UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1997
Commission File Number 000-18343
NU-DAWN RESOURCES INC.
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(Exact Name of Registrant as specified in its charter)
Not Applicable
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(Translation of Registrant's name into English)
Province of British Columbia
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(Jurisdiction of incorporation or organization)
102 Piper Crescent, Nanaimo, BC, Canada V9T 3G3
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(Address of principal executive offices)
Securities registered or to be registered pursuant to
Section 12(b) of the Act.
None
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Securities registered or to be registered pursuant to
Section 12(g) of the Act.
No Par Value Common Stock
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(Title of Class)
Securities for which there is a reporting obligation
pursuant to Section 15(d) of the Act.
None
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(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period of this Registration
Statement: 27,493,104
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 X Item 18
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Currencies: Monetary amounts in this Form 20-F are stated in Canadian dollars
(Cdn $) except where specifically stated otherwise.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
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Nu-Dawn Resources, Inc. (the "Company") was incorporated on October 3, 1980 by
registration of its Memorandum and Articles under the Company Act of the
Province of British Columbia. Since its formation, the Company has been engaged
in the acquisition and exploration of mineral properties.
In 1986 the Company completed the sale of 600,000 shares of common stock at
$0.50 per share in a public offering in Canada. In subsequent years, the Company
raised additional capital for the primary purpose of exploring certain mineral
properties through the private placement of common stock in Canada.
By agreement dated November 21, 1986 the Company completed a private placement
of 248,000 "flow-through" common shares at a price of $0.3226 per share to 14
private investors, together with warrants to purchase up to 248,000 additional
shares at $0.40 per share during the ensuing 12 months. No commissions were paid
by the Company. Subsequently, warrants for the purchase of an additional 105,614
shares were exercised by certain of the investors for total proceeds to the
Company of $42,245. "Flow-through" common shares under applicable laws of Canada
permit amounts paid by investors to be expended by the issuer in exploration of
mineral properties with the amounts expended deductible, for purposes of
reporting income under applicable Canadian income tax laws, by the individual
investor and not by the issuer. Other than such characteristics, such shares are
equivalent to all other shares of common stock of the issuer.
In August 1987, the Company completed a private placement of 550,797
'flow-through' common shares at a price of $0.37 per share to 19 private
investors, together with warrants to purchase up to 550,797 additional shares at
$0.42 per share during the ensuing 12 months. Yorkton Securities Inc. (a
Canadian broker-dealer) received a commission of 10% of the gross proceeds. None
of the warrants were exercised and all have expired.
In 1988, the Company entered into an agreement to acquire an ore concentrating
and milling facility and small parcel of land located within a few miles of the
Company's two principal mining prospects in British Columbia near the town of
Salmo. The acquisition was completed in 1989 and as consideration for the
acquisition of the milling facility (referred to hereafter as the "H.B. Mill"),
the Company issued 7,200,000 shares of its common stock to Nor-Quest Resources
Ltd., a publicly-owned British Columbia corporation ("Nor-Quest"). For
approximately 12 months through late 1989, the Company had an agreement with
Nor-Quest pursuant to which certain operating and other expenses of the Company
were advanced by Nor-Quest, which was then the majority shareholder of the
Company. In late 1989, Nor-Quest sold its stock ownership interest in the
Company in a private transaction and agreed with the purchaser that amounts owed
by the Company to Nor-Quest would be limited to $50,000 and would be repaid only
out of future operating profits from the H.B. Mill.
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In 1989 the Company issued 120,000 shares of its common stock to Najcorp
Investments Inc., a British Columbia corporation, for the acquisition of a 0.5%
working interest in four natural gas wells located in Atoka County, Oklahoma,
U.S.A.
Subsequent to the private sale of the Company's stock by Nor-Quest, as described
above, the purchaser of those shares, Dydar Resources Ltd. ('Dydar'), a British
Columbia corporation owned by Raynerd B. Carson, who became a director of the
Company in November, 1989, made a private acquisition from the Company of
2,000,000 shares of the Company's common stock and a stock purchase warrant
entitling Dydar to purchase an additional 2,000,000 shares of common stock at
$0.20 per share for a total purchase price of $300,000. The shares and any
shares acquired from exercise of the warrant are subject to a 12 month
restriction from transfer expiring November 20, 1990. Dydar exercised its stock
purchase warrant to purchase an additional 2,000,000 shares of common stock for
$400,000 on October 30, 1990. In connection with the acquisition of the Company
shares from Nor-Quest and the private purchase from the Company, three persons
designated by Dydar were added to the Board of Directors of the Company and two
former directors resigned.
During the year ended October 31, 1991 the Company issued 476,388 shares, to a
company controlled by a director and officer, for consideration of $160,781
pursuant to a private placement. The consideration consisted of cash of $30,000
and the assumption of accounts payable of $130,781 by the investor. In addition,
the investor received warrants to purchase an additional 476,388 shares at
$0.3375 per share until May 22, 1992 and at $0.39 per share from May 23, 1992 to
May 22, 1993.
During the year ended October 31,1992 the Company issued 1,494,217 shares.
1,400,000 shares were issued pursuant to a private placement of 1,400,000 units
consisting of one share and a two year purchase warrant to purchase a share at
$0.15 in the first year and $0.20 in the second year. The warrants expire on
September 10,1993.During the period 94,217 shares were issued at $0.29.9 to
settle a debt totalling $28,265.00. Three directors resigned during the period
and one new director was appointed. The lease on the Yankee Dundee mining
property was terminated.
During the year ended October 31, 1993 the Company issued 784,470 shares
pursuant to exercise of warrants for debt. The Company sold the Jersey Emerald
mining claims for the consideration of twelve thousand dollars to be paid on
equal annual instalments over three years. The Company retains a one and one
half percent net smelter return royalty from any future production.
During the year ended October 31, 1994 the Company issued 1,000,000 units
pursuant to a private placement of $0.15 per unit, each unit consisting of one
common share and one non-transferable share purchase warrant exercisable for a
period of two years entitling the holders the right to purchase an additional
share at a price of $0.15, if exercised before April 18, 1995 and at a price of
$0.20 per share if exercised between April 19, 1995 and April 18, 1996. As at
October 31, 1994, 666,667 warrants were outstanding.
Issued 50,000 shares at a deemed price of $0.15 per share pursuant to a letter
agreement for exploration work.
None of the Company's mineral properties in Canada are in production. One small
interest in a producing oil and gas property in the United States, acquired in
1989, provides no revenue.
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During the year ended October 31, 1995 the Company :
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(i) issued 1,500,000 units at $0.15 per unit pursuant to a private placement
agreement dated July 7,1995, each unit consisting of one common share and
one non-transferable share purchase warrant entitling the holder to
purchase a further common share for a period of two years at a price of
$0.15 per share during the first year and $0.20 per share during the second
year. The Company issued 266,667 units as an exploration payment on the
Guanacaste property in Costa Rica and the balance for cash. A further
150,000 common shares were issued as a finder's fee in connection with this
transaction.
As at October 31,1996, 1,055,334 of the share purchase warrants remained
unexercised.
(ii) issued 386,709 common shares at a deemed price of $0.15 per share pursuant
to a share for debt agreement.
The Company employs one full-time officer. The Company relies on its
officers and directors to conduct its business affairs.
During the year ended October 31, 1996 the Company:
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(i) issued 329,338 common shares for debt settlement of $71,069 of which
196,000 of those shares were issued to an individual related to the
President of the Company for debt settlement of $29,400.
(ii) issued 700,000 units at $0.20 per unit pursuant to a private placement
agreement, each unit consisting of one flow-through common share and one
non-transferable share purchase warrant entitling the holder to purchase
either one flow-through common share or one common share, at a price of
$0.20 per share, for a period of one year. As at October 31, 1996 all the
share purchase warrants remain unexercised.
(iii)issued 500,000 units at $0.50 per unit pursuant to a private placement to
a company controlled by the President of the Company for cash proceeds of
$233,331 and debt settlement of $16,669. Each unit consisting of one common
share and one non-transferable share purchase warrant entitling the holder
to purchase an additional common share for a period of two years at a price
of $0.50 per share during the first year and $0.60 per share during the
second year. As at October 31, 1996, 115,495 of the share purchase warrants
had been exercised for debt settlement of $57,748.
(iv) issue 444,666 common shares pursuant to a private placement for cash
proceeds of $50,000 and settlement of exploration payments of $14,000.
During the year ended October 31, 1997 the Company:
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(i) issued 1,000,000 shares at $0.15 per share with non-transferable share
purchase warrants to purchase 1,000,000 shares at $0.15 per share for a one
year period and $0.18 per share in the second year. As at October 31, 1997
696,499 of the share purchase warrants remained unexercised.
