U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
|X| Annual report under Section 13 or 15 (d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1998
|_| Transition report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 for the transition period from _____________to _____________
Commission File Number 33-28562
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TOUCAN GOLD CORPORATION
(Name of Small Business Issuer in Its Charter)
Delaware 75-2661571
- - ------------------------------- -------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8201 Preston Road
Suite 600
Dallas, Texas 75225
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(Address of Principal Executive Offices) (Zip code)
(214)890-8065
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(Issuer's Telephone Number, Including Area Code.)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
NONE ---------------------
N/A
Securities registered under Section 12(g) of the Exchange Act: None
-----------------
(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for past 90 days.
Yes X No
----------- ----------
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |X|
State issuer's revenues for its most recent fiscal year. $ 0
The aggregate market value of the voting and non-voting stock held by
non-affiliates of the registrant as of March 29, 1999 was $440,548 based upon
the average bid and ask price of the common stock on such date of $.10 per share
on the OTC Electronic Bulletin Board of Nasdaq. For purposes of this
computation, all executive officers, directors and 10% stockholders were deemed
affiliates. Such a determination should not be construed as an admission that
such executive officers, directors or 10% stockholders are affiliates.
As of March 29, 1999, there were 8,027,933 shares of the common stock, $.01 par
value, of the registrant issued and outstanding.
Transitional Small Business Disclosure Format: Yes No X
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Toucan Gold Corporation
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Page Number
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PART I .........................................................................................................1
Items 1 and 2. Description of Business and Property..............................................................1
Item 3. Legal Proceedings........................................................................................9
Item 4. Submission of Matters to a Vote of Security-Holders......................................................9
PART II ........................................................................................................10
Item 5. Market for Common Equity and Related Stockholder Matters................................................10
Item 6. Management's Discussion and Analysis of Financial Condition or Plan of Operation........................11
Item 7. Financial Statements....................................................................................14
Report of Independent Certified Public Accountants..............................................................F-1
Consolidated Balance Sheet as of December 31, 1998..............................................................F-2
Consolidated Statements of Operations for the years ended December 31, 1998, 1997
and the period from November 3, 1995 to December 31, 1998.....................................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, 1996
and the period from November 3, 1995 to January 1, 1996.......................................................F-4
Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997
and the period from November 3, 1995 to December 31, 1998.....................................................F-5
Notes to Financial Statements...................................................................................F-6
PART III ........................................................................................................15
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act.......................................................................15
Item 10. Executive Compensation.................................................................................16
Item 11. Security Ownership of Certain Beneficial Owners and Management.........................................17
Item 12. Certain Relationships and Related Transactions.........................................................18
Item 13. Exhibits, List and Reports on Form 8-K.................................................................20
SIGNATURES.......................................................................................................22
INDEX TO EXHIBITS...........................................................................................INDEX-1
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PART I
Items 1 and 2. Description of Business and Property
General
Toucan Gold Corporation (the "Company" or "Toucan") was organized in
the State of Delaware on July 22, 1996. The Certificate of Incorporation of
Toucan authorizes a class of 30,000,000 shares of common stock, par value $.01
per share (the "Company Common Stock"), and 2,000,000 shares of preferred stock,
par value $.01 per share. The Company was formed for the purposes of
reincorporating Starlight Acquisitions, Inc., a Colorado corporation
("Starlight"), in the State of Delaware (the "Reincorporation"). Starlight was
incorporated on January 20, 1989. The Reincorporation was effected by merging
(the "Merger") Starlight into the Company, which, prior to the Reincorporation,
was a wholly owned subsidiary of Starlight, pursuant to an Agreement and Plan of
Merger (the "Merger Agreement"). Upon completion of the Merger, Starlight ceased
to exist, and Toucan continued to operate the business of Starlight under the
name Toucan Gold Corporation. The Reincorporation became effective on July 29,
1996. As a result of the Reincorporation, each then outstanding share of
Starlight common stock, no par value (the "Starlight Common Stock"), was
converted into one share of Company Common Stock. Existing warrants (the
"Starlight Warrants") to purchase an aggregate of 100,000 shares of Starlight
Common Stock at an exercise price of $4.00 per share were exchanged into
warrants (the "Toucan Warrants") to purchase an aggregate of 100,000 shares of
Company Common Stock at an exercise price of $4.00 per share.
The Share Exchange
Effective May 10, 1996, Toucan Mining Limited, an exploration stage
company incorporated on November 3, 1995 under the laws of the Isle of Man
(British Isles) ("Toucan Mining"), became a wholly owned subsidiary of Starlight
when Starlight acquired all of the outstanding capital stock of Toucan Mining in
exchange for 4,534,999 shares of Starlight Common Stock (the "Share Exchange)
pursuant to a Share Exchange Agreement (the "Share Exchange Agreement"). As a
result of the Share Exchange, each shareholder of Toucan Mining received seven
shares of Starlight Common Stock for each share of common stock of Toucan Mining
held by such shareholder. The shares of Starlight Common Stock received by the
Toucan Mining shareholders in the Share Exchange were issued in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, are restricted securities. The Starlight
Warrants issued in connection with Starlight's initial public offering expired
pursuant to their terms prior to the Share Exchange and the Starlight Warrants
were issued on May 10, 1996 to purchase an additional 100,000 shares of
Starlight Common Stock at an exercise price of $4.00 per share, which were
immediately exercisable and expire on the six month anniversary of the closing
of the first registration of securities by the Company. The new Starlight
Warrants were issued to former officers and directors of Starlight in
consideration of, among other things, their agreement to indemnify Toucan Mining
and Starlight with respect to certain representations in the Share Exchange
Agreement and the cancellation of their prior warrants to purchase Starlight
Common Stock. The Starlight Warrants provided for certain piggy-back
registration rights with respect to the shares of Starlight Common Stock
underlying the Starlight Warrants. Pursuant to the Reincorporation, the
Starlight Warrants were exchanged into the Toucan Warrants to purchase an
aggregate of 100,000 shares of Company Common Stock at an exercise price of
$4.00 per share. The holders of the Toucan Warrants have certain piggy-back
registration rights with respect to the shares of Company Common Stock
underlying the Toucan Warrants. The Toucan Warrants are immediately exercisable
and expire on the six month anniversary of the closing of the first registration
of securities by the Company.
Toucan Mining Limited
General. Toucan conducts its operations primarily through its wholly
owned subsidiary, Toucan Mining. The principal executive office of Toucan Mining
is located at Celtic House, Victoria Street, Douglas, Isle of Man IM99 1QZ. In
turn, Toucan Mining conducts its operations primarily through its wholly owned
subsidiary, Mineradora de Bauxita Ltda. ("MBL"), which is an authorized mining
company organized under the laws of Brazil. Of the 10,000 issued and outstanding
capital shares of MBL, all but one (1) are owned and held by Toucan Mining.
Pursuant to the corporate regulations of Brazil, a Brazilian corporation must
have at least one capital shareholder who is a Brazilian entity or individual.
The single capital share of MBL that is not held by Toucan Mining is held in
trust by a Brazilian citizen for the benefit of Toucan Mining. The registered
office of MBL is located in Cuiaba at Trav. Mestre Joao Monge Guimarae
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82 - Cuiaba - Mt - Brazil where, in April 1997, MBL set up an operations office
for geological and exploration staff. In November 1997, MBL set up a small
warehouse to process and store drilling samples on the outskirts of Cuiaba. The
assets of MBL are mineral claims in the Cuiaba Basin, Mato Grosso, Brazil. See
"Description of Exploration and Mining Concessions" below.
Management. The directors of Toucan Mining are Robert P. Jeffcock, Francis
Howard and Douglas Powley. Mr. Jeffcock serves as Managing Director of Toucan
Mining and/or President of the Company. See "Directors, Executive Officers,
Promoters, and Control Persons". The director of MBL is Igor Mousasticoshvily
("Mr. Mousasticoshvily"), a United States educated and trained geologist, who is
responsible for the overall negotiation and management of Toucan Mining and
MBL's mining claims. See "Certain Relationships and Related Transactions".
During the last five years, Mr. Mousasticoshvily has provided consulting
services to various Brazilian business interests, especially in the mining
industry. Mr. David Carmichael, a Canadian educated and trained geologist, is
responsible for onsite geology and day-to-day management of MBL. Since April,
1997, Mr. Carmichael has served as the General Manager of MBL. See "Certain
Relationships and Related Transactions." Prior to that time, Mr. Carmichael
served as geologist and plant manager for several companies in Brazil and Chile.
Neither Toucan Mining nor MBL are required to have titled officers.
Minmet Transactions
On December 4, 1998, the Company consummated the following
transactions, involving, among other things, the grant of an option to Minmet
Plc ("Minmet"), an Irish company, whose shares ("Minmet Shares") are quoted on
the Exploration Securities Market of the Irish Stock Exchange, to purchase all
of the issued share capital of MBL (the "Minmet Transactions").
Toucan Mining granted an option (the "MBL Option") to Minmet to acquire
all of the issued share capital of MBL. Toucan Mining received 7.5 million
Ordinary Shares (the "Option Shares") in Minmet solely for Toucan Mining
granting the MBL Option. The MBL Option expires on June 30, 1999, subject to
earlier termination under certain circumstances. If the MBL Option is exercised
by Minmet, Minmet will acquire all of the issued share capital of MBL by issuing
an additional 25 million Ordinary Shares (the "Completion Shares") in Minmet to
Toucan Mining.
Toucan Mining is restricted from selling or distributing the Option
Shares during the term of the MBL Option and for two (2) months thereafter
without the consent of Minmet, provided, however, that such two-month hold
period does not apply if the MBL Option is exercised prior to June 30, 1999.
The sale and distribution of the Completion Shares are also restricted
as follows. Toucan Mining or the Company may sell up to 3 million of the
Completion Shares in each of the three six (6) month periods after the issuance
thereof. Any Completion Shares not disposed of in a six (6) month period may be
added to the number of Completion Shares that may be sold in later periods.
Minmet has agreed that the Option Shares and the Completion Shares may
be placed through Minmet's brokers with Minmet's consent and that it will act
reasonably in respect of all such requests by the Company for the sale of the
Option Shares and the Completion Shares.
Pursuant to the terms and conditions of the Transaction Documents (as
defined below), from November 1, 1998 to the expiration of the MBL Option,
Minmet is obligated: (i) to conduct detailed ground and airborne geophysical
surveys of MBL's claims and additional geological mapping (the "Exploration
Plan"), (ii) to prepare and complete all appropriate plans. logs and records of
the Exploration Plan, (iii) to spend a minimum of $500,000 on the Exploration
Plan, or, if the Exploration Plan expenses do not exceed $500,000, pay to the
Company the difference between $500,000 and the Exploration Plan expenses, and
(iv) cover all of MBL's reasonable overhead and costs not related to the
Exploration Plan. MBL will have the benefit of these obligations even if the MBL
Option is not exercised.
In addition, the Company granted an option (the "Loan Option") to
Minmet to acquire from the Company the benefit of the loans that it has made to
MBL in the approximate principal amount of $975,000. The Company received the
sum of U.S. $275,000 solely for the Company granting the Loan Option. The Loan
Option expires on June 30, 1999, subject to earlier termination under certain
circumstances. If the Loan Option is exercised, Minmet will pay to the Company
the further sum of U.S. $250,000 and will issue to the Company warrants (the
"Warrants") to subscribe for a further 7.7 million Ordinary Shares (the "Warrant
Shares") of Minmet at an exercise price of (pound)0.08p per share.
