<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:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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.
<PAGE>
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 l0:00 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
-------------------------------------
ANDREW F. B. MILLIGAN
President and Chief Executive Officer
<PAGE>
- -------------------------------------------------------------------------------
REVISED PRELIMINARY PROXY STATEMENT
OF
CORNUCOPIA RESOURCES LTD.
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Currency Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
PERSONS MAKING THE SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . .2
VOTING OF PROXIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
REVOCABILITY OF PROXY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF. . . . . . . . . . . . . . . . . . . . .3
VOTES NECESSARY TO PASS RESOLUTIONS AT THE MEETING . . . . . . . . . . . . . . . . .5
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . .5
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 11
MANAGEMENT'S DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . 12
Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . 14
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Ivanhoe Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Other Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Dispositions and Investments in Other Properties. . . . . . . . . . . . . . . 21
DIRECTORS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Business Experience and Principal Occupation of Directors, Executive
Officers and Significant Employees. . . . . . . . . . . . . . . . . . . . . . 23
Board and Committee Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 24
Certain Relationships and Transactions. . . . . . . . . . . . . . . . . . . . 25
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Summary of Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 26
Summary Compensation Table Annual Compensation. . . . . . . . . . . . . . . . 26
Stock Incentive Transactions. . . . . . . . . . . . . . . . . . . . . . . . . 27
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Table of Option and SAR Repricings. . . . . . . . . . . . . . . . . . . . . . 28
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Management Agreements and Termination of Employment and Change-In-Control
Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Compensation Committee Interlocks and Insider Participation . . . . . . . . . 29
Board of Compensation Committee Report on Executive Compensation. . . . . . . 29
Stock Incentive Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Comparative Shareholder Return Performance Graph. . . . . . . . . . . . . . . 30
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS. . . . . . . . . . . . . . . . . . . 31
MANAGEMENT/EMPLOYMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 31
INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS . . . 32
APPOINTMENT OF AUDITOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON. . . . . . . . . . . . . . . . . . . 32
Disposition of Ivanhoe Joint Venture Interest . . . . . . . . . . . . . . . . 32
Material Terms of Sale Agreement . . . . . . . . . . . . . . . . . . . . 32
Reasons for Disposition of Ivanhoe Joint Venture . . . . . . . . . . . . 33
Sale of Undertaking . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Rights of Dissent . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidation and Name Change . . . . . . . . . . . . . . . . . . . . . . . . 34
Reason for Consolidation and Name Change. . . . . . . . . . . . . . . . 35
STOCKSCAPE TECHNOLOGIES LTD.. . . . . . . . . . . . . . . . . . . . . . 35
Adoption of New Stock Incentive Plan. . . . . . . . . . . . . . . . . . . . . 54
Share Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Share Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Share Bonus Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SHAREHOLDER PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
<PAGE>
-(ii)-
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE>
CORNUCOPIA RESOURCES LTD.
SUITE #540, THE MARINE BUILDING, 355 BURRARD STREET,
VANCOUVER, BRITISH COLUMBIA, CANADA V6C 2G8
INFORMATION CIRCULAR
(PROXY STATEMENT)
(As at May - , 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 of the Meeting was published in
The Province newspaper in Vancouver, British Columbia, on March 12, 1999, 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.
<PAGE>
-2-
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 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.
<PAGE>
-3-
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:
<PAGE>
-4-
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRIOR TO TRANSACTIONS AFTER TRANSACTIONS(2)
- -------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL NO. OF COMMON PERCENTAGE NO. OF COMMON PERCENTAGE OF
OWNER(1) SHARES OF 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)., nil 0% 10,000,000 55.06%
c/o 2900 - 595 Burrard Street,
Vancouver, British Columbia,
V7X 1J5
- -------------------------------------------------------------------------------------------------------
</TABLE>
(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 NO. OF COMMON PERCENTAGE NO. OF COMMON PERCENTAGE OF
NAMED EXECUTIVE SHARES OF CLASS SHARES CLASS
OFFICER BENEFICIALLY BENEFICIALLY
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) LESS THAN 1% 101,000 (7) LESS THAN 1%
- ----------------------------------------------------------------------------------------------------
David R. Williamson 100,000 (4) LESS THAN 1% 100,000 (7) LESS THAN 1%
- ----------------------------------------------------------------------------------------------------
Charles Russell 100,000 (4) LESS THAN 1% 25,000 LESS THAN 1%
- ----------------------------------------------------------------------------------------------------
Stephen Sopher 145,000 (4) LESS THAN 1% 29,500 LESS THAN 1%
- ----------------------------------------------------------------------------------------------------
A. Murray Sinclair Nil 0% 100,000 (7) LESS THAN 1%
- ----------------------------------------------------------------------------------------------------
John J. Brown Nil 0% 200,000 (8) 1.1%
- ----------------------------------------------------------------------------------------------------
Directors and Executive
Officers as a Group 1,037,200(10) 2.49% 1,360,220 (9) 7.49%
- ----------------------------------------------------------------------------------------------------
Reserved for Proposed Nil 0% 200,000 1.1%
CEO
- ----------------------------------------------------------------------------------------------------
</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.
