UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO 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 _____________________
IDAHO CONSOLIDATED METALS CORP.
(Name of Small Business Issuer in its Charter)
British Columbia, Canada 82-0465571
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
504 Main Street, Suite 470
Post Office Box 1124
Lewiston, Idaho 83501
(Address of Principal Executive Offices)
(208) 743-0914
(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Without Par Value
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(Title of Class)
Check whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to filing requirements for the past 90 days. Yes |_| No |X|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, 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. |_|
State Issuer's revenue for its most recent fiscal year. $0
The aggregate market value of the voting stock held by non-affiliates of the
registrant at December 31, 1998 was C$1,886,930 (based on the closing sale price
on the Vancouver Stock Exchange on December 31, 1998). This calculation does not
reflect a determination that persons are affiliates for any other purposes.
At December 31, 1998, there were 9,434,650 of the registrant's voting shares
issued and outstanding.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
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IDAHO CONSOLIDATED METALS CORP.
Form 10-KSB
For the Fiscal Year Ended December 31, 1998
TABLE OF CONTENTS
Page
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PART I
ITEM 1. DESCRIPTION OF BUSINESS..........................................1
ITEM 2. DESCRIPTION OF PROPERTY..........................................7
ITEM 3. LEGAL PROCEEDINGS...............................................30
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............32
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........32
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......40
ITEM 7. FINANCIAL STATEMENTS............................................46
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.......................................46
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.............46
ITEM 10. EXECUTIVE COMPENSATION..........................................47
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..48
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................50
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K...............................55
SIGNATURES...............................................................57
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Forward-Looking Information
Certain statements within this Form 10-KSB and in the documents attached as
exhibits hereto are "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995. Any statements
that express or involve discussions with respect to predictions, expectations,
beliefs, plans, objectives, assumptions or future events or performance (often,
but not always, using words and phrases such as "expects", "believe",
"believes", "plans", "anticipates", "is anticipated", or stating that certain
actions, events or results "will", "may", "should", or "can" be taken, occur or
be achieved) are not statements of historical fact and may be "forward-looking
statements". Such statements may be included, among other places, in the
Company's press releases, the Company's 1998 and 1997 Annual Report and the
Company's Offering Memorandum dated November 12, 1997. The statements referred
to above generally relate to the prospects of the Company's exploration and
development activities. Forward-looking statements are based on expectations,
estimates and projections at the time the statements are made that involve a
number of risks and uncertainties which could cause actual results or events to
differ materially from those anticipated by the Company. These risks and
uncertainties include, but are not limited to, the inherent risks associated
with precious metals and mineral property development and production such as,
the competitive nature of the precious metals industry, the existence of
competitors with integrated development and marketing organizations, market
fluctuations in the world price of gold and other precious metals, the
fluctuation in the supply and demand for gold and other precious metals and the
proximity and capacity of competitors, the risks and uncertainties associated in
complying with governmental regulations, including regulations relating to price
controls, taxes, royalties, land tenure, allowable production, the import and
export of precious metals and environmental protection, the risk that no
commercial quantities of precious metals will be discovered, the uncertainties
related to dealing with third-party operators of precious metal properties, the
risks and uncertainties related to the future development and acquisition of
suitable additional producing properties or prospects, the risks associated with
unusual or unexpected geological formations, pressures or other unforeseen
conditions during drilling, the risks associated with liabilities and damages
relating to pollution or other hazards against which the Company may not be able
to adequately insure against and the risk that actual costs incurred in the
abandonment of drilling or mines will substantially exceed the estimated
abandonment costs. The Company assumes no obligation to update the information
contained in this Form 10-KSB upon the occurrence of one or more of the factors
listed above.
Summary
The Company was incorporated by registration of its memorandum and articles
under the laws of the Province of British Columbia on September 15, 1988 under
the name "Consolidated Idaho Platinum Resources Inc." The Company changed its
name from "Consolidated Idaho Platinum Resources Inc." to "Idaho Consolidated
Metals Corp." (the "Company") effective as of June 30, 1989. The Company's head
and principal office is located at 504 Main Street, Suite 470, P.O. Box 1124,
Lewiston, Idaho, 83501, U.S.A. The Company's registered and records office is
located at #1040 - 1055 West Hastings Street, Vancouver, British Columbia, V6E
2E9, Canada.
The Company has a wholly owned subsidiary, Idaho Consolidated Metals
International, Ltd., incorporated under the laws of the British Virgin Islands
on July 17, 1996. Its registered and records office is located at Craigmuir
Chambers, P.O. Box 71 Road Town, Tortola, British Virgin Islands and its
business address is located at 504 Main Street, Suite 470, P.O. Box 1124,
Lewiston, Idaho, 83501, U.S.A. This company does not operate any business at
this time.
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The Company is engaged in the acquisition, exploration and, when warranted,
development of precious metals properties and the mining and processing of ores.
The principal precious metals targeted by the Company are gold and platinum
group elements. The Company's business strategy is the production of precious
metals from its properties by careful exploration, conservative development and
implementation of practices that achieve minimal environmental disturbances. The
Company's material property interests consist of the Petsite Property, Friday
Property, Deadwood Property, Buffalo Gulch Property and the Petsite Joint
Venture agreement. To December 31, 1998, the Company's primary focus has been on
the Elk City, Idaho area and the Company's four primary properties: Buffalo
Gulch, Deadwood, Petsite and Dixie. The Company or its joint venture partner is
in the process of carrying out preliminary drilling or exploration programs on
these properties, except with regard to the Buffalo Gulch Property which is in
the development phase and the Petsite property including the Friday property and
the Deadwood property which are in the advanced exploration stage. Subsequent to
December 31, 1998, the Company acquired approximately 6,700 acres, by staking
349 claims and entering into a lease on 54 claims near Stillwater, Montana. The
area shows anomalous enrichment in the platinum group elements and a mapping and
sampling program is planned to delineate these features. None of the Company's
properties are in commercial production. There is no guarantee that ore will be
found in any of these properties or that if it is found, it will be found in
commercially mineable quantities and grades. For further particulars, see
"Description of Property."
Petsite Joint Venture
On May 20, 1996, the Company entered into a joint venture agreement (the "Joint
Venture Agreement") with Cyprus Gold Exploration Corporation ("Cyprus Gold" or
"Cyprus") to jointly explore, evaluate, develop, mine, and market the Petsite
Property and the Friday Property. Kinross Gold Corporation ("Kinross Gold" or
"Kinross") has merged with Amax Gold Inc. and now controls both of Cyprus Gold's
joint ventures on both the Petsite and Deadwood properties. Effective February
23, 1998, Kinross Gold has earned a 70% participating interest in the joint
venture by expending approximately $1.8 million on the exploration of both
properties.
The project is now in the joint venture phase and the Company has elected to
participate and be carried by Kinross. During 1998, Kinross Gold reported
$362,256 of exploration expenditures on the joint venture phase of the project.
In order to allow Kinross to meet its 1998 expenditure requirement on the
Deadwood project, $10,592 of the amount spent was credited to the Deadwood
project. After this transfer, Kinross has reported to have spent $351,664 and
the Company's carried share of these expenditures would amount to $105,499. The
Company's carried share is treated as a loan and bears interest at bank prime
plus 2% compounded quarterly. The principal together with accrued interest is
contingently repayable from 85% of the Company's share of the proceeds of
production or from its share of proceeds on sale of the property, if any. Should
the Company's share of any such proceeds be insufficient to repay the loan then
the balance shall be forgiven. Certain of the 1998 balances, confirmed by
Kinross, are disputed by the Company and may result in a reduction in the amount
expended by Kinross and the Company's carried balance.
The Joint Venture Agreement also granted to Kinross Gold the right to explore
the Eagle and Golden Eagle properties. During 1998, the Company received
notification from Kinross of their determination to drop the majority of the
Eagle and Golden Eagle properties from the joint venture.
Pursuant to the Joint Venture Agreement, the Company and Kinross Gold may elect
to alter their contributions to the program and budget.
Kinross Gold initiated a 7000 foot-large diameter ore drilling program on the
Friday Property to further delineate the mineralized structure and raise grade
from previous drilling. The anticipated cost of this exploration program is
$500,000, which will accrue to the Petsite Joint Venture.
Concurrent with the drilling, an IP/resistivity geophysical program was
initiated on the Deadwood
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Property to delineate the Orogrande shear zone and locate the mineralized
structures. The cost of this exploration program was $42,000, which accrued to
the Deadwood Joint Venture.
Competition
There are numerous companies, partnerships and individuals engaged in mineral
exploration and development, not only in the geographic areas in which the
Company proposes to conduct activities, but also throughout the continental
United States and abroad. To the extent that the Company seeks further
opportunities to participate in promising exploration projects, the Company will
have to compete with other parties for the discovery and acquisition of
properties considered to have commercial potential. Many of these competitors
possess or have access to financial and other resources that exceed those
available to the Company.
Potential profitability of mining ventures and mineral properties depends upon
factors beyond the Company's control. For instance, world prices of, and markets
for, non-precious and precious metals and minerals are unpredictable, highly
volatile, potentially subject to government fixing, pegging and controls, and
respond to changes in domestic, international, political, social and economic
environments. Additionally, in the current period of world-wide economic
uncertainty, the availability and costs of funds for exploration, development
and production and other costs have become increasingly difficult, if not
impossible, to project. These changes and events will materially affect the
financial performance of the Company.
Regulations and Environmental Protection Matters
Environmental Protection Law Compliance
The Company believes that it complies in all material respects with applicable
environmental protection laws and regulations. The Company is not presently
under any order to remedy any existing violation of any environmental protection
law or regulation. The Company is committed to achieving and maintaining full
compliance with all laws, including those governing environmental protection,
and to prompt resolution of any alleged violations in accordance with applicable
law.
General
The Company's business is subject to extensive federal, state and local
governmental controls and regulations, including regulation of mining and
exploration operations, discharge of materials into the environment, disturbance
of land, reclamation of disturbed lands, threatened or endangered species and
other environmental matters. Generally, compliance with these regulations
requires the Company to obtain permits issued by federal, state and local
regulatory agencies. Certain permits require periodic renewal or review of their
conditions. The Company cannot predict whether it will be able to renew such
permits or whether material changes in permit conditions will be imposed.
Non-renewal of permits or the imposition of additional conditions could have a
material adverse effect on the Company's financial condition or results of
operations. The Company believes that its operations and facilities comply in
all material respects with current federal, state, and local permits and
regulations at each of its exploration properties. However, compliance with
existing and future laws and regulations may require additional control measures
and expenditures which cannot be estimated at this time. Compliance requirements
for any mines and mills may require substantial additional control measures that
could materially affect proposed permitting and construction schedules for such
facilities. Under certain circumstances, facility construction may be delayed
pending regulatory approval. The cost of complying with existing and future laws
and regulations may render existing and any future properties unprofitable and
could adversely affect the level of the Company's ore resources, if any.
Environmental Protection Laws
At its exploration operations, the Company is required to comply with federal
environmental protection laws. The Company is also required to comply with
implementing regulations adopted by the U.S.
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Environmental Protection Agency (the "EPA"), the U.S. Forest Service (the
"USFS"), the Bureau of Land Management (the "BLM"), the U.S. Fish and Wildlife
Service, the United States Army Corps of Engineers and other agencies. In each
state in which the Company operates, various federal, state and local agencies
enforce extensive laws and regulations which address the environmental impacts
of mining and mineral processing. Such laws and regulations include the
potential for contamination of soil, water and air from various discharges or
wastes generated in the normal course of mining activities. In particular,
various legislation, including, but not limited to, the Clean Air Act, the Clean
Water Act, the Endangered Species Act and the National Environmental Policy Act,
requires analyses and/or imposes effluent standards, new source performance
standards, air quality and emissions standards and other design or operational
requirements upon various aspects of gold exploration, mining and processing.
Clean Air Act
The 1990 amendments to the Clean Air Act imposed a large number of new
regulatory requirements, including the establishment of a federal air permitting
program, a list of regulated hazardous air pollutants, including various metals
and cyanide, and expanded enforcement authority. The EPA has published final
regulations establishing minimum elements of state operating permit programs.
The individual states were given until November 15, 1993 to submit their permit
programs to the EPA for review and approval. Until federal approval of these
state programs occurs, the full effect of the new regulations on the Company
cannot be accurately predicted. At a minimum, the new federal program will
require additional permitting at certain existing facilities and may require
additional facility monitoring and additional air pollution control equipment.
Clean Water Act
The Clean Water Act is one of the principal federal environmental protection
laws regulating mining operations. The Clean Water Act sets effluent limitations
on waste water discharges and establishes the National Pollution Discharge
Elimination System (the "NPDES"), which permits limited discharges from point
sources, including certain mining facilities, into waters of the United States.
Some dry washes are deemed to be waters of the United States within the meaning
of the Clean Water Act. Permits with strict effluent limitations are often
issued for discharges from ore-processing, maintenance and heap leaching
operations, tailings ponds, and acid mine drainage. The Clean Water Act permits
are also required for the dredging and filling of all waters and wetlands (which
are broadly defined under federal law) and for certain storm water discharges
where runoff comes in contact with overburden. The Company does have certain
required clean water obligations, specifically in regard to the Buffalo Gulch
Property. See Item 2 - Description of Properties for further details.
Endangered Species Act
Certain of the Company's properties are directly affected by the Endangered
Species Act through the listing of salmon as a threatened species. Absent the
success of pending reform proposals to lessen the effect of the Endangered
Species Act, the Company anticipates increasingly difficult permitting and
operating conditions under the Endangered Species Act.
National Environmental Policy Act
The National Environmental Policy Act requires all agencies to consider the
impact on the human environment of major federal actions within the meaning of
the National Environmental Policy Act. The Company's exploration activities
often involve federal lands or federal permits, or both, and may trigger major
federal actions. The National Environmental Policy Act's requirements for major
federal actions is that they be reviewed in an environmental impact statement
prepared by or under the direction of a federal agency, if the major federal
actions have a significant impact on the human environment. Preparation of an
environmental impact statement can delay the federal action being reviewed and
the Company's activity which depends on that action. The Company has no control
over the preparation or review of the environmental impact statement, and delays
resulting from environmental impact statement
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preparation or review are uncertain risks to the completion of any activity
subject to the environmental impact statement required under the National
Environmental Policy Act. The Company currently does not have any activity
subject to an environmental impact statement.
State Environmental Protection Laws
Certain state environmental protection laws address subjects - most notably
groundwater withdrawal - not directly regulated by federal law. Other state
environmental protection laws complement or overlap federal laws. Where states
have enacted environmental protection laws covering similar subject matter as
federal laws and the state laws are more stringent or burdensome, the Company
must comply with the state law in all cases except where the state law is
pre-empted by the federal law.
Governmental Permits, Reclamation and Permitting
The Company must seek governmental permits for its exploration activities at its
properties. Obtaining the necessary governmental permits is a complex and
time-consuming process involving numerous federal, state and local agencies. The
duration and success of each permitting effort are contingent upon many
variables not within the Company's control. In the context of environmental
protection permitting, including the approval of reclamation plans, the Company
must comply with the known standards and existing laws and regulations. These
laws and regulations may entail greater or lesser costs and delays depending on
the nature of the activity to be permitted and the interpretation of the
regulations implemented by the permitting authority. All future exploration and
development projects of the Company require or will require a variety of
permits. Although the Company believes the permits for its projects can be
obtained in a timely fashion, permits have only been obtained to operate the
Eckert's Hill Plant and full-scale mill facility, as well as to begin mini-strip
mining on the Golden Eagle Property. The Company does not believe that existing
permitting requirements or other environmental protection laws and regulations
will have a material adverse effect on its business, financial condition or
results of operations. However, the failure to obtain certain permits could have
a material adverse effect on the Company's business, operations and prospects.
Unpatented Mining Claims
Lands owned by the United States on which unpatented mining claims have been
located by the Company (or located by others and acquired by the Company or by
the joint ventures) under the General Mining Law of 1872 account for
approximately 6,000 acres of federal mineral rights controlled by the Company
through ownership of the unpatented mining claims. The Company also controls
five patented lode mining claims.
Requirements for the location of a valid unpatented mining claim depend on the
type of claim being staked. Generally the requirements include discovery of
valuable minerals, erecting a monument and posting thereon a location notice,
marking the boundaries of the unpatented mining claim, and filing a notice of
location within the county in which the claim is located. If the statutes and
regulations for the location of an unpatented mining claim are complied with,
the claimant obtains a valid possessory right to the contained minerals. To
preserve an otherwise valid unpatented mining claim, a claimant also must make
certain additional findings with the county and the BLM and annually pay a fee
required by the United States. Failure to pay the fee or make the required
filings may render the unpatented mining claim void or voidable.
Because unpatented mining claims are self-initiated and self-maintained, they
possess some unique vulnerabilities not associated with other types of property
interests. It is impossible to ascertain the validity of unpatented mining
claims from public real property records, and therefore it can be difficult or
impossible to confirm that all of the requisite steps have been followed for
location and maintenance of an unpatented mining claim.
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Claim Rental Fees
On October 5, 1992, the United States Congress enacted the Interior Department
and Related Agencies Appropriations Act of 1993, Public Law 102-381 (the
"Appropriations Act"). The Appropriations Act, among other things, established a
mandatory annual rental fee of $100 for each mining claim or site located and
held on public lands under the Mining Law. The requirements of the
Appropriations Act were recently renewed by the United States Congress.
The Company paid rental fees on 190 claims in Idaho and 16 claims in Nevada and
these claims remain active. Kinross paid the rental fees on the claims in the
Joint Ventures and these totaled approximately 250 claims. The majority of the
Golden Eagle claims have been returned to Mr. Swisher and a detailed list may be
reviewed in the Exhibits to the Company's Form 10-KSB for the year ended
December 31, 1997.
Access to Mineral Rights
Many of the mineral rights controlled by the Company do not have public or
negotiated private access, which the Company would need to conduct exploration,
development or mining on such mineral rights. Where existing public or
negotiated private access routes do not cross or touch the property on which the
Company controls mineral rights, access is not assured for the personnel and
equipment necessary for exploration and mining activities. Federal agencies
regulate the access to unpatented mining claims not located on established
access routes. There is no assurance that the Company will be able to negotiate
satisfactory access to all of its mineral rights, however the Company is
currently unaware of any private landowners whose rights could limit access to
the properties.
Research and Development
The Company has not spent any amounts on research and development activities
during each of the last two fiscal years. The Company spent $82,763 and $268,857
on exploration and development in 1998 and 1997 respectively, and $75,671 and
$105,585 on acquisitions in 1998 and 1997 respectively.
Office Lease
The Company's principal offices are located at 504 Main Street, Suite 470,
Lewiston, Idaho 83501, U.S.A., and consist of approximately 1,450 square feet.
These offices are leased from Towne Square Mall for an aggregate monthly rental
of $1,500, which lease expires January 31, 2000.
Employees
On December 31, 1998, the Company had 3 full time employees and one part-time
employee. None of the Company's employees is represented by a labor union.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has no mineral producing properties at this time and receives no
revenues from production. All of the Company's properties are exploration
projects, and there is no assurance that a commercially viable ore deposit
exists in any such properties until further exploration work and a comprehensive
evaluation based upon unit cost, grade, recoveries and other factors conclude
economic feasibility.
Investment Policies
Other than the mining properties described below, the Company does not have any
investments in real estate, interests in real estate, investments in real estate
mortgages, or securities of or interests in persons primarily engaged in real
estate activities. Accordingly, the Company has not established any limitations
on the percentage of assets, which may be invested in any one investment, or
type of investment. However, pursuant to the listing requirements of the
Vancouver Stock Exchange ("VSE"), if such an investment were to be made, and the
investment was outside of the ordinary business of the Company, and as a result
of such investment, the revenue of the Company was increased by more than 25%,
approval of the VSE would be required.
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Petsite Joint Venture Agreement
On May 20, 1996, the Company entered into a joint venture agreement (the "Joint
Venture Agreement") with Cyprus Gold to jointly explore, evaluate, develop,
mine, and market the Petsite Property, the Friday Property and certain
properties contributed by Cyprus. Kinross Gold has since merged with Amax Gold
and now controls Cyprus Gold's joint venture on the Petsite Project properties.
Effective February 23, 1998, Kinross Gold has earned a 70% participating
interest in the joint venture by expending approximately $1.8 million on the
exploration of these properties.
The project is now in the joint venture phase and the Company has elected to
participate and be carried by Kinross. During 1998, Kinross Gold reported
$362,256 of exploration expenditures on the joint venture phase of the project.
In order to allow Kinross to meet its 1998 expenditure requirement on the
Deadwood project, $10,592 of the amount spent was credited to the Deadwood
project. After this transfer, Kinross has reported to have spent $351,664 and
the Company's carried share of these expenditures would amount to $105,499. The
Company's carried share is treated as a loan and bears interest at bank prime
plus 2% compounded quarterly. The principal together with accrued interest is
contingently repayable from 85% of the Company's share of the proceeds of
production or from its share of proceeds on sale of the property, if any. Should
the Company's share of any such proceeds be insufficient to repay the loan then
the balance shall be forgiven. Certain of the 1998 balances, confirmed by
Kinross, are disputed by the Company and may result in a reduction in the amount
expended by Kinross and the Company's carried balance.
The Joint Venture Agreement also granted to Kinross Gold the right to explore
the Eagle and Golden Eagle properties. During 1998, the Company received
notification from Kinross of their determination to drop the majority of the
Eagle and Golden Eagle properties from the joint venture, except for certain
specific claims which have been retained to provide a buffer on the northwestern
corner of the Petsite Joint.
Pursuant to the Joint Venture Agreement, the Company and Kinross Gold may elect
to alter their contributions to the program and budget.
Kinross Gold has initiated a 7000 foot-large diameter core drilling program on
the Friday Property to further delineate the mineralized structure and confirm
grade from previous drilling. The anticipated cost of this exploration program
is $500,000, which will accrue to the Petsite Joint Venture.
Petsite Property
Pursuant to an agreement dated May 24, 1989 and amended February 29, 1991 (the
"Petsite Agreement"), the Company purchased from IMD, a company controlled by
Mr. Swisher, a shareholder of the Company, 89 unpatented contiguous mining
claims located in the Orogrande Mining District, Idaho County, Idaho ("Petsite
Property"). See "Conflicts of Interest, Certain Relationships and Related
Transactions." The purchase price of the property was $20,000 and 20,000 shares
of the Company. IMD retained a 5% net profits interest in the property.
The Petsite Property is located in the Nez Perce National Forest approximately
10 miles southwest of Elk City, Idaho. The Petsite Property is in the advanced
exploration stage. The 89 unpatented mining claims are described in Notices of
Location recorded in the office of the county recorder of Idaho County. Access
to the Petsite Property is gained from Elk City, by traveling seven miles west
on Idaho State Highway 14 to the intersection with the all-weather gravel
Crooked River Road, then south 11.5 miles to the Penman Hill Road (USFS Route
331), and then one mile south to the Petsite Property.
Water is abundant on the Petsite Property. It is generally covered with heavy
snow between November and April of each year. The area is heavily timbered,
except for local west-facing slopes and the more
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open slopes below the Petsite workings, which are generally in dry land grasses
with minimal underbrush except near drainages. Overburden on the property is not
deep, but outcrops are scarce. There is no underground or surface plant or
equipment, however there is power to within 200 feet of the Friday Claims.
Development in the Orogrande District started in 1861 with the discovery of rich
placer properties in the area, which were worked and reworked through the
mid-1900's. The first lode gold discovery in the area was made in 1870, but the
main period of production was from 1902 to 1915. Historical documents suggest
that during the period from 1902 to 1931, $69,598 (3,367 ounces of gold @
$20.67/oz) of lode gold was recovered (Shenon and Reed, 1934) in this district,
mainly from low-grade deposits situated along the Crooked River.
Historically, most of the precious metal mineralization developed on the Petsite
Property has been associated with an elliptically-shaped stock of rhyolite
porphyry which has intruded into the underlying Idaho Batholith granodiorite
near the center of the property. Due to lack of outcrop and the compositional
similarities between the rhyolite porphyry and the granodiorite, the size and
shape of this stock has not yet been accurately determined. An east-west
trending system of mineralized quartz veins and stringers has been emplaced near
the northern contact of this stock as a result of particularly intense local
hydrothermal activity. The most prominent of these, the Petsite Vein System, was
developed by the 450-foot long Waligura Tunnel, now caved, which is reported to
have exposed quartz veining containing varying amounts of pyrite, chalopyrite,
galena, molybdenite, tetradymite, petzite, wolframite and scheelite, with free
gold being observed locally in association with the telluride mineralization1
Without the access to the Waligura Tunnel, most recent exploration has been
confined to surface sampling in the immediate area of the workings, in an effort
to outline a low grade, bulk tonnage deposit along the northern contact of the
rhyolite stock. Assays as high as 0.43 ounces per ton gold across 27 feet have
been obtained from trenches on this portion of the property.
Through 1934, production from this portion of the property is reported to have
been limited to only a few sacks of high-grade ore. In 1942, a shipment of
concentrate, derived from 95 tons of ore taken from the Waligura Tunnel,
reportedly yielded 17,498 ounces of gold and 6.12 ounces of silver (David M.
Nelles, 1989). Minor underground development and various exploration work is
reported to have been undertaken on this portion of the property through 1970.
In 1971, Midwest Oil Corporation examined the property as a copper prospect, but
determined the size and grade of the deposit to be too small to warrant further
exploration. In 1974, two trenches, totaling over 1,000 feet in length, were
bulldozed for Henrietta Mines, Inc. in the area of the old workings and road cut
samples were taken. While some encouraging assays were obtained, the average
grade of the sampled area precluded it as a bulk mining target at the gold
prices which then prevailed. Coastal Mining Company later collared two diamond
drill holes of unknown length outside the rhyolite stock with apparently
disappointing results. In 1975, an induced polarization and resistivity survey
was performed on the property by Kerr-McGee Corporation during their examination
of the Petsite Property. An anomalous response measuring approximately 4,500
feet by 2,500 feet and between 500 feet and 1,000 feet thick was picked up in
the area of the rhyolite stock, and a sulfide content of from 3% to 6% by volume
was hypothesized. In 1980, U.S. Borax collected and analyzed 61 surface samples
from the property, five of which returned values exceeding 0.1 ounces of gold
per ton. Although these results warranted further work, U.S. Borax allowed the
claims to lapse and the claims were subsequently acquired by IMD.
IMD leased the property to Billiton Exploration USA, Inc. ("Billiton") in 1986.
Billiton conducted an initial soil and plant geochemical sampling program. The
program successfully delineated several gold anomalies. Billiton allowed its
lease to lapse in 1988 when the USFS permit required for its proposed
_______
1. A number of companies (Henrietta Mines, Inc., U.S. Borax, Midwest Oil
Corporation and Kerr-McGee Corporation) have collected samples on the
property. The assays have ranged in value from nil to 1.7 ounces of gold
per ton across a 6 inch vein (John S. Vincent, 1984). The exact location of
all of the sampling is not known.
8
<PAGE>
trenching and road building program was delayed pending the outcome of an
environmental impact review. One of the anomalies identified by Billiton
correlated well with the rhyolite stock in the center of the property. However,
a second anomaly was identified along the western edge of the property
approximating the trace of the regional shear zone, which transects the
Orogrande area. Geochemical samples as high as 345 parts per billion gold were
returned from the soil samples making up this anomaly, which has a strike length
of approximately one mile and is open to the north towards the recently
discovered Friday Deposit.
In 1989, based on the recommendations of a January 1989 report on the Petsite
Property commissioned by the Company, the Company carried out a drilling program
to determine the size and grade of the precious metal mineralization associated
with the rhyolite stock. Nine shallow five and one-half inch holes totaling
3,350 feet were reverse circulation drilled at a total cost of approximately
$81,000. The holes were drilled approximately perpendicular to the strike of the
rhyolite/granodiorite contact from five pads established both north and south of
the Waligura Tunnel. Samples were taken for assay, at five foot intervals, over
the entire length of each hole. This program was successful in defining the
geometry of the Petsite Vein System in the area of the Waligura Tunnel.
Significant intervals of variably mineralized quartz veining were intersected in
six of the nine holes, assessing the system over a total strike length of 500
feet to a maximum depth of 340 feet. The true width of the veining system was
determined to increase down dip from a maximum three feet in the Waligura Tunnel
to a maximum of 35 feet at a depth of 300 feet. While the vein itself is
moderately enriched with sulfide mineralization at depth, it contained only low
gold and silver values in the area tested. Values from the five foot interval
samples taken across the vein system ranged from trace to 775 parts per billion
gold. However, anomalous values ranging up to 5,950 parts per billion gold were
obtained from samples taken a short distance into both the foot and the hanging
wall of the rhyolite/granodiorite contact. In one hole, a continuous series of
21 samples grading better than 670 parts per billion gold were taken across a
105 foot interval adjacent to the contact. Samples taken elsewhere in the
rhyolite stock were also elevated in gold, ranging up to 1,690 parts per billion
gold; however, no clear pattern of enrichment emerged from the drill results.
Check assays were subsequently performed on several of the anomalous samples,
with erratic results, and are to be reconfirmed using standard one-ton fire
assay procedures, however such supplemental assays have not yet been performed.
Beginning in October 1991, based on the recommendations of a report on the
Petsite Property prepared by an independent geological engineer, dated December
15, 1989, the Company carried out an additional exploration program which
included the opening of four old exploration adits and a three-hole, 1,324 foot
core drilling program. The preliminary results tended to confirm the historic
assays and indicated a need for further exploration work.
In September 1992, Wilfried J. Struck, an independent geological engineer
retained by the Company, who now is an executive officer of the Company,
completed a report on the Petsite Property. Mr. Struck concluded that
mineralization occurred on the Petsite Property as finely disseminated sulfides
in a quartz stockwork, a quartz porphyry rhyolite and associated granodiorite.
Mr. Struck recommended a program of trenching, mapping, sampling and drilling on
the Petsite Property.
On May 20, 1996, the Company entered into a joint venture agreement with Cyprus
Gold Corporation ("Joint Venture Agreement") to jointly explore, evaluate,
develop, mine, and market the Petsite Property and Friday Property. Kinross Gold
has since merged with Amax Gold and now controls Cyprus Gold's joint venture on
the Petsite property. See "Petsite Joint Venture Agreement." Effective February
23, 1998, Kinross Gold earned a 70% participating interest in the joint venture
by expending approximately $1,775,000 on the exploration of the properties
within the joint venture.
The project is now in the joint venture phase and the Company has elected to
participate and be carried by Kinross. During 1998, Kinross Gold reported
$362,256 of exploration expenditures on the joint venture phase of the project.
In order to allow Kinross to meet its 1998 expenditure requirement on the
Deadwood project, $10,592 of the amount spent was credited to the Deadwood
project. After this
9
<PAGE>
transfer, Kinross has reported to have spent $351,664 and the Company's carried
share of these expenditures would amount to $105,499. The Company's carried
share is treated as a loan and bears interest at bank prime plus 2% compounded
quarterly. The principal together with accrued interest is contingently
repayable from 85% of the Company's share of the proceeds of production or from
its share of proceeds on sale of the property, if any. Should the Company's
share of any such proceeds be insufficient to repay the loan then the balance
shall be forgiven. Certain of the 1998 balances, confirmed by Kinross, are
disputed by the Company and may result in a reduction in the amount expended by
Kinross and the Company's carried balance.
As of December 31, 1998, the Company has spent a total of $266,090, on
acquisition and exploration of the Petsite Property. The Company expenditures
were incurred prior to the May 20, 1996 joint venture agreement and do not
include the carried balance of $105,499, which is contingently payable to
Kinross Gold at December 31, 1998
Friday Property
The Friday Property is at the southern end of the Elk City Gold Belt and
consists of 63 unpatented lode mining claims, five patented lode mining claims
and one mill site claim. The Friday Property is in the advanced exploration
stage. The claims are located in the Nez Perce National Forest approximately 138
miles north of Boise in Idaho County. Access is gained from Grangeville by
travelling 55 miles east on Highway 14 to the intersection with Crooked River
Road (USFS 233), then 10 miles south to the bridge over the Crooked River at the
confluence of Quartz Creek, which is in the central portion of the property.
The Company acquired a leasehold interest in these claims (known as the "Friday
Claims") from Idaho Gold Corporation ("Idaho Gold"), an unaffiliated third
party, pursuant to an agreement dated December 11, 1995 ("Friday Agreement") for
an initial term of five years. In consideration for the grant of the lease, the
Company must deliver 60,000 shares of the Company's common stock; incur
exploration and development expenditures of not less than $135,000 within five
years; replace all bonds; bear all costs of environmental compliance; pay a 3%
net smelter return royalty; and grant an option to acquire a 49% working
interest in the Friday Claims to Idaho Gold. The Company may acquire the option
by payment of C$300,000 to Idaho Gold. The Company has issued the required
60,000 shares to Idaho Gold. There are no bonds to replace.
On May 20, 1996, the Company entered into a joint venture agreement with Cyprus
Gold to jointly explore, evaluate, develop, mine, and market the Petsite
Property and Friday Property. Kinross Gold has since merged with Amax Gold and
now controls Cyprus Gold's joint venture on the Petsite and Friday properties.
See "Petsite Joint Venture Agreement." Effective February 23, 1998, Kinross Gold
earned a 70% participating interest in the joint venture by expending
approximately $1,775,000 on the exploration of the properties within the joint
venture.
The project is now in the joint venture phase and the Company has elected to
participate and be carried by Kinross. During 1998, Kinross Gold reported
$362,256 of exploration expenditures on the joint venture phase of the project.
In order to allow Kinross to meet its 1998 expenditure requirement on the
Deadwood project, $10,592 of the amount spent was credited to the Deadwood
project. After this transfer, Kinross has reported to have spent $351,664 and
the Company's carried share of these expenditures would amount to $105,499. The
Company's carried share is treated as a loan and bears interest at bank prime
plus 2% compounded quarterly. The principal together with accrued interest is
contingently repayable from 85% of the Company's share of the proceeds of
production or from its share of proceeds on sale of the property, if any. Should
the Company's share of any such proceeds be insufficient to repay the loan then
the balance shall be forgiven. Certain of the 1998 balances, confirmed by
Kinross, are disputed by the Company and may result in a reduction in the amount
expended by Kinross and the Company's carried balance.
10
<PAGE>
Physiography
The property is located on the south slope of the Elk City Basin in the Idaho
Peneplane at an elevation of 4,000 to 5,500 feet. The area is characterized by
gently rolling rounded hills which have been deeply incised by the valleys of
the Deadwood Creek and tributaries and the Crooked River and tributaries. The
terrain along the Crooked River is steeper and more incised than the Deadwood
Creek drainage. Vegetation consists of open pine forests on the south facing
slopes and ridges with thicker stands of spruce predominating on the north
slope. The area averages 25 to 30 inches of precipitation per year with the
major portion falling in the fall and winter.
History and Previous Work
Placer gold was discovered in the drainages of Elk City in 1861. Hydraulic
mining of the higher level placers, stream sluicing and operation of bucket
wheel dredges began in the late 1860's and ran intermittently through the late
1950's. The dredging of the upper region of the Crooked River near Orogrande was
one of the last phases.
The claims comprising the Friday Property were assembled into one group in 1983
by Joseph Gray of Joyce Mines, Inc. and optioned to ABM Mining Group ("ABM") in
the fall of 1983. ABM conducted reconnaissance surveys over the old showings
surrounding Deadwood Mountain and detail mapped and prospected the
Orogrande-Frisco mine. ABM optioned the property in the spring of 1984 to
Centennial Minerals Ltd. ("Centennial") of Vancouver, B.C. Centennial
concentrated their work on the Orogrande-Frisco mine area. They completed
detailed gold soil geochemical sampling, induced polarization surveys and rock
chip sampling surveys on both properties. They also drilled 2,047 feet of HQ
diamond core and 4,645 feet of reverse circulation drilling in 21 holes on the
Orogrande-Frisco property and a total of 1,610 feet of reverse circulation
drilling in six holes on the Friday patented claims.
Regionally, Centennial collected 450 stream silt samples, 301 soil samples and
323 rock samples throughout the claim area. These surveys outlined several large
disseminated gold targets in sheared, altered rocks along the east flank of
Deadwood Mountain on the Zenith and Lucky Strike properties and the upper
reaches of Campbell Creek (North Deadwood area).
Centennial allowed their option on the claims to expire in the summer of 1985
without further testing the results on the Friday patented claims and the
indicated Deadwood Mountain disseminated gold zones.
Amir optioned the Friday Property in September 1985 and subsequently joint
ventured the property with Normine in November 1985 and Glamis Gold Ltd.
("Glamis") in May 1986. Glamis may earn a 51% interest by placing the project in
production with Normine and Amir retaining 25% and 24% interests respectively.
Present Work
During November 1985, Normine carried out a seven hole reverse circulation drill
program consisting of 2100 feet on the Alaska 3 and 4 patented mineral claims of
the Friday patented claims. The program was to test a large 1000' x 400' wide,
strong gold anomaly of greater then 100 ppb in soil as the southern extension of
the Friday Knob Hill zone. The drilling returned mixed results with one hole
grading 0.031 oz/ton gold over 50 feet.
In May 1986, Amir and Normine entered into a Joint Venture Agreement with Glamis
where Glamis would fund exploration on the claims through private placements to
a detailed development stage.
11
<PAGE>
During the period May to October 1986, detailed drilling was conducted on the
Friday patented claims and the Orogrande-Frisco mine to test anomalous gold
values in soil and rocks as defined by Centennial in 1985 and the eastern flank
of Deadwood Mountain was prospected. The programs executed are outlined below.
1. On the Orogrande-Frisco property 2,780 feet of drilling was completed
in thirteen holes to test a large soil geochemical anomaly immediately
west of the open cut.
2. On the Friday patented claims a total of 6,645 feet of reverse
circulation drilling in 37 holes traced the mineralization at the Knob
Hill open cut northward 1,200 feet to the Crooked River. Detailed
geological mapping and chip sampling was also conducted on this zone.
3. An extensive reconnaissance program consisting of soil sampling,
geological mapping and rock chip sampling was conducted along four
miles of grid from the south fork of the Clearwater River to Deadwood
Mountain to test the Deadwood Mountain disseminated gold zones as
indicated by the Centennial reconnaissance program in 1985.
A total of 2,685 soil samples and 821 rock chip samples were taken
during the 1986 field season distributed as follows:
Regional soil samples 375
Detailed soil samples:
Zenith Grid 881
North Deadwood Grid 1,424
Regional rock samples 601
Detailed rock samples:
North Deadwood 180
Friday Patented Claims 70
On the North Deadwood Gold Zones II and III a total of 2,865 feet of
reverse circulation was completed in twenty holes to test a portion of
a large gold soil geochemical anomaly with coincident rock chip assays
ranging from 0.014 to 0.120 oz/ton gold.
The soil samples were analysed for gold and arsenic by atomic absorption and the
rock samples by fire assay-gravimetric for gold and silver.
Friday Patented Claims
Geology
The geological information on the Friday patented claims is derived from mapping
of float, surface pits and recent road cuts and a 160 foot long adit, open pit
and logging of 37 reverse circulation drill holes.
The gold mineralization is associated with a dense limonitic fracture stockwork
within highly sheared and sericite altered pendant of schist and gneiss
surrounded by a leucocratic quartz monzonite stock. The sheared gold zone
strikes north, is approximately 160 to 180 feet wide and has been drill tested
over 1,400 feet of strike length. The gold zone dips steeply and is oxidized to
a depth of 50 to 150 feet. Below the oxide zone pyrite coats the fracture
stockwork and has similar grades as the oxide zone. The zone is open to depth
below current drilling.
Detailed mapping shows the zone to be an intimate mix of sericite gneiss-schist
(75%) and leucocratic
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quartz monzonite (25%). The quartz monzonite has been injected as irregular
dykes and apothesis 5 to 20 feet wide along foliation and joint fracture planes,
then sheared and crosscut by gold bearing limonitic fractures. No extensive
silicification is seen on surface or underground, however, several more
competent silicified zones were intersected in drilling. The gold however, is
not specifically associated with these zones.
The sheared gold zone has sharp distinct contacts with competent leucocratic
quartz monzonite to the west. On the east the quartz monzonite is strongly
sheared with highly limonitic fractures over 100 to 200 feet and contains weak
gold mineralization up to 0.02 oz/ton over 200 feet. A sharp break in slope
marks the contact of the sheared and competent leucocratic quartz monzonite.
Mineralization
A total of 6,645 feet of circulation drilling (in 37 holes), was completed on
the Friday patented claims by Normine/Glamis in 1986. Holes were spaced on grid
lines at 200 foot intervals with drilling on line at 100 foot spacing at
- -50(Degree) to -65(Degree) altitudes to the east and west.
The position and results of six reverse circulation holes drilled by Centennial
were used in estimating mineralization on the Friday Property.
Calculations were made by the polygonal section method with vertical cross
sections spaced at 200 foot intervals; ore blocks were then projected half way
between section lines. Based on these calculations, the Company believes the
mineralization can be broken down into oxide deposits and sulphide deposits; a
summary is given as follows:
<TABLE>
<S> <C> <C>
Estimated Oxide 1,354,782 tons = .038 oz/ton gold
Estimated Sulphide Deposit 1,706,648 tons = .039 oz/ton gold
-------------- ----------------
Estimated Combined Oxide and 2,993,764 tons = .039 oz/ton gold
Sulphide Deposits
</TABLE>
The ore:waste ratio is estimated to be approximately 1 : 1.5.
Metallurgy
Metallurgical sampling consists of five bottle roll tests of oxide and sulphide
material from drill cuttings and one column leach test of material from the
Friday Open Cut. Bottle roll recoveries ranged from 44% to 80%, and the column
test showed 75% gold recovery in 25 days.
The Friday Property is in the exploration stage of development, and there is no
assurance that a commercially viable ore deposit exists in any such properties
until further exploration work and a comprehensive evaluation based upon unit
cost, grade, recoveries and other factors conclude economic feasibility.
As at December 31, 1998, the Company has made exploration and development
expenditures of $50,688 on the Friday Claims.
Golden Eagle Property
The Golden Eagle Property is located in the Nez Perce National Forest,
approximately 140 miles north of Boise, in Idaho County.
Pursuant to 3 agreements dated October 15, 1992 (the "Golden Eagle Agreements"),
the Company acquired a 60% interest in 238 unpatented contiguous claims ("Golden
Eagle Property") (identified as
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claim blocks XI, XIV and XV in the agreements). The Company also obtained a
right of first refusal to acquire the remaining 40% interest from IMD and Silver
Crystal Mines, Inc.("Silver Crystal"). IMD and Silver Crystal are companies
controlled by Mr. Swisher. Consideration of $60,000 per claim block and 100,000
common shares of the Company per claim block was paid to IMD and Silver Crystal.
During 1998, the Company received notification from Kinross of their
determination to drop the majority of the Eagle and Golden Eagle properties from
the joint venture, except for certain specific claims, which have been retained
to provide a buffer on the northwestern corner of the Petsite Joint Venture. Due
to current market conditions, management elected to drop all of the claims
released from the joint venture by Kinross and provided notification to IMD.
Accordingly, the related acquisition, exploration and development costs of
$332,077 have been written-off in 1998.