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The grant of the MBL Option and Loan Options to Minmet was accomplished
through the sale of all of the issued share capital of Anagram Limited, a newly
formed, wholly-owned subsidiary of Toucan Mining and a private limited company
incorporated under the laws of the Isle of Man ("Anagram") pursuant to an
Agreement dated December 3, 1998 among the Company, Toucan Mining and Minmet
(the "Purchase Agreement"). Through the purchase of Anagram by Minmet and the
assumption by Minmet of that certain Option Agreement among the Company, MBL and
Anagram dated December 3, 1998 (the "Option Agreement") and that certain
Supplemental Agreement dated December 3, 1998 among the Company, MBL, Anagram
and Minmet (the "Supplemental Agreement," collectively with the Purchase
Agreement and the Option Agreement, the "Transaction Documents"), Minmet
obtained the MBL Option and the Loan Option and incurred the obligations
detailed above.
In the event that Minmet exercises the MBL Option, the Company will
likely cease to have any rights to any Brazilian claims, other than the
potential rights to the six (6) claims offered for delivery by Seller.
Therefore, upon exercise of the Minmet Option, it is likely that the Company
will at such time, cease doing business in Brazil and discontinue all of its
mining operations.
The Company has reached agreement with certain of its creditors,
including certain affiliates of the Company, for the creditors to receive
Ordinary Shares of Minmet from the Option Shares held by the Company in payment
of the obligations of the Company to such creditors. Such creditors received
such Minmet Shares with the same restrictions on transfer applicable to the
Company and described above. For this purpose the Minmet Shares were valued at
approximately $0.09 per share, and the Company extinguished $641,300 of
obligations with 7,100,000 Minmet Shares.
Among the creditors described above is Roy G. Williams ("Williams").
The Company has agreed to pay Williams certain fees for introducing Minmet to
the Company, negotiation of the MBL Option, arranging short term funding of the
Company's operations, and providing basic office accommodations and secretarial
assistance. On the execution of the Transaction Documents, Williams was paid a
fee of $60,000. The Company paid the fee by issuing to Williams 180,000 shares
in the Company valued for this purpose at $0.20 per share and transferring to
Williams 265,000 Minmet Shares valued for this purpose at approximately $0.09
per share. On the exercise of the MBL Option, Williams will be entitled to a
further fee of $60,000 payable as to $36,000 in cash or the equivalent value in
shares of the Company and as to $24,000 in cash or the equivalent value in
shares of Minmet. See "Certain Relationships and Related Transactions."
While the Transaction Documents may permit the Company to distribute
the Option Shares, the Completion Shares, the Warrants, and the Warrant Shares
(collectively, the "Minmet Securities") to stockholders of the Company, subject
to certain limitations, the Board of Directors of the Company, in approving the
various agreements with Minmet, has determined for securities law reasons that
no Minmet Securities will be distributed to stockholders of the Company as a
dividend or in any similar distribution. Accordingly, the Board of Directors of
the Company has no present intention of distributing any of the Minmet
Securities to stockholders of the Company as a dividend or in any similar
distribution, and no such distribution can be made to stockholders of the
Company unless with the unanimous consent of the Board based on an opinion of
counsel that such distribution will not require registration under the
Securities Act of the issuance of the Minmet Securities to Toucan Mining or the
Company or such distribution. Consequently, depending on the amount and nature
of other assets owned by the Company at relevant times, the Company may need to
acquire non-securities assets or sell or otherwise dispose of the Minmet
Securities in order to avoid being deemed to be an investment company under the
Investment Company act of 1940, as amended.
Mining Claims
As of December 31, 1998, MBL has purchased and filed for exploration
claims with the Departamento Nacional De Produca Mineral ("DNPM"), the Brazilian
governmental agency responsible for regulating mineral rights, for approximately
941,000 Hectares [3,633 square miles] ("Ha") (259 Ha to 1 square mile) in the
Cuiaba Basin. Management believes that these claims will be approved by the
DNPM. This area is approximately 165 kilometers long in a northeast/southwest
direction and is approximately 60 kilometers wide. The claims are located
between 15(0) and 16(0) 15' South latitude and between 56(0) 57(0) West
longitude. The large, provincial city of Cuiaba, the capital of Mato Grosso, is
located within MBL's claim area.
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In September 1996, the Company entered into an agreement with a
Brazilian individual (the "Seller") to acquire twenty-five (25) additional
priority claims in the Cuiaba Basin (the "Claims Agreement"). Pursuant to the
terms of the Claims Agreement, as the Company understood it, the Company was to
make an initial payment to the Seller in the amount of $500,000. The Claims
Agreement provided that the Seller would receive $36,000 in cash for each claim
(a "Certified Claim") that was certified by the DNPM as held by the Seller with
priority, having good, clean and transferrable title. As of the date of this
Annual Report on Form 10-KSB (the "Annual Report"), the Company has paid to the
Seller the initial cash payment of $500,000, as contemplated by the Claims
Agreement, and an additional payment of $576,000 in cash as payment for sixteen
(16) claims that the Company believed at the time of the transfer of such claims
to the Company to be Certified Claims. Additionally, pursuant to the terms of
the Claims Agreement as the Company understood it, the Company was required to
issue to the Seller 12,000 shares of Company Common Stock for each Certified
Claim, and the Company was required to issue to the Seller a bonus payment of
50,000 shares of Company Common Stock, if and when the Seller transfers to the
Company twenty-five (25) Certified Claims.
The DNPM has determined that one of the sixteen (16) claims referred to
above was defective from a title perspective and informed the Company that such
claim was not a Certified Claim. During 1998, management determined that it was
not economically efficient to maintain ownership of two (2) of the claims that
were originally delivered to the Company. Therefore, these two (2) claims, of
the original sixteen (16) claims, were dropped from the Company's current roster
of mining claims. The Company, therefore, is the beneficial owner of thirteen
(13) claims in connection with the Claims Agreement, which cover approximately
99,645 Ha. See "Description of Exploration and Mining Concessions" below.
In early 1999, the DNPM determined that the instruments of transfer
presented by the Seller to the Company, representing the remaining thirteen (13)
claims, contained registration errors that have resulted in the DNPM requesting
the Company to provide additional transfer documentation with respect to such
claims. Management believes that the additional transfer documentation is not
required and has requested that the DNPM review its request for such
documentation.
Also during 1998, the Seller offered to deliver to the Company an
additional six (6) claims. The Seller also asserted that his understanding of
the Claims Agreement was different from the Company's understanding as set forth
above. The Seller asserted that delivery to the Company of an aggregate of
twenty-one (21) of the twenty-five (25) claims resulted in the Seller being
entitled to full payment for all twenty-five (25) claims under his understanding
of the Claims Agreement. The Seller has refused to accept shares of Company
Common Stock as consideration for claims as was set forth in the Claims
Agreement and has requested that the Company pay the consideration for the
remainder of the claims solely in cash. Additionally, a dispute has arisen
between the Seller and the Company as to the amount that is to be paid by the
Company in connection with the delivery of the claims. Management is currently
in negotiations with the Seller to resolve these matters.
In connection with the issuance of Company Common Stock to the Seller
pursuant to the terms of the Claims Agreement, the Company in 1996 and 1997
reported in the notes to its financial statements that the number of shares of
Company Common Stock to be issued to the Seller pursuant to the Claims Agreement
have been authorized for issuance to the Seller but that the certificates
representing such shares have not been physically delivered to the Seller. As of
the Date of this Annual Report, these shares have not been issued to the Seller.
On November 18, 1997, Mr. Mousasticoshvily acquired 10,000 Ha of
priority exploration claims (the "Mousasticoshvily Claims") in the Cuiaba Basin
for a purchase price of $150,000. On December 8, 1997, the Company agreed to
purchase the Mousasticoshvily Claims for $150,000 consisting of a cash payment
of $50,000 with the remaining $100,000 balance being paid in shares (the
"Acquisition Shares") of Company Common Stock valued at $.75 per share (i.e.,
133,333 shares) and the issuance to Mr. Mousasticoshvily of warrants (the
"Acquisition Warrants") to purchase 133,333 shares of Company Common Stock at an
exercise price of $1.50. The Acquisition Warrants will be exercisable until
January 1, 2000. In March 1999, the Company issued to Mr. Mousasticoshvily the
Acquisition Shares. The Acquisition Shares had been authorized and accounted for
by the Company in 1997, but had not been physically issued and delivered to Mr.
Mousasticoshvily until 1999.
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Quadros Claims.
On December 20, 1996, the DNPM issued to Professor Alvaro Pizatto
Quadros ("Quadros") a certificate granting Quadros priority in the eight (8)
claims located in the Cuiaba Basin (the "Quadros Claims"). In early 1997, the
Company purchased the Quadros Claims through MBL's agent, Mr. Mousasticoshvily,
for the sum of $100,000. During 1997, Quadros granted an irrevocable power of
attorney over the Quadros Claims to Mr. Mousasticoshvily for the benefit of MBL.
In March 1998, the Company was informed that the DNPM had mistakenly issued
Quadros the priority certificate in four (4) of the eight (8) Quadros Claims.
After extensive discussions with the DNPM, it was determined that the Company
had no priority rights to the four (4) contested Quadros Claims. As a result,
the Company has eliminated these claims from its list of active claims.
Access to Claims. The Cuiaba Basin has a network of hard top roads that are
generally in good condition. MBL's claims are also criss-crossed with sand and
gravel roads, the majority of which are well maintained. Daily scheduled
commercial air service is available to and from Cuiaba.
Mining Operations
The following discussion of MBL's mining operations includes a
discussion of Brazilian law. The discussion of Brazilian law matters represents
the Company's current understanding of applicable Brazilian law based on it and
its advisors' and consultants' review of information relating thereto made
available to them as of the date hereof.
Description of Exploration and Mining Concessions. Under the Brazilian
Federal Constitution, all mineral resources belong to Brazil. The government of
Brazil does not grant outright ownership of a mineral deposit to a mining
company. Exploration and mining of mineral resources may be carried out only
following the grant of an exploration permit or mining concession by the DNPM,
which administers the Brazilian Mining Code and other laws and regulations
governing prospecting and mining operations in Brazil. Mining concessions are
granted only to Brazilian companies that have been duly authorized by the
Ministry of Mines and Energy to act as a mining company. In 1995, the Brazilian
government approved a constitutional amendment that eliminated the requirement
of Brazilian control of mining companies, so that a Brazilian mining company can
be 100% foreign owned and still qualify as a mining company.
Under Brazilian law, in order to obtain a mining concession, a mining
company must first obtain an exploration permit (referred to herein as a claim).
The first step in obtaining a mining claim is filing an application with the
DNPM, which must include an exploration plan as well as comply with certain
other requirements.
Under Brazilian law, if a claim is granted, the granting of the claim
will, in due course, be published by the Brazilian authorities in the Government
Gazette. Such publication can occur from one to twenty years from the date of
the claimant making such application with respect to such claim. Once the claim
is published in the Government Gazette an annual tax of $0.47 per Ha is payable
on the published claim.
The granting of an exploration claim conveys the right to explore the
area covered by the claim. Claims are granted for a three-year term, renewable
on request, subject to an annual fee. Exploration must begin in accordance with
the exploration plan forming part of the application within a specified period
of the claim being granted. The claim may be canceled at the discretion of the
DNPM if the claim holder suspends exploration for a period of more than three
consecutive months or 120 non-consecutive days. The holder of a terminated claim
may reapply to regain the claim area. The onus is on the claim holder to notify
the DNPM of any changes to the exploration plan. On completion of the work, a
final report must be filed with the DNPM describing the results of the
exploration program.
Mining concessions are granted only after exploration demonstrates the
existence of a mineral deposit that is economically exploitable. Therefore, the
report filed by the claimant with the DNPM must include an economic assessment
of the claim area and a feasibility analysis. Moreover, the claimant must
demonstrate to the DNPM that it has the financial capability to carry out the
proposed plan. The application for a concession must also include an
environmental plan, covering water treatment, soil erosion, air quality control,
re-vegetation and reforestation and site reclamation. Once granted, the terms of
the concession will include conditions concerning mitigating environmental
impacts, site safety, construction codes, waste disposal and site reclamation.
Following application, the DNPM may request additional information.
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A mining concession grants the right to extract and process the mineral
contained in the deposit in accordance with the plan approved by the DNPM and
allows a mining company to exploit the deposit to exhaustion, usually without a
predetermined or fixed term. The concession holder also has the right to sell,
transfer or lease such rights to a third party subject to DNPM approval. After
the grant of the mining concession is published in the Government Gazette, a
concession holder has 90 days to request possession of the deposit, and initial
work in accordance with the mining plan must begin within six months of the
publishing date. Once begun, mining may not be suspended for a period of more
than six months on penalty of a possible cancellation of the concession at the
discretion of the DNPM. However, management understands that longer suspensions
have been granted by the DNPM. Annual statistical data on production must be
reported to the DNPM, which will also send representatives on periodic site
inspections. Failure to comply with regulations and mining plans may result in
penalties ranging from fines and other restitution to cancellation of the mining
concession and/or prison terms for officers of the company.
The Brazilian Mining Code and the Federal Constitution of Brazil impose
on mining companies requirements relating to, among other things, the manner in
which mineral deposits are exploited, the health and safety of workers, the
protection and restoration of the environment, the prevention of pollution and
the promotion of the health and safety of local communities where the mines are
located. The Mining Code also imposes certain notification and reporting
requirements.
Landowners. The majority of land covered by MBL's claims is a sandy
gravely soil covered in light scrub. Cattle ranching is the principal
agricultural activity. Except where the claims fall within a township such as
Cuiaba, the majority of the land is agricultural and has a low value.
The Brazilian Mining Code requires a claim holder to obtain the consent
of the surface owners to access the surface of the property. This usually
entails some form of an agreement between the claim owner and the surface owner
involving the payment of compensation to the surface owners for damage and loss
of income caused by the use and occupation of their land in connection with
mining activities. In the event that an agreement cannot be reached with the
surface owner, MBL may seek legal recourse under Brazilian law, which provides
that a claim holder has the right of access if conducting mineral exploration
activities, by seeking a judicial order to determine the amount of surface
damage to the property and to grant the surface owner a royalty on future
production.
Brief History of Previous Operations. Gold mining in the Cuiaba Basin
began around 1719. Mining activity was sporadic, tending to coincide with
periods of high gold price or technical innovations that enabled profitable
extraction of the gold. The most recent phase of activity occurred during the
1980's when a period of high gold prices coincided with the availability of
metal detectors. Miners quickly realized that by using this equipment,
near-surface gold mineralization (nuggets) could be readily located and
recovered with the help of earth moving equipment. Thousands of hectares were
stripped of soil and vegetation. Under present economic conditions, the mining
by garimpeiros of the easily located nugget fields is not feasible as near
surface quartz veins and mineralized host rock are only accessible by using bulk
earth and rock moving equipment, not generally available to the garimpeiros.
Climate. Exploration and mining operations are possible throughout the
year. The rainy season is from December through to April. There are only
occasional thunder storms from May to December. In summer (December - February)
the temperature can reach as high as 45 degrees Centigrade although the mean
temperature is 35 degrees Centigrade.
Environmental Laws. Previous miners have stripped thousands of hectares
of soil and vegetation in the Cuiaba Basin. MBL will arrange to document the
existing environmental condition of its claims to place on record with the
environmental authorities the damage done to the environment by previous
operators. Environmental regulation and protection in Brazil is based on
provisions of the Federal Constitution, and of federal, state and municipal
legislation. Mining and industrial activities require the preparation of an
environmental impact statement and the acquisition of an environmental permit.
In addition, the Mining Code requires the reclamation and restoration of mined
areas.
6
<PAGE>
In March of 1998, Brazilian Federal Law No. 9605, which reclassifies
certain practices against the environment as crimes, became effective. Some of
the activities which are enumerated as "crimes against the environment" include:
(1) performing research, mining or extraction of mineral resources without
authorization and (2) inducing mortality in the animal life existing in rivers,
lakes, dams, ponds, bays or waters under Brazilian jurisdiction. Additionally,
the new law provides for the possibility of forced liquidation of any legal
entity formed or used primarily with the intent to permit, facilitate or cover
up crimes against the environment.
Gold Sales. Gold mined in Brazil must be sold (i) to the Central Bank
of Brazil (via one of their registered agents), (ii) to the Sao Paulo gold
exchange or (iii) to any registered gold buyer in Brazil. The price paid is
normally the London afternoon Gold Fix. On occasion a premium is paid of
typically 2%. The agent charges a commission that is normally between 0.5 -
1.0%. The seller of the gold is paid in U.S. Dollars.
Brazilian Taxation. In general, Brazilian mining companies are subject
to a 25% income tax and an 8% social security contribution. Dividends paid to
shareholders domiciled abroad are subject to a 15% withholding tax by the
Brazilian taxing authority.
Exchange Controls. Exchange transactions are generally controlled by
the Central Bank of Brazil which authorizes a series of banks to act in the
foreign exchange market, selling and buying currencies. There is a commercial
rate of exchange published daily by the Central Bank based upon market results
on said day. A free market, and quotation system exists, mainly dealing with
tourist activities. Both rates have been extremely close since the inception of
the stabilization plan ("Plano Real") several years ago. Subject to certain
registration requirements with the Central Bank of Brazil and compliance with
certain regulations, MBL may repatriate U.S. Dollars earned from its Brazilian
operations to Toucan Mining or the Company through the repayment of loans and
the payment of dividends. On occasions in the past, Brazil has imposed temporary
restrictions on the conversion and remittance of foreign capital, for example
when there was a serious imbalance in Brazil's balance of payments. In such
circumstances, the Company could be adversely affected, if the exchange control
rules were changed to delay or deny remittances abroad from MBL.
Description of Present Condition of Property; Modernization and
Physical Condition of Plant and Equipment. MBL, through its Brazilian office,
with funds provided in connection with the Minmet Transactions, intends to
continue its mining concessions by undertaking a program of mineral exploration
to target and explore selected areas of its exploration claims to determine
which areas are most likely to contain economic gold mineralization. The
Brazilian office is staffed by eight (8) employees and consultants, consisting
of geologists, land personnel, administrative personnel and field hands. MBL
conducts its mineral exploration program through third-party operators.
During December 1997, the Company completed a 5,000 meter reverse
circulation drilling program involving six separate locations in the Cuiaba
District on which artisanal mine workings ("nugget patches") have taken place.
The Company believes that these nugget patches are de facto geochemical
anomalies reflecting the possible presence of disseminated gold mineralization
in the subsurface. A total of 73 holes were drilled to an average depth of 69
meters and sampled at one-meter intervals. In addition to intersecting variable
quantities of "visible gold" at all six of the localities tested, drilling has
revealed the presence of metasediments with imbedded metavolcanic rocks of
Proterozoic age. Samples weighing approximately 25 kg. were split, and
approximately 3 kg. from each sample were sent for assay testing at two
well-known Canadian laboratories.
An assay test is a chemical test performed on a sample of ore or
minerals to determine the amount of valuable minerals contained in such sample.
An assay test does not constitute, and should not be read as, a reserve report
reflecting proven or probable reserves.
The Company's 1997 drilling program was designed to penetrate the upper
saprolite and geochemically sample lower saprolitic material. Management
expected any gold mineralization in the lower saprolite to be finer grained,
more homogeneous and reliably sampled by reverse circulation drilling. However,
the assay reports reflected a wide variation of results ranging from less than 5
parts per billion and 23.64 grams per ton. Because such results can occur when
sampling "coarse gold" mineralization, management conducted additional testing
of the samples utilizing a commonly practiced manual inspection technique, which
revealed the presence of "visible gold" in some of the samples, many of which
appeared, on the basis of the prior assay, to have negligible gold content.
Based on such testing, management believes that the weathering of the saprolite
extended deeper into the surface than was originally estimated and that its
7
<PAGE>
drilling did not sample the lower saprolite. Because of the indication of course
gold mineralization, management concluded that it could not rely upon the
individual values obtained in the original assay. Accordingly, management
resubmitted 132 larger samples containing "visible gold" for re-assaying to one
of the Canadian laboratories in order to use such laboratory's special method of
sample preparation and testing suited for the detection and measurement of
course gold mineralization. Most of the later assayed samples were found to
contain consistently higher gold content than the previously assayed samples.
With funds provided in connection with the Minmet Transactions, the
Company has begun conducting additional exploration, both regional and detailed.
In March 1999, the Company commenced an aerial survey of the certain regions in
the Cuiaba Basin covering an area of approximately 6,745 Km2 . It is anticipated
that this aerial survey will provide to the Company the magnetic and radiometric
detail required to analyze typical mineral targets located in the surveyed
region. Additionally, the aerial survey will provide to the Company information
necessary to analyze certain mineral targets currently known to the Company.
This information will help the Company to prioritize the mineral targets so that
any exploration efforts will be directed at those targets with highest mineral
potential.
Also, MBL is currently conducting geochemical orientation surveys on
five chosen nugget patches. These tests are being conducted to determine the
utility to the Company's of the new MMI technology. MMI technology, considered
to be cutting edge geochemical technology, is a recent Australian development,
that is proving to be a very useful tool in mineral exploration. Finally, MBL
has just completed a regional geochemical BLEG ("bulk leach extractable gold")
survey. The results of the first assay tests from these BLEG surveys are not yet
conclusive.
At this time, MBL is an exploration stage company and has no probable
or proven reserves as defined by the rules and regulations of the Commission.
Exploration and Development Risks
The exploration for and development of mineral deposits involves
significant risks that even a combination of careful evaluation, experience and
knowledge may not eliminate. While the discovery of gold reserves may result in
substantial rewards, few properties that are explored are ultimately developed
into producing mines. Major expenses may be required to establish gold reserves,
to develop metallurgical processes and to construct mining and processing
facilities at a particular site. There can be no assurance that the exploration
programs being conducted by the Company, Toucan Mining and/or MBL will result in
a profitable commercial mining operation. There is aggressive competition within
the mining industry for the discovery and acquisition of properties considered
to have commercial potential. The Company, Toucan Mining and MBL will compete
with other interests, many of which have greater financial resources than they
will have, for the opportunity to participate in promising projects. Significant
capital investment is required to achieve commercial production from successful
exploration efforts.
Whether a mineral deposit will be commercially viable depends on a
number of factors, some of which are the particular attributes of the deposit,
such as size, grade and proximity to infrastructure, as well as gold prices
which are highly cyclical and government regulations, including regulations
relating to prices, taxes, royalties, land use, importing and exporting of
minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but the combination of these factors may result in the
Company not receiving an adequate return on investment capital.
The economic feasibility of prospective projects, such as the mineral
claims in the Cuiaba Basin, is based upon, among other things, estimates of
reserves, metallurgic characteristics, recoverability, capital and operating
costs of such projects and future gold prices. These and other prospective
projects are also subject to the successful completion of feasibility studies,
issuance of necessary permits and receipt of adequate financing.
Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating costs are
to a large extent based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques and feasibility studies which derive
estimates of cash operating costs based upon anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body, expected
recovery rates of various metals from the ore, comparable facility and equipment
costs, anticipated climate conditions and other factors. As a result, it is
possible that actual cash operating costs and economic returns of any and all
development projects may materially differ from the costs and returns initially
estimated.