<PAGE>
-5-
(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 (1) 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.
MARKET FOR COMMON EQUITY AND RELATED STAREHOLDER 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
OTSBB:
<PAGE>
-6-
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TSE OCTBB (U.S.)
----------------------------------------------
YEAR QUARTERLY HIGH LOW HIGH LOW
SUMMARY (CDN.$) (CDN.$) (U.S.$) (U.S.$)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 First Quarter 1.29 0.90 0.94 0.62
Second Quarter 1.10 0.70 0.81 0.50
Third Quarter 0.85 0.45 0.59 0.31
FourthQuarter 0.79 0.19 0.56 0.16
1998 First Quarter 0.49 0.19 0.37 0.12
Second Quarter 0.33 0.04 0.21 0.03
Third Quarter 0.15 0.05 0.09 0.03
FourthQuarter 0.13 0.035 0.09 0.02
1999 First Quarter (to 0.20 0.035 0.20 0.02
March 29, 1999)
- --------------------------------------------------------------------------------
</TABLE>
In accordance with British Columbia regulatory requirements, the following
table sets out the market price range of the Company's common shares as
reported on The Toronto Stock Exchange and as quoted on the OTCBB for the
periods indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
TSE OCTBB (U.S.)
------------------------------------------------------------------------------
YEAR MONTHLY HIGH LOW VOLUME HIGH LOW VOLUME
SUMMARY (CDN.$) (CDN.$) (#) (U.S.$) (U.S.$) (#)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 April 0.295 0.16 1,372,300 .219 .125 2,320,300
May 0.20 0.08 1,120,700 .156 .031 3,068,200
June 0.10 0.04 3,205,500 .094 .031 1,902,100
July 0.11 0.05 1,059,000 .094 .031 1,829,300
August 0.15 0.06 654,500 .094 .031 1,323,300
September 0.15 0.08 632,400 .094 .063 1,375,500
October 0.13 0.08 252,100 .094 .030 884,800
November 0.09 0.045 632,600 .055 .030 866,900
December 0.08 0.035 601,480 .062 .020 1,965,313
1999 January 0.05 0.04 313,800 .034 .025 674,500
February 0.065 0.035 244,500 .040 .020 1,251,500
March 0.020 0.06 1,592,909 .115 .030 1,962,600
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1999 WEEKLY HIGH LOW VOLUME HIGH LOW VOLUME
SUMMARY (CDN.$) (CDN.$) (#) (U.S.$) (U.S.$) (#)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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.
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)
<PAGE>
-7-
(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
<PAGE>
-8-
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.
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.
<PAGE>
-9-
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 PCIF. (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.
<PAGE>
-10-
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.
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 RED MOUNTAIN RESOURCES, INC.
(Nevada) (Colorado)
(Sold on March 2, 1999)
---------------------------- ----------------------------
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
<PAGE>
-11
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".
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.
<PAGE>
-12-
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
PRO FORMA CONSOLIDATED AS AT -----------------------------
DECEMBER 31, 1998
(UNAUDITED)(1) 1998 1997
-----------------------------
<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 18,159,483 39,291,535 37,514,204
common 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".
<PAGE>
-13-
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 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.
<PAGE>
-14-
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 withdrawl 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 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 $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
<PAGE>
-15-
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.
<PAGE>
-16-
"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
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
<PAGE>
-17-
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.
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
<PAGE>
-18-
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>
-19-
FIGURE 1
[Location Map of the Ivanhoe Property]
<PAGE>
-20-
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
<PAGE>
-21-
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 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").