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(ii) issued 325,000 units at $0.20 per share pursuant to a private placement
agreement dated November 1996 entitling the holder to purchase either one
flow-through common share or one common share at a price of $0.20 for a
period of one year.
(iii)issued 303,501 units at $0.15 per share on exercise of warrants for cash
proceeds of $45,526.
(iv) issued 1,054,610 units at $0.20 per share on exercise of warrants for debt
settlement of $210,922.
(b) Industry Segments
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The Company presently operates in one industry and two geographic segments, the
mineral exploration and development business in Canada and Costa Rica, and the
Company is in the development stage, never having received material revenues
from such operations. During the fiscal year, 1991, the Company received $8,416
for the sale of timber cut on Company land. During the fiscal year ended October
31,1993 the Company received $152,005 for the sale of timber cut on Company
land. During the year ended October 31, 1994 the Company received $10,155 for
the sale of equipment. During the year ended October 31, 1995, the Company
received $4,284 from operations. The Company received $14,379 from operations
during the year ended October 31, 1996. During the year ended October 31, 1997
the only revenue received by the Company was interest from investment and sale
of spare equipment parts from the HB Mill, totalling $3,201.
In the future, the Company contemplates selling the land, and equipment of its
H.B. Mill in Salmo, British Columbia or if the opportunity presents its self
bringing the H.B. Mill and Concentrator into operation either for its own
account or in custom processing of mineral ores for others and in such event,
such activities may constitute a separate industry segment.
(c) Narrative Description of Business
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Upon organization the Company's organizers caused two non-producing mineral
properties located near Salmo, British Columbia, Canada, to be transferred to
the Company. Subsequently, the Company acquired interest in two other
non-producing mineral properties located in Ontario and British Columbia,
Canada. (ITEM 2)
The Company's principal activities through the end of 1994 have consisted
principally of financing activities for the purpose of raising capital to
explore Company properties and the exploration of the properties using the funds
raised. The Company intends to continue to explore its properties to determine
whether commercially extractable minerals exist and, if funding is available,
may engage in the development of mineralized zones and the production of
minerals. Through 1994/95 substantially all of the Company's available capital
has been expended for mineral property acquisition exploration and upgrading the
H.B. Mill. No mining operations have been conducted and no operation of the
Company's H.B. Mill, acquired in 1989, has been attempted.
(d) Plan of Operation
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The Company's planned principal operations, as soon as funds are available, are
to complete the exploration of existing properties in the Salmo, British
Columbia area and either develop or acquire a source of mineral bearing ore
sufficient to justify the commencement of operations at the Company's H.B. Mill,
either alone or under a joint venture type arrangement with one or more other
mining companies.
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The Company may sell all or part of its mining and milling equipment in Salmo,
BC. The Company may sell all or any part of its land holdings in Salmo, BC. The
Company may develop alone or with others all or any part of its land holdings in
Salmo, BC into residential and recreational lots.
Since its initial public offering in Canada in 1986, the Company has had
insufficient capital available to complete the exploration of its existing
properties or to develop any mining reserves. Due to the significant capital
investment involved in production mining operations and the operation of an ore
processing mill, it is likely that the Company may not make any final
determination as to the value or presence of any commercial mining reserves in
its existing properties for up to several years. Therefore, the Company will
continue to consider alternative sources of capital which may include
arrangements under which the Company would enter into joint venture arrangements
or undertake mineral property management on behalf of others. However, due to
uncertainties involved it cannot be ascertained whether sufficient capital will
be available for any such activities.
(i) Products
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Because the Company has been in the development stage in the mining business and
is not engaged in the business of extracting minerals from any of its properties
or operating its ore processing mill, the Company does not have any principal
products. The only revenues received were from spare machinery and parts that
the Company owned.
(ii) Status of Product
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There has been no public announcement of, nor has the Company otherwise made
public information about, any new product or industry segment of the Company
requiring the investment by the Company of a material amount of its total
assets, or which is otherwise material to the Company's operations. However,
should the Company determine to commence operations of its H.B. Mill, as to
which there has been no determination, the commencement of such operations would
require a large expenditure of funds prior to commencement of operations and the
commitment of future operating capital, neither of which are presently available
to the Company.
(iii) Raw Materials
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The sources and availability of raw materials essential to the Company's
business are limited in the context that mineral bearing ore of a high enough
commercial grade to justify development must be discovered or otherwise acquired
and explored before a production decision can be made and implemented. Because
the Company's processing mill is already in existence, the Company intends to
focus early efforts in developing a source of ore for processing in the vicinity
of Salmo, British Columbia, and area in which mineral exploration, mining and
processing has been conducted for over 100 years and therefore, many of the
available properties may have been mined out or acquired by others. Any raw
materials essential to mineral exploration or mine and mill operations are
limited only to the extent that major mineral supply firms may be unable to
provide the Company with required supplies as the need therefore arises in the
future. No shortages are anticipated.
(iv) Patents, Trademarks and Licenses
--------------------------------
The Company has no material patents, trademarks, licenses, franchises or
concessions except insofar as the Company depends upon mining claims or
properties acquired from the Canadian and the Costa Rican government. The
Company believes that it is in compliance with all applicable obligations
regarding such titles.
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(v) Seasonality
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The Company's business is seasonal only to the extent that severe winter
conditions may limit the Company's exploratory activities or future mill
operating activities.
(vi) Working Capital Items
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The Company is in the development state and thus has no material revenues from
activities. As a result, most of the Company's activities have been and are
likely in the future to be conducted using available capital resources, the lack
of which could restrict the Company's future activities.
(vii) Customer Dependence
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The Company is not dependent upon a single or few customers for revenues.
(viii) Backlog of Orders
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The nature of the Company's business precludes a backlog of orders.
(ix) Government Contracts
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No portion of the Company's business is subject to renegotiation of profits or
termination of contracts or subcontracts at the election of the government.
(x) Competition
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The mining industry in which the Company is engaged is in general, highly
competitive. Competitors include well-capitalized mining companies, independent
mining companies and other companies having financial and other resources far
greater than those of the Company. The Company encounters strong competition in
attempting to acquire additional mineral properties and interest in commercially
mineable ore reserves in the Salmo, British Columbia area. In general,
properties with a higher grade of recoverable mineral and/or which are more
readily mineable afford the owners a competitive advantage in that the cost of
production of the final mineral product is lower. Thus, a degree of competition
exists between those engaged in the mining industry to acquire the most valuable
properties. The Company's competitive position in the mining business in general
and in the Salmo, British Columbia area in particular, is insignificant.
(xi) Research and Development
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The Company has not engaged in any material research and development activities
during its last three fiscal years except to the extent that it conducted
mineral exploration activities.
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(xii) Environmental Regulation
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The Company, like any business involved in the extraction or processing of
mineral properties, may be required to make extensive capital expenditures in
the future to protect the environment and to comply with applicable
environmental regulations in connection with any exploration, development,
mining or milling activities. As of the end of 1997, the Company was engaged in
no such activities. However, such capital expenditures or requirements could
effect the Company's competitive position in the mining and exploration business
and, conceivably, could limit the Company's availability to enter into some
mining or milling projects. No capital expenditures for environmental control
facilities have been made and the Company does not expect to make any such
expenditures during the current or coming fiscal year.
(xiii) Employees
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During its fiscal year ended October 31, 1997, the Company employed one
full-time office manager, and a president's assistant provided services to the
Company on a contract basis. Most Company operations will be conducted by the
officers on a part time basis or by outside contractors. If the H.B. Mill is
placed into operation by the Company, full-time employees would be expected to
be hired. Presently, a Mill Superintendent is employed on a part-time basis.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
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The Company does not foresee that there is any risk to the conduct of its
business in Canada or Costa Rica.
ITEM 2. DESCRIPTION OF PROPERTY
Ymir Properties
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The Company holds a group of contiguous Crown granted mineral claims and located
mineral claims and fractions which cover workings of the Ymir Consolidated and
Protection (Goodenough) Mines which were operated in the early twentieth
century. In addition to the two mines, the Company's properties cover two old
mill sites, tailings ponds and surface rights aggregating about five acres. The
Company holds a 100% interest in these properties subject to a 15% net profit
interest in favor of Zone International Ltd. (formerly C.T. Exploranda Ltd.), an
unaffiliated British Columbia corporation. The property is situated
approximately 3 miles northeast of Ymir, British Columbia, between Ymir and
Huckleberry Creeks. The town of Ymir lies on Highway 6 between Salmo and Nelson.