8
<PAGE>
In addition, exploration activities and mining operations generally
involve a high degree of risk. If MBL were to discover gold reserves and bring
them into production, MBL would be subject to all of the hazards and risks
normally encountered in the exploration, development and production of gold,
including unusual and unexpected geology formations, rock bursts, cave-ins,
flooding and other conditions involved in the drilling and removal of materials,
and which could result in damage to, or destruction of, mines, equipment and
other producing facilities, damage to life or property, environmental damage and
possible legal liability. Although adequate precautions to minimize risk will be
taken, mining operations are subject to hazards (such as equipment failure or
failure of retaining dams around tailings, disposal areas), which may result in
environmental pollution and consequent liability.
Employees.
As of March 29, 1999, the Company employed nine (9) individuals.
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding, nor is the
Company's property the subject of a pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security-Holders
No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 1998 to a vote of the Company's stockholders through the
solicitation of proxies or otherwise.
9
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company Common Stock is listed on the OTC Electronic Bulletin Board
of NASDAQ. The following table indicates the quarterly high and low bid price
for the Company Common Stock on the OTC Electronic Bulletin Board for the period
during 1998 and for the first quarter of fiscal year ending December 31, 1999.
Such inter-dealer quotations do not necessarily represent actual transactions,
and do not reflect retail mark-ups, mark-downs or commissions.
OTC ELECTRONIC
BULLETIN BOARD
BID PRICE
HIGH LOW
Calendar 1998
1st Quarter $ 1.500 $ .625
2nd Quarter $ 1.06 $ .41
3rd Quarter $ .875 $ .08
4th Quarter $ .53 $ .055
Calendar 1999
1st Quarter $ .13 $ .05
On March 29, 1999, the bid price of the Company Common Stock as
reported on the OTC Electronic Bulletin Board was $.07.
As of March 29, 1999, there were approximately 348 holders of record of
the Company Common Stock.
The Company has not declared or paid any cash or other dividends on the
Company Common Stock to date for the last two (2) fiscal years and in any
subsequent period for which financial information is required and has no
intention of doing so in the foreseeable future.
Recent Sales of Unregistered Securities
The following contains information for all securities that the Company
sold within the past year without registering the securities under the
Securities Act:
1. On February 2, 1998, the Company granted options to purchase, in the
aggregate, 250,000 shares of Company Common Stock to two separate
individuals in their capacities as Directors of the Company. The
options allowed Robert P. Jeffcock and Robert A. Pearce to purchase
200,000 and 50,000 shares of Company Common Stock, respectively, at an
exercise price of $1.00 per share. Mr. Jeffcock and Mr. Pearce received
their options as part of their remuneration for services rendered to
the Company. Each individual's options vested on the date of grant and
are exercisable up until December 31, 1999.
2. In connection with the Minmet Transactions, the Company has agreed to
pay Williams certain fees for introducing Minmet to the Company,
negotiation of the MBL Option, arranging short term funding of the
Company's operations, and providing basic office accommodations and
secretarial assistance. On the execution of the Transaction Documents,
Williams was paid a fee of $60,000. The Company paid the fee by issuing
to Williams 180,000 shares in the Company valued for this purpose at
$0.20 per share and transferring to Williams 265,000 Minmet Shares
valued for this purpose at approximately $0.09 per share.
3. On November 18, 1997, Mr. Mousasticoshvily acquired the
Mousasticoshvily Claims in the Cuiaba Basin for a purchase price of
$150,000. On December 8, 1997, the Company agreed to purchase the
Mousasticoshvily Claims for $150,000 consisting of a cash payment of
$50,000 with the remaining $100,000 balance being paid in the
Acquisition Shares (133,333 shares of Company Common Stock) and the
issuance to Mr. Mousasticoshvily of the Acquisition Warrants to
10
<PAGE>
purchase 133,333 shares of Company Common Stock at an exercise price
of $1.50. The Acquisition Warrants will be exercisable until January
1, 2000. In March 1999, the Company issued to Mr. Mousasticoshvily the
Acquisition Shares. The Acquisition Shares had been authorized by the
Company and reflected in the Company's financial statements in 1997.
Therefore, the holding period for the Acquisition Shares under Rule
144 of the Securities Act began in 1997.
The securities placements described in paragraphs 1, 2 and 3 were
effectuated pursuant to the exemption from registration set forth in Section
4(2) of the Securities Act; therefore, such securities are "restricted
securities" under Rule 144 of the Securities Act.
Item 6. Management's Discussion and Analysis of Financial Condition or
Plan of Operation
Effective May 10, 1996, Starlight acquired all of the outstanding
capital stock of Toucan Mining in exchange for shares of Starlight Common Stock.
As a result of the Share Exchange, a change in control of Starlight occurred,
whereby Toucan Mining is deemed to have acquired Starlight. See "Notes to the
Consolidated Financial Statements."
Toucan Mining is a development stage company that conducts its
operations primarily through its wholly-owned subsidiary, MBL, which is an
authorized mining company organized under the laws of Brazil. From its inception
until the December of 1998, MBL was financed entirely by the Company. The
Company sought to capitalize MBL for the purpose of conducting mineral
exploration, specifically gold exploration. Pursuant to the Minmet Transactions,
MBL has received additional capital infusions from Minmet for the same purposes.
During July 1996, Starlight formed the Company as a wholly-owned
subsidiary. On July 29, 1996, Starlight merged into the Company, and pursuant to
the terms of the Merger, the outstanding shares of Starlight Common Stock were
canceled in exchange for shares of the Company's Common Stock.
In December 1998, the Company consummated the Minmet Transactions
pursuant to which Toucan Mining granted the MBL Option to Minmet giving Minmet
the right to acquire all of the issued share capital of MBL. Toucan Mining
received the Option Shares as consideration for granting the MBL Option. In
addition, the Company granted the Loan Option to Minmet to acquire certain loans
that the Company had made to MBL. The Company received U.S. $275,000 as
consideration for granting the Loan Option. See Items 1 and 2. "Description of
Business and Property - Minmet Transactions."
The consolidated financial statements for the fiscal year ended
December 31, 1998, reflect the results of Toucan's operations, which consisted
primarily of the Minmet Transactions and the maintenance of Toucan Mining and
MBL's various claims and purchase of new claims which were capitalized in the
financial statements. Legal, accounting, investor relations, consulting, travel,
subsistence expenses and other general administrative costs were expensed. See
Description of Business and Property--Minmet Transactions.
A substantial portion of the cash proceeds of the Loan Option were used
by the Company to pay creditors of the Company and/or MBL. The resale of the
Option Shares to third parties to raise funds for the Company's operations by
Toucan Mining and affiliates is restricted by provisions of the agreements
entered into in connection with the Minmet Transactions. See Items 1 and 2.
"Description of Business Property - Minmet Transactions." Therefore, the Option
Shares provide only limited liquidity to the Company.
Pursuant to the terms and conditions of the Transaction Documents, from
November 1, 1998 to the expiration of the MBL Option in June 1999, Minmet is
obligated: (i) to conduct detailed ground and airborne geophysical surveys of
MBL's claims and additional geological mapping (the "Exploration Plan"), (ii) to
prepare and complete all appropriate plans. logs and records of the Exploration
Plan, (iii) to spend a minimum of $500,000 on the Exploration Plan, or, if the
Exploration Plan expenses do not exceed $500,000, pay to the Company the
difference between $500,000 and the Exploration Plan expenses, and (iv) cover
all of MBL's reasonable overhead and costs not related to the Exploration Plan.
MBL will have the benefit of these obligations even if the MBL Option is not
exercised.
11
<PAGE>
MBL, through its Brazilian office, with funds provided in connection
with the Minmet Transactions, intends to continue its mining concessions by
undertaking a program of mineral exploration to target and explore selected
areas of its exploration claims to determine which areas are most likely to
contain economic gold mineralization. The Brazilian office is staffed by eight
(8) employees and consultants, consisting of geologists, land personnel,
administrative personnel and field hands. MBL conducts its mineral exploration
program through third-party operators.
During December 1997, the Company completed a 5,000 meter reverse
circulation drilling program involving six separate locations in the Cuiaba
District on which artisanal mine workings ("nugget patches") have taken place.
The Company believes that these nugget patches are de facto geochemical
anomalies reflecting the possible presence of disseminated gold mineralization
in the subsurface. A total of 73 holes were drilled to an average depth of 69
meters and sampled at one-meter intervals. In addition to intersecting variable
quantities of "visible gold" at all six of the localities tested, drilling has
revealed the presence of metasediments with imbedded metavolcanic rocks of
Proterozoic age. Samples weighing approximately 25 kg. were split, and
approximately 3 kg. from each sample were sent for assay testing at two
well-known Canadian laboratories.
An assay test is a chemical test performed on a sample of ore or
minerals to determine the amount of valuable minerals contained in such sample.
An assay test does not constitute, and should not be read as, a reserve report
reflecting proven or probable reserves.
The Company's 1997 drilling program was designed to penetrate the upper
saprolite and geochemically sample lower saprolitic material. Management
expected any gold mineralization in the lower saprolite to be finer grained,
more homogeneous and reliably sampled by reverse circulation drilling. However,
the assay reports reflected a wide variation of results ranging from less than 5
parts per billion and 23.64 grams per ton. Because such results can occur when
sampling "coarse gold" mineralization, management conducted additional testing
of the samples utilizing a commonly practiced manual inspection technique, which
revealed the presence of "visible gold" in some of the samples, many of which
appeared, on the basis of the prior assay, to have negligible gold content.
Based on such testing, management believes that the weathering of the saprolite
extended deeper into the surface than was originally estimated and that its
drilling did not sample the lower saprolite. Because of the indication of course
gold mineralization, management concluded that it could not rely upon the
individual values obtained in the original assay. Accordingly, management
resubmitted 132 larger samples containing "visible gold" for re-assaying to one
of the Canadian laboratories in order to use such laboratory's special method of
sample preparation and testing suited for the detection and measurement of
course gold mineralization. Most of the later assayed samples were found to
contain consistently higher gold content than the previously assayed samples.
With funds provided in connection with the Minmet Transactions, the
Company has begun conducting additional exploration, both regional and detailed.
In March 1999, the Company commenced an aerial survey of the certain regions in
the Cuiaba Basin covering an area of approximately 6,745 Km2 . It is anticipated
that this aerial survey will provide to the Company the magnetic and radiometric
detail required to analyze typical mineral targets located in the surveyed
region. Additionally, the aerial survey will provide to the Company information
necessary to analyze certain mineral targets currently known to the Company.
This information will help the Company to prioritize the mineral targets so that
any exploration efforts will be directed at those targets with highest mineral
potential.
Also, MBL is currently conducting geochemical orientation surveys on
five chosen nugget patches. These tests are being conducted to determine the
utility to the Company's of the new MMI technology. MMI technology, considered
to be cutting edge geochemical technology, is a recent Australian development,
that is proving to be a very useful tool in mineral exploration. Finally, MBL
has just completed a regional geochemical BLEG ("bulk leach extractable gold")
survey. The results of the first assay tests from these BLEG surveys are not yet
conclusive.
Management believes that with funds provided in connection with the
Minmet Transactions, the Company will have sufficient funds to meet its
obligations through the end of the MBL Option period, June 30, 1999, except as
set forth below.
The Seller has offered to deliver an additional six (6) claims to the
Company and pursuant to his understanding of the Claims Agreement has asserted
that he is entitled to full payment for all of the twenty-five (25) claims in
cash, which would result in an additional cash payment of approximately $324,000
with respect to such claims. costs and economic returns of any and all
development projects may materially differ from the costs and returns initially
estimated.