<PAGE>
-22-
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 COMMON
NAME AND COUNTRY POSITION DATE OF SHARES PER- SHARES PER-
OF ORDINARY WITH AGE APPOINT- BENEFICIALLY CENTAGE BENEFICIALLY CENTAGE
RESIDENCE COMPANY MENT 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) LESS THAN 1% 101,000 (6) LESS THAN 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) LESS THAN 1%
London, England 1989
- ----------------------------------------------------------------------------------------------------------------------------
John J. Brown Proposed 66 N/A Nil 0% 200,000 (7) LESS THAN 1%
Vancouver, B.C., Director
Canada
- ----------------------------------------------------------------------------------------------------------------------------
A. Murray Sinclair Proposed 37 N/A Nil 0% 100,000 (6) LESS THAN 1%
Vancouver, B.C., Director
Canada
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-23-
(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
<PAGE>
-24-
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.
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
<PAGE>
-25-
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>
-26-
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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
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 1997 155,530 -- 500,000(4) --
Executive 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 1997 5,400 -- -- --
President and Chief 1996 132,062 39,168 240,000 --
Financial Officer
</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.
<PAGE>
-27-
(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.
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 REALIZABLE REALIZABLE
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION VALUE VALUE
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ----------------- ------------------ --------------------- -------------- --------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew F.B. 500,000 39% C$0.15 Sept. 9, C$20,721 C$45,788
Milligan 2003
</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 IN-THE-MONEY
NAME (#) REALIZED OPTIONS AT 12/31/98(1) OPTIONS AT 12/31/98 OPTIONS AT 04/30/99 (4)
- -------------- ------------ ----------- ---------------------------- -------------------------- -----------------------------
EXERCISABLE UNEXERCIS- EXERCIS- UNEXERCIS- EXERCIS- UNEXERCIS-
ABLE ABLE ABLE ABLE ABLE
--------------- ---------- ------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew -- -- 500,000(3) 500,000 Nil -- Nil Nil
F.B.
Milligan
James A. -- -- 400,000(2)(3) -- Nil -- Nil Nil
Currie
</TABLE>
<PAGE>
-28-
(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 $0.091 on the OTCBB on April 30, 1999.
TABLE OF OPTION AND SAR REPRICINGS
The following table sets forth stock options of Named Executive Officers which
were repriced under the Company's Stock Option Plan (the "Stock Option Plan") or
otherwise during the ten year period preceding the date of this Proxy Statement.
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE ORIGINAL
SECURITIES OF SECURITIES EXERCISE PRICE OPTION TERM
UNDER AT TIME OF AT TIME OF NEW REMAINING AT
OPTIONS/SARS REPRICING OR REPRICING OR EXERCISE DATE OF
DATE OF REPRICED OR AMENDMENT AMENDMENT PRICE REPRICING OR
NAME REPRICING AMENDED (#) (C$/SECURITY) (C$/SECURITY) (C$/SECURITY) AMENDMENT
- --------------- -------------- ------------------ ----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Andrew Oct 21-97 500,000 0.68 1.75/ 0.68 2 1/4 years/
F.B. 1.69(1) 3 1/4 years(1)
Milligan
James A. Oct 21-97 400,000 0.68 1.06/ 0.68 4 1/2 years(2)
Currie 0.80(2)
Bobbi-Jo Oct 21-97 150,000 0.68 1.08 0.68 4 1/4 years
Gordon
</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.
<PAGE>
-29-
MANAGEMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
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.
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
<PAGE>
-30-
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>
-31-
COMPARISON OF FIVE-YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN ("CSR") ON COMMON SHARES
OF THE CORPORATION AND THE TSE 300 STOCK INDEX
[GRAPH]
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").
<PAGE>
-32-
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.
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 2,750,000 common shares (the "Great Basin
Shares") at a price of $1.25 per share (total $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 $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 $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
<PAGE>
-33-
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>
-34-
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
<PAGE>
-35-
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.
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
<PAGE>
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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 for companies that do not already have a website, for
Sponsor A: 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 for companies with an existing website, Stockscape
Sponsor B: 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 for companies with a website who do not wish to have
Sponsor C: 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.
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.
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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
<PAGE>
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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
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.
<PAGE>
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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.
<PAGE>
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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 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
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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.
ORGANIZATIONAL STRUCTURE
John J. Brown
Director
President
Trevor Newton
Manager
Senior Senior Senior Senior Administration Marketing
Programmer Programmer Programmer Programmer Manager Manager
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
<PAGE>
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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
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Stockscape.com. targets only those client companies which it considers to be
characterized by strong management teams and sufficient working capital.
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.
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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 Principal Occupation During The Other Reporting Issuers
Residence Past Five Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
John J. Brown A Chartered Accountant United States Lime &
Vancouver, British since 1959, Mr. Brown is Minerals, Inc.
Columbia President of Pacific (Director)
Director, President Opportunity Company Ltd., International Mahogany
a private financial Corp. (President and
services and merchant Director)
banking company, which Golden Sitka Resources
also manages Stockscape. Ltd. (President and
Mr. Brown does not hold Director)
any securities of Rio Amarillo Mining Ltd.
Stockscape. (Director and CFO)
Key West Energy Ltd.
(Director)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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.
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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 Stockscape is in the early stage of developing its
STAGE AND HISTORY business. Stockscape has realized relatively
OF LOSSES. 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.
LIMITED OPERATING Stockscape has had a very limited operating history upon
HISTORY. 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
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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 to it the
NEEDS/LIQUIDITY funds necessary to meet its anticipated capital needs.
DEFICIENCIES/ However, Stockscape anticipates that the net proceeds from
POTENTIAL LACK OF a financing intended to be completed contemporaneously
FINANCING. 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 The Company expects operating results of the Stockscape
FLUCTUATIONS IN business to fluctuate significantly in the future as a
QUARTERLY RESULTS. 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,
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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 Competition for senior management, experienced sales and
PERSONNEL. 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 The market for community based e-commerce on the Internet
COMPETITION. 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 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
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effect on Stockscape's business, results of operations
and financial condition.
TECHNOLOGICAL The performance of Stockscape's server and networking
RISKS. 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 REGULA- Stockscape is not currently subject to direct regulation
TION AND LEGAL by any government agency, other than regulations
UNCERTAINTIES. 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
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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 Because materials may be downloaded by users of
INFORMATION Stockscape's Website and subsequently distributed to
RETRIEVED FROM THE others, there is a possibility that claims will be made
WEB. against Stockscape for defamation, negligence, copyright
or trademark infringement, personal injury or other
theories based on the nature, content, 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.
<PAGE>
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RELIANCE ON Stockscape regards certain of its technology and certain
INTELLECTUAL advertising programs, including E-mail Blaster, Investor
PROPERTY AND Harvest Program and NewsStand Express as proprietary and
PROPRIETARY relies on common law trademark, service mark, copyright
RIGHTS. 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 Stockscape's future success is dependent upon continued
CONTINUED GROWTH growth in the use of the Internet and the Web. There can
IN USE OF be no assurance that the number of Internet users will
INTERNET. 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. Upon completion of the acquisition of Stockscape by the
RULE INVESTMENTS Company, A.R. Rule Investments (B.C.) Ltd. will, in the
(B.C.) LTD. 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
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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 Stockscape is addressing the potential impact of the Year
COMPLIANCE. 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 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
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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.
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.
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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
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(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.
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 attached hereto as Appendix "E".
(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. [following disclosure relocated]
<PAGE>
- 55 -
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>
- 56 -
(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 200,000
Officer
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.
<PAGE>
- 57 -
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.
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
<PAGE>
- 58 -
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
----------------------------------------
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."
<PAGE>
SCHEDULE "A" TO APPENDIX "A"
OF THE PROXY STATEMENT OF CORNUCOPIA RESOURCES LTD. DATED -,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
<PAGE>
- 2 -
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.
<PAGE>
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
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.
<PAGE>
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
<PAGE>
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.
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:
"JOHN J. BROWN"
- ---------------------------------------
John J. Brown
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
<TABLE>
<CAPTION>
Statement of Income and Deficit
- -------------------------------------------------------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Statement of Changes in Financial Position
- -------------------------------------------------------------------------------------------------------------------------------
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.
Computer Equipment 30%
Computer Software 100%
Equipment and furniture 20%
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.
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(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.
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- --------------------------------------------------------------------------------
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.
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>
<PAGE>
STOCKSCAPE TECHNOLOGIES LTD.
Notes to Financial Statements
As at December 31, 1998 and September 30, 1998 and 1997
- --------------------------------------------------------------------------------
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.
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.
<PAGE>
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.
<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.
/s/ 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.