Deadwood Property
The Deadwood Property consists of 64 unpatented lode mining claims located in
Idaho County in Townships 28 and 29 North in Range 7 East, Sections 5, 6, 7 and
8, Boise Meridian. Each claim is approximately 20 acres in extent. The Deadwood
Property is in the exploration stage. The claims are located in the Nez Perce
National Forest approximately 145 miles north of Boise in Idaho County. Access
is gained from Grangeville by travelling 58 miles east on Highway 14 to the
intersection with the Wheeler Mountain Road (USFS 222), then 0.5 miles south to
the Little Campbell Creek which is at the northeastern end of the property. The
Company acquired its interest in the property from Idaho Gold pursuant to an
agreement dated December 11, 1995 whereby Idaho Gold transferred certain mining
interests known as the "Deadwood Claims" to the Company. In consideration for
such transfer, the Company must deliver 70,000 shares of the Company; incur
exploration and development expenditures of not less than $135,000 within five
years; replace all bonds; bear all costs of environmental compliance; pay a 3%
net smelter return royalty; and grant an option to acquire a 49% working
interest in the Deadwood Claims to Idaho Gold. The Company may acquire the
option by payment of C$100,000 to Idaho Gold. To date, the Company has made
exploration and development expenditures of $20,000 on the Deadwood Claims and
issued 70,000 shares to Idaho Gold. There are no bonds to replace.
On June 13, 1997, the Company entered into a joint venture agreement (the
"Deadwood Joint Venture Agreement") with Cyprus Gold to jointly explore,
evaluate, develop, mine, and market the Deadwood Property. Kinross Gold has
since merged with Amax Gold and now controls the Cyprus Gold joint venture on
the Deadwood Property. Kinross Gold will earn a 60% interest in the joint
venture, subject to the following requirements: payment of future BLM and county
claim maintenance and filing fees; maintaining in good standing all existing
leases/options presently held by the Company within the area of interest;
reimburse the Company for the lease costs incurred on the Joyce Mines &
Thunderbird Resources - Amir Mines agreement during 1997; payment of $65,000 on
signing of the Agreement and $50,000 upon receiving proof to Cyprus Gold's
satisfaction that the Company has completed the acquisition of the Eagle/Golden
Eagle Claim group pursuant to the Cyprus Joint Venture Agreement; and purchase
$100,000 in common shares of the Company within 6 months from the date of the
agreement; and expend exploration costs of $1,150,000 within a three year
period. Cyprus Gold has the option to earn a further 20% interest in the joint
venture by: continuing to maintain the Company's unpatented lode claims, payment
of the BLM and county claim maintenance and filing fees, maintaining in good
standing all existing leases or option presently held by the Company within the
area of interest, and expenditure of further exploration costs of $1,350,000.
Kinross has spent a total of $305,000 on the Deadwood Property as of December
31, 1998. Subsequent to December 31, 1998, the Company received notification
from Kinross of its withdrawal from the Deadwood Joint Venture Agreement, prior
to earning any interest in the property. The Company is currently resolving
certain issues regarding the allocation of expenditures between the Petsite and
Deadwood joint ventures with Kinross. Management is pleased to have the Deadwood
property back and intends to conduct a limited exploration program as it seeks a
new partner to further explore and develop
14
<PAGE>
this property. The return of the Deadwood property allows the Company to group
this property with other contiguous properties making the combined properties
more attractive to possible future partners.
As at December 31, 1998, the Company has expended exploration and development
expenditures of $72,588 on the Deadwood Property. The Company expenditures were
expensed in 1997 as the cost of property options, upon the receipt of the
$165,000 from Kinross pursuant to the Petsite and Deadwood joint venture
agreements.
The following description includes excerpts from an internal report prepared by
Bema Industries Ltd., the former owners of the property.
The North Deadwood zone is the most significant gold zone outlined by
reconnaissance prospecting on the Friday Property to date.
Stream silt sampling by Centennial in 1985 outlined an anomalous gold source
area at the head of Little Campbell Creek. Several drainages over a northerly
strike length of 5,000 feet from the South Fork of the Clearwater River to
Campbell Creek had values of 900 to 4,000 ppb gold.
Reconnaissance mapping and sampling was carried out along a road accessing the
Carter group of patented claims and westerly up Little and Big Campbell Creeks
to the divide. Geological mapping and sampling outlined a silicified, sheared
and brecciated structure 200 feet wide on the Carter claims with rock sample
values of 0.01 to 0.036 oz/ton and soil values of 25 to 400 ppb gold. The
anomalous silt and soil samples continued south through to Big Campbell Creek
5,000 feet to the south.
To trace this persistent gold structure a large soil geochemical grid measuring
10,000 feet by 4,000 feet was established extending southwesterly from the South
Fork of the Clearwater River just east of the height of land.
Geochemistry
A gold soil geochemical sampling program consisting of 1,424 soil samples on 200
foot spaced grid lines at 100 foot centers was completed over a grid area
measuring 10,000 feet by 4,000 feet. The survey outlined a broad gold
geochemical anomaly greater than 25 ppb gold striking N20(Degree)E over the
entire grid length of 10,000 feet with a width varying from 500 to 2,000 feet.
The anomaly has a strongly defined core of greater than 100 ppb to a maximum of
1,220 ppb gold which corresponds to an intensely sheared, brecciated and
silicified gold zone.
Geology and Gold Zones
Geological mapping was conducted over the gold soil geochem grid as a follow up
on the large gold geochemical anomaly. A broad zone of pervasive sericite-clay
alteration which averages 2,000 to 3,000 feet in width was traced throughout the
grid area and surrounds the gold soil anomaly. On the northern portion of the
grid the alteration zone corresponds to the outer limits of the greater than 10
ppb gold soil anomaly and on the southern portion of the grid it extends 2,000
feet further north outside the soil anomaly. This extension may be due to a
weakly limonitic quartz monzonite intrusive mapped in this area.
The persistent linear core gold anomaly of greater than 100 ppb is associated
with a strongly sheared, brecciated, and intensely limonitic silicified zone
which has been traced from the northern most line 420N to the southern most
portion of the grid L324N. Detailed mapping and channel sampling on recent drill
road cuts in the center of the area on line 380-376N shows the zone to be a
complex brecciated system. The rock is a mixed assemblage of quartz monzonite
and sericite schist which has been altered to sericite and clay, then
silicified, sheared and brecciated with gracutes and voids coated with intense
15
<PAGE>
orange to dark chocolate brown limonite. The oxide zone extends to a depth of 50
to 200 feet below surface and averaging 170 to 200 feet on the ridge tops. Below
the oxide zone the fractures and voids are filled with pyrite and traces of
arsenopyrite.
The alteration has characteristics of a porphyry copper system, with large
advanced argillic alteration zones and mineralization being associated with
fractures fillings in zones of brecciation and silicification. The inner fault
zone is a part of a large scale regional shear zone which has controlled
intrusive implacement, alteration and gold mineralization.
Gold Zone
Rock sampling has been conducted over the length of the silicified, brecciated
and limonitic gold zone and has outlined four strong gold zones with values of
0.010 to 2.8 oz/ton gold with an average of 0.03 to 0.05 oz/ton gold. These gold
zones are numbered I to IV and are described in detail below.
Zone II
Rock sampling has outlined a zone 800 feet in strike by 150 to 200 feet in width
with an average of seven rock chips of 0.05 oz/ton gold. The zone lies on the
southern fringe of the Carter patented claims. Two vertical reverse circulation
drill holes tested the southern fringe of this zone with one hole returning
0.012 oz/ton gold over 50 feet.
Zone III Central Zone
This is the largest gold soil geochemical anomaly outlined along the sheared
gold structure. Detailed mapping and rock channel sampling on three drill access
road cuts have outlined a large gold bearing structure. A central zone 400 feet
wide consisting of strong brecciation and silicification with intense limonitic
fracture coatings and void fillings is flanked on either side by several hundred
feet of soft intensely clay-sericite altered limonitic schist. Channel sampling
show the best gold values of 0.03 to 0.283 oz/ton gold to the south in the area
of the best reverse circulation drill holes. A total of 18 reverse circulation
drill holes totaling 2,385 feet tested the zone in October 1986. Three holes in
the southern portion of the drill area intersected significant gold
mineralization over a strike of 300 feet. Gold soil geochem and rock sampling
have traced the zone 1,000 feet to the south with five rock chip samples
averaging 0.048 oz/ton gold.
Summary
A broad gold bearing zone has been outlined by drilling and channel sampling in
the area of the southernmost drill holes 86-04 to 86-06. Channel sampling on
surface indicates average grades of 0.02 to 0.028 oz/ton gold with significant
drill intersections averaging 0.028 oz/ton gold on the southernmost holes with
the zone open to depth and on strike to the southwest and north.
The silicified brecciated structure is 350 to 400 feet wide and is flanked by a
soft intensely sericite-clay altered zone to the north and south of over several
hundred feet. Channel sampling on the southern sericite-clay altered zone
averaged 0.02 and 0.028 over 100 to 200 feet on road cuts.
Drilling indicates the gold zone may be vertically zoned with grades and
alteration dropping off to the north down slope into the steeply incised little
Campbell Creek. The depth of oxide is greatest in the bench area of holes 86-04
to 86-06 with a thickness of 150 to 200 feet. This zone is the main drill
target.
The gold zone has a potential strike length of 1,200 feet and a width of 800
feet. The zone should be tested by 5,000 feet of angled reverse circulation
drill holes on 200 foot centers during the 1987 field season.
Zone IV
The soil geochemistry and rock sampling has outlined a large gold zone extending
over 3,000 feet in the
16
<PAGE>
southern portion of the gird area. This gold zone is separated from the Central
Gold Zone III by a projected east-west fault zone along Big Campbell Creek with
an inferred displacement of 1,000 feet. Rocks in the northern portion of the
Zone IV Gold Zone are a highly sheared and sericite-clay altered mixed zone of
quartz monzonite and schist with irregular crushed silicified zones. In the main
southern portion of the gold zone sericite quartzite is the main rock type which
has been highly fractured and cut by irregular quartz veins and veinlets. The
silicification of Zone IV is characterized by the splayed out zone of quartz
veins and veinlets rather than a central core flanked by soft intense sericite
alteration as in the Northern Gold Zones I to III.
Conclusion
The northern portion of the gold zone IV is 100 to 200 feet wide and has a
strike of 1,500 feet. It consists of mixed schist and quartz monzonite which is
highly sheared and altered to a soft sericite-clay with sheared silicified
zones. Soil geochemistry and rock sampling indicate gold mineralization is
irregular and should be drill tested after the southerly zone.
The southern portion of the gold zone IV is 400 to 500 feet wide and has a
strike length of 2,000 feet. It consists of highly fractured and limonitic
sericite quartzite with minor sericite schist-gneiss. It is cut by numerous
quartz veins and veinlets with similar gold grade to the limonitic sericite
quartzite. The average gold value of thirteen rock samples is 0.05 oz/ton with a
range of 0.004 to 0.163 oz/ton gold. This is a strong persistent gold system
with good alteration, fracturing and gold values. The southern portion of the
Zone IV gold zone should be tested by 4,000 to 5,000 feet of angled reserve
circulation drilling spread throughout the anomaly at 200 to 300 foot centers.
The northern portion of the gold zone IV is 100 to 200 feet wide and has a
strike of 1,500 feet. It consists of mixed schist and quartz monzonite, which is
highly sheared and altered to a soft sericite-clay with sheared silicified
zones. Soil geochemistry and rock sampling indicate gold mineralization is
irregular and should be drill tested after the southerly zone.
The southern portion of the gold zone IV is 400 to 500 feet wide and has a
strike length of 2,000 feet. It consists of highly fractured and limonitic
sericite quartzite with minor sericite schist-gneiss. It is cut by numerous
quartz veins and veinlets with similar gold grade to the limonitic sericite
quartzite. The average gold value of thirteen rock samples is 0.05 oz/ton with a
range of 0.004 to 0.163 oz/ton gold. This is a strong persistent gold system
with good alternation, fracturing and gold values.
The southern portion of the Zone IV gold zone should be tested by 4,000 to 5,000
feet of angled reserve circulation drilling spread throughout the anomaly at 200
to 300 foot centers.
Buffalo Gulch Property
Location, Description and Acquisition
The Buffalo Gulch property is located 3 miles west of Elk City, Idaho in Idaho
County and is in the development stage. The deposit lies within sections 17, 20
and 21, Township 29 North, Range 8 East. Elk City is approximately 55 mile east
of Grangeville, Idaho. Access from Grangeville is on state highway 13 and 14.
The property can be accessed directly from highway 14, by a secondary logging
road along Buffalo Gulch. Most services including fuel, groceries, and lodging
are available in Elk City and Grangeville. There is also a small landing strip
for lighter aircraft at Elk City, and an airport with fuel at Grangeville.
Pursuant to an agreement (the "Buffalo Gulch Agreement") dated December 11, 1995
with Idaho Gold, Idaho Gold transferred to the Company certain mining interest
known as the "Buffalo Gulch Claims" to the Company. In consideration for such
transfer, the Company issued 120,000 shares of the Company to Idaho Gold and
will incur exploration and development expenditures of not less than $310,000
within
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five years. The Company also agreed to bear all costs of environmental
compliance; pay a 3% net smelter return royalty capped at C$3,000,000; and grant
an option to acquire a 49% working interest in the Buffalo Gulch Claims to Idaho
Gold. The Company may acquire the option by payment of C$300,000 to Idaho Gold.
As at December 31, 1998, the Company has incurred exploration and development
expenditures of $600,175 on the Buffalo Gulch property, excluding the deemed
cost related to the acquisition of the property.
The Company is also a party to three underlying agreements pertaining to the
Buffalo Gulch property as follows:
Black Bear Agreement - On August 1, 1996, the Company entered into an agreement
(the "Black Bear Agreement") with Frank H. Piatt, John R. Heigis and Thomas C.
Rich ("Owners") whereby the Company was granted an option to acquire a 100%
interest in six claims known as the "Black Bear Mining Claims" located in the
Elk City Mining District, Idaho. To keep the option in good standing, the
Company is required to pay; $2,400 per quarter commencing August 1, 1997 (paid),
$3,600 per quarter commending August 1, 1998 (paid to date), $4,800 per quarter
commencing August 1, 1999, $6,000 per quarter commencing August 1, 2000, $7,200
per quarter commencing August 1, 2001 and a final payment of $24,000 by July 31,
2002. In the event the Company places the claims into production, the Owners
agree to transfer the claims to the Company and the Owners shall receive
$120,000 less all quarterly payments made. If the claims are not placed into
production by July 1, 2002, then the Company shall have no further interest in
the claims unless it pays the sum of $120,000 less all quarterly payments made.
Pursuant to the terms of the agreement, the Company must expend a total of
$3,000 per year on the claims, commencing July 1,1997. The Company must also
perform assessment work or make payments in lieu thereof and pay all applicable
taxes on the claims. The Company has been granted unrestricted access and
exclusive rights to the claims for the purposes of certain exploration and
activities. The Company has right of first refusal to purchase the land pursuant
to the agreement.
As at December 31, 1998, the Company had made all required payments to the
owners of the Black Bear Mining Claims, under the agreement totaling $26,100.
Whiskey Jack Agreement - By an agreement dated August 29,1998, the Company was
granted an option to acquire a 100% working interest in certain unpatented
mineral claims in Idaho. To keep the option in good standing, the Company is
required to pay; $1,000 per quarter commencing July 1, 1998 (paid to date),
$1,400 per quarter commending July 1, 1999, $1,800 per quarter commencing July
1, 2000, $2,000 per quarter commencing July 1, 2001, $2,400 per quarter
commencing July 1, 2002 and a final payment of $30,600 by July 1, 2003. Pursuant
to the terms of the agreement, the Company must expend a total of $1,000 per
year on the claims. The agreement supercedes the Company's assumption of an
agreement dated July 1, 1988 under which a total of $23,400 was paid.
As of December 31, 1998, the Company has made all required payments under the
new agreement totaling $2,000.
Gray Estates Agreement - The Company has assumed the obligations of an
underlying agreement dated May 21, 1984 which requires quarterly advance royalty
payments of a minimum of $6,000 to a maximum of $500,000. The agreement is
subject to a 5% net smelter royalty over certain claims with the Buffalo Gulch
property.
As of December 31, 1997, the Company or Idaho Gold Corporation has made all
required payments under this agreement totaling $348,000.
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Exploration & Development History
Gold mineralization was discovered by the Bema Group, through prospecting and
reconnaissance stream sediment and soil sampling campaigns. Subsequently, grid
soil sampling and dozer trenching defined the extent of the mineralization in
bedrock. Drilling on the Buffalo Gulch property consisted of 150 vertical
reverse circulation drill holes, drilled on a 100 foot grid. This drill hole
distribution and spacing are sufficient to define the deposit. The deepest
mineralized intersection is at a depth of about 500ft. The oxide mineralization
has been completely delineated by drilling; the sulphide mineralization is open
at depth to the east, to the north and to the south.
Limited surface mapping has been done because of poor exposure. Excavation of
the test pit for metallurgical samples allowed limited geological mapping.
Buffalo Gulch ore has been the subject of an extensive metallurgical testing
program, beginning with bottle-roll cyanidation leach tests in 1986 performed by
Bateman Labs and Glamis Gold Corp., through two pilot-scale heap leach tests
carried out in 1987 and 1989.
Following permit approval for full-scale operation in late 1990, initial
construction activities began in anticipation of mine construction in the spring
of 1991. These initial construction activities consisted of logging the site,
upgrading the access road, building sediment control "brush filter winrows"
around the site, and completion of over 12,000 feet of pole fence along the
perimeter of the project site. These activities have been completed, leaving the
site prepared for construction to begin upon completion of required permitting.
Permitting Status
The Company has made various applications for permits required to operate the
Buffalo Gulch mine.
The Plan of Operations submitted by the Company was subject to an Environmental
Assessment which was approved by way of a Finding of No Significant Impact
(FONSI) which was issued by the BLM on August 30, 1990. Six permits required
from the State of Idaho have also been approved.
The Company has suspended permitting activities at this time pending an
improvement in the price of gold.
The Company is awaiting approval of the other permits required to operate the
Buffalo Gulch mine. There can be no assurance that such approval will be
obtained in a timely manner. See "Item 1. Description of Business - Government
Permits, Reclamation and Permitting."
The Geology
The Buffalo Gulch Property is underlain by Precambrian gneisses, schists and
quartzites which have been intruded by the Cretaceous-Tertiary granitic rocks.
The intrusives form small dykes, sills, irregular lensoid bodies and breccias
within the country rocks. The regional structural lineament/fracture zone is
thought to be the feeder for the gold mineralization with associated
hydrothermal fluids. The resulting alteration envelope around the Buffalo Gulch
Deposit weakened the local rock fabric, which was then subjected to deep
weathering. Much of the host rock is totally dissociated to sand and gravel
sized fragments, yet original rock fabric is still visible and mappable.
Weathering is up to 300 feet deep, facilitating trenching, sampling and reverse
circulation drilling. Although little determinative work has been done, detailed
assaying indicates the gold was liberated from the sulphides and now occurs as
free grains associated with siliceous, hematitic or limonitic zones. Sulphide
gold mineralization underlies the
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oxidized zone with the deepest mineralization occurring at about 500 feet depth.
The deposit is open and untested at depth.
Drilling
Recent drilling at Buffalo Gulch consisted of nine diamond drill holes of core
size HQ. The drilling contractor was Sunrise Exploration of Northport,
Washington. Total footage drilled was 2762 feet.
Recoveries were generally good with the exception of the upper portion of
several holes. At the beginning of the program, recovery in the top portion of
the holes was averaging about 45%. As the program progressed different methods
were implemented to boost recovery in the top portion of the holes. A triple
tube system and a face discharge bit were used in the softer near surface
material to curtail washing of the core. This system helped to bolster
recoveries to an average of about 76% for the upper portion of later holes. The
soft washable material represents about 18% of the material drilled. Below this
zone of soft material, recoveries were very good, generally 100%. A graph of
gold values versus recovery indicates that the amount of material recovered had
no statistical affect on the grade of the material.
Down hole surveys were conducted in holes BGDDH-01 through BGDDH-05.. Holes
BGDDH-03 through BGDDH-05 are angle holes. The bottom of holes BGDDH-01 and
BGDDH-02 deviated less then 1 degree. BGDDH-03 deviated about 35 feet southward
and the inclination remained constant. The hole deviated 2.5 degrees between the
collar and 96 feet, 2 degrees between .96 feet and 196 feet, 3 degrees between
196 feet and 296 feet and 2.5 degrees between 296 feet and 396 feet. BGDDH-04
dipped a total of about 20 feet and deviated about 10 feet northward. The hole
deviated 1.5 degrees and dipped 4 degrees between the collar and 191 feet, and
deviated back southward 1 degree and dipped 1 degree between 191 and 291 feet.
BGDDH-05 deviated less than 10 feet northward and dipped about 10 feet. The
deviation in direction as about 1 degree, while the hole steepened about 4
degrees over the entire length.
Regionally the Buffalo Gulch deposit is within Proterozoic biotite gneiss, which
lies between the two separate lobes of the Idaho Batholith. It is also located
adjacent to a regional fault known as the Orogrande Shear Zone. This is a
structure which is at least twelve miles long, stretching from Orogrande on the
south to just north of the Buffalo Gulch deposit. On the northern end the
structure disappears under Tertiary gravel deposits.
Locally the Buffalo Gulch deposit lies along conjugate structures to the
Orogrande shear zone within altered gneissic rocks. Deposit lithologies include:
highly altered monzonite gneiss, less altered biotite gneiss, pegmatite, mafic
material, ultra mafic material, biotite schist and a quartz rich unit of
possible hydrothermal origin. Gneissic material is the most abundant rock type
on the property, pegmatite is the second most abundant, followed by the quartz
rich unit and then the minor units (ultra mafic, mafic and schist). Pegmatite is
an abundant rock type within the deposit. It often occurs as thin lenses from 4
to 12 inches, but may also occur as thicker units up to several tens of feet. A
quartz rich unit is oriented along the eastern side of the Buffalo Gulch
deposit. The ultra mafic and mafic material occur as thin sills or dikes which
seem to be localized to the southern end of the deposit area. The interpreted
structures represent areas where shearing is the greatest in intensity and is
the probable location of faults.
Alteration and Mineralization
Phyllic alteration is pervasive throughout and around the Buffalo Gulch deposit.
A rough alteration zoning may be present, but more work would be needed to
confirm and define the zoning. The upper portion of the deposit consists of very
soft clay rich material which may represent highly phyllic/argillic altered
gneiss. Below the soft clay rich material lies intensely phyllic altered gneiss.
This material is light colored and has little or no biotite remaining. Zones of
biotite gneiss were encountered during the core drilling program. These areas
are simply less altered material and occur as irregular small bodies
interspersed through the deposit area. In a couple of the deeper holes drilled
at Buffalo Gulch
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chloritization of the gneiss has occurred and may suggest a zone of propylitic
alteration.
In the oxidized portion of the deposit limonite is pervasive throughout the
material, but also occurs as: specs after sulfide grains, darker bands along
foliation, fracture filings, and as solution bands in more permeable crystalline
layers. Minor amounts of hematite are present as well. The limonite is probably
after pyrite and arsenopyrite. Analytical data indicates an increase in arsenic
with increased gold values. Below the redox boundary pyrite is the most abundant
sulfide with some arsenopyrite and possibly some marcasite. The sulfides occur
mostly along foliation and as fracture filings, but also as finely disseminated
grains throughout the material.
Silification has occurred at depth, but is lacking (for the most part) in the
oxidized portion of the deposit. There are a few thin zones of silicic material
in the oxidized portion, as well as a few veins and the large quartz rich unit.
Silicification at depth has not changed original rock appearance, but exists as
silica flooding that has replaced individual mineral grains. The veining and
quartz rich material in the upper portions of the deposit is cryptocrystalline
quartz, which has wholly replaced or displaced the original material.
There is evidence that there has been movement along foliation planes during
shearing. There is also evidence of dilation along small fractures in the core.
These dilations often contain blebs of sulfides. Abundant fracturing was in
evidence throughout all the core drilled in 1996. This indicates structure is an
important control for the circulation and deposition of mineralizing fluids.
Analytical Results and Comparison
Results from the 1996 drilling program indicate that gold values from reverse
circulation drilling programs have validity. There is also evidence suggesting
there may be a zone of supergene enrichment or near the redox boundary. This
characteristic was only observed in a few of the reverse circulation drill
holes, which may indicate some caving during drilling of the reverse circulation
holes, thus down grading the deeper samples. Results for the top portion of the
1996 core drill holes, where recoveries were poor, may not represent the actual
values of the entire interval stated because all the material for that interval
was not recovered.
During 1998, the Company conducted a geophysical program on the property and
delineated several co-incident resistivity and I.P. anomalies that are similar
in characteristic to the geophysical anomaly over the Buffalo Gulch deposit. The
anomalies represent targets which will be tested by drilling in the future. At
this time, work will be curtailed to minimize expenditures pending an
improvement in the price of gold.
Geotechnical Test Results
All core drilled in 1996 was logged using a geotechnical classification
developed by the Association of Consulting Engineers of Canada. Core was
measured to determine recovery, RQD (rock quality designation), hardness, degree
of breakage, degree of weathering, joints (angle, frequency and character), and
foliation (angles and frequency). This information was then used to select
representative samples for geotechnical testing.
Sixty-one selected core samples were tested to determine percent moisture and
dry specific gravity. When the geotechnical samples are plotted on a two axis
graph using depth verses density, a rough linear trend is apparent in both the
oxidized and unoxidized material. The best fit line in the oxidized material is
steeper then in the unoxidized material, indicating that weathering has an
effect on density. The shallower highly weathered, highly clay altered, material
is less dense than the deeper less weathered material. It is apparent in the
oxidized material that rock densities generally increase with increased depth.
This effect is also true for the unoxidized material although less apparent.
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Conclusions and Recommendations
Results from the 1996 core-drilling program, indicate the mineral deposit
estimate established from the reverse circulation drilling are valid. The core
drilling has also indicated there is a probability of adding ounces of gold to
the mineral deposit estimate by moving material out of the waste category and
into the ore category. Results from the core-drilling program should be used to
recalculate ore mineralization for the individual blocks in which they were
drilled. If additional ounces of gold are inferred outside of these ore blocks,
they would have to be classified as probable ounces and not drill proven ounces.
There is also a probability of expanding the deposit in several areas where
previous drill coverage was not adequate to test the area. Geophysical methods
could be used to define these areas after which a limited reverse circulation
and core drilling program should be initiated to test the targets. Care should
be exercised during such a program to insure sample integrity. Additional ounces
may also exist in a zone of supergene enrichment. Although indicated, core
drilling did not fully establish such a zone over the entire deposit area.
A better understanding of the geology and genesis of the Buffalo Gulch deposit
was gained through the core-drilling program. This knowledge may prove very
valuable in searching for similar mineralization in the region. It is
recommended that additional petrologic studies be conducted on selected core
samples to further the understanding of this deposit. Fluid inclusion studies on
the quartz may be helpful in establishing a pressure and temperature for mineral
formation characteristics are more important. The better understanding of the
deposit genesis has established a potential or sizable deposit of sulfide hosted
mineralization. Metallurgical tests should be conducted on the sulfide material
retrieved during the core- drilling program to determine the feasibility of
defining such a deposit. If tests show it is feasible to retrieve gold from this
material, a drilling program to test the sulfide potential at Buffalo Gulch
should be initiated as soon as possible.
Geotechnical tests on the core have established a rock density of approximately
16 cubic feet per ton, for the majority of the material in the Buffalo Gulch
deposit. These tests also indicate a general density increase with increased
depth. Increased density with increase depth might also be important if the zone
of supergene enrichment is of significant size. Clay alteration is less with
increasing depth and this could be very important in that less agglomeration
will be required as less altered material is exposed at depth. Most of the low
density, clay rich material is at depths less then 50 feet. This material is at
the deepest portions of the oxide zone at the bottom of individual ore
intercepts, which would mean the material is more dense.
The knowledge gained from the core-drilling program at Buffalo Gulch should be
used to explore the potential areas of South Buffalo. Such a program should also
employ some geophysical methods to help define potential drill targets. Gradient
Array SP is a geophysical method that has been successful in defining targets
similar to mineralization at Buffalo Gulch. This type of survey should be
attempted over about two square miles, including the Buffalo Gulch and South
Buffalo areas. More geochemistry and reconnaissance mapping should be completed
in the area to help define potential drill targets. This should be initiated
well before any drilling program. About 4,000 feet of core should be drilled to
follow up on targets defined by the above mentioned work. Depending on results,
a follow up program, consisting of both core and reverse circulation drilling,
should be initiated to define the extent of mineralization encountered in the
first round of drilling.
The Company estimates that approximately $150,000 will be required for
reconnaissance mapping and sampling at the Buffalo Gulch property. The 1998
mapping, sampling and geophysical program identified several substantial
anomalies, that have not been tested to date, but the Company plans to test
these zones in the future on an improvement in the price of gold. The Company
intends to identify potential joint venture partners in regard to the Buffalo
Gulch Property with a view to concluding a joint venture agreement thereon.
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Dixie Property
Phase 1 exploration of the property consisted of collection of 100 soil samples
on a 600 x 1500 foot sample grid. Bedrock mapping was also conducted and the
results indicate a large zone of anomalous gold mineralization. The zone within
the greater than 33 ppb gold line is approximately 13,000 feet north to south
and 4,000 feet east to west. Proposed Phase 2 will consist of detailed mapping
and sampling followed by trenching to further delineate these zones. The Company
will minimize expenditures on this property and intends to identify potential
joint venture partners with a view to concluding a joint venture agreement
thereon.
Montana Property
The properties acquired in Park, Sweet Grass and Stillwater counties, Montana,
consist of three separate groups.
Property 1 - Chrome Mountain Property
The property consists of the acquisition of approximately 3,500 acres covering a
seven mile strike length of Ultramafic and Banded series near Stillwater,
Montana. ICMC has entered into a Memorandum of Understanding with a privately
held company, Platinum Fox, Inc., on 54 claims in the Chrome Mountain area
covering approximately 1,000 acres. The terms of the agreement will be provided
upon signing of the definitive agreement currently being prepared. The Company
has also acquired the mineral rights to an additional 2,500 acres along the
seven-mile strike length by staking 255 claims.
The combined property staked by ICMC and acquired from Platinum Fox covers the
upper member of the Ultramafic series composed of cumulates of Olivine and
Bronzite, as well as the contact between the Ultramafic series and the Banded
series. The Banded series consists of several stratigraphic subdivisions for
plagioclase bearing cumulates and hosts several PGE bearing layers.
The most explored and developed is known as the J.M. Reef which strikes
northwesterly and dips approximately 70 degrees to the northeast and can be
traced for approximately 26 miles. The J.M. Reef hosts the Stillwater Mine, the
only commercial reserve of platinum and palladium in production in North America
operated by the Stillwater Mining Company ("Stillwater").
ICMC's property is parallel to the strike of the J.M. Reef and contiguous for 7
miles along the Reef. The property adjoins Stillwater's patented ground and is
within 1,500 feet of the Frog Pond adit. The J.M. Reef occurs in the Banded
series and mineralization fluctuates in width both vertically and horizontally,
going from a minimum of less than 1" to in excess of 30' and consists of
platinum and palladium at a ratio of 1:3.3. Based on review of previous geologic
investigations, the area has some structural complexities consisting of
transverse faults perpendicular to the strike of the J.M. Reef with lateral
offsets of up to 2,000 feet.
Limited grab sampling on the Platinum Fox property and area staked by ICMC in
the fall of 1998 has returned anomalous platinum and palladium numbers of up to
264 ppb combined platinum/palladium. The Company is planning to initiate an
extensive structure mapping and sampling program as soon as the snow melts.
Property 2 - Picket Pin Zone
The second property consists of the acquisition of approximately 2,200 acres by
staking 119 claims near Stillwater, Montana. The claims are located along the
stratigraphic subdivisions between the Middle Banded series and the Upper Banded
series over a 12 mile strike length.
The property consists of contiguous claims from Picket Pin Creek on the east end
of the Zone, east of Picket
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Pin Mountain, to Contact Creek 1.5 miles west of the Boulder River and excludes
approximately 0.75 miles of private property along the Boulder River. The zone
shows anomalous enrichment the platinum group elements (PGE's) and is parallel
and to the north of the J.M. Reef, 2.6 km stratigraphically lower. The PGE
bearing sulfides are hosted in anorthosite and are overlain by troctolite and
anorthosite of the Olivine-bearing Zone V.
Mineralization is reported (from work conducted by Anaconda Mining Co.) along
the entire exposed strike length of the deposit and samples from the Picket Pin
Creek area assayed 0.58 weight percent Cu, 0.21 weight percent Ni, 2.3 ppm Pt,
2.3 ppm Pd and 0.2 ppm Au (A.E. Boudreau). These values are stated as typical
for Picket Pin mineralization. The majority of mineralization occurs within 10
to 20 m, at or below the contact on an abrupt change in texture and mode in the
amorthosite.
A significant feature described by A.E. Boudreau is the presence of "podiform
and transgressive pipelike bodies of PGE bearing sulphide mineralization, which
occur to a depth of 150 m in the coarse-grained amorthosite below the interval
of stratabound mineralization." The speculation is that these pipelike bodies
are "possibly analogous to the volatile channelways leading up through the
footwall to the potholes of the Merensky Reef" or the "platiniferous pipes in
the Upper Critical Zone of the Bushveld" in South Africa. Over 88% of the
world's Pt and Pd supply comes from these deposits in South Africa. A mapping
and sampling programs is planned to delineate these features.
The Company continues to actively acquire property in the area.
Property 3 - Black Butte Property
This property consists of the acquisition of approximately 1,200 acres by
staking 75 claims near Stillwater Montana. The claims are located 1.5 miles east
of the main stem of the Stillwater River in the Stillwater Complex, Montana. The
claims are located along a key geological feature mapped as the Upper Banded
series over a 4 mile strike length.
The new property consists of 3 blocks of claims. The claims cover up to 1,800
feet of the lower stratigraphic section of the Platinum and Palladium (PGE)
bearing Lower Banded Series. This horizon is the host to the 26 mile long J. M.
Reef, which contains the most developed PGE deposit. Based on review of previous
geologic investigations, the area has some structural complexities consisting of
transverse faults perpendicular to the strike of the J.M. Reef with lateral
offsets that have shifted the mineralized horizon.
Contingent on financing, the company expects to launch an extensive exploration
program on these three properties once the snow melts.
Gallaugher Property
On September 5, 1996, the Company entered into an agreement (the "Gallaugher
Agreement") with Cliff and June Gallaugher ("Gallaughers") pursuant to which the
Company was granted an exclusive option to purchase six unpatented mining claims
located in the Elk City Mining District, Idaho County, Idaho.
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Location and Access
The Gallaugher Property is accessed from Elk City, Idaho, which is located 60
miles east of Grangeville on State Highway 14. From State Highway 14, access to
the Gallaugher Property is gained by turning north on USFS Road 443, past the
intersection with the Erickson Ridge Road, which is the continuation of USFS
443, and continue 1 mile east to the American River. The Gallaugher Property
contains several prospect pits and portals with the main one being the Alamance
Mine. Services including lodging, fuel and groceries, which are available in Elk
City and Grangeville. There is also a small landing strip for lighter aircraft
at Elk City and an airport with fuel at Grangeville.
History
The Alamance Mine is reported as being a high grade, underground mine on two
parallel, gold bearing, quartz veins. The main elements mine is on a quartz vein
reportedly 4 to 5 feet in width, traceable for 500 feet at the surface and
produced a small quantity of very rich ore in the early days of the camp. The
mine was discovered and worked at the turn of the century and worked
sporadically up until 1941. Allotta Resources had also optioned this property at
one point in time and reportedly drilled several holes in the location of the
veins but that information has not been located at this time.
Geology
The Gallaugher Property is underlined by Precambrian gneiss and schists with
quartzites which have been intruded by Cretaceous Tertiary granite rocks. The
rocks consist of biotite gneiss, biotite schists and biotite quartzite with
irregular layers of medium to coarse grain muscovite pegmatite which have been
highly deformed and intruded by the quartz monzonite Idaho batholith which is
Cretaceous in age. The property is located on the eastern side of the Elk City
graben and mineralization appears to be associated with the north striking
graben bounding fault as well as with quartz veins in tension gashes.
Mineralization
The mineralization consists of gold hosted in 2 major veins striking easterly
and dipping to the south. They are traceable on the surface for over 600 feet.
The historic grade according to a report, published in 1909, was $12 per ton,
which would be equivalent to approximately 0.6 ounces per ton.
The Gallaugher Property is in the exploration stage of development, and there is
no assurance that a commercially viable ore deposit exists in any such
properties until further exploration work and a comprehensive evaluation based
upon unit cost, grade, recoveries and other factors conclude economic
feasibility.
The option may be exercised by quarterly payments over a five-year period,
totalling $150,000. The Company is required to pay $2,400 per quarter commencing
March 5, 1997 (paid), $3,600 per quarter commencing March 5, 1998 (paid), $4,800
per quarter commencing March 5, 1999 (paid to date), $6,000 per quarter
commencing March 5, 2000, $7,200 per quarter commencing March 5, 2001, and a
final payment of $54,000 due by March 5, 2002. A third party receives a 10%
finder's fee deducted from all option payments made by the Company to the
optionor. In the event the Company places the claims into production, the
Gallaughers will transfer the claims to the Company and the Gallaughers will
receive $150,000 less all quarterly payments made. If the claims are not placed
into production by September 5, 2002, then the Company shall have no further
interest in the claims unless it pays the sum of $150,000 to the Gallaughers
less all quarterly payments made. Until the Company exercises its option, the
Company will have all rights of access and use of the claims to carry out
certain activities, including the removal of minerals for testing and
evaluation. The Company is to keep the claims in good standing by payment of all
taxes and assessments. As at December 31, 1998, the Company has expended $24,650
on the acquisition and exploration costs of this property. The Company is
currently renegotiating the agreement to substantially reduce the quarterly
property payments.
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Eckert Hill Property
The Eckert Hill Property is located 5 miles Northwest of Cottonwood, Idaho and
consists of patented Reservation Lode claims totalling 320 acres. The Company
leased this property from certain unaffiliated individuals ("Lessors") pursuant
to an agreement dated June 28, 1993 (the "Eckert Hill Agreement").
During 1998, the Company terminated the lease and has written-off cumulative
acquisition, exploration and development costs of $662,253. The Company has
turned the property back to the underlying owners and is paying a storage fee
for the building and the equipment that the Company continues to store at the
site.
Tuxedo Property
By an agreement dated December 28, 1993 and a subsequent addendum, the Company
acquired the right to investigate and negotiate for all current and future
mineral rights regarding certain property located in Deer Lodge and Silver-Bow
counties of Montana, for a cash payment of $100,000. Pursuant to an assignment
dated September 30, 1994 and an underlying purchase and sale agreement dated
June 1, 1994, the Company acquired the mineral rights to 1,380 acres in
Silver-Bow County, Montana, for cash payment of $43,000. The underlying vendor
retains a 3% net smelter return on the property.
During 1998, due to current market conditions, management has determined to
continue to hold this patented property, but no ongoing work programs are
currently contemplated. Accordingly, the property been written-down by $205,907
to a nominal carrying value.
Dean Mine and Mill Sites
In October, 1996, the Company entered into an agreement with St. George Metals,
Inc. ("St. George"), an unaffiliated third party, to acquire all of St. George's
interest in the mill site, mining property and equipment known as the "Dean Mine
and Mill Sites" located in the Battle Mountain, Nevada area. In consideration
thereof the Company paid $75,000 ($25,000 cash and acceptance of $50,000 in
prior option payments) and agreed to issue 75,000 shares of the Company's common
stock from treasury upon the completion of certain events. Pursuant to the terms
of the agreement, the Company was to assume all liabilities for the required
reclamation and neutralization of existing cyanide at the Dean Mill, the Dean
Mine Property and various unpatented mining claims and pay for the required
transfer of all permits to the Company. The agreement was conditional upon the
Company entering into a satisfactory agreement with Domingo A. Calzacorta
relating to the lease of the Dean Mine Property. The Company was unable to
negotiate reasonable lease terms with Mr. Calzacorta. Accordingly, the Company
has not issued the 75,000 shares of its stock, and the parties have mutually
agreed that the Company will retain the data base and equipment acquired for the
cash payments made and that the portion of the Agreement related to the shares
and property were rescinded. The Company has re-evaluated the reclamation
liability associated with the Dean Mine patent claims. The Company is of the
opinion that the reclamation responsibility will be far greater than the
$200,000 bond posted by St. George. Consequently, the Company has declined
involvement in the Dean Mill site proper but has kept 16 unpatented mining
claims on the Battle Mountain Gold Trend which are contiguous to the Dean Mine
site and which have minimal or no reclamation liability associated with them.
During 1998, due to current market conditions, management has determined to
continue to hold this unpatented property and to continue to pay the annual
claim rental fees. However, no ongoing work programs are currently contemplated.
Accordingly, the property has been written-down by $86,644 to a nominal carrying
value.
26
<PAGE>
Other Properties
S/S Ophir Property
The S/S Ophir Property, a portion of Claim Block X, consists of 343 claims
located in the Nez Perce National Forest, approximately 152 miles north of Boise
in Idaho County. The claims were purchased for consideration of $60,000 and
100,000 common shares of the Company, upon VSE acceptance of the purchase
agreement.
During 1998, due to current market conditions and title concerns, management has
dropped all claims and signed a quitclaim of these claims in favour of IMD.
Accordingly, the related acquisition, exploration and development costs of $
138,089 have been written-off.
Mineral Zone Property
On December 1, 1995, the Company entered into an agreement (the "Mineral Zone
Agreement"), with IMD and Delbert Steiner, President and Director of the
Company, to acquire certain property, known as the "Mineral Zone Property",
located in the Elk City Mining District, Idaho County, Idaho in consideration
for the payment of $1,710,000 over time. Regulatory approval of this agreement
was held in abeyance by the regulatory authorities pending resolution of legal
disputes with IMD. During 1997, the Company restaked the property due to title
concerns over certain claims covered by the December 1, 1995 agreement.
Pursuant to the terms of a Global Settlement Agreement, reached in 1997, the
Company terminated the agreement dated December 1, 1995 and the parties agreed
to negotiate a new agreement. During 1998, IMD failed to provide proof of title
and negotiations for purchase of the claims from IMD have been terminated. The
Company is continuing to negotiate a satisfactory agreement on the claims of Mr.
D. Steiner, subject to regulatory approval.
Location and Access
The property is accessed from Elk City, Idaho, which is located 60 miles each of
Grangeville on State Highway 14. Once in Elk City turn north on USFS Road 443
and travel 2 miles north to the southern boundary of the property. Services
including lodging, fuel and groceries are available in Elk City and Grangeville.
There is also a small landing strip for lighter aircraft at Elk City and an
airport with fuel at Grangeville.
History
The Mineral Zone Property was first discovered and mined in the late 1800's as a
high-grade quartz vein system. The Mineral Zone Property was originally
developed and mined from narrow underground adits. It was mined sporadically
through the 1970's at which time a small open cut was developed over the
deposit. Some limited tonnage was mined at that time and then the Mineral Zone
Property was inactive until 1986 at which time Allotta Resources optioned the
Mineral Zone Property from Idaho Mining and Development. Allotta Resources
drilled approximately 21 core holes and 84 reverse circulation holes, totalling
25,000 feet and developed a small resource. At that time, the Mineral Zone
Property was optioned to Billiton, a subsidiary of Shell Oil. Billiton continued
with the reverse circulation drilling and developed a mineral inventory based on
this drilling. A total of 112 drill holes across the Mineral Zone Property were
used for calculation of geologic and grade models for the area. The Company has
initiated some limited mapping and sampling which has returned assays as high as
2 ounces per ton. The Company is currently reviewing the historical data base
and reconstructing the geologic model to define priority targets for future
mapping and sampling, as well as drilling.
Geology
The Mineral Zone Property is underlined by Precambrian gneiss and schists with
quartzites which have
27
<PAGE>
been intruded by Cretaceous Tertiary granite rocks. The rocks consist of biotite
gneiss, biotite schists and quartzite with irregular layers of medium to coarse
grain muscovite pegmatite which have been highly deformed and intruded by the
quartz monzonite Idaho batholith which is Cretaceous in age. In the vicinity of
the Mineral Zone Property, the sericite muscovite schist and gneiss rocks have
been intruded by a dike of quartz monzonite along a series of westerly striking
faults. The Mineral Zone Property is located on the eastern side of the Elk City
Graben and mineralization appears to be associated with the north striking
graben bounding fault as well as with quartz veins in tension gashes.
Mineralization
Gold mineralization occurs in a east/west striking steeply, south dipping quartz
filled fracture zone. The host rocks are generally barren on the hanging wall
side of the fault zone and consist of biotite gneiss and schist. The gold
mineralization occurs in a sheared and brecciated schist and gneiss up to 50
feet thick and in vein quartz and gouge. The rocks show strong argillic sericite
alteration with minor to moderate limonite staining. The depth of oxide has been
reported to be in excess of 400 feet. Preliminary metallurgical work indicates
an amenability to cyanide dissolution which would help with the economics of the
project.
As at December 31, 1998, the Company has expended $13,349 on the acquisition and
exploration costs of this property.
ITEM 3. LEGAL PROCEEDINGS
Civil Suit by Joe Swisher and IMD
During 1996, a lawsuit was brought against the Company and Mr. D. Steiner,
President and Director of the Company, by Mr. Joseph Swisher and IMD. The two
plaintiffs sued for approximately $6,000,000 or a combination of shares of the
Company plus cash for alleged non-payments, non-issuance of shares from treasury
and alleged breaches of contractual obligations.
During 1996, the Company commenced a lawsuit against Mr. Joseph Swisher and
Silver Crystal alleging that Silver Crystal breached certain agreements it had
with the Company and that Mr. Swisher breached certain contractual obligations
he owed to the Company.
Subsequent to December 31, 1997, the Company settled all lawsuits with Mr.
Swisher and IMD. On April 29, 1998, the parties signed the Global Settlement
Agreement, which causes all claims and counter-claims between the parties to be
dismissed. A copy of this agreement is filed as an exhibit to this report. In
full and final settlement of all existing and potential claims between and
amongst the parties, the Company paid $100,000 to IMD. The Company recorded a
gain on the settlement of the lawsuit of $223,946 in the fiscal year ended
December 31, 1997.
Civil Suit Against Geoffrey Magnuson
The Company commenced a lawsuit against Geoffrey Magnuson, a former officer of
the Company, in the District Court of the Second Judicial District of the State
of Idaho, in and for the County of Nez Perce on September 26, 1997. The Company
sued for diversion of corporate assets, conversion of corporate property,
including but not limited to, books, records and geological data, breach of
fiduciary duty and slander, and sought as relief: an order compelling Mr.
Magnuson to account for his alleged misconduct in appropriating the Company's
property and to pay to the Company the amount of such damage to the Company's
business and goodwill; and an order mandating Mr. Magnuson to return all
property belonging to the Company and to pay to the Company the amount of any
damage to the Company.
On April 21, 1999, the Company filed a dismissal of this action, without
prejudice.
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<PAGE>
Civil Suit by Gumprecht - Promissory Note
During 1997, a lawsuit was brought against the Company, IMD and Mr. Joseph
Swisher by the plaintiffs, Thomas Gumprecht and Bonnie Witrak (the
"Plaintiffs"). The Plaintiffs brought the action to collect on a promissory note
dated October 19, 1995 entered into between the Plaintiffs and the Company in
the amount of $250,000. In connection with the execution of the promissory note,
the Company and Plaintiffs entered into a security agreement, which granted the
Plaintiffs a security interest in certain assets. The Plaintiffs sought
possession of certain assets, which included equipment located at the Eckert's
Hill Mine and Mill site and at the Golden Eagle site. The Plaintiffs sought a
judgment in the total amount of $308,000 for principal and interest up to and
including October 1, 1997.
During 1998, the Company elected to allow a default to be entered in the lawsuit
and the Court ordered the Company to pay the amount of $332,216 (paid) which
included interest through May 17, 1998. The Plaintiffs' claim for attorney fees
was denied by the Court and they have appealed this decision. The Company has
indicated its willingness to attend a settlement conference to conclude this
matter.
Civil Suit by Gumprecht - Share Exchange
During 1996, a lawsuit was brought against IMD and Mr. Joseph Swisher, by Thomas
Gumprecht (the "Plaintiff"). During 1997, the Plaintiff filed an Amended
Complaint which added the Company and Delbert and Elli Steiner as defendants
(with IMD and Joseph Swisher, collectively the "Defendants"). The Plaintiff
alleges that the Plaintiff made various loans to Idaho Non-Metallic Mineral, a
company owned in part by Mr. Steiner and Mr. Swisher, in exchange for shares of
Silver Crystal Mines and IMD. The Plaintiff claims that prior to December 1991,
the parties to the lawsuit had an oral agreement to exchange the Plaintiff's
shares in Silver Crystal and IMD for 250,000 of the Company's shares, which were
owned by IMD. The Plaintiff is seeking transfer of such shares. The Defendants
deny that any such oral agreement was made and have raised the statute of frauds
and statute of limitations as defenses to the Plaintiff's claims.
During 1998, the claims for securities fraud and negligent misrepresentation
were dismissed by the Court, on summary judgment. The remaining claims of the
lawsuit are in the discovery phase and a trial date has been set for August 23,
1999. The Company is of the view that the allegations are generally without
merit and will continue to defend such actions vigorously.
Civil Suit by Gumprecht - Derivative Action
Thomas Gumprecht and Kirke White (the "Plaintiffs") filed an Amended Complaint,
Shareholders Direct and Derivative Action in the District Court of the Second
Judicial District of the State of Idaho, in and for the County of Idaho on
August 5, 1997. While the Complaint names the Company as a defendant on several
pages, the Company is not named formally as a party to the Amended Complaint.
The lawsuit makes allegations against Mr. Steiner and names the Company with
respect to the transfer of various funds and alleged agreements between Mr.
Steiner and the Plaintiffs set out more particularly as follows:
The Plaintiffs allege that Mr. Joseph Swisher was involved in the creation of
the Company, an allegation that the Company denies. The Plaintiffs further
allege that the Company paid Silver Crystal $800,000 for the construction of the
Eckert's Hill Mine and Mill site which the Company admits. The Plaintiffs allege
that such funds were diverted for the personal use of Mr. Joseph Swisher, which
the Company denies. These funds were utilized by the Company for an independent
metallurgical evaluation of the entire Swisher-Br Process and for general and
administrative expenditures.
The Plaintiffs alleged that an agreement was made in August of 1995 by the
Company to exchange the Plaintiffs' stock in Silver Crystal for that of the
Company. The Company admits an offer was made to
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<PAGE>
this effect but denies that such offer was accepted and as a result no agreement
was formed.
The Plaintiffs allege that Mr. Steiner solicited funds from the Plaintiffs while
acting as their attorney and deposited such funds into his attorney/client trust
account and/or his attorney general business account. The Plaintiffs allege such
funds were given to Mr. Steiner in exchange for stock in the Company which was
not delivered. The Plaintiffs allege that the solicitation of funds, the
depositing of such funds into Mr. Steiner's client accounts, the disbursement of
such funds without accounting, and the failure to transfer stock to the
Plaintiffs exhibits negligence by failure to exhibit the care expected of a
reasonably prudent attorney acting in the same or similar circumstances in the
same or similar community. Mr. Steiner specifically denies soliciting funds from
the Plaintiffs and states that the disbursement of such funds was undertaken at
the instruction of the Plaintiff, Mr. Gumprecht. Mr. Steiner further denies the
remainder of the aforementioned allegations.
The Plaintiffs are seeking recission and restitution of funds, compensatory
damages, specific performance of the alleged contract, the formation of a
constructive trust in the Golden Eagle Mining properties and all Company stock
owned by Mr. Joseph Swisher and IMD, punitive damages for $1,000,000, and
several orders relating to the Golden Eagle Property, Silver Crystal Mines,
Inc., IMD and Mr. Swisher.
The action has been put on hold pending the plaintiffs locating a shareholder
who is willing to represent a class of Silver Crystal shareholders. No specific
allegations nor claims are made against the Company.
The Company is of the view that the allegations are generally without merit and
will continue to defend such actions vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's security holders during the fourth
quarter of fiscal 1998.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market in the United States for the
Company's common stock. The common shares of the Company are listed on the VSE,
Vancouver, British Columbia, Canada, under the classification of an "advanced"
Company and trade under the symbol "IDO".
The following table sets forth the volume and the high and low sales prices (in
Canadian dollars) for the common stock of the Company regarding the quarterly
periods set forth therein, as reported by the VSE.
<TABLE>
- --------------------------------- ------------------------------ ------------------------------ ----------------------
Quarter Ended Volume High Low
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
<S> <C> <C> <C>
12/31/1998 145,324 $0.28 $0.15
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
9/30/1998 90,097 $0.36 $0.20
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
6/30/1998 243,717 $0.42 $0.20
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
3/31/1998 340,104 $0.35 $0.16
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
12/31/1997 367,439 $0.65 $0.18
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
9/30/1997 579,466 $0.90 $0.41
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
6/30/1997 103,050 $0.95 $0.60
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
3/31/1997 514,633 $1.40 $0.75
- --------------------------------- ------------------------------ ------------------------------ ----------------------
30
<PAGE>
- -------------------------------- ------------------------------ ------------------------------ ----------------------
Quarter Ended Volume High Low
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
12/31/1996 296,685 $3.50 $1.20
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
9/30/1996 375,375 $4.45 $2.70
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
6/30/1996 463,479 $4.25 $1.70
- --------------------------------- ------------------------------ ------------------------------ ----------------------
- --------------------------------- ------------------------------ ------------------------------ ----------------------
3/31/1996 73,307 $2.05 $1.45
- --------------------------------- ------------------------------ ------------------------------ ----------------------
</TABLE>
There are approximately 213 registered shareholders of the Company's common
stock, which includes some of the holders who purchased on the VSE and those
whose shares of the Company's common stock were acquired pursuant to private
sales, who together hold in total 9,434,650 of such stock as at December 31,
1998.
No dividends were paid with respect to the Company's common stock for 1998, and
the Company does not plan to declare dividends in the foreseeable future.
Unregistered Sales of Securities
The following information describes the securities the Company has sold within
the past three years without registering the securities under the Securities
Act.
Property Transactions
On March 24, 1997 and September 2, 1997, the Company issued common shares to
Idaho Gold as partial consideration for the acquisition of certain resource
properties from Idaho Gold, pursuant to an agreement dated December 11, 1995
between the Company and Idaho Gold. The particulars in regard to the number of
shares, resource properties and price were as follows:
<TABLE>
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Number of
Property Shares Issued Date Issued Price per Share (C) Total Proceeds (C)
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Buffalo Gulch 60,000 March 24, 1997 $1.15 $69,000
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Buffalo Gulch 60,000 September 2, 1997 $1.15 $69,000
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Deadwood 35,000 March 24, 1997 $1.15 $40,250
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Deadwood 35,000 September 2, 1997 $1.15 $40,250
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Friday 30,000 March 24, 1997 $1.15 $34,500
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
Friday 30,000 September 2, 1997 $1.15 $34,500
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
TOTAL 250,000 $287,500
- -------------------------- ----------------------- ----------------------- ----------------------- -----------------------
</TABLE>
Private Placement pursuant to May 1996 Offering Memorandum
On September 11, 1996, the VSE accepted for filing the Company's non-brokered
Private Placement of 477,950 units. The Private Placement was concluded in two
tranches, with each tranche having its own unique unit pricing and rights. The
shares and warrants comprising the units of the two tranches were issued
effective September 12, 1996. The tranches and the private placees were as
follows:
Private Placement - September 12, 1996 - 100,000 Units
Effective September 12, 1996, the Company issued by way of a private placement a
total of 100,000
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<PAGE>
Units at a price of C$2.00 per Unit, with each Unit consisting of one common
share and one non-transferable common share purchase warrant. Each Warrant
entitles the holder to purchase an additional common share for a term of one
year at a price of C$2.00 per share. The total offering price was C$200,000. The
private placee was as follows:
<TABLE>
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
Name Number of Units Purchased Price per Unit (C) Total Proceeds (C)
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Delbert W. Steiner(1) 100,000 $2.00 $200,000
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
</TABLE>
(1) Delbert W. Steiner is the President, Chief Executive Officer and a Director
of the Company.
Private Placement - September 12, 1996 - 377,950 Units
Effective September 12, 1996, the Company issued by way of a private placement a
total of 377,950 Units at a price of $3.50 per Unit, with each Unit consisting
of two common shares and one non-transferable common share purchase warrant.
Each Warrant entitles the holder to purchase an additional common share for a
term of two years at a price of $1.75 per share during the first year and $2.75
per share during the second year. The total offering price was US$1,322,825. The
private placees were as follows:
<TABLE>
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
Number of
Name Units Purchased Price per Unit (US) Total Proceeds(US)
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
J.T. Blackfield Partners (1) 377,950 $3.50 $1,322,835
- -------------------------------- ----------------------------- ----------------------------- -----------------------------
</TABLE>
(1) Theodore Tomasovich, a director of the Company, is the President of J.T.
Blackfield Partners.
Private Placement - November 12, 1997 Offering Memorandum
On November 12, 1997, the Company announced a private placement of a maximum of
1,786,458 units (the "Units") at a price of C$0.60 of which 1,763,233 were
subscribed for, resulting in net proceeds to the Company of C$1,057,940. Each
Unit consisted of one common share and one non-transferable share purchase
warrant. The Tomasovich Family Trust (the "Trust"), Theodore Tomasovich being
both Trustee of the Trust and a Director of the Company, subscribed for 927,062
Units. Bernd Struck, being the brother of Wilfried Struck, V.P., Mining and
Exploration of the Company, subscribed in both his personal capacity for 25,890
Units and in his capacity as beneficial owner of Cardinal Forest Consulting
Company Ltd. for 25,889 Units. The VSE accepted the private placement on March
18, 1998 and the shares were issued from treasury on the same day.
Private Placement - February 3, 1999
On February 3, 1999, the Company announced a private placement of a maximum of
2,000,000 units (the "Units"), at a price of C$0.15, resulting in net proceeds
to the Company of C$200,000. Each Unit consisted of one common share and one
non-transferable share purchase warrant. Mr. Del Steiner a Director of the
Company, subscribed for 758,000 Units. Kenneth A. Scott, the Chief Financial
Officer of the Company, subscribed in his capacity as beneficial owner of
Kenneth A. Scott, Inc. for 100,000 Units. Bernd Struck, being the brother of
Wilfried Struck, V.P., Mining and Exploration of the Company, subscribed in his
capacity as beneficial owner of Cardinal Forest Consulting Company Ltd. for
100,000 Units. The VSE accepted the private placement on March 24, 1999 and the
shares were issued from treasury on March 29, 1999.
32
<PAGE>
Debt Settlement Agreements - September 30, 1997
Pursuant to a series of agreements dated September 30, 1997 entered into by the
Company and certain of its creditors, the Company issued shares of stock in
settlement of certain debts owed to various parties including parties related to
the Company. All of the agreements were approved by the VSE on March 18, 1998
and 567,209 shares were issued on April 21, 1998.
The Company entered into a debt settlement agreement (the "Steiner Agreement")
dated September 30, 1997 with Mr. Delbert Steiner, President and a Director of
the Company, pursuant to which the Company issued shares in settlement of
certain debts owed to Mr. Steiner by the Company. The debts owed to Mr. Steiner
resulted from loans he made to the Company and interest thereon. The total
amount due and owing to Mr. Steiner by the Company at September 30, 1997 was
$135,672. Pursuant to the Steiner Agreement, the parties settled for $130,975.
Mr. Steiner agreed to accept 247,781 common shares of the Company deemed to be
issued at a price of C$0.73 per share in settlement of the debt owed.
The Company entered into a debt settlement agreement (the "Tomasovich
Agreement") dated September 30, 1997, with the Tomasovich Family Trust (the
"Trust"), Mr. Theodore Tomasovich being both Trustee of the Trust and a Director
of the Company, pursuant to which the Company issued shares in settlement of
debts owed to the Trust. As at September 30, 1997, the Company owed the Trust
the total amount of $40,774 representing a promissory note and interest.
Pursuant to the Tomasovich Agreement, the parties agreed to the issuance of
77,137 common shares of the Company deemed to be issued at a price of C$0.73 per
share in settlement of the debt owed.
The Company entered into a debt settlement agreement (the "Staley Agreement")
dated September 30, 1997, with Staley, Okada, Chandler & Scott ("Staley,
Okada"), Mr. Ken Scott being both a Partner of Staley, Okada and the Chief
Financial Officer of the Company, pursuant to which the Company issued shares in
settlement of certain debts owed to Staley, Okada. As at September 30, 1997, the
Company owed Staley, Okada the amount of C$47,016 representing amounts for
services rendered and interest thereon. Pursuant to the Staley Agreement, the
parties agreed to the issuance of 64,407 common shares of the Company deemed to
be issued at a price of C$0.73 per share in settlement of the debt owed.
The Company entered into a debt settlement agreement (the "Young Agreement")
dated September 30, 1997, with Robert A. Young & Associates ("Young Inc."), Mr.
Robert A. Young being both a partner of Young Inc. and a Director of the
Company. At September 30, 1997, the Company issued shares in settlement of debts
owed to Young Inc. in the amount of C$28,700 comprised of expenses and overhead
relating to the Company's Vancouver office. Pursuant to the Young Agreement, the
parties agreed to the issuance of 39,315 common shares of the Company deemed to
be issued at a price of C$0.73 per share in settlement of the debt owed.
The Company entered into a debt settlement agreement (the "Struck Agreement")
dated September 30, 1997 with Mr. Wilfried Struck, V.P. Mining and Exploration
for the Company, pursuant to which the Company issued shares in settlement of
debts owed to Mr. Struck. As at September 30, 1997, the amount of $20,387 was
owed to Mr. Struck representing unpaid wages and interest thereon. Pursuant to
the Struck Agreement, the parties agreed to the issuance of 38,569 common shares
of the Company deemed to be issued at a price of C$0.73 per share in settlement
of the debt owed.
In summary, a total of 467,209 common shares of the Company were deemed to be
issued to related parties at a price of C$0.73 for a total reduction in debt of
C$341,063.
Convertible Debt Issuances:
Convertible Loan Agreement #1
On April 9, 1998, the Company entered into a Convertible Loan Agreement
regarding a promissory note
33
<PAGE>
dated January 23, 1998 with the Tomasovich Family Trust (the "Trust"), Theodore
Tomasovich being both Trustee of the Trust and a Director of the Company. The
Company borrowed $100,000 repayable to the Trust on or before January 23, 2000
(the "Maturity Date") bearing interest at 9% per annum. After June 17, 1998, the
Trust could require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.26 of indebtedness until and including
January 23, 1999 and at a conversion price of one Unit for each C$0.31 of
indebtedness during the period from January 24, 1999 until the Maturity Date for
a maximum of 546,154 units if the principal amount is converted in its entirety
by January 23, 1999 and a maximum of 458,065 units if the principal amount is
converted in its entirety between January 24, 1999 and the Maturity Date. Each
Unit consisted of one common share and one non-transferable common share
purchase warrant with each warrant being exercisable at a price of C$0.26 per
share until January 23, 1999 and C$0.31 per share from January 24, 1999 to the
Maturity Date. The Convertible Loan Agreement was accepted by the VSE on June
22, 1998.
In accordance with Canadian generally accepted accounting principles, the
$100,000 convertible security instrument has been allocated $73,784 to notes
payable and $26,216 to equity (as convertible securities) based upon the fair
value of the equity component. As the equity component is not detachable, the
amount would be recorded as $100,000 notes payable, for U.S. generally accepted
accounting principles. (See Note 12 to the Company's December 31, 1998 Financial
Statements.)
Subsequent to December 31, 1998, the holder of the convertible loan agreement
requested conversion of the note payable and on January 20, 1999 the Company
issued 546,154 units to the holder. Each Unit consists of one common share and
one non-transferable common share purchase warrant with each warrant being
exercisable at a price of C$0.31 per share until January 23, 2000. The Company
reduced notes payable by $73,784, reduced convertible securities by $13,108 and
increased share capital by $86,892 on conversion of these notes. The remaining
$13,108 of equity remains in convertible securities until the related warrants
are exercised.
Convertible Loan Agreement #2
On April 9, 1998, the Company entered into Convertible Loan Agreement #2
regarding a promissory note dated March 31, 1998 with the Trust, as lender. The
Company borrowed $110,000 repayable to the Trust on or before March 31, 2000
(the "Maturity Date") bearing interest at 9% per annum. After June 17, 1998, the
Trust could require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.26 of indebtedness until and including
March 31, 1999 and at a conversion price of one Unit for each C$0.31 of
indebtedness during the period from April 1, 1999 until the Maturity Date for a
maximum of 600,769 units if the principal amount is converted in its entirety by
March 31, 1999 and a maximum of 503,870 units if the principal amount is
converted in its entirety between April 1, 1999 and the Maturity Date. Each Unit
consisted of one common share and one non-transferable common share purchase
warrant with each warrant being exercisable at a price of C$0.26 per share until
March 31, 1999 and C$0.31 per share from April 1, 1999 to the Maturity Date. The
Convertible Loan Agreement was accepted by the VSE on June 22, 1998.
In accordance with Canadian generally accepted accounting principles, the
$110,000 convertible security instrument has been allocated $81,162 to notes
payable and $28,838 to equity based upon the fair value of the equity component.
As the equity component is not detachable, the amount would be recorded as
$110,000 notes payable, for U.S. generally accepted accounting principles. (See
Note 12 to the Company's December 31, 1998 Financial Statements.)
Subsequent to December 31, 1998, the holder of the convertible loan agreement
requested conversion of the note payable and on March 23, 1999 the Company
issued 600,769 units to the holder. Each Unit consisted of one common share and
one non-transferable common share purchase warrant with each
34
<PAGE>
warrant being exercisable at a price of C$0.31 per share until March 31, 2000.
The Company reduced notes payable by $81,162, reduced convertible securities by
$14,419 and increased share capital by $95,581 on conversion of these notes. The
remaining $14,419 of equity remains in convertible securities until the related
warrants are exercised.
Convertible Loan Agreement #3
On May 15, 1998, the Company as borrower, entered into Convertible Loan
Agreement #3 with the Trust as lender for $150,000 repayable on or before May
15, 2000 (the "Maturity Date") bearing interest at 9% per annum. After June 17,
1998, the Trust may require the Company to convert all or any portion of the
principal amount of the loan advanced and then outstanding into units ("Units")
at a conversion price of one Unit for each C$0.23 of indebtedness until and
including May 15, 1999 and at a conversion price of one Unit for each C$0.28 of
indebtedness during the period from May 16, 1999 until the Maturity Date for a
maximum of 932,608 units if the principal amount is converted in its entirety by
May 15, 1999 and a maximum of 766,071 units if the principal amount is converted
in its entirety between May 16, 1999 and the Maturity Date. Each Unit consists
of one common share and one non-transferable common share purchase warrant with
each warrant being exercisable at a price of C$0.23 per share until May 15, 1999
and C$0.28 per share from May 16, 1999 to the Maturity Date. The Convertible
Loan Agreement was accepted by the VSE on June 22, 1998.
In accordance with Canadian generally accepted accounting principles, the
$150,000 convertible security instrument has been allocated $110,830 to notes
payable and $39,170 to equity (as convertible securities) based upon the fair
value of the equity component. As the equity component is not detachable, the
amount would be recorded as $150,000 notes payable, for U.S. generally accepted
accounting principles. (See Note 12 to the Company's December 31, 1998 Financial
Statements.)
Convertible Loan Agreement #4
On September 10, 1998, the Company as borrower, entered into Convertible Loan
Agreement #4 with the Trust as lender for $250,000 repayable on or before
September 10, 2000 (the "Maturity Date") bearing interest at 9% per annum. The
Trust may require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.17 of indebtedness until and including
September 10, 1999 and at a conversion price of one Unit for each C$0.22 of
indebtedness during the period from September 11, 1999 until the Maturity Date
for a maximum of 2,227,941 units if the principal amount is converted in its
entirety by September 10, 1999 and a maximum of 1,721,590 units if the principal
amount is converted in its entirety between September 11, 1999 and the Maturity
Date. Each Unit consists of one common share and one non-transferable common
share purchase warrant with each warrant being exercisable at a price of C$0.17
per share until September 10, 1999 and C$0.22 per share from September 11, 1999
to the Maturity Date. The Convertible Loan Agreement was accepted by the VSE on
November 3, 1998 as to $191,060 and on December 11, 1998 as to the remaining
$58,940.
In accordance with Canadian generally accepted accounting principles, the
$250,000 convertible security instrument has been allocated $183,162 to notes
payable and $66,838 to equity based upon the fair value of the equity component.
As the equity component is not detachable, the amount would be recorded as
$250,000 notes payable, for U.S. generally accepted accounting principles. (See
Note 12 to the Company's December 31, 1998 Financial Statements.)
Convertible Loan Agreement #5
On October 1, 1998, the Company as borrower, entered into Convertible Loan
Agreement #5 with the Trust as lender for $322,000 repayable on or before
October 1, 2000 (the "Maturity Date") bearing
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interest at 9% per annum. The Trust may require the Company to convert all or
any portion of the principal amount of the loan advanced and then outstanding
into units ("Units") at a conversion price of one Unit for each C$0.20 of
indebtedness until and including October 1, 1999 and at a conversion price of
one Unit for each C$0.25 of indebtedness during the period from October 2, 1999
until the Maturity Date for a maximum of 2,466,681 units if the principal amount
is converted in its entirety by October 1, 1999 and a maximum of 1,973,732 units
if the principal amount is converted in its entirety between October 2, 1999 and
the Maturity Date. Each Unit consists of one common share and one
non-transferable common share purchase warrant with each warrant being
exercisable at a price of C$0.20 per share until October 1, 1999 and C$0.25 per
share from October 2, 1999 to the Maturity Date. The Convertible Loan Agreement
was accepted by the VSE on November 20, 1998 as to $300,000 and on December 10,
1998 as to the remaining $22,000.
In accordance with Canadian generally accepted accounting principles, the
$322,000 convertible security instrument has been allocated $233,200 to notes
payable and $88,800 to equity based upon the fair value of the equity component.
As the equity component is not detachable, the amount would be recorded as
$322,000 notes payable, for U.S. generally accepted accounting principles. (See
Note 12 to the Company's December 31, 1998 Financial Statements.)
Convertible Loan Agreement #6
On January 28, 1999, the Company as borrower, entered into Convertible Loan
Agreement #6 with the Trust as lender for $115,000 repayable on or before
January 28, 2001 (the "Maturity Date") bearing interest at 9% per annum. The
Trust may require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.15 of indebtedness until and including
January 28, 2000 and at a conversion price of one Unit for each C$0.20 of
indebtedness during the period from January 29, 2000 until the Maturity Date for
a maximum of 1,172,847 units if the principal amount is converted in its
entirety by January 28, 2000 and a maximum of 879,635 units if the principal
amount is converted in its entirety between January 29, 2000 and the Maturity
Date. Each Unit consists of one common share and one non-transferable common
share purchase warrant with each warrant being exercisable at a price of C$0.15
per share until January 28, 2000 and C$0.20 per share from January 29, 2000 to
the Maturity Date. The Convertible Loan Agreement was accepted by the VSE on
February 9, 1999.
In accordance with Canadian generally accepted accounting principles, the
$115,000 convertible security instrument has been allocated $72,778 to notes
payable and $42,222 to equity based upon the fair value of the equity component.
As the equity component is not detachable, the amount would be recorded as
$115,000 notes payable, for U.S. generally accepted accounting principles.
Taxation
The following summary discusses only the Canadian federal income tax
considerations generally applicable to a holder ("Holder") of one or more common
shares of the Company who for the purposes of the Income Tax Act (Canada) (the
"Act") is a non-resident of Canada who holds his common shares as capital
property. The summary deals with the provisions of the Act in force on December
31, 1998 and all specific proposals to amend the Act publicly announced by the
Minister of Finance (Canada) prior to December 31, 1998. It does not discuss all
the tax consequences that may be relevant to particular Holders in light of
their circumstances or to Holders subject to special rules. It is therefore not
intended to be, nor should it be construed to be, legal or tax advice to any
Holder of common shares of the Company and no opinion or representation with
respect to the Canadian income tax consequences to any such Holder or
prospective Holder is made. Holders and prospective Holders should therefore
consult their own tax advisers with respect to their particular circumstances.
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Dividends
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to
25%, or such lower rate as may be available under an applicable tax treaty, of
the gross amount of any dividend paid or deemed to be paid on his common shares.
Under the Canada-U.S. Income Tax Convention (1980) as it applied on December 31,
1998 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on
common shares paid to a Holder who is a resident of the United States is, if the
Holder is the beneficial owner of the dividend and is a company that owns at
least 10% of the voting stock of the Company, 5% and, in any other case, 15% of
the gross amount of the dividend. The Company will be required to withhold the
applicable amount of Part XIII Tax from each dividend so paid and remit the
withheld amount directly to the Receiver General for Canada for the account of
the Holder.
Disposition of Common Shares
A Holder who disposes of a common share, including by deemed disposition on
death, will not be subject to Canadian tax on any capital gain (or capital loss)
thereby realized unless the common share constituted "taxable Canadian property"
as defined by the Act. Generally, a common share of a public corporation will
not constitute taxable Canadian property of a Holder unless he held the common
share as capital property used by him in carrying on a business (other than an
insurance business) in Canada, or he or persons with whom he did not deal at
arm's length alone or together held or held options to acquire, at any time
within the five years preceding the disposition, 25% or more of the shares of
any class of the capital stock of the Company.
A Holder who is a resident of the United States and realizes a capital gain on a
disposition of a common share that was taxable Canadian property will
nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax
thereon unless (a) more than 50% of the value of the common shares is derived
from or from an interest in, Canadian real estate, including Canadian mineral
resource properties, (b) the common share formed part of the business property
of a permanent establishment that the Holder has or had in Canada within the 12
months preceding disposition, or (c) the Holder is an individual who (i) was a
resident of Canada at any time within the 10 years immediately, and for a total
of 120 months during any period of 20 consecutive years, preceding the
disposition, and (ii) owned the common shares when he ceased to be resident in
Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on
a disposition of a common share must include three quarters of the capital gain
(taxable capital gain) in computing his taxable income earned in Canada. The
Holder may, subject to certain limitations, deduct three quarters of any capital
loss (allowable capital loss) arising on disposition of taxable Canadian
property from taxable capital gains realized in the year of disposition in
respect to taxable Canadian property and, to the extent not so deductible, from
such taxable capital gains realized in any of the three preceding years or any
subsequent year.
If the shares of the Canadian company represent taxable Canadian property to the
non-resident shareholder, the non-resident will be required to provide certain
information to the Canadian tax authority regarding the proceeds of the
disposition and the tax values of the shares. The non-resident must pay a
withholding tax equal to 33% of the estimated taxable gain on the transaction or
provide adequate security for such tax. If this amount is in excess of the final
tax liability, the excess is refunded upon the filing of appropriate tax returns
by the non-resident. In certain cases, the withholding tax can be reduced if the
gain is otherwise not subject to tax by way of operation of the Treaty.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-KSB contains forward-looking statements. A forward looking
statement may contain words such as "will continue to be," "will be," "expect
to," "anticipates that," "to be" or "can impact." Management cautions that
forward-looking statements are subject to risks and uncertainties that could
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cause the Company's actual results to differ materially from those projected in
forward-looking statements. Please refer also to the paragraph titled
"Forward-Looking Information" in Item 1.
Results of Operations
Fiscal 1998 Compared with 1997
The Company is in the exploration stage and has yet to generate revenue from
production; however, in a prior year the Company received some revenues from
optioning interests in certain of its properties to establish a joint venture
relationship. The Company continues to explore its mineral properties in an
effort to establish proven ore resources.
In 1998, the Company did not receive any revenues compared to $165,000 received
in 1997 from granting an option over certain of its resource properties.
Furthermore, general and administrative expenses decreased by $268,124 from
1997, the decrease resulting primarily from: (i) a decrease in wages, fees and
benefits of $62,785 as a result of having fewer employees in 1998 as compared to
1997; (ii) reduced shareholder relations expenses of $101,747; (iii) reduced
professional fees of $41,882 as a result of the settlement of the disputes with
Mr. J. Swisher and IMD; and (iv) other general cost cutting measures employed by
management.
During 1998, the Company expended cash of $158,434 (1997 - $374,442), and cash
equivalent share issuances2 of $Nil (1997 - $185,250), for a total of $158,434
(1997 - $559,692) on its resource property exploration, development and
acquisition program. See the schedule of non-cash investing and financing
activities included as part of the Consolidated Statements of Cash Flows in the
Company's December 31, 1998 Financial Statements. The 1998 decrease was due to
cost cutting measures necessitated by the effect of the current precious metal
prices on the Company's Buffalo Gulch Property together with its joint venture
partner covering all costs of the Petsite and Deadwood projects. During 1998,
the Company wrote off or wrote down certain property rights and processing
equipment for a total charge of $1,705,167 (1997 - $1,363,505).
In 1997, the Company recorded income from two unusual items: (i) a gain on
settlement of certain lawsuits; and (ii) a gain on settlement of certain debts.
These two items provided other income of $403,084 in 1997. There was no similar
other income in 1998. For U.S. purposes, these gains would receive treatment as
extraordinary items. (See Note 12 to the Company's December 31, 1998 Financial
Statements.)
In regard to the Petsite Project, the Company's joint venture partner, Kinross
Gold reported expenditures of $362,256 during 1998 on the joint venture phase of
the project. In order to allow Kinross to meet its 1998 expenditure requirement
on the Deadwood project, $10,592 of the amount reported was credited to the
Deadwood project. After this transfer, Kinross has reported to have spent
$351,664 and the Company's carried share of these expenditures, would amount to
$105,499. The Company's carried share is treated as a loan and bears interest at
bank prime plus 2% compounded quarterly. The principal together with accrued
interest is contingently repayable from 85% of the Company's share of the
proceeds of production or from its share of proceeds on sale of the property, if
any. Should the Company's share of any such proceeds be insufficient to repay
the loan, then the balance shall be forgiven. Certain of the 1998 balances,
confirmed by Kinross, are disputed by the Company and may result in a reduction
in the amount expended by Kinross and the Company's carried balance.
In regard to the Friday Property, the Company has completed the issuance of the
remaining 30,000 shares of the Company's stock to IGC during 1997, and completed
exploration and development expenses, with Kinross, which are in excess of the
$135,000 option requirement. As of December 31,
_______________
2. For more information, please see the Consolidated Statement of Changes in
Shareholder's Equity in the Company's December 31, 1998 Financial
Statements.
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1998, $156,000 in advance royalty payments to underlying royalty interests were
made on behalf of the Company by its joint venture partner, Kinross, which is
responsible for such payments pursuant to their joint venture arrangement with
the Company.
In regard to the Deadwood Project, during 1997 the Company granted Kinross the
right to participate in a joint venture to earn up to an 80% interest in the
Deadwood Property. Cyprus paid the Company a total of $165,000 pursuant to this
option in 1997, of which $50,000 remains in trust to December 31, 1998.
Subsequent to December 31, 1998, the $50,000 was released from trust to the
Company. The Company has completed exploration and development expenses in the
amount of $24,838 (excluding acquisition costs) to December 31, 1998. Kinross
has confirmed expenditures of $305,344 to December 31, 1998, for a total of
$330,182 spent on the property. Subsequent to December 31, 1998, the Company
received notice from Kinross of its withdrawal from the joint venture prior to
earning any interest in the property.
As a result, the Company will continue with annual claim rental fees and
property payments to maintain the property. Geological expenditures will be
reduced and consist of expenditures related to the review of the Cyprus/Kinross
data and geochemical and geophysical results.. An exploration program will be
prepared to assist in locating a new joint venture partner.
In regard to the Buffalo Gulch Property, the Company has completed exploration
and development expenses in the aggregate of $600,175 (1997 - $306,144). The
Company is also responsible for the following certain payments pursuant to three
agreements underlying the Buffalo Gulch Property. Black Bear Agreement - the
Company has made the required quarterly payments of $3,600 and minimum annual
expenditure of $3,000 for 1998. Whiskey Jack Agreement - the Company has made
the required quarterly payments of $1,000 for 1998. Gray Estates Agreement the
Company has made the required quarterly advance royalty payments of $6,000 for
1998.
All of the Company's resource properties continue to be explored on the basis of
independent engineering report recommendations and a determination as to whether
the properties contain resources has yet to be made. Management has presently
written down to net realizable value or written off the Eckert's Hill, Tuxedo,
Dean Mine and Mill Sites, S/S Ophir, Golden Eagle and other properties.
The net loss for the year was $2,396,731 as a result of the write-offs and
write-downs of resource properties and was higher (39.0%) than the net loss of
$1,724,219 for the year ended 1997.
Under Canadian generally accepted accounting principles, no value is attributed
on the release of performance shares from escrow and accordingly, no executive
remuneration expense is recorded. Under U.S. generally accepted accounting
principles, the Company must record executive remuneration when the performance
shares are eligible for release from escrow. The Company issued 750,000 shares
at the time of its initial public offering to the original principal founders of
the Company at a price of C$0.01 per share, subject to the terms of an escrow
agreement. The number of shares released from escrow is calculated on an annual
basis as the Company expends qualifying amounts on its exploration and
development programs, and the Company must seek regulatory approval for each
release. The Company completed the entire amount of qualifying expenditures by
December 31, 1996. During 1998 and 1997, the Company did not apply for release
of any escrowed shares, and accordingly, for U.S. purposes, no executive
remuneration expense was incurred and there was no corresponding change in share
capital. The executive remuneration is a deemed amount and would be based upon
the fair market value of the Company's common shares during 1998. (See Notes 5
and 12 to the Company's December 31, 1998 Financial Statements and Security
Ownership of Certain Beneficial Owners and Management - Shares of the Company
held in Escrow.)
Fiscal 1997 Compared with 1996
The Company is in the exploration stage and has yet to generate revenue from
production; however, the Company has received some revenues from optioning
interests in certain of its properties to establish a
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joint venture relationship. The Company continues to explore its mineral
properties in an effort to establish proven ore resources.
In 1997, the Company received revenue of $165,000 from granting an option over
certain of its resource properties. Furthermore, general and administrative
expenses increased by $191,252 from 1996, the increase resulting primarily from:
(i) increased wages and salary expenses ($266,284 vs $157,831); and (ii) an
increase in shareholder information expenses ($127,135 vs 68,741). These
increases were partially offset by a decrease in office and general expenses
($65,223 vs $80,828).
During 1997, the Company expended cash of $374,442, and cash equivalent share
issuances3 of $185,250, for a total of $559,692 on its resource property
exploration, development and acquisition program as compared to $500,516 in
1996. The actual amount expended in 1996 was $683,816 which was reduced by
$183,300 of BLM claim rental fees which were accrued in earlier years and
reversed in 1996. See the schedule of non-cash investing and financing
activities included as part of the Consolidated Statements of Cash Flows in the
Company's December 31, 1998 Financial Statements. The 1997 increase was due to
significant property payments and exploration work performed on the Company's
Buffalo Gulch Property. The Company wrote off processing equipment and abandoned
certain property rights for a total charge of $1,363,505 in 1997.
The Company recorded income from two unusual items: (i) a gain on settlement of
certain lawsuits; and (ii) a gain on settlement of certain debts. These two
items provided other income of $403,084 in 1997. For U.S. purposes, these gains
would receive treatment as extraordinary items. (See Note 12 to the Company's
December 31, 1998 Financial Statements.)
In regard to the Petsite Project, the Company's joint venture partner, Kinross
Gold completed the following in order to maintain its rights to earn a 70%
interest in the Project: Kinross made a required cash payment of $50,000 to the
Company, contributed certain of its unpatented mining claims to the joint
venture, completed $1,500,000 of cumulative exploration and development
expenditures and maintained the unpatented claims within the project during the
earn in period. Subsequent to December 31, 1997, Kinross has advised the Company
that it had completed its requirements to earn its 70% interest in the project,
for more information see Item 2 - Description of Property - Petsite Joint
Venture.
In regard to the Friday Property, the Company has completed the issuance of the
remaining 30,000 shares of the Company's stock to IGC, and has completed
exploration and development expenses, with Kinross, which are in excess of the
$135,000 option requirement. As of December 31, 1997, $144,000 in advance
royalty payments to underlying royalty interests were made on behalf of the
Company by its joint venture partner, Kinross, which is responsible for such
payments pursuant to their joint venture arrangement with the Company.
In regard to the Deadwood Project, during 1997 the Company granted Kinross the
right to participate in a joint venture to earn up to an 80% interest in the
Deadwood Property. Kinross paid the Company a total of $165,000 pursuant to this
option in 1997, of which $50,000 remains in trust. Furthermore, the Company has
completed the issuance of the remaining 35,000 shares of the Company's stock to
IGC as well as completed exploration and development expenses in the amount of
$24,838 (excluding acquisition costs) during the year. Kinross has confirmed
expenditures of $239,408 to December 31, 1997, for a total of $264,246 spent on
the property.
In regard to the Buffalo Gulch Property, the Company has completed the issuance
of the remaining
__________
3. Fore more information, please see the Consolidated Statements of Changes in
Shareholder's Equity in the Company's December 31, 1998 Financial
Statements.
40
<PAGE>
60,000 shares of the Company's stock to IGC as well as completed exploration and
development expenses in the aggregate of $310,000 during the year. The Company
is also responsible for the following certain payments pursuant to three
agreements underlying the Buffalo Gulch Property. Black Bear Agreement - the
Company has made the required quarterly payments of $2,400 and minimum annual
expenditure of $3,000 for 1997. Whiskey Jack Agreement - the Company has made
the required quarterly payments of $600 for 1997. Gray Estates Agreement - the
Company has made the required quarterly advance royalty payments of $6,000 for
1997.
All of the Company's resource properties continue to be explored on the basis of
independent engineering report recommendations and a determination as to whether
the properties contain resources has yet to be made. Management has obtained
independent valuations of the various resource properties and presently has
written down to net realizable value the Mallard and Snowstorm properties.
The net loss for the year was $1,724,219, and was substantially larger (33.2%)
than the net loss for the year ended 1996 as a result of the increased write-off
of processing equipment.
Under Canadian generally accepted accounting principles, no value is attributed
on the release of performance shares from escrow and accordingly, no executive
remuneration expense is recorded. Under U.S. generally accepted accounting
principles, the Company must record executive remuneration when the performance
shares are eligible for release from escrow. The Company issued 750,000 shares
at the time of its initial public offering to the original principal founders of
the Company at a price of C$0.01 per share, subject to the terms of an escrow
agreement. The number of shares released from escrow is calculated on an annual
basis as the Company expends qualifying amounts on its exploration and
development programs, and the Company must seek regulatory approval for each
release. The Company completed the entire amount of qualifying expenditures by
December 31, 1996. During 1997, the Company did not apply for release of any
escrowed shares, and accordingly, for U.S. purposes, no executive remuneration
expense was incurred and there was no corresponding change in share capital. The
executive remuneration is a deemed amount and would be based upon the fair
market value of the Company's common shares during 1997. (See Notes 5 and 12 to
the Company's December 31, 1998 Financial Statements and Security Ownership of
Certain Beneficial Owners and Management - Shares of the Company held in
Escrow.)
Liquidity and Capital Resources
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations and exploration activities, that if the market is
conducive to fund raising, the Company will raise and spend $500,000 on
exploration and development activities on the Buffalo Gulch, Mineral Zone and
Dixie projects in 1999. The Company is on an accelerated exploration time frame
on the platinum/palladium properties in Montana, such that if the market is
conducive to fund raising, the Company will raise and spend $500,000 in 1999 on
mapping, sampling, geochemical, geophysical and some limited drilling.
The Company requires approximately $250,000 for general and administrative
expenses for the ensuing twelve month period and $9,527 for payments on its
notes payable. For the immediate future, funding will be raised by equity and
debt financing, including, but not limited to private placements and the
exercise of stock options and warrants.
The remaining proceeds of private placements and the exercise of stock options
will be reserved for general working capital purposes and to reduce current
liabilities.
The Company has $9,527 in payments on notes payable due in the next year. The
balance represents the expected principal reduction of the Company's $13,070 and
$5,000 notes payable. The Company anticipates repayment of these notes from the
proceeds of the private placement and the exercise of stock options and
warrants.
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As at December 31, 1998, the Company has a working capital deficiency of
$313,452. The Company anticipates improvement of this deficiency from the
proceeds of private placements and the exercise of stock options and warrants
during 1999. The Company may also seek a debt restructuring plan with its
current debt holders during 1999 in order to correct this deficiency.
The Company is dependent on the proceeds of equity and debt financing, including
private placements and the exercise of stock options, as well as the granting of
options on its properties and asset sales to fund its general and administrative
expenditures and its mineral exploration and development costs. Without such
proceeds, the Company may not continue as a going concern. (See Note 1 to the
Company's December 31, 1998 Financial Statements.) The Company will need further
funds to continue its operations and there is no reasonable assurance that such
funding will be available.
For the year ended December 31, 1998, the Company raised $932,000 from the
issuance of convertible promissory notes payable. In accordance with Canadian
generally accepted accounting principles, the $932,000 convertible security
instruments were allocated $682,138 to notes payable and $249,862 to equity
based upon the fair value of the equity component. As the equity component is
not detachable, the amount would be recorded as $932,000 notes payable for U.S.
generally accepted accounting principles. (See Notes 4, 6 and 12 to the
Company's December 31, 1998 Financial Statements.)
Subsequent to December 31, 1998, the Company raised a further $115,000 on the
issuance of an additional convertible promissory note payable. In accordance
with Canadian generally accepted accounting principles the $115,000 convertible
security instruments was allocated $72,778 to notes payable and $42,222 to
equity based upon the fair value of the equity component. As the equity
component is not detachable, the amount would be recorded as $115,000 notes
payable for U.S. generally accepted accounting principles. Subsequent to
December 31, 1998, the Company also raised $200,000 on the issuance of 2,000,000
units on a private placement. Each unit consists of one common share of the
Company's stock and one non-transferable share purchase warrant. These funds
were used for working capital purposes and funding of exploration, development
and claim maintenance of the Company's properties. (See note 14 to the Company's
December 31, 1998 Financial Statements.)
Subsequent to December 31, 1998, the Holder of the convertible promissory notes
payable elected to convert $210,000 of the notes issued during 1998 for
1,146,923 units of the Company. Each unit consists of one common share of the
Company's stock and one non-transferable share purchase warrant. The Company
reduced notes payable by $154,946, reduced convertible securities by $27,527 and
increased share capital by $182,473 on conversion of these notes. The remaining
$27,527 of equity remains in convertible securities until the related warrants
are exercised. (See notes 6 and 14 to the Company's December 31, 1998 Financial
Statements.)
Positive cash flow from the financing activities of the Company of $682,850,
$761,702 and $1,389,663 were recorded for the years ended December 31, 1998,
1997, 1996, respectively. The long-term debt increased to $747,493 in 1998 from
$13,070 in 1997 as a result of the $682,138 debt component of the $932,000 on
the issuance of convertible promissory notes payable during the year. (See notes
4, 6 and 12 to the Company's December 31, 1998 Financial Statements.) Current
liabilities decreased to $365,922 in 1998 from $589,716 in 1997. Of the December
31, 1998 current liabilities, $9,527 represents the amounts due to notes payable
to shareholders and $128,687 represent amounts payable to various related
parties.
Negative cash flows from operating activities of ($602,894), ($520,517) and
($581,006) were recorded for the years ended December 31, 1998, 1997, and 1996,
respectively. The Company will continue recording negative cash flow from
operating activities unless significant revenue is generated from ore
production. The continued negative cash flow will have a material negative
impact on liquidity.
Investing activities consist of funds being expended on resource properties. The
net cash expended on investing activities decreased to ($158,434) in 1998 from
($429,442) in 1997. The 1998 and 1997
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additions to resource properties were primarily from cash except for the
$185,250 in 1997 related to share issuances to Idaho Gold Corp. in regard of the
Friday, Deadwood and Buffalo Gulch properties.
Year 2000 Compliance
The year 2000 computer risks arise from the practice of some computers using
only two digits rather than four to indicate the year portion of the date. When
January 1, 2000 arrives, these computers will change from "99" to "00" and may
react as if it is the year 1900 rather than 2000.
The Company does not use any "in house" computer program packages for
information processing relating to mineral exploration on its portfolio of
properties. The Company uses "off the shelf" computer programs for accounting
purposes and does not anticipate these programs will be significantly affected
by the year 2000 computer issue. In any event, the Company is in the process of
preparing an inventory of all the computer products and services that it uses.
Once the inventory is completed, an assessment will be conducted and a plan
created so that any altering of computer code, testing and implementation
thereof will be completed by June 30, 1999. Furthermore, the Company will obtain
assurances from all of its program suppliers regarding the year 2000 computer
risks. If any of these programs are found to be subject to the year 2000
computer problems, the Company will endeavor to replace the affected programs by
June 30, 1999, ahead of the critical date and the cost of replacing any affected
programs is not anticipated to be material.
However, the Company is subject to the year 2000 computer risks to the extent
that third parties, including major banks, consultants and other suppliers, may
be unable to modify and test their computer programs prior to January 1, 2000.
ITEM 7. FINANCIAL STATEMENTS
The Financial statements are indexed under item 13(a)(1).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the name, age and position of each of Executive
Officer and Director of the Company.
<TABLE>
- --------------------------------------- ------------ ------------------------------------------------------------------
Name and Municipality Age Principal Occupation for
of Residence Previous Five Years
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
<S> <C>
Delbert W. Steiner(1) 53 Mr. Steiner's principal occupation in the last five years is as
Lewiston, Idaho President of the Company from September 15, 1988 to June 27,
Director, President and CEO 1997 and from July 23, 1997 to the present and CEO of the
Company from June 24, 1996
to June 27, 1997 and July
23, 1997 to the present.
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
Theodore Tomasovich(1) 52 Director of the Company since July 22, 1997. Mr. Tomasovich's
Los Angeles, CA principal occupation in the last five years was as President of
Director PYI Corporation, a real estate development company, from October
1988 to the present.
- --------------------------------------- ------------ ------------------------------------------------------------------
43
<PAGE>
- --------------------------------------- ------------ ------------------------------------------------------------------
Name and Municipality Age Principal Occupation for
of Residence Previous Five Years
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
Jag Vyas(1) 56 Director of the Company since July 22, 1997. Mr. Vyas'
Coquitlam, B.C. principal occupation in the last five years was as a
Director self-employed accountant from 1991 to present.
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
Robert A. Young 50 Director of the Company since July 23, 1997. Mr. Young's
Vancouver, B.C. principal occupation in the last five years was as a partner in
Director Robert A. Young & Associates, a public relations company, from
1991 to present.
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
Wilfried J. Struck 40 VP, Mining and Exploration and Chief Operating Officer of the
Lewiston, Idaho Company since August 29, 1995. Mr. Struck's principal
VP, Mining and Exploration and Chief occupations in the last five years was as a self employed
Operating Officer consulting geological mining engineer from July, 1991 to August
29, 1995 and as C.O.O. of the Company from August 1995 to the
present.
- --------------------------------------- ------------ ------------------------------------------------------------------
- --------------------------------------- ------------ ------------------------------------------------------------------
Kenneth A. Scott 41 Chief Financial Officer of the Company since March 25, 1995.
Surrey, B.C. Mr. Scott's principal occupation in the last five years was as a
Chief Financial Officer partner in Staley, Okada, Chandler & Scott, Chartered
Accountants.
- --------------------------------------- ------------ ------------------------------------------------------------------
</TABLE>
(1) Member of the Company's Audit Committee.
Each Director is elected annually and holds office until the next annual meeting
and until his successor is duly elected, unless his office is earlier vacated in
accordance with the Articles of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership on Form 3 and reports of changes in ownership of common stock and
other equity securities of the Company on Form 4 and/or Form 5. Officers,
directors and greater-than-ten-percent shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports on
Forms 3, 4, and 5 as they are filed.
Based soley upon a review of Forms 3, 4 and 5 and amendments thereto, furnished
to the Company during or respecting its last fiscal year, the following persons
who, at any time during the most recent fiscal year, were Directors, officers,
beneficial owners of more than 10% of any class of equity securities of the
Company or any other persons known to be subject to Section 16 of the Exchange
Act failed to file, on a timely basis, reports required by Section 16(a) of the
Exchange Act: Delbert W. Steiner, Chairman, President and Chief Executive
Officer, filed a late Form 4 reporting a single transaction; Kenneth A. Scott,
Chief Financial Officer, filed three late Form 4s and a late Form 5 reporting an
aggregate of six transactions; Wilfried J. Struck, Vice-President, Mining and
Exploration, filed three late Form 4s and a late Form 5 reporting an aggregate
of nine transactions; Theodore Tomasovich, Director, filed three late Form 4s
and a late Form 5 reporting an aggregate of eleven transactions; the Tomasovich
Family Trust, a 10% shareholder, filed a late Form 3 and five late Form 4s
reporting an aggregate of seven transactions; Jag Vyas, Director, filed one late
Form 4 and a late Form 5 reporting an aggregate of three transactions; and
Robert A. Young, Director, filed three late Form 4s and a late Form 5 reporting
an aggregate of seventeen transactions.
The Company has assisted the reporting officers, directors and
greater-than-ten-percent shareholders in bringing their Section 16(a) reports
current and has provided information to help the Company's officers, directors
and greater-than-ten-percent shareholders in complying with their reporting
obligations.
ITEM 10. EXECUTIVE COMPENSATION
The following compensation information relates to amounts paid to the Chief
Executive Officer for the preceding three (3) years. No other director or
executive officer received compensation in excess
44
<PAGE>
of $100,000 in 1998, 1997 or 1996.
<TABLE>
- ---------------------- ------------------------------------- ---------------------------------------------- -----------
Annual Compensation Long Term Compensation
----------------------------------------------
------------------------------------ ---------
Awards Payouts
- ---------------------- ------------------------------------- ------------------------------------ --------- -----------
- ---------------------- --------- ------------------ -------- ---------- ----------- ------------- --------- -----------
Other Securities Restricted
Annual Under Shares or LTIP All Other
Name and Principal Year Compen-satiOptions Restricted Pay-Outs Compen-sation
Position Ending Salary Bonus Granted share Units
- ---------------------- --------- ------------------ -------- ---------- ----------- ------------- --------- -----------
- ---------------------- --------- ------------------ -------- ---------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Delbert W. Steiner 1998 US$69,000 - - - - - -
1997 US$69,000 - - 150,000 - - -
1996 US$24,129 - - - - - -
- ---------------------- --------- ------------------ -------- ---------- ----------- ------------- --------- -----------
</TABLE>
Pension Plans
The Company does not have any defined benefit pension plan which provides annual
benefits to any Executive Officers.
Compensation of Directors
None of the Directors receives Director's fees.
Executive Compensation
Other than the Chief Executive Officer, none of the Executive Officers of the
Company received any reportable salary or bonus during 1998. The following
describes the stock option regime currently followed by the Company.
Incentive stock options to purchase securities from the Company are granted to
Directors and employees on terms and conditions acceptable to the regulatory
authorities in Canada, namely the VSE. The Company has no formal written stock
option plan. Incentive stock options for up to 10% of the number of issued and
outstanding shares of the common stock may be granted from time to time,
provided that incentive stock options in favour of any one individual may not
exceed 5% of the issued and outstanding shares of common stock. No incentive
stock option granted under the stock option program is transferable by the
optionee other than by will or the laws of descent and distribution, and each
incentive stock option is exercisable during the lifetime of the optionee only
by such optionee. The exercise price of all incentive stock options granted
under the stock option program must be at least equal to the fair market value
of such shares of common stock on the date of grant, and the maximum term of
each incentive stock option may not exceed five years. The exercise prices for
incentive stock options are determined in accordance with VSE Guidelines and
reflect the average closing price of the Company's common stock for the ten
trading days on the VSE immediately preceding the day on which the Directors
grant and publicly announce the incentive stock options.
There were no grants of options to the named Executive Officers during the year
ended December 31, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the total number of the Company's common shares
and the percentage of such beneficially owned as of December 31, 1998 by the
Directors and Officers, and with respect to shares owned by each person or group
known by the Company to be the beneficial owner of more than 5% of the shares.
45
<PAGE>
<TABLE>
---------------------------------------------- ---------------------------------------- -----------------------------
Name of Beneficial Owners Number of Shares Owned Percent of Class
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
<S> <C> <C>
Tomasovich Family Trust 1,548,611 16.41
Theodore Tomasovich, Director, is the
Trustee of the Tomasovich Family Trust
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Delbert W. Steiner 673,782(1) 7.14
Director, President and CEO
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Theodore Tomasovich 1,548,611(2) 16.41
Director
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Robert Young 9,315 0.1%
Director
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Kenneth A. Scott 43,508(3) 0.46
Chief Financial Officer
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Wilfried J. Struck 103,069 1.09
Chief Operating Officer
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
Name of Beneficial Owners Number of Shares Owned Percent of Class
---------------------------------------------- ---------------------------------------- -----------------------------
---------------------------------------------- ---------------------------------------- -----------------------------
All Directors and Executive Officers as a 2,378,285 25.21
Group (7 persons)
---------------------------------------------- ---------------------------------------- -----------------------------
</TABLE>
(1) Includes 247,500 shares subject to the Escrow Agreement (as described
below).
(2) Indirect ownership resulting from Mr. Tomasovich being the Trustee
of the Tomasovich Family Trust. These shares are not included in the
group total line.
(3) Indirect ownership resulting from Mr. Scott being the beneficial owner
of a holding company which owns the shares.
Securities of the Company held in Escrow
Escrow Shares
562,500 shares of the Company's common stock, issued at a price of C$0.01 per
share (the "Escrowed Shares") are held in escrow by Montreal Trust Company of
Canada pursuant to an escrow agreement dated July 10, 1990 (the "Escrow
Agreement"). The Escrowed Shares are subject to release from time to time at the
direction of the VSE, in accordance with the policies of the VSE then in effect.
The current VSE policies allow for the release of 7.5% of the original 750,000
Escrowed Shares for each C$100,000 of qualifying exploration and development
expenditures subject to an annual maximum of 25% of the original 750,00 Escrowed
Shares. In the case where the Company's general and administrative expenses are
less than 33% of the total expenditures, these release limits are increased to
15% for each C$100,000 of qualifying expenditures up to an annual maximum of 50%
of the original 750,000 Escrowed Shares. The Escrow Agreement provides that the
Escrowed shares may not be transferred except in accordance with Local Policy
Statement 3-07 of the British Columbia Securities Commission and with the
consent of the VSE. The holders of the Escrowed Shares (the "Escrow
Shareholders") are entitled under the
46
<PAGE>
Escrow Agreement to exercise all voting rights attached to such Escrowed Shares,
except in respect of resolutions to cancel the Escrowed Shares, to receive
dividends or to participate in the assets and property of the Company on winding
up and dissolution of the Company. If an Escrow Shareholder ceases to be a
principal of the Company, such shareholder is required under the Escrow
Agreement to transfer his Escrowed Shares to such person or persons as the
Company, with the approval of the VSE, determines, or to transfer or surrender
the Escrowed Shares to the Company for cancellation, with such compensation or
for no compensation, as the Company, with approval of the VSE, determines. The
Escrow Shareholders are required to surrender for cancellation any of the
Escrowed Shares which remain unreleased from escrow by April 3, 2001, or earlier
if there is a major reorganization of the Company and the VSE requires the
cancellation thereof as a condition of approval thereof, or if the shares of the
Company have been subject to a cease trade order for a period of two consecutive
years.
By December 31, 1996, the Company had met all of the expenditure requirements
for the release of the Escrowed Shares. During 1998, the Company did not request
release of such shares from the VSE. Notwithstanding the foregoing, during 1996,
the Company expended sufficient amounts on exploration and development to
qualify for a release of an additional 187,500 shares, although the Company has
not yet requested release of such shares from the VSE. During 1995, the Company
expended sufficient amounts on exploration and development to qualify for a
release of an additional 187,500 shares, although the Company has not yet
requested release of such shares from the VSE. As of December 31, 1998, there
were 562,500 Escrowed shares subject to the Escrow Agreement, of which 270,000,
247,500, 37,500 and 7,500 were owned by Peter Lepik, Del Steiner, John Kennedy
and Roy Knickel, respectively.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is subject to various conflicts of interest arising out of its
relationships with its Executive Officers, Directors and shareholders, including
conflicts related to the arrangements by which the Company acquired certain of
its assets, as described below. The Company believes that all of the
transactions described below were conducted as arm's-length transactions and
were in the best interest of the Company. The Company intends to continue to
exercise its best business judgment and discretion in resolving any such
conflicts between the Company and others with respect to these and all other
matters, and the Company believes that it will generally be able to resolve such
conflicts on an equitable basis.
Delbert W. Steiner, the President and a Director of the Company, was
"interested" as a principal shareholder and Director of IMD and as a minority
beneficial shareholder and Director of Silver Crystal in the transactions under
which the Company acquired the Petsite Property and the Mallard Property for
cash and shares of the Company's common stock and the Snowstorm Property for
cash. At the time of such transactions, Mr. Steiner owned 33.3% of the
outstanding shares of IMD, and IMD owned 87.5% of the outstanding shares of
Silver Crystal.
On July 25, 1995, the Company received funding for construction of the Plant by
way of a private unsecured loan in the amount of $75,000 from the Tomasovich
Family Trust. The loan bore interest at the rate of prime plus 3.25% per annum
and was repayable in full on or before November 15, 1996. Subsequent to December
31, 1997, the outstanding loan amount was dealt with as part of a debt
restructuring plan, see Note 9 to the Company's December 31, 1998 Financial
Statements for more information.
During 1998, the Company received funding, by way of the issuance of five
separate convertible loans, in the total amount of $932,000 to the Tomasovich
Family Trust. For more information, see below and Note 4 to the Company's
December 31, 1998 Financial Statements.
Subsequent to December 31, 1998, the Company received funding, by way of
issuance of a convertible loan, in the total amount of $115,000 to the
Tomasovich Family Trust. For more information, see below and Note 12 to the
Company's December 31, 1998 Financial Statements.
47
<PAGE>
Private Placements
On November 12, 1997, the Company announced a private placement of a maximum of
1,786,458 units (the "Units") at a price of C$0.60 of which 1,763,233 were
subscribed for, resulting in net proceeds to the Company of C$1,057,940. Each
Unit consists of one common share and one non-transferable share purchase
warrant. The Tomasovich Family Trust (the "Trust"), Theodore Tomasovich being
both Trustee of the Trust and a Director of the Company, subscribed for 927,062
Units. Bernd Struck, being the brother of Wilfried Struck, V.P., Mining and
Exploration of the Company, subscribed in both his personal capacity for 25,890
Units and in his capacity as beneficial owner of Cardinal Forest Consulting
Company Ltd. for 25, 889 Units. The VSE accepted the private placement on March
18, 1998 and the shares were issued from treasury on the same day.
On February 3, 1999, the Company announced a private placement of a maximum of
2,000,000 units (the "Units"), at a price of C$0.15, resulting in net proceeds
to the Company of C$200,000. Each Unit consists of one common share and one
non-transferable share purchase warrant. Mr. D. Steiner a Director of the
Company, subscribed for 758,000 Units. Kenneth A. Scott, the Chief Financial
Officer of the Company, subscribed in his capacity as beneficial owner of
Kenneth A. Scott, Inc. for 100,000 Units. Bernd Struck, being the brother of
Wilfried Struck, V.P., Mining and Exploration of the Company, subscribed in his
capacity as beneficial owner of Cardinal Forest Consulting Company Ltd. for
100,000 Units. The VSE accepted the private placement on March 24, 1999 and the
shares were issued from treasury on the same day.
Convertible Loan Agreement #1
On April 9, 1998, the Company entered into a Convertible Loan Agreement
regarding a promissory note dated January 23, 1998 with the Tomasovich Family
Trust (the "Trust"), Theodore Tomasovich being both Trustee of the Trust and a
Director of the Company. The Company borrowed $100,000 repayable to the Trust on
or before January 23, 2000 (the "Maturity Date") bearing interest at 9% per
annum. After June 17, 1998, the Trust could require the Company to convert all
or any portion of the principal amount of the loan advanced and then outstanding
into units ("Units") at a conversion price of one Unit for each C$0.26 of
indebtedness until and including January 23, 1999 and at a conversion price of
one Unit for each C$0.31 of indebtedness during the period from January 24, 1999
until the Maturity Date for a maximum of 546,154 units if the principal amount
is converted in its entirety by January 23, 1999 and a maximum of 458,065 units
if the principal amount is converted in its entirety between January 24, 1999
and the Maturity Date. Each Unit consisted of one common share and one
non-transferable common share purchase warrant with each warrant being
exercisable at a price of C$0.26 per share until January 23, 1999 and C$0.31 per
share from January 24, 1999 to the Maturity Date. The Convertible Loan Agreement
was accepted by the VSE on June 22, 1998.
Subsequent to December 31, 1998, the holder of the convertible loan agreement
requested conversion of the note payable and on January 20, 1999 the Company
issued 546,154 units to the holder. Each Unit consisted of one common share and
one non-transferable common share purchase warrant with each warrant being
exercisable at a price of C$0.31 per share until January 23, 2000.
Convertible Loan Agreement #2
On April 9, 1998, the Company entered into Convertible Loan Agreement #2
regarding a promissory note dated March 31, 1998 with the Trust as lender. The
Company borrowed $110,000 repayable to the Trust on or before March 31, 2000
(the "Maturity Date") bearing interest at 9% per annum. After June 17, 1998, the
Trust could require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.26 of indebtedness until and including
March 31, 1999 and at a conversion price of one Unit for
48
<PAGE>
each C$0.31 of indebtedness during the period from April 1, 1999 until the
Maturity Date for a maximum of 600,769 units if the principal amount is
converted in its entirety by March 31, 1999 and a maximum of 503,870 units if
the principal amount is converted in its entirety between April 1, 1999 and the
Maturity Date. Each Unit consisted of one common share and one non-transferable
common share purchase warrant with each warrant being exercisable at a price of
C$0.26 per share until March 31, 1999 and C$0.31 per share from April 1, 1999 to
the Maturity Date. The Convertible Loan Agreement was accepted by the VSE on
June 22, 1998.
Subsequent to December 31, 1998, the holder of the convertible loan agreement
requested conversion of the note payable and on March 23, 1999 the Company
issued 600,769 units to the holder. Each Unit consisted of one common share and
one non-transferable common share purchase warrant with each warrant being
exercisable at a price of C$0.31 per share until March 31, 2000.
Convertible Loan Agreement #3
On May 15, 1998, the Company as borrower, entered into Convertible Loan
Agreement #3 with the Trust as lender for $150,000 repayable on or before May
15, 2000 (the "Maturity Date") bearing interest at 9% per annum. After June 17,
1998, the Trust may require the Company to convert all or any portion of the
principal amount of the loan advanced and then outstanding into units ("Units")
at a conversion price of one Unit for each C$0.23 of indebtedness until and
including May 15, 1999 and at a conversion price of one Unit for each C$0.28 of
indebtedness during the period from May 16, 1999 until the Maturity Date for a
maximum of 932,608 units if the principal amount is converted in its entirety by
May 15, 1999 and a maximum of 766,071 units if the principal amount is converted
in its entirety between May 16, 1999 and the Maturity Date. Each Unit consists
of one common share and one non-transferable common share purchase warrant with
each warrant being exercisable at a price of C$0.23 per share until May 15, 1999
and C$0.28 per share from May 16, 1999 to the Maturity Date. The Convertible
Loan Agreement was accepted by the VSE on June 22, 1998.
Convertible Loan Agreement #4
On September 10, 1998, the Company as borrower, entered into Convertible Loan
Agreement #4 with the Trust as lender for $250,000 repayable on or before
September 10, 2000 (the "Maturity Date") bearing interest at 9% per annum. The
Trust may require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of one Unit for each C$0.17 of indebtedness until and including
September 10, 1999 and at a conversion price of one Unit for each C$0.22 of
indebtedness during the period from September 11, 1999 until the Maturity Date
for a maximum of 2,227,941 units if the principal amount is converted in its
entirety by September 10, 1999 and a maximum of 1,721,590 units if the principal
amount is converted in its entirety between September 11, 1999 and the Maturity
Date. Each Unit consists of one common share and one non-transferable common
share purchase warrant with each warrant being exercisable at a price of C$0.17
per share until September 10, 1999 and C$0.22 per share from September 11, 1999
to the Maturity Date. The Convertible Loan Agreement was accepted by the VSE on
November 3, 1998 as to $191,060 and on December 11, 1998 as to the remaining
$58,940.
Convertible Loan Agreement #5
On October 1, 1998, the Company as borrower, entered into Convertible Loan
Agreement #5 with the Trust as lender for $322,000 repayable on or before
October 1, 2000 (the "Maturity Date") bearing interest at 9% per annum. The
Trust may require the Company to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units ("Units") at a
conversion price of
49
<PAGE>
one Unit for each C$0.20 of indebtedness until and including October 1, 1999 and
at a conversion price of one Unit for each C$0.25 of indebtedness during the
period from October 2, 1999 until the Maturity Date for a maximum of 2,466,681
units if the principal amount is converted in its entirety by October 1, 1999
and a maximum of 1,973,732 units if the principal amount is converted in its
entirety between October 2, 1999 and the Maturity Date. Each Unit consists of
one common share and one non-transferable common share purchase warrant with
each warrant being exercisable at a price of C$0.20 per share until October 1,
1999 and C$0.25 per share from October 2, 1999 to the Maturity Date. The
Convertible Loan Agreement was accepted by the VSE on November 20, 1998 as to
$300,000 and on December 10, 1998 as to the remaining $22.000.
Convertible Loan Agreement #6
On January 28, 1999, the Company as borrower, entered into Convertible Loan
Agreement #6 with the Trust as for $115,000 repayable on or before January 28,
2001 (the "Maturity Date") bearing interest at 9% per annum. The Trust may
require the Company to convert all or any portion of the principal amount of the
loan advanced and then outstanding into units ("Units") at a conversion price of
one Unit for each C$0.15 of indebtedness until and including January 28, 2000
and at a conversion price of one Unit for each C$0.20 of indebtedness during the
period from January 29, 2000 until the Maturity Date for a maximum of 1,172,847
units if the principal amount is converted in its entirety by January 28, 2000
and a maximum of 879,635 units if the principal amount is converted in its
entirety between January 29, 2000 and the Maturity Date. Each Unit consists of
one common share and one non-transferable common share purchase warrant with
each warrant being exercisable at a price of C$0.15 per share until January 28,
2000 and C$0.20 per share from January 29, 2000 to the Maturity Date. The
Convertible Loan Agreement was accepted by the VSE on February 9, 1999.
Global Settlement Agreement
On April 29, 1998, the Company, Delbert Steiner, President and a Director of the
Company, Elli Steiner spouse of Mr. Steiner, Theodore Tomasovich, individually
as a Director of the Company and in his capacity as Trustee of the Tomasovich
Family Trust (the "Trust") entered into an agreement (the "Global Settlement
Agreement") with Joe Swisher the President, a Director and the controlling
shareholder of IMD and the President and a Director of Silver Crystal, Barbara
Swisher, spouse of Mr. Swisher, IMD and Silver Crystal. (collectively the "IMD
Group") to settle numerous lawsuits and disagreements.
In full and final settlement of all existing and potential claims between and
among the parties to the agreement, and to establish rights and obligations
under the Agreement, the Company agreed to pay IMD the sum of $100,00.00. The
obligations created under the agreement include the following:
Eckert Hill Mine and Millsite ("Eckert Hill")
The Company and IMD agreed to jointly undertake an inventory of Eckert Hill with
a view to allowing IMD to remove certain items (the "Items") and all chemicals
and reagents. The IMD Group agreed to assume the risk of any damage to the
property of the Company that may have occurred during the removal of the Items
and to provide insurance coverage for any person involved in the removal of the
Items. During 1998, the inventory and removal of IMD items occurred.
Restriction on acquisition of the Company's shares
The IMD Group agreed that subsequent to the Agreement and for three years
thereafter, neither they nor any corporation or entity in which they own more
than a five
50
<PAGE>
percent equity interest or more than five percent of all issued and outstanding
shares of common stock, nor any entity in which they are an officer or director
shall acquire any shares of stock in the Company.
Swisher Br-Process
The Company agreed to transfer to IMD and Joe Swisher any ownership or licensing
interest in the Swisher Br-Process (the "Process"). IMD and Joe Swisher agree to
grant the Company a royalty of 2% of gross revenue paid quarterly from any use,
including licensing use of the Process generated by any member of the IMD Group.
During 1998, the transfer was completed and to date the Company has received no
royalties from IMD on the process.
Golden Eagle
As a full and final resolution of all issues between and among the parties to
the Global Settlement Agreement, IMD agreed to lease to the Company all of IMD's
interest in mineral rights in the Golden Eagle claim blocks ("Golden Eagle").
The initial term of the lease shall coincide with the remaining term of the
Cyprus Joint Venture. Under the lease, IMD shall be entitled to a 40% share of
all benefits derived from Golden Eagle but will not be responsible for any
costs, risks, or debts of any kind created by the Company or by Cyprus via the
Joint Venture. IMD Group will retain ownership and possession of certain
buildings, machinery, and equipment located at Golden Eagle. The Company agrees
to allow IMD Group to retain all placer mining rights and rights of ingress and
egress to the Golden Eagle. During 1998, the Company determined that due to
current market conditions and title concerns these claims should be dropped and
accordingly the Company quit claim all interest in this property to IMD.
Joint Development Agreements
As part of the Global Settlement Agreement, the Company intended to enter into
certain joint development agreements with Mr. Swisher and IMD. Due to the
failure of these parties to provide proof of titles to these properties, the
Company did not conclude the signing of these agreements.
Mineral Zone
The Company and the IMD Group agreed that the existing Letter of Agreement dated
December 1, 1995 ("Letter of Agreement") in which IMD and Delbert Steiner agreed
to sell to the Company the Mineral Zone property ("Mineral Zone") will be
voided. Under the Global Settlement Agreement the Company entered into a new
agreement (the "New Mineral Zone Agreement") to purchase Mineral Zone from IMD
and Mr. Steiner under the following conditions; within five months from the
execution of the Global Settlement Agreement the Company will have the property
appraised by a qualified appraiser; within six months from the execution of the
Global Settlement Agreement (the "Valuation Date") the Company shall pay Mr.
Steiner and IMD a payment equal to 3.5% of the purchase price (to be determined
by the foregoing appraisal formula); an additional 3.5% of the purchase price
shall be paid by the Company to Mr. Steiner and IMD six months from the
Valuation Date; from that date forward the principal balance shall bear interest
at the rate of 7% per annum. The New Mineral Zone Agreement is subject to VSE
approval. During 1998, IMD failed to provide proof of title and negotiations for
purchase of the claims from IMD have been terminated. The Company is continuing
to negotiate a satisfactory agreement on the claims of Mr. D. Steiner, subject
to regulatory approval.
In 1998, the Company paid or accrued a total of $69,000 in management fees to
Mr. Steiner and $1,952 to a company controlled by a director, and $130,858 in
interest expense on notes payable to directors. See Note 7 to the Company's of
December 31, 1998 Financial Statements for more information.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
1. The following documents are filed as part of this report:
(a) Financial statements are included herein as Exhibit 99.1:
51
<PAGE>
Page
----
Report of Independent Accountants F-1
Consolidated Balance Sheets - December 31, 1998 and 1997 F-2
Consolidated Statements of Changes in Shareholder's Equity F-3
Consolidated Statements of Cash Flow F-7
Notes to Consolidated Financial Statements F-10
The Company's 1998 Annual Report to Shareholders is not to be deemed
filed as part of this report except for those parts thereof
specifically incorporated by reference herein.
(b) Exhibits.
An asterisk (*) beside the exhibit number indicates the subset
of the exhibits containing each management contract,
compensatory plan, or arrangement required to be identified
separately in this report.
<TABLE>
Exhibit Number Exhibit Description
---------------- ----------------------------------------------------------------------------------------
<S> <C>
10.1 Employee Stock Option Agreement dated April 1, 1998 for Trudy Weed
---------------- ----------------------------------------------------------------------------------------
10.2 Schedule to Employee Stock Option Agreement dated April 1, 1998
---------------- ----------------------------------------------------------------------------------------
10.3 Convertible Loan Agreement #4 dated effective September 10, 1998 (U.S. $250,000)
between the Tomasovich Family Trust and the Company
---------------- ----------------------------------------------------------------------------------------
10.4 Convertible Loan Agreement #5 dated effective October 1, 1998 (U.S. $300,000) between
the Tomasovich Family Trust and the Company
---------------- ----------------------------------------------------------------------------------------
10.5 Amendment to Convertible Loan Agreement #5 dated November 17, 1998 between the Trust
and the Company
---------------- ----------------------------------------------------------------------------------------
10.6 Convertible Loan Agreement #6 dated January 29, 1998 (U.S. $115,000) between the
Tomasovich Family Trust and the Company
---------------- ----------------------------------------------------------------------------------------
10.7 Subscription Agreement dated March 10, 1999 between the Company and Delbert Steiner
---------------- ----------------------------------------------------------------------------------------
10.8 Schedule to Subscription Agreement dated March 10, 1999
---------------- ----------------------------------------------------------------------------------------
10.9 Director Stock Option Agreement dated April 7, 1999 between the Company and Del Steiner
---------------- ----------------------------------------------------------------------------------------
10.10 Schedule to Director Stock Option Agreement dated April 7, 1999
---------------- ----------------------------------------------------------------------------------------
10.11 Employee Stock Option Agreement dated April 7, 1999 between the Company and Wilf Struck
---------------- ----------------------------------------------------------------------------------------
10.12 Schedule to Employee Stock Option Agreement dated April 7, 1999
---------------- ----------------------------------------------------------------------------------------
22.1 Notice of Annual and Extraordinary General Meeting and Information Circular dated May
18, 1999
---------------- ----------------------------------------------------------------------------------------
27 Financial Data Schedule
---------------- ----------------------------------------------------------------------------------------
99.1 Financial Statements for year ending December 31, 1998
---------------- ----------------------------------------------------------------------------------------
</TABLE>
2. Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fourth
quarter of the fiscal year ended December 31,1998, nor were any such
reports filed during 1998.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 15th day of
July, 1999.
IDAHO CONSOLIDATED METALS CORP.
By: /s/ Delbert W. Steiner
Delbert W. Steiner
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 15th day of July, 1999.
Signature Title Date
/s/ Delbert Steiner Director, President and July 15, 1999
Delbert W. Steiner Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer July 15, 1999
/s/ Kenneth A. Scott (Principal Financial Officer and
Kenneth A. Scott Principal Accounting Officer)
/s/ Theodore Tomasovich Director July 15, 1999
Theodore Tomasovich
/s/ Robert A. Young Director July 15, 1999
Robert A. Young
EMPLOYEE'S OPTION AGREEMENT
THIS AGREEMENT IS MADE AS OF THE 1ST DAY OF APRIL, 1998 (THE "AGREEMENT DATE").
BETWEEN:
IDAHO CONS0LIDATED METALS CORPORATION, a company duly
incorporated under the laws of the Province of British
Columbia, having a place of business at Suite 470, 504 Main
Street, Lewiston, Idaho, 83501;
(the "Company")
AND:
TRUDY WEED
540 Burrell Street
P.O. Box 1788
Lewiston, ID 83501;
(the "Employee")
WHEREAS the Employee is a bona-fide employee of the Company, and the Company
would like to grant to the Employee an option to purchase common shares of the
Company on the terms and conditions hereinafter set forth;
NOW THEREFORE THIS AGREEMENT WITNESSES, that in consideration of the premises
and of the covenants and agreements herein contained the parties hereto covenant
and agree (the "Agreement") as follows:
1. From and including the Agreement Date through to and including the day 4
years from the Agreement Date (the "Termination Date"), the Employee shall have
and be entitled to and the Company hereby grants to the Employee an option (the
"Option") to purchase a total of 15,000 common shares without par value in the
capital stock of the Company from treasury at the price of $0.26 per share.
2. Subject to the terms of this Agreement, the right to take up shares pursuant
to the Option is exercisable by the Employee giving notice in writing to the
Company accompanied by a cheque, certified if so required by the Company, in
favour of the Company for the full amount of the purchase price of the shares
then being purchased. Provided such written notice and payment are received by
the Company prior to 5:00 p.m. local time on the Termination Date at its address
first above written, the Company covenants and agrees to issue and deliver to
the Employee, forthwith thereafter, a share certificate for the number of shares
so purchased registered in the Employee's name.
<PAGE>
3. This is an Option only and does not impose upon the Employee any obligation
to take up and pay for any of the shares under Option.
4. The Option shall not be assignable or transferable by the Employee otherwise
than by will or the law of intestacy and the Option may be exercised during the
lifetime of the Employee only by the Employee himself.
5. This Option shall terminate 30 days after the Employee ceases to be an
employee of the Company save and except where the Employee ceases to be an
employee of the Company as a result of:
(a) termination for cause; or
(b) by order of the Superintendent of Brokers for B.C., B.C. Securities
Commission, Vancouver Stock Exchange or any securities regulatory body
having jurisdiction to so order,
in which case the Option shall terminate on the date the Employee ceases to be
an employee of the Company.
6. If the Employee should die while still an employee of the Company, the Option
may then be exercised by the Employee's legal heirs or personal representatives
to the same extent as if the Employee were alive and an employee of the Company
for a period of one year after the Employee's death but only for such shares as
the Employee was entitled to purchase pursuant to the Option at the date of the
Employee's death.
7. This Agreement and any amendments hereto are subject to the approval of the
Vancouver Stock Exchange and, if the Employee is an insider (as that term is
defined in the Securities Act, S.B.C. 1997, c. 418) of the Company, by the
members of the Company. In the event such approvals are not obtained, this
Agreement shall be null and void and of no further force and effect.
8. In the event of any subdivision, consolidation or other change in the share
capital of the Company while any portion of the Option is outstanding, the
number of shares under option to the Employee and the exercise price thereof
shall be adjusted in accordance with such subdivision, consolidation or other
change in the share capital of the Company.
9. In the event that the Company undertakes an amalgamation, merger,
reorganization or other arrangement while any portion of the Option is
outstanding, the number of shares under option to the Employee and the exercise
price thereof shall be adjusted in accordance with such amalgamation, merger,
reorganization or other arrangement.
<PAGE>
10. The Company hereby covenants and agrees to and with the Employee that it
will reserve in its treasury sufficient shares to permit the issuance and
allotment of shares to the Employee in the event the Employee exercises the
Option.
IN WITNESS WHEREOF the parties have hereunto caused these presents to be
executed effective as of the day and year first above written.
THE COMMON SEAL of IDAHO )
CONSOLIDATED METALS )
CORPORATION was hereunto )
affixed in the presence of: ) c/s
)
___________________________________ )
SIGNED, SEALED AND DELIVERED )
by TRUDY WEED in the presence of: )
)
Signature of )
Witness: ___________________________________________ )
) TRUDY WEED
Address of )
Witness: ___________________________________________ )
)
Occupation )
of Witness: _________________________________________)
Exhibit 10.2
SCHEDULE TO EMPLOYEE'S STOCK OPTION AGREEMENT
April 1, 1998
In addition to the Employee's Stock Option Agreement dated April 1, 1998,
between the Company and Trudy Weed, the Company on the same date granted options
to purchase Common shares in the capital stock of the Company on identical terms
to the option granted to Ms. Weed to the following individuals in the following
amounts:
<TABLE>
---------------------------- -------------------------
Name of Optionee No. of Shares
---------------------------- -------------------------
---------------------------- -------------------------
<S> <C>
Lori Cox 15,000
---------------------------- -------------------------
---------------------------- -------------------------
Vanessa Gill 15,000
---------------------------- -------------------------
</TABLE>
Exhibit 10.3
CONVERTIBLE LOAN AGREEMENT #4
THIS CONVERTIBLE LOAN AGREEMENT dated effective the 10th day
of September,1998
BETWEEN:
TOMASOVICH FAMILY TRUST, 600 Wilshire Boulevard, Suite 1410,
Los Angeles, California, 90017
(the "Lender")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a company incorporated
under the laws of British Columbia, having its principal
office at 540 Main Street, Suite 470, Lewiston, Idaho, 83501
(the "Borrower")
WHEREAS the Borrower wishes to borrow and the Lender is
willing to lend to the Borrower up to the sum of U.S.$250,000 (the "Loan"), upon
the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the laws prevailing in British Columbia.
1.2 Severability. If any one or more of the provisions contained in this
Agreement is found by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
1.3 Headings and Marginal References. The divisions of the Agreement into
articles, paragraphs, sub-paragraphs and other subdivisions and the insertion of
headings are for convenience of reference only and do not affect the
construction or interpretation of this Agreement.
1.4 Currency. All sums of money to be paid or calculated pursuant to this
Agreement shall be paid or calculated in United States or Canadian currency, as
indicated throughout.
<PAGE>
1.5 Number and Gender. All references to any party to this Agreement shall be
read with such changes in number and gender as the context may require.
ARTICLE 2
THE LOAN
2.1 Closing Date. The closing of the financing contemplated by this Agreement
will take place on the first business day following the date of receipt of final
acceptance by the Vancouver Stock Exchange (the "Exchange") of this Agreement
for filing (the "Closing Date") or such later date as the parties may agree upon
in writing.
2.2 Establishment of the Loan. On the terms and subject to the conditions set
forth in this Agreement, the Lender shall lend to the Borrower up to the sum of
U.S.$250,000, which may be advanced from time to time at the sole request of the
Borrower. The Borrower and the Lender acknowledge that as at the date hereof,
the sum of U.S.$183,660 of the Loan has been advanced.
2.3 Evidence of Indebtedness. In order to evidence the indebtedness of the
Borrower to the Lender in respect of the Loan, the Borrower shall execute and
deliver to the Lender a promissory note in substantially the form attached as
Schedule "A" hereto with respect to the sum of U.S.$183,660 advanced and
outstanding as at the date hereof. The Borrower also agrees to execute and
deliver to the Lender on each further advance of the Loan hereafter, a
promissory note in substantially the form attached as Schedule "A" hereto (such
promissory notes individually and collectively referred to herein as the
"Note").
2.4 Interest. Commencing on September 10, 1999, the Borrower shall pay to the
Lender annually on September 10, 1999 and September 10, 2000 while any amount of
the Loan remains outstanding, interest on the principal amount of the Loan at
the rate of 9% per annum, calculated annually in arrears, both before and after
maturity, default and judgment. In the event that any interest payment is not
made in a timely manner, a late payment fee of 9% of the amount of the interest
payment then due shall be paid to the Lender.
2.5 Repayment of the Loan. Subject to paragraphs 2.6 and 3.1, the Borrower shall
repay the Loan, together with any outstanding interest thereon, to the Lender on
or before September 10, 2000 (the "Maturity Date").
2.6 Prepayment of the Loan. Subject to paragraph 3.1, the Borrower may prepay
the Loan in whole or in part, together with any outstanding interest thereon to
the Lender at any time after September 10, 1999 until the Maturity Date without
penalty.
ARTICLE 3
CONVERSION
3.1 Conversion. During the period from the Closing Date until the Maturity Date,
the Lender may require the Borrower to convert all or any portion of the
principal amount of the Loan advanced and then outstanding into units ("Units"),
at a conversion price of one Unit for each Cdn.$0.17 of indebtedness until and
including September 10, 1999 and at a conversion price of one
<PAGE>
Unit for each Cdn.$0.22 of indebtedness during the period from September 11,
1999 until the Maturity Date. Each Unit consists of one common share in the
capital stock of the Borrower (the "Share") and one non-transferable common
share purchase warrant ("Warrant"). The Lender shall give written notice of
conversion to the Borrower specifying the part or whole of the principal
indebtedness of the Borrower to the Lender to be converted and the number of
Units to be issued on conversion, calculated in accordance with the terms of
this Agreement.
3.2 No Fractions. In converting the principal indebtedness of the Loan into
Units, the Borrower shall round fractions down to the nearest whole Unit, so
that the Lender will not be entitled to receive a fraction of a Unit.
3.3 Delivery. Three business days after the date a notice of conversion is
received by the Borrower from the Lender (the "Conversion Date"), the Lender
shall be deemed for all purposes to be the holder of record of that number of
Shares and Warrants designated in the notice of conversion, the outstanding
principal indebtedness of the Borrower to the Lender shall be deemed to be
reduced by the amount designated in the notice of conversion and the Borrower
shall deliver to the Lender on the Conversation Date a share certificate
representing the number of Shares and a certificate representing the number of
Warrants comprised in the Units as specified in the notice of conversion,
together with any unpaid interest which is due as at the Conversion Date.
3.4 Warrants. The Warrants shall be non-transferable and, if and when issued,
each Warrant shall entitle the Lender to purchase one common share in the
capital stock of the Borrower (the "Warrant Share") for a term commencing on the
Conversion Date and exercisable until the Maturity Date at a price of Cdn.$0.17
per Warrant Share until September 10, 1999 and thereafter at a price of
Cdn.$0.22 per Warrant Share until the Maturity Date. The terms and conditions
governing the Warrants shall contain provisions, inter alia, for appropriate
adjustment in the class, number and price of the Shares issuable pursuant to any
exercise thereof upon the occurrence of certain events including any
subdivision, consolidation or reclassification of the Shares, the payment of
stock dividends or the amalgamation of the Company, as set forth in the form of
warrant certificate attached hereto as Schedule "B".
3.5 Adjustment. The terms and conditions set out in sections 1 and 2 of Schedule
"B" with respect to the adjustment in the class, number and price of the Warrant
Shares upon the occurrence of certain events apply, with the necessary changes,
to the Shares.
3.6 Reservation of Shares and Warrant Shares. For so long as any part of the
principal indebtedness of the Loan remains outstanding, the Borrower shall at
all times reserve out of its unissued common shares a sufficient number thereof
to accommodate the conversion of the principal indebtedness of the Loan into
Shares and the exercise of the Warrants into Warrant Shares, all as provided for
in this Agreement.
3.7 Questionnaire and Undertaking. The Lender shall execute and deliver to the
Borrower for filing with the Exchange the form of Private Placement
Questionnaire and Undertaking and such other documents and information as may be
required by the Exchange in connection with this transaction.
<PAGE>
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.1 The Borrower represents and warrants to the Lender that:
(a) the Borrower is a reporting issuer only in British Columbia and is not
in default of any requirement of the British Columbia Securities Act
and Rules promulgated thereto (the "Act");
(b) the Borrower is a corporation duly incorporated, validly existing and
in good standing with respect to filing of annual reports with the
Registrar of Companies for British Columbia;
(c) the Borrower has all requisite corporate power and authority to own
and use its property, to carry on its business as now being conducted,
to enter into this Agreement and to execute and deliver the Note and
to carry out the obligations contemplated herein and therein;
(d) all necessary corporate action of the directors of the Borrower to
authorize the execution, delivery and performance of this Agreement
has been taken;
(e) this Agreement has been duly executed and delivered on behalf of the
Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable by the Lender in accordance with its terms;
(f) the authorized capital of the Borrower consists of 100,000,000 common
shares without par value of which 9,434,650 common shares are validly
issued and outstanding as at September 10, 1998;
(g) the Shares to be allotted and issued pursuant to the due and valid
conversion, in whole or in part, of the principal indebtedness of the
Loan have been duly and validly authorized to be issued as fully paid
and non-assessable common shares upon receipt by the Borrower of a
notice of conversion;
(h) the Warrant Shares to be allotted and issued pursuant to the due and
valid exercise, in whole or in part, of the Warrants have been duly
and validly authorized to be issued as fully paid and non-assessable
common shares upon receipt by the Borrower of full payment therefor;
(i) the common shares of the Borrower are listed and posted for trading
only on the Exchange; and
(j) no Default (as defined below) or event which with the giving of notice
or the lapse of time would become a Default has occurred or is
continuing.
ARTICLE 5
LENDER'S REPRESENTATIONS AND WARRANTIES
<PAGE>
5.1 The Lender represents and warrants to the Borrower that:
(a) the Lender, if a corporation, is a valid and subsisting corporation
under the laws of its incorporating jurisdiction, has the necessary
corporate capacity and authority to execute and deliver this Agreement
and to observe and perform its covenants and obligations hereunder and
has taken all necessary corporate action in respect thereof, and this
Agreement constitutes a legal, valid and binding contract of the
Lender enforceable against the Lender in accordance with its terms;
(b) the Lender is a resident of the State of California;
(c) the Lender is entering into this Agreement and acquiring the Note as
principal for the Lender's own account, and not for the benefit of any
other person;
(d) the Lender is purchasing the Note in an aggregate acquisition cost of
not less than $97,000 and the Lender was not created solely, and is
not being used primarily, to permit a group of individuals to purchase
the Note without a prospectus; or
(e) the Lender is aware that this Agreement and the Note are being
distributed under an exemption from the registration and prospectus
requirements of the Act and states that this Agreement is not being
entered into as a result of any information about the affairs of the
Borrower that is not generally known to the public save knowledge of
this particular transaction;
(f) this Agreement and the Loan are not being used to settle prior
outstanding debts of the Borrower to the Lender or, if they are being
used to settle prior outstanding debt owing by the Borrower to the
Lender, then the Lender is not permitted to receive Warrants comprised
in the Units on that part of its Loan that corresponds to the amount
of the prior outstanding debt;
(g) the Lender is not presently a "control person" of the Borrower as
defined in the Act but may become a "control person" of the Borrower
by virtue of the purchase of the Note pursuant to this Agreement and
the conversion of the Note into the Units or the conversion of other
convertible securities to acquire Common shares of the Borrower owned
by the Lender; and
(h) the Lender has executed and delivered to the Company herewith the
additional representations and warranties set out on Schedule "C"
attached hereto.
ARTICLE 6
ACKNOWLEDGMENTS AND COVENANTS OF THE LENDER
6.1 The Lender hereby acknowledges and covenants that:
(a) the Note that is being issued and the Units, Shares, Warrants and
Warrant Shares that may be issued pursuant to this Agreement (together
the "Securities") will be issued under an exemption from the
registration and prospectus requirements of the Act and under the
policies of the Exchange and that the sale by the Lender in British
<PAGE>
Columbia of the Securities is, unless otherwise exempted under the Act
and approved by the Exchange, deemed to be a distribution to the
public unless:
(i) if the Lender is an insider of the Borrower, other than a
director or senior officer of the Borrower, the Lender has
filed all records required to be filed under section 87
(insider reports) and section 90 (personal information form)
of the Act;
(ii) if the Lender is a director or senior officer of the
Borrower, the Lender has filed all records required to be
filed under section 87 (insider reports) and section 90
(personal information form) of the Act and the Borrower has
filed all records required to be filed under part 12 of the
Act and of the Rules promulgated to the Act (continuous
disclosure);
(iii)a twelve-month period has elapsed from the date of advance
of the Loan or, if on the Conversion Date the Company is an
AIF Issuer as defined in the policies of the Exchange, a
four month period has elapsed from the date of advance of
the Loan;
(iv) the trade is not a distribution from the holdings of a
control person;
(v) no unusual effort is made to prepare the market or to create
a demand for the Securities; and
(vi) no extraordinary commission or consideration is paid in
respect of the trade;
(b) the foregoing is a summary based on the provisions of the Act as at
the date hereof and is subject to amendment and the Lender covenants
that, prior to trading in the Securities in British Columbia, the
Lender will consult with the Lender's own legal counsel in connection
with the applicable resale rules;
(c) the Lender will complete, execute and deliver to the Borrower the
Private Placement Questionnaire and Undertaking attached as Schedule
"D" hereto as required by the Exchange for filing with the Exchange in
connection with the Loan;
(d) if the Lender is an individual, the Lender will complete, execute and
deliver to the Borrower a Form 20A(IP), Acknowledgement and
Undertaking as required under the Act; and
(e) the certificates representing the Securities will contain a legend
denoting the restrictions on transfer imposed by the Act or, if
applicable, by the policies of the Exchange, to the effect that the
securities represented by the certificate are subject to a hold period
and may not be traded in British Columbia until one year from the date
of advance of the Loan, or, if on the Conversion Date the Company is
an AIF Issuer, until four months from the date of advance of the Loan.
ARTICLE 7
COVENANTS OF THE BORROWER
<PAGE>
7.1 The Borrower covenants and agrees with the Lender that at all times
during the currency of this Agreement it will:
(a) take all reasonable steps to remain in good standing under the Act;
(b) pay the principal sum of the Loan, interest and all other monies
required to be paid to the Lender pursuant to this Agreement in the
manner set forth herein;
(c) observe and perform each of its covenants and agreements set forth in
this Agreement and the Note; and
(d) provide the Lender with immediate notice of any Default.
7.2 The Borrower shall assume and pay all costs, charges and
expenses, including reasonable legal fees and expenses, which may be incurred by
the Lender in respect of this Agreement or the Note in any proceedings taken or
things done by the Lender or on its behalf in connection therewith to
collect, protect, realize or enforce the Note.
ARTICLE 8
DEFAULT
8.1 It is a Default if:
(a) the Borrower defaults in any payment when the same is due under this
Agreement;
(b) the Borrower becomes insolvent or makes a general assignment for the
benefit of its creditors, or if an order is made or effective
resolutions are passed for the winding-up, merger or amalgamation of
the Borrower or if the Borrower is declared bankrupt or if a custodian
or receiver is appointed for the Borrower under any bankruptcy
legislation, or if a compromise or arrangement is proposed by the
Borrower to its creditors or any class of its creditors, or if a
receiver or other officer with like powers is appointed for the
Borrower; or
(c) the Borrower defaults in observing or performing any other covenant or
agreement of this Agreement on its part to be observed or performed
and such default has continued for a period of seven days after notice
in writing has been given by the Lender to the Borrower specifying
such default.
8.2 In the event of a Default, unless it is waived in writing by the
Lender, the principal balance of the Loan, costs and any other money owing to
the Lender under this Agreement shall immediately become payable by the
Borrower.
ARTICLE 9
GENERAL
<PAGE>
9.1 Waiver or Modification. No consent or waiver, express or implied,
by any party to or of any breach or default by any other party of any or all
of its obligations under this Agreement will:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent or waiver to or of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
9.2 Further Assurances. The parties hereto will do, execute and deliver
or will cause to be done, executed and delivered all such further acts,
documents and things as may be reasonably required for the purpose of giving
effect to this Agreement.
9.3 Assignment. No party may assign its interest herein or any part
thereof without the consent of the other party which neither party will
unreasonably withhold. In the case of an assignment by the Borrower, the
Borrower must comply with all applicable securities laws and obtain the consent
of the Vancouver Stock Exchange.
9.4 Notices. Any notice, demand or other document required or permitted
to be given hereunder shall be deemed to have been well and sufficiently given
if telecopied to or delivered at the address of the intended recipient set forth
on the first page hereof or at such other address as the intended recipient may
from time to time direct in writing, and any such notice, demand or document
shall be deemed to have been received.
9.5 Exchange Acceptance for Filing. It is acknowledged and agreed
between the parties that the Loan made hereunder is subject to acceptance for
filing by the Exchange. If final acceptance is not obtained within 120 days
of the date of this Agreement, unless the parties agree otherwise, the
Agreement shall automatically be terminated and of no further force or effect.
9.6 Amendments. No provision of this Agreement may be amended, waived,
discharged or terminated orally, but only by instrument in writing signed by the
party against whom enforcement of the amendment, waiver, discharge or
termination is sought.
9.7 Parties in Interest. This Agreement shall enure to the benefit of and
be binding upon the parties hereto and their respective personal
representatives, successors and permitted assigns.
9.8 Counterparts. This Agreement may be executed in counterparts and by
facsimile with the same effect as if all parties had signed the same document
and all such counterparts will be construed together and will constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION was )
hereunto affixed in the presence of: )
)
Per: )
Authorized Signatory ) C/S
)
Per: )
Authorized Signatory )
)
TOMASOVICH FAMILY TRUST
Per:
Authorized Signatory
<PAGE>
SCHEDULE "A"
FORM OF
CONVERTIBLE PROMISSORY NOTE #4
U.S.$o o, 1998
FOR VALUE RECEIVED, the undersigned, Idaho Consolidated Metals
Corporation, a British Columbia, corporation ("ICMC" or "the Company"), hereby
promises to pay to the Tomasovich Family Trust ("Tomasovich"), the principal sum
of U.S. o Dollars (U.S.$o) plus interest at 9% per annum. All unpaid principal
and interest shall be due and payable in full on September 10, 2000. Unpaid
principal and interest under this Note may be prepaid without penalty after the
first anniversary hereof. Interest to be paid annually. In the event that any
interest payment is not made in a timely manner, a late payment fee of 9% of the
amount of the interest payment then due shall be paid to Tomasovich.
Said note shall be convertible to units in the Company at the sole
election of Tomasovich. Each unit shall consist of one (1) share and one (1)
non-transferable share purchase warrant. The principal outstanding amount of
this note is convertible into units on the basis of one unit for each Cdn.$0.17
of principal indebtedness if converted at any time up to and including September
10, 1999 and one unit for each Cdn.$0.22 of principal indebtedness if converted
at any time from September 11, 1999 up to and including September 10, 2000. Any
conversion shares will have a hold period commencing on the date of advance of
the funds until the lesser of one (1) year or four (4) months if ICMC is an "AIF
Issuer" as defined in the policies of the Vancouver Stock Exchange ("VSE") at
the time of conversion.
All payments on this Note, as well as any notices, are to be made or
given to Tomasovich whose address for this purpose is 600 Wilshire Blvd., Suite
1410, Los Angeles, California, 90017, or to such other place as Tomasovich may
from time to time direct by written notice to ICMC.
All amounts payable hereunder are payable in lawful money of the United
States. If any suit or action be instituted to enforce this Note, ICMC promises
to pay, in addition to the costs and disbursements otherwise allowed by law, all
other costs including actual attorneys' fees incurred by Tomasovich if such suit
or action is successful.
The parties hereto recognize that there may be other VSE requirements
other than notice concerning this Note. ICMC shall fulfill all of said
requirements which shall be met prior to payment to or conversion by the lender
hereof.
This Note is given pursuant to the Convertible Loan Agreement #4 dated
effective September 10, 1998 between Tomasovich and ICMC and is to be construed
and enforced in accordance therewith.
This Note shall be governed by and construed according to the laws of
the Province of British Columbia and meet all requirements of the VSE.
IDAHO CONSOLIDATED METALS CORPORATION
a British Columbia Corporation
By:----------------------------------
Delbert Steiner, President
<PAGE>
SCHEDULE "B"
FORM OF WARRANT CERTIFICATE
THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE 4:30
P.M. (VANCOUVER TIME) ON SEPTEMBER 10, 2000.
THIS WARRANT AND THE SHARE CERTIFICATES REPRESENTING ANY COMMON SHARES ISSUED ON
EXERCISE OF ALL OR A PART OF THE RIGHTS REPRESENTED BY THIS WARRANT ARE SUBJECT
TO A HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL [ONE YEAR FROM
THE DATE OF ADVANCE OF FUNDS OR FOUR MONTHS FROM DATE OF ADVANCE OF FUNDS IF
IDAHO IS AN AIF ISSUER ON CONVERSION DATE] EXCEPT AS PERMITTED BY THE BRITISH
COLUMBIA SECURITIES ACT AND RULES MADE THEREUNDER (THE "HOLD PERIOD").
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A
UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF
APPLICABLE, OR (3) WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY, ANOTHER
EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT (THE "U.S. LEGEND").
NON-TRANSFERABLE WARRANTS
-------------------------
IDAHO CONSOLIDATED METALS CORPORATION
(Incorporated under the laws of British Columbia)
Warrant Certificate No.: Wo/o Right to Purchase o Common Shares
WARRANT CERTIFICATE FOR PURCHASE OF COMMON SHARES
-------------------------------------------------
THIS IS TO CERTIFY THAT, for value received, Tomasovich Family
Trust of 600 Wilshire Boulevard, Suite 1410, Los Angeles, California, 90017
(hereinafter called the "holder") is entitled to subscribe for and purchase o
fully paid and non-assessable Common Shares in the capital of Idaho Consolidated
Metals Corporation (hereinafter called the "Corporation") at any time prior to
4:30 p.m. (Vancouver Time) on September 10, 2000 and at a price of Cdn.$0.17 per
share until September 10, 1999 and at price of Cdn.$0.22 per share from
September 11, 1999 to September 10, 2000 subject, however, to the provisions and
upon the terms and conditions hereinafter set forth.
<PAGE>
The rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional share of Common
Shares), by completing the subscription form attached hereto as Schedule "A" and
surrendering this Warrant at the office of the Transfer Agent of the
Corporation, Montreal Trust Company of Canada, of 4th Floor - 510 Burrard
Street, Vancouver, British Columbia, together with a certified cheque payable to
or to the order of the Corporation in payment of the purchase price of the
number of Common Shares subscribed for.
In the event of any exercise of the right represented by this
Warrant, certificates for the Common Shares so purchased shall be delivered to
the holder hereof within a reasonable time, not exceeding three business days
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of Common
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within such time.
The Corporation covenants and agrees that all Common Shares
which may be issued upon the exercise of the right represented by this Warrant
will, upon issuance, be fully paid and non-assessable and free of all liens,
charges and encumbrances. The Corporation further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Corporation will at all times have authorized and reserved, a
sufficient number of Common Shares to provide for the exercise of the rights
represented by this Warrant.
THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:
1. In case the Corporation shall at any time subdivide its outstanding Common
Shares into a greater number of shares, the Warrant purchase price shall be
proportionately reduced and the number of subdivided Common Shares entitled to
be purchased proportionately increased, and conversely, in case the outstanding
Common Shares of the Corporation shall be consolidated into a smaller number of
shares, the Warrant purchase price shall be proportionately increased and the
number of consolidated Common Shares entitled to be purchased hereunder shall be
proportionately decreased.
If any capital reorganization or reclassification of the capital stock of
the Corporation, or the merger, amalgamation or arrangement of the Corporation
with another corporation shall be effected, then as a condition of such
reorganization, reclassification, merger, amalgamation or arrangement, adequate
provision shall be made whereby the holder hereof shall have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the Common Shares immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby,
such shares of stock, or other securities as may be issued with respect to or in
exchange for such number of outstanding Common Shares equal to the number of
Common Shares purchasable and receivable upon the exercise of this Warrant had
such reorganization, reclassification, merger, amalgamation or arrangement not
taken place. The Corporation shall not effect any merger, amalgamation or
arrangement unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Corporation) resulting from such
merger, amalgamation or arrangement shall assume by written instrument executed
and mailed or delivered to the holder of this Warrant the obligation to deliver
<PAGE>
to such holder such shares of stock or securities in accordance with the
foregoing provisions, such holder may be entitled to purchase.
2. In case at any time:
(a) the Corporation shall pay any dividend payable in stock upon
its Common Shares or make any distribution to the holders of
its Common Shares;
(b) the Corporation shall offer for subscription pro rata to the
holders of its Common Shares any additional shares of stock of
any class or other rights;
(c) there shall be any capital reorganization, or reclassification
of the capital stock of the Corporation, or consolidation or
merger, amalgamation or arrangement of the Corporation with,
or sale of all or substantially all of its assets to, another
corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then, and in any one or more of such cases, the Corporation shall give to the
holder of this Warrant, at least twenty days' prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights, or for determining rights to
vote with respect to such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up
and in the case of any such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up,
at least twenty days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause, shall also specify,
in the case of any such dividend, distribution or subscription rights, the date
on which the holders of Common Shares shall be entitled thereto, and such notice
in accordance with the foregoing shall also specify the date on which the
holders of Common Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation, arrangement, sale,
dissolution, liquidation or winding-up as the case may be. Each such written
notice shall be given by first class mail, registered postage prepaid, addressed
to the holder of this Warrant at the address of such holder, as shown on the
books of the Corporation.
3. As used herein, the term "Common Shares" shall mean and include the
Corporation's presently authorized Common Shares and shall also include any
capital stock of any class of the Corporation hereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends and in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation.
4. This Warrant shall not entitle the holder hereof to any rights as a
shareholder of the Corporation, including without limitation, voting rights.
5. This Warrant and all rights hereunder are not transferable.
<PAGE>
6. This Warrant is exchangeable, upon the surrender hereof by the holder hereof
at the office of the Transfer Agent of the Corporation, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of Common Shares as shall be designated by such holder hereof at the time
of such surrender.
IN WITNESS WHEREOF the Corporation has caused this Warrant to
be signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated __________________________,__________.
Idaho Consolidated Metals Corporation
Per: ______________________________
Director
COUNTERSIGNED BY:
Montreal Trust Company of Canada
Per: ______________________________
<PAGE>
SCHEDULE "A"
To
WARRANT CERTIFICATE
SUBSCRIPTION FORM - TO BE COMPLETED
ON EXERCISE OF WARRANTS
TO: Idaho Consolidated Metals Corporation
(the "Corporation")
The undersigned hereby exercises the right to purchase and hereby subscribes for
_______________ Common Shares in the capital stock of the Corporation referred
to in the attached Warrant Certificate according to the conditions thereof and
herewith makes payment by certified cheque of the purchase price in full for the
said shares. The undersigned acknowledges that the share certificates
representing any Common shares issued on exercise of all or a part of the rights
represented by this Warrant ("Warrant Shares") are subject to the Hold Period
noted on page one of this Warrant Certificate, and may not be traded in British
Columbia except as permitted by the British Columbia Securities Act and Rules
made thereunder. The undersigned also acknowledges that the share certificates
representing any Warrant Shares will be endorsed with the U.S. Legend.
Please issue a certificate for the shares being purchased as follows:
(Note: Until the expiry of the Hold Period, the certificate must be issued in
the name of the undersigned.)
Name: __________________________________________________
(please print)
Address: __________________________________________________
__________________________________________________
__________________________________________________
If applicable, please deliver a Warrant Certificate in respect of the balance of
the Common Shares referred to in the attached Warrant Certificate but not
presently subscribed for, to the undersigned.
DATED this _______ day of _____________________, _______.
- --------------------------------------
<PAGE>
SCHEDULE "C"
ONLY U.S. SUBSCRIBERS NEED TO COMPLETE AND SIGN
(Capitalized terms not specifically defined herein shall have
the meaning ascribed to them in the Convertible Loan Agreement #4 to
which this Schedule is attached.)
In connection with the execution of the Convertible Loan Agreement #4 made
effective September 10, 1998 (the "Agreement") to which this Schedule is
attached, the undersigned (the "Lender") covenants, represents and warrants to
the Borrower that:
(a) it has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of
an investment in the Securities and it is able to bear the
economic risk of loss of its entire investment;
(b) it is acquiring the Securities for its own account, for
investment purposes only and not with a view to any resale,
distribution or other disposition of the Securities in
violation of the United States securities laws;
(c) it understands that the Securities have not been and will not
be registered under the United States Securities Act of 1933,
as amended (the "1933 Act") or the securities laws of any
state of the United States and that the sale contemplated
hereby is being made in reliance of an exemption from such
registration requirements;
(d) it satisfies one or more of the categories indicated below
(please place an "X" on the appropriate lines):
____ Category 1. An organization described in Section 501(c)(3)
of the United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Securities, with
total assets in excess of U.S.$5,000,000;
____ Category 2. A natural person whose individual net worth, or
joint net worth with that person's spouse, at the date hereof
exceeds U.S.$1,000,000;
____ Category 3. A natural person who had an individual income in
excess of U.S.$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of U.S.$300,000
in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
____ Category 4. A trust that (a) has total assets in excess of
U.S.$5,000,000, (b) was not formed for the specific purpose of
acquiring the Securities and (c) is directed in its purchases of
securities by a person who has such knowledge and experience in
financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the
Securities;
<PAGE>
____ Category 5. An investment company registered under the
Investment Company Act of 1940 or a business development company
as defined in Section 2(a)(48) of that Act;
____ Category 6. A Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958;
____ Category 7. A private business development company as
defined in Section 202(a)(22) of the Investment Advisors Acts of
1940; or
____ Category 8. An entity in which all of the equity owners
satisfy the requirements of one or more of the foregoing
categories.
(e) it has not purchased the Securities as a result of any form of
general solicitation or general advertising, including
advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media or
broadcast over radio, or television, or any seminar or meeting
whose attendees have been invited by general solicitation or
general advertising;
(f) if it decides to offer, sell or otherwise transfer any of the
Securities, it will not offer, sell or otherwise transfer any of
such Securities directly or indirectly, unless:
(i) the sale is to the Borrower;
(ii) the sale is made outside the United States in a
transaction meeting the requirements of Rule 904 of
Regulation S under the 1933 Act and in compliance
with applicable local laws and regulations;
(iii) the sale is made pursuant to the exemption from the
registration requirements under the 1933 Act provided
by Rule 144 thereunder and in accordance with any
applicable state securities or "Blue Sky" laws; or
(iv) the Securities are sold in a transaction that does
not require registration under the 1933 Act or any
applicable state laws and regulations governing the
offer and sale of securities, and it has prior to
such sale furnished to the Borrower an opinion of
counsel reasonably satisfactory to the Borrower;
(g) the certificates representing the Securities will bear a
legend stating that such shares have not been registered under
the 1933 Act or the securities laws of any state of the United
States and may not be offered for sale or sold unless
registered under the 1933 Act and the securities laws of all
applicable states of the United States or an exemption from
such registration requirements is available;
<PAGE>
(h) it understands and agrees that the Warrants may not be
exercised in the United States or by or on behalf of a "U.S.
Person" or a person in the United States unless registered
under the 1933 Act and any applicable state securities laws or
unless an exemption from such registration requirements is
available and that certificates representing the Warrants will
bear a legend to such effect;
(i) it understands and agrees that there may be material tax
consequences to the Lender of an acquisition or disposition of
the Securities. The Borrower gives no opinion and makes no
representation with respect to the tax consequences to the
Lender under United States, state, local or foreign tax law of
the undersigned's acquisition or disposition of such
Securities. In particular, no determination has been made
whether the Borrower will be a "passive foreign investment
company" ("PFIC") within the meaning of Section 1291 of the
United States Internal Revenue Code;
(j) it understands and agrees that the financial statements of the
Borrower have been prepared in accordance with Canadian
generally accepted accounting principles, which differ in some
respects from United States generally accepted accounting
principles, and thus may not be comparable to financial
statements of United States companies; and
(k) it consents to the Borrower making a notation on its records
or giving instructions to any transfer agent of the Borrower
in order to implement the restrictions on transfer set forth
and described herein.
ONLY U.S. SUBSCRIBERS NEED TO COMPLETE AND SIGN
Dated this ______ day of ______________________, _________.
Name of Subscriber - please print)
By: _____________________________________
(Authorized Signature)
____________________________________________
(Official Capacity or Title - please print)
(Please print name of individual whose
signature appears above if different than
the name of the Subscriber printed above)
<PAGE>
SCHEDULE "D"
APPENDIX 16A
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
1. DESCRIPTION OF TRANSACTION
a) Name of issuer of the securities
Idaho Consolidated Metals Corporation
b) Number and description of securities to be purchased
Up to U.S.$250,000 convertible loan (line of credit), the
outstanding principal of the loan being convertible into Units
on the basis of one unit for each Cdn.$0.17 principal
indebtedness in the first year and Cdn.$0.22 in the second
year
c) Purchase price
U.S.$250,000 line of credit
2. DETAILS OF PURCHASER
a) Name of Purchaser Tomasovich Family Trust
b) Address 600 Wilshire Boulevard, Suite 1410, Los Angeles,
California, 90017
c) If the purchaser is a corporation, state the jurisdiction of
incorporation
N/A
d) Names and addresses of persons having a greater than 10%
beneficial interest in the purchaser, if a corporation or
trust
Theodore Tomasovich, of 600 Wilshire Boulevard, Suite 1410,
Los Angeles, California, 90017
<PAGE>
3. RELATIONSHIP TO LISTED COMPANY
a) State if the purchaser will become a control person with over
20% of the company's issued share capital as a result of the
purchase in section 1 above.
If the outstanding principal amount of the Convertible Loan or
other convertible securities owned by the purchaser are
converted into common shares, the purchaser may then be a
control person. The change of control of the Company to
Theodore Tomasovich and the Tomasovich Family Trust was
approved by the members at the annual general meeting held on
June 17, 1998.
b) Does the purchaser own any securities of the issuer at the
date hereof, if so, give particulars. State the number of
securities of the listed company held by the purchaser not
including the purchase in section 1 above.
(1) 1,498,611 shares;
(2) warrants to purchase 927,062 shares;
(3) U.S.$100,000 convertible promissory note repayable on
or before January 23, 2000 bearing interest at 9% per
annum. After June 17, 1998, the lender may require
the Issuer to convert all or any portion of the
principal amount of the loan advanced and then
outstanding into units at a conversion price of one
unit for each Cdn.$0.26 of indebtedness until and
including January 23, 1999 and at a conversion price
of one unit for each Cdn.$0.31 of indebtedness during
the period from January 24, 1999 until January 23,
2000 for a maximum of 546,154 units if the principal
amount is converted in its entirety by January 23,
1999 and a maximum of 458,064 units if the principal
amount is converted in its entirety between January
24, 1999 and January 23, 2000. Each unit consists of
one common share and one non-transferable warrant
with each warrant being exercisable at a price of
$0.26 per share until January 23, 1999 and $0.31 per
share from January 24, 1999 to January 23, 2000;
(4) U.S.$110,000 convertible promissory note repayable on
or before March 31, 2000 bearing interest at 9% per
annum. After June 17, 1998, the lender may require
the Issuer to convert all or any portion of the
principal amount of the loan advanced and then
outstanding into units at a conversion price of one
unit for each Cdn.$0.26 of indebtedness until and
including March 31, 1999 and at a conversion price of
one unit for each Cdn.$0.31 of indebtedness during
the period from April 1, 1999 until March 31, 2000
for a maximum of 600,769 units if the principal
amount is converted in its entirety by March 31, 1999
and a maximum of 508,871 units if the principal
amount is converted in its entirety between April 1,
1999 and March 31, 2000. Each unit consists of one
common share and one non-transferable warrant with
each warrant being exercisable at a price of $0.26
per share until March 31, 1999 and $0.31 per share
from April 1, 1999 to March 31, 2000;
<PAGE>
(5) U.S.$150,000 convertible promissory note repayable on
or before May 15, 2000 bearing interest at 9% per
annum. After June 17, 1998, the lender may require
the Issuer to convert all or any portion of the
principal amount of the loan advanced and then
outstanding into units at a conversion price of one
unit for each Cdn.$0.23 of indebtedness until and
including May 15, 1999 and at a conversion price of
one unit for each Cdn.$0.28 of indebtedness during
the period from May 16, 1999 until May 15, 2000 for a
maximum of 932,608 common shares if the principal
amount is converted in its entirety in the first year
and a maximum of 766,071 units if the principal
amount is converted in its entirety between May 16,
1999 and May 15, 2000. Each unit consists of one
common share and one non-transferable warrant with
each warrant being exercisable at a price of $0.23
per share until May 15, 1999 and $0.27 per share from
May 16, 1999 to May 15, 2000.
4. PAYMENT DATE
a) State the date the purchaser has advanced full payment.
September 10, 1998 - U.S.$183,660; balance: o
b) If the purchase funds are held in trust pending receipt of
final regulatory approval identify the trustee and give
particulars of the condition(s) required for release of the
funds.
N/A
c) If the purchaser is an institutional investor and the funds
have not yet been advanced, give particulars of the
condition(s) required for the advance of funds.
N/A
5. UNDERTAKING
*Last amended January 1998
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase as principal,
the securities described in section 1 of this Private Placement
Questionnaire and Undertaking. (The purchase funds may be deposited in
trust with advancement to the Company subject only to receipt of all
necessary regulatory approvals).
The undersigned undertakes not to sell or otherwise dispose of any of
the said securities so purchased or any securities derived therefrom
for a period of twelve months (four months if the issuer is an AIF
Issuer as defined in the Definitions Section of the Manual) from the
payment day, without the prior consent of the Vancouver Stock Exchange
and any other
<PAGE>
regulatory body having jurisdiction. The undersigned acknowledges that
all certificates representing the said securities will bear a legend to
the effect that the certificates are subject to the applicable hold
period.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's
affairs that has not been publicly disclosed. The undersigned
acknowledges that it is aware that the removal from the securities of
any resale restriction after the applicable twelve or four months that
is imposed solely as a requirement of the Vancouver Stock Exchange will
not entitle it to sell the securities if such sale would contravene any
other applicable securities legislation or regulation.
6. ADDITIONAL UNDERTAKING AND CERTIFICATION
- PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for
accounts that are fully managed by it, the undersigned acknowledges
that it is bound by the provisions of the Securities Act (British
Columbia) (the "Act"), and undertakes to comply with all provisions of
the Act relating to ownership of, and trading in, securities including,
without limitation, the filing of insider reports and reports pursuant
to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a
jurisdiction outside of Canada, the undersigned certifies that:
a) it is purchasing securities of the Issuer on behalf of managed
accounts over which it has absolute discretion as to
purchasing and selling, and in respect of which it receives no
instructions from any person beneficially interested in such
accounts or from any other person;
b) it carries on the business of managing the investment
portfolio of clients through discretionary authority granted
by those clients (a "portfolio manager" business) in
________________________ [jurisdiction], and it is permitted
by law to carry on a portfolio manager business in that
jurisdiction;
c) it was not created solely or primarily for the purpose of
purchasing securities of the Issuer;
d) the total asset value of the investment portfolios it manages
on behalf of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe,
that any resident of British Columbia has a beneficial
interest in any of the managed accounts for which it is
purchasing; and
f) the Issuer has provided it with a list of the directors,
senior officers and other insiders of the Issuer, and the
persons that carry on investor relations activities for the
Issuer
<PAGE>
(which list is attached as a schedule to this Appendix), and
it does not believe, and has no reasonable grounds to believe,
that any of those persons has a beneficial interest in any of
the managed accounts for which it is purchasing, except as
follows:
(name of insider(s) or person(s) carrying on investor
relations activities for the Issuer that have a
beneficial interest in an account)
The undersigned acknowledges that it is bound by the provisions of the
British Columbia Securities Act including, without limitation, sections
87 and 111 concerning the filing of insider reports and reports of
acquisitions.
Dated at Los Angeles, California
this _____ day of _________________, 1998
Tomasovich Family Trust
-----------------------
Name of Purchaser - please print)
(Authorized Signature)
(Official Capacity - please print)
(please print name of individual whose
signature appears above, if different
from name of purchaser printed above)
Exhibit 10.4
CONVERTIBLE LOAN AGREEMENT #5
THIS CONVERTIBLE LOAN AGREEMENT dated effective the 1st day of October,
1998
BETWEEN:
TOMASOVICH FAMILY TRUST, 600 Wilshire Boulevard, Suite 1410,
Los Angeles, California, 90017
(the "Lender")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a company incorporated
under the laws of British Columbia, having its principal
office at 540 Main Street, Suite 470, Lewiston, Idaho, 83501
(the "Borrower")
WHEREAS the Borrower wishes to borrow and the Lender is willing to lend to
the Borrower up to the sum of U.S.$300,000 (the "Loan"), upon the terms and
subject to the conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE 1
INTERPRETATION
1.1 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the laws prevailing in British Columbia.
1.2 Severability. If any one or more of the provisions contained in this
Agreement is found by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
1.3 Headings and Marginal References. The divisions of the Agreement into
articles, paragraphs, sub-paragraphs and other subdivisions and the insertion of
headings are for convenience of reference only and do not affect the
construction or interpretation of this Agreement.
<PAGE>
1.4 Currency. All sums of money to be paid or calculated pursuant to this
Agreement shall be paid or calculated in United States or Canadian currency, as
indicated throughout.
1.5 Number and Gender. All references to any party to this Agreement shall be
read with such changes in number and gender as the context may require.
ARTICLE 2
THE LOAN
2.1 Vancouver Stock Exchange Acceptance. This Agreement is subject to receipt of
final acceptance by the Vancouver Stock Exchange (the "Exchange") (the
"Acceptance").
2.2 Establishment of the Loan. On the terms and subject to the conditions set
forth in this Agreement, the Lender shall lend to the Borrower up to the sum of
U.S.$300,000, which will be advanced by the Lender to the Borrower in whole or
in part from time to time upon the request of the Borrower. The Borrower and the
Lender acknowledge that as at the date hereof, no portion of the Loan has been
advanced.
2.3 Evidence of Indebtedness. In order to evidence the indebtedness of the
Borrower to the Lender in respect of the Loan, the Borrower agrees to execute
and deliver to the Lender on each advance of funds to the Borrower under the
Loan, a promissory note for the principal amount so advanced in substantially
the form attached as Schedule "A" hereto (such promissory notes individually and
collectively referred to herein as the "Note") up to the maximum sum of
U.S.$300,000.
2.4 Interest. Commencing on October 1, 1999, the Borrower shall pay to the
Lender annually on October 1, 1999 and October 1, 2000 while any amount of the
Loan remains outstanding, interest on the principal amount of the Loan advanced
at the rate of 9% per annum, calculated annually in arrears, both before and
after maturity, default and judgment. In the event that any interest payment is
not made in a timely manner, a late payment fee of 9% of the amount of the
interest payment then due shall be paid to the Lender.
2.5 Repayment of the Loan. Subject to paragraphs 2.6 and 3.1, the Borrower shall
repay the principal amount of the Loan advanced, together with any outstanding
interest thereon, to the Lender on or before October 1, 2000 (the "Maturity
Date").
2.6 Prepayment of the Loan. Subject to paragraph 3.1, the Borrower may prepay
the principal amount of the Loan advanced in whole or in part, together with any
outstanding interest thereon to the Lender at any time after October 1, 1999
until the Maturity Date without penalty.
ARTICLE 3
CONVERSION
3.1 Conversion. During the period from the date of Acceptance until the Maturity
Date, the Lender may require the Borrower to convert all or any portion of the
principal amount of the Loan advanced and then outstanding into units ("Units"),
at a conversion price of one Unit for each Cdn.$0.20 of indebtedness until and
including October 1, 1999 and at a conversion price of one Unit
<PAGE>
for each Cdn.$0.25 of indebtedness during the period from October 2, 1999 until
the Maturity Date. Each Unit consists of one common share in the capital stock
of the Borrower (the "Share") and one non-transferable common share purchase
warrant ("Warrant"). The Lender shall give written notice of conversion to the
Borrower specifying the part or whole of the principal indebtedness of the
Borrower to the Lender to be converted and the number of Units to be issued on
conversion, calculated in accordance with the terms of this Agreement.
3.2 No Fractions. In converting the principal indebtedness of the Loan into
Units, the Borrower shall round fractions down to the nearest whole Unit, so
that the Lender will not be entitled to receive a fraction of a Unit.
3.3 Delivery. Three business days after the date a notice of conversion is
received by the Borrower from the Lender (the "Conversion Date"), the Lender
shall be deemed for all purposes to be the holder of record of that number of
Shares and Warrants designated in the notice of conversion, the outstanding
principal indebtedness of the Borrower to the Lender shall be deemed to be
reduced by the amount designated in the notice of conversion and the Borrower
shall deliver to the Lender on the Conversion Date a share certificate
representing the number of Shares and a certificate representing the number of
Warrants comprised in the Units as specified in the notice of conversion,
together with any unpaid interest which is due as at the Conversion Date.
3.4 Warrants. The Warrants shall be non-transferable and, if and when issued,
each Warrant shall entitle the Lender to purchase one common share in the
capital stock of the Borrower (the "Warrant Share") for a term commencing on the
Conversion Date and exercisable until the Maturity Date at a price of Cdn.$0.20
per Warrant Share until October 1, 1999 and thereafter at a price of Cdn.$0.25
per Warrant Share until the Maturity Date. The terms and conditions governing
the Warrants shall contain provisions, inter alia, for appropriate adjustment in
the class, number and price of the Shares issuable pursuant to any exercise
thereof upon the occurrence of certain events including any subdivision,
consolidation or reclassification of the Shares, the payment of stock dividends
or the amalgamation of the Company, as set forth in the form of warrant
certificate attached hereto as Schedule "B".
3.5 Adjustment. The terms and conditions set out in sections 1 and 2 of Schedule
"B" with respect to the adjustment in the class, number and price of the Warrant
Shares upon the occurrence of certain events apply, with the necessary changes,
to the Shares.
3.6 Reservation of Shares and Warrant Shares. For so long as any part of the
principal indebtedness of the Loan remains outstanding, the Borrower shall at
all times reserve out of its unissued common shares a sufficient number thereof
to accommodate the conversion of the principal indebtedness of the Loan into
Shares and the exercise of the Warrants into Warrant Shares, all as provided for
in this Agreement.
3.7 Questionnaire and Undertaking. The Lender shall execute and deliver to the
Borrower for filing with the Exchange the form of Private Placement
Questionnaire and Undertaking and such other documents and information as may be
required by the Exchange in connection with this transaction.
<PAGE>
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.1 The Borrower represents and warrants to the Lender that:
(a) the Borrower is a reporting issuer only in British Columbia and is not
in default of any requirement of the British Columbia Securities Act
and Rules promulgated thereto (the "Act");
(b) the Borrower is a corporation duly incorporated, validly existing and
in good standing with respect to filing of annual reports with the
Registrar of Companies for British Columbia;
(c) the Borrower has all requisite corporate power and authority to own
and use its property, to carry on its business as now being conducted,
to enter into this Agreement and to execute and deliver the Note and
to carry out the obligations contemplated herein and therein;
(d) all necessary corporate action of the directors of the Borrower to
authorize the execution, delivery and performance of this Agreement
has been taken;
(e) this Agreement has been duly executed and delivered on behalf of the
Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable by the Lender in accordance with its terms;
(f) the authorized capital of the Borrower consists of 100,000,000 common
shares without par value of which 9,434,650 common shares are validly
issued and outstanding as at October 1, 1998;
(g) the Shares to be allotted and issued pursuant to the due and valid
conversion, in whole or in part, of the principal indebtedness of the
Loan have been duly and validly authorized to be issued as fully paid
and non-assessable common shares upon receipt by the Borrower of a
notice of conversion;
(h) the Warrant Shares to be allotted and issued pursuant to the due and
valid exercise, in whole or in part, of the Warrants have been duly
and validly authorized to be issued as fully paid and non-assessable
common shares upon receipt by the Borrower of full payment therefor;
(i) the common shares of the Borrower are listed and posted for trading
only on the Exchange; and
(j) no Default (as defined below) or event which with the giving of notice
or the lapse of time would become a Default has occurred or is
continuing.
ARTICLE 5
LENDER'S REPRESENTATIONS AND WARRANTIES
<PAGE>
5.1 The Lender represents and warrants to the Borrower that:
(a) the Lender, if a corporation, is a valid and subsisting corporation
under the laws of its incorporating jurisdiction, has the necessary
corporate capacity and authority to execute and deliver this Agreement
and to observe and perform its covenants and obligations hereunder and
has taken all necessary corporate action in respect thereof, and this
Agreement constitutes a legal, valid and binding contract of the
Lender enforceable against the Lender in accordance with its terms;
(b) the Lender is a resident of the State of California and is not a
resident of British Columbia;
(c) the Lender is entering into this Agreement and acquiring the Note as
principal for the Lender's own account, and not for the benefit of any
other person;
(d) the Lender is purchasing the Note in an aggregate acquisition cost of
not less than $97,000 and the Lender was not created solely, and is
not being used primarily, to permit a group of individuals to purchase
the Note without a prospectus;
(e) the Lender is aware that this Agreement and the Note are being
distributed under an exemption from the registration and prospectus
requirements of the Act and states that this Agreement is not being
entered into as a result of any information about the affairs of the
Borrower that is not generally known to the public save knowledge of
this particular transaction;
(f) this Agreement and the Loan are not being used to settle prior
outstanding debts of the Borrower to the Lender or, if they are being
used to settle prior outstanding debt owing by the Borrower to the
Lender, then the Lender is not permitted to receive Warrants comprised
in the Units on that part of its Loan that corresponds to the amount
of the prior outstanding debt;
(g) the Lender is not presently a "control person" of the Borrower as
defined in the Act but may become a "control person" of the Borrower
by virtue of the purchase of the Note pursuant to this Agreement and
the conversion of the Note into the Units or the conversion of other
previously issued convertible securities to acquire Common shares of
the Borrower owned by the Lender; and
(h) the Lender has executed and delivered to the Company herewith the
additional representations and warranties set out on Schedule "C"
attached hereto.
ARTICLE 6
ACKNOWLEDGMENTS AND COVENANTS OF THE LENDER
6.1 The Lender hereby acknowledges and covenants that:
(a) the Note that is being issued and the Units, Shares, Warrants and
Warrant Shares that may be issued pursuant to this Agreement (together
the "Securities") will be issued under an exemption from the
registration and prospectus requirements of the Act and
<PAGE>
under the policies of the Exchange and that the sale by the Lender in
British Columbia of the Securities is, unless otherwise exempted under
the Act and approved by the Exchange, deemed to be a distribution to
the public unless:
(i) if the Lender is an insider of the Borrower, other than a
director or senior officer of the Borrower, the Lender has filed
all records required to be filed under section 87 (insider
reports) and section 90 (personal information form) of the Act;
(ii) if the Lender is a director or senior officer of the Borrower,
the Lender has filed all records required to be filed under
section 87 (insider reports) and section 90 (personal information
form) of the Act and the Borrower has filed all records required
to be filed under part 12 of the Act and of the Rules promulgated
to the Act (continuous disclosure);
(iii)a twelve-month period has elapsed from the date of advance of
the Loan or, if on the Conversion Date the Company is an AIF
Issuer as defined in the policies of the Exchange, a four month
period has elapsed from the date of advance of the Loan;
(iv) the trade is not a distribution from the holdings of a control
person;
(v) no unusual effort is made to prepare the market or to create a
demand for the Securities; and
(vi) no extraordinary commission or consideration is paid in respect
of the trade;
(b) the foregoing is a summary based on the provisions of the Act as at
the date hereof and is subject to amendment and the Lender covenants
that, prior to trading in the Securities in British Columbia, the
Lender will consult with the Lender's own legal counsel in connection
with the applicable resale rules;
(c) the Lender will complete, execute and deliver to the Borrower the
Private Placement Questionnaire and Undertaking attached as Schedule
"D" hereto as required by the Exchange for filing with the Exchange in
connection with the Loan;
(d) if the Lender is an individual, the Lender will complete, execute and
deliver to the Borrower a Form 20A(IP), Acknowledgement and
Undertaking as required under the Act; and
(e) the certificates representing the Securities will contain a legend
denoting the restrictions on transfer imposed by the Act or, if
applicable, by the policies of the Exchange, to the effect that the
securities represented by the certificate are subject to a hold period
and may not be traded in British Columbia until one year from the date
of advance of the Loan, or, if on the Conversion Date the Company is
an AIF Issuer, until four months from the date of advance of the Loan.
ARTICLE 7
<PAGE>
COVENANTS OF THE BORROWER
7.1 The Borrower covenants and agrees with the Lender that at all times during
the currency of this Agreement it will:
(a) take all reasonable steps to remain in good standing under the Act;
(b) pay the principal sum of the Loan, interest and all other monies
required to be paid to the Lender pursuant to this Agreement in the
manner set forth herein;
(c) observe and perform each of its covenants and agreements set forth in
this Agreement and the Note; and
(d) provide the Lender with immediate notice of any Default.
7.2 The Borrower shall assume and pay all costs, charges and expenses, including
reasonable legal fees and expenses, which may be incurred by the Lender in
respect of this Agreement or the Note in any proceedings taken or things done by
the Lender or on its behalf in connection therewith to collect, protect, realize
or enforce the Note.
ARTICLE 8
DEFAULT
8.1 It is a Default if:
(a) the Borrower defaults in any payment when the same is due under this
Agreement;
(b) the Borrower becomes insolvent or makes a general assignment for the
benefit of its creditors, or if an order is made or effective
resolutions are passed for the winding-up, merger or amalgamation of
the Borrower or if the Borrower is declared bankrupt or if a custodian
or receiver is appointed for the Borrower under any bankruptcy
legislation, or if a compromise or arrangement is proposed by the
Borrower to its creditors or any class of its creditors, or if a
receiver or other officer with like powers is appointed for the
Borrower; or
(c) the Borrower defaults in observing or performing any other covenant or
agreement of this Agreement on its part to be observed or performed
and such default has continued for a period of seven days after notice
in writing has been given by the Lender to the Borrower specifying
such default.
8.2 In the event of a Default, unless it is waived in writing by the Lender, the
principal balance of the Loan, costs and any other money owing to the Lender
under this Agreement shall immediately become payable by the Borrower.
ARTICLE 9
GENERAL
<PAGE>
9.1 Waiver or Modification. No consent or waiver, express or implied, by any
party to or of any breach or default by any other party of any or all of its
obligations under this Agreement will:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
(b) be relied upon as a consent or waiver to or of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
9.2 Further Assurances. The parties hereto will do, execute and deliver or will
cause to be done, executed and delivered all such further acts, documents and
things as may be reasonably required for the purpose of giving effect to this
Agreement.
9.3 Assignment. No party may assign its interest herein or any part thereof
without the consent of the other party which neither party will unreasonably
withhold. In the case of an assignment by the Borrower, the Borrower must comply
with all applicable securities laws and obtain the consent of the Vancouver
Stock Exchange.
9.4 Notices. Any notice, demand or other document required or permitted to be
given hereunder shall be deemed to have been well and sufficiently given if
telecopied to or delivered at the address of the intended recipient set forth on
the first page hereof or at such other address as the intended recipient may
from time to time direct in writing, and any such notice, demand or document
shall be deemed to have been received.
9.5 Exchange Acceptance for Filing. It is acknowledged and agreed between the
parties that the Loan made hereunder is subject to acceptance for filing by the
Exchange. If final acceptance is not obtained within 120 days of the date of
this Agreement, unless the parties agree otherwise, the Agreement shall
automatically be terminated and of no further force or effect.
9.6 Amendments. No provision of this Agreement may be amended, waived,
discharged or terminated orally, but only by instrument in writing signed by the
party against whom enforcement of the amendment, waiver, discharge or
termination is sought.
9.7 Parties in Interest. This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
successors and permitted assigns.
9.8 Counterparts. This Agreement may be executed in counterparts and by
facsimile with the same effect as if all parties had signed the same document
and all such counterparts will be construed together and will constitute one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the date first above written.
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION was )
hereunto affixed in the presence of: )
)
Per: ______________________________ )
Authorized Signatory ) C/S
)
Per: ______________________________ )
Authorized Signatory )
)
TOMASOVICH FAMILY TRUST
Per: ______________________________
Authorized Signatory
<PAGE>
SCHEDULE "A"
FORM OF
CONVERTIBLE PROMISSORY NOTE #5
U.S.$o o, 1998
FOR VALUE RECEIVED, the undersigned, Idaho Consolidated Metals
Corporation, a British Columbia, corporation ("ICMC" or "the Company"), hereby
promises to pay to the Tomasovich Family Trust ("Tomasovich"), the principal sum
of U.S.$o Dollars plus interest at 9% per annum. All unpaid principal and
interest shall be due and payable in full on October 1, 2000. Unpaid principal
and interest under this Note may be prepaid without penalty after the first
anniversary hereof. Interest to be paid annually. In the event that any interest
payment is not made in a timely manner, a late payment fee of 9% of the amount
of the interest payment then due shall be paid to Tomasovich.
Said note shall be convertible to units in the Company at the sole
election of Tomasovich. Each unit shall consist of one (1) share and one (1)
non-transferable share purchase warrant. The principal outstanding amount of
this note is convertible into units on the basis of one unit for each Cdn.$0.20
of principal indebtedness if converted at any time up to and including October
1, 1999 and one unit for each Cdn.$0.25 of principal indebtedness if converted
at any time from October 2, 1999 up to and including October 1, 2000. Any
conversion shares will have a hold period commencing on the date of advance of
the funds until the lesser of one (1) year or four (4) months if ICMC is an "AIF
Issuer" as defined in the policies of the Vancouver Stock Exchange ("VSE") at
the time of conversion.
All payments on this Note, as well as any notices, are to be made or
given to Tomasovich whose address for this purpose is 600 Wilshire Blvd., Suite
1410, Los Angeles, California, 90017, or to such other place as Tomasovich may
from time to time direct by written notice to ICMC.
All amounts payable hereunder are payable in lawful money of the United
States. If any suit or action be instituted to enforce this Note, ICMC promises
to pay, in addition to the costs and disbursements otherwise allowed by law, all
other costs including actual attorneys' fees incurred by Tomasovich if such suit
or action is successful.
The parties hereto recognize that there may be other VSE requirements
other than notice concerning this Note. ICMC shall fulfill all of said
requirements which shall be met prior to payment to or conversion by the lender
hereof.
This Note is given pursuant to the Convertible Loan Agreement #5 dated
effective October 1, 1998 between Tomasovich and ICMC and is to be construed and
enforced in accordance therewith.
This Note shall be governed by and construed according to the laws of
the Province of British Columbia and meet all requirements of the VSE.
IDAHO CONSOLIDATED METALS CORPORATION
a British Columbia Corporation
By: ____________________________
Delbert Steiner, President
<PAGE>
SCHEDULE "B"
FORM OF WARRANT CERTIFICATE
THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE 4:30
P.M. (VANCOUVER TIME) ON OCTOBER 1, 2000.
THIS WARRANT AND THE SHARE CERTIFICATES REPRESENTING ANY COMMON SHARES ISSUED ON
EXERCISE OF ALL OR A PART OF THE RIGHTS REPRESENTED BY THIS WARRANT ARE SUBJECT
TO A HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL [ONE YEAR FROM
THE DATE OF ADVANCE OF FUNDS OR FOUR MONTHS FROM DATE OF ADVANCE OF FUNDS IF
IDAHO IS AN AIF ISSUER ON CONVERSION DATE] EXCEPT AS PERMITTED BY THE BRITISH
COLUMBIA SECURITIES ACT AND RULES MADE THEREUNDER (THE "HOLD PERIOD").
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A
UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF
APPLICABLE, OR (3) WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY, ANOTHER
EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT (THE "U.S. LEGEND").
NON-TRANSFERABLE WARRANTS
-------------------------
IDAHO CONSOLIDATED METALS CORPORATION
(Incorporated under the laws of British Columbia)
Warrant Certificate No.: Wo/o Right to Purchase o Common Shares
WARRANT CERTIFICATE FOR PURCHASE OF COMMON SHARES
-------------------------------------------------
THIS IS TO CERTIFY THAT, for value received, Tomasovich Family
Trust of 600 Wilshire Boulevard, Suite 1410, Los Angeles, California, 90017
(hereinafter called the "holder") is entitled to subscribe for and purchase o
fully paid and non-assessable Common Shares in the capital of Idaho Consolidated
Metals Corporation (hereinafter called the "Corporation") at any time prior to
4:30 p.m. (Vancouver Time) on October 1, 2000 and at a price of Cdn.$0.20 per
share until October 1, 1999 and at price of Cdn.$0.25 per share from October 2,
1999 to October 1, 2000 subject, however, to the provisions and upon the terms
and conditions hereinafter set forth.
The rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional share of Common
Shares), by completing the subscription form attached hereto as Schedule "A" and
surrendering this Warrant at the office of the Transfer
<PAGE>
Agent of the Corporation, Montreal Trust Company of Canada, of 4th Floor - 510
Burrard Street, Vancouver, British Columbia, together with a certified cheque
payable to or to the order of the Corporation in payment of the purchase price
of the number of Common Shares subscribed for.
In the event of any exercise of the right represented by this
Warrant, certificates for the Common Shares so purchased shall be delivered to
the holder hereof within a reasonable time, not exceeding three business days
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of Common
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within such time.
The Corporation covenants and agrees that all Common Shares
which may be issued upon the exercise of the right represented by this Warrant
will, upon issuance, be fully paid and non-assessable and free of all liens,
charges and encumbrances. The Corporation further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Corporation will at all times have authorized and reserved, a
sufficient number of Common Shares to provide for the exercise of the rights
represented by this Warrant.
THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN
THIS WARRANT:
1. In case the Corporation shall at any time subdivide its outstanding Common
Shares into a greater number of shares, the Warrant purchase price shall be
proportionately reduced and the number of subdivided Common Shares entitled to
be purchased proportionately increased, and conversely, in case the outstanding
Common Shares of the Corporation shall be consolidated into a smaller number of
shares, the Warrant purchase price shall be proportionately increased and the
number of consolidated Common Shares entitled to be purchased hereunder shall be
proportionately decreased.
If any capital reorganization or reclassification of the
capital stock of the Corporation, or the merger, amalgamation or arrangement of
the Corporation with another corporation shall be effected, then as a condition
of such reorganization, reclassification, merger, amalgamation or arrangement,
adequate provision shall be made whereby the holder hereof shall have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the Common Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, or other securities as may be issued
with respect to or in exchange for such number of outstanding Common Shares
equal to the number of Common Shares purchasable and receivable upon the
exercise of this Warrant had such reorganization, reclassification, merger,
amalgamation or arrangement not taken place. The Corporation shall not effect
any merger, amalgamation or arrangement unless prior to or simultaneously with
the consummation thereof the successor corporation (if other than the
Corporation) resulting from such merger, amalgamation or arrangement shall
assume by written instrument executed and mailed or delivered to the holder of
this Warrant the obligation to deliver to such holder such shares of stock or
securities in accordance with the foregoing provisions, such holder may be
entitled to purchase.
2. In case at any time:
<PAGE>
(a) the Corporation shall pay any dividend payable in stock upon its
Common Shares or make any distribution to the holders of its Common
Shares;
(b) the Corporation shall offer for subscription pro rata to the holders
of its Common Shares any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization, or reclassification of the
capital stock of the Corporation, or consolidation or merger,
amalgamation or arrangement of the Corporation with, or sale of all or
substantially all of its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any one or more of such cases, the Corporation shall give to the
holder of this Warrant, at least twenty days' prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights, or for determining rights to
vote with respect to such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up
and in the case of any such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up,
at least twenty days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause, shall also specify,
in the case of any such dividend, distribution or subscription rights, the date
on which the holders of Common Shares shall be entitled thereto, and such notice
in accordance with the foregoing shall also specify the date on which the
holders of Common Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation, arrangement, sale,
dissolution, liquidation or winding-up as the case may be. Each such written
notice shall be given by first class mail, registered postage prepaid, addressed
to the holder of this Warrant at the address of such holder, as shown on the
books of the Corporation.
3. As used herein, the term "Common Shares" shall mean and include the
Corporation's presently authorized Common Shares and shall also include any
capital stock of any class of the Corporation hereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends and in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation.
4. This Warrant shall not entitle the holder hereof to any rights as a
shareholder of the Corporation, including without limitation, voting rights.
5. This Warrant and all rights hereunder are not transferable.
6. This Warrant is exchangeable, upon the surrender hereof by the holder hereof
at the office of the Transfer Agent of the Corporation, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and
<PAGE>
purchase such number of Common Shares as shall be designated by such holder
hereof at the time of such surrender.
IN WITNESS WHEREOF the Corporation has caused this Warrant to
be signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated __________________________,__________.
Idaho Consolidated Metals Corporation
Per: ________________________________
Director
COUNTERSIGNED BY:
Montreal Trust Company of Canada
Per: _______________________________
<PAGE>
SCHEDULE "A"
To
WARRANT CERTIFICATE
SUBSCRIPTION FORM - TO BE COMPLETED
ON EXERCISE OF WARRANTS
TO: Idaho Consolidated Metals Corporation
(the "Corporation")
The undersigned hereby exercises the right to purchase and hereby subscribes for
_______________ Common Shares in the capital stock of the Corporation referred
to in the attached Warrant Certificate according to the conditions thereof and
herewith makes payment by certified cheque of the purchase price in full for the
said shares. The undersigned acknowledges that the share certificates
representing any Common shares issued on exercise of all or a part of the rights
represented by this Warrant ("Warrant Shares") are subject to the Hold Period
noted on page one of this Warrant Certificate, and may not be traded in British
Columbia except as permitted by the British Columbia Securities Act and Rules
made thereunder. The undersigned also acknowledges that the share certificates
representing any Warrant Shares will be endorsed with the U.S. Legend.
Please issue a certificate for the shares being purchased as follows:
(Note: Until the expiry of the Hold Period, the certificate must be issued in
the name of the undersigned.)
Name: ____________________________________________________
(please print)
Address: ____________________________________________________
____________________________________________________
____________________________________________________
If applicable, please deliver a Warrant Certificate in respect of the balance of
the Common Shares referred to in the attached Warrant Certificate but not
presently subscribed for, to the undersigned.
DATED this _______ day of _____________________, _______.
- --------------------------------------
<PAGE>
SCHEDULE "C"
(U.S. SUBSCRIBERS)
(Capitalized terms not specifically defined herein
shall have the meaning ascribed to them in the
Convertible Loan Agreement #5 to
which this Schedule is attached.)
In connection with the execution of the Convertible Loan Agreement #5 made
effective October 1, 1998 (the "Agreement") to which this Schedule is attached,
the undersigned (the "Lender") covenants, represents and warrants to the
Borrower that:
(a) it has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment
in the Securities and it is able to bear the economic risk of loss of
its entire investment;
(b) it is acquiring the Securities for its own account, for investment
purposes only and not with a view to any resale, distribution or other
disposition of the Securities in violation of the United States
securities laws;
(c) it understands that the Securities have not been and will not be
registered under the United States Securities Act of 1933, as amended
(the "1933 Act") or the securities laws of any state of the United
States and that the sale contemplated hereby is being made in reliance
of an exemption from such registration requirements;
(d) it satisfies one or more of the categories indicated below (please
place an "X" on the appropriate lines):
____ Category 1. An organization described in Section 501(c)(3) of the
United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Securities, with
total assets in excess of U.S.$5,000,000;
____ Category 2. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the date hereof exceeds
U.S.$1,000,000;
____ Category 3. A natural person who had an individual income in
excess of U.S.$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of U.S.$300,000
in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
____ Category 4. A trust that (a) has total assets in excess of
U.S.$5,000,000, (b) was not formed for the specific purpose of
acquiring the Securities and (c) is directed in its purchases of
securities by a person who has such knowledge and experience in
financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the
Securities;
<PAGE>
____ Category 5. An investment company registered under the Investment
Company Act of 1940 or a business development company as defined
in Section 2(a)(48) of that Act;
____ Category 6. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958;
____ Category 7. A private business development company as defined in
Section 202(a)(22) of the Investment Advisors Acts of 1940; or
____ Category 8. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing categories.
(e) it has not purchased the Securities as a result of any form of general
solicitation or general advertising, including advertisements,
articles, notices or other communications published in any newspaper,
magazine or similar media or broadcast over radio, or television, or
any seminar or meeting whose attendees have been invited by general
solicitation or general advertising;
(f) if it decides to offer, sell or otherwise transfer any of the
Securities, it will not offer, sell or otherwise transfer any of such
Securities directly or indirectly, unless:
(i) the sale is to the Borrower;
(ii) the sale is made outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under the
1933 Act and in compliance with applicable local laws and
regulations;
(iii)the sale is made pursuant to the exemption from the registration
requirements under the 1933 Act provided by Rule 144 thereunder
and in accordance with any applicable state securities or "Blue
Sky" laws; or
(iv) the Securities are sold in a transaction that does not require
registration under the 1933 Act or any applicable state laws and
regulations governing the offer and sale of securities, and it
has prior to such sale furnished to the Borrower an opinion of
counsel reasonably satisfactory to the Borrower;
(g) the certificates representing the Securities will bear a legend
stating that such shares have not been registered under the 1933 Act
or the securities laws of any state of the United States and may not
be offered for sale or sold unless registered under the 1933 Act and
the securities laws of all applicable states of the United States or
an exemption from such registration requirements is available;
<PAGE>
(h) it understands and agrees that the Warrants may not be exercised in
the United States or by or on behalf of a "U.S. Person" or a person in
the United States unless registered under the 1933 Act and any
applicable state securities laws or unless an exemption from such
registration requirements is available and that certificates
representing the Warrants will bear a legend to such effect;
(i) it understands and agrees that there may be material tax consequences
to the Lender of an acquisition or disposition of the Securities. The
Borrower gives no opinion and makes no representation with respect to
the tax consequences to the Lender under United States, state, local
or foreign tax law of the undersigned's acquisition or disposition of
such Securities. In particular, no determination has been made whether
the Borrower will be a "passive foreign investment company" ("PFIC")
within the meaning of Section 1291 of the United States Internal
Revenue Code;
(j) it understands and agrees that the financial statements of the
Borrower have been prepared in accordance with Canadian generally
accepted accounting principles, which differ in some respects from
United States generally accepted accounting principles, and thus may
not be comparable to financial statements of United States companies;
(k) it consents to the Borrower making a notation on its records or giving
instructions to any transfer agent of the Borrower in order to
implement the restrictions on transfer set forth and described herein;
(l) it acknowledges that no securities commission or similar regulatory
authority has reviewed or passed on the merits of the Securities;
(m) it acknowledges that there is no government or other insurance
covering the Securities;
(n) it acknowledges that there are risks associated with the purchase of
the Securities;
(o) it acknowledges that there are restrictions on the Lender's ability to
resell the Securities and it is the responsibility of the Lender to
find out what those restrictions are and to comply with them before
selling the Securities; and
(p) it acknowledges that the Borrower has advised the Lender that the
Borrower is relying on an exemption from the requirements to provide
the Lender with a prospectus and to sell securities through a person
registered to sell securities under the British Columbia Securities
Act and, as a consequence of acquiring securities pursuant to this
exemption, certain protections, rights and remedies provided by the
British Columbia Securities Act, including statutory rights of
rescission or damages, will not be available to the Lender.
Dated this ______ day of ______________________, _________.
<PAGE>
___________________________________________
(Name of Subscriber - please print)
By: ___________________________________
(Authorized Signature)
__________________________________________
(Official Capacity or Title - please print)
__________________________________________
(Please print name of individual whose
signature appears above if different than
the name of the Subscriber printed above)
<PAGE>
SCHEDULE "D"
APPENDIX 16A
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
1. DESCRIPTION OF TRANSACTION
a) Name of issuer of the securities
Idaho Consolidated Metals Corporation
------------------------------------------------------------------
b) Number and description of securities to be purchased
U.S.$300,000 convertible loan, the outstanding principal of the loan
being convertible into Units on the basis of one unit for each
Cdn.$0.20 principal indebtedness in the first year and one unit for
each Cdn.$0.25 principal indebtedness in the second year
c) Purchase price U.S.$300,000
2. DETAILS OF PURCHASER
a) Name of Purchaser Tomasovich Family Trust
b) Address 600 Wilshire Boulevard, Suite 1410, Los Angeles, California,
90017
-------------------------------------------------------------------
c) If the purchaser is a corporation, state the jurisdiction of
incorporation
N/A
d) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser, if a corporation or trust
Theodore Tomasovich, of 600 Wilshire Boulevard, Suite 1410, Los
Angeles, California, 90017 is the Trustee and exercises control over
the Tomasovich Family Trust
<PAGE>
3. RELATIONSHIP TO LISTED COMPANY
a) State if the purchaser will become a control person with over 20% of
the company's issued share capital as a result of the purchase in
section 1 above.
If the outstanding principal amount of the Convertible Loan or other
previously issued convertible securities owned by the purchaser are
converted into common shares, the purchaser may then be a control
person. The change of control of the Company to Theodore Tomasovich
and the Tomasovich Family Trust was approved by the members at the
annual general meeting held on June 17, 1998.
b) Does the purchaser own any securities of the issuer at the date
hereof, if so, give particulars. State the number of securities of the
listed company held by the purchaser not including the purchase in
section 1 above.
(1) 1,498,611 shares;
(2) warrants to purchase 927,062 shares;
(3) U.S.$100,000 convertible promissory note repayable on or before
January 23, 2000 bearing interest at 9% per annum. After June 17,
1998, the lender may require the Issuer to convert all or any
portion of the principal amount of the loan advanced and then
outstanding into units at a conversion price of one unit for each
Cdn.$0.26 of indebtedness until and including January 23, 1999
and at a conversion price of one unit for each Cdn.$0.31 of
indebtedness during the period from January 24, 1999 until
January 23, 2000 for a maximum of 546,154 units if the principal
amount is converted in its entirety by January 23, 1999 and a
maximum of 458,064 units if the principal amount is converted in
its entirety between January 24, 1999 and January 23, 2000. Each
unit consists of one common share and one non-transferable
warrant with each warrant being exercisable at a price of $0.26
per share until January 23, 1999 and $0.31 per share from January
24, 1999 to January 23, 2000;
(4) U.S.$110,000 convertible promissory note repayable on or before
March 31, 2000 bearing interest at 9% per annum. After June 17,
1998, the lender may require the Issuer to convert all or any
portion of the principal amount of the loan advanced and then
outstanding into units at a conversion price of one unit for each
Cdn.$0.26 of indebtedness until and including March 31, 1999 and
at a conversion price of one unit for each Cdn.$0.31 of
indebtedness during the period from April 1, 1999 until March 31,
2000 for a maximum of 600,769 units if the principal amount is
converted in its entirety by March 31, 1999 and a maximum of
508,871 units if the principal amount is converted in its
entirety between April 1, 1999 and March 31, 2000. Each unit
consists of one common share and one non-transferable warrant
with each warrant being exercisable at a price of $0.26 per share
until March 31, 1999 and $0.31 per share from April 1, 1999 to
March 31, 2000;
<PAGE>
(5) U.S.$150,000 convertible promissory note repayable on or before
May 15, 2000 bearing interest at 9% per annum. After June 17,
1998, the lender may require the Issuer to convert all or any
portion of the principal amount of the loan advanced and then
outstanding into units at a conversion price of one unit for each
Cdn.$0.23 of indebtedness until and including May 15, 1999 and at
a conversion price of one unit for each Cdn.$0.28 of indebtedness
during the period from May 16, 1999 until May 15, 2000 for a
maximum of 932,608 common shares if the principal amount is
converted in its entirety in the first year and a maximum of
766,071 units if the principal amount is converted in its
entirety between May 16, 1999 and May 15, 2000. Each unit
consists of one common share and one non-transferable warrant
with each warrant being exercisable at a price of $0.23 per share
until May 15, 1999 and $0.27 per share from May 16, 1999 to May
15, 2000.
(6) U.S.$250,000 convertible promissory note convertible promissory
note repayable on or before September 10, 2000 bearing interest
at 9% per annum. The lender may require the Issuer to convert all
or any portion of the principal amount of the loan advanced and
then outstanding into units at a conversion price of one unit for
each Cdn.$0.17 of indebtedness until and including September 10,
1999 and at a conversion price of one unit for each Cdn.$0.22 of
indebtedness during the period from September 11, 1999 until
September 10, 2000 for a maximum of 2,227,941 common shares if
the principal amount is converted in its entirety in the first
year and a maximum of 1,721,590 units if the principal amount is
converted in its entirety between September 11, 1999 and
September 10, 2000. Each unit consists of one common share and
one non-transferable warrant with each warrant being exercisable
at a price of $0.17 per share until September 10, 1999 and $0.27
per share from September 11, 1999 to September 10, 2000.
4. PAYMENT DATE
a) State the date the purchaser has advanced full payment.
November 17, 1998
b) If the purchase funds are held in trust pending receipt of final regulatory
approval identify the trustee and give particulars of the condition(s)
required for release of the funds.
N/A
c) If the purchaser is an institutional investor and the funds have not
yet been advanced, give particulars of the condition(s) required for
the advance of funds.
N/A
<PAGE>
5. UNDERTAKING
*Last amended January 1998
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase as principal, the
securities described in section 1 of this Private Placement Questionnaire and
Undertaking. (The purchase funds may be deposited in trust with advancement to
the Company subject only to receipt of all necessary regulatory approvals).
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
twelve months (four months if the issuer is an AIF Issuer as defined in the
Definitions Section of the Manual) from the payment day, without the prior
consent of the Vancouver Stock Exchange and any other regulatory body having
jurisdiction. The undersigned acknowledges that all certificates representing
the said securities will bear a legend to the effect that the certificates are
subject to the applicable hold period.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's affairs
that has not been publicly disclosed. The undersigned acknowledges that it is
aware that the removal from the securities of any resale restriction after the
applicable twelve or four months that is imposed solely as a requirement of the
Vancouver Stock Exchange will not entitle it to sell the securities if such sale
would contravene any other applicable securities legislation or regulation.
6. ADDITIONAL UNDERTAKING AND CERTIFICATION
- PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that it is bound by the
provisions of the Securities Act (British Columbia) (the "Act"), and undertakes
to comply with all provisions of the Act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a jurisdiction
outside of Canada, the undersigned certifies that:
a) it is purchasing securities of the Issuer on behalf of managed
accounts over which it has absolute discretion as to purchasing and
selling, and in respect of which it receives no instructions from any
person beneficially interested in such accounts or from any other
person;
b) it carries on the business of managing the investment portfolio of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in
<PAGE>
________________________ [jurisdiction], and it is permitted by law to
carry on a portfolio manager business in that jurisdiction;
c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d) the total asset value of the investment portfolios it manages on
behalf of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe, that
any resident of British Columbia has a beneficial interest in any of
the managed accounts for which it is purchasing; and
f) the Issuer has provided it with a list of the directors, senior
officers and other insiders of the Issuer, and the persons that carry
on investor relations activities for the Issuer (which list is
attached as a schedule to this Appendix), and it does not believe, and
has no reasonable grounds to believe, that any of those persons has a
beneficial interest in any of the managed accounts for which it is
purchasing, except as follows:
(name of insider(s) or person(s) carrying on investor relations
activities for the Issuer that have a beneficial interest in an
account)
The undersigned acknowledges that it is bound by the provisions of the
British Columbia Securities Act including, without limitation, sections 87
and 111 concerning the filing of insider reports and reports of
acquisitions.
Dated at Los Angeles, California
this _____ day of _________________, 1998
Tomasovich Family Trust
_________________________________________
Name of Purchaser - please print)
_________________________________________
(Authorized Signature)
Trustee
_________________________________________
(Official Capacity - please print)
Theordore Tomasovich
________________________________________
(please print name of individual whose
signature appears above, if different
from name of purchaser printed above)
Exhibit 10.5
AMENDMENT
TO
CONVERTIBLE LOAN AGREEMENT #5
THIS AMENDING AGREEMENT dated effective the 17th day of
November, 1998
BETWEEN:
TOMASOVICH FAMILY TRUST, 600 Wilshire Boulevard, Suite 1410,
Los Angeles, California, 90017
(the "Lender")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a company incorporated
under the laws of British Columbia, having its principal
office at 540 Main Street, Suite 470, Lewiston, Idaho, 83501
(the "Borrower")
WHEREAS by convertible loan agreement #5 ("Convertible Loan
Agreement #5) dated October 1, 1998 between the Lender and the Borrower, the
Lender agreed to lend to the Borrower up to the principal sum of U.S.$300,000
(the "Loan"), on the terms and conditions set forth in Convertible Loan
Agreement #5.
AND WHEREAS the Lender advanced the sum of U.S.$300,000 to the
Borrower on November 17, 1998 and in addition, advanced an additional
U.S.$22,000 (the "Additional Loan") to the Borrower on November 17, 1998.
AND WHEREAS the Borrower and the Lender have agreed to make
the Additional Loan subject to the terms and conditions of Convertible Loan
Agreement #5.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. The Borrower and the Lender acknowledge and agree that the Lender has
lent to the Borrower the Additional Loan, which funds were advanced by
the Lender to the Borrower on November 17, 1998.
2. The Borrower and the Lender hereby agree that the Convertible Loan
Agreement #5 is hereby amended by:
<PAGE>
(a) deleting the reference to "U.S.$300,000" contained in paragraph 2.2
and substituting therefore "U.S.$322,000"; and
(b) deleting the reference to "U.S.$300,000" contained in paragraph 2.3
and substituting therefore "U.S.$322,000".
3. In all other respects, the terms and conditions of Convertible
Loan Agreement #5 are hereby ratified and confirmed.
4. The parties will do, execute and deliver or will cause to be done,
executed and delivered all such further acts, documents and things as
may be reasonably required for the purpose of giving affect to this
Amending Agreement.
5. This Amending Agreement is subject to acceptance for filing by the
Vancouver Stock Exchange.
6. This Amending Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective personal representatives,
successors and permitted assigns.
7. This Amending Agreement may be executed in counterparts and by
facsimile with the same effect as if all parties had signed the same
document and all such counterparts will be construed together and will
constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the date first above written.
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION was )
hereunto affixed in the presence of: )
)
Per: ____________________________ )
Authorized Signatory ) C/S
)
Per: ____________________________ )
Authorized Signatory )
)
TOMASOVICH FAMILY TRUST
Per: __________________________________
Authorized Signatory
Exhibit 10.6
CONVERTIBLE LOAN AGREEMENT #6
THIS CONVERTIBLE LOAN AGREEMENT dated effective the 28th day of January,
1999
BETWEEN:
TOMASOVICH FAMILY TRUST, 600 Wilshire Boulevard, Suite 1410,
Los Angeles, California, 90017
(the "Lender")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a company incorporated
under the laws of British Columbia, having its principal
office at 540 Main Street, Suite 470, Lewiston, Idaho, 83501
(the "Borrower")
WHEREAS the Borrower wishes to borrow and the Lender is
willing to lend to the Borrower up to the sum of U.S.$115,000 (the "Loan"), upon
the terms and subject to the conditions hereinafter set forth.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration
of the mutual covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the laws prevailing in British Columbia.
1.2 Severability. If any one or more of the provisions contained in this
Agreement is found by a court of competent jurisdiction to be invalid, illegal
or unenforceable in any respect the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
1.3 Headings and Marginal References. The divisions of the Agreement into
articles, paragraphs, sub-paragraphs and other subdivisions and the insertion of
headings are for convenience of reference only and do not affect the
construction or interpretation of this Agreement.
<PAGE>
1.4 Currency. All sums of money to be paid or calculated pursuant to this
Agreement shall be paid or calculated in United States or Canadian currency, as
indicated throughout.
1.5 Number and Gender. All references to any party to this Agreement shall be
read with such changes in number and gender as the context may require.
ARTICLE 2
THE LOAN
2.1 Vancouver Stock Exchange Acceptance. This Agreement is subject to receipt of
final acceptance by the Vancouver Stock Exchange (the "Exchange") (the
"Acceptance").
2.2 Establishment of the Loan. On the terms and subject to the conditions set
forth in this Agreement, the Lender shall lend to the Borrower the sum of
U.S.$115,000, which, the parties acknowledge, has been advanced in full by the
Lender to the Borrower on January 28, 1999.
2.3 Evidence of Indebtedness. In order to evidence the indebtedness of the
Borrower to the Lender in respect of the Loan, the Borrower agrees to execute
and deliver to the Lender a promissory note for the principal amount of
U.S.$115,000 in substantially the form attached as Schedule "A" hereto (such
promissory note referred to herein as the "Note").
2.4 Interest. Commencing on January 28, 1999, the Borrower shall pay to the
Lender annually on January 28, 2000 and January 28, 2001 while any amount of the
Loan remains outstanding, interest on the principal amount of the Loan advanced
at the rate of 9% per annum, calculated annually in arrears, both before and
after maturity, default and judgment. In the event that any interest payment is
not made in a timely manner, a late payment fee of 9% of the amount of the
interest payment then due shall be paid to the Lender.
2.5 Repayment of the Loan. Subject to paragraphs 2.6 and 3.1, the Borrower shall
repay the principal amount of the Loan advanced, together with any outstanding
interest thereon, to the Lender on or before January 28, 2001 (the "Maturity
Date").
2.6 Prepayment of the Loan. Subject to paragraph 3.1, the Borrower may prepay
the principal amount of the Loan advanced in whole or in part, together with any
outstanding interest thereon to the Lender at any time after January 28, 2000
until the Maturity Date without penalty.
ARTICLE 3
CONVERSION
3.1 Conversion. During the period from the date of Acceptance until the Maturity
Date, the Lender may require the Borrower to convert all or any portion of the
principal amount of the Loan advanced and then outstanding into units ("Units"),
at a conversion price of one Unit for each
<PAGE>
Cdn.$0.15 of indebtedness until and including January 28, 2000 and at a
conversion price of one Unit for each Cdn.$0.20 of indebtedness during the
period from January 29, 2000 until the Maturity Date. Each Unit consists of one
common share in the capital stock of the Borrower (the "Share") and one
non-transferable common share purchase warrant ("Warrant"). The Lender shall
give written notice of conversion to the Borrower specifying the part or whole
of the principal indebtedness of the Borrower to the Lender to be converted and
the number of Units to be issued on conversion, calculated in accordance with
the terms of this Agreement.
3.2 No Fractions. In converting the principal indebtedness of the Loan into
Units, the Borrower shall round fractions down to the nearest whole Unit, so
that the Lender will not be entitled to receive a fraction of a Unit.
3.3 Delivery. Three business days after the date a notice of conversion is
received by the Borrower from the Lender (the "Conversion Date"), the Lender
shall be deemed for all purposes to be the holder of record of that number of
Shares and Warrants designated in the notice of conversion, the outstanding
principal indebtedness of the Borrower to the Lender shall be deemed to be
reduced by the amount designated in the notice of conversion and the Borrower
shall deliver to the Lender on the Conversion Date a share certificate
representing the number of Shares and a certificate representing the number of
Warrants comprised in the Units as specified in the notice of conversion,
together with any unpaid interest which is due as at the Conversion Date.
3.4 Warrants. The Warrants shall be non-transferable and, if and when issued,
each Warrant shall entitle the Lender to purchase one common share in the
capital stock of the Borrower (the "Warrant Share") for a term commencing on the
Conversion Date and exercisable until the Maturity Date at a price of Cdn.$0.15
per Warrant Share until January 28, 2000 and thereafter at a price of Cdn.$0.20
per Warrant Share until the Maturity Date. The terms and conditions governing
the Warrants shall contain provisions, inter alia, for appropriate adjustment in
the class, number and price of the Shares issuable pursuant to any exercise
thereof upon the occurrence of certain events including any subdivision,
consolidation or reclassification of the Shares, the payment of stock dividends
or the amalgamation of the Company, as set forth in the form of warrant
certificate attached hereto as Schedule "B".
3.5 Adjustment. The terms and conditions set out in sections 1 and 2 of Schedule
"B" with respect to the adjustment in the class, number and price of the Warrant
Shares upon the occurrence of certain events apply, with the necessary changes,
to the Shares.
3.6 Reservation of Shares and Warrant Shares. For so long as any part of the
principal indebtedness of the Loan remains outstanding, the Borrower shall at
all times reserve out of its unissued common shares a sufficient number thereof
to accommodate the conversion of the principal indebtedness of the Loan into
Shares and the exercise of the Warrants into Warrant Shares, all as provided for
in this Agreement.
3.7 Questionnaire and Undertaking. The Lender shall execute and deliver to the
Borrower for filing with the Exchange the form of Private Placement
Questionnaire and Undertaking and such other documents and information as may be
required by the Exchange in connection with this transaction.
<PAGE>
ARTICLE 4
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.1 The Borrower represents and warrants to the Lender that:
(a) the Borrower is a reporting issuer only in British Columbia and is not
in default of any requirement of the British Columbia Securities Act
and Rules promulgated thereto (the "Act");
(b) the Borrower is a corporation duly incorporated, validly existing and
in good standing with respect to filing of annual reports with the
Registrar of Companies for British Columbia;
(c) the Borrower has all requisite corporate power and authority to own
and use its property, to carry on its business as now being conducted,
to enter into this Agreement and to execute and deliver the Note and
to carry out the obligations contemplated herein and therein;
(d) all necessary corporate action of the directors of the Borrower to
authorize the execution, delivery and performance of this Agreement
has been taken;
(e) this Agreement has been duly executed and delivered on behalf of the
Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable by the Lender in accordance with its terms;
(f) the authorized capital of the Borrower consists of 100,000,000 common
shares without par value of which 9,980,804 common shares are validly
issued and outstanding as at January 28, 1999;
(g) the Shares to be allotted and issued pursuant to the due and valid
conversion, in whole or in part, of the principal indebtedness of the
Loan have been duly and validly authorized to be issued as fully paid
and non-assessable common shares upon receipt by the Borrower of a
notice of conversion;
(h) the Warrant Shares to be allotted and issued pursuant to the due and
valid exercise, in whole or in part, of the Warrants have been duly
and validly authorized to be issued as fully paid and non-assessable
common shares upon receipt by the Borrower of full payment therefor;
(i) the common shares of the Borrower are listed and posted for trading
only on the Exchange; and
(j) no Default (as defined below) or event which with the giving of notice
or the lapse of time would become a Default has occurred or is
continuing.
<PAGE>
ARTICLE 5
LENDER'S REPRESENTATIONS AND WARRANTIES
5.1 The Lender represents and warrants to the Borrower that:
(a) the Lender, if a corporation, is a valid and subsisting corporation
under the laws of its incorporating jurisdiction, has the necessary
corporate capacity and authority to execute and deliver this Agreement
and to observe and perform its covenants and obligations hereunder and
has taken all necessary corporate action in respect thereof, and this
Agreement constitutes a legal, valid and binding contract of the
Lender enforceable against the Lender in accordance with its terms;
(b) the Lender is a resident of the State of California and is not a
resident of British Columbia;
(c) the Lender is entering into this Agreement and acquiring the Note as
principal for the Lender's own account, and not for the benefit of any
other person;
(d) ^the Lender is aware that this Agreement and the Note are being
distributed under an exemption from the registration and prospectus
requirements of the Act and states that this Agreement is not being
entered into as a result of any information about the affairs of the
Borrower that is not generally known to the public save knowledge of
this particular transaction;
(e) this Agreement and the Loan are not being used to settle prior
outstanding debts of the Borrower to the Lender or, if they are being
used to settle prior outstanding debt owing by the Borrower to the
Lender, then the Lender is not permitted to receive Warrants comprised
in the Units on that part of its Loan that corresponds to the amount
of the prior outstanding debt;
(f) the Lender is ^presently a "control person" of the Borrower as defined
in the Act^; and
(g) the Lender has executed and delivered to the Company herewith the
additional representations and warranties set out on Schedule "C"
attached hereto.
ARTICLE 6
ACKNOWLEDGMENTS AND COVENANTS OF THE LENDER
6.1 The Lender hereby acknowledges and covenants that:
(a) the Note that is being issued and the Units, Shares, Warrants and
Warrant Shares that may be issued pursuant to this Agreement (together
the "Securities") will be issued under an exemption from the
registration and prospectus requirements of the Act and under the
policies of the Exchange and that the sale by the Lender in British
Columbia of the Securities is, unless otherwise exempted under the Act
and approved by the Exchange, deemed to be a distribution to the
public unless:
<PAGE>
(i) if the Lender is an insider of the Borrower, other than a
director or senior officer of the Borrower, the Lender has filed
all records required to be filed under section 87 (insider
reports) and section 90 (personal information form) of the Act;
(ii) if the Lender is a director or senior officer of the Borrower,
the Lender has filed all records required to be filed under
section 87 (insider reports) and section 90 (personal information
form) of the Act and the Borrower has filed all records required
to be filed under part 12 of the Act and of the Rules promulgated
to the Act (continuous disclosure);
(iii)a twelve-month period has elapsed from the date of this
Agreement or, if on the Conversion Date the Company is an AIF
Issuer as defined in the policies of the Exchange, a four month
period has elapsed from the date of this Agreement;
(iv) the trade is not a distribution from the holdings of a control
person;
(v) no unusual effort is made to prepare the market or to create a
demand for the Securities; and
(vi) no extraordinary commission or consideration is paid in respect
of the trade;
(b) the foregoing is a summary based on the provisions of the Act as at
the date hereof and is subject to amendment and the Lender covenants
that, prior to trading in the Securities in British Columbia, the
Lender will consult with the Lender's own legal counsel in connection
with the applicable resale rules;
(c) the Lender will complete, execute and deliver to the Borrower the
Private Placement Questionnaire and Undertaking attached as Schedule
"D" hereto as required by the Exchange for filing with the Exchange in
connection with the Loan;
(d) if the Lender is an individual, the Lender will complete, execute and
deliver to the Borrower a Form 20A(IP), Acknowledgement and
Undertaking as required under the Act; and
(e) the certificates representing the Securities will contain a legend
denoting the restrictions on transfer imposed by the Act or, if
applicable, by the policies of the Exchange, to the effect that the
securities represented by the certificate are subject to a hold period
and may not be traded in British Columbia until one year from the date
of advance of the Loan, or, if on the Conversion Date the Company is
an AIF Issuer, until four months from the date of advance of the Loan.
ARTICLE 7
COVENANTS OF THE BORROWER
7.1 The Borrower covenants and agrees with the Lender that at all times during
the currency of this Agreement it will: (a)
<PAGE>
take all reasonable steps to remain in good standing under the Act;
(b) pay the principal sum of the Loan, interest and all other monies
required to be paid to the Lender pursuant to this Agreement in the
manner set forth herein;
(c) observe and perform each of its covenants and agreements set forth in
this Agreement and the Note; and
(d) provide the Lender with immediate notice of any Default.
7.2 The Borrower shall assume and pay all costs, charges and expenses, including
reasonable legal fees and expenses, which may be incurred by the Lender in
respect of this Agreement or the Note in any proceedings taken or things done by
the Lender or on its behalf in connection therewith to collect, protect, realize
or enforce the Note.
ARTICLE 8
DEFAULT
8.1 It is a Default if:
(a) the Borrower defaults in any payment when the same is due under this
Agreement;
(b) the Borrower becomes insolvent or makes a general assignment for the
benefit of its creditors, or if an order is made or effective
resolutions are passed for the winding-up, merger or amalgamation of
the Borrower or if the Borrower is declared bankrupt or if a custodian
or receiver is appointed for the Borrower under any bankruptcy
legislation, or if a compromise or arrangement is proposed by the
Borrower to its creditors or any class of its creditors, or if a
receiver or other officer with like powers is appointed for the
Borrower; or
(c) the Borrower defaults in observing or performing any other covenant or
agreement of this Agreement on its part to be observed or performed
and such default has continued for a period of seven days after notice
in writing has been given by the Lender to the Borrower specifying
such default.
8.2 In the event of a Default, unless it is waived in writing by the Lender, the
principal balance of the Loan, costs and any other money owing to the Lender
under this Agreement shall immediately become payable by the Borrower.
ARTICLE 9
GENERAL
9.1 Waiver or Modification. No consent or waiver, express or implied, by any
party to or of any breach or default by any other party of any or all of its
obligations under this Agreement will:
(a) be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section;
<PAGE>
(b) be relied upon as a consent or waiver to or of any other breach or
default of the same or any other obligation;
(c) constitute a general waiver under this Agreement; or
(d) eliminate or modify the need for a specific consent or waiver pursuant
to this section in any other or subsequent instance.
9.2 Further Assurances. The parties hereto will do, execute and deliver or will
cause to be done, executed and delivered all such further acts, documents and
things as may be reasonably required for the purpose of giving effect to this
Agreement.
9.3 Assignment. No party may assign its interest herein or any part thereof
without the consent of the other party which neither party will unreasonably
withhold. In the case of an assignment by the Borrower, the Borrower must comply
with all applicable securities laws and obtain the consent of the Vancouver
Stock Exchange.
9.4 Notices. Any notice, demand or other document required or permitted to be
given hereunder shall be deemed to have been well and sufficiently given if
telecopied to or delivered at the address of the intended recipient set forth on
the first page hereof or at such other address as the intended recipient may
from time to time direct in writing, and any such notice, demand or document
shall be deemed to have been received.
9.5 Exchange Acceptance for Filing. It is acknowledged and agreed between the
parties that the Loan made hereunder is subject to acceptance for filing by the
Exchange. If final acceptance is not obtained within 120 days of the date of
this Agreement, unless the parties agree otherwise, the Agreement shall
automatically be terminated and of no further force or effect and the Borrower
shall then forthwith repay the outstanding principal amount of the Loan and
accrued interest to the Lender.
9.6 Amendments. No provision of this Agreement may be amended, waived,
discharged or terminated orally, but only by instrument in writing signed by the
party against whom enforcement of the amendment, waiver, discharge or
termination is sought.
9.7 Parties in Interest. This Agreement shall enure to the benefit of and be
binding upon the parties hereto and their respective personal representatives,
successors and permitted assigns.
9.8 Counterparts. This Agreement may be executed in counterparts and by
facsimile with the same effect as if all parties had signed the same document
and all such counterparts will be construed together and will constitute one and
the same instrument.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the date first above written.
<PAGE>
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION was )
hereunto affixed in the presence of: )
)
Per: ________________________________ )
Authorized Signatory ) C/S
)
Per: ________________________________ )
Authorized Signatory )
)
TOMASOVICH FAMILY TRUST
Per: ________________________________
Authorized Signatory
<PAGE>
[NOTE: SCHEDULE ONLY]
SCHEDULE "A"
FORM OF
CONVERTIBLE PROMISSORY NOTE #6
U.S.$115,000 January 28, 1999
FOR VALUE RECEIVED, the undersigned, Idaho Consolidated Metals
Corporation, a British Columbia, corporation ("ICMC" or "the Company"), hereby
promises to pay to the Tomasovich Family Trust ("Tomasovich"), the principal sum
of U.S.$115,000 Dollars plus interest at 9% per annum. All unpaid principal and
interest shall be due and payable in full on January 28, 2001. Unpaid principal
and interest under this Note may be prepaid without penalty after the first
anniversary hereof. Interest to be paid annually. In the event that any interest
payment is not made in a timely manner, a late payment fee of 9% of the amount
of the interest payment then due shall be paid to Tomasovich.
Said note shall be convertible to units in the Company at the sole
election of Tomasovich. Each unit shall consist of one (1) share and one (1)
non-transferable share purchase warrant. The principal outstanding amount of
this note is convertible into units on the basis of one unit for each Cdn.$0.15
of principal indebtedness if converted at any time up to and including January
28, 2000 and one unit for each Cdn.$0.20 of principal indebtedness if converted
at any time from January 29, 2000 up to and including January 28, 2001. Any
conversion shares will have a hold period commencing on the date of advance of
the funds until the lesser of one (1) year or four (4) months if ICMC is an "AIF
Issuer" as defined in the policies of the Vancouver Stock Exchange ("VSE") at
the time of conversion.
All payments on this Note, as well as any notices, are to be made or
given to Tomasovich whose address for this purpose is 600 Wilshire Blvd., Suite
1410, Los Angeles, California, 90017, or to such other place as Tomasovich may
from time to time direct by written notice to ICMC.
All amounts payable hereunder are payable in lawful money of the United
States. If any suit or action be instituted to enforce this Note, ICMC promises
to pay, in addition to the costs and disbursements otherwise allowed by law, all
other costs including actual attorneys' fees incurred by Tomasovich if such suit
or action is successful.
The parties hereto recognize that there may be other VSE requirements
other than notice concerning this Note. ICMC shall fulfill all of said
requirements which shall be met prior to payment to or conversion by the lender
hereof.
This Note is given pursuant to the Convertible Loan Agreement #6 dated
effective January 28, 1999 between Tomasovich and ICMC and is to be construed
and enforced in accordance therewith.
This Note shall be governed by and construed according to the laws of
the Province of British Columbia and meet all requirements of the VSE.
IDAHO CONSOLIDATED METALS CORPORATION
a British Columbia Corporation
By: [NOTE: SCHEDULE ONLY]
______________________________
Delbert Steiner, President
<PAGE>
SCHEDULE "B"
FORM OF WARRANT CERTIFICATE
THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED ON OR BEFORE 4:30
P.M. (VANCOUVER TIME) ON JANUARY 28, 2001.
THIS WARRANT AND THE SHARE CERTIFICATES REPRESENTING ANY COMMON SHARES ISSUED ON
EXERCISE OF ALL OR A PART OF THE RIGHTS REPRESENTED BY THIS WARRANT ARE SUBJECT
TO A HOLD PERIOD AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL JANUARY 28,
2000 OR FOUR MONTHS FROM DATE OF ADVANCE OF FUNDS IF IDAHO IS AN AIF ISSUER ON
CONVERSION DATE] EXCEPT AS PERMITTED BY THE BRITISH COLUMBIA SECURITIES ACT AND
RULES MADE THEREUNDER (THE "HOLD PERIOD").
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") AND MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A
UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF
APPLICABLE, OR (3) WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY, ANOTHER
EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT (THE "U.S. LEGEND").
NON-TRANSFERABLE WARRANTS
-------------------------
IDAHO CONSOLIDATED METALS CORPORATION
(Incorporated under the laws of British Columbia)
Warrant Certificate No.: W99-1/o Right to Purchase of Common Shares
WARRANT CERTIFICATE FOR PURCHASE OF COMMON SHARES
-------------------------------------------------
THIS IS TO CERTIFY THAT, for value received, Tomasovich Family
Trust of 600 Wilshire Boulevard, Suite 1410, Los Angeles, California, 90017
(hereinafter called the "holder") is entitled to subscribe for and purchase o
fully paid and non-assessable Common Shares in the capital of Idaho Consolidated
Metals Corporation (hereinafter called the "Corporation") at any time prior to
4:30 p.m. (Vancouver Time) on January 28, 2001 at a price of Cdn.$0.15 per share
until January 28, 2000 and at price of Cdn.$0.20 per share from January 29, 2000
to January 28, 2001 subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.
The rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part (but not as to a fractional share of Common
Shares), by completing the subscription
<PAGE>
form attached hereto as Schedule "A" and surrendering this Warrant at the
principal office of the Corporation together with a certified cheque or bank
wire transfer payable to or to the order of the Corporation in payment of the
purchase price of the number of Common Shares subscribed for.
In the event of any exercise of the right represented by this
Warrant, certificates for the Common Shares so purchased shall be delivered to
the holder hereof within a reasonable time, not exceeding three business days
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of Common
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof within such time.
The Corporation covenants and agrees that all Common Shares
which may be issued upon the exercise of the right represented by this Warrant
will, upon issuance, be fully paid and non-assessable and free of all liens,
charges and encumbrances. The Corporation further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Corporation will at all times have authorized and reserved, a
sufficient number of Common Shares to provide for the exercise of the rights
represented by this Warrant.
THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:
1. In case the Corporation shall at any time subdivide its outstanding Common
Shares into a greater number of shares, the Warrant purchase price shall be
proportionately reduced and the number of subdivided Common Shares entitled to
be purchased proportionately increased, and conversely, in case the outstanding
Common Shares of the Corporation shall be consolidated into a smaller number of
shares, the Warrant purchase price shall be proportionately increased and the
number of consolidated Common Shares entitled to be purchased hereunder shall be
proportionately decreased.
If any capital reorganization or reclassification of the
capital stock of the Corporation, or the merger, amalgamation or arrangement of
the Corporation with another corporation shall be effected, then as a condition
of such reorganization, reclassification, merger, amalgamation or arrangement,
adequate provision shall be made whereby the holder hereof shall have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in this Warrant and in lieu of the Common Shares immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, or other securities as may be issued
with respect to or in exchange for such number of outstanding Common Shares
equal to the number of Common Shares purchasable and receivable upon the
exercise of this Warrant had such reorganization, reclassification, merger,
amalgamation or arrangement not taken place. The Corporation shall not effect
any merger, amalgamation or arrangement unless prior to or simultaneously with
the consummation thereof the successor corporation (if other than the
Corporation) resulting from such merger, amalgamation or arrangement shall
assume by written instrument executed and mailed or delivered to the holder of
this Warrant the obligation to deliver to such holder such shares of stock or
securities in accordance with the foregoing provisions, such holder may be
entitled to purchase.
<PAGE>
2. In case at any time:
(a) the Corporation shall pay any dividend payable in stock upon its
Common Shares or make any distribution to the holders of its Common
Shares;
(b) the Corporation shall offer for subscription pro rata to the holders
of its Common Shares any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization, or reclassification of the
capital stock of the Corporation, or consolidation or merger,
amalgamation or arrangement of the Corporation with, or sale of all or
substantially all of its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then, and in any one or more of such cases, the Corporation shall give to the
holder of this Warrant, at least twenty days' prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights, or for determining rights to
vote with respect to such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up
and in the case of any such reorganization, reclassification, consolidation,
merger, amalgamation, arrangement, sale, dissolution, liquidation or winding-up,
at least twenty days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause, shall also specify,
in the case of any such dividend, distribution or subscription rights, the date
on which the holders of Common Shares shall be entitled thereto, and such notice
in accordance with the foregoing shall also specify the date on which the
holders of Common Shares shall be entitled to exchange their Common Shares for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, amalgamation, arrangement, sale,
dissolution, liquidation or winding-up as the case may be. Each such written
notice shall be given by first class mail, registered postage prepaid, addressed
to the holder of this Warrant at the address of such holder, as shown on the
books of the Corporation.
3. As used herein, the term "Common Shares" shall mean and include the
Corporation's presently authorized Common Shares and shall also include any
capital stock of any class of the Corporation hereafter authorized which shall
not be limited to a fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends and in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation.
4. This Warrant shall not entitle the holder hereof to any rights as a
shareholder of the Corporation, including without limitation, voting rights.
5. This Warrant and all rights hereunder are not transferable.
6. This Warrant is exchangeable, upon the surrender hereof by the holder hereof
at the principal office of the Corporation, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase
<PAGE>
such number of Common Shares as shall be designated by such holder hereof at the
time of such surrender.
IN WITNESS WHEREOF the Corporation has caused this Warrant to
be signed by its duly authorized officers under its corporate seal, and this
Warrant to be dated __________________________,__________.
Idaho Consolidated Metals Corporation
Per: _______________________________
Director
<PAGE>
SCHEDULE "A"
To
WARRANT CERTIFICATE
SUBSCRIPTION FORM - TO BE COMPLETED
ON EXERCISE OF WARRANTS
TO: Idaho Consolidated Metals Corporation
(the "Corporation")
The undersigned hereby exercises the right to purchase and hereby subscribes for
_______________ Common Shares in the capital stock of the Corporation referred
to in the attached Warrant Certificate according to the conditions thereof and
herewith makes payment by certified cheque of the purchase price in full for the
said shares. The undersigned acknowledges that the share certificates
representing any Common shares issued on exercise of all or a part of the rights
represented by this Warrant ("Warrant Shares") are subject to the Hold Period
noted on page one of this Warrant Certificate, and may not be traded in British
Columbia except as permitted by the British Columbia Securities Act and Rules
made thereunder. The undersigned also acknowledges that the share certificates
representing any Warrant Shares will be endorsed with the U.S. Legend.
Please issue a certificate for the shares being purchased as follows:
(Note: Until the expiry of the Hold Period, the certificate must be issued in
the name of the undersigned.)
Name: ________________________________________________________
(please print)
Address: ________________________________________________________
________________________________________________________
________________________________________________________
If applicable, please deliver a Warrant Certificate in respect of the balance of
the Common Shares referred to in the attached Warrant Certificate but not
presently subscribed for, to the undersigned.
DATED this _______ day of _____________________, _______.
- --------------------------------------
<PAGE>
SCHEDULE "C"
(U.S. SUBSCRIBERS)
(Capitalized terms not specifically defined herein
shall have the meaning ascribed to them in the
Convertible Loan Agreement #6 to
which this Schedule is attached.)
In connection with the execution of the Convertible Loan Agreement #6 made
effective January 28, 1999 (the "Agreement") to which this Schedule is attached,
the undersigned (the "Lender") covenants, represents and warrants to the
Borrower that:
(a) it has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment
in the Securities and it is able to bear the economic risk of loss of
its entire investment;
(b) it is acquiring the Securities for its own account, for investment
purposes only and not with a view to any resale, distribution or other
disposition of the Securities in violation of the United States
securities laws;
(c) it understands that the Securities have not been and will not be
registered under the United States Securities Act of 1933, as amended
(the "1933 Act") or the securities laws of any state of the United
States and that the sale contemplated hereby is being made in reliance
of an exemption from such registration requirements;
(d) it satisfies one or more of the categories indicated below (please
place an "X" on the appropriate lines):
____ Category 1. An organization described in Section 501(c)(3) of the
United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Securities, with
total assets in excess of U.S.$5,000,000;
____ Category 2. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the date hereof exceeds
U.S.$1,000,000;
____ Category 3. A natural person who had an individual income in
excess of U.S.$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of U.S.$100,000
in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
X Category 4. A trust that (a) has total assets in excess of
U.S.$5,000,000, (b) was not formed for the specific purpose of
acquiring the Securities and (c) is directed in its purchases of
securities by a person who has such knowledge and experience in
financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the
Securities;
<PAGE>
____ Category 5. An investment company registered under the Investment
Company Act of 1940 or a business development company as defined
in Section 2(a)(48) of that Act;
____ Category 6. A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958;
____ Category 7. A private business development company as defined in
Section 202(a)(22) of the Investment Advisors Acts of 1940; or
____ Category 8. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing categories.
(e) it has not purchased the Securities as a result of any form of general
solicitation or general advertising, including advertisements,
articles, notices or other communications published in any newspaper,
magazine or similar media or broadcast over radio, or television, or
any seminar or meeting whose attendees have been invited by general
solicitation or general advertising;
(f) if it decides to offer, sell or otherwise transfer any of the
Securities, it will not offer, sell or otherwise transfer any of such
Securities directly or indirectly, unless:
(i) the sale is to the Borrower;
(ii) the sale is made outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under the
1933 Act and in compliance with applicable local laws and
regulations;
(iii)the sale is made pursuant to the exemption from the registration
requirements under the 1933 Act provided by Rule 144 thereunder
and in accordance with any applicable state securities or "Blue
Sky" laws; or
(iv) the Securities are sold in a transaction that does not require
registration under the 1933 Act or any applicable state laws and
regulations governing the offer and sale of securities, and it
has prior to such sale furnished to the Borrower an opinion of
counsel reasonably satisfactory to the Borrower;
(g) the certificates representing the Securities will bear a legend
stating that such shares have not been registered under the 1933 Act
or the securities laws of any state of the United States and may not
be offered for sale or sold unless registered under the 1933 Act and
the securities laws of all applicable states of the United States or
an exemption from such registration requirements is available;
<PAGE>
(h) it understands and agrees that the Warrants may not be exercised in
the United States or by or on behalf of a "U.S. Person" or a person in
the United States unless registered under the 1933 Act and any
applicable state securities laws or unless an exemption from such
registration requirements is available and that certificates
representing the Warrants will bear a legend to such effect;
(i) it understands and agrees that there may be material tax consequences
to the Lender of an acquisition or disposition of the Securities. The
Borrower gives no opinion and makes no representation with respect to
the tax consequences to the Lender under United States, state, local
or foreign tax law of the undersigned's acquisition or disposition of
such Securities. In particular, no determination has been made whether
the Borrower will be a "passive foreign investment company" ("PFIC")
within the meaning of Section 1291 of the United States Internal
Revenue Code;
(j) it understands and agrees that the financial statements of the
Borrower have been prepared in accordance with Canadian generally
accepted accounting principles, which differ in some respects from
United States generally accepted accounting principles, and thus may
not be comparable to financial statements of United States companies;
(k) it consents to the Borrower making a notation on its records or giving
instructions to any transfer agent of the Borrower in order to
implement the restrictions on transfer set forth and described herein;
(l) it acknowledges that no securities commission or similar regulatory
authority has reviewed or passed on the merits of the Securities;
(m) it acknowledges that there is no government or other insurance
covering the Securities;
(n) it acknowledges that there are risks associated with the purchase of
the Securities;
(o) it acknowledges that there are restrictions on the Lender's ability to
resell the Securities and it is the responsibility of the Lender to
find out what those restrictions are and to comply with them before
selling the Securities; and
(p) it acknowledges that the Borrower has advised the Lender that the
Borrower is relying on an exemption from the requirements to provide
the Lender with a prospectus and to sell securities through a person
registered to sell securities under the British Columbia Securities
Act and, as a consequence of acquiring securities pursuant to this
exemption, certain protections, rights and remedies provided by the
British Columbia Securities Act, including statutory rights of
rescission or damages, will not be available to the Lender.
Dated this ______ day of ______________________, _________.
<PAGE>
____________________________________________
(Name of Subscriber - please print)
By: _____________________________________
(Authorized Signature)
___________________________________________
(Official Capacity or Title - please print)
___________________________________________
(Please print name of individual whose
signature appears above if different than
the name of the Subscriber printed above)
<PAGE>
SCHEDULE "D"
VSE
APPENDIX 16A
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
1. DESCRIPTION OF TRANSACTION
a) Name of issuer of the securities
Idaho Consolidated Metals Corporation
-------------------------------------
b) Number and description of securities to be purchased
U.S.$115,000 convertible loan, the outstanding principal of the loan
being convertible into Units on the basis of one unit for each
Cdn.$0.15 principal indebtedness in the first year and one unit for
each Cdn.$0.20 principal indebtedness in the second year
c) Purchase price U.S.$115,000
2. DETAILS OF PURCHASER
a) Name of Purchaser Tomasovich Family Trust
b) Address 600 Wilshire Boulevard, Suite 1410, Los Angeles, California,
90017
-------------------------------------------------------------------
c) If the purchaser is a corporation, state the jurisdiction of
incorporation
N/A
d) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser, if a corporation or trust
Theodore Tomasovich, of 600 Wilshire Boulevard, Suite 1410, Los
Angeles, California, 90017 is the Trustee and exercises control over
the Tomasovich Family Trust
<PAGE>
3. RELATIONSHIP TO LISTED COMPANY
a) State if the purchaser will become a control person with over 20% of
the company's issued share capital as a result of the purchase in
section 1 above.
If the outstanding principal amount of the Convertible Loan or other
previously issued convertible securities owned by the purchaser are
converted into common shares, the purchaser may then be a control
person. The change of control of the Company to Theodore Tomasovich
and the Tomasovich Family Trust was approved by the members at the
annual general meeting held on June 17, 1998.
b) Does the purchaser own any securities of the issuer at the date
hereof, if so, give particulars. State the number of securities of the
listed company held by the purchaser not including the purchase in
section 1 above.
(1) 2,094,765 shares;
(2) warrants to purchase 1,473,216 shares;
(3) U.S.$110,000 convertible promissory note repayable on or before
March 31, 2000 bearing interest at 9% per annum. After June 17,
1998, the lender may require the Issuer to convert all or any
portion of the principal amount of the loan advanced and then
outstanding into units at a conversion price of one unit for each
Cdn.$0.26 of indebtedness until and including March 31, 1999 and
at a conversion price of one unit for each Cdn.$0.31 of
indebtedness during the period from April 1, 1999 until March 31,
2000 for a maximum of 600,769 units if the principal amount is
converted in its entirety by March 31, 1999 and a maximum of
508,871 units if the principal amount is converted in its
entirety between April 1, 1999 and March 31, 2000. Each unit
consists of one common share and one non-transferable warrant
with each warrant being exercisable at a price of $0.26 per share
until March 31, 1999 and $0.31 per share from April 1, 1999 to
March 31, 2000;
(4) U.S.$150,000 convertible promissory note repayable on or before
May 15, 2000 bearing interest at 9% per annum. After June 17,
1998, the lender may require the Issuer to convert all or any
portion of the principal amount of the loan advanced and then
outstanding into units at a conversion price of one unit for each
Cdn.$0.23 of indebtedness until and including May 15, 1999 and at
a conversion price of one unit for each Cdn.$0.28 of indebtedness
during the period from May 16, 1999 until May 15, 2000 for a
maximum of 932,608 common shares if the principal amount is
converted in its entirety in the first year and a maximum of
766,071 units if the principal amount is converted in its
entirety between May 16, 1999 and May 15, 2000. Each unit
consists of one common share and one non-transferable warrant
with each warrant being exercisable at a price of $0.23 per share
until May 15, 1999 and $0.27 per share from May 16, 1999 to May
15, 2000.
<PAGE>
(5) U.S.$250,000 convertible promissory note convertible promissory
note repayable on or before September 10, 2000 bearing interest
at 9% per annum. The lender may require the Issuer to convert all
or any portion of the principal amount of the loan advanced and
then outstanding into units at a conversion price of one unit for
each Cdn.$0.17 of indebtedness until and including September 10,
1999 and at a conversion price of one unit for each Cdn.$0.22 of
indebtedness during the period from September 11, 1999 until
September 10, 2000 for a maximum of 2,227,941 common shares if
the principal amount is converted in its entirety in the first
year and a maximum of 1,721,590 units if the principal amount is
converted in its entirety between September 11, 1999 and
September 10, 2000. Each unit consists of one common share and
one non-transferable warrant with each warrant being exercisable
at a price of $0.17 per share until September 10, 1999 and $0.27
per share from September 11, 1999 to September 10, 2000.
(6) U.S.$322,000 convertible promissory note repayable on or before
October 1, 2000 bearing interest at 9% per annum. The lender may
require the Issuer to convert all or any portion of the principal
amount of the loan advanced and then outstanding into units at a
conversion price of one unit for each Cdn.$0.20 of indebtedness
until and including October 1, 1999 and at a conversion price of
one unit for each Cdn.$0.25 of indebtedness during the period
from October 2, 1999 until October 1, 2000 for a maximum of
2,466,681 units if the principal amount is converted in its
entirety in the first year and a maximum of 1,973,344 units if
the principal amount is converted in its entirety between October
2, 1999 and October 1, 2000. Each unit consists of one common
share and one non-transferable warrant with each warrant being
exercisable at a price of $0.20 per share until October 1, 1999
and $0.25 per share from October 2, 1999 to October 1, 2000;
4. PAYMENT DATE
a) State the date the purchaser has advanced full payment.
January 28, 1999
b) If the purchase funds are held in trust pending receipt of final
regulatory approval identify the trustee and give particulars of the
condition(s) required for release of the funds.
N/A
c) If the purchaser is an institutional investor and the funds have not
yet been advanced, give particulars of the condition(s) required for
the advance of funds.
N/A
<PAGE>
5. UNDERTAKING
*Last amended January 1998
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase as principal, the
securities described in section 1 of this Private Placement Questionnaire and
Undertaking. (The purchase funds may be deposited in trust with advancement to
the Company subject only to receipt of all necessary regulatory approvals).
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
twelve months (four months if the issuer is an AIF Issuer as defined in the
Definitions Section of the Manual) from the payment day, without the prior
consent of the Vancouver Stock Exchange and any other regulatory body having
jurisdiction. The undersigned acknowledges that all certificates representing
the said securities will bear a legend to the effect that the certificates are
subject to the applicable hold period.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's affairs
that has not been publicly disclosed. The undersigned acknowledges that it is
aware that the removal from the securities of any resale restriction after the
applicable twelve or four months that is imposed solely as a requirement of the
Vancouver Stock Exchange will not entitle it to sell the securities if such sale
would contravene any other applicable securities legislation or regulation.
6. ADDITIONAL UNDERTAKING AND CERTIFICATION - PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that it is bound by the
provisions of the Securities Act (British Columbia) (the "Act"), and undertakes
to comply with all provisions of the Act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a jurisdiction
outside of Canada, the undersigned certifies that:
a) it is purchasing securities of the Issuer on behalf of managed
accounts over which it has absolute discretion as to purchasing and
selling, and in respect of which it receives no instructions from any
person beneficially interested in such accounts or from any other
person;
b) it carries on the business of managing the investment portfolio of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ________________________
[jurisdiction], and it is permitted by law to carry on a portfolio
manager business in that jurisdiction;
<PAGE>
c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d) the total asset value of the investment portfolios it manages on
behalf of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe, that
any resident of British Columbia has a beneficial interest in any of
the managed accounts for which it is purchasing; and
f) the Issuer has provided it with a list of the directors, senior
officers and other insiders of the Issuer, and the persons that carry
on investor relations activities for the Issuer (which list is
attached as a schedule to this Appendix), and it does not believe, and
has no reasonable grounds to believe, that any of those persons has a
beneficial interest in any of the managed accounts for which it is
purchasing, except as follows:
______________________________________________________________________
(name of insider(s) or person(s) carrying on investor relations
activities for the Issuer that have a beneficial interest in an
account)
The undersigned acknowledges that it is bound by the provisions of the
British Columbia Securities Act including, without limitation, sections 87
and 111 concerning the filing of insider reports and reports of
acquisitions.
Dated at Los Angeles, California
this ______ day of _________________, 1999
Tomasovich Family Trust
____________________________________________
Name of Purchaser - please print)
____________________________________________
(Authorized Signature)
Trustee
____________________________________________
(Official Capacity - please print)
Theodore Tomasovich
____________________________________________
(please print name of individual whose
signature appears above, if different from
name of purchaser printed above)
Exhibit 10.7
UNIT SUBSCRIPTION AGREEMENT
This Agreement made the 11th day of March, 1999
BETWEEN:
Delbert Steiner
3555 Country Club Drive
Lewiston, Idaho 83501
the "Subscriber")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a company incorporated under
the laws of British Columbia, having its principal office at 540 Main
Street, Suite 470, Lewiston, Idaho, 83501
(the "Company")
WHEREAS the Company has agreed to sell securities by way of
private placement by way of the sale of Units (as hereinafter defined) at a
price of U.S.$0.10 per Unit (Cdn.$0.15 per Unit) and the Subscriber has agreed
to participate in the private placement.
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration
of the mutual promises and agreements herein contained, the parties agree each
with the other as follows:
Subscription
- ------------
1. Subject to the terms of this Agreement, the Subscriber hereby irrevocably
subscribes for 75,800 units (the "Units"), each Unit consisting of one common
share (the "Share") in the capital stock of the Company and one non-transferable
common share purchase warrant (the "Warrant"), at a price of U.S.$0.10 per Unit
(Cdn.$0.15 per Unit) and agrees to pay the total subscription price of U.S.$0.10
or Cdn.$0.15 (the "Subscription Proceeds") by delivering to the Company,
concurrently with the execution and delivery of this Agreement, a cheque in
favour of the Company in the amount of the Subscription Proceeds.
Registration and Delivery
- -------------------------
2. The Company will cause the Shares to be issued as fully paid and
non-assessable and the Warrants to be created and issued on the Closing Date (as
hereafter defined) and shall register the share certificates representing the
Shares and the warrant certificate representing the Warrants in accordance with
the instructions from the Subscriber set out on Appendix I hereto.
<PAGE>
Certificates representing the Shares and the Warrants will be available for
delivery on the Closing Date and shall be delivered to the address specified by
the Subscriber on Appendix I.
Closing Date
- ------------
3. The closing of the private placement as contemplated hereby shall be
completed on or before the fifth business day after receipt by the Company of
written notification of acceptance by the Vancouver Stock Exchange (the
"Exchange") of final documentation in connection with the private placement, or
on such later date as the Company and the Subscriber may agree (the "Closing
Date"). The Company may, in its sole discretion, close the private placement in
one or more tranches.
Warrants
- --------
4. The Warrants shall be non-transferable and one Warrant shall entitle the
Subscriber to purchase one common share (the "Warrant Share") in the capital
stock of the Company for a term of two years from the Closing Date at a price of
U.S.$0.10 (Cdn.$0.15) per Warrant Share in the first year and at a price of
U.S.$0.12 (Cdn.$0.18) per Warrant Share in the second year. The terms and
conditions governing the Warrants shall contain provisions, inter alia, for
appropriate adjustment in the class, number and price of the shares issuable
pursuant to any exercise thereof upon the occurrence of certain events including
any subdivision, consolidation or reclassification of the shares, the payment of
stock dividends or the amalgamation of the Company.
Representations and Warranties of the Subscriber
- ------------------------------------------------
5. The Subscriber hereby represents and warrants to the Company that:
(a) the Subscriber, if a corporation, is a valid and subsisting
corporation under the laws of its incorporating jurisdiction, has the
necessary corporate capacity and authority to execute and deliver this
Agreement and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect
thereof, and this Agreement constitutes a legal, valid and binding
contract of the Subscriber enforceable against the Subscriber in
accordance with its terms;
(b) the Subscriber is either:
(i) a resident of the Province of British Columbia, or
(ii) not a resident of the Province of British Columbia but a resident
in the province or jurisdiction set out on the cover page of this
Agreement;
(c) if the Subscriber is a "U.S. Person" (as such term is defined in
Regulation S under the United States Securities Act of 1933 as amended
(the "1933 Act")):
(i) the Subscriber satisfies one or more of the categories indicated
below:
[CIRCLE APPLICABLE Category 1. A director or executive officer of the Company;
CATEGORY]
<PAGE>
Category 2. An organization described in Section 501(c)(3) of the
United States Internal Revenue Code, a corporation, a
Massachusetts or similar business trust or partnership, not
formed for the specific purpose of acquiring the Units, the
Shares, the Warrants and the Warrant Shares (together, the
"Securities"), with total assets in excess of U.S.$5,000,000;
Category 3. A trust that (a) has total assets in excess of
U.S.$5,000,000, (b) was not formed for the specific purpose of
acquiring the Securities and (c) is directed in its purchases of
Securities by a person who has such knowledge and experience in
financial and business matters that he/she is capable of
evaluating the merits and risks of an investment in the
Securities;
Category 4. An investment company registered under the Investment
Company Act of 1940 or a business development company as defined
in section 2(a)(48) of that Act;
Category 5. A small business investment company licensed by the
U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958;
Category 6. A small business investment company as defined in
section 202(a)(22) of the Investment Advisors Act of 1940;
Category 7. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the date hereof exceeds
U.S.$1,000,000;
Category 8. A natural person who had an individual income in
excess of U.S.$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of U.S.$300,000
in each of those years and has a reasonable expectation of
reaching the same income level in the current year; or,
Category 9. An entity in which all of the equity owners satisfy
the requirements of one or more of the foregoing categories.
(ii) the Subscriber is acquiring the Securities for his own account,
for investment purposes only and not with a view to any resale,
distribution or other disposition of the Securities in violation
of the United States securities laws;
(iii)the Subscriber understands that the Securities have not been and
will not be registered under the 1933 Act or the securities laws
of any state of the United States and that the sale contemplated
hereby is being made in reliance of an exemption from such
registration requirements;
(iv) the Subscriber has not purchased the Securities as a result of
any form of general solicitation or general advertising,
including advertisements,
<PAGE>
articles, notices or other communications published in any
newspaper, magazine or similar media or broadcast over radio, or
television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising;
(v) if the Subscriber decides to offer, sell or otherwise transfer
any of the Securities, the Subscriber will not offer, sell or
otherwise transfer any of such Securities directly or indirectly,
unless:
(A) the sale is to the Company;
(B) the sale is made outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under
the 1933 Act and in compliance with applicable local laws
and regulations;
(C) the sale is made pursuant to the exemption from the
registration requirements under the 1933 Act provided by
Rule 144 thereunder and in accordance with any applicable
state securities or "Blue Sky" laws; or
(D) the Securities are sold in a transaction that does not
require registration under the 1933 Act or any applicable
state laws and regulations governing the offer and sale of
Securities, and it has prior to such sale furnished to the
Company an opinion of counsel reasonably satisfactory to the
Company;
(vi) the certificates representing the Securities will bear a legend
stating that such shares have not been registered under the 1933
Act or the securities laws of any state of the United States and
may not be offer for sale or sold unless registered under the
1933 Act and the securities laws of all applicable states of the
United States or an exemption from such registration requirements
is available (the "U.S. Legend");
(vii)the Subscriber understands and agrees that there may be material
tax consequences to a Subscriber of an acquisition or disposition
of the Securities. The Company gives no opinion and makes no
representation with respect to the tax consequences to a
Subscriber under United States, state, local or foreign tax law
of the undersigned's acquisition or disposition of such
Securities. In particular, no determination has been made whether
the Company will be a "passive foreign investment company"
("PFIC") within the meaning of Section 1291 of the United States
Internal Revenue Code;
(viii) the Subscriber consents to the Company making a notation on its
records or giving instructions to any transfer agent of the
Company in order to implement the restrictions on transfer set
forth and described herein;
(d) the Subscription Proceeds are not being used to settle outstanding
debts of the Company to the Subscriber or, if the Subscription
Proceeds are being used to settle
<PAGE>
outstanding debt owing by the Company to the Subscriber, then the
Subscriber is not permitted to receive Warrants comprised in the Units
on that part of their subscription that corresponds to the amount of
the outstanding debt;
(e) the Subscriber is purchasing the Units as principal and no other
person, corporation, firm or other organization will have a beneficial
interest in the Units and the Subscriber is:
(i) purchasing sufficient Units so that the aggregate acquisition
cost of the Units to the Subscriber is not less than Cdn.$97,000,
the Subscriber is not a corporation, partnership, trust, fund,
association or any other organized group of persons created
solely, or used primarily, to permit the purchase of the Units
(or other similar purchases) by a group of individuals whose
individual share of the aggregate acquisition cost of the Units
is less than Cdn.$97,000 and the Purchaser is purchasing the
Units as principal and no other person, corporation, firm or
other organization will have a beneficial interest in the Units;
OR
(ii) either:
(A) a spouse, parent, brother, sister or child of a
director or senior officer of the Company or of an
affiliate of the Company,
(B) a close personal friend of a director or senior officer
of the Company, being a person who has known the
director or senior officer for a number of years and
who, through personal knowledge and friendship, is in a
position to access the capabilities and the
trustworthiness of the director or senior officer, and
is not a person who is a casual business associate of a
director or senior officer or a person introduced or
solicited for the purpose of purchasing securities; or
(C) a corporation, all of the voting securities of which
are beneficially owned by one or more of a director or
senior officer of the Company or of an affiliate of the
Company or by one or more of a spouse, parent, brother
or sister, child or close personal friend of a director
or senior officer of the Company or of an affiliate of
the Company, OR
(iii) either:
(A) a senior officer or director of the Company or a senior
officer or director of an affiliate of the Company; (B)
a person who is considered under the Income Tax Act to
be an employee of the Company or of a person providing
management services to the Company so long as that
person is not induced to purchase by expectation of
employment or continued employment; (C) a person who is
a full time dependent contractor working full time for
the Company, or for a person providing management
services
<PAGE>
to the Company, providing services normally provided by
an employee and is subject to the same control and
direction by the Company over the details and methods
of work as an employee of the Company, but for whom
income tax deductions are not made at source so long as
that person is not induced to purchase by expectation
of employment or continued employment; (D) a person who
is a part time dependent contractor working part time
for the Company, or for a person providing management
services to the Company, on a continuing and regular
basis for a minimum amount of time per week, providing
services normally provided by an employee and is
subject to the same control and direction by the
Company over the details and methods of work as an
employee of the Company, but for whom income tax
deductions are not made at source so long as that
person is not induced to purchase by expectation of
employment or continued employment; or (E) an issuer
all of the voting securities of which are beneficially
owned by one or more of the persons referred to in
subsections 5.(e)(iii)(A), (B), (C) or (D); OR
(iv) not a resident of the Province of British Columbia;
(f) to the best of the Subscriber's knowledge, the sale of the Units was
not advertised;
(g) the Subscriber is aware that the Units will be distributed under a
special exemption from the registration and prospectus requirements of
the British Columbia Securities Act (the "B.C. Act") and states that
the Units are not being acquired as a result of any information about
the affairs of the Company that is not generally known to the public
save knowledge of this particular transaction;
(h) the Subscriber is not a "control person" of the Company as defined in
the B.C. Act and will not become a "control person" of the Company by
virtue of the purchase of the Units pursuant to this subscription and
does not intend to act in concert with any other person to form a
control group;
(i) the Subscriber has been independently advised as to the applicable
hold period imposed in respect of Securities by securities legislation
in the jurisdiction in which the Subscriber resides and confirms that
no representation has been made respecting the applicable hold periods
for the Securities in such jurisdiction and is aware of the risks and
other characteristics of the Securities and of the fact that the
Subscriber may not be able to resell the Securities except in
accordance with the applicable securities legislation and regulatory
policies; and
(j) the offer made by this subscription is irrevocable and requires
acceptance by the Company and the acceptance of the Exchange.
Acknowledgements and Covenants of the Subscriber
- ------------------------------------------------
6. The Subscriber hereby acknowledges and covenants that:
<PAGE>
(a) no securities commission or similar regulatory authority has reviewed
or passed on the merits of the Securities;
(b) there is no government or other insurance covering the Securities;
(c) there are risks associated with the purchase of the Securities;
(d) there are restrictions on the Subscriber's ability to resell the
Securities and it is the responsibility of the Subscriber to find out
what those restrictions are and to comply with them before selling the
Securities;
(e) the Company has advised the Subscriber that the Company is relying on
an exemption from the requirements to provide the Subscriber with a
prospectus and to sell securities through a person registered to sell
securities under the B.C. Act and, as a consequence of acquiring
securities pursuant to this exemption, certain protections, rights and
remedies provided by the B.C. Act, including statutory rights of
rescission or damages, will not be available to the Subscriber;
(f) the Units to be issued pursuant to this Agreement and the Warrant
Shares will be issued under an exemption from the registration and
prospectus requirements of the B.C. Act and the Rules promulgated
thereto (the "Rules") and that the sale by the Subscriber of
Securities is, unless otherwise exempted under the B.C. Act or the
Rules, deemed to be a distribution to the public unless:
(i) if the Subscriber is an insider of the Company, other than a
director or senior officer of the Company, the Subscriber has
filed all records required to be filed under sections 87 (insider
reports) and 90 (personal information form) of the B.C. Act;
(ii) a twelve month period has elapsed from the Closing Date unless,
as at the Closing Date the Company is an "AIF Issuer" as defined
in the policies of the Exchange, in which event, the twelve month
hold period is reduced to a four month hold period from the
Closing Date;
(iii)the trade is not a distribution from the holdings of a control
person;
(iv) no unusual effort is made to prepare the market or to create a
demand for the Securities; and
(v) no extraordinary commission or consideration is paid in respect
of the trade; and
(g) the summary set forth in clause (f) above is based on the provisions
of the B.C. Act and the Rules as at the date hereof and is subject to
amendment and the Subscriber covenants that, prior to trading in the
Securities in British Columbia, the Subscriber will consult with the
Subscriber's own legal counsel in connection with the then applicable
resale rules.
<PAGE>
Representations and Warranties of the Company
- ---------------------------------------------
7. The Company represents and warrants to the Subscriber that:
(a) the Company has been duly incorporated and organized and is validly
existing and in good standing under the laws of the Province of
British Columbia; it has the corporate power to own or lease its
property and to carry on its business as currently conducted by it;
(b) it has the full power, legal right and authority to execute and
deliver this Agreement and has such power, legal right and authority
to do all such acts and things as are required hereunder to be done,
observed or performed by it, subject to and in accordance with the
terms hereof;
(c) all necessary corporate action of the directors of the Company to
authorize the execution, delivery and performance of this Agreement
has been taken; this Agreement has been duly executed and delivered on
behalf of the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable by the Subscriber in accordance
with its terms;
(d) the authorized capital of the Company consists of 100,000,000 common
shares without par value of which 9,980,804 common shares are validly
issued and outstanding as at February 1, 1999;
(e) the Warrant Shares to be allotted and issued pursuant to the due and
valid exercise, in whole or in part, of the Warrants will be duly and
validly allotted and authorized to be issued as fully paid and
non-assessable common shares upon receipt by the Company of full
payment therefor;
(f) the common shares of the Company are listed and posted for trading
only on the Exchange; and
(g) the Company is a reporting issuer only in British Columbia and it is
not in default under the B.C. Act.
Covenants of the Company
- ------------------------
8. The Company covenants with the Subscriber that:
(a) it will take all reasonable steps to remain in good standing under the
B.C. Act; and
(b) it will use its reasonable efforts to file an Annual Information Form
(as defined in Local Policy 3-17 of the British Columbia Securities
Commission) with the British Columbia Securities Commission prior to
the Closing Date so that by the Closing Date the Company will be an
"AIF Issuer" and therefore will be eligible for the shorter hold
period of four months instead of twelve months from the Closing Date.
Private Placement Questionnaire and Undertaking/Form 20A(IP)
- ------------------------------------------------------------
<PAGE>
9. The Subscriber hereby covenants and agrees to execute and deliver to the
Company the Private Placement Questionnaire and Undertaking as required by the
Exchange attached as Appendix II hereto, for filing with the Exchange in
connection with the subscription for Units hereunder.
Certificate Legend
- ------------------
10. The Subscriber acknowledges that the certificates representing the Shares,
the Warrants and the Warrant Shares, if any, will contain the following legend
in addition to the U.S. Legend, denoting the restrictions on transfer imposed by
the B.C. Act and Rules: "The securities represented by this certificate are
subject to a hold period and may not be traded in British Columbia until [twelve
months/four months, if applicable] from the Closing Date except as permitted by
the B.C. Act and Rules made thereunder."
Exchange Acceptance
- -------------------
11. This Agreement is subject to acceptance for filing by the Exchange.
Notices
- -------
12. Any notice, demand or other communication (in this paragraph, a "notice")
required or permitted to be given or made hereunder shall be in writing and
shall be sufficiently given or made if:
(a) delivered in person during normal business hours on a business day and
left with a receptionist or other responsible employee of the
addressee at the applicable address set forth above; or
(b) sent by facsimile transmission, charges prepaid and confirmed by
prepaid first class mail
in each case addressed to the relevant party as set forth on the first page of
this Agreement.
Each notice sent in accordance with this paragraph shall be
deemed to have been received on the day of delivery, if delivered as aforesaid
and, if sent by facsimile transmission, on the date of sending if sent during
normal business hours of the addressee on a business day and, if not, on the
first business day thereafter. Any party may change its address for notice by
giving notice to the other party in accordance with this paragraph.
Governing Law
- -------------
13. This Agreement shall be governed by and interpreted and enforced in
accordance with, the laws in force in the Province of British Columbia
(excluding any conflict of laws, rule or principle which might refer such
interpretation to the laws of the another jurisdiction). Each party hereto
irrevocably submits to the exclusive jurisdiction of the Courts of British
Columbia with respect to any matter arising hereunder or related hereto.
Time of Essence
- ---------------
<PAGE>
14. Time shall be of the essence of this Agreement and in the event the
acceptance referred to in paragraph 3 hereof has not been received from the
Exchange within 100 days from the date hereof, this Agreement shall thereafter
unless extended or continued by the parties hereto, be null and void and of no
further force and effect and the total subscription price for the Units will be
refunded to the Subscriber by the Company, without interest within ten days of
such termination.
Further Assurance
- -----------------
15. The parties hereto agree to do or cause to be done all acts or things
necessary to implement and carry into effect this Agreement to the full extent.
Assignment, Successors and Assigns
- ----------------------------------
16. This Agreement shall enure to the benefit of and be binding upon the parties
hereto, and their respective heirs, executors, administrators and successors.
Neither party may assign any of its interest in this Agreement.
Execution in Counterparts
- -------------------------
17. This Agreement may be executed in counterparts, and by facsimile, each of
which so signed shall be deemed to be an original and together the counterparts
shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties hereto have executed these
presents.
SUBSCRIBER:
"Delbert Steiner"
______________________________________________________
(signature of subscriber or authorized representative)
______________________________________________________
(name and address of subscriber - please print)
3555 Country Club Drive
Lewiston, Idaho 83501
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION )
was hereunto affixed in the presence of: )
)
Per: ) C/S
-------------------------------------------- )
Authorized Signatory )
)
<PAGE>
APPENDIX I
TO: IDAHO CONSOLIDATED METALS CORPORATION
Dear Sirs:
RE: Private Placement of Units
1. Registration - Registration of the share certificates and warrant
certificate which are to be delivered at closing should be as follows:
Del Steiner
-------------------------------------------------------------
(Name)
3555 Country Club Drive
-------------------------------------------------------------
(Address)
Lewiston, Idaho 83501
-------------------------------------------------------------
2. Delivery - Please deliver the share certificate and warrant certificate to:
Same as above
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
Dated March 10 , 1999
----------------------------
Delbert Steiner
------------------------------------------------------
(Name of Purchaser - please print)
"Delbert Steiner"
------------------------------------------------------
(Signature of Purchaser or Authorized Representative)
<PAGE>
APPENDIX II
APPENDIX 16A
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
1. DESCRIPTION OF TRANSACTION
a) Name of issuer of the securities
Idaho Consolidated Metals Corporation
----------------------------------------------------------------------
b) Number and description of securities to be purchased
758,000 Units, each Unit consisting of one common share and one
----------------------------------------------------------------------
non-transferable warrant
----------------------------------------------------------------------
c) Purchase price
U.S.$0.10 (Cdn.$0.15) per Unit
----------------------------------------------------------------------
2. DETAILS OF PURCHASER
a) Name of Purchaser Delbert Steiner
b) Address 3555 Country Club Drive, Lewiston, Idaho 83501
c) If the purchaser is a corporation, state the jurisdiction of
incorporation
d) Names and addresses of persons having a greater than 10% beneficial
interest in the purchaser, if a corporation or trust
<PAGE>
3. RELATIONSHIP TO LISTED COMPANY
a) State if the purchaser will become a control person with over 20% of
the company's issued share capital as a result of the purchase in
section 1 above.
N/A
----------------------------------------------------------------------
b) Does the purchaser own any securities of the issuer at the date
hereof, if so, give particulars. State the number of securities of the
listed company held by the purchaser not including the purchase in
section 1 above.
673,782 shares and options to purchase 210,000 shares
----------------------------------------------------------------------
4. PAYMENT DATE
a) State the date the purchaser has advanced full payment.
March 16, 1999
----------------------------------------------------------------------
b) If the purchase funds are held in trust pending receipt of final
regulatory approval identify the trustee and give particulars of the
condition(s) required for release of the funds.
N/A
----------------------------------------------------------------------
c) If the purchaser is an institutional investor and the funds have not
yet been advanced, give particulars of the condition(s) required for
the advance of funds.
N/A
----------------------------------------------------------------------
5. UNDERTAKING
*Last amended January 1998
TO: THE VANCOUVER STOCK EXCHANGE
The undersigned has subscribed for and agreed to purchase as principal, the
securities described in section 1 of this Private Placement Questionnaire and
Undertaking. (The purchase funds may be deposited in trust with advancement to
the Company subject only to receipt of all necessary regulatory approvals).
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
twelve months (four months if the
<PAGE>
issuer is an AIF Issuer as defined in the Definitions Section of the Manual)
from the payment day, without the prior consent of the Vancouver Stock Exchange
and any other regulatory body having jurisdiction. The undersigned acknowledges
that all certificates representing the said securities will bear a legend to the
effect that the certificates are subject to the applicable hold period.
The undersigned hereby certifies that the said securities are not being
purchased as a result of any material information about the Company's affairs
that has not been publicly disclosed. The undersigned acknowledges that it is
aware that the removal from the securities of any resale restriction after the
applicable twelve or four months that is imposed solely as a requirement of the
Vancouver Stock Exchange will not entitle it to sell the securities if such sale
would contravene any other applicable securities legislation or regulation.
6. ADDITIONAL UNDERTAKING AND CERTIFICATION
- PORTFOLIO MANAGER
If the undersigned is a portfolio manager purchasing as agent for accounts that
are fully managed by it, the undersigned acknowledges that it is bound by the
provisions of the Securities Act (British Columbia) (the "Act"), and undertakes
to comply with all provisions of the Act relating to ownership of, and trading
in, securities including, without limitation, the filing of insider reports and
reports pursuant to Section 111 of the Act.
If the undersigned carries on business as a portfolio manager in a jurisdiction
outside of Canada, the undersigned certifies that:
a) it is purchasing securities of the Issuer on behalf of managed accounts
over which it has absolute discretion as to purchasing and selling, and
in respect of which it receives no instructions from any person
beneficially interested in such accounts or from any other person;
b) it carries on the business of managing the investment portfolio of
clients through discretionary authority granted by those clients (a
"portfolio manager" business) in ________________________
[jurisdiction], and it is permitted by law to carry on a portfolio
manager business in that jurisdiction;
c) it was not created solely or primarily for the purpose of purchasing
securities of the Issuer;
d) the total asset value of the investment portfolios it manages on behalf
of clients is not less than $20,000,000;
e) it does not believe, and has no reasonable grounds to believe, that any
resident of British Columbia has a beneficial interest in any of the
managed accounts for which it is purchasing; and
f) the Issuer has provided it with a list of the directors, senior
officers and other insiders of the Issuer, and the persons that carry
on investor relations activities for the Issuer (which list is attached
as a schedule to this Appendix), and it does not believe, and has no
reasonable
<PAGE>
grounds to believe, that any of those persons has a beneficial interest
in any of the managed accounts for which it is purchasing, except as
follows:
_______________________________________________________
(name of insider(s) or person(s) carrying on investor
relations activities for the Issuer that have a
beneficial interest in an account)
The undersigned acknowledges that it is bound by the provisions of the British
Columbia Securities Act including, without limitation, sections 87 and 111
concerning the filing of insider reports and reports of acquisitions.
Dated at _________________________
this 15th day of March, 1999
Delbert Steiner
__________________________________
Name of Purchaser - please print)
"Delbert Steiner"
__________________________________
(Authorized Signature)
__________________________________
(Official Capacity - please print)
(please print name of individual
whose signature appears above, if
different from name of purchaser
printed above)
Exhibit 10.8
SCHEDULE TO SUBSCRIPTION AGREEMENTS
March 10, 1999
In addition to the Subscription Agreement dated March 10, 1999, between the
Company and Del Steiner, the Company on the same date granted shares to each of
the following subscribers:
<TABLE>
------------------------------------------------- ------------------------------
Name of Optionee No. of Shares
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
<S> <C>
Jack Kennedy 200,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Stan Moore 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Paul Rohde 150,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Kenneth A. Scott, Inc. 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Cardinal Forestry Consulting Co. Ltd. 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Sterling Securities Ltd. 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Michael C. Bousfield 225,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Robert S. Rein 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Bradford P. Shaffer 100,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
Myron P. Forst 50,000
------------------------------------------------- ------------------------------
------------------------------------------------- ------------------------------
David S. Consani 32,000
------------------------------------------------- ------------------------------
</TABLE>
Exhibit 10.9
STOCK OPTION AGREEMENT
(Director)
This Agreement made as of the 7th day of April, 1999.
BETWEEN:
DEL STEINER, of 3555 Country Club Drive, Lewiston, Idaho, U.S.A. 83501
(the "Optionee")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a body corporate having
its registered office at Suite 1040 Guinness Tower, 1055 West
Hastings
Street, Vancouver, British Columbia, V6E 2E9
(the "Company")
WHEREAS the Directors of the Company have authorized the
granting of options to purchase shares in the capital of the Company to the
Optionee as a director of the Company.
NOW THEREFORE THIS AGREEMENT WITNESSES:
DEFINITION
- ----------
1. In this Agreement the term "share" or "shares" means, as the case may be, one
or more Common shares without par value in the capital stock of the Company as
constituted at the date of this Agreement.
GRANTING OF OPTION
- ------------------
2. The Company hereby irrevocably grants to the Optionee, being one of the
directors of the Company, a non-assignable, non-transferable option to purchase
50,000 shares in the capital stock of the Company (hereinafter called the
"Option") at a price of Cdn.$0.49 (U.S.$0.34) per share (the "Option Price") on
the terms and conditions hereinafter set forth.
EXERCISE OF OPTION
- ------------------
3. The Option, or any part thereof, may be exercised by the Optionee at any
time, and from time to time during the period April 7, 1999 until and including
April 7, 2004 (the "Expiry Date") by notice in writing to the Company to that
effect. Any such notice given to the Company (an "Exercise Notice") shall
specify the number of shares with respect to which the Option is being exercised
and shall
<PAGE>
be accompanied by a cheque drawn on a Canadian chartered bank in favour of the
Company in full payment of the Option Price for the number of shares then being
purchased.
DELIVERY OF SHARE CERTIFICATE
- -----------------------------
4. The Company shall, within three business days after receipt of the Exercise
Notice deliver to the Optionee a share certificate representing the number of
shares with respect to which the Option was exercised and issued as of the date
of the Exercise Notice.
5. An Exercise Notice shall be deemed to have been given, if delivered, on the
date of delivery, or if mailed, on the date of mailing. A mailed Exercise Notice
shall be sent by prepaid registered mail addressed to the Company at its head
office address.
SHAREHOLDER APPROVAL
- --------------------
6. The granting of the Option was approved by at the Annual General Meeting held
on June 17, 1998 by the members of the Company as part of the general approval
for the granting of new stock options to insiders of the Company passed by
ordinary resolution of the members of the Company.
FILING WITH VANCOUVER STOCK EXCHANGE
- ------------------------------------
7. This Agreement is required to be accepted for filing by the Vancouver Stock
Exchange (the "Exchange") and the Optionee hereby agrees to be bound by any
modification of the terms and conditions of the Option as may be required by the
Exchange.
FIRST TRADE: EXCHANGE ISSUER
- -----------------------------
8. The Optionee acknowledges that any shares issued to the Optionee as a result
of the exercise of the Option will be issued under an exemption from the
registration and prospectus requirements of the British Columbia Securities Act
and Rules thereto as amended (the "Act") and that the sale by the Optionee of
shares acquired pursuant to the exercise of this Option is, except as otherwise
provided in the Act, a distribution to the public unless:
(a) the Optionee has filed all records required to be filed under
sections 87 (insider reports) and 90 (personal information
form) of the Act;
(b) the Company has filed all records to be filed under Part 12
of the Act and the Rules thereto (Continuous Disclosure);
(c) the trade is not a distribution from the holdings of a control
person;
(d) no unusual effort is made to prepare the market or create a
demand for the shares; and
(e) no extraordinary commission or other consideration is paid in
respect of the trade.
9. The Company hereby covenants with the Optionee that it will take all
reasonable steps to remain not in default of any requirement of the Act during
the term of the Option.
<PAGE>
The Optionee also acknowledges that the Optionee has been
independently advised as to restrictions with respect to trading in the shares
acquired pursuant to the exercise of the Option imposed by the applicable
securities legislation in the jurisdiction where the Optionee resides, confirms
that no representation has been made respecting the applicable hold period for
the shares in such jurisdiction, that the Optionee is aware of the
characteristics of the shares, the risks relating to and investment therein, and
of the fact that the Optionee may not be able to resell the shares except in
accordance with limited exemptions under applicable securities legislation and
regulatory policy.
ACKNOWLEDGEMENTS OF THE OPTIONEE
- --------------------------------
10. The Optionee hereby acknowledges that:
(a) the Option and any shares issued on exercise of the Option
(the "Option Shares") (together the "Securities") have not
been and will not be, registered under United States
Securities Act of 1933 (the "1933 Act") but are to be issued
to the Optionee under an available exemption under the 1933
Act;
(b) the certificates representing the Option Shares will bear an
appropriate restrictive legend as follows:
"The securities represented hereby have not been and will not
be registered under the United States Securities Act of 1933,
as amended (the "Securities Act"), or the securities laws of
any state of the United States and may not be offered, sold,
or otherwise transferred or assigned except (a) to the
Company, (b) outside the United States in accordance with
Regulation S under the Securities Act, or (c) inside the
United States (1) pursuant to the exemption from registration
under the Securities Act provided by Rule 144 thereunder, if
available, and in compliance with applicable state securities
laws or (2) in a transaction that does not require
registration under the Securities Act or any applicable state
securities laws, and, in connection with any transfers
pursuant to (c)(1) or (c)(2) above, the Seller has furnished
to the Company an opinion of counsel of recognized standing,
reasonably satisfactory to the Company, to that effect; and
(c) the Optionee will execute and deliver to the Company such
investment representations, documentation and financial and
other information deemed necessary by the Company upon which
the Company may rely to support the exemptions claimed.
CAPITAL REORGANIZATION
- ----------------------
11. In the event the authorized capital of the Company as presently constituted
is consolidated into a lesser number of shares or subdivided into a greater
number of shares, the number of shares in respect of which the Option remains
unexercised shall be decreased or increased proportionately as the case may be,
and the then prevailing purchase price to be paid by the Optionee for each such
share shall be correspondingly decreased or increased as applicable. In the
event the Company shall determine to amalgamate or merge with any other company
or companies (and the right to do so is hereby expressly reserved) whether by
way of statutory amalgamation, sale of its assets and undertaking, or otherwise
howsoever, then and in each such event the number of shares in the corporation
resulting from such amalgamation or merger in respect of which the Option
remains unexercised shall be such number of
<PAGE>
shares in that corporation as would have been acquired by the Optionee pursuant
to the amalgamation or merger had the Option been fully exercised immediately
prior to the date of such amalgamation or merger and the then prevailing
purchase price of the shares to be paid by the Optionee shall be correspondingly
decreased or increased as applicable.
EFFECT OF A TAKE-OVER
- ---------------------
12. If a bona fide offer (the "Offer") for shares is made to the Optionee or to
members generally or to a class of members which includes the Optionee, which
Offer constitutes a take over bid within the meaning of section 92(1) of the
Act, the Company shall, immediately upon receipt of notice by the offer, notify
the Optionee of full particulars of the Offer, whereupon the Option held by the
Optionee may be exercised in whole or in part by the Optionee so as to permit
the Optionee to tender the shares received upon such exercise (the "Optioned
Shares") to the Offer. If:
(a) the Offer is not completed within the time specified
therein; or
(b) all of the Optioned Shares tendered by the Optionee
pursuant to the offer are not taken up and paid for
by the offeror pursuant thereto;
the Optioned Shares, in the case of clause (b) above, the Optioned Shares that
are not taken up and paid for, may be returned by the Optionee to the Company
and reinstated as authorized but unissued shares and with respect to such
returned Optioned Shares, the Option shall be reinstated as if it has not been
exercised. If any Optioned Shares are returned to the Company under this
section, the Company shall refund the exercise price to the Optionee for such
Optioned Shares.
ASSIGNMENT OF OPTION
- --------------------
13. The Option is not assignable or transferable to any person except that the
Option may be assigned to a personal corporation beneficially wholly owned by
the Optionee with the prior written consent of the Company and the Exchange.
TERMINATION OF OPTION
- ---------------------
14. The Option shall terminate 30 days following the date upon which the
Optionee ceases to be a director of the Company; provided, however, that if such
cessation is due to the death of the Optionee, then the Option will not
terminate until the earlier of the Expiry Date and that date which is 12 months
after the date of death of the Optionee during which period the personal
representative of the Optionee shall have the right to exercise any unexercised
part of the Option.
AMENDMENT OF MATERIAL TERMS
- ---------------------------
15. Any amendment to the Option is subject to approval by ordinary resolution of
the members of the Company entitled to vote at a general meeting of the Company
and to acceptance for filing by the Exchange.
TIME OF THE ESSENCE
- -------------------
16. Time shall be of the essence of this Agreement.
<PAGE>
SUCCESSORS
- ----------
17. This Agreement shall enure to the benefit of and be binding upon the heirs,
executors, administrators and permitted assigns of the Optionee and the
successors of the Company.
IN WITNESS WHEREOF the parties hereto have caused these
presents to be executed as of the day and year first above written.
SIGNED, SEALED AND DELIVERED BY DEL STEINER in the presence of)
)
)
Name )
)
Address )_______________
)DEL STEINER
- ----------------------------------------------------- )
)
)
- ----------------------------------------------------- )
Occupation )
)
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION )
was hereunto affixed in the presence of )
)
Per: )
Authorized Signatory ) C/S
)
Exhibit 10.10
SCHEDULE TO DIRECTOR'S STOCK OPTION AGREEMENT
April 13, 1999
In addition to the Director's Stock Option Agreement dated April 13, 1999,
between the Company and Delbert Steiner, the Company on the same date granted
options to purchase Common shares in the capital stock of the Company on
identical terms to the option granted to Mr. Steiner to the following
individuals in the following amounts:
<TABLE>
------------------------------------------- ---------------------------
Name of Optionee No. of Shares
------------------------------------------- ---------------------------
<S> <C>
Theodore Tomasovich 50,000
------------------------------------------- ---------------------------
------------------------------------------- ---------------------------
Robert Young 50,000
------------------------------------------- ---------------------------
------------------------------------------- ---------------------------
Jag Vyas 50,000
------------------------------------------- ---------------------------
</TABLE>
Exhibit 10.11
STOCK OPTION AGREEMENT
(Employee)
This Agreement made as of the 7th day of April, 1999.
BETWEEN:
WILFRIED STRUCK, of 2303 7th Avenue, Lewiston, Idaho, USA 83501
(the "Optionee")
AND:
IDAHO CONSOLIDATED METALS CORPORATION, a body corporate having
its registered office at Suite 1040 - Guinness Tower, 1055
West Hastings
Street, Vancouver, British Columbia, V6E 2E9
(the "Company")
WHEREAS the Optionee is employed by the Company as
Vice-President, Chief Operating Officer, Mining and Exploration for the Company.
AND WHEREAS the Company wishes to maintain the continued
services of and to provide incentive to the Optionee and to this end is desirous
of granting to the Optionee an option to purchase shares in the capital stock of
the Company subject to the terms and conditions hereinafter contained.
NOW THEREFORE THIS AGREEMENT WITNESSES:
DEFINITION
- ----------
1. In this Agreement the term "share" or "shares" means, as the case may be, one
or more Common shares without par value in the capital stock of the Company as
constituted at the date of this Agreement.
REPRESENTATIONS AND WARRANTIES
- ------------------------------
2. The Company and the Optionee each represent and warrant to the other that the
Optionee is a bona fide employee of the Company and the Optionee has been
employed by the Company as Vice-President, Chief Operating Officer, Mining and
Exploration of the Company.
GRANTING OF OPTION
- ------------------
<PAGE>
3. The Company hereby irrevocably grants to the Optionee a non-assignable,
non-transferable option to purchase 50,000 shares in the capital stock of the
Company (hereinafter called the "Option") at a price of Cdn.$0.49 (U.S.$0.34)
per share (the "Option Price") on the terms and conditions hereinafter set
forth.
EXERCISE OF OPTION
- ------------------
4. The Option, or any part thereof, may be exercised by the Optionee at any
time, and from time to time during the period April 7, 1999 until and including
April 7, 2004 (the "Expiry Date") by notice in writing to the Company to that
effect. Any such notice given to the Company (an "Exercise Notice") shall
specify the number of shares with respect to which the Option is being exercised
and shall be accompanied by a cheque drawn on a Canadian chartered bank in
favour of the Company in full payment of the Option Price for the number of
shares then being purchased.
DELIVERY OF SHARE CERTIFICATE
- -----------------------------
5. The Company shall, within three business days after receipt of the Exercise
Notice deliver to the Optionee a share certificate representing the number of
shares with respect to which the Option was exercised and issued as of the date
of the Exercise Notice.
6. An Exercise Notice shall be deemed to have been given, if delivered, on the
date of delivery, or if mailed, on the date of mailing. A mailed Exercise Notice
shall be sent by prepaid registered mail addressed to the Company at its head
office address.
FILING WITH VANCOUVER STOCK EXCHANGE/SHAREHOLDER APPROVAL
- ---------------------------------------------------------
7. This Agreement is required to be filed with the Vancouver Stock Exchange (the
"Exchange") and the Optionee hereby agrees to be bound by any modification of
the terms and conditions of the Option as may be required by the Exchange. The
Optionee acknowledges that it is a condition of the Exchange that shareholder
approval to the grant of options is obtained prior to the exercise of options
granted to insiders of the Company as defined in the British Columbia Securities
Act and the Rules thereto (the "Act"). In this connection, the granting of the
Option was approved at the annual general meeting of the Company held on June
17, 1998, by the members of the Company as part of the general approval for the
granting of new stock options to insiders of the Company passed by ordinary
resolution of the members of the Company.
FIRST TRADE: EXCHANGE ISSUER
- -----------------------------
8. The Optionee acknowledges that any shares issued to the Optionee as a result
of the exercise of the Option will be issued under an exemption from the
registration and prospectus requirements of the Act and that the sale by the
Optionee of shares acquired pursuant to the exercise of this Option is, except
as otherwise provided in the Act, a distribution to the public unless:
(a) the Optionee has filed all records required to be filed under
sections 87 (Insider Reports) and 90 (Personal Information
Form) of the Act;
(b) the Company has filed all records to be filed under part 12 of
the Act (Continuous Disclosure);
<PAGE>
(c) the trade is not a distribution from the holdings of the
control person;
(d) no unusual effort is made to prepare the market and create a
demand for the shares; and
(e) no extraordinary commission or other consideration is paid in
respect of the trade.
The Optionee also acknowledges that the Optionee has been
independently advised as to restrictions with respect to trading in the shares
acquired pursuant to the exercise of the Option imposed by the applicable
securities legislation in the jurisdiction where the Optionee resides, confirms
that no representation has been made respecting the applicable hold period for
the shares in such jurisdiction, that the Optionee is aware of the
characteristics of the shares, the risks relating to and investment therein, and
of the fact that the Optionee may not be able to resell the shares except in
accordance with limited exemptions under applicable securities legislation and
regulatory policy.
ACKNOWLEDGEMENTS OF THE OPTIONEE
- --------------------------------
9. The Optionee hereby acknowledges that:
(a) the Option and any shares issued on exercise of the Option
(the "Option Shares") (together the "Securities") have not
been and will not be, registered under United States
Securities Act of 1933 (the "1933 Act") but are to be issued
to the Optionee under an available exemption under the 1933
Act;
(b) the certificates representing the Option Shares will bear an
appropriate restrictive legend as follows:
"The securities represented hereby have not been and will not
be registered under the United States Securities Act of 1933,
as amended (the "Securities Act"), or the securities laws of
any state of the United States and may not be offered, sold,
or otherwise transferred or assigned except (a) to the
Company, (b) outside the United States in accordance with
Regulation S under the Securities Act, or (c) inside the
United States (1) pursuant to the exemption from registration
under the Securities Act provided by Rule 144 thereunder, if
available, and in compliance with applicable state securities
laws or (2) in a transaction that does not require
registration under the Securities Act or any applicable state
securities laws, and, in connection with any transfers
pursuant to (c)(1) or (c)(2) above, the Seller has furnished
to the Company an opinion of counsel of recognized standing,
reasonably satisfactory to the Company, to that effect; and
(c) the Optionee will execute and deliver to the Company such
investment representations, documentation and financial and
other information deemed necessary by the Company upon which
the Company may rely to support the exemptions claimed.
CAPITAL REORGANIZATION
- ----------------------
10. In the event the authorized capital of the Company as presently constituted
is consolidated into a lesser number of shares or subdivided into a greater
number of shares, the number of shares in
<PAGE>
respect of which the Option remains unexercised shall be decreased or increased
proportionately as the case may be, and the then prevailing purchase price to be
paid by the Optionee for each such share shall be correspondingly decreased or
increased as applicable. In the event the Company shall determine to amalgamate
or merge with any other company or companies (and the right to do so is hereby
expressly reserved) whether by way of statutory amalgamation, sale of its assets
and undertaking, or otherwise howsoever, then and in each such event the number
of shares in the corporation resulting from such amalgamation or merger in
respect of which the Option remains unexercised shall be such number of shares
in that corporation as would have been acquired by the Optionee pursuant to the
amalgamation or merger had the Option been fully exercised immediately prior to
the date of such amalgamation or merger and the then prevailing purchase price
of the shares to be paid by the Optionee shall be correspondingly decreased or
increased as applicable.
EFFECT OF A TAKE-OVER
- ---------------------
11. If a bona fide offer (the "Offer") for shares is made to the Optionee or to
members generally or to a class of members which includes the Optionee, which
Offer constitutes a take over bid within the meaning of section 92(1) of the
Act, the Company shall, immediately upon receipt of notice by the offer, notify
the Optionee of full particulars of the Offer, whereupon the Option held by the
Optionee may be exercised in whole or in part by the Optionee so as to permit
the Optionee to tender the shares received upon such exercise (the "Optioned
Shares") to the Offer. If:
(a) the Offer is not completed within the time specified therein;
or
(b) all of the Optioned Shares tendered by the Optionee pursuant
to the offer are not taken up and paid for by the offeror
pursuant thereto;
the Optioned Shares, in the case of clause (b) above, the Optioned Shares that
are not taken up and paid for, may be returned by the Optionee to the Company
and reinstated as authorized but unissued shares and with respect to such
returned Optioned Shares, the Option shall be reinstated as if it has not been
exercised. If any Optioned Shares are returned to the Company under this
section, the Company shall refund the exercise price to the Optionee for such
Optioned Shares.
ASSIGNMENT OF OPTION
- --------------------
12. The Option is not assignable or transferable to any person except that the
Option may be assigned to a personal corporation beneficially wholly owned by
the Optionee with the prior written consent of the Company and the Exchange.
TERMINATION OF OPTION
- ---------------------
13. The Option shall terminate 30 days following the date upon which the
Optionee fails to take or ceases, for any reason or cause whatsoever, employment
with the Company during the term of this Agreement. Notwithstanding the
foregoing, if the Optionee should cease to be an employee of the Company but
become:
(a) an employee of a subsidiary of the Company, or
(b) an employee of a person or company providing management
services to the Company,
<PAGE>
the Option will not terminate, but will continue in full force and effect and
the Optionee may exercise the Option as if the Optionee had been continuously
employed since the date of this Agreement. If such cessation of employment is
due to the death of the Optionee, then the Option will not terminate until the
earlier of the Expiry Date and that date which is 12 months after the date of
death of the Optionee during which period the personal representative of the
Optionee shall have the right to exercise any unexercised part of the Option.
AMENDMENT OF MATERIAL TERMS
- ---------------------------
14. Any amendment to the Option is subject to approval by ordinary resolution of
the members of the Company entitled to vote at a general meeting of the Company.
TIME OF THE ESSENCE
- -------------------
15. Time shall be of the essence of this Agreement.
SUCCESSORS
- ----------
16. This Agreement shall enure to the benefit of and be binding upon the heirs,
executors, administrators and permitted assigns of the Optionee and the
successors of the Company.
IN WITNESS WHEREOF the parties hereto have caused these
presents to be executed as of the day and year first above written.
SIGNED, SEALED AND DELIVERED BY WILFRIED STRUCK in the )
presence of )
)
)
Name )
)
Address )WILFRIED STRUCK
)
- ----------------------------------------------------- )
)
)
- -----------------------------------------------------
Occupation )
THE CORPORATE SEAL of IDAHO CONSOLIDATED METALS CORPORATION )
was hereunto affixed in the presence of )
)
Per: )
Authorized Signatory ) C/S
)
Exhibit 10.12
SCHEDULE TO EMPLOYEE'S STOCK OPTION AGREEMENT
April 7, 1999
In addition to the Employee's Stock Option Agreement dated April 7, 1999,
between the Company and Wilfried Struck, the Company on the same date granted
options to purchase Common shares in the capital stock of the Company on
identical terms to the option granted to Mr. Struck to the following individuals
in the following amounts:
<TABLE>
------------------------------------------- ---------------------------
Name of Optionee No. of Shares
------------------------------------------- ---------------------------
<S> <C>
Ken Scott 50,000
------------------------------------------- ---------------------------
------------------------------------------- ---------------------------
Trudy Weed 50,000
------------------------------------------- ---------------------------
------------------------------------------- ---------------------------
Vanessa Gill 15,000
------------------------------------------- ---------------------------
------------------------------------------- ---------------------------
Arthur Glover 100,000
------------------------------------------- ---------------------------
</TABLE>
Exhibit 22.1
IDAHO CONSOLIDATED METALS CORP.
NOTICE OF ANNUAL & EXTRAORDINARY GENERAL MEETING OF MEMBERS
NOTICE IS HEREBY GIVEN that an Annual and Exptraordinary General Meeting of
Members of Idaho Consolidated Metals Corp. (hereinafter called the "Company")
will be held at the Wedgewood Hotel, 845 Hornby Street, Vancouver, British
Columbia, on Monday, the 28th day of June, 1999, at the hour of 11:00 a.m.
(local time), for the following purposes:
(a) To receive the report of the Directors;
(b) To receive the financial statements of the Company for the
fiscal year ended December 31, 1998, together with the report
of the auditors thereon;
(c) To appoint auditors and to authorize the Directors to fix
their remuneration;
(d) To elect Directors;
(e) To consider and, if thought fit, to pass an ordinary
resolution as set out in the Information Circular to approve
any alterations to existing stock options to insiders and the
granting of new stock options to insiders during the ensuing
year; and
(f) To transact such further or other business as may properly
come before the meeting or any adjournment or adjournments
thereof.
The Company's Annual Report, including the Directors' Report to the
Members, Management Discussion and Analysis and the financial statements of the
Company for the fiscal year ended December 31, 1998, including the Auditors'
report thereon, accompanies this Notice.
Members who are unable to attend the meeting are requested to read the
notes included in the form of Proxy enclosed and then to complete, date, sign
and mail the enclosed form of Proxy in accordance with the instructions set out
in the Proxy and in the Information Circular accompanying this Notice.
This Notice and the form of Proxy are being first furnished to members
of the Company on approximately May 20, 1999. The accompanying Information
Circular provides additional information relating to the matters to be dealt
with at the meeting and is incorporated by reference into and deemed to form
part of this Notice. The board of directors has fixed the close of business on
May 14, 1999 as the record date for the determination of members entitled to
notice of the meeting or any adjournment or adjournments thereof and the right
to vote thereat.
DATED at Vancouver, British Columbia, this 18th day of May, 1999.
BY ORDER OF THE BOARD
"DELBERT W. STEINER"
Delbert W. Steiner,
President
================================================================================
If you are a non-registered shareholder of the Company and receive these
materials through your broker or through another intermediary, please complete
and return the materials in accordance with the instructions provided to you by
your broker or by the other intermediary. Failure to do so may result in your
shares not being eligible to be voted by proxy at the meeting.
================================================================================
<PAGE>
IDAHO CONSOLIDATED METALS CORP.
P.O. Box 1124
504 Main Street, Suite 470
Lewiston, Idaho
USA 83501
Telephone: (208) 743-0914
INFORMATION CIRCULAR
as at May 18, 1999
SOLICITATION OF PROXIES
This Information Circular is furnished in connection with the solicitation of
proxies by the management of Idaho Consolidated Metals Corp. (the "Company") for
use at the Annual and Extraordinary General Meeting of Members of the Company to
be held on Monday, June 28, 1999 (the "Meeting") and any adjournment thereof at
the time and place and for the purposes set forth in the accompanying Notice of
Meeting. While it is expected that the solicitation will be primarily by mail,
proxies may be solicited personally or by telephone or e-mail by the directors
and regular employees of the Company. All costs of solicitation will be borne by
the Company.
APPOINTMENT AND REVOCATION OF PROXIES
The individuals named in the accompanying form of proxy are the President and a
Director of the Company. A MEMBER WISHING TO APPOINT SOME OTHER PERSON (WHO NEED
NOT BE A MEMBER) TO REPRESENT HIM AT THE MEETING HAS THE RIGHT TO DO SO, EITHER
BY INSERTING SUCH PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY
AND STRIKING OUT THE TWO PRINTED NAMES OR BY COMPLETING ANOTHER FORM OF PROXY. A
proxy will not be valid unless the completed, dated and signed form of proxy is
received by Montreal Trust Company of Canada, 4th Floor, 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9, not less than 48 hours (excluding
Saturdays, Sundays and holidays) before the time for holding the Meeting or any
adjournment thereof, or is delivered to the Chairman of the Meeting prior to the
commencement of the Meeting or an adjourned meeting.
A member who has given a proxy may revoke it by an instrument in writing
executed by the member or by his attorney authorized in writing or, where the
member is a corporation, by a duly authorized officer or attorney of the
corporation, and delivered either to the registered office of the Company, 1040
- - 1055 West Hastings Street, Vancouver, British Columbia, V6E 2E9, at any time
up to and including the last business day preceding the day of the Meeting, or
if adjourned, any reconvening thereof, or to the Chairman of the Meeting on the
day of the Meeting or, if adjourned, any reconvening thereof or in any other
manner provided by law. A revocation of a proxy does not affect any matter on
which a vote has been taken prior to the revocation.
EXERCISE OF DISCRETION
Shares represented by proxy are only entitled to be voted on any poll and, where
a choice with respect to any matter to be acted upon has been specified in the
form of proxy, the shares will, on a poll, be voted or withheld from voting in
accordance with the specification so made.
SUCH SHARES WILL ON A POLL BE VOTED FOR EACH MATTER FOR WHICH NO CHOICE HAS BEEN
SPECIFIED BY THE MEMBER.
<PAGE>
The enclosed form of proxy when properly completed and delivered and not revoked
confers discretionary authority upon the person appointed proxy thereunder to
vote with respect to amendments or variations of matters identified in the
Notice of Meeting, and with respect to other matters which may properly come
before the Meeting. In the event that amendments or variations to matters
identified in the Notice of Meeting are properly brought before the Meeting or
any further or other business is properly brought before the Meeting, it is the
intention of the persons designated in the enclosed form of proxy to vote in
accordance with their best judgment on such matters or business. At the time of
the printing of this Information Circular, the management of the Company knows
of no such amendment, variation or other matter which may be presented to the
Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As at the date hereof, the Company has issued and outstanding 13,514,181 fully
paid and non-assessable Common shares, each share carrying the right on a poll
to one vote. THE COMPANY HAS NO OTHER CLASSES OF VOTING SECURITIES.
Any Member of record at the close of business on May 14, 1999 who either
personally attends the Meeting or who has completed and delivered a form of
proxy in the manner and subject to the provisions described above shall be
entitled to vote or to have his shares voted at the Meeting.
To the knowledge of the directors and senior officers of the Company, the only
person or company who beneficially owns, directly or indirectly, