any plan comprised in the Stock Incentive
Plan or which would materially change the number or value of Common Shares
that may be granted under the Share Option Plan will require any necessary
approval of any regulatory body having jurisdiction over the securities of
the Company.
It is presently contemplated that future stock options granted by the Company
will generally be granted pursuant to the Share Option Plan.
(a) SHARE PURCHASE PLAN
Participants in the Share Purchase Plan are to be full time or seasonal
full-time employees of the Company who have completed at least one year (or
less, at the option of the Company Board of Directors) of continuous service
and who have been designated by the Company's Board of Directors as
participants in the Share Purchase Plan.
An employee may contribute up to 10 per cent of his annual basic salary to
the Share Purchase Plan. The Company makes contributions based on a
proportion of the employee's contribution on a quarterly basis. During the
first year of the employee's participation, the Company's contribution will
equal one-sixth of the participant's contribution and, thereafter, will
increase to one-third of the participant's contribution.
At the end of each calendar quarter each participant will then be issued
Common Shares having a value equal to the amount contributed to that date by
the participant and the Company to the Share Purchase Plan. Common Shares
issued to a participant will be held in safekeeping and delivered to the
participant six months after issue.
If, prior to the delivery of such Common Shares, the participant's employment
is terminated other than due to death, disability or normal retirement (in
which cases the Common Shares will be delivered), such Common Shares will be
purchased for cancellation or sold at market and the participant will
receive, without interest, an amount equal in value to the lesser of (i) his
contribution and (ii) a portion of the proceeds of any sale of such shares
equal to six-sevenths of the proceeds if the shares were issued during the
first year of participation, or three-quarters of the proceeds if the shares
were issued thereafter. Any portion of a participant's contribution then held
in trust for a participant will be returned to him or his estate, as the case
may be in the event of his termination of employment, for any reason. To
date, no Common Shares have been purchased by participants under the Share
Purchase Plan.
<PAGE>
- 38 -
(b) SHARE OPTION PLAN
The number of shares subject to option under the Share Option Plan,
previously limited to a maximum of 4,750,000, will now be determined by the
Board of Directors, subject to any necessary approval of any regulatory
authority having jurisdiction over the Company. Options granted pursuant to
the Share Option Plan are to be either options intended to qualify under
Section 422 of the United States Internal Revenue Code (the "Code") or
options designated by the Company that do not so qualify.
The date of grant, the number of Common Shares, the exercise price per Common
Share and certain other terms of options are determined by the Company's
Board of Directors. In order to ensure that the Company will receive the
benefits intended from the grant of options, no option is exercisable until
it has vested. The vesting schedule for each option is specified by the
Company's Board of Directors at the time of grant of the option.
Options are exercisable for any period specified by the Company's Board of
Directors up to a maximum of five years after the date of grants. In all
cases, any Common Shares not purchased pursuant to an option prior to the
participant's termination of employment or directorship or death may be
exercised, to the extent entitled, within 30 days after the termination of
employment or directorship or within up to one year after death (as specified
in the particular option agreement). An option is not transferable, except by
will or the laws of descent and distribution.
Subject to approval of the Stock Incentive Plan by the shareholders at the
Meeting, the following options have been allocated and will be granted at an
exercise price of C$0.50 per share (post-consolidation):
NEW PLAN BENEFITS(1)
<TABLE>
<CAPTION>
NAME AND POSITION POSITION WITH COMPANY NUMBER OF SHARES
- ----------------- --------------------- ----------------
<S> <C> <C>
Andrew F.B. Milligan Director, President and Chief Executive Officer 200,000
Sargent H. Berner Director 100,000
David W. Williamson Director 100,000
A. Murray Sinclair Proposed Director 100,000
John J. Brown Proposed Director 200,000
Stephen Sopher Former Director 25,000
Charles Russell Former Director 25,000
</TABLE>
(1) The dollar value of the proposed allocation of options is not
determinable at this time. The closing bid price of the Company's
shares on the OTCBB on April 30, 1999 was U.S.$0.091.
(c) SHARE BONUS PLAN
The Share Bonus Plan permits the Company's Board of Directors to enter into
agreements for the issuance of Common Shares to full-time or seasonal
full-time employees of the Company who have rendered meritorious service
which contributed to the success of the Company. The Company's Board of
Directors may enter into agreements with such full-time or seasonal full-time
employees, on any terms and conditions, subject to any provisions and
restrictions, and for such cash consideration, if any, as the Company's Board
of Directors may determine for the issuance of any number of Common Shares to
any such employee. No shares can be issued pursuant to the Share Bonus Plan
unless the employee has entered into such an agreement with the Company's
Board of Directors.
The maximum number of Common Shares that may be issued under the Share Bonus
Plan, in any calendar year, may not exceed 5% of the total number of Common
Shares of the Company that were issued and outstanding on the date the Share
Bonus Plan is adopted.
PERSONS ELIGIBLE
All employees of the Company are eligible to participate in the Share
Purchase Plan and the Share Bonus Plan. The number of employees is currently
three and, upon completion of the acquisition of Stockscape an additional 10
employees will be eligible under those plans. Participants in the Share
Option Plan are the Company's officers, members of the Executive Committee;
non-executive directors; and full-time or part-time employees of the Company
who, by the nature of their jobs, are, in the opinion of the Company's Board
of Directors, in a position to contribute to the success of the Company or
who, by virtue of their length of service to the Company, are, in the opinion
of the Company's Board of Directors, worthy of special recognition. As at the
date of this Proxy Statement a total of 12 persons are eligible under the
Share Option Plan.
CONSEQUENCES TO SHAREHOLDERS
The impact of the proposed new Stock Incentive Plan differs very little from
that of the present plan insofar as the impact on the shareholders is
concerned. Exercise of options has the benefit of increasing working capital
when other means are not available, although clearly a measure of dilution
will result. Past experience has indicated that the exercise of options
generally coincides with a period of strong market activity and therefore
usually does not negatively affect the stock price.
The absence of a maximum number of shares which may be reserved for future
issuance will require the exercise of prudence and restraint by the board and
it is expected that the guidelines imposed by the previous plan will be
followed. On the other hand, the availability of additional options may be
advantageous when, as contemplated, the Company will be seeking to hire a
top-flight CEO from within the Internet industry to direct the affairs of
Stockscape.
<PAGE>
- 39 -
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
FOR OPTIONEE AND COMPANY
To the knowledge of the Company, at present, all persons eligible under the
proposed Stock Incentive Plan are Canadian residents. The following summary
describes material Canadian federal income tax consequences generally
applicable to a holder of Common Shares (optionee) who is a resident of
Canada, and who, for purposes of the Income Tax Act (Canada) (the "ITA"),
holds such shares as capital property.
This summary is based upon the current provisions of the ITA and the
regulations thereunder and on an understanding of the published
administrative practices of Revenue Canada. This summary does not take into
account or anticipate any possible changes in law, or the administration
thereof, whether by legislative, governmental or judicial action, except
proposals for specific amendment thereto which have been publicly announced
by the Canadian Minister of Finance prior to the date hereof.
This summary does not address all aspects of Canadian federal income tax law
that may be relevant to optionees based upon their particular circumstances,
and does not deal with foreign income tax consequences, which might differ
significantly from the consequences under Canadian federal income tax law.
Stock options of directors, officers and employees will constitute a taxable
benefit in the same tax year as the exercise of the option. As the Company is
not a Canadian-controlled private corporation the taxable benefit arises at
the time of exercise rather than at the time that the shares are sold.
The amount of the taxable benefit would be calculated as the difference
between the fair market value of the shares at the exercise date and the
acquisition cost to the optionee. An offsetting deduction in the amount of
25% of the taxable benefit amount is allowed in the same tax year as the
taxable benefit. A further tax consequence may occur for the optionee upon
the subsequent sale of the shares. The difference between the fair market
value at the time the option was exercised and the actual proceeds of
disposition would be treated as a capital gain, three quarters of which would
be a taxable capital gain in the year of sale of the shares.
The Canadian federal income tax consequences of the Company upon exercise of
stock options would be to record a compensation expense in the difference
between the fair market value of the shares at the time of exercise and the
exercise price. This deduction may qualify to reduce the tax liability of the
Company in a future year. No tax consequences exist for the Company on the
initial issuance of the stock options.
APPROVAL SOUGHT
At the Meeting, shareholders will be asked to consider and, if thought fit,
pass an ordinary resolution in the form set out as Item 3 in the attached
Appendix "A" to this Proxy Statement to ratify and approve the adoption of
the new Stock Incentive Plan, as described under "Stock Incentive Plan"
herein, which Plan confers on the Board of Directors discretion to grant
options at such times and for such number of shares as the Board sees fit.
The form of the Plan is attached as Appendix "F" to this Proxy Statement.
Shareholder approval of the Plan will constitute approval to the exercise of
options granted under it, and in the absence of such approval such options
will not be exercisable.
(g) OTHER MATTERS
SHAREHOLDER PROPOSAL
Any shareholder who intends to present a proposal at the 2000 Annual General
Meeting of shareholders for inclusion in the Company's Proxy Statement and
Proxy Form relating to such meeting must submit such proposal by January 31,
2000 to the Company at its principal executive offices.
Management of the Company is not aware of any matter to come before the
meeting other than as set forth in the notice of meeting. If any other matter
properly comes before the meeting, it is the intention of the persons named
in the enclosed Proxy Form to vote the shares represented thereby in
accordance with their best judgment on such matter.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1998 IS
AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, CORNUCOPIA RESOURCES LTD., SUITE 540 - 355 BURRARD STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA, V6C 2G8.
DATED at Vancouver, British Columbia this 26th day of May, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
(SIGNED)
----------------------------------------
ANDREW F. B. MILLIGAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
APPENDIX "A"
ITEM 1. DISPOSITION OF IVANHOE JOINT VENTURE INTEREST
"BE IT RESOLVED, as a special resolution, that the
disposition of substantially the whole of the undertaking
of the Company consequent upon the sale of the Company's
25% joint venture interest in the Ivanhoe property, through
the sale of all of the issued and outstanding shares of
Touchstone Resources Company, pursuant to the terms of an
agreement dated March 2, 1999 between the Company and Great
Basin Gold Ltd., be and it is hereby authorized and
approved."
ITEM 2. INCREASE OF AUTHORIZED CAPITAL, CHANGE OF NAME AND
CONSOLIDATION OF COMMON SHARES
"BE IT RESOLVED, as a special resolution, that:
1. the Company consolidate all of its issued and
unissued common shares without par value from
200,000,000 common shares without par value into
20,000,000 common shares without par value, every
ten (10) of such common shares without par value
being consolidated into one (1) common share
without par value;
2. the Company increase its authorized common shares
without par value from 20,000,000 common shares
without par value to 200,000,000 common shares
without par value such that the authorized capital
of the Company shall be 300,000,000 shares divided
into 200,000,000 common shares without par value
and 100,000,000 preferred shares without par
value, issuable in series and that the Memorandum
of the Company be altered accordingly so that it
will be in the form set out in Schedule "A"
attached hereto;
3. the name of the Company be changed from "Cornucopia
Resources Ltd." to "Stockscape Technologies Ltd." or
to such other name as decided upon by the directors
and acceptable to the Registrar of Companies for
British Columbia and that the Memorandum of the
Company be altered accordingly."
4. the Members hereby authorize the directors to
decide when and whether or not to proceed with the
consolidation, the post-consolidation increase in
authorized capital and the name change in their
discretion, and authorize any one director or
officer of the Company to do such further acts and
file such documents to effect the consolidation,
increase in authorized capital and name change as
may seem necessary to such director or officer."
ITEM 3 ADOPTION OF STOCK INCENTIVE PLAN
--------------------------------
"BE IT RESOLVED, as an ordinary resolution, that the adoption
of a new Stock Incentive Plan, in the form attached as
Appendix F to this Proxy Statement be and is hereby ratified
and approved."
SCHEDULE "A" TO APPENDIX "A"
OF THE PROXY STATEMENT OF CORNUCOPIA RESOURCES LTD. DATED O,1999
COMPANY ACT
ALTERED MEMORANDUM
(AS ALTERED BY SPECIAL AND ORDINARY RESOLUTIONS PASSED ON THE DAY OF , 1999)
1. The name of the company is "STOCKSCAPE TECHNOLOGIES LTD.".
2. The authorized capital of the company consists of Three Hundred
Million (300,000,000) shares divided into Two Hundred Million
(200,000,000) common shares without par value and One Hundred
Million (100,000,000) preferred shares without par value. The
special rights and restrictions attached to the preferred shares are
as set out in the Articles of the Company.
<PAGE>
APPENDIX "B"
SECTION 207 OF
THE COMPANY ACT (BRITISH COLUMBIA)
DISSENT PROCEDURE
207.(1) If,
(a) being entitled to give notice of dissent to a resolution as
provided in section 37, 103, 126, 222, 244, 249 or 289, a
member of a company (in this Act called a "dissenting
member") gives notice of dissent,
(b) the resolution referred to in paragraph (a) is passed, and
(c) the company or its liquidator proposes to act on the
authority of the resolution referred to in paragraph (a),
the company or the liquidator shall first give to the dissenting member
notice of the intention to act and advise the dissenting member of his rights
under this section.
(2) On receiving a notice of intention to act in accordance with
subsection (1), a dissenting member is entitled to require the company to
purchase all of the dissenting members shares in respect of which the notice
of dissent was given.
(3) The dissenting member shall exercise the right given by subsection
(2) by delivering to the registered office of the company, within 14 days
after the company, or the liquidator, gives the notice of intention to act,
(a) a notice that the dissenting member requires the company to
purchase all of the dissenting member's shares referred to in
subsection (2); and
(b) the share certificates representing all of those and, on
delivery of that notice and those share certificates, the
dissenting member is bound to sell those shares to the
company and the company is bound to purchase them.
(4) A dissenting member who has complied with subsection (3), the
company, or, if there has been an amalgamation, the amalgamated company, may
apply to the court, and the court may
(a) require the dissenting member to sell, and the company or the
amalgamated company to purchase, the shares in respect of
which the notice of dissent has been given;
(b) fix the price and terms of the purchase and sale, or order
that the price and terms be established by arbitration, in
either case having due regard for the rights of creditors;
(c) join in the application any other dissenting member who has
complied with subsection (3); and
(d) make consequential orders and give directions it considers
appropriate.
(5) The price that must be paid to a dissenting member for the shares
referred to in subsection (2) is their fair value as of the day before the
date on which the resolution referred to in subsection (1) was passed,
including any appreciation or depreciation in anticipation of the vote on the
resolution, and every dissenting member who has complied with subsection (3)
must be paid the same price.
(6) The amalgamation or winding up of the company, or any change in its
capital, assets or liabilities resulting from the company acting on the
authority of the resolution referred to in subsection (1), shall not affect
the right of the dissenting member and the company under this section or the
price to be paid for the shares.
(7) Every dissenting member who has complied with subsection (3)
(a) may not vote, or exercise or assert any rights of a member,
in respect of the shares for which notice of dissent has
been given, other than under this section,
(b) may not withdraw the requirement to purchase the shares,
unless the company consents, and
(c) until the dissenting member is paid in full, may exercise and
assert all the rights of a creditor of the company.
(8) If the court determines that a person is not a dissenting member, or
is not otherwise entitled to the right provided by subsection (2), the court,
without prejudice to any acts or proceedings that the company, its members or
any class of members may have taken during the intervening period, may make
the order, it considers appropriate to remove the limitations imposed on the
person by subsection (7).
(9) The relief provided by this section is not available if, subsequent
to giving his notice of dissent, the dissenting member acts inconsistently
with his dissent, but a request to withdraw the requirement to purchase the
dissenting member's shares is not an act inconsistent with the dissent.
(10) A notice of dissent ceases to be effective if the dissenting member
consents to or votes in favour of the resolution of the company to which the
dissent relates, unless the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
<PAGE>
APPENDIX "C"
UNAUDITED PRO FORMA BALANCE SHEET AND NOTES AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
STOCKSCAPE STOCKSCAPE CORNUCOPIA
DECEMBER 31/98 DECEMBER 31/98 DECEMBER 31/98 PRO FORMA PRO FORMA
C$ US$ US$ NOTE ADJUSTMENTS CONSOLIDATED
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEETS
ASSETS
Cash and cash equivalents 58,732 38,304 103,949 5(d) 1,304,376 1,446,629
Accounts receivable 74,742 48,746 25,844 74,590
Prepaid expenses and deposits 8,920 5,818 21,180 26,998
Investment in Vista Gold Corp. 0 234,305 234,305
- ---------------------------------------------------------------------------------------------------------------------------
142,394 92,868 385,278 1,782,522
- ---------------------------------------------------------------------------------------------------------------------------
Investment in Great Basin Gold
Ltd. 0 0 3(a) 1,681,422 1,681,422
Capital assets 95,314 62,163 11,701 73,864
Mineral properties and deferred
exploration expenses 0 1,874,895 3(a) (1,874,892) 3
Patents & trademarks 8,270 5,394 0 5,394
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 245,978 160,424 2,271,874 3,543,205
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued
liabilities 100,506 65,549 101,277 166,826
Unearned Revenue 55,224 36,016 0 36,016
- ---------------------------------------------------------------------------------------------------------------------------
155,730 101,565 101,277 202,842
Long term debt 672,988 438,915 0 5(e) (438,915) 0
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 828,718 540,480 101,277 202,842
- ---------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL
Share Subscriptions 200,000 130,438 0 5(f) (130,438) 0
Common shares 57,500 37,501 38,119,366 5(f) 130,438
5(e) 438,915
5(d) 1,304,376
(38,119,366)
(193,470)
2(c) 2,170,597 3,888,357
- ---------------------------------------------------------------------------------------------------------------------------
257,500 167,938 38,119,366 3,888,357
Deficit (840,240) (547,995) (35,948,769) 2(c) 35,948,769 (547,995)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (582,740) (380,056) 2,170,597 3,340,363
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 245,978 160,424 2,271,874 3,543,205
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to pro forma financial statements.
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations
<TABLE>
<CAPTION>
STOCKSCAPE STOCKSCAPE CORNUCOPIA
DECEMBER 31/98 DECEMBER 31/98 DECEMBER 31/98 PRO FORMA PRO FORMA
C$ US$ US$ NOTE ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Product sales 226,839 152,949 0 152,949
Production costs 327,205 220,622 0 220,622
Reclamation 0
- -------------------------------------------------------------------------------------------------------------------------
Operating profit or loss (100,366) (67,673) 0 (67,673)
Interest and other income 1,462 986 70,394 2(c) (70,394) 986
- -------------------------------------------------------------------------------------------------------------------------
(98,904) (66,687) 70,394 (70,394) (66,687)
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES
Selling, General and
administrative expenses 304,693 205,443 968,455 2(c) (968,455) 205,443
(Gain) on disposal of mineral
property 0 (180,972) 2(c) 180,972 0
Loss on sale of Touchstone Resources Co. 2(c),3(a) 193,470
2(c),3(a) (193,470) 0
(Gain) on disposal / write down of investments 0 (9,482) 2(c) 9,482 0
- -------------------------------------------------------------------------------------------------------------------------
304,693 205,443 778,001 (778,001) 205,443
- -------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (403,597) (272,131) (707,607) 707,607 (272,131)
Income tax 0 0 0 0
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD (403,597) (272,131) (707,607) 707,607 (272,131)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
BOOK VALUE PER SHARE 0.18
NET INCOME (LOSS) PER SHARE (0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 18,159,483
- -------------------------------------------------------- ----------------
- -------------------------------------------------------- ----------------
</TABLE>
See accompanying notes to pro forma financial statements.
<PAGE>
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS.
1. PROPOSED ACQUISITION AND BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial statements of
Cornucopia Resources Ltd. have been compiled from and include:
(a) the audited consolidated financial statements of Cornucopia Resources
Ltd. ("Cornucopia") as at December 31, 1998 and for the year ended
December 31, 1998. The Cornucopia audited financial statements are
prepared using the United States dollar as the reporting currency.
(b) The audited financial statements of Stockscape Technologies Ltd.
("Stockscape") as at December 31, 1998 an for the year ended
September 30, 1998 and for the three months ended December 31,
1998. The Stockscape audited financial statements are prepared
using the Canadian dollar as the reporting currency (note 2b).
For more detailed information, readers should refer to the audited financial
statements of Cornucopia included in its Form 10K and to the financial
statements of Stockscape included in Appendix "D" of this Form DEF14A.
These unaudited pro forma consolidated financial statements give effect to
the proposed transactions, as detailed in the Share Exchange Agreement
between Cornucopia and Stockscape, described in notes 3,4 and 5 below. The
unaudited pro forma consolidated balance sheets have been presented as though
the transactions occurred on December 31, 1998. The unaudited pro forma
statement of operations have been prepared as the transactions had occurred
on January 1, 1998.
In the opinion of management, the unaudited pro forma consolidated financial
statements include all the adjustments necessary for fair presentation in
accordance with Canadian generally accepted accounting principles.
THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE NOT INTENDED TO REFLECT
THE RESULTS OF OPERATIONS OR THE FINANCIAL POSITION OF THE COMPANY WHICH
WOULD HAVE RESULTED HAD THE TRANSACTIONS BEEN EFFECTED ON THE DATES INDICATED
ABOVE. FURTHER, THE PRO FORMA FINANCIAL INFORMATION IS NOT NECESSARILY
INDICATIVE OF THE RESULTS OF OPERATIONS OR THE FINANCIAL POSITION THAT MAY BE
OBTAINED IN THE FUTURE.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) These pro forma financial statements for the year ended December
31, 1998, are prepared on the basis of accounting principles
generally accepted in Canada. Pro forma consolidated balances
after adjustments agree, in all material respects, to accounting
principles generally accepted in the United States.
(b) The balance sheet of Stockscape has been translated into United
States dollars using the rate of exchange prevailing at December
31, 1998 and the statement of operations of Stockscape has been
translated into United States dollars using the average rate of
exchange for the period.
(c) As this proposed transaction will result in the former
shareholders of Stockscape owning greater than 50% of
Cornucopia's common shares, accounting principles applicable to
reverse takeovers have been used in the compilation of this pro
forma consolidated balance sheet to record the acquisition by
Stockscape of Cornucopia using the purchase method, with
Cornucopia deemed to be the purchased entity.
3. SALE OF TOUCHSTONE RESOURCES CO.
The Company has entered into an agreement dated March 2, 1999 (the "Sale
Agreement"), subject to shareholder approval, pursuant to which the
Company will sell its wholly-owned subsidiary, Touchstone Resources
Company, ("Touchstone") to Great Basin Gold Ltd., ("Great Basin") its
joint venture partner in the Ivanhoe Property, in exchange for 2,750,000
common shares (the "Great Basin Shares") and 250,000 share purchase
warrants of Great Basin. The share purchase warrants will entitle the
Company to purchase additional shares of Great Basin at $2.00 per share
for one year.
(a) A pro forma adjustment to record the sale of Touchstone for
consideration of the Great Basin Shares is accounted for at
C$1.25 the market value attributed to the Great Basin Shares on
the date of the agreement with a 25% discount taken off the value
because of restrictions on resale and voting rights of the
Payment Shares.
4. SHARE CONSOLIDATION
At the Meeting shareholders will be asked to consider and, if thought fit,
to pass a special resolution approving:
(a) The consolidation of the Company's authorized and issued common
share capital from TWO HUNDRED MILLION (200,000,000) common
shares to TWENTY MILLION (20,000,000) common shares, (i.e.) one
(1) new common share for ten (10) pre-consolidation common shares
without par value.
(b) An increase in the Company's authorized common share capital to
its pre-consolidation level of Two Hundred Million (200,000,000)
common shares without par value.
No pro forma adjustments arise from the proposed share consolidation.
5. ACQUISITION OF STOCKSCAPE
<PAGE>
The common share consolidation and name change are fundamental to the
Company's reorganization and are conditions precedent to completion of
the acquisition by the Company of Stockscape Technologies Ltd.
("Stockscape"). Stockscape is an Internet investment research provider
and, after acquisition of Stockscape, the business of Stockscape will
become the Company's primary business.
(a) Under the terms of the Share Exchange Agreement between the
Company and the owners of Stockscape dated March 2, 1999, the
Company will acquire all of the issued and outstanding shares of
Stockscape by issuing 10,000,000 post-consolidation Common Shares
of the Company (the "Payment Shares").
(b) This business combination will be accounted for under the
purchase method with Cornucopia deemed to be the purchased
entity. In application of reverse takeover accounting the legal
subsidiary ie. Stockscape is the continuing company for purposes
of future comparative and for presentation of shareholders'
equity. This means that the deficit in the consolidated financial
statements immediately after the reverse takeover will be the
same as the accounts of Stockscape at December 31, 1998. The cost
of the purchase, and the value attributed to the 10,000,000
Payment Shares (note 6(b)), is determined to be the value of the
net assets acquired.
(c) Subsequent to the acquisition of all of the outstanding shares of
Stockscape, Cornucopia will change its name to Stockscape
Technologies Ltd.
(d) Further conditions precedent to the acquisition are commitments
for a financing of up to 4 million units of the Company to be
completed contemporaneously with the acquisition The 4,000,000
unit financing will be done on a post-consolidation basis at
C$0.50 per unit to raise maximum proceeds of C$2,000,000. Each
unit will consist of one common share and two share purchase
warrants. One share purchase warrant will be exercisable in the
first year to acquire one additional common share in the capital
of the Company at C$0.65. The second warrant will be exercisable
for a period of two years to acquire one additional common share
at C$0.95. The warrants will have forced conversion features.
(e) Stockscape agreed on March 26, 1999 to convert long term debt to
common shares of Stockscape and pro forma adjustment of
US$438,915 has been made.
(f) Share subscriptions recorded at US$130,438 December 31, 1998 have
been adjusted to reflect the subsequent issuance of common shares
on March 26, 1999.
6. SHARE CAPITAL
(a) Authorized share capital:
200,000,000 common shares without par value.
(b) Issued and outstanding
<TABLE>
<CAPTION>
NUMBER OF
SHARES AMOUNT
<S> <C> <C>
Balance, December 31, 1998, per Cornucopia
financial statements 41,594,834 $ 38,119,366
Consolidation of common shares on a 1 new for 10 old basis
(note 4a) (37,435,351) --
------------------- -------------------
4,159,483 38,119,366
Reduction in the book value of the continuing company's stated
share capital to that of Stockscape. -- (37,512,512)
------------------- -------------------
4,159,483 606,854
Issuance of common shares to the shareholders of Stockscape in
exchange for their shares of Stockscape
(note 5a) and (note5b) 10,000,000 1,977,127
Issuance of common shares in private placement, condition
precedent to Share Exchange Agreement (note 5d) 4,000,000 1,304,376
------------------- -------------------
Pro forma balance, December 31, 1998 18,159,483 $ 3,888,357
------------------- -------------------
</TABLE>
<PAGE>
APPENDIX "D"
STOCKSCAPE TECHNOLOGIES LTD.
Financial Statements
December 31, 1998
INDEX
AUDITORS' REPORT
Balance Sheet
Statement of Income and Deficit
Statement of Changes in Financial Position
Notes to the Financial Statements
AUDITORS' REPORT
To the Shareholder of
STOCKSCAPE TECHNOLOGIES LTD.
We have audited the balance sheets of Stockscape Technologies Ltd. as at
September 30, 1997, September 30, 1998 and December 31, 1998 and the
statements of income and deficit and changes in financial position for the
periods then ended from October 1, 1996 to December 31, 1998. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at September 30, 1997,
September 30, 1998 and December 31, 1998 and the results of its operations
and the changes in its financial position for the periods then ended in
accordance with generally accepted accounting principles. As required by the
Company Act of the Province of British Columbia, we report that, in our
opinion, these principles have been applied on a consistent basis over the
period of review.
(Signed)
---------------------
Vancouver, Canada ELLIS FOSTER
March 25, 1999 Chartered Accountants
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
<TABLE>
<CAPTION>
Balance Sheet
- ---------------------------------------------------------------------------------------------------------------------------
December 31 September 30 September 30
1998 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash and short term investments $ 58,732 $ 99,045 $ 778
Accounts receivable 74,742 29,005 19,940
Prepaid expenses and deposits 8,920 7,712 1,431
- ---------------------------------------------------------------------------------------------------------------------------
142,394 135,762 22,149
CAPITAL (note 3) 95,314 100,753 75,805
INTANGIBLE (note 3) 8,270 6,992 3,081
- ---------------------------------------------------------------------------------------------------------------------------
$ 245,978 $ 243,507 $ 101,035
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 100,506 $ 76,583 $ 10,259
Deposits from clients - 11,926 -
Unearned revenue 55,224 75,098 -
- ---------------------------------------------------------------------------------------------------------------------------
155,730 163,607 10,259
LONG TERM DEBT (note 4) 672,988 579,311 90,832
- ---------------------------------------------------------------------------------------------------------------------------
828,718 742,918 101,091
- ---------------------------------------------------------------------------------------------------------------------------
SHARE CAPITAL AND DEFICIT
SHARE SUBSCRIPTIONS (note 5) 200,000 200,000 200,000
SHARE CAPITAL (note 5) 57,500 57,500 57,500
DEFICIT (840,240) (756,911) (257,556)
- ---------------------------------------------------------------------------------------------------------------------------
(582,740) (499,411) (56)
- ---------------------------------------------------------------------------------------------------------------------------
COMMITMENTS (note 6)
$ 245,978 $ 243,507 $ 101,035
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Approved by the Director:
(signed)
- ---------------------------------
John J. Brown
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Statement of Income and Deficit
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Three Months
Ended Year Ended Year Ended
December 31 September 30 September 30
1998 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME $ 68,422 $ 170,157 $ 15,250
WEB SITE DEVELOPMENT AND MAINTENANCE 74,365 337,494 184,758
- ------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (5,943) (167,337) (169,508)
- ------------------------------------------------------------------------------------------------------------------------------
MARKETING AND ADMINISTRATION
Advertising and promotion 12,398 48,661 23,948
Allowance for doubtful accounts - 6,657 -
Bank charges 861 1,496 264
Commissions, salaries and other services 36,708 171,961 39,401
Communications, supplies and office 8,043 40,624 20,242
Insurance and professional services 403 18,140 3,361
Interest on long-term debt 18,973 44,479 832
- ------------------------------------------------------------------------------------------------------------------------------
77,386 332,018 88,048
- ------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) FOR THE PERIOD (83,329) (499,355) (257,556)
DEFICIT, beginning of period (756,911) (257,556) -
- ------------------------------------------------------------------------------------------------------------------------------
DEFICIT, end of period $ (840,240) $ (756,911) $ (257,556)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE (note 2) $ (0.09) $ (0.53) $ (0.27)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Statement of Changes in Financial Position
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months
Ended Year Ended Year Ended
December 31 September 30 September 30
1998 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH USED FOR OPERATING ACTIVITIES
Net (loss) for the period $ (83,329) $ (499,355) $ (257,556)
Item not affecting cash:
Amortization 8,416 35,895 17,539
- -----------------------------------------------------------------------------------------------------------------------------
(74,913) (463,460) (240,017)
Changes in non-cash working capital (54,822) 138,002 (11,112)
- -----------------------------------------------------------------------------------------------------------------------------
(129,735) (325,458) (251,129)
- -----------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) INVESTMENT
ACTIVITIES
Investment in trademarks (1,758) (5,150) (3,852)
Purchase of capital assets (2,497) (59,604) (92,573)
- -----------------------------------------------------------------------------------------------------------------------------
(4,255) (64,754) (96,425)
- -----------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Long-term debt 93,677 488,479 90,832
Share subscriptions - - 200,000
Share capital - - 57,500
- -----------------------------------------------------------------------------------------------------------------------------
93,677 488,479 348,332
- -----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (40,313) 98,267 778
CASH, beginning of period 99,045 778 -
- -----------------------------------------------------------------------------------------------------------------------------
CASH, end of period $ 58,732 $ 99,045 $ 778
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- ------------------------------------------------------------------------------
1. INCORPORATION
The Company (formerly 523833 B.C. Ltd.) is incorporated under the laws
of the Province of British Columbia and its principal activity is the
provision of services to establish and maintain clients on the world
wide web. The Company's website, Stockscape.com, has been established
as an entrance point on the internet for interested parties to access
various information about public companies and various reports written
by other parties on those companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Short Term Investments
Short-term investments are valued at the lower of cost or
market.
(b) Capital and Intangible Assets
(i) Capital assets are recorded at cost and amortized
over the estimated useful life of the asset on a
declining balance basis at the following annual
rates.
<TABLE>
<S> <C>
Computer Equipment 30%
Computer Software 100%
Equipment and furniture 20%
</TABLE>
In the year an asset is purchased, the amortization
rate is one-half of the annual rate.
(ii) Leasehold improvements are amortized on a
straight-line basis over the three year lease term.
(iii) Trademarks are recorded at cost and amortized on a
straight-line basis over five years.
(iv) Development and maintenance costs of the corporate
website are being expensed as incurred.
(c) Revenue Recognition
Revenue is usually recognized in the period services are
performed for the clients. Monthly maintenance fees received
in advance of services to be performed are recorded as
unearned revenue.
(d) Income Taxes
The provision for income taxes are based on the accounting
income. Deferred income taxes arise as a result of recognizing
expenses and revenues in different time periods for accounting
and tax purposes. Such timing differences arise principally
from amortization costs foregone.
(e) Financial Instruments
The Company's financial instruments include cash and short
term investments, accounts receivable, accounts payable, and
long term debt. The fair value of these financial instruments
approximate carrying values.
(f) Segmented Information
The Company operates in only one business segment - the
provision of services to establish companies on the internet.
There is only one geographic location of the Company which is
in Canada and substantially all of the assets of the Company
are used in the provision of internet services.
(g) Loss Per Share
Basic loss per share was calculated based on the weighted
average number of shares outstanding during the period. Fully
diluted loss per share was calculated based on the issuance of
shares for the share subscription proceeds. Pro-forma fully
diluted loss per share was calculated as if shares were issued
for the conversion of the long term debt at the beginning of
the December 31, 1998 period (notes 5 and 10).
<TABLE>
<CAPTION>
December 31, September 30, September 30,
1998 1998 1997
---------------------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C>
Basic $ (0.09) $(0.53) $(0.27)
Fully diluted (0.05) (0.29) (0.15)
Pro forma fully diluted (0.006) - -
</TABLE>
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- ------------------------------------------------------------------------------
3. CAPITAL AND INTANGIBLE ASSETS
<TABLE>
<CAPTION>
December 31, September 30, September 30,
CAPITAL ASSETS 1998 1998 1997
----------------------------------------------- ------------------- -------------------- --------------------
<S> <C> <C> <C>
Computer equipment $124,319 $122,517 $78,841
Computer software 13,861 13,166 8,960
Office equipment 8,883 8,883 4,772
Leasehold improvements 7,611 7,611 -
----------------------------------------------- ------------------- -------------------- --------------------
154,674 152,177 92,573
Less: accumulated amortization (59,360) (51,424) (16,768)
----------------------------------------------- ------------------- -------------------- --------------------
Net book value $ 95,314 $100,753 $75,805
----------------------------------------------- ------------------- -------------------- --------------------
----------------------------------------------- ------------------- -------------------- --------------------
INTANGIBLE ASSETS
Trademarks $10,760 $ 9,002 $3,852
Less: accumulated amortization (2,490) (2,010) (771)
----------------------------------------------- ------------------- -------------------- --------------------
Net book value $ 8,270 $ 6,992 $3,081
----------------------------------------------- ------------------- -------------------- --------------------
----------------------------------------------- ------------------- -------------------- --------------------
</TABLE>
4. LONG TERM DEBT
The Company has a long-term loan outstanding to its sole shareholder,
of $672,988 (September 30, 1998 - $579,311, September 30, 1997 -
$90,832) which is repayable on demand and bears interest at a rate of
12% per annum.
The shareholder has agreed to fund the Company's operations until a
change of control is completed. Additional advances will be made on the
same terms and conditions as the outstanding loans.
5. SHARE CAPITAL
(a) Authorized:
1,000,000 common shares without par value.
By resolution dated March 26, 1999 authorized capital has
been increased to 100,000,000 common shares without par
value.
(b) Issued:
<TABLE>
<CAPTION>
Number of Shares
Amount
------------------------------------------------------ ----------------------- ---------------------
<S> <C> <C>
Issued for cash 750,000 $ 7,500
Issued for cash 200,000 50,000
------------------------------------------------------ ----------------------- ---------------------
Balance, September 30, 1997 950,000 57,500
------------------------------------------------------ ----------------------- ---------------------
Balance, September 30, 1998 950,000 57,500
------------------------------------------------------ ----------------------- ---------------------
Balance, December 31, 1998 950,000 $57,000
------------------------------------------------------ ----------------------- ---------------------
------------------------------------------------------ ----------------------- ---------------------
</TABLE>
(c) During the period ended September 30, 1997, the Company
received Share Subscriptions for 800,000 common shares at a
subscription price of $0.25 per share. The funds received for
the share subscriptions were non-interest bearing. These
shares were issued on March 26, 1999.
(d) The Company agreed to convert $825,000 of the long term debt
(note 4) into common shares at $0.10 per share, such that an
additional 8,250,000 shares would be issued to the
shareholder. These shares were issued on March 26, 1999.
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- ------------------------------------------------------------------------------
6. COMMITMENTS
The Company has the following commitments relating to lease
obligations. The future minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year Payment
-------------------------------------- -------------------------------
<S> <C>
1999 $62,360
2000 44,520
2001 12,258
-------------------------------------- -------------------------------
$119,138
-------------------------------------- -------------------------------
-------------------------------------- -------------------------------
</TABLE>
7. RELATED PARTY TRANSACTIONS
(a) A Company controlled by the president of the
Company provides reception, accounting, administrative
and management services to the Company. Office space,
supplies, and employee benefits were also provided and
are included in the payments, as are out of pocket
travel expenses. During the period ended December 31,
1998, the Company paid $14,490 (September 30, 1998 -
$65,794, September 30, 1997 - $47,306) for these services.
Included in accounts payable is $17,934 payable to a
company controlled by the president of the Company
(September 30, 1998 - $13,185, September 30, 1997 -
$nil). These expenses are incurred in the normal
course of business and are at market rates.
(b) The shareholder has long term loans outstanding of
$672,988 (1998 - $579,311, 1997 - $90,832) to the Company
to sustain operations. Interest of $18,973 (September
30, 1998 - $44,479, September 30, 1997 - $832) was accrued
during the period (note 4).
(c) The shareholder is also a client of the Company and during
the current period paid $1,589 (September 30, 1998 -
$6,372, September 30, 1997 - $3,210) to the Company for
internet services.
8. INCOME TAXES
The Company has incurred losses for Canadian income tax purposes of
approximately $644,383 which can be carried forward to reduce taxable
income in future years.
2
<PAGE>
These losses will expire as follows:
<TABLE>
<CAPTION>
Year Amount
-------------------------------------- -------------------------------
<S> <C>
2003 $ 1,026
2004 238,159
2005 405,198
-------------------------------------- -------------------------------
$644,383
-------------------------------------- -------------------------------
-------------------------------------- -------------------------------
</TABLE>
The potential income tax benefits of these losses have not been
recognized in these financial statements.
9. YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in some systems which use
certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 Issue may be experienced before, on, or
after January 1, 2000, and, if not addressed, the impact on
operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability
to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the
Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
10. SUBSEQUENT EVENTS
(a) On March 26, 1999, the Company converted the shareholder loan
into common shares of the Company and the number of
authorized common shares of the Company was increased to
100,000,000 shares (notes 4 and 5).
(b) Effective date of March 1, 1999, the Shareholder agreed to
sell its shares to Cornucopia Resources Ltd., a publicly
traded company, by exchanging all of the outstanding shares
of the Company for 10 million common shares of Cornucopia,
subsequent to Cornucopia completing a share consolidation on
a ten for one basis, and changing its name to StockScape.com,
if available.
3
<PAGE>
APPENDIX "E"
AUDITORS' REPORT
TO THE SHAREHOLDERS
CORNUCOPIA RESOURCES LTD.
We have audited the consolidated balance sheets of Cornucopia Resources Ltd.
as at December 31, 1998 and 1997 and the consolidated statements of loss and
deficit and changes in financial position for each of the years in the three
year period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1998 and 1997 and the results of its operations and changes in its
financial position for each of the years in the three year period ended
December 31, 1998, in accordance with generally accepted accounting
principles in Canada. As required by the Company Act (British Columbia) we
report that, in our opinion, these principles have been applied on a
consistent basis.
Significant measurement differences between Canadian and United States
accounting principles are explained and quantified in note 7 to the financial
statements.
(SIGNED) "KPMG LLP"
Chartered Accountants
Vancouver, Canada
April 1, 1999
COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
consolidated financial statements are affected by conditions and events that
cast substantial doubt on the company's ability to continue as a going
concern, such as those described in note 1 to the consolidated financial
statements. Our report to the shareholders, dated April 1, 1999, is expressed
in accordance with Canadian reporting standards which do not permit a
reference to such events and conditions in the auditors' report when these
are adequately disclosed in the financial statements.
(SIGNED) "KPMG LLP"
Chartered Accountants
Vancouver, Canada
April 1, 1999
<PAGE>
CORNUCOPIA RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in United States Dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
<S> <C> <C>
ASSETS
NOTE
CURRENT ASSETS
Cash and cash equivalents 103,949 996,732
Accounts receivable 25,844 546,050
Prepaid expenses and deposits 21,180 40,880
Investment 4 234,305 --
---------------------------------------------------------------------------------------------
385,278 1,583,662
---------------------------------------------------------------------------------------------
Capital Assets 3 11,701 63,116
Mineral properties and deferred 4 1,874,895 16,710,818
exploration costs
---------------------------------------------------------------------------------------------
TOTAL ASSETS 2,271,874 18,357,596
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 101,277 2,367,508
Debt 5 -- 13,186,599
---------------------------------------------------------------------------------------------
101,277 15,554,107
---------------------------------------------------------------------------------------------
Capital Lease Obligations -- 42,436
Provision for Site Reclamation 4,10 -- 172,908
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 101,277 15,769,451
---------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL 6
Issued and outstanding common shares 38,119,366 37,829,307
1998 - 41,591,834 (1997 - 38,556,040)
Deficit (35,948,769) (35,241,162)
---------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,170,597 2,588,145
---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' 2,271,874 18,357,596
EQUITY
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Operations 1
Commitments and Contingencies 10
Subsequent events 12
Approved by the Board:
(SIGNED)
----------------------------------
Andrew F. B. Milligan, Director
(SIGNED)
----------------------------------
Sargent H. Berner, Director
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CORNUCOPIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(Stated in United States Dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
REVENUES
Product sales -- -- 115,096
Production costs -- (19,433) 193,365
-----------------------------------------------------------------------------------------------
Operating profit (loss) -- 19,433 (78,269)
Interest and other income 70,394 51,705 460,093
-----------------------------------------------------------------------------------------------
70,394 71,138 381,824
-----------------------------------------------------------------------------------------------
EXPENSES (OTHER INCOME)
General and administrative expenses 968,455 1,987,525 2,776,253
(Gain) loss on disposal and writedown of
investments (9,482) 476,341 (631,970)
and marketable securities
(Gain) on sale or write down of mineral (180,972) 16,000,000 988,396
properties
Equity loss -- 71,897 112,264
-----------------------------------------------------------------------------------------------
778,001 18,535,763 3,244,943
-----------------------------------------------------------------------------------------------
LOSS BEFORE NON-CONTROLLING INTEREST 707,607 18,464,625 2,863,119
Non-controlling interest -- -- 252,484
-----------------------------------------------------------------------------------------------
NET LOSS FOR THE YEAR 707,607 18,464,625 2,610,635
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Deficit, beginning of the year 35,241,162 16,776,537 14,165,902
Net loss for the year 707,607 18,464,625 2,610,635
-----------------------------------------------------------------------------------------------
DEFICIT, END OF THE YEAR 35,948,769 35,241,162 16,776,537
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
LOSS PER SHARE .02 0.49 0.09
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 39,291,535 37,514,204 30,287,082
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CORNUCOPIA RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(Stated in United States Dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATIONS
Net loss for the period (707,607) (18,464,625) (2,610,635)
Items not involving cash;
Amortization 134,683 103,536 101,692
Reclamation accrual -- 172,908 --
(Gain) loss on disposal and writedown of
investments (9,482) 476,341 (631,970)
and marketable securities
(Gain) on sale or write down of mineral (180,972) 16,000,000 988,396
properties
Equity loss -- 71,897 --
Non - controlling interest -- -- (252,484)
---------------------------------------------------------------------------------------------
(763,378) (1,639,943) (2,405,001)
Net change in non-cash working capital items;
Accounts receivable 420,479 (413,720) 14,044
Product inventory -- 3,084 18,617
Prepaid expenses and deposits 19,701 (2,384) 24,961
Loans and advances -- (85,500) --
Prepaid to mining venture net of liabilities -- -- (25,000)
Accounts payable and accrued liabilities (400,009) (1,806,913) 4,003,572
Due to mining joint venture -- (47,888) (92,530)
---------------------------------------------------------------------------------------------
(723,207) (3,993,264) 1,538,663
---------------------------------------------------------------------------------------------
INVESTING
Investments (250,000) 1,001,727 969,354
Proceeds on partial disposition of mineral -- -- 99,980
properties
Proceeds on disposal of investments 25,177 -- 631,970
Proceeds on sale of subsidiary, net of cash
of 212,450 -- --
subsidiary at date of sale
Note receivable -- 111,837 15,488
Capital assets -- (64,102) (83,384)
Mineral properties and deferred exploration (1,268,559) (13,818,341) (13,579,965)
costs
---------------------------------------------------------------------------------------------
(1,280,932) (12,768,879) (11,946,557)
---------------------------------------------------------------------------------------------
FINANCING
Debt, Mineral Ridge 853,737 13,186,599 --
Capital lease obligations (32,440) (53,394) (14,036)
Non - controlling interest -- -- (455,779)
Net proceeds from issue of common shares for 250,000 2,501,535 11,741,248
cash
Issue of common shares for services 40,059 -- --
Net proceeds (expenses) from issue of -- (1,746,178) 1,746,177
special warrants
---------------------------------------------------------------------------------------------
1,111,356 13,888,562 13,017,610
---------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (892,783) (2,873,581) 2,609,716
Cash and Equivalents, beginning of the year 996,732 3,870,313 1,260,596
---------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS, END OF THE YEAR 103,949 996,732 3,870,312
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
(includes funds in escrow)
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
1. OPERATIONS
These financial statements are prepared in accordance with accounting
principles applicable to a going concern. The recoverability of the amounts
shown for interests in mining properties and deferred costs is dependent upon
discovery and delineation of economically recoverable reserves, on the
outcome of legislative or regulatory developments relating to environmental
protection, and on future profitable operations or proceeds from the
disposition thereof. The viability of production on mineral properties or
resource related share investments held by the Company is highly dependent on
the price of gold.
The Company's principal mineral property, the Ivanhoe Property, is currently
being explored by Great Basin Gold Ltd. (Great Basin) under a Venture
Agreement . The Company faces dilution under the Venture Agreement unless it
participates in future exploration programs conducted by Great Basin. The
financial position of the Company would not allow participation in such
exploration programs without undertaking some form of financing. At December
31, 1998, the Company had working capital of $284,001 (1997 - deficit of
$13,970,445). The Company has very limited ability to access capital markets
because of market conditions generally in financing resource related business
activities as well as the depressed price of the Company's Common Shares.
The Company has announced a reorganization (note 12) which, if completed,
will result in the exchange of its interest in the Ivanhoe Property for an
equity interest in Ivanhoe and will release the Company from any past and
future cash calls for Ivanhoe reclamation. However, for such reorganization
to be successful, a major financing will need to be completed and shareholder
approval must be sought. There can be no assurances that the Company will
complete the proposed reorganization. If the proposed reorganization is not
successful, the Company will be required to significantly curtail their
operations and future exploration programs.
2. SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying consolidated financial statements for the fiscal year ended
December 31, 1998, are prepared on the basis of accounting principles
generally accepted in Canada. Significant differences to accounting
principles generally accepted in the United States of America are explained
in note 7.
The consolidated financial statements include the accounts of Cornucopia
Resources Ltd., (the "Company") which is incorporated under the Company Act
(British Columbia), its subsidiaries, including Cornucopia Resources, Inc. a
wholly-owned subsidiary incorporated in the State of Nevada, and its
subsidiaries which are wholly-owned, except, Carlin Resources Corp. ("Carlin
Resources") which was a partially-owned subsidiary.
The Company consolidated its investment in Carlin Resources up to September
20, 1996. At that date the Company's interest in Carlin Resources decreased
to 38% and the equity method applied until April 30, 1997, and due to further
disposition of Carlin Resources shares the application of the cost method
thereafter. During the year ended December 31, 1998, the Company divested all
of the remaining shares of Carlin Resources.
The Company's 25% interest in the Ivanhoe joint venture (note 4(a)) has been
accounted for by the proportionate consolidation method. For the 1996 year
end, product sales and production costs represent the Company's proportionate
share of the Ivanhoe joint venture operations. All significant intercompany
accounts and transactions have been eliminated upon consolidation.
The Company's operations are in the mining exploration and development
industry and are conducted primarily in the United States of America.
b) CASH & CASH EQUIVALENTS
For the purpose of these consolidated financial statements, the Company
considers all investments in commercial paper and other highly liquid
investments which are readily convertible to cash and with a maturity date
within three months of purchase, to be cash equivalents. The Company follows
a policy of diversifying its investments in different government and industry
sectors.
c) INVESTMENT
Investment is carried at the lowest cost or quoted market value.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(d) MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
Property acquisition costs, which include financing costs, are deferred until
the property to which they relate is placed into commercial production, sold
or abandoned. These costs will be charged to future operations on a
unit-of-production basis following commencement of commercial production
using estimated recoverable reserves of the principal property as the base,
or written down if the property is sold, abandoned or there is an impairment
in value.
Where the Company enters into agreements for the acquisitions of interest in
mining properties which provide for periodic payments, such amounts unpaid
are not recorded as a liability since they are payable entirely at the
Company's discretion. Such payments, when made are recorded as a cost of the
property to which they relate. If unpaid, such non-payment will result in the
write-off of the related investment in mining properties.
Exploration costs incurred during the search for new ore bodies are deferred
and will be charged to future operations on a unit-of-production basis
following commencement of production. If the property is abandoned or sold or
there is an impairment in value, the exploration costs will be charged to
operations.
(e) RECLAMATION
Post closure reclamation and site restoration costs are estimated based upon
regulatory and environmental requirements and are accrued over the life of
the mine. Expenditures relating to environmental, reclamation and restoration
programs are expensed as determinable [see note 10(b)].
(f) FOREIGN CURRENCIES
The Company's functional and reporting currency is the United States dollar.
Monetary assets and liabilities stated in Canadian dollars are translated at
the exchange rate in effect at the balance sheet date and non-monetary assets
and liabilities at the rate in effect on the dates of the related
transactions. Revenues and expenses are translated at rates approximating
exchange rates in effect at the time of the transactions. Gains or losses
arising on conversion of foreign currency transactions are included in income
in the period they occur.
(g) SHARE CAPITAL
Shares issued for other than cash consideration are valued at the quoted
price on the Toronto Stock Exchange on the date the agreement to issue the
shares was reached.
(h) LOSS PER SHARE
The loss per share is computed on the basis of the weighted average number of
shares outstanding during the year. Fully diluted loss per share is not
presented as the effect of outstanding convertible instruments is
anti-dilutive.
(i) COMPARATIVE FIGURES
Where necessary, prior year figures have been reclassified to conform with
the current period's presentation.
(j) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, such as the recoverability of Mineral properties
and deferred exploration costs and liabilities, including the determination
of reclamation obligations, and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(k) FINANCIAL INSTRUMENTS
In prior years, the Company used forward sales agreements for the purpose of
managing its anticipated gold sales. These financial instruments were
accounted for as hedges of anticipated transactions and are not recorded on
the balance sheet of the Company. Gains and losses from these contracts have
been recorded in income in the same period as production is delivered to meet
the commitments. As at December 31, 1998, the Company had no forward sales
agreements outstanding.
The carrying values of cash and cash equivalents, accounts receivable, and
accounts payable and accrued liabilities approximate fair values due to the
relatively short period to maturity of the instruments. The market value of
investment, based on quoted market price, is not materially different from
carrying value.
2
<PAGE>
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
-------------------------------------- ------------------------------------- ----------------------------------------
December 31, 1998 December 31, 1997
-------------------------------------- ------------------------------------- ----------------------------------------
Accumulated Net Book Accumulated Net Book
Cost Depreciation Value Cost Depreciation Value
CAPITAL ASSETS $ $ $ $ $ $
-------------------------------------- ----------- ------------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Buildings, leasehold improvements 12,088 9,937 2,151 12,088 5,810 6,278
Drilling, field equipment and - - - - - -
vehicles
Furniture, fixtures, and office 212,163 202,613 9,550 212,163 155,325 56,838
equipment
-------------------------------------- ----------- ------------- ----------- ------------ ------------- -------------
$224,251 $212,550 $11,701 $224,251 $161,135 $63,116
-------------------------------------- ----------- ------------- ----------- ------------ ------------- -------------
-------------------------------------- ----------- ------------- ----------- ------------ ------------- -------------
</TABLE>
4. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS
<TABLE>
<CAPTION>
------------------------------------------------- -------------- --------------- ------------- ----------------------
Acquisition Deferred December December 31,
Costs Expenses 31, 1998 1997
EXPLORATION PROPERTIES $ $ $ $
------------------------------------------------- -------------- --------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Ivanhoe Property (a) 1 1,874,891 1,874,892 1,874,892
Mineral Ridge Mine (b) -- -- -- 14,835,922
Other Properties 4 -- 4 4
------------------------------------------------- -------------- --------------- ------------- ----------------------
$5 $1,874,891 $1,874,896 $16,710,818
------------------------------------------------- -------------- --------------- ------------- ----------------------
------------------------------------------------- -------------- --------------- ------------- ----------------------
</TABLE>
(a) IVANHOE PROPERTY
At December 31, 1998, the Company's principal and only active mining asset is
its interest in the Ivanhoe Property (note 12) in Nevada's Carlin Trend. The
Company holds a 25% interest in the Ivanhoe Property in Nevada where mining
of the Hollister deposit ceased in May 1992, and reclamation activities
continued thereafter.
Newmont Exploration Limited ("Newmont") the former joint venture partner,
conducts all reclamation, which consisted primarily of rinsing the heaps,
monitoring the site, constructing extensive diversion ditches and re-shaping
waste stock piles. Newmont submitted a formal reclamation and closure plan to
the State of Nevada, Bureau of Land Management (the "BLM") in March 1997, and
began a more extensive program. The budget for the complete reclamation plan
through to December 2004, is estimated to be $5,900,000.
The Company, Newmont and Great Basin, ratified a purchase agreement on August
13, 1997, whereby their respective interests in the Ivanhoe Property were
transferred to a joint venture. Under the terms of the agreement, Newmont
transferred its 75% interest in the Ivanhoe Property to Great Basin in
consideration for a $1,000,000 contribution to a reclamation fund.
Immediately thereafter, the Company and Great Basin entered into a joint
venture agreement whereby Great Basin must spend $5.0 million in exploration
and related expenditures by August 12, 1999. As at December 31, 1998, Great
Basin has earned a 75% interest in the property by incurring expenditures
totaling $5 million.
Reclamation spending surpassed the $4,500,000 level in June 1998, after which
the parties are each required to contribute funds to the reclamation fund on
an equal basis until a total of $6,000,000 has been spent. Reclamation costs
in excess of $6,000,000 will be paid 75% by Newmont and 25% pro rata by the
Company and Great Basin. The terms of the joint venture agreement between the
Company and Great Basin allow for Great Basin to repay reclamation cash calls
on behalf of the Company.
(b) MINERAL RIDGE MINE
<TABLE>
<CAPTION>
- ------------------------------------------ ----------------- -----------------
December 31, December 31,
1998 1997
Mineral properties and deferred $ $
exploration costs
- ------------------------------------------ ----------------- -----------------
<S> <C> <C>
Deposits/Bonds -- 1,056,700
Capital Assets, net -- 484,751
Land/Options -- 1,428,616
Deferred Royalties -- 127,354
Deferred Exploration -- 4,298,803
Deferred Construction Costs -- 12,271,104
Net Smelter Revenue -- (7,612,719)
Deferred Financing Costs -- --
Other Capital Costs -- 2,781,313
- ------------------------------------------ ----------------- -----------------
-- $14,835,922
- ------------------------------------------ ----------------- -----------------
- ------------------------------------------ ----------------- -----------------
</TABLE>
3
<PAGE>
4. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS (cont'd)
The Company acquired its interest in the Mineral Ridge property in April
1993, pursuant to an agreement with Mary Mining Company, Inc., a Florida
corporation, and in August 1995, acquired an option from BenguetCorp. USA,
Inc. on other contiguous mining properties.
Construction of the mine and related facilities commenced in 1996, with the
first gold poured June 1997. Construction delays, depressed gold price and
problems associated with water supply and ore processing led the Company to
default on the covenants and repayment provisions of its Mine Debt Financing
Facility. Mining operations were suspended in November 1997, after which the
Company engaged in discussions with several parties to sell the Mineral Ridge
Mine.
On October 21, 1998, Vista Gold Corp. ("Vista Gold") of Denver, Colorado
purchased all of the shares of Cornucopia's wholly-owned subsidiary Mineral
Ridge Resources Inc. ("Mineral Ridge") which holds and operates the Mineral
Ridge Gold Mine in Esmeralda County, Nevada. As consideration, the Company
received 1,562,500 common shares of Vista valued at $250,000 and in
connection with the transaction, Vista subscribed to a private placement of
2,777,777 Common Shares of Cornucopia valued at $250,000. As at December 31,
1998, the Company wrote down its investment to market value, being $234,305.
The transaction, included an agreement between Vista Gold and Dresdner
Kleinwort Benson to restructure the Mine Debt Financing Facility, which at
the date of the transaction totaled $14.0 million including accrued interest.
Roberts & Schaefer Company, D. H. Blattner & Sons and Mary Mining Company
also agreed to settlements of outstanding amounts.
Annually, the Company reviews the carrying values of its portfolio of mining
properties and exploration properties. During 1997, it was determined that
certain Mineral Ridge mine assets had suffered a permanent impairment in
value and therefore were written down to their estimated net recoverable
amounts.
5. MINE DEBT FINANCING FACILITY
On January 17, 1997, the Company entered into a loan agreement with Dresdner
Kleinwort Benson for senior secured loan facilities to be used for the
construction, development, and mining of ore from the Mineral Ridge Mine.
Advances totaling $13,000,000 were made under the agreement.
The Mine Debt Financing Facility contemplated that the Company's 100% share
holdings in Touchstone Resources Company be pledged as security for the
Company's indebtedness. The facility also provided for guarantees by the
parent company, Cornucopia Resources Ltd.
Upon the sale of Mineral Ridge Resources Inc. to Vista Gold, a release was
obtained from the bank for the indebtedness and from the pledges and
guarantees made by Cornucopia Resources Ltd., Cornucopia Resources Inc. and
Touchstone Resources Company. Release was also obtained from the letter of
credit obligation in the amount of $1,089,242 which had been used to finance
construction of power lines and ancillary electrical distribution equipment
at the Mineral Ridge Mine.
As part of the Vista Gold transaction, approval was sought and granted to
reprice the warrants held by Dresdner Kleinwort Benson to purchase 1,750,000
Common Shares, to C$0.20 at any time until December 31, 2001.
6. SHARE CAPITAL
(A) SHARES AUTHORIZED, ISSUED AND OUTSTANDING
Authorized:
100,000,000 preferred shares without par value, with rights to be determined
upon issue.
200,000,000 Common Shares authorized, without par value.
<TABLE>
<CAPTION>
- -------------------------------------- -------------- ----------------- ---------------------
Number of Average Price Value of Share
Shares per Share Capital
ISSUED AND OUTSTANDING: $ $
<S> <C> <C> <C>
- -------------------------------------- -------------- ----------------- ---------------------
Balance, January 1, 1996 26,290,340 23,586,524
- - issued for cash 8,767,700 1.339 11,741,248
- -------------------------------------- -------------- ----------------- ---------------------
Balance, December 31, 1996 35,058,040 35,327,772
- - issued for cash 3,498,000 0.715 2,501,535
- -------------------------------------- -------------- ----------------- ---------------------
Balance, December 31, 1997 38,556,040 37,829,307
- - issued for services 107,500 0.200 21,500
- - issued for services 150,517 0.123 18,559
- - issued for cash 2,777,777 0.090 250,000
- -------------------------------------- -------------- ----------------- ---------------------
BALANCE, DECEMBER 31, 1998 41,591,834 $38,119,366
- -------------------------------------- -------------- ----------------- ---------------------
- -------------------------------------- -------------- ----------------- ---------------------
</TABLE>
4
<PAGE>
6. SHARE CAPITAL (cont'd)
(b) STOCK INCENTIVE PLAN
The Company has a Stock Incentive Plan (the "Plan") which was adopted in June
1988. The Plan consists of a Share Purchase Plan, a Share Option Plan and a
Share Bonus Plan, the terms of which, as amended, are described below.
The aggregate maximum number of shares which the Company may at any time reserve
for issuance under the Plan was 4,750,000 as at December 31, 1998.
Under the Share Purchase Plan participants who are full-time employees and have
one year of continuous service, may contribute up to 10% of their annual basic
salary to the plan for the purpose of purchasing Common Shares of the Company.
The Company will contribute an amount equal to one-sixth of the participant's
contribution during the first year of participation and one-third in subsequent
years. At the end of each calendar quarter, participants are issued Common
Shares based on the contributions made to date, with delivery of the shares to
the participants six months after issue.
Under the Share Option Plan participants who are employees of the Company or
who, in the opinion of the Board of Directors, are in a position to contribute
to the Company's success or are worthy of special recognition, may be granted
options ("discretionary options") to purchase Common Shares of the Company at a
price per share not less than the fair market value of the shares on the day
before the grant.
No discretionary option is exercisable until it has vested according to a
vesting schedule specified by the Board of Directors at the time of grant of the
option. A discretionary option is exercisable for any period specified by the
Board of Directors up to a maximum of five years after the date of grant.
Options to persons who would be deemed "insiders" under the United States
Securities Exchange Act of 1934, are allocated under a formula set out in the
Plan.
Under the Share Bonus Plan, the Board of Directors may issue Common Shares to
full-time employees in respect of meritorious service. The maximum number of
shares that may be issued under the Plan in any calendar year may not exceed
107,676 being 0.5% of the total number of Common Shares of the Company that were
issued and outstanding on December 31, 1994.
(c) GRANT OF OPTIONS
As at December 31, 1998, there were an aggregate of 3,160,000 stock options
outstanding (December 31, 1997; 2,275,000) granted to directors, officers and
employees of the Company.
The following table summarizes the options granted under the Plan, and outside
of the Plan, to directors and employees of the Company for the purchase of
Common Shares at various exercise prices. Stock options are granted at exercise
prices based on the closing market price of the Company's shares on the day
before the grant.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
OPTIONS GRANTED OPTIONS OPTIONS NUMBER OF
OUTSTANDING OUTSTANDING OPTIONS
OUTSTANDING
EXERCISE PRICE INSIDE THE OUTSIDE THE
YEAR GRANTED (C $) EXPIRY DATE STOCK OPTION PLAN STOCK OPTION PLAN TOTAL
- ------------ -------------- ----------------- ----------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
1995 $ 0.68 January 4, 2000 175,000 175,000
1996 $ 0.68 January 4, 2001 873,000 873,000
1997 $ 0.68 February 2, 2002 12,000 12,000
0.68 February 27, 2002 300,000 300,000
0.68 May 20, 2002 35,000 35,000
0.68 June 19, 2002 250,000 250,000
1998 $0.26 January 4, 2003 50,000 50,000
0.15 November 17, 2003 100,000 100,000
0.15 September 9, 2003 1,365,000 1,365,000
- ------------ -------------- ----------------- ----------------- ----------------- -----------
1,795,000 1,365,000 3,160,000
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
On September 10, 1998, the Board of Directors resolved that an aggregate of
1,415,000 new stock options, of which 50,000 have been subsequently canceled, be
granted to directors and employees of the Company to reflect the current market
price of the Company's shares, at an exercise price of C$0.15 per share expiring
September 9, 2003, and that the new options would be granted outside of the
Plan. The Company received notice from the Toronto Stock Exchange that the
options were not approved until such time that the Company received a favorable
disinterested vote of the shareholders at the upcoming Annual and Extraordinary
General Meeting.
5
<PAGE>
6. SHARE CAPITAL (cont'd)
A summary of the Company's outstanding stock option transactions as at year
ended December 31, is as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
1998 1997 1996
------------------------------------------------- --------- ----------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year (Share Option
Plan) 2,275,000 2,303,000 950,000
Granted 150,000 992,000 1,675,000
Exercised -- -- (222,000)
Cancelled or expired (630,000) (1,020,000) (100,000)
--------- ----------- ---------
Outstanding at end of year (Share Option Plan) 1,795,000 2,275,000 2,303,000
Granted on September 10, 1998 (Outside the Plan) 1,415,000 -- --
Cancelled or expired (50,000) -- --
--------- ----------- ---------
Outstanding at end of year (Outside the Plan) 1,365,000 -- --
------------------------------------------------- --------- ----------- ---------
Total Stock Options Outstanding 3,160,000 2,275,000 2,303,000
----------------------------------------------------------------------------------------------------
</TABLE>
As at December 31, 1998, there were an aggregate of 3,160,000 stock options
outstanding, of which 2,325,000 were granted to the directors of the Company.
During the years ended December 31, 1998 and 1997, there were no options
exercised. During the year ended December 31, 1996, there were a total of
222,000 options exercised at prices ranging between C$0.87 and C$1.75 per share.
(d) SHARE PURCHASE WARRANTS
As at December 31, 1998, the following share purchase warrants were outstanding:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
---------------- -------------- -----------------
<S> <C> <C> <C>
C$
900,000 2.65 March 4, 1998 (expired)
3,025,000 2.75 May 15, 1998 (expired)
1,199,000 1.50 May 15, 1998 (expired)
1,100,000 1.25 March 26, 1998 (expired)
1,750,000 0.20 December 31, 2001
------------------------------------------------------------------------------------------
</TABLE>
(e) SHAREHOLDER PROTECTION PLAN
On August 18, 1992, the Company adopted a Shareholder Protection Rights Plan
Agreement and amended on July 16, 1996, (the "SPRPA") which will remain in
effect for ten years. Under the SPRPA, one right is issued in respect of each
Common Share outstanding and each Common Share issued thereafter. Each right
entitles the holder to purchase one Common Share at a 50% discount to the
market. After a person acquires 10% or more of the voting shares of the Company
or announces an intention to do so, the rights become exercisable. The rights
are not triggered by a bid which is made to all shareholders in accordance with
relevant securities legislation.
7. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
THE UNITED STATES
(a) For purposes of United States generally accepted accounting principles, the
Company would have adopted Financial Accounting Standards Board Statement
("FASB") No. 109, "Accounting for Income Taxes". Statement 109 requires
companies to account for income taxes by an asset and liability method. As
indicated in note 8, the Company has significant unrecognized loss carry
forwards for income tax purposes. As it is not more likely than not as to
the utilization of the loss carry forwards, the benefit attributable
thereto would be fully offset by the valuation allowance. Accordingly, the
adoption of Statement No. 109 does not result in a material difference for
accounting purposes.
(b) Under United States accounting principles the value attributable to the
Common Shares issued for services and non-cash transactions would be
excluded from operating, financing, and investing activities in the
consolidated statement of changes in financial position and reported
separately. The value attributed to the shares received on the sale of the
Company's subsidiary would also be excluded.
(c) Under United States accounting principles the $16,000,000 writedown of
assets relating to the Mineral Ridge Mine in 1997 would have been
calculated using discounted cash flow methods. Under such calculation
methods using a discount rate of 4% per annum an additional provision of
$900,000 would have been recorded. Due to the sale of the Mineral Ridge
Mine in 1998, the Company would have recorded an additional $900,000 gain
on sale of such assets.
(d) Under United States accounting principles, the Company's interest in the
Ivanhoe joint venture (note 4 (a)) would be accounted for by the equity
method. If applied, this difference would not impact the reported earnings
or shareholders' equity.
6
<PAGE>
7. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
THE UNITED STATES (cont'd)
(e) For United States accounting purposes the Company adopted FASB
Statement of Financial Accounting Standard ("SFAS") No.121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". Under SFAS No. 121, and under practices proscribed by
the SEC mineral property exploration expenses relating to mineral
properties for which commercial feasibility has not yet been established
may be expensed. For U.S. GAAP purposes, the Company has chosen to
expense these costs and accordingly the Ivanhoe Property is written down
to a nominal amount as at December 31, 1996. Under Canadian GAAP, these
costs are deferred and amortized over the estimated life of the property
following the commencement of commercial production or written off if
the property is sold, allowed to laps, or abandoned.
(f) Under United States accounting principles, Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation",
requires that stock-based compensation be accounted for based on a fair
value methodology. As permitted by the statement, the Company has
elected to continue measuring compensation costs using the intrinsic
value based method of accounting. Under this method, compensation is the
excess, if any, of the quoted market value of the stock at the
measurement date of the grant over the amount an optionee must pay to
acquire the stock. As the exercise price of the options approximate
market value at date of grant, the Company has determined that there is
no material difference to United States accounting principles.
The effect of the difference between accounting principals generally accepted in
Canada and the United States on the statement of operations is summarized as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1998 1997 1996
----------------------------------- ---------- ------------- ------------
<S> <C> <C> <C>
Loss for the period under
Canadian GAAP $(707,607) $(18,464,625) $(2,610,635)
Adjustment for writedown of
Ivanhoe Property under SFAS No.121 (1,874,891)
Adjustment for writedown of
mineral property (note 7(c)) -- (900,000) --
Adjustment for sale of Mineral
Ridge Mine (note 7(c)) 900,000 -- --
----------------------------------- ---------- ------------- ------------
Net income (loss) for the period,
under U.S. GAAP $ 192,393 $(19,364,625) $(4,485,526)
----------------------------------- ---------- ------------- ------------
Net income (loss) per share,
under U.S. GAAP $0.00 $(0.52) ($0.15)
-------------------------------------------------------------------------------------------------------------
</TABLE>
The effect of the difference between accounting principals generally accepted
in Canada and the United States on specific balance sheet items are
summarized as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1997 1996
------------------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Mineral properties and deferred
exploration expenses under
Canadian GAAP $1,874,895 $16,710,818 $18,941,138
Adjustment for writedown of
Ivanhoe Property under SFAS No.121 (1,874,891) (1,874,891) (1,874,891)
Adjustment for additional writedown of
Mineral Ridge Mine as if discounted cash
flow method had been used. (900,000)
------------------------------------------- ---------- ------------ -----------
Mineral properties and deferred exploration
expenses, under U.S. GAAP $4 $13,935,927 $17,066,247
------------------------------------------- ---------- ------------ -----------
-------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1997 1996
------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Deficit under Canadian GAAP $35,948,769 $35,241,162 $16,776,537
Adjustment for writedown of
Ivanhoe Property under SFAS No.121 1,874,891 1,874,891 1,874,891
Adjustment for additional writedown of
Mineral Ridge Mine (900,000) 900,000
------------------------------------------- ----------- ------------ -----------
Deficit under U.S. GAAP $36,923,660 $38,016,053 $18,651,428
-------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
8. INCOME TAXES
The Company's operations are primarily in the United States. Tax benefits
related to losses of prior years are not recognized in the statements of
operations and deficit due to the uncertainty of their realization.
At December 31, 1998, the Company had net operating loss carry forwards for
United States income tax purposes of approximately $4,000,000 which, if not
utilized to reduce United States taxable income in future periods, expires
through 2011. Of this amount, approximately $945,000 can only be utilized
against future taxable income of a non-operating subsidiary and will begin to
expire in the year 2001.
At December 31, 1998, the Company had net operating losses for Canadian income
tax purposes carried forward of approximately C$10,900,000 which, if not
utilized to reduce Canadian taxable income in future periods, will expire during
the years 1999 to 2004.
9. RELATED PARTY TRANSACTIONS
Related party transactions not disclosed elsewhere are as follows:
(a) The Company paid $145,488 in 1998, (year ended: 1997 - $155,530; 1996 -
$158,474) to Glencoe Management Ltd. (Glencoe), a company controlled by an
officer and director, in return for consulting services.
(b) The Company paid $nil in 1998, (year ended: 1997 - nil; 1996 - $11,005) to
7557 Management Group Ltd., a company controlled by an officer and
director, in return for consulting services provided by two officers.
(c) The Company paid $14,192 in 1998, (year ended: 1997 - $23,041: 1996 - nil)
to Anacortes Management Inc., a company controlled by an officer, in return
for consulting services.
(d) The Company incurred legal fees of $60,570 in 1998, (year ended:
1997 - $155,758; 1996 - $74,217) to DuMoulin Black, a firm in which a
director of the Company is a partner.
(e) During the year ended December 31, 1998, the Company sold 1,227,806 shares
of Carlin Resources to an officer and director of the Company. The Company
also sold 1,333,333 shares of Carlin Resources to a director of the
Company. For the above transactions, the Company sold the shares at C$0.015
per share which approximated the market value at the date of sale.
(f) The Company paid $1,445 in 1998, (year ended: 1997 - $2,341: 1996 - $954)
to David Williamson Associates Limited, a company controlled by a director
in return for consulting services.
10. COMMITMENTS AND CONTINGENCIES
(a) LEASE COMMITMENTS
The Company leases certain office premises and equipment under operating lease
arrangements. Minimum rental expense under such arrangements amounted to
approximately $87,615, $111,000, and $106,000 for fiscal 1998, 1997 and 1996,
respectively. Future minimum lease commitments under such arrangements will be
approximately $13,350 and $764 for fiscal 1999 and 2000, and nil thereafter.
(b) PROVISION FOR SITE RESTORATION
The budget for the complete reclamation and closure plan for the Hollister Mine
on the Ivanhoe Property through to December 2004, is estimated by Newmont to be
$5,900,000 (note 4(a)). Of the $5,900,000, $465,000 of the reclamation liability
exists for the Company, which has not been recorded in the accounts of the
Company. However, the joint venture agreement with Great Basin provides for
Great Basin to make payments on Touchstone's behalf.
(c) AGREEMENTS
The services of Andrew F. B. Milligan, a director, President and Chief Executive
Officer of the Company, are provided to the Company pursuant to a
Consultant/Management Agreement with Glencoe dated December 1, 1991, and amended
on December 19, 1992, June 29, 1994, June 1, 1995 and May 20, 1998. Mr. Milligan
is the principal shareholder of Glencoe. The agreement includes provisions by
which Mr. Milligan is entitled to receive an amount equal to three years'
management fees, and to participate in all employee insurance and benefit plans
in place for a period of up to three years if the Company should terminate the
agreement or the employment of Mr. Milligan without cause. In order to
facilitate the reorganization contemplated herein, Mr. Milligan has agreed that
in the event the reorganization described in note 12 receives all required
approvals, effective June 1, 1999, Glencoe will accept a 44.4% reduction in
salary and the substitution of a 3 year fixed term employment contract in lieu
of the three year severance provisions of the current Consultant/Management
Agreement. As consideration, for relinquishing these benefits, Glencoe will be
granted 400,000 warrants to purchase 400,000 Common Shares of the Company on a
post-consolidation basis at a price of C$0.50, in addition to any other options
to which Mr. Milligan may be entitled in his continuing capacity as a director
and officer of the Company.
8
<PAGE>
10. COMMITMENTS AND CONTINGENCIES (cont'd)
(d) LEGAL
The Company is from time to time involved in various legal proceedings of a
character normally incidental to its business. The Company does not believe
adverse decisions in any pending or threatened proceedings, or any amounts which
it may be required to pay by reason thereof, will have a material adverse effect
on the financial condition, cash flows and results of operations of the Company.
(e) YEAR 2000
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effect of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 issue affecting the
Company, including those related to the efforts of customers, suppliers or other
third parties, will be fully resolved.
11. SEGMENTED INFORMATION
During the year, the Company adopted the new recommendation of the Canadian
Institute of Chartered Accountants with respect to segmented disclosure. The
Company believes it conducts its business in a single operating segment being
the exploration and development of mineral properties. For each of the years
presented, all mineral properties were located in the United States and product
sales were earned from sources in the United States.
12. SUBSEQUENT EVENTS
Subsequent to year end, the Company announced that it had entered into
arrangements with arm's length parties which will result in a substantial
reorganization of the Company and its business. The reorganization, which is
subject to requisite regulatory and shareholder approvals, will involve: the
sale of the Company's primary asset, its joint venture interest in the Ivanhoe
Property in the State of Nevada, a consolidation of its authorized and issued
Common Share capital, the acquisition of a new business, and a change of name
and restructuring of the Board of Directors of the Company.
The costs associated with the Company's 25% interest in the Ivanhoe Joint
Venture have been carried by Great Basin. In the absence of funds to maintain
this position in the future, however, the Company's interest would have been
subject to progressive dilution. The likelihood of the Company funding its share
of the substantial costs associated with the anticipated drilling program at
Ivanhoe was assessed to be remote. The Company has therefore made the decision
to exchange its direct interest in the Ivanhoe Property for a significant equity
interest in Great Basin.
As a first step in the reorganization, the Company entered into an agreement
with Great Basin, its joint venture partner, pursuant to which the Company's
interest in the Ivanhoe Property will be sold in exchange for 2,750,000 common
shares at a deemed price of C$1.25 per share and 250,000 warrants of Great
Basin, exercisable to purchase an additional 250,000 shares at C$2.00 per share
for one year. Resale of the shares issued in consideration for the Company's
interest will be restricted, by agreement, for a period of twelve months. The
Company has agreed to a voting trust in favour of Great Basin management for a
period of two years and will be given representation on the board of directors
of Great Basin. As well, the Company will have the right to participate in
future financings of Great Basin in order to maintain its equity interest. In
addition to the regulatory and shareholder approvals, completion of the purchase
and sale is subject to satisfactory due diligence review.
The Company has also announced it has reached an agreement in principle for the
acquisition of a privately-held Internet investment research provider,
Stockscape Technologies Ltd. The acquisition will be accomplished by the
issuance of 10,000,000 post-consolidation shares of the Company at a deemed
price of C$.50 per share for aggregate consideration of C$5,000,000 and is
conditional upon the completion of due diligence and the execution and delivery
of definitive documentation. These shares will be subject to trading
restrictions under United States Securities legislation for a minimum of two
years.
Further conditions precedent to the acquisition are a consolidation of the
Company's Common Share capital on the basis of ten old for one new, a change of
name of the Company, restructuring of the Board of Directors and commitments for
a financing of up to 4,000,000 units of the Company to be completed
contemporaneously with the acquisition.
The 4,000,000 unit financing will be done on a post-consolidation basis at
C$0.50 per unit to raise maximum proceeds of C$2,000,000. Each unit will consist
of one Common Share and two share purchase warrants. One share purchase warrant
will be exercisable in the first year to acquire one additional Common Share in
the capital of the Company at C$0.65. The second warrant will be exercisable for
a period of two years to acquire one additional Common Share at C$0.95. The
warrants will have forced conversion features.
9
<PAGE>
APPENDIX "F"
CORNUCOPIA RESOURCES LTD.
STOCK INCENTIVE PLAN
PART 1 - INTRODUCTION:
1.01 PURPOSE: The purpose of the Stock Incentive Plan (the "Plan") is to
establish a plan to advance the interests of Cornucopia Resources Ltd. (the
"Company") by encouraging equity participation in the Company by directors and
certain full-time and part-time employees of the Company or subsidiaries of the
Company through acquisition of common shares without par value in the Company.
The Plan is to consist of a share purchase plan (the "Share Purchase Plan"), a
share option plan (the "Share Option Plan"), and a share bonus plan (the "Share
Bonus Plan").
1.02 MEANING OF SHARES AND MAXIMUM NUMBER OF SHARES: As used in the Plan,
"Shares" means common shares without par value of the Company as constituted on
the day following the implementation by the Company of the share consolidation
proposed for approval by the shareholders of the Company at the Annual and
Extraordinary General Meeting of the shareholders to be held on or about May 19,
1999, subject to Sections 2.09 and 3.11. Subject to Section 4.02, the number of
Shares available or made available for the Share Purchase Plan, Share Option
Plan and Share Bonus Plan, individually and collectively, will be determined
from time to time by the Board of Directors, but the aggregate maximum number of
Shares which the Company may at any time reserve for issuance under the Plan to
any individual shall not exceed 5% of the issued and outstanding Shares of the
Company at such time.
PART 2 - SHARE PURCHASE PLAN:
2.01 PARTICIPANTS: Participants in the Share Purchase Plan will be full-time or
seasonal full-time employees of the Company or any of its subsidiaries
(including employees who are officers thereof, whether or not directors) who
have been continuously employed by the Company or any of its subsidiaries for at
least 12 consecutive months and who have been designated by the Company as
participants in the Share Purchase Plan. The Board of Directors shall have the
right in its absolute discretion to waive such 12 month period or refuse any
employee or group of employees the right of participation or continued
participation in the Share Purchase Plan.
2.02 DIRECTORS' AUTHORITY TO ESTABLISH AND PARTICIPANTS' RIGHT TO ELECT TO
PARTICIPATE IN THE SHARE PURCHASE PLAN AND PARTICIPANT'S CONTRIBUTION: The Board
of Directors of the Company shall have the authority to implement a Share
Purchase Plan for the benefit of designated Participants. Any such Participant
may elect to contribute money (the "Participant's Contribution") to the Share
Purchase Plan for any 12 month period commencing on any of January l, April l,
July 1 or October 1 in any calendar year (any of which dates is hereinafter
called the "Commencement Date") if the Participant, at least two weeks prior to
the Commencement Date, delivers to the Company a written direction in form and
substance satisfactory to the Company:
(a) Authorizing the Company to deduct, or authorizing any
subsidiary of the Company to deduct and remit to the
Company, from the Participant's salary in 12 equal
installments the Participant's Contribution
commencing on the Commencement Date; and
(b) directing the Company to register a municipal address
specified by the Participant as the Participant's
address on the shareholders' register for any Shares
issued to the Participant in accordance with the
Share Purchase Plan.
The Participant's Contribution shall not exceed 10 percent of
the Participant's basic annual salary from the Company and/or its subsidiaries
before deductions, exclusive of any overtime pay, bonuses or allowances of any
kind whatsoever (the "Basic Annual Salary") as at the Commencement Date. No
adjustment shall be made to the Participant's Contribution until the next 12
month period in which the Participant elects to participate and then only if a
new written direction has been delivered to the Company for such 12 month
period. The Participant's Contribution shall be held by the Company in trust for
the purposes of the Share Purchase Plan.
2.03 COMPANY'S CONTRIBUTION: Immediately prior to the date any Shares are issued
to a Participant in accordance with Section 2.05, the Company will credit the
Participant with and thereafter hold in trust for the Participant an amount (the
"Company's Contribution") equal to:
(a) For the first 12 months after an employee has been
designated as a Participant in the Share Purchase
Plan - one-sixth of the Participant's Contribution
then held in trust by the Company; and
(b) thereafter - one-third of the Participant's
Contribution then held in trust by the Company.
2.04 AGGREGATE CONTRIBUTION: The Participant's Contribution plus the Company's
Contribution shall be the "Aggregate Contribution". The Company shall not be
required to segregate the Aggregate Contribution from its own corporate funds or
to pay interest thereon.
2.05 ISSUE OF SHARES: On March 31, June 30, September 30 and December 31 in each
calendar year the Company will issue to each Participant fully paid and
non-assessable Shares equal in value to the Aggregate Contribution held in trust
on such date by the Company converted into Shares at the Issue Price on such
dates. If such conversion would otherwise result in the issue to a Participant
of a fraction of a Share the Company will issue only such whole Shares as are
issuable. "Issue Price" means the simple average of the high and low trading
<PAGE>
- 2 -
prices of the Shares for the three months prior to the date of issue on the
stock exchange on which the Shares are then listed or other securities market
having the highest trading volume for the Shares during such three-month period.
The Company shall hold any unused balance of the Aggregate Contribution in trust
for a Participant until used in accordance with the Share Purchase Plan.
2.06 SAFEKEEPING AND DELIVERY OF SHARES: All Shares issued to a Participant in
accordance with the Share Purchase Plan will be held in safekeeping by the
Company and will be delivered, subject as provided in the Plan, to such
Participant upon the expiry of a period (the "Holding Period") of six months
following the date of issue of such Shares. If the Company receives on behalf of
a Participant in respect of any Shares so held:
(a) Cash dividends (less any sums required to be
withheld pursuant to applicable income tax
legislation);
(b) options or rights to purchase additional securities
of the Company or any other Company;
(c) any notice of meeting, proxy statement and proxy for
any meeting of holders of Shares of the Company; or
(d) other or additional Shares or other securities
(issued by the Company to holders of Shares by way
of dividend or otherwise);
then the Company shall forward to such Participant at his last known address
according to the records of the Company any of the money or items listed in
Subsections 2.06(a) and (c), and in Subsection 2.06(b) if allowed by applicable
securities laws; and shall hold in safekeeping any additional securities
referred to in Subsection 2.06(d) and shall deliver such securities to a
Participant with delivery of the Shares in respect of which such additional
securities were issued.
2.07 EARLY DELIVERY OF SHARES: Any Shares issued to a Participant but held in
safekeeping by the Company will be distributed to a Participant or his estate
prior to the expiry of the Holding Period only upon:
(a) The Participant's retirement in accordance with the
Company's retirement policy, as determined from time
to time by the Board of Directors;
(b) the Participant's total disability, as determined in
accordance with the Company's disability policy, as
determined from time to time by the Board of
Directors; or
(c) the Participant's death.
2.08 TERMINATION OF EMPLOYMENT: If a Participant shall cease to be employed by
the Company or any of its subsidiaries for any reason or shall receive notice
from the Company of the termination of his employment the Participant shall be
deemed to be no longer a Participant in the Share Purchase Plan; and
(a) Any portion of the Participant's Contribution then
held in trust for the Participant shall be paid to
the Participant or his estate, as the case may be;
(b) any portion of the Company's Contribution then held
in trust for the Participant shall be paid to the
Company; and
(c) except as provided in Section 2.07, any Shares then
held in safekeeping for a Participant shall, subject
to Section 260 of the Company Act (British Columbia),
be purchased for cancellation by the Company at the
Issue Price thereof or sold at market and an amount
equal to the lesser of:
(i) the Participant's Contribution; and
(ii) the portion of the proceeds received on any
sale of such Shares equal to:
(A) six-sevenths of the proceeds if the
Shares were issued within 12 months
after the Participant was designated
as a Participant in the Share
Purchase Plan; or
(B) three-quarters of the proceeds if
the Shares were issued after the
Participant's first year of
participation in the Share Purchase
Plan;
shall be paid to the Participant and the balance
shall be paid to the Company.
2.09 AMALGAMATION, CONSOLIDATION OR MERGER: If the Company amalgamates,
consolidates with or merges with or into another company each Participant for
whom Shares are held in safekeeping will receive on the date any Shares would
otherwise be delivered to the Participant in accordance with Section 2.06 or
2.07 the securities, property or cash to which the Participant was entitled on
such amalgamation or merger.
<PAGE>
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PART 3 - SHARE OPTION PLAN:
Options granted pursuant to the Share Option Plan are either options intended to
qualify under Section 422A of the United States Internal Revenue Code of 1986,
as amended ("Qualified Options") or options designated by the Company that do
not so qualify ("Non-Qualified Options"). Qualified Options and Non-Qualified
Options are hereafter collectively referred to as "options".
3.01 ELIGIBILITY: Participants in the Share Option Plan will be individuals who
are:
(a) Full-time, seasonal full-time or part-time employees
of the Company or any of its subsidiaries (including
employees who are officers thereof, whether or not
directors) who, by the nature of their jobs, are, in
the opinion of the Board of Directors, in a position
to contribute to the success of the Company or any of
its subsidiaries or who, by virtue of their length of
service to the Company or to any of its subsidiaries,
are, in the opinion of the Board of Directors, worthy
of special recognition; or
(b) Directors of the Company or any of its subsidiaries,
provided, however, that Qualified Options may only be granted to full-time
employees of the Company or any of its subsidiaries.
Options may also be granted in substitution for outstanding options of another
company in connection with a merger, consolidation, acquisition of property or
stock, or other reorganization between such other company and the Company or any
of its subsidiaries. In addition, options may be granted in exchange for
outstanding options whether such outstanding options be granted under the Share
Option Plan or any other stock option plan of the Company, or under any
incentive stock option agreement with the Company.
Subject to the terms and conditions of the Share Option Plan, the Board of
Directors may make grants of options in their discretion to eligible
participants under the Share Option Plan.
3.02 LAPSED OPTIONS: In the event that options granted under the Share Option
Plan are surrendered, terminate or expire without being exercised in whole or in
part, new options may be granted covering the Shares not purchased under such
lapsed options.
3.03 NUMBER OF OPTIONED SHARES PER PARTICIPANT: The determination regarding the
number or value of optioned Shares that may be granted to each Participant
pursuant to a grant of options will take into consideration the Participant's
present and potential contribution to the success of the Company, provided that:
(a) Such number or value of optioned Shares shall not
exceed that permitted by the rules and policies of
any stock exchanges on which the Shares are then
listed; and
(b) the aggregate fair market value (determined at the
date of grant) of Shares for which Qualified Options
granted hereunder first become exercisable or vest
during any calendar year shall not exceed U.S.
$100,000.
3.04 PRICE: The option price per Share for options will be fixed by the Board of
Directors at a price to be determined by the Board of Directors in its sole
discretion, provided that:
(a) The option price per Share shall not be less than
that required by the rules and policies of any stock
exchanges on which the Shares are then listed; and
(b) if an employee owns more than 10% of the total
combined voting power of all classes of shares of the
Company or any subsidiary, the option price per Share
for a Qualified Option shall be equal to or greater
than 110% of the value otherwise determined in this
Section 3.04. The attribution of stock ownership
rules in Section 425(d) of the United States Internal
Revenue Code of 1986, as amended (the "Code") are
incorporated herein by this reference and apply for
purposes of calculating the 10% voting power
limitation.
3.05 EXERCISE OF OPTIONS: The period during which an option may be exercised
(the "Option Period") shall be determined by the Board of Directors at the time
the option is granted and may be up to five years from the date the option is
granted, except as the same may be reduced pursuant to the provisions of
Sections 3.08 and 3.09.
In order to ensure that the Company will receive the benefits
contemplated in exchange for the options granted hereunder no option shall be
exercisable until it has vested. The vesting schedule for each option shall be
specified in an option agreement as provided for in Section 3.10 hereof,
provided, however, that the Board of Directors shall have the right with respect
to any one or more Participants in the Share Option Plan to accelerate the time
at which a discretionary option may be exercised.
Options shall be exercisable, either all or in part, at any
time after vesting. If less than all of the shares included in the vested
portion of any option are purchased the remainder may be purchased at any
subsequent time prior to the expiration of the Option Period.
Except as set forth in Sections 3.08 and 3.09, no option may
be exercised unless the Participant is at the time of such exercise a full-time,
seasonal full-time or part-time employee or a director of the Company or any of
its subsidiaries and shall have
<PAGE>
- 4 -
continuously so served since the grant of his option. Absence on leave, with
the approval of the Company or any of its subsidiaries, shall not be considered
an interruption of service for any purpose of the Share Option Plan.
The exercise of any option will be contingent upon receipt by
the Company of cash payment for the full purchase price of such Shares. No
Participant or his legal representatives, legatees or distributees will be, or
will be deemed to be, a holder of any Shares subject to an option under the
Share Option Plan, unless and until certificates for such Shares are issued to
him or them under the terms of the Share Option Plan.
3.06 SUBSEQUENT OPTIONS: After an option is fully exercised, any grant of a
subsequent option by the Company to the Participant, whether such subsequent
option be granted under the Share Option Plan or any other stock option plan of
the Company, shall be subject to the rules and policies of any stock exchanges
on which the Shares are then listed.
3.07 RENEGOTIATION OF OPTIONS: An option, to the extent that it has not been
exercised, may be renegotiated, subject to the rules and policies of any stock
exchanges on which the Shares are then listed.
3.08 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP: If a Participant shall cease to
be a full-time, seasonal full-time or part-time employee or a director of the
Company or any of its subsidiaries for any reason (other than death), he may
exercise his option to the extent that he was entitled to exercise it at the
date of his ceasing to be such an employee or a director for such period as is
determined by the Board of Directors, and in the absence of any such
determination, for a period of 30 days from the date on which the Participant
ceased to be an employee or director.
3.09 DEATH OF PARTICIPANT: In the event of the death of a Participant, or in the
event of the death of a Participant within 30 days after his ceasing to be a
full-time, seasonal full-time or part-time employee or a director of the Company
or any of its subsidiaries, the option theretofore granted to him shall be
exercisable only within a period of up to one year after such death and then
only:
(a) by the person or persons to whom the Participant's
rights under the option shall pass by the
Participant's will or by the laws of descent and
distribution; and
(b) to the extent that he was entitled to exercise the
option at the date of his death.
3.10 OPTION AGREEMENT: Upon the grant of an option to a Participant, the Company
and the Participant shall enter into an option agreement setting out the number
of optioned Shares granted to the Participant and incorporating the terms and
conditions of the Share Option Plan and any other requirements of regulatory
bodies having jurisdiction over the securities of the Company. Each option
agreement shall also state whether the option evidenced thereby is a Qualified
Option or a Non-Qualified Option.
3.11 STOCK DIVIDEND, REORGANIZATION OR LIQUIDATION: Until the Participant
becomes a record holder of the Shares covered by each outstanding option, the
number of such Shares and the option price per Share shall be proportionately
adjusted for any increase or decrease in the number of issued shares of the
Company resulting from a subdivision or consolidation of shares, payment of a
stock dividend, or any other increase or decrease in the number of shares
effected by the Company without receipt of any, or for a nominal, consideration.
If the Shares of the Company are changed into the same number
of Shares with a different par value, the shares resulting from any such change
shall be deemed to be Shares within the meaning of the Share Option Plan, and
each option shall apply to the same number of such new shares resulting from
such change as applied to old Shares immediately prior to such change.
If the Company is the surviving or resulting Company in any
"reorganization" as that term is defined in Section 368 of the Code, each
outstanding option shall apply to such securities of the Company after the
reorganization as a holder of the number of Shares subject to the option would
be entitled under the terms of the reorganization. If, pursuant to the terms of
any reorganization in which the Company is not the surviving or resulting
Company, options granted hereunder are assumed by the surviving or resulting
company, each option shall continue in full force and effect, and shall apply to
such securities of the surviving company as a holder of the number of Shares
subject to the option would be entitled under the terms of the reorganization.
Should any such surviving or resulting company assume options granted hereunder,
the type and terms of securities of the surviving or resulting company to which
options would then be deemed to apply shall be fixed solely by the terms of any
applicable reorganization agreement and holders of options shall have no rights
whatsoever concerning the type and terms of the substituted securities to which
options would then apply. In particular, holders of options shall have no rights
as to the setting of distribution, payment, expiration or maturity dates of any
preferred stock, certificates of contingent interest, bonds, debentures,
warrants, rights, options or other securities of any surviving or resulting
company, with respect to the date or dates of exercise of such options, and any
such distribution, payment, expiration or maturity dates shall be determined
solely by the terms of the reorganization agreement. In the event of any
dissolution or liquidation of the Company, or of any reorganization in which the
Company is not the surviving or the resulting company, and in connection with
which no assumption of or substitution of new options for the options granted
hereunder is made, each outstanding option shall terminate as of the effective
date of such dissolution, liquidation or reorganization. In lieu of assuming any
option, any resulting or surviving company may substitute new options
("Substitute Options") for options granted hereunder, as contemplated by Section
425 of the Code, and in such event each outstanding option shall terminate as of
the date of effectiveness of the corresponding Substitute Option. In the event
of any such reorganization, surviving original options or Substitute Options
shall have the same vesting dates as the corresponding options granted
hereunder.
The foregoing adjustments in the Shares shall be made by the
Board of Directors, or by any successor administrator of the Stock Incentive
Plan, or by the applicable terms of any assumption or substitution document, and
any adjustments so made shall be final, binding, and conclusive.
<PAGE>
- 5-
Except as provided in this Section 3.11, no Participant shall
have rights by reason of any subdivision or consolidation of shares of any class
including the Shares, or the payment of any stock dividend on Shares, or any
other increase or decrease in the number of Shares, or by reason of any
liquidation, dissolution, corporate combination or division; and any issue by
the Company of shares of any class including the Shares, or securities
convertible into shares of any class including the Shares, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of the Shares subject to any option.
The grant of an option shall not affect in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, consolidate,
dissolve or liquidate, or to sell or transfer all or any part of its business or
assets.
PART 4 - SHARE BONUS PLAN:
4.01 PARTICIPANTS AND THE PLAN: Where the Board of Directors in its discretion
decides that any full-time or seasonal full-time employee of the Company or any
of its subsidiaries has rendered meritorious services which contributed to the
success of the Company or any of its subsidiaries, the Board of Directors shall
have the right in its sole and absolute discretion to enter into any agreement
with any such full-time or seasonal full-time employee, on any terms and
conditions, subject to any provisos and restrictions, and for such cash
consideration, if any, as the Board of Directors may determine for the issuance
of any number of Shares (subject to Sections 1.02 and 4.02) to any such
employee. No Shares shall be issued pursuant to the Share Bonus Plan unless the
employee has entered into such an agreement with the Board of Directors.
4.02 NUMBER OF SHARES: The maximum number of Shares that may be issued under the
Share Bonus Plan in any calendar year shall be 500,000 shares.
PART 5 - GENERAL:
5.01 TRANSFERABILITY: All benefits, rights and options accruing to any
Participant in accordance with the terms and conditions of the Plan shall not be
transferable other than as specifically provided in Section 3.09 in the event of
the death of the Participant. During the lifetime of a Participant all benefits,
rights and options shall not be transferable and may only be exercised by the
Participant.
5.02 EMPLOYMENT: In the case of employees nothing contained in the Plan shall
confer upon any Participant any right with respect to employment or continuance
of employment with the Company or any of its subsidiaries, or interfere in any
way with the right of the Company or any of its subsidiaries to terminate the
Participant's employment at any time. Participation in any Plan by a Participant
is voluntary.
5.03 RECORD KEEPING: The Company shall maintain a register in which shall
be recorded:
(a) The name and address of each Participant;
(b) the Plan in which the Participant participates;
(c) any Participant's Contributions;
(d) the number of Shares held in safekeeping for a
Participant; and
(e) the number of Shares subject to an option granted to
a Participant and the number of Shares subject to the
option remaining outstanding.
5.04 SECURITIES REGULATION AND TAX WITHHOLDING:
(a) Where necessary to effect exemption from registration
of the Shares under securities laws applicable to
the securities of the Company, a Participant
shall be required, upon the acquisition of any
Shares pursuant to the Plan, to acquire the
Shares with investment intent (i.e. for
investment purposes) and not with a view to their
distribution, and to present to the Board of
Directors an undertaking to that effect in a
form acceptable to the Board of Directors. The
Board of Directors may take such other action or
require such other action or agreement by such
Participant as may from time to time be
necessary to comply with applicable securities
laws. This provision shall in no way obligate
the Company to undertake the registration of any
options or the Shares under any securities laws
applicable to the securities of the Company.
(b) The Board of Directors and the Company may take all
such measures as they deem appropriate to ensure that
the Company's obligations under the withholding
provisions under income tax laws applicable to the
Company and other provisions of applicable laws are
satisfied with respect to the issuance of Shares
pursuant to the Plan or the grant or exercise of
options under the Share Option Plan.
(c) Issuance, transfer or delivery of certificates for
Shares purchased pursuant to the Plan may be delayed,
at the discretion of the Board of Directors, until
the Board of Directors is satisfied that the
applicable requirements of securities and income tax
laws have been met.
<PAGE>
- 6 -
5.05 ADMINISTRATION OF THE PLAN: The Plan will be administered by the Board of
Directors. The Board of Directors is authorized to interpret the Plan and may
from time to time amend or rescind rules and regulations required for carrying
out the Plan. Any such interpretation or construction of any provision of the
Plan shall be final and conclusive. All administrative costs of the Plan shall
be paid by the Company. The senior officers of the Company are authorized and
directed to do all things and execute and deliver all instruments, undertakings
and applications and writings as they in their absolute discretion consider
necessary for the implementation of the rules and regulations established for
administering the Plan.
5.06 AMENDMENT OF THE PLAN: The Board of Directors reserves the right to amend,
modify or terminate any part of the Plan at any time if and when it is advisable
in the absolute discretion of the Board of Directors. All amendments to the Plan
will be subject to any necessary approval of any regulatory body having
jurisdiction over the securities of the Company.
5.07 NO REPRESENTATION OR WARRANTY: The Company makes no representation or
warranty as to the future market value of any Shares issued in accordance with
the provisions of the Plan.
5.08 EFFECTIVE DATE AND TERM: The Plan shall be effective as of the date the
Board of Directors of the Company approve the Plan, and options, benefits and
rights may be granted by the Board of Directors from time to time thereafter up
to and including a date which is ten years from the effective date of the Plan.
5.09 NECESSARY APPROVALS: The obligation of the Company to issue and deliver any
Shares in accordance with the Plan is subject to any necessary approval of any
regulatory authority having jurisdiction over the securities of the Company. If
any Shares cannot be issued to any Participant for whatever reason, the
obligation of the Company to issue such Shares shall terminate and any
Participant's Contribution held in trust for a Participant and any option
exercise price paid to the Company will be returned to the Participant.
5.10 INTERPRETATION: The Plan shall be governed by and construed in accordance
with the laws of the Province of British Columbia.
<PAGE>
PROXY
ANNUAL AND EXTRAORDINARY GENERAL MEETING OF MEMBERS OF
CORNUCOPIA RESOURCES LTD. (THE "COMPANY")
TO BE HELD AT The Pan Pacific Hotel
Level R, Governor General Suite B
#300 - 999 Canada Place
Vancouver, British Columbia
ON WEDNESDAY, JUNE 30, 1999, AT 10:00 AM
THE UNDERSIGNED MEMBER OF THE COMPANY HEREBY APPOINTS, ANDREW F.B. MILLIGAN,
President and a Director of the Company, or failing this person, SARGENT H.
BERNER, a Director of the Company, or in the place of the foregoing,
______________________________ as proxyholder for and on behalf of the Member
with the power of substitution to attend, act and vote for and on behalf of the
Member in respect of all matters that may properly come before the Meeting of
the Members of the Company and at every adjournment thereof, to the same extent
and with the same powers as if the undersigned Member were present at the said
Meeting, or any adjournment thereof.
RESOLUTIONS (For full detail of each item, please see the enclosed Notice of
Meeting and Proxy Statement (Information Circular))
<TABLE>
<CAPTION>
For Against
<S> <C> <C>
1. To determine the number of Directors at five.
------------ -----------
For Withhold
2. To elect Sargent H. Berner as Director
------------ -----------
To elect Andrew F.B. Milligan as Director
------------ -----------
To elect David R. Williamson as Director
------------ -----------
To elect A. Murray Sinclair as Director
------------ -----------
To elect John J. Brown as Director
------------ -----------
For Against
3. To appoint KPMG as Auditors of the Company.
------------ ------------
4. To authorize the Directors to fix the auditors'
remuneration.
------------ ------------
5. To consider and if thought fit to pass a special
resolution approving the disposition of substantially
the whole of the undertaking of the Company consequent
upon the sale of the Company's 25% interest in the
Ivanhoe Venture, through the sale of all of the issued
and outstanding shares of Touchstone Resources
Company, on terms and conditions substantially as set
out in the Proxy Statement accompanying this Proxy.
------------- ------------
6. To consider and if thought fit to pass a special
resolution:
(a) consolidating all of the Company's common shares
without par value from 200,000,000 common shares into
20,000,000 common shares, every 10 common shares being
consolidated into 1 common share, as set out in the
Proxy Statement accompanying this Proxy; and
(b) increasing the Company's authorized common share
capital to its pre-consolidation level of 200,000,000
common shares without par value and altering the
Company's Memorandum accordingly, as set out in the
Proxy Statement accompanying this Proxy; and
(c) authorizing a change of the name of the Company
to "Stockscape Technologies Ltd." or such other name
as decided upon by the directors.
------------- ------------
7. To consider and if thought fit to pass an ordinary
resolution to approve the adoption of a stock option
plan, as set out in the Proxy Statement accompanying
this Proxy
------------- ------------
8. To transact such other business as may properly come
before the Meeting.
------------- ------------
</TABLE>
THE UNDERSIGNED MEMBER HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN TO ATTEND AND
VOTE AT SAID MEETING.
SIGN HERE:
---------------------------------------------------------
PLEASE PRINT NAME:
---------------------------------------------------------
DATE:
---------------------------------------------------------
NUMBER OF SHARES
REPRESENTED BY PROXY:
---------------------------------------------------------
IF THE NUMBER OF SHARES REPRESENTED BY THIS PROXY FORM IS NOT INDICATED BY THE
MEMBER, THEN IT SHALL BE DEEMED TO REPRESENT THAT NUMBER INDICATED ON THE
AFFIXED LABEL.
THIS PROXY FORM IS NOT VALID UNLESS IT IS SIGNED AND DATED.
SEE IMPORTANT INFORMATION AND INSTRUCTIONS ON REVERSE.
<PAGE>
INSTRUCTIONS FOR COMPLETION OF PROXY
1. THIS PROXY IS SOLICITED BY THE MANAGEMENT OF THE COMPANY.
2. IF SOMEONE OTHER THAN THE MEMBER OF THE COMPANY SIGNS THIS PROXY FORM on
behalf of the named Member of the Company, documentation acceptable to the
Chairman of the Meeting must be deposited with this proxy form, authorizing
the signing person to do such. If the proxy form is not dated by the
Member, it shall be deemed to be dated the date of receipt by the Company
or CIBC Mellon Trust Company.
3. (i) IF A REGISTERED MEMBER WISHES TO ATTEND THE MEETING TO VOTE ON THE
RESOLUTIONS IN PERSON, REGISTER YOUR ATTENDANCE WITH THE COMPANY'S
SCRUTINEERS AT THE MEETING.
(ii) IF THE SECURITIES OF A MEMBER ARE HELD BY A FINANCIAL INSTITUTION AND
THE MEMBER WISHES TO ATTEND THE MEETING TO VOTE ON THE RESOLUTIONS IN
PERSON, cross off the management appointee name or names, insert the
Member's name in the blank space provided, do not indicate a voting
choice by any resolution, sign and date the proxy form and return the
proxy form to the financial institution or its agent. At the Meeting,
a vote will be taken on each of the resolutions as set out on this
proxy form and the Member's vote will be counted at that time.
4. IF A MEMBER CANNOT ATTEND THE MEETING BUT WISHES TO VOTE ON THE
RESOLUTIONS, the Member can APPOINT ANOTHER PERSON, who need not be a
Member of the Company, to vote according to the Member's instructions. To
appoint someone other than the person named, cross off the management
appointee name or names and insert your appointed proxyholder's name in the
space provided, sign and date the proxy form and return the proxy form.
Where no instruction on a resolution is specified by the Member, this proxy
form confers discretionary authority upon the Member's appointed
proxyholder.
5. IF THE MEMBER CANNOT ATTEND THE MEETING BUT WISHES TO VOTE ON THE
RESOLUTIONS and to APPOINT ONE OF THE MANAGEMENT APPOINTEES named, leave
the wording appointing a nominee as shown, sign and date the proxy form and
return the proxy form. Where no instruction is specified by a Member on a
resolution shown on the proxy form, a nominee of management acting as
proxyholder will vote the securities as if the Member had specified an
affirmative vote.
6. The securities represented by this proxy form will be voted or withheld
from voting in accordance with the instructions of the Member on any poll
of a resolution that may be called for and, if the Member specifies a
choice with respect to any matter to be acted upon, the securities will be
voted accordingly. With respect to any amendments or variations in any of
the resolutions shown on the proxy form, or matters which may properly come
before the Meeting, the securities will be voted, if so authorized, by the
proxyholder appointed, as the proxyholder in his/her sole discretion sees
fit.
7. If a registered Member has returned the proxy form, the Member may still
attend the Meeting and vote in person should the Member later decide to do
so. To attend, and vote at the Meeting, the Member must record his/her
attendance with the Company's scrutineers at the Meeting and revoke the
proxy form in writing.
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TO BE REPRESENTED AT THE MEETING, THIS PROXY FORM MUST BE RECEIVED AT THE
OFFICE OF "CIBC MELLON TRUST COMPANY" BY MAIL OR BY FAX NO LATER THAN FORTY
EIGHT (48) HOURS (EXCLUDING SATURDAYS, SUNDAYS AND HOLIDAYS) PRIOR TO THE
TIME OF THE MEETING, OR ADJOURNMENT THEREOF OR MAY BE ACCEPTED BY THE
CHAIRMAN OF THE MEETING PRIOR TO THE COMMENCEMENT OF THE MEETING. THE MAILING
ADDRESS OF CIBC MELLON TRUST COMPANY IS 1177 WEST HASTINGS STREET, MALL
LEVEL, VANCOUVER, B.C., V6E 2K3 AND ITS FAX NUMBER IS (604) 688-4301.
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