/s/ 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
ASSETS
Note
<S> <C> <C>
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
exploration costs 4 1,874,895 16,710,818
- ----------------------------------------------------------------------------------------------
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' EQUITY 2,271,874 18,357,596
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
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
REVENUES
<S> <C> <C> <C>
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 and marketable securities (9,482) 476,341 (631,970)
(Gain) on sale or write down of
mineral properties (180,972) 16,000,000 988,396
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. 3
<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 and marketable securities (9,482) 476,341 (631,970)
(Gain) on sale or write down of
mineral properties (180,972) 16,000,000 988,396
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 properties -- -- 99,980
Proceeds on disposal of investments 25,177 -- 631,970
Proceeds on sale of subsidiary, net of
cash of subsidiary at date of sale 212,450 -- --
Note receivable -- 111,837 15,488
Capital assets -- (64,102) (83,384)
Mineral properties and deferred
exploration costs (1,268,559) (13,818,341) (13,579,965)
- ----------------------------------------------------------------------------------------------
(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 cash 250,000 2,501,535 11,741,248
Issue of common shares for services 40,089 -- --
Net proceeds (expenses) from issue
of special warrants -- (1,746,178) 1,746,177
- ----------------------------------------------------------------------------------------------
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 103,949 996,732 3,870,312
YEAR
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
(includes funds in escrow)
See accompanying notes to consolidated financial statements. 4
</TABLE>
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
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.
5
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(d) RESOURCE ASSETS 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 resource assets
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.
6
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
(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.
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 equipment 212,163 202,613 9,550 212,163 155,325 56,838
- ------------------------------------------- ------------- -------------- ------------ ------------- ------------- --------------
$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 31, December 31,
Costs Expenses 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.
7
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
4. MINERAL PROPERTIES AND DEFERRED EXPLORATION COSTS (cont'd)
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>
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 resource 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.
8
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
5. MINE DEBT FINANCING FACILITY (cont'd)
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>
(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.
9
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
6. SHARE CAPITAL (cont'd)
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 OPTIONS OPTIONS NUMBER OF OPTIONS
GRANTED OUTSTANDING OUTSTANDING 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.
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 2,275,000 2,303,000 950,000
Option Plan)
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>
10
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
6. SHARE CAPITAL (cont'd)
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$1.75 per share.
(d) SHARE PURCHASE WARRANTS
As at December 31, 1998, the following share purchase warrants were outstanding:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NUMBER OF SHARES EXERCISE PRICE EXPIRY DATE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
C$
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.
(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.
11
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
(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.
7. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND
THE UNITED STATES (cont'd)
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,
1998 1997 1996
- ---------------------------------------- --------------------------- ----------------------------- ---------------------------
<S> <C> <C> <C>
Mineral properties and deferred $1,874,895 $16,710,818 $18,941,138
exploration expenses under Canadian GAAP
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,
1998 1997 1996
- ---------------------------------------- --------------------------- ----------------------------- ---------------------------
<S> <C> <C> <C>
Deficit under $35,948,769 $35,241,162 $16,776,537
Canadian GAAP
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>
8. INCOME TAXES
12
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
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
13
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
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.
(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.
14
<PAGE>
CORNUCOPIA RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Stated in United States Dollars)
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.
15
<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
<PAGE>
-2-
(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
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
<PAGE>
-3-
(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
<PAGE>
-4-
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.
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.
<PAGE>
-5-
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 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
<PAGE>
-6-
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
<PAGE>
-7-
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, liquiation 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.
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.
<PAGE>
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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.
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.
<PAGE>
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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 Information Circular (Proxy Statement))
<TABLE>
<S> <C> <C>
For Against
1. To determine the number of Directors at five.
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For Withhold
2. To elect Sargent H. Berner as Director
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To elect Andrew F.B. Milligan as Director
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To elect David R. Williamson as Director
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To elect A. Murray Sinclair as Director
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To elect John J. Brown as Director
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For Against
2. To appoint KPMG as Auditors of the Company.
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3. To authorize the Directors to fix the auditors' remuneration.
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4. To consider and if thought fit to approve 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.
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5. To consider and if thought fit to approve 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.
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6. 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
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7. To transact such other business as may properly come before the Meeting.
</TABLE>
<PAGE>
THE UNDERSIGNED MEMBER HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN TO ATTEND AND
VOTE AT SAID MEETING.
SIGN HERE:
-------------------------------------
PLEASE PRINT NAME:
-------------------------------------
DATE:
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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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