The Canadian Pacific Railway also passes through Ymir. The towns of Castlegar
(at which is located an airport) and Trail (at which is located a smelter) lie
approximately 37 miles to the west on Highway 3. Access to the two properties is
on government all- weather gravel roads from Ymir.
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The mines are adjacent and interconnected and both are reported to have produced
as follows:
Ymir Zone (1895-1950)- 366,983 tons containing:
109,606 oz Au ( 0.299 oz / ton )
459,909 oz Ag ( 1.250 oz / ton )
1,777,780 lb Zn ( 0.24 % Zn )
10,531,644 lb Pb ( 1.43 % )
Protection (Goodenough) Zone (1889-1973) - 16,745 tons containing:
10,685 oz Au ( 1.638 oz / ton )
83,089 oz Ag ( 4.960 oz / ton )
1,520,137 lb Pb ( 4.5 % Pb )
1,565,216 lb Zn ( 4.6 % Zn )
1,134 lb Cadmium
Since acquiring the properties the Company has expended approximately $265,000
in exploration activities, primarily in 1984, 1986, 1990 and in 1991 expended a
further $68,608. The work consisted of geological surveys, geochemistry
analysis, trenching and drilling. These exploration activities located
mineralization which would indicate that further exploration is indicated. The
Company has no plans to conduct additional work on this project.
As of October 31, 1997 The Company has a 100% interest in certain mineral claims
located in the Nelson Mining Division, British Columbia, subject to a 15% net
profit interest, and has freehold title to the land. During the year ended
October 31, 1997, the Company wrote down the balance of its interest in this
resource property.
Triton Property
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The Company has a 50% interest in a joint-venture basis with Greater Temagami
Mines Ltd., an unaffiliated corporation, in five unsurveyed mining claims in the
Shiningtree area of the Larder Lake mining division, Ontario, Canada. The Triton
Property is accessible from both the east (New Liskeard, Elk Lake and Gowganda)
and from the west (Sudbury, Grogama) via highway 560. A 4- mile gravel road
connects the property to the highway. The Shiningtree region is underlain mainly
by basic to intermediate volcanic rocks which occur within a wide trending belt.
The main historic gold occurrence near the Triton Property is the Kingston Vein,
though only limited production has been recorded. A number of other gold
deposits in the Siningtree region occur to the northwest, along the strike of
the volcanos.
In November 1978, a brief geological mapping project which encompassed the
Triton Property, was conducted which determined that sparse outcrops in the area
consisted of basalt. In late 1986 and early 1987 the joint venture established a
grid on the property, including the 1978 baseline, and carried out surveys and
862 metres of diamond drilling in six holes.
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During August 1987, the joint venture conducted a mapping and prospecting
program on the Triton Property which included trenching and stripping the
bedrock in two different locations. Several old trenches and pits were
discovered during mapping. From October through mid-November 1987, a diamond
drilling program, Phase 1, was carried out on the Triton Property for the
purpose of investigating the depth and extent of the Kingston Vein and to extend
the known mineralized zone. The program consisted of five drill holes totalling
492 metres.
From mid-January to March 1988, the Phase 2 diamond drilling program was carried
out on the Triton Property for the purpose of investigating the extent of the
Kingston Vein in and around the Kingston shaft and testing the area around the
Western Shaft and the trenches in the northeast portion of the grid. The program
consisted of 12 holes totalling 1,349 metres. The exploration program has
established several gold bearing quartz veins on the Triton Property, with
anomalous gold values obtained ranging from .035 oz. gold per ton in one test
hole to as high as .694 oz. of gold per ton in one hole. Additional drilling to
further test the areas where encouraging results were found has been
recommended. The Company and its join venture partners have made no
determination about what further exploration will be undertaken.
The Company's expenditures in the joint venture have totalled $250,000.
As of October 31, 1997 The Company has a 50% interest in certain mineral claims
located in MacMurchy Township of the Larder Lake Mining Division, Ontario. A
third party has agreed to maintain the good standing of the mineral claims.
During the year ended October 31, 1997, the Company wrote down the balance of
its interest in this property.
H.B. Mill Property
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In 1989 the Company acquired the H.B. Mill in Salmo, British Columbia, by the
issuance of 7,200,000 shares to Nor-Quest Resources Ltd. The H.B. millsite
occupies a small parcel of land and was originally constructed in the 1950s to
process ore produced at the H.B. Mine in Salmo. Ultimately, the mine was
depleted and the mill was used for custom processing intermittently for a number
of years, last in 1983. Thereafter, regular maintenance was conducted by various
owners. In the mid-1980s the cyanide processing portion of the plant was
rehabilitated and modernized in anticipation of placing the mill into operation.
However, the mill has not been operated. In 1990 an unaffiliated mining
engineering firm provided a report concerning the mill which indicated that its
present fair market value, based on its size, condition and replacement costs,
and considering that in excess of $517,000 in expenditures would be required
before operations could commence, would be in excess of $11,200,000. Replacement
value is estimated at $45,287,000. The Company considers that its ownership of
the H.B. Mill will place it in a position during the coming years to acquire
ownership or operating interests in various mineral properties in the area as no
other operable or processing mill of comparable size presently exists and
numerous other individuals and companies maintain properties from which minerals
may be developed and mined.
The Company does not have any proven or probable mineral reserves on any of its
properties and none of the exploratory activities previously conducted by the
Company have established any such reserves, although the Company continues to
believe that further exploration of its properties could lead to establishment
of commercial quantities of extractable ore.
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Jersey Emerald Property
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The Company sold the Jersey Emerald mining claims in 1993 for the consideration
of $12,000 to be paid in three equal annual payments and the Company retains a
one and one half percent net smelter return royalty. All property payments have
been made and the Company retains one and one-half percent net smelter return
royalty. Sultan Minerals Inc., a public company unrelated to Nu-Dawn Resources
Inc., is carrying out an exploration program, including core drilling, in
1996/97 on the property.
Saskatchewan Properties
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During February and March of 1994 the Company acquired mining concessions in the
Fort a La Corne and White Swan Lake areas of Saskatchewan from the Saskatchewan
Department of Mineral Resources with an estimate of 50,000 acres. An airborne
maganetometer was carried out over the area required a cost of $67,638.98.
Ground geophysical surveys, plus 2 drilling holes, were competed in 1996 with
inconclusive results. The Company issued 50,000 shares of its common stock from
treasury to Dave McGowan (prospector) for acquiring the White Swan Lake
property. The combined costs of acquisition and exploration of all of the
Saskatchewan properties totalled an expenditure of $242,160.00.
The Company also entered into an option agreement to acquire a 100% interest,
subject to a 5% net profits royalty, in certain mineral claims in the Prince
Albert Mining District, Saskatchewan. To maintain this interest, the Company is
required to pay $2,000 annually for ten years to July 2003.
As of October 31, 1997 The Company had a 100% interest in certain mineral
exploration permits issued by Saskatchewan Energy and Mines in the Southern
Mining District in Saskatchewan. During the year, the Company allowed the
permits to lapse and wrote off the investment in those permits. The remaining
balance of $55,788 represents the Company's interest in the option in the Prince
Albert Mining District.
Panama, Pan-Oro
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During the year 1995, the Company entered into a letter of agreement with Grande
Portage Resources Ltd to enter into a joint-venture agreement to develop mineral
concessions in Panama. The agreement has not yet been concluded and regulatory
approval remains outstanding. The Company has 90% ownership interest in Pan-Oro,
S.A., a Panamanian corporation. During 1996, the Company entered into a letter
of agreement with Grande Portage Resources Ltd. to enter into a joint venture
agreement to develop mineral concessions in Panama. The Company has a 90%
ownership interest in Pan-Oro S.A., a Panamanian corporation. The agreements
have not been concluded and regulatory approval remains outstanding. Resource
properties include $21,000 in costs charged by Pan-Oro S.A.
Costa Rica, Guanacaste
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Pursuant to an option agreement dated October 23, 1995 between the Company and
Minera Oceanica, S.A., the Company acquired an option for the mineral and
surface rights in Concession 6622 situated in the Juntas de Abangores, District
of Guanacaste, Costa Rica, subject to a 10% royalty in favor of Minera Oceanica,
S.A. on operating profits derived from the property, or US $100,000 per year,
whichever is the greater.
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In order to exercise the option, the Company must obtain an independent
feasibility study prior to June 30, 1997, and thereafter put the property into
production. Finders fees in the amount of $22,500 have been included in resource
properties.
Geological and geochemical surveys were carried out in 1996, and a core drill
hole was drilled to test for gold. Results to date have been inconclusive.
Sukut, Costa Rica
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The Company entered into an option agreement dated April 24, 1996 for the
mineral exploration permit (ID#6200) over an area of eighteen square kilometres
within the Bribri Indian Reservation situated in the Province of Limon, County
of Talamanca, District of Bratsi. There has been a moratorium placed on any
mining activity by the Asamblea Legislativa de Costa Rica.
In order to exercise this option, the Company must comply with the following:
i) pay the optionor $10,000 within eight days of the signing of the agreement
(paid); and
ii) pay the optionor $10,000 upon the anniversary date of the agreement; and
iii) spend a minimum amount of $100,000 in lobbying and perform the necessary
efforts to obtain the approval of the exploration permit by the Asamblea
Legislativa de Costa Rica; and
iv) once the exploration permit becomes fully legal and enforceable, pay the
optionor $15,000 within three months, $50,000 one year after approval,
$75,000 two years after the approval and subsequently $75,000 per year upon
each anniversary date.
Once the exploration phase is completed, the Company has the option to apply for
the exploitation (mining) permit. In order to exercise this option, the Company
must, once the exploitation permit is granted, pay the optionor the greater of
3% of the net smelter return and $75,000 per year. The Company has the option to
purchase outright 50% of the vendor's net smelter return for US$1,500,000 and
the right of first refusal to purchase the remaining balance.
During the year ended October 31, 1997, the permit was withdrawn from the
optionor by the Costa Rican authorities. Therefore, the Company has written down
its interest in this property.
During the year ended October 31, 1997, Minera Oceanica S.A., a Nu-Dawn
associate Costa Rican company, entered into an agreement with an Indian Mining
Cooperative. Whereby, Minera Oceanica S.A. can earn a 75% working interest in
three mining concessions on the Indian Reserve. One of these concessions (18 sq
km) covers the Sukut prospect, and other two (40 sq km) cover an area
approximately 20 km west of the Sukut, referred to as the Rio Dueri. Minera
Oceanica S.A. has assigned to Nu-Dawn the rights to its contract.
Asbestos Claims, Quebec, Canada
- -------------------------------
The Company entered into an option agreement dated October 8, 1997, with Vant
Resources Inc. for the Asbestos "A" claims in Maizerets, Quebec and the
Exploration Claims in Soissons, Quebec. In order to exercise the option, the
Company must pay the optionor an aggregate of $1,070,000 as follows:
-12-
<PAGE>
1. $10,000 on execution of this Agreement (paid);
2. $10,000 on or before March 15, 1998;
3. $50,000 on or before September 15, 1998; and
4. $1,000,000 on or before September 15, 1999.
After the Company has recovered all its pre-production expenditures on the
property, it shall pay to the optionor a royalty equal to 5% of the net profits
arising from commercial production. At any time after the commencement of
commercial production, the optionor can surrender its royalty to the Company in
consideration of shares of the Company with a market value of $500,000 at the
date of surrender.
ITEM 3. LEGAL PROCEEDINGS
As of October 31, 1995, there are two legal actions to which the Company is a
party or of which any of its property is the subject as of the date of this
Registration Statement.
(a) During 1995, Premanco Industries Ltd. (Premanco) an unrelated party, has
brought an action against the Company and others in the Supreme Court of
British Columbia claiming that the Company and others logged or caused to
be logged without the permission of Premanco approximately 20,000 cubic
meters or more of timber from certain properties. The claim has been
defended by the Company and they have stated that if any logging was done
any liability for these actions must rest with the Company's solicitor who
acted on the Company's behalf in connection with an application to the
Nelson land title office to release Premanco's timber rights.
As of October 31, 1997, this action is ongoing with no new developments to
report.
(b) A damage action has commenced in Ontario, Canada against the Company, R.B.
Carson, and Dydar Resources Ltd. Dydar and Carson are vehemently defending
themselves against this action. The Company's counsel advises that the
Company should not be a defendant and counsel has made a plea to the court
to effectively have Nu-Dawn removed from this action. The 1,000,000 shares
referred to in Item 4:Note 2, are the subject of the legal action.
During 1996 the action discussed in Item 3 (b) has been dismissed at no
cost to the Company, except for Nu-Dawn's legal fees.
ITEM 4. CONTROL OF REGISTRANT
The following table sets forth the person(s) known to the Company to own
beneficially more that ten percent (10%) of any class of the Company's voting
securities and the total amount of any class of the Company's voting securities
owned by the officers and directors as a group:
-13-
<PAGE>
Title of Class Identity of Amount and Nature of Percent
Person or Group Beneficial Ownership of Class
( Note 1 )
- --------------------------------------------------------------------------------
Common Curitiba S.A.
P.O. Box 2122, 1002 Ave 6
St 11, Don Eugenio Bldg 10,588,441 38.5%
San Jose, Costa Rica
Common Officers and Directors 1,593,500 5.8%
Collectively
- --------------------------------------------------------------------------------
Note 1: Beneficial owners listed have sole voting and investment power with
respect to the shares shown unless otherwise indicated.
ITEM 5. NATURE OF TRADING MARKET
The common stock of the Company are listed on the Vancouver Stock Exchange in
Canada. There is no trading market called in the United States. The following
table sets forth the high and the low sales prices for shares of common stock on
the Vancouver Stock Exchange for each quarter of the Company's last two fiscal
years. Brokers in the United States can make a market on the NASD electronic
bulletin board by submitting a Form 211 with the NASD.
PRICE RANGE High Low
- --------------------------------------------------------------------------
1996 1st Quarter 0.30 0.15
1996 2nd Quarter 0.56 0.25
1996 3rd Quarter 0.55 0.26
1996 4th Quarter 0.44 0.26
- --------------------------------------------------------------------------
1997 1st Quarter 0.50 0.16
1997 2nd Quarter 0.26 0.11
1997 3rd Quarter 0.20 0.07
1997 4th Quarter 0.16 0.08
- --------------------------------------------------------------------------
As of October 31, 1997 the Company had approximately 202 registered shareholders
on record of its no par value common stock. Based on representations received by
the Company from certain record holders, the Company believes that there are in
excess of 1248 non-registered beneficial owners of its common stock bringing the
total number of shareholders in excess of 1,450.
-14-
<PAGE>
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
Canada has no system of exchange controls. There are no restrictions on the
repatriation of capital or earnings of a Canadian public company to non-resident
investors. There are no laws of Canada or exchange restrictions affecting the
remittance of dividends, profits, interest, royalties and other payments to
non-resident holders of the Company's securities, except as discussed in Item 7
below.
There are no limitations under the laws of Canada or in the charter of the
Company on the right of foreigners to hold or vote securities of the Company,
except that the Investment Canada Act may require review and approval by the
agency operated thereunder of acquisition of "control" of the Company's
securities by a "non-Canadian". Control for such purpose is classed as one-third
or more of the issued voting securities. "Non-Canadian" generally means a person
not ordinarily resident in Canada.
ITEM 7. TAXATION
A brief description of certain provision of the tax treaty between Canada and
the United States is included below, together with a brief outline of certain
taxes, including withholding provisions, to which United States security holders
are subject under existing laws and regulations of Canada and the United States.
The consequences, if any, of state, provincial and local taxes are not
considered. The information below necessarily is general and security holder
should seek the advice of their own tax advisors, tax counsel or accountants
with respect to the applicability or effect of the matters discussed to their
own individual circumstances and also with respect to any state and local taxes.
Under the tax convention between Canada and the United States, with limited
exceptions, security holders who are residents of the United States (other than
United States corporations holding 10% or more of the voting securities of the
Company) are subject to a 15% withholding tax on the gross amount of any
dividends paid by the Company. the non-resident tax withheld is nonrefundable.
The tax withheld will not reduce the amount of dividends reportable for United
States income tax purposes, but security holders will have the election to
either (a) deduct the tax withheld from adjusted gross income, if they itemized
deductions, or (b) offset the tax withheld as a credit against United States
income tax liability, subject to the applicable limitations on the use of the
foregoing tax credit.
United States corporate security holders will not be able to avail themselves of
the 80% dividends received deduction to any extent unless the foreign
corporation is subject to United States income tax, has for an uninterrupted
period of 36 months or such shorter period of its existence been engaged in a
trade or business in the United States, and 50% or more of its gross income over
the 36 month period is effectively connected with its United States business.
(These conditions have not been satisfied in the past and likely will not be in
the future).
United States corporations owning 10% or more of the voting securities of the
Company are subject to a 10% withholding tax on the gross amount of any
dividends paid by the Company. For United States income tax purposes, such
corporations are deemed to have paid the Canadian or other non-United States
income taxes paid by the Company attributable to that dividend under a formula
that takes into account the dividend and both the Company's undistributed
earnings and the Canadian or other non-United States taxes paid by the Company
with respect to such earnings.
-15-
<PAGE>
ITEM 8. SELECTED FINANCIAL DATA
The following selected financial information concerning the Company is presented
in Canadian currency in accordance with U.S. generally accepted accounting
principles as reconciled from the Company's financial statements which are
presented in accordance with Canadian generally accepted accounting principles.
This information should be read in conjunction with the financial statements
appearing elsewhere herein.
The rate of exchange between U.S. dollars (U.S.$) and Canadian dollars (Cdn$)
for each of the Company's last five fiscal years was as follows:
1997 1996 1995 1994 1993
-----------------------------------------
Rate at October 31,1997 0.66 0.769 0.739 0.741 0.762
Average Rate for the Calendar Year 0.71 0.762 0.740 0.752 0.792
-----------------------------------------
FOR THE YEAR ENDED OCTOBER 31, 1997:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS $ $ $
- ------------------------------------
Revenue 3,201 14,627 4,284
Costs and Expenses (327,487) 321,894 229,797
Write Down of Resource Property (654,179) 0 0
Write Down of Capital Assets & Deferred Costs (860,439) 0 0
Net (-Loss) (1,838,904) -307,267 -225,513
Net (Loss) Per Share (0.07) -0.01 -0.01
CONSOLIDATED BALANCE SHEETS
- ---------------------------
Total Assets 2,227,249 3,550,828 $2,728,503
Resource Properties 431,803 920,015 684,751
Total Liabilities 257,634 213,757 342,564
Accumulated Deficit (4,145,734) 2,306,830 -1,999,563
Working Capital (-Deficit) (1,838,904) -307,267 -225,513
Shareholder's Equity (Note 1) 1,969,615 3,337,071 3,413,254
Cash Dividends per Share 0 0 0
- -------------------------------------------------------------------------------------
</TABLE>
Note 1: During the year ended October 31,1996, the Company issued 329,338
common shares for debt settlement of $71,069 of which 196,000 of those
shares were issued to an individual related to the President of the
Company for debt settlement of $29,400.
-16-
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All of the Company's capital resources from inception have come from the sale of
stock to investors. Available cash has been expended by the Company to explore
its nonproducing mineral properties in British Columbia and Ontario. Operating
without full-time employees for most of the last six years and depending on the
part-time services of its officers and directors, the Company has been able to
direct most of its cash resources directly to property acquisition, exploration
and to upgrade the H.B. Mill facility. Resource properties reflect the
acquisition cost and direct exploration and development expenditures on the
Company's nonproducing properties. During 1995/96 the Company expended $32,214
on the mill in maintenance and upgrading the facility.
Results of Operations
- ---------------------
The Company has never received revenue from operations and has only minimal
amounts of interest and related income since inception. As acquisition,
exploration and development expenses are capitalized, annual losses reflect
primarily general and administrative expenses. Total expenses have increased
most years. The increases in 1990 and 1989 reflect an increase relating to
activities at the H.B. Mill. From acquisition of the H.B. Mill until September
1989, Nor-Quest Resources Ltd., from which the mill was acquired, advanced most
expenses on behalf of the Company subject to the Company's agreement to repay
the expenses. In September 1989, as part of an agreement between Nor-Quest and
Dydar, Nor- Quest agreed to limit the amount of liability of the Company to
$50,000 and that amounts owed would be paid only out of future operating profits
of the H.B. Mill. The acquisition cost of the H.B. Mill, $2,160,000, was paid in
Company stock. The cost was capitalized and resulted in the large increase in
total assets from 1988 to 1989. Expenditures on the mill during 1995 and 1996
have been capitalized and increased the assets. October 31, 1997 Costs
capitalized to the H.B. Mill totalled $15,759 (1996 - $14,013) for the year.
Costs capitalized include property taxes and general maintenance costs, net of
equipment sales. During the year ended October 31, 1997 the Company recorded a
write down of $860,439 to adjust the carrying value of this asset to
management's best estimate of the net recoverable amount.
The Company expects to be carrying out exploration and development work on
properties held under agreement. The result of this work could bring in revenues
from Company managed mining operations. Operating losses approximating losses
for previous years are expected if no operations of the H.B. Mill are
undertaken.
Liquidity and Capital Resources
- -------------------------------
The Company's capital, and therefore its liquidity, has always depended upon
amounts raised from investors from the sale of stock, either privately or
publicly. The Company took over the position, " little cash available" in 1989
and Nor-Quest paid a large portion of the Company's expenses. During 1992 Dydar
purchased 1,066,436 shares of common stock for $160,000 and an investor
subscribed for 333,333,($50,000) units (private placement one share plus one two
year purchase warrant exercisable at $0.15 in first year and $0.20 in second
year) which amount will provide some liquidity for 1992. During 1993 Dydar
exercised part of its option at $0.20 to provide the Company $156,894. During
1994 the Company issued 1,333,333 shares @ $0.15 per share pursuant to a private
placement of 1,000,000 units @ $0.15 per unit. 333,333 shares were issued
pursuant to the exercise of warrants @ $0.15 per share. 666,667 warrants remain
outstanding and may be exercised @ at rate of $0.15 per share up until April 19,
1995 or @ $0.20 per share up until April 19, 1996. The Company issued 266,667
-17-
<PAGE>
units as an exploration payment on the Guanacaste property in Costa Rica and the
balance for cash. A further 150,000 common shares were issued as a finder's fee
in connection with this transaction. As at October 31, 1996, 1,055,334 of the
share purchase warrants remain unexercised. During the year ended October 31,
1997, operating capital for the Company was raised by a private placement of
1,000,000 shares at $0.15 per share; issuance of 325,000 flow-through shares at
$0.20; exercise of warrants of 303,512 shares at $0.15 per share for cash
proceeds; and the issuance of 1,054,610 at $0.20 per share on exercise of
warrants for debt settlement of $210,922.
The Company will concentrate its efforts on arrangements with others in the
mining business under which cash expenditures would be paid in large part by the
other entity. The Company presently lacks the cash required (approximately
$700,000) to place its H.B. Mill into operation. The Company does intend to
raise outside capital for that purpose, although no decisions on the sources or
means of raising such capital have been made. The Company intends to pursue in
1998 its option to sell equipment and land that it owns.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The present term of office of each director will expire at the next Annual
Meeting of Shareholders. The executive officers of the Company are elected
annually at the first meeting of the Company's Board of Directors held after
each Annual Meeting of Shareholders. Each executive officer shall hold office
until his successor duly is elected and qualified or until his resignation or
until he shall be removed in the manner provided by the Company's Bylaws. The
name, position with the Company, the age of each director and executive officer,
and the period during which each has served are as follows:
Name and Position in the Company Age Director or Officer Since
- --------------------------------------------------------------------------------
Raynerd B. Carson 64 Director since November 1989
President and Director President since 1990
James Wadsworth 59 Director since August 1992
Vice-President and Director
Dr. Stewart Jackson 57 Appointed Director - June 24, 1997
Vice-President Explorations and Director
Geoffrey A. Vantreight 76 Director since June 1994
Director
Gary Van Norman 59 Director since February 1996
Director
-18-
<PAGE>
The following is a brief account of the business experience during the past five
years of each director and executive officer:
Director / Officer Principal Occupation During the Last Five Years
- ------------------ -----------------------------------------------
Raynerd B. Carson Began his career working in the Uranium mines in
the Northwest Territories. From 1958 to 1966 he
worked as a prospector in Northern Quebec and
Ontario where he found one of the largest asbestos
deposits the world. In 1966 he organized Abitibi
Asbestos Mining Co. Ltd. He worked in all facets
of the mining industry up until the present time.
Dr. Stewart Jackson Experienced professional with 37 years in the
mineral industry. Involved in exploration and
development of both base and precious metal
deposits in a wide range of environments for both
large and small companies. Responsible for the
discovery and development of several major mineral
discoveries.
James Wadsworth Mill Superintendent in the Company's employ since
1990. director. He has over thirty years of
experience in the mineral extraction business and
during this time he has worked in many capacities
from foreman to mill superintendent for a number
of mining companies in British Columbia.
Geoff Vantreight A business man and farmer, Mr. Vantreight
developed Vantreight & Sons Ltd over a period of
50 years. Vantreight & Sons Ltd is one of the
largest growers and suppliers of cut flowers in
North America. He has many years experience in
land development in British Columbia.
Gary Van Norman Businessman/Land Developer, has over 30 years
expertise with land development, project
management, and marketing industry, both in Canada
and the USA. Mr. Van Norman was instrumental in
the development of two of Whistler, BC's largest
residential and recreational developments. He is
currently actively involved in senior capacities
with a similar project in BC.
One of the officers or directors of the Company are directors of any entities
the securities of which are registered under the Securities Exchange Act of 1934
or the Securities Exchange Act of 1933.
Dr. Stewart Jackson Monument Resources Inc., Director, V.P.
Exploration Little Squaw Gold Mining Company,
Director, V.P. Exploration
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
During the fiscal year ended October 31, 1997, there was no compensation to the
Company for services because of Canadian allowance standards.
OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
The following is a summary of the employee and director stock options
outstanding as of October 31, 1997 and a summary of all such Options exercised
in 1996 and 1997.
-19-
<PAGE>
Stock options granted as at October 31, 1997 were as follows:
Directors Number of shares Price Expiration Date
- --------------------------------------------------------------------------------
Stewart Jackson 1,000,000 0.15 August 20, 2002
James Wadsworth 100,000 0.15 August 20, 2002
Gary Van Norman 100,000 0.15 August 20, 2002
Employees and/or Consultants
Blair Carson 100,000 0.15 July 15, 2001
Ferne Nowlan 100,000 0.15 September 27, 2002
Total outstanding director and employee stock options.................1,400,000
Under applicable regulations of the Vancouver Stock Exchange, the Company is not
authorized to issue options to directors, employees or affiliates constituting
more than 10% of the outstanding common stock.
There are no other plans.
The Company pays other incidental compensation to executive officers from time
to time, consisting primarily of reimbursement for business related activities
on behalf of the Company. However, the aggregate of all such other compensation
did not exceed 10% of cash compensation reported for the fiscal year ended
October 31, 1997.
No cash compensation is currently being paid to members of the Board of
Directors for their services as directors.
The Company paid no money to the Company's executive officers for management,
consulting and related services rendered to the Company during the 1997
Financial Year.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
In September 1989 subject to the approval of the Vancouver Stock Exchange,
Raynerd B. Carson and Dydar Resources Ltd. (Dydar), a corporation owned by
Raynerd B. Carson and members of his family, agreed to settle certain litigation
with Nor-Quest Resources Ltd. (Nor-Quest), then the majority shareholder of the
Company. Included in the terms of such settlement was the agreement by Dydar to
acquire the 7,200,000 shares of common stock of the Company owned by Nor-Quest.
Upon the approval of the transaction by the Vancouver Stock Exchange, Dydar
acquired the shares (and subsequently transferred beneficial ownership of
1,000,000 of such shares to an unaffiliated third party). Subsequently, two
members of the Board of Directors of the Company resigned and were replaced by
Raynerd B. Carson and two other nominees of Dydar.
-20-
<PAGE>
In November 1989, upon approval by the Vancouver Stock Exchange, Dydar
subscribed to purchase, by way of private placement, 2,000,000 Units of the
Company's securities, consisting of 2,000,000 shares of common stock and a stock
purchase warrant to acquire an additional 2,000,000 shares for a purchase price
of $300,000. Dydar subscribed for the private placement of which Raynerd B.
Carson is the President, a director and substantial stockholder. Dydar exercised
its warrant October 30, 1990 bringing its holdings to 10,200,000 shares. During
the year ended October 31, 1991, the Company issued 476,388 shares, to Dydar (a
company controlled by a director and officer), for consideration of $160,781
pursuant to a private placement. The consideration consisted of cash of $30,000
and the assumption of accounts payable of $130,781 by the investor. In addition,
the investor received warrants to purchase an additional 476,388 shares at
$0.3375 per share until May 22, 1992 and at $0.39 per share from May 23, 1992 to
May 22, 1993. As at October 31, 1991, no warrants have been exercised. The
476,388 shares issued to Dydar brings its holdings to 10,676,388 shares. 425,901
shares were sold during the fiscal period via private sale or market sales.
During 1992 Dydar purchased 1,066,667 shares of common stock for $160,000.
During 1992 Dydar sold during the fiscal period via private sale or market sales
1,138,667 shares to bring its total to 10,178,487 shares. During 1993 fiscal
period Dydar exercised part of its option for a total of 784,470 shares and
during 1993 sold 784,958 to hold 10,177,999 shares. During 1994 Dydar sold
1,400,000 shares and purchased 666,666 from treasury through the take-down of
units and warrants at $0.15 per share and Dydar held 9,444,665 shares. During
the year 1995, Dydar purhcased 56,500 shares $0.14 average per share bringing
the total to 9,501,165. During 1996, Curitiba S.A. purchased from Dydar
Resources Ltd. 7,813,665 shares of Nu-Dawn Resources Inc. for investment
purposes. As of October 31, 1996 Dydar held 2,115,495 shares of Nu-Dawn
Resources Inc.
PART II
ITEM 14. DESCRIPTION OF SECURITIES
(a) Capital Stock
-------------
The Company's authorized capital stock consists of 50,000,000 shares of common
stock, no par value. The following is a summary and is qualified in its entirety
by reference to the Company's Articles and Special Resolution and Altered
Memorandum, copies of which are exhibits to the Company's Registration
Statement.
(b) Common Stock
------------
The outstanding shares of common stock are fully paid and non-assessable. As of
the date of this Statement, 27,493,104 shares of common stock were issued and
outstanding.
Holders of shares of common stock are entitled to participate equally as to
dividends, voting powers and participation in assets. No shares have been issued
subject to call or assessment. There are no pre-emptive rights, conversion
rights, provisions for redemption or purchase for either cancellation or
surrender or provisions for sinking or purchase funds. Provisions as to the
modifications, amendments or variations of such rights or such provisions are
contained in the Company Act of the Province of British Columbia.
-21-
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES
None.
PART IV
ITEM 17. FINANCIAL STATEMENTS
Auditors' Report..................................................... F1
Balance Sheets as at October, 1997................................... F2
Statements of Loss and Deficit ...................................... F3
for the period from November 01, 1996 to October 31, 1997
Statement of Changes in Financial Position........................... F4
for the period from November 01, 1996 to October 31, 1997
Notes to Financial Statements........................................ F5 - F11
ITEM 18. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
--------------------
See Item 17 for a list of financial statements and schedules incorporated as:
pages F-1 to F-11.
(b) Exhibits
- ------------
None
-22-
<PAGE>
Auditors' Report and Financial Statements of
NU-DAWN RESOURCES INC.
October 31, 1997 and 1996
Deloitte &
Touche
<PAGE>
Auditors' Report
To the Shareholders of
Nu-Dawn Resources Inc.
We have audited the balance sheets of Nu-Dawn Resources Inc. as at October 31,
1997 and 1996 and the statements of loss and deficit and changes in financial
position for each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at October 31, 1997 and 1996
and the results of its operations and the changes in its financial position for
the years then ended, in accordance with generally accepted accounting
principles applied on a consistent basis.
/s/ Deloitte & Touche
- --------------------------------
Chartered Accountants
Vancouver, British Columbia
February 13, 1998
F-1
<PAGE>
NU-DAWN RESOURCES INC.
(Incorporated under the Company Act of British Columbia)
Balance Sheets
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
----------- -----------
ASSETS
CURRENT
Cash $ 15,875 $ 22,248
Accounts receivable 4,680 4,759
Due from related company (Note 8(d)) 10,648 3,286
----------- -----------
31,203 30,293
Capital assets and deferred costs (Note 4) 1,764,243 2,600,520
Resource properties (Note 5 and schedule) 431,803 920,015
----------- -----------
$ 2,227,249 $ 3,550,828
----------- -----------
LIABILITIES
CURRENT
Accounts payable $ 202,682 $ 158,805
Deferred revenue 4,952 4,952
----------- -----------
207,634 163,757
Long-term debt (Note 6) 50,000 50,000
----------- -----------
257,634 213,757
----------- -----------
SHAREHOLDERS' EQUITY
Capital stock (Note 7)
Authorized
50,000,000common shares without par value
Issued
27,493,104shares (1996 - 24,809,993 shares) 6,115,349 5,643,901
Deficit (4,145,734) (2,306,830)
----------- -----------
1,969,615 3,337,071
----------- -----------
$ 2,227,249 $ 3,550,828
----------- -----------
GOING CONCERN (Note 1)
CONTINGENCY (Note 10)
APPROVED BY THE DIRECTORS:
/s/ Reynerd B. Carson
- --------------------------------
Reynerd B. Carson, Director
/s/ James Wadsworth
- --------------------------------
James Wadsworth, Director
F-2
<PAGE>
NU-DAWN RESOURCES INC.
Statements of Loss and Deficit
Years ended October 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
----------- -----------
REVENUE
Logging revenue $ -- $ 14,379
Interest and other 3,201 248
----------- -----------
3,201 14,627
----------- -----------
EXPENSES
Accounting and administration 42,254 47,781
Consulting and management fees 30,200 26,784
Corporation capital taxes 9,229 7,500
Depreciation 1,597 1,978
Exploration 32,601 --
Interest and bank charges 10,269 14,613
Office and sundry 21,692 31,965
Professional fees 97,524 83,400
Rent 16,160 15,200
Telephone and fax 11,690 11,637
Transfer agent, filing fees and printing 17,430 12,210
Travel and promotion 11,869 34,982
Vehicle and fuel 24,972 33,844
----------- -----------
327,487 321,894
----------- -----------
NET LOSS BEFORE UNDERNOTED ITEMS (324,286) (307,267)
WRITE DOWN OF RESOURCE PROPERTIES (654,179) --
WRITE DOWN OF CAPITAL ASSETS
AND DEFERRED COSTS (860,439) --
----------- -----------
NET LOSS (1,838,904) (307,267)
DEFICIT, BEGINNING OF YEAR (2,306,830) (1,999,563)
----------- -----------
DEFICIT, END OF YEAR $(4,145,734) $(2,306,830)
----------- -----------
LOSS PER SHARE $ (0.07) $ (0.01)
----------- -----------
F-3
<PAGE>
<TABLE>
<CAPTION>
NU-DAWN RESOURCES INC.
Statements of Changes in Financial Position
Years ended October 31, 1997 and 1996
- -----------------------------------------------------------------------------------
1997 1996
----------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(1,838,904) $ (307,267)
Items not involving cash
Depreciation 1,597 1,978
Write down of resource properties 654,179 --
Write down of capital assets and deferred costs 860,439 --
Change in non-cash operating working capital items 43,956 (29,521)
----------- -----------
(278,733) (334,810)
----------- -----------
INVESTING ACTIVITIES
Expenditures relating to resource properties,
net of recoveries (165,967) (235,264)
Additions to capital assets and deferred costs (25,759) (14,152)
Proceeds on sale of capital assets -- 31,149
----------- -----------
(191,726) (218,267)
----------- -----------
FINANCING ACTIVITIES
Capital stock issued 471,448 573,648
Advances to related parties (7,362) (104,287)
----------- -----------
464,086 469,361
----------- -----------
DECREASE IN CASH (6,373) (83,716)
CASH POSITION, BEGINNING OF YEAR 22,248 105,964
----------- -----------
CASH POSITION, END OF YEAR $ 15,875 $ 22,248
----------- -----------
F-4
</TABLE>
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
1. GOING CONCERN
These financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern which assume
that the Company will realize its assets and discharge its liabilities in
the normal course of business. The Company's current financial position and
historical operating losses indicate significant uncertainty as to whether
the going concern assumption is appropriate.
During the year, the Company incurred a net loss of $1,838,904 (accumulated
losses from inception of the Company total $4,145,734) and at October 31,
1997 has an excess of liabilities over current assets of $226,431. If the
Company fails to secure additional financing or its creditors enforce their
rights to settlement of indebtedness, then realization values of assets are
likely to be substantially lower than those indicated in these financial
statements. Additionally, failure to make required resource property
payments may result in a dilution of the Company's interest or forfeiture
of its resource properties.
The Company's ability to meet its obligations and maintain its operations
is contingent upon successful completion of additional financing
arrangements and the continuing support of its creditors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Resource properties
Acquisition costs of resource properties together with direct
exploration and development expenditures thereon, including interest,
are deferred in the accounts. When production is attained these costs
will be amortized. When deferred expenditures on individual producing
properties exceed the estimated net realizable value, the properties
are written down to the estimated value. Costs relating to properties
abandoned are written-off when the decision to abandon is made.
(b) Capital assets and deferred costs
Capital assets and deferred costs are recorded at cost. Direct net
expenditures incurred on the H.B. Mill are deferred in the accounts.
The Company provides for depreciation on the following basis:
H.B. Mill 15 year straight-line basis,
commencing on the start of
production
Office equipment and motor vehicles 20% declining-balance basis
3. FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, accounts receivable, due
from related company, accounts payable and long-term debt. Except for
long-term debt, the fair values of these financial instruments approximate
their carrying values. Due to the nature of the long-term debt (see Note 6)
it is not practicable to determine its fair value.
F-5
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
4. CAPITAL ASSETS AND DEFERRED COSTS
1997 1996
---------------------------------------------------
Accumulated Net Book Net Book
Cost Depreciation Value Value
---------------------------------------------------
H.B. Mill and freehold land $1,757,855 $ -- $1,757,855 $2,592,535
Office equipment 9,803 6,345 3,458 4,323
Motor vehicles 17,219 14,289 2,930 3,662
- --------------------------------------------------------------------------------
$1,784,877 $ 20,634 $1,764,243 $2,600,520
- --------------------------------------------------------------------------------
Costs capitalized to the H.B. Mill totalled $15,759 (1996 - $14,013) for
the year. Costs capitalized include property taxes and general maintenance
costs, net of equipment sales. During the year ended October 31, 1997, the
Company recorded a write down of $860,439 to adjust the carrying value of
this asset to management's best estimate of the net recoverable amount.
5. RESOURCE PROPERTIES
Resource properties consist of:
1997 1996
-------- --------
Goodenough and Ymir $ -- $175,012
Triton -- 285,136
Prince Albert 55,788 242,160
Guanacaste 328,475 168,753
Pan-Oro 37,517 33,905
Sukut -- 15,049
Asbestos 10,023 --
- --------------------------------------------------------------------------------
$431,803 $920,015
- --------------------------------------------------------------------------------
(a) Goodenough and Ymir, British Columbia
The Company has a 100% interest in certain mineral claims located in
the Nelson Mining Division, British Columbia, subject to a 15% net
profit interest, and has freehold title to the land. During the year
ended October 31, 1997, the Company wrote down the balance of its
interest in this resource property.
(b) Triton, Ontario
The Company has a 50% interest in certain mineral claims located in
MacMurchy Township of the Larder Lake Mining Division, Ontario. A
third party has agreed to maintain the good standing of the mineral
claims. During the year ended October 31, 1997, the Company wrote down
the balance of its interest in this property.
F-6
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
5. RESOURCE PROPERTIES (Continued)
(c) Prince Albert, Saskatchewan
The Company has entered into an option agreement to acquire a 100%
interest, subject to a 5% net profit royalty, in certain mineral
claims in the Prince Albert Mining District, Saskatchewan. To maintain
its interest in the agreement, the Company is required to pay $2,000
annually for ten years to July 2003.
The Company had a 100% interest in certain mineral exploration permits
issued by Saskatchewan Energy and Mines in the Southern Mining
District in Saskatchewan. During the year, the Company allowed the
permits to lapse and wrote off the investment in those permits. The
remaining balance of $55,788 represents the Company's interest in the
option in the Prince Albert Mining District.
(d) Guanacaste, Costa Rica
Pursuant to an option agreement dated October 23, 1995 and amended
February 27, 1996, between the Company and Minera Oceanica S.A., the
Company acquired an option for the mineral and surface rights in
Concession 6622 situated in the Juntas de Abangares, District of
Guanacaste, Costa Rica, subject to a 10% royalty in favour of Minera
Oceanica S.A. on operating profits derived from the property, or
US$100,000 per year, whichever is the greater.
Finders fees in the amount of $22,500 have been included in resource
properties.
(e) Pan-Oro, Panama
During 1995, the Company entered into a Letter of Agreement with
Grande Portage Resources Ltd. to enter into a joint venture agreement
to develop mineral concessions in Panama. The agreement has not yet
been concluded and regulatory approval remains outstanding. The
Company has a 90% ownership interest in Pan-Oro S.A., a Panamanian
corporation. Resource properties include $21,000 in costs charged by
Pan-Oro S.A.
(f) Sukut, Costa Rica
The Company entered into an option agreement dated April 24, 1996 for
the mineral exploration permit (ID# 6200) over an area of eighteen
square kilometres within the Bri Bri Indian Reservation situated in
the Province of Limon, County of Talamanca, District of Bratsi. There
has been a moratorium placed on any mining activity by the Asamblea
Legislativa de Costa Rica.
During the year the permit was withdrawn from the optionor by the
Costa Rican authorities. Therefore, the Company has written down its
interest in this property.
F-7
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
5. RESOURCE PROPERTIES (Continued)
(g) Asbestos claims, Quebec
The Company entered into an option agreement dated October 8, 1997
with Vant Resources Inc. for the Asbestos "A" claims in Maizerets,
Quebec and the Exploration Claims in Soissons, Quebec. In order to
exercise the option, the Company must pay the optionor an aggregate of
$1,070,000 as follows:
1. $10,000 on execution of this Agreement (paid);
2. $10,000 on or before March 15, 1998;
3. $50,000 on or before September 15, 1998; and
4. $1,000,000 on or before September 15, 1999.
After the Company has recovered all its preproduction expenditures on
the property, it shall pay to the optionor a royalty equal to 5% of
the net profits arising from commercial production. At any time after
the commencement of commercial production, the optionor can surrender
its royalty to the Company in consideration of shares of the Company
with a market value of $500,000 at the date of surrender.
6. LONG-TERM DEBT
This amount is unsecured, non-interest bearing and will be repaid at a rate
of 10% of the net profits of the H.B. Mill if and when it goes into
production.
F-8
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
7. CAPITAL STOCK
(a) Changes in common shares during the following periods were as follows:
Number of
shares Amount
---------- ----------
BALANCE AS AT OCTOBER 31, 1995 22,703,832 $5,070,253
Issued for debt settlement 329,338 71,069
Issued for cash pursuant to private placements 1,514,057 423,331
Issued for cash on exercise of options 50,000 7,500
Issued for settlement of exploration payment 97,271 14,000
Issued for debt settlement on exercise of warrants 115,495 57,748
- --------------------------------------------------------------------------------
BALANCE AS AT OCTOBER 31, 1996 24,809,993 5,643,901
Issued for cash pursuant to private placements 1,000,000 150,000
Issued for cash on exercise of warrants 628,501 110,526
Issued for debt settlement on exercise of warrants 1,054,610 210,922
- --------------------------------------------------------------------------------
BALANCE AS AT OCTOBER 31, 1997 27,493,104 $6,115,349
- --------------------------------------------------------------------------------
(b) During the year ended October 31, 1996, the Company:
(i) issued 329,338 common shares for debt settlement of $71,069 of
which 196,000 of those shares were issued to an individual
related to the President of the Company for debt settlement of
$29,400.
(ii) issued 700,000 units at $0.20 per unit pursuant to a private
placement agreement, each unit consisting of one flow-through
common share and one non-transferable share purchase warrant
entitling the holder to purchase either one flow-through common
share or one common share, at a price of $0.20 per share, for a
period of one year.
(iii)issued 500,000 units at $0.50 per unit pursuant to a private
placement to a company controlled by the President of the Company
for cash proceeds of $233,331 and debt settlement of $16,669.
Each unit consisting of one common share and one non-transferable
share purchase warrant entitling the holder to purchase an
additional common share for a period of two years at a price of
$0.50 per share during the first year and $0.60 per share during
the second year.
(iv) issued 444,666 common shares pursuant to a private placement for
cash proceeds of $50,000 and settlement of exploration payments
of $14,000.
F-9
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
7. CAPITAL STOCK (Continued)
(c) During the year ended October 31, 1997, the Company issued 1,000,000
shares at $0.15 per share with non-transferable share purchase
warrants to purchase 1,000,000 shares at $0.15 per share for a one
year period and $0.18 per share in the second year. As at October 31,
1997, 696,499 of the share purchase warrants remained unexercised.
(d) Stock options outstanding to directors and employees as at October 31,
1997 were as follows:
Number of
Shares Exercise Price Expiry Date
------ -------------- -----------
100,000 $ 0.15 July 15, 2001
1,200,000 $ 0.15 August 20, 2002
100,000 $ 0.15 October 8, 2002
(e) Share purchase warrants outstanding as at October 31, 1997 were as
follows:
Number of
Shares Exercise Price Expiry Date
------ -------------- -----------
384,505 $ 0.50 May 29, 1998
696,499 $ 0.15 April 28, 1999
8. RELATED PARTY TRANSACTIONS
(a) Services provided by directors or parties related to directors:
1997 1996
------- -------
Accounting and administration fees $ 3,320 $12,264
Rent $16,160 $15,200
(b) Accounts receivable includes $2,988 due from a director (1996 -
$2,988).
(c) Accounts payable includes $Nil due to an individual related to the
President of the Company (1996 - $17,000).
(d) The amount receivable from a related company is non-interest bearing,
due on demand and is receivable from Dydar Resources Inc., a company
controlled by the President of the Company.
F-10
<PAGE>
NU-DAWN RESOURCES INC.
Notes to the Financial Statements
October 31, 1997 and 1996
- --------------------------------------------------------------------------------
9. SEGMENTED INFORMATION
The Company operates in one industry and two geographic segments.
Central
Canada America 1997 1996
----------- ----------- ----------- -----------
SALES
From operations $ -- $ -- $ -- $ 14,379
Other income 3,201 -- 3,201 248
- --------------------------------------------------------------------------------
$ 3,201 $ -- $ 3,201 $ 14,627
- --------------------------------------------------------------------------------
SEGMENT NET LOSS $(1,823,855) $ (15,049) $(1,838,904) $ (307,267)
- --------------------------------------------------------------------------------
IDENTIFIABLE ASSETS $ 1,861,257 $ 365,992 $ 2,227,249 $ 3,550,828
- --------------------------------------------------------------------------------
10. CONTINGENCY
Premanco Industries Ltd. (Premanco), an unrelated party, has brought an
action against the Company and others in the Supreme Court of British
Columbia claiming that the Company and others logged or caused to be logged
without the permission of Premanco approximately 20,000 cubic meters or
more of timber from certain properties. The claim has been defended by the
Company and they have stated that if any logging was done any liability for
these actions must rest with the Company's solicitor who acted on the
Company's behalf in connection with an application to the Nelson land title
office to release Premanco's timber rights.
F-11
<PAGE>
<TABLE>
<CAPTION>
NU-DAWN RESOURCES INC.
Schedule of Changes in Resource Properties
October 30, 1997 and 1996
- -----------------------------------------------------------------------------------------------------------------------------------
Goodenough Prince
and Ymir Triton Albert Guanacaste Pan-Oro Sukut Asbestos Totals
--------- --------- --------- ---------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1995 $ 175,012 $ 285,136 $ 135,802 $ 57,873 $ 30,928 $ -- $ -- $ 684,751
- -----------------------------------------------------------------------------------------------------------------------------------
Consulting -- -- 2,000 3,579 -- -- -- 5,579
Drilling -- -- 21,965 -- -- -- -- 21,965
Equipment rental -- -- 5,182 -- -- -- -- 5,182
Field crew -- -- 17,888 -- -- -- -- 17,888
Field data processing -- -- 2,210 -- -- -- -- 2,210
Geological consultants -- -- 27,941 -- -- -- -- 27,941
Miscellaneous -- -- 2,394 -- -- -- -- 2,394
Option payments -- -- -- 86,337 -- 15,049 -- 101,386
Travel -- -- 15,497 20,964 2,977 -- -- 39,438
Vehicle expense -- -- 11,281 -- -- -- -- 11,281
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1996 175,012 285,136 242,160 168,753 33,905 15,049 -- 920,015
- -----------------------------------------------------------------------------------------------------------------------------------
Geological consultants -- -- 610 44,725 -- -- -- 45,335
Legal and management -- -- -- 32,798 -- -- -- 32,798
Miscellaneous -- -- -- 3,277 123 -- 23 3,423
Option payments -- -- 2,000 -- -- -- 10,000 12,000
Permits, appeals -- -- -- 22,363 -- -- -- 22,363
Public relations -- -- -- 10,734 -- -- -- 10,734
Rent -- -- -- 11,629 -- -- -- 11,629
Travel -- -- -- 28,452 3,489 -- -- 31,941
Vehicle expense -- -- -- 5,744 -- -- -- 5,744
Write down of resource
properties (165,012) (285,136) (188,982) -- -- (15,049) -- (654,179)
Transfer to capital assets and
deferred costs (10,000) -- -- -- -- -- -- (10,000)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1997 $ -- $ -- $ 55,788 $ 328,475 $ 37,517 $ -- $ 10,023 $ 431,803
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
a Forms 20-F and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
NU-DAWN RESOURCES INC.
/s/ Raynerd B. Carson April 16, 1998
- ---------------------------- ----------------
Raynerd B. Carson, President Date