12
<PAGE>
In the event that Minmet exercises the Minmet Option, the Company will
likely cease to have any rights to any Brazilian claims, other than the
potential rights to the six (6) claims offered for delivery by the Seller.
Therefore, upon the exercise of the Minmet Option, it is likely that the Company
will cease its mining operations in Brazil altogether and will no longer be a
participant in the mining industry. As a result of exercising the Minmet Option
and the Loan Option, the Company will receive the Completion Shares, the
Warrants and U.S. $250,000 in cash. The Company believes that it will have
sufficient cash proceeds from the exercise of the Minmet Option and the Loan
Option to pay the Seller with respect to the additional claims.
Conversely, if the Minmet Option is not exercised, the Company, through
MBL, will (i) maintain is Brazilian mining operations, (ii) have the benefit of
the funds provided in connection with the Minmet Transactions, (iii) will own
and will derive the benefits of the surveys conducted by Minmet in connection
with the Minmet Transactions and other assets that are derived from Minmet's
operations conducted in connection therewith, and (iv) will continue its program
to acquire and explore additional claims in the Cuiaba Basin.
In the event that the Minmet Option is not exercised, the Company will
need a substantial amount of additional capital to meet its obligations to the
Seller with respect to the additional claims and to finance its exploration
activities and to meet its working capital needs beyond June 30, 1999. In that
event the Company will explore strategic alternatives that may involve any one
or a combination of further capital raising, a joint venture, sale of part or
all of its exploration assets, a merger, restructuring or other business
arrangements. Such possible transactions may result in substantial dilution or
even elimination of the Company's interest in its mining claims. There can be no
assurance that the Company will be able to raise such additional capital or
negotiate and consummate such other transactions on terms that are favorable to
the Company.
The program to fully explore and develop its claim area will take
several years. The costs associated with continuing the Company's operations
could rise if, among other things, the weather proves untypically harsh,
unforeseen ground conditions are encountered, equipment becomes difficult to
source, the availability of drilling operators becoming increasingly scarce and
their rates increasing accordingly, or negotiations with surface owners become
prolonged. MBL may spend more or less on claim acquisitions than currently
estimated. There can be no assurance that the exploration program will result in
the discovery of economic gold mineralization. The Company's financial
statements have been prepared assuming that the Company will continue as a going
concern. Furthermore, the recoverability of the cost of mineral rights is
dependent on the Company's ability to continue exploration, establish the
existence of economically recoverable reserves, develop these reserves, and
achieve profitable production or obtain sufficient proceeds from the disposition
of the rights. The Company's financial statements do not include any adjustments
that might result from the outcome of these uncertainties. The matters discussed
herein contain forward-looking statements that involve certain risks,
uncertainties and additional costs detailed herein. The actual results that are
achieved may differ materially from any forward-looking projections, due to such
risks, uncertainties and additional costs.
Certain of the information contained in this Annual Report on Form
10-KSB constitutes forward looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended, that involves certain risks, uncertainties and additional costs
described in this Annual Report on Form 10-KSB. The actual results that are
achieved may differ materially from any forward looking projections, due to such
risks, uncertainties and additional costs. Although the Company believes that
the expectations reflected in such forward looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Subsequent written and oral forward looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by reference to such risks, uncertainties and additional costs.
13
<PAGE>
Item 7. Financial Statements
Filed herewith beginning on page F-1 are the following audited
financial statements of the Company:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Certified Public Accountants..............................................................F-1
Consolidated Balance Sheet as of December 31, 1998..............................................................F-2
Consolidated Statements of Operations for the years ended December 31, 1998, 1997
and the period from November 3, 1995 to December 31, 1998.....................................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, 1996
and the period from November 3, 1995 to January 1, 1996.......................................................F-4
Consolidated Statement of Cash Flows for the years ended December 31, 1998, 1997
and the period from November 3, 1995 to December 31, 1998.....................................................F-5
Notes to Financial Statements...................................................................................F-6
</TABLE>
14
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Toucan Gold Corporation
We have audited the accompanying consolidated balance sheet of Toucan Gold
Corporation as of December 31, 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 1998 and 1997 and the period from November 3, 1995 (inception) through
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 the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Toucan Gold
Corporation as of December 31, 1998, and the results of its operations and its
cash flows for the years ended December 31, 1998 and 1997 and the period from
November 3, 1995 through December 31, 1998, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company is in its
development stage and is not generating cash from operations. As discussed in
Note C, additional financing is necessary for the Company to continue its
exploration and development activities. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note C. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
GRANT THORNTON LLP
Dallas, Texas
March 5, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED BALANCE SHEET
December 31, 1998
ASSETS
<S> <C>
Cash $ 83,973
Receivables and other assets 47,844
----------
Total current assets 131,817
Mineral rights 2,559,869
----------
$2,691,686
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other liabilities $ 100,436
Stockholders' equity
Preferred stock, par value .01 per share; authorized, 2,000,000
shares; issued and outstanding, none --
Common stock, $.01 par value per share; authorized, 30,000,000
shares; issued and outstanding, 8,237,933 shares 82,379
Additional paid-in capital 4,526,226
Deficit accumulated during the development stage (2,017,355)
----------
Total stockholders' equity 2,591,250
----------
$2,691,686
==========
The accompanying notes are an integral part of these statements.
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the period
November 3, 1995
(commencement
For the years ended of operations)
December 31, through
1998 1997 December 31, 1998
------------ ----------- -----------------------
<S> <C> <C> <C>
Cost and expenses
Legal and professional fees $ 141,261 $ 312,007 $ 612,210
Consulting Fees 214,985 237,288 476,273
Abandoned claims 385,420 50,000 435,420
Travel costs 14,818 82,254 253,889
Public relations 62,766 59,613 156,034
Other 15,101 42,553 88,054
---------- ---------- -----------
Total cost and expenses 834,351 783,715 2,021,880
Other expense (income)
Interest income (1,898) (59,168) (78,716)
Interest expense 25,849 -- 74,191
---------- ---------- -----------
Total other expense (income) 23,951 (59,168) (4,525)
---------- ---------- -----------
Net loss $ 858,302 $ 724,547 $ 2,017,355
========== ========== ===========
Basic and diluted loss per share $0.11 $.09
==== ===
Weighted average shares outstanding 8,050,891 7,476,372
========= =========
</TABLE>
The accompanying notes are an integral part of these statement.
F-3
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Additional during
Common Stock paid-in development
Shares Amount capital stage Total
<S> <C> <C> <C> <C> <C>
Balance at November 3, 1995 -- $ -- $ -- $ -- $ --
Issuance of common stock 647,857 96,170 -- -- 96,170
Net Loss -- -- -- (45,343) (45,343)
----------- ----------- ----------- ------------- ----------
Balance at January 1, 1996 647,857 96,170 -- (45,343) 50,827
Recapitalization of Toucan Mining
Limited and merger with
Starlight Acquisitions, Inc. 4,453,602 (50,787) 150,787 -- 100,000
Issuance of common stock, net of 2,331,141 28,943 3,899,892 -- 3,928,835
expenses of $519,700
Net Loss -- -- -- (389,163) (389,163)
----------- ----------- ----------- ------------- -----------
Balance at December 31, 1996 7,432,600 74,326 4,050,679 (434,506) 3,690,499
Issuance of common stock 607,333 6,073 437,927 -- 444,000
Net loss -- -- -- (724,547) (724,547)
----------- ----------- ----------- ------------- -----------
Balance at December 31, 1997 8,039,933 80,399 4,488,606 (1,159,053) 3,409,952
Issuance of common stock 198,000 1,980 37,620 -- 39,600
Net loss -- -- -- (858,302) (858,302)
----------- ----------- ----------- ------------- -----------
Balance at December 31, 1998 8,237,933 $ 82,379 $ 4,526,226 $(2,017,355) $ 2,591,250
=========== =========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these statement.
F-4
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period
November 3, 1995
(commencement
For the years ended of operations)
December 31, through
1998 1997 December 31, 1998
<S> <C> <C> <C>
-------- -------- -----------------
Operating activities
Net loss $(858,302) $(724,547) $(2,017,355)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Claims written off 385,420 50,000 435,420
Net changes in operating assets and liabilities
Receivables and other assets (19,269) (10,001) (35,644)
Accrued expenses and other liabilities 220,007 169,802 419,120
--------- --------- -----------
Net cash provided by (used in) operating
activities (272,144) (514,746) (1,198,459)
Investing activities
Acquisition and exploration of mineral rights (710,748) (1,446,453) (3,512,645)
Sale of option (Note C) 275,000 -- 275,000
--------- --------- ---------
(435,748) (1,446,453) (3,237,643)
Financing Activities
Net repayments/borrowings from related parties 287,070 (9,051) 287,070
Issuance of common stock, net of expenses -- 444,000 4,133,005
Proceeds from merger with Starlight Acquisitions, Inc. -- -- 100,000
--------- --------- ---------
Net cash provided by financing activities 287,070 434,949 4,520,075
--------- --------- ---------
Net increase (decrease) in cash (420,822) (1,526,250) 83,973
Cash at beginning of period 504,795 2,031,045 --
--------- --------- ---------
Cash at end of period $83,973 $ 504,795 $ 83,793
========= ========= =========
Cash paid for:
Interest $7,680 $ -- $ 56,022
Noncash investing and financing activities:
Mineral rights acquired for common stock 3,600 30,000 369,600
Securities received on sale of option 677,500 -- 677,500
Securities used to satisfy liabilities 665,300 -- 665,300
Common stock issued for services 36,000 -- 58,500
</TABLE>
The accompanying notes are an integral part of these statement.
F-5
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS
Nature of Operations
--------------------
Toucan Gold Corporation and subsidiaries, collectively (the Company) are
engaged in acquiring, exploring and developing mineral rights in Brazil. No
revenues have been generated. See Note C regarding sale of option to
purchase the Company's mineral rights.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Consolidation
-------------
The consolidated financial statements include the accounts of Toucan Gold
Corporation and its wholly-owned subsidiaries, Toucan Mining Limited
(Mining), an Isle of Man company, and Mineradora de Bauxita Ltda. (MBL), a
Brazilian company.
Mineral Rights
--------------
Acquisition costs of mineral rights and related exploration and development
expenditures are deferred. If deferred expenditures exceed estimated net
realizable values, the assets will be written down to their estimated net
realizable values. Costs relating to abandoned properties are written-off
when such a decision is made.
Currency Translation
--------------------
The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. The remeasurement of local currencies and transactions denominated
in local currencies creates translation adjustments which are included in
operations. For 1998 and 1997, these translation adjustments were not
material.
Financial Instruments
---------------------
The carrying amounts reported in the balance sheet for cash and payables
approximate fair value due to the short-term maturity of these financial
instruments.
F-6
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, 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.
NOTE C - SALE OF OPTION TO PURCHASE MINERAL RIGHTS
On December 3, 1998, the Company sold an option to Minmet PLC (Minmet), an
Irish publicly-traded company, to purchase all of the outstanding capital
stock of MBL. The option price was 7.5 million shares of Minmet valued at
$677,500. The option has an exercise price of 25 million Minmet shares and
expires June 30, 1999. In connection with the purchase of option, Minmet
agreed to spend $500,000 on exploration of MBL's mineral claims, to make a
survey of the claims, and to pay the operating costs of MBL for the period
from November 1, 1998 to June 30, 1999.
Minmet also acquired from the Company for $275,000, an option to acquire
$995,000 of debt owed by MBL to the Company. The option exercise price is
$250,000 plus warrants to purchase 7.7 million Minmet shares at (pound).08
per share. This option also expires on June 30, 1999.
The proceeds of $952,500 from the sale of the options have been applied
against the carrying value of the mineral interests. Based on the market
price of Minmet shares on March 1, 1999 of (pound).075 ($.12), the Company
would recognize a gain of approximately $700,000 if both options were
exercised. However, there is no assurance the options will be exercised.
NOTE D - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the company as a going concern. However, the Company is a development stage
company which has undertaken a program of mineral exploration to target and
explore selected areas of its claims to determine which areas are most
likely to contain economic gold reserves.
F-7
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE D - REALIZATION OF ASSETS - Continued
The recoverability of the cost of mineral rights is dependent on the
Company's ability to continue exploration, establish the existence of
economically recoverable reserves, develop these reserves, and achieve
profitable production or obtain sufficient proceeds from the disposition of
the rights. The Company's ability to continue exploration is dependent upon
raising additional capital or embarking into joint ventures to fund these
activities.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence. As discussed in Note C, the Company has
sold an option to Minmet PLC for the purchase of mineral rights.
NOTE E - MINERAL RIGHTS
Mineral rights include the following as of December 31, 1998:
Consideration paid for priority claims $1,350,680
Other acquisition and exploration costs (Note F) 2,161,689
----------
3,512,369
Less proceeds from sale of options 952,500
----------
$2,559,869
==========
The Company owns priority claims for approximately 480,000 hectares which
were filed for exploration in 1995 with the Departamento Nacional De
Produca Mineral (DNPM), the Brazilian governmental agency responsible for
regulating mineral rights. The Company was not required to make any
payments to the DNPM or third parties in relation to the filing of these
claims.
In November 1996, the Company entered into a transaction with a Brazilian
individual to acquire 25 priority claims, over a period of time, as each of
these claims were confirmed by the DNPM. As of December 31, 1997, the
Company had acquired 16 of these claims, approximately 97,000 hectares,
although, the Company was informed by the DNPM that the seller did not hold
priority title on one of these 16 claims. As a result, the Company
currently holds priority claims on only 15 of these claims. Consideration
paid for these claims included $1,076,000 in cash and 210,000 shares of
common stock.
In 1997, the Company acquired 10 claims from a stockholder for $50,000 in
cash, 133,333 shares of the Company's common stock, a warrants to purchase
133,333 shares at $1.50 per shares. The warrants expire in January 1, 2000.
In 1998, the Company acquired one claim from the same stockholder for
$48,000. The stockholder holds the claims on behalf of the Company under an
agreement of beneficial ownership.
F-8
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - MINERAL RIGHTS - Continued
In 1998, the Company abandoned 85 claims covering approximately 800,000
hectares, which resulted in a write-off of $385,420. No significant
exploration had been performed on these claims.
At December 31, 1998, the Company's remaining claims filed for exploration
covered approximately 941,000 hectares. The number of hectares for which
exploration is granted by DNPM is expected to be less than the number of
hectares for which the Company has filed.
NOTE F - RELATED PARTIES
In 1998 and 1997, the Company made payments of approximately $259,000 and
$526,000, respectively, to related parties, including five stockholders,
for various consulting services including geological surveys and advice,
working with the DNPM to establish beneficial ownership of the priority
claims, Brazilian legal and regulatory advice in relation to the priority
claims, and the registration of MBL. Included in these costs are
approximately $174,000 and $330,000 in 1998 and 1997, respectively, which
are considered to be costs relating to the acquisition and exploration of
mineral rights and have been capitalized as mineral rights.
In 1998, a fee of $60,000 was paid to a related party for assistance in
connection with the sale of the option to Minnet PLC (Note C).
In 1998, related parties advanced $434,000 to the Company. Substantially
all of these advances, including interest of $18,000, were repaid by
December 31, 1998 with shares of Minmet PLC received in connection with the
sale of an option (Note C). See Note E regarding other related party
transactions.
NOTE G - PER SHARE DATA
Loss per share is determined by dividing net loss by the weighted average
number of common shares outstanding during the period. No effect has been
given to assumed exercise of options and warrants because their effect
would be antidilutive.
NOTE H - STOCK OPTIONS AND WARRANTS
The Company has issued stock options to employees. All options were granted
at prices no less than market price at date of grant. The Company accounts
for stock option grants pursuant to the provisions of APB No. 25 and
accordingly, has recognized no expense related to the grants. All options
are exercisable immediately, and expire over periods of approximately two
to four years after grant.
F-9
<PAGE>
<TABLE>
<CAPTION>
Toucan Gold Corporation Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE H - STOCK OPTIONS AND WARRANTS - Continued
Option activity for 1997 and 1998 is as follows:
Number of Weighted average
Shares exercise price
--------- ----------------
<S> <C> <C>
Outstanding at January 1, 1997 -- --
Granted 633,000 $1.42
-------
Outstanding at December 31, 1997 633,000 1.42
Granted 250,000 1.00
-------
Outstanding at December 31, 1998 883,000 $1.30
=======
</TABLE>
The weighted average remaining life at December 31, 1997 of the options was 1.1
years.
If the Company had elected to account for stock options under the fair value
method pursuant to Statement of Financial Accounting Standards No. 123, net loss
and loss per share would have been increased to the pro forma amounts set forth
below:
1998 1997
---- ----
Net loss:
Actual $858,302 $724,547
Pro forma 950,802 759,547
Loss per share
Actual $0.11 $0.09
Pro forma $0.12 $0.10
The fair value of these options was estimated at date of grant using the
Black-Scholes option pricing model with the following assumptions used:
1998 1997
---- ----
Dividend yield 0% 0%
Volatility 122% 122%
Risk-free interest rate 5.0% 5.0%
Expected life 1 year 2 years
The weighted average fair value per share of options granted in 1998 and 1997
were $0.23 and $0.35, respectively.
F-10
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE H - STOCK OPTIONS AND WARRANTS - Continued
On November 1, 1996, the Company completed an offering of 1,600,000 units
for gross proceeds of $4 million. Each unit consisted of one share of
common stock, par value $.01 per share, and one common stock share purchase
warrant. The warrants expired on January 31, 1998.
Warrants to purchase 100,000 shares of the Company's common stock at an
exercise price of $4.00 per share were issued in 1996 in connection with
the Company's merger with Starlight Acquisitions, Inc. The holders of these
warrants have certain piggy-back registration rights with respect to the
shares of the Company's common stock underlying the warrants. The warrants
are immediately exercisable and expire on the six month anniversary of
closing of the first registration of securities by the Company.
NOTE I - INCOME AND OTHER TAXES
The tax effects of temporary differences that give rise to deferred tax assets
were as follows:
December 31,
------------
1998 1997
---- ----
Deferred tax asset
Net operating loss carryforwards $188,000 $105,000
Organization costs 172,000 172,000
---------- ----------
Gross deferred tax assets 360,000 277,000
Valuation allowance (360,000) (277,000)
---------- ----------
Net deferred taxes $ -- $ --
=========== ============
At December 31, 1998, the Company had approximately $550,000 of U.S. net
operating loss carryforwards expiring through 2013.
Under Brazilian tax law, MBL must begin to pay property taxes on the claims
under exploration upon the public disclosure of the claims by the Brazilian
authorities.
F-11
<PAGE>
Toucan Gold Corporation
(a development stage company)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE J - COMMITMENT AND CONTINGENCIES
Under an agreement with a Brazilian individual (Note E), the Company is
committed to acquire 9 additional priority claims upon clearance of title
by the DNPM. A dispute has arisen between the parties as to the amount to
be paid for the additional claims. The Company interprets the agreement to
provide for consideration for each claim of $36,000 in cash and 12,000
shares of common stock. Pending resolution of the dispute, the Brazilian
individual is withholding transfer documentation for the registration with
the DNPM of the 15 claims previously delivered (Note E). While transfer
documentation is not a prerequisite to registration of claims, the lack of
documentation complicates and prolongs the registration process. The
Company has commenced the registration process and believes that it will be
successful in obtaining registration of all 15 claims. However, there is no
assurance that these claims will be certified by the DNPM.
The Company is required to obtain the consent of surface owners to access
the surface property for exploration and mining. In the event an agreement
cannot be reached with the surface owner, the Company may seek legal
recourse under Brazilian law which provides the claim holder the right to
access if conducting mineral exploration activities.
The surface owner is granted a royalty on future production.
NOTE K - RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
statements to conform to the 1998 presentation.
F-12
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The Board of Directors currently consists of four (4) persons, Robert P.
Jeffcock, L. Clark Arnold, Don Box and Robert A. Pearce. The following table
sets forth information about all Directors and executive officers of the Company
and all persons nominated or chosen to become such:
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME AND BUSINESS ADDRESS AGE OFFICE DIRECTOR
------------------------- --- ------ --------
<S> <C> <C> <C>
Robert P. Jeffcock 59 President, Chief Executive Officer, 1996
2 The Promenade Chairman of the Board of Directors and
Castle Town Secretary
Isle of Man
United Kingdom 1M9-1BJ
L. Clark Arnold 58 Director and Executive Vice President- 1996
201 East Rudasill Road Exploration
Tucson, Arizona
Don Box 49 Director and Assistant Secretary 1996
8201 Preston Road, Suite 600
Dallas, Texas
Robert A. Pearce 54 Director and Chief Financial Officer 1998
Rycote Oasthouse, Wyck Lane
East Worldham
Hants, United Kingdom GU34-3AW
</TABLE>
Robert P. Jeffcock - Mr. Jeffcock has served as the Chairman of the Board
of Directors, Chief Financial Officer and Secretary of the Company since the
date of the Share Exchange (May 10, 1996), and also served as President and
Chief Executive Officer of the Company from the date of the Share Exchange until
December 31, 1996. Mr. Jeffcock resumed his positions as President and Chief
Executive Officer of the Company on May 31, 1997 after the resignation of Oliver
Lennox-King. Mr. Jeffcock is currently the President and Chief Executive Officer
in addition to his other positions. Since 1995, Mr. Jeffcock has been a Director
of Toucan Mining. From 1987 until 1990 Mr. Jeffcock was the Managing Director of
Blue Angel Mining Ltd., a gold exploration company in Ecuador and from 1990
until 1994 he was a director of Atlantis Diamonds Ltd., which was involved in
diamond exploration and production in Brazil. From 1990 until 1994, Mr. Jeffcock
was President of Rand Industries Inc., a mining company. In 1981, Mr. Jeffcock
was the co-founder and President of Isle Resources Inc., a public oil and gas
company. In 1984, Mr. Jeffcock co-founded Lysander Petroleum Ltd., which is now
Pentex Energy Plc. Mr. Jeffcock was educated at Bedales School and at Aiglon
School Villars, Switzerland.
L. Clark Arnold - Mr. Arnold has served as a Director and Executive Vice
President-Exploration of the Company since the date of the Share Exchange. Mr.
Arnold is a registered professional geologist in the State of Arizona. Since the
mid-1970s, Mr. Arnold has engaged in a consulting practice located in Tucson,
Arizona, focused on mineral exploration in Southwest U.S., South America and the
Southwest Pacific. Mr. Arnold holds a MS Degree and a Pd.D. Degree in Geology,
both from the University of Arizona.
Don Box - Mr. Box has served as a Director and Assistant Secretary of the
Company since the date of the Share Exchange. Mr. Box has served since November
1, 1997, as the Executive Vice President of Remington Oil and Gas Corp., a
publicly held oil and gas exploration and production company. Mr. Box served as
Chairman of the Board of Directors of Box Energy Corporation, a public company
owning oil and gas interests in the Gulf of Mexico and mainland U.S., from 1993
until November 1, 1997, and served as Chief Executive Officer of Box Energy
Corporation from January 1, 1997, until November 1, 1997. Since 1992, Mr. Box
has been President and a Director of Box Brothers Holding Company ("Box
15
<PAGE>
Brothers"), which is engaged in the oil and gas business. Box Brothers underwent
a plan of reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code in
Federal Bankruptcy Court in Delaware in 1995. Since 1988, Mr. Box has been the
President of CKB Petroleum, which is engaged in the oil and gas business. Since
1984, Mr. Box has been the President of CKB Petroleum, which is engaged in the
oil and gas business. From 1990 until 1996, Mr. Box was President of Race
Circuit Management of Texas, which is engaged in motor sports promotion. Mr. Box
holds a Bachelor of Arts degree from the University of Pennsylvania, a Bachelor
of Science degree in Economics from the Wharton School of Business and a Masters
degree in Business Administration from Southern Methodist University.
Robert A. Pearce - Mr. Pearce has served as a Director and Chief Financial
Officer of the Company since January 31, 1998. From 1992 through 1993, Mr.
Pearce served as a director, and subsequently as the chairman, of Aspermont Ltd.
("Aspermont"), a publicly traded holding company holding interests in the
television broadcasting and engineering industries. Also during 1993, Mr. Pearce
served as the Executive Chairman of A. I. Engineering Ltd., a publicly traded
engineering firm in the mining industry. From 1994 until his appointment as
Director and Chief Financial Officer of the Company, Mr. Pearce was an
independent consultant to various companies in the United States and the United
Kingdom. Mr. Pearce is a certified accountant having received his accounting
certificate from the Institute of Chartered Accountants of Australia. Mr. Pearce
provides services to the Company one day per week and such additional time as is
requested by the President of the Company. Mr. Pearce received certain options
to purchase Company Common Stock in connection with his appointment as Chief
Financial Officer and Chief Accounting Officer. See "Certain Relationships and
Related Transactions."
The Company is not aware of any "family relationships" (as defined in Item
401(c) of Regulation S-B promulgated by the Commission) among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Except as set forth above, the Company is not aware of any event (as listed
in Item 401(d) of Regulation S-B promulgated by the Commission) that occurred
during the past five years that are material to an evaluation of the ability or
integrity of any director, person nominated to become a director, executive
officer, promoter or control person of the Company.
Item 10. Executive Compensation
The following tables set forth the compensation paid by the Company to its
Chief Executive Officer during the fiscal years ended December 31, 1998, 1997
and 1996 and the options granted by the Company to its Chief Executive Officer
during the fiscal year ended December 31, 1998; no executive officer earned in
excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation
Year Stock
Name/Principal Ending Options Other Annual
Position December 31 Salary Bonus Granted Compensation
- - ------------------------------ ---------------------- --------------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Robert P. Jeffcock, CEO 1996 $32,000 $ 0 0 $ 0
1997 $120,000 $ 0 0 $ 0
1998 $90,000 $ 0 200,000 $ 0
</TABLE>
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Number of % of Total
Securities Options Granted to Exercise
Name/Principal Underlying Employees in Price
Position Options Fiscal Year (Per Share) Expiration Date
- - ----------------------------- ----------------------- --------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Robert P. Jeffcock, CEO 200,000 80% $1.00 December 31, 1999
</TABLE>
CORPDAL:124319.7 29976-00001
16
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of the close of business on March 29,
1999, information as to the beneficial ownership of shares of the Company Common
Stock for all directors, each of the named executive officers (as defined in
Item 402(a)(2) of Regulation S-B promulgated by the Commission), for all
directors and executive officers as a group, and any person or "group" (as that
term is defined in Item 403 of Regulation S-B promulgated by the Commission) who
or which is known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Company Common Stock. In addition, except as set forth
below, the Company Does not know of any person or group who or which owns
beneficially more than 5% of its outstanding shares of Company Common Stock as
of the close of business on March 29, 1999.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of Company Common Stock as of March 29, 1999 by (i) each person known
by the Company to own more than 5% of the outstanding Company Common Stock, (ii)
each of the Company's Directors and executive officers, and (iii) all Directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and
Nature of
Name of Individual or Beneficial Percent
Number of Persons in Group Owner(1) of Class(2)
<S> <C> <C>
Robert P. Jeffcock(3)(4)(5).......................................... 200,000 2.43%
Don D. Box(3)........................................................ 0 *
Robert A. Pearce(3)(9)............................................... 50,000 *
L. Clark Arnold(3)(10)............................................... 470,000 5.82
Caithness Limited(5)................................................. 965,445 12.03
Zalcany Limited(6)................................................... 1,088,000 13.08
Roy G. Williams(6)(7)................................................ 1,736,000 20.6
Reads Trustees Limited(5)............................................ 1,554,453 19.36
J. P. Jeffcock No. 2 Settlement(5)................................... 484,008 6.03
Carlos Lins E. Silva(8).............................................. 210,000 2.57
Igor Mousasticoshvily(8)............................................. 476,666 5.84
All Directors and executive
officers as a group (4 persons)...................................... 720,000 8.65
- - ---------------
<FN>
* Less than 1%
(1) The persons named in this table have record ownership of such shares
and except as indicated in the footnotes to this table, the persons
name in the table have sole voting power with respect to shares shown
as beneficially owned by them.
(2) Based on 8,027,933 shares of Company Common Stock outstanding.
(3) Director and officer of the Company.
(4) Mr. Robert Jeffcock is included in a class of potential beneficiaries
in a Trust which owns Caithness Limited. Includes an option to purchase
200,000 shares of Company Common Stock that is presently exercisable.
17
<PAGE>
(5) Reads Trustees Limited, as trustee, has sole voting and investment
control with respect to the shares held by the following shareholders:
Caithness Limited (965,445) J.P. Jeffcock No. 2 Settlement (484,008);
The Magnum Trust (105,000).
(6) Zalcany Limited is a company ultimately controlled and owned by
Williams, Mr. R. M. Harris and Mr. J.D. Harris. Together they
effectively share the voting and investment power of the shares in the
Company held by Zalcany Limited. Each of R. M. Harris and J. D. Harris
owns individually, beneficially and of record, 42,000 shares. Includes
a warrant to acquire 292,000 shares of Company Common Stock that are
presently exercisable.
(7) Williams' family owns the equity share capital of Mustardseed Estates
Limited. Accordingly, Williams controls or shares voting investment
power over the following shareholders: Williams (110,000); Zalcany
Limited (796,000); and Mustardseed Estates Limited (250,000). Includes
warrants to acquire 68,000, 292,000 and 40,000 shares of Company
Common Stock by Williams, Zalcany Limited and Mustardseed Estates
Limited, respectively, that are presently exercisable.
(8) Consultant to MBL, the principal mining subsidiary of the Company.
Includes an option to acquire 133,333 shares of Company Common Stock
that is presently exercisable.
(9) Includes an option to acquire 50,000 shares of Company Common stock
that is presently exercisable.
(10) Includes an option to acquire 50,000 shares of Company Common stock
that is presently exercisable.
</FN>
</TABLE>
Item 12. Certain Relationships and Related Transactions
During 1998, Zalcany Limited, a company affiliated with Williams, who
is a principal stockholder of the Company, made various unsecured loans to the
Company to fund the Company's current operations. Such loans were made in the
aggregate principal amount of $350,796, each of which had an annual interest
rate of 10%. During 1998, the entire amount of these loans, including interest,
were repaid to Zalcany Limited by the Company in full. All but $9,960 of these
loans were repaid through the transfer to Zalcany Limited of 3,935,000 Minmet
Shares received by the Company in the Minmet Transactions, which shares were
valued at $0.09 per share.
Likewise, during 1998, Robert P. Jeffcock, the President, Chief
Executive Officer and Chairman of the Board of Directors of the Company, made
various unsecured loans to the Company to fund the Company's current operations.
Such loans were made in the aggregate principal amount of $82,373 each of which
had an annual interest rate of 10%. All but $5,000 of these loans, including
interest, were repaid through the transfer to Mr. Jeffcock of 1,325,000 Minmet
Shares received by the Company in the Minmet Transactions, which shares were
valued at $0.09 per share. At the time of the Minmet Transactions, Mr. Jeffcock
had accrued $40,000 in salary as part of his compensation package which had not,
at that time, been paid by the Company. A portion of the 1,325,000 Minmet Shares
issued to Mr. Jeffcock pursuant to the Minmet Transactions were remuneration for
the $40,000 in salary that was accrued but unpaid.
Additionally, in connection with the Minmet Transactions, the Company
has agreed to pay Williams certain fees for introducing Minmet to the Company,
negotiation of the MBL Option, arranging short term funding of the Company's
operations, and providing basic office accommodations and secretarial
assistance. On the execution of the Transaction Documents, Williams was paid a
fee of $60,000. The Company paid the fee by issuing to Williams 180,000 shares
in the Company valued for this purpose at $0.20 per share and transferring to
Williams 265,000 Minmet Shares valued for this purpose at approximately $0.09
per share. On the exercise of the MBL Option, Williams will be entitled to a
further fee of $60,000 payable as to $36,000 in cash or the equivalent value in
shares of the Company and as to $24,000 in cash or the equivalent value in
Minmet Shares.
Certain officers of the Company or MBL received consulting fees for
various consulting services as follows:
Mr. Arnold, Vice President - Exploration of the Company, received in
1998 and 1997 fees totaling $6,891 and $23,934, respectively, in return for
geological consulting services.
Mr. Pearce, a Director and the Chief Financial Officer of the Company,
received in 1998 and 1997 fees totaling $64,985 and $9,900, respectively, in
return for consulting services.
In addition, Mr. Mousasticoshvily, the sole member of the Board of
Directors of MBL, received in 1998 and 1997 fees totaling $125,000 and $167,000,
respectively, for geological and general consulting services.
18
<PAGE>
Following the consummation of the Minmet Transaction, the Company paid
certain creditors with Minmet Shares that were part of the Option Shares
received by the Company in the Minmet Transactions, including certain affiliates
of the Company in addition to the Minmet Shares transferred to Zalcany Limited,
Williams and Robert P. Jeffcock, as described above. For this purpose the Minmet
Shares were valued at $0.09 per share. The following affiliates also received
Minmet Shares in satisfaction of obligations owed to them by the Company and/or
MBL: L. Clark Arnold, Vice President-Exploration (70,000 shares); Igor
Mousasticoshvily (800,000 shares) and Robert A. Pearce, Director and Chief
Financial Officer (500,000 shares).
On December 23, 1997, the Company completed a private placement of an
aggregate of 400,000 shares (the "Investor Shares") of Company Common Stock to
three of its existing stockholders at a purchase price of $.75 per share of
Company Common Stock. Williams, Zalcany, and Mustardseed Estates Limited
received 68,000, 292,000 and 40,000 shares of Company Common Stock,
respectively. Zalcany and Mustardseed Estates are affiliated with Williams. See
"Security Ownership of Certain Beneficial Owners and Management." Along with
each share of Company Common Stock sold in the private placement, the Company
granted to the holder thereof a warrant (the "Investor Warrants") to purchase
one share of Company Common Stock at an exercise price of $1.50. The Investor
Warrants will be exercisable until January 1, 2000. The proceeds of the private
placement was used for the Company's working capital purposes.
On September 27, 1997, the Company granted options to purchase, in the
aggregate, 100,000 shares of Company Common Stock to two separate individuals in
their capacities as employees of the Company. The options allowed each
individual to purchase 50,000 shares of Company Common Stock at an exercise
price of $1.00.
(1) The first block of options, allowing the grantee to
purchase 50,000 shares of Company Common Stock, was granted to
David Carmichael. Mr. Carmichael serves as the General Manager
for MBL. These options would vest in increments of 17,000,
17,000 and 16,000. The initial grant of options to purchase
17,000 shares vested on the date of grant, the second grant of
options vested on April 1, 1998 and the final grant of options
will vest on April 1, 1999. Mr. Carmichael must be employed
with the Company on April 1, 1999, to receive his final grant
of dates.
(2) The second block of options, allowing the grantee to
purchase 50,000 shares of Company Common Stock, was granted to
L. Clark Arnold, a Director and Vice President - Exploration,
whose responsibility is overseeing the Company's exploration
program, for his continuing contributions to the Company in
discharging such responsibilities. Mr. Arnold options vested
on the date of grant and are exercisable up until September
27, 1999.
On February 2, 1998, the Company granted options to purchase, in the
aggregate, 250,000 shares of Company Common Stock to two separate individuals in
their capacities as Directors of the Company. The options allowed Robert P.
Jeffcock and Robert A. Pearce to purchase 200,000 and 50,000 shares of Company
Common Stock, respectively, at an exercise price of $1.00. Mr. Jeffcock and Mr.
Pearce received their options as part of their remuneration for services
rendered to the Company. Each individual's options vested on the date of grant
and are exercisable up until December 31, 1999.
19
<PAGE>
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Exhibit
- - ------- ----------------------
2.1 Agreement and Plan of Merger, dated July 29, 1996, and among Toucan Gold
Corporation and Starlight Acquisitions, Inc. (incorporated by reference
from the Current Report on Form 8-K dated July 29, 1996, Exhibit 2.1).
2.2 Share Exchange Agreement, dated May 10, 1996, by and among Starlight
Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
from the Current Report on Form 8-K dated May 13, 1996, Exhibit 2).
3.1 Certificate of Incorporation of Toucan Gold Corporation filed on July 22,
1996 with the Secretary of State of the State of Delaware (incorporated by
reference from the Current Report on Form 8-K dated July 29, 1996, Exhibit
4.1).
3.2(1) Bylaws of Toucan Gold Corporation (Exhibit 3.2).
10.1(4) Option Agreement, dated September 27, 1997, by and between the Company
and David Carmichael (Exhibit 10.1).
10.2(4) Option Agreement, dated September 27, 1997, by and between the Company
and L. Clark Arnold (Exhibit 10.2).
10.3(4) Option Agreement, dated February 2, 1998, by and between the Company and
Robert P. Jeffcock (Exhibit 10.3).
10.4(4) Option Agreement, dated February 2, 1998, by and between the Company and
Robert A. Pearce (Exhibit 10.4).
10.5(2) Warrant Agreements, dated as of December 31, 1997, by and between the
Company and Roy G. Williams, Zalcany Limited and Mustardseed Estates
Ltd.(Exhibit 10.1)
10.6(2) Warrant Agreement dated as of December 31, 1997, by and between the
Company and Igor Mousasticoshvily (Exhibit 10.2)
10.7(3) Employment Agreement, dated as of April 1, 1997, by and between the
Company and David Carmichael (Exhibit 10.1)
10.8(1) Warrant Agreement, dated July 29, 1996, by and between Toucan Gold
Corporation and R. Haydn Silleck (Exhibit 10.1).
10.9(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and John B. Marvin (Exhibit 10.2).
10.10(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and Peter S. Daley (Exhibit 10.3).
10.11(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and Jay Lutsky (Exhibit 10.4).
20
<PAGE>
10.12 Indemnification Agreement, dated May 10, 1996, by and between R. Haydn
Silleck, John B. Marvin, Peter S. Daley, Jay Lutsky, Starlight
Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
from the Current Report on Form 8-K dated May 13, 1996, Exhibit 10.2).
10.13 Agreement with Yorkton Securities, Inc., dated October 17, 1996
(incorporated by reference from the Current Report on Form 8-K, dated
October 21, 1996, Exhibit 10).
10.14 Amendment to the Agreement with Yorkton Securities, Inc., dated October
23, 1996 (incorporated by reference from the Current Report on Form 8-K,
dated October 29, 1996, Exhibit 10.2).
10.15(5) Agreement for the sale and purchase of the whole of the issued share
capital of Anagram Limited, dated December 3, 1998, among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.1).
10.16(5) Supplemental Agreement, dated December 3, 1998 among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.2).
10.17(5) Option Agreement Regarding Mineradora De Bauxita Ltda, dated December
3, 1998, among Toucan Mining Limited, Toucan Gold Corporation, Inc. and
Anagram Limited (Exhibit 10.3).
10.18(5) Agreement for the purchase of the whole of the issued share capital of
Mineradora de Bauxita Ltda, dated December 3, 1998 among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Anagram Limited (Exhibit 10.4).
10.19(5) Form of Minmet Plc Warrant Instrument (Exhibit 10.5).
21* Subsidiaries of the Company.
27* Financial Data Schedules.
*Filed herewith
(1) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-KSB for the period ended December
31, 1996, filed by the Company with the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Current Report on Form 8-K, filed January 8, 1998 with the
Securities and Exchange Commission.
(3) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1997, filed by the Company with the Securities and Exchange
Commission.
(4) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-KSB for the period ended December
31, 1997, filed by the Company with the Securities and Exchange Commission.
(5) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Current Report on Form 8-K, filed January 5, 1999, filed by
the Company with the Securities and Exchange Commission.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the last quarter of the
Company's fiscal year ended December 31, 1998. The Company did, however, file a
Current Report on Form 8-K, dated January 5, 1999, describing the Minmet
Transactions.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this annual report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.
Toucan Gold Corporation
(Registrant)
Date: March 31, 1999 By: /s/ Robert P. Jeffcock
-----------------------------------
Robert P. Jeffcock, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this annual report on Form 10-KSB has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE OFFICE DATE
------------ ------------ --------
<S> <C> <C>
/s/ Robert P. Jeffcock President, Chief Executive Officer and March 31, 1999
- - ------------------------------------ Chairman of the Board of Directors (Principal
Robert P. Jeffcock Executive Officer)
/s/ L. Clark Arnold Director and Executive Vice President- March 29, 1999
- - ------------------------------------ Exploration
L. Clark Arnold
/s/ Don Box Director and Assistant Secretary March 30, 1999
- - ------------------------------------
Don Box
/s/ Robert A. Pearce Director and Chief Financial Officer March 31, 1999
- - ------------------------------------ (Principal Financial Officer and Chief
Robert A. Pearce Accounting Officer)
</TABLE>
22
<PAGE>
Index to Exhibits
(a) Exhibits
Exhibit
Number Description of Exhibit
- - ------- ----------------------
2.1 Agreement and Plan of Merger, dated July 29, 1996, and among Toucan Gold
Corporation and Starlight Acquisitions, Inc. (incorporated by reference
from the Current Report on Form 8-K dated July 29, 1996, Exhibit 2.1).
2.2 Share Exchange Agreement, dated May 10, 1996, by and among Starlight
Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
from the Current Report on Form 8-K dated May 13, 1996, Exhibit 2).
3.1 Certificate of Incorporation of Toucan Gold Corporation filed on July 22,
1996 with the Secretary of State of the State of Delaware (incorporated by
reference from the Current Report on Form 8-K dated July 29, 1996, Exhibit
4.1).
3.2(1) Bylaws of Toucan Gold Corporation (Exhibit 3.2).
10.1(4) Option Agreement, dated September 27, 1997, by and between the Company
and David Carmichael (Exhibit 10.1).
10.2(4) Option Agreement, dated September 27, 1997, by and between the Company
and L. Clark Arnold (Exhibit 10.2).
10.3(4) Option Agreement, dated February 2, 1998, by and between the Company and
Robert P. Jeffcock (Exhibit 10.3).
10.4(4) Option Agreement, dated February 2, 1998, by and between the Company and
Robert A. Pearce (Exhibit 10.4).
10.5(2) Warrant Agreements, dated as of December 31, 1997, by and between the
Company and Roy G. Williams, Zalcany Limited and Mustardseed Estates Ltd.
(Exhibit 10.1)
10.6(2) Warrant Agreement dated as of December 31, 1997, by and between the
Company and Igor Mousasticoshvily (Exhibit 10.2)
10.7(3) Employment Agreement, dated as of April 1, 1997, by and between the
Company and David Carmichael (Exhibit 10.1)
10.8(1) Warrant Agreement, dated July 29, 1996, by and between Toucan Gold
Corporation and R. Haydn Silleck (Exhibit 10.1).
10.9(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and John B. Marvin (Exhibit 10.2).
10.10(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and Peter S. Daley (Exhibit 10.3).
10.11(1) Warrant Agreement dated July 29, 1996, by and between Toucan Gold
Corporation and Jay Lutsky (Exhibit 10.4).
Index - 1
<PAGE>
10.12Indemnification Agreement, dated May 10, 1996, by and between R. Haydn
Silleck, John B. Marvin, Peter S. Daley, Jay Lutsky, Starlight
Acquisitions, Inc. and Toucan Mining Limited (incorporated by reference
from the Current Report on Form 8-K dated May 13, 1996, Exhibit 10.2).
10.13Agreement with Yorkton Securities, Inc., dated October 17, 1996
(incorporated by reference from the Current Report on Form 8-K, dated
October 21, 1996, Exhibit 10).
10.14Amendment to the Agreement with Yorkton Securities, Inc., dated October
23, 1996 (incorporated by reference from the Current Report on Form 8-K,
dated October 29, 1996, Exhibit 10.2).
10.15(5) Agreement for the sale and purchase of the whole of the issued share
capital of Anagram Limited, dated December 3, 1998, among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.1).
10.16(5) Supplemental Agreement, dated December 3, 1998 among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Minmet Plc (Exhibit 10.2).
10.17(5) Option Agreement Regarding Mineradora De Bauxita Ltda, dated December
3, 1998, among Toucan Mining Limited, Toucan Gold Corporation, Inc. and
Anagram Limited (Exhibit 10.3).
10.18(5) Agreement for the purchase of the whole of the issued share capital of
Mineradora de Bauxita Ltda, dated December 3, 1998 among Toucan Mining
Limited, Toucan Gold Corporation, Inc. and Anagram Limited (Exhibit 10.4).
10.19(5) Form of Minmet Plc Warrant Instrument (Exhibit 10.5).
21* Subsidiaries of the Company.
27* Financial Data Schedule.
*Filed herewith
(1) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-KSB for the period ended December
31, 1996, filed by the Company with the Securities and Exchange Commission.
(2) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Current Report on Form 8-K, filed January 8, 1998 with the
Securities and Exchange Commission.
(3) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1997, filed by the Company with the Securities and Exchange
Commission.
(4) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Annual Report on Form 10-KSB for the period ended December
31, 1997, filed by the Company with the Securities and Exchange Commission.
(5) Incorporated by reference to the exhibit shown in parenthesis included in
the Company's Current Report on Form 8-K, filed January 5, 1999, filed by
the Company with the Securities and Exchange Commission.
Index - 2
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
The following is a list of all subsidiaries, the state or other
jurisdiction of incorporation or organization of each, and the names under which
such subsidiaries do business:
1. Toucan Mining Limited ("Toucan Mining"), an exploration stage company
incorporated under the laws of the Isle of Man (British Isles), is a
wholly owned subsidiary of the Company.
2. Mineradora de Bauxita Ltda. ("MBL"), an authorized mining company
organized under the laws of Brazil, is a wholly owned subsidiary of
Toucan Mining.
<TABLE> <S> <C>
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<NAME> Toucan Gold Corporation
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<CASH> 83,973
<SECURITIES> 0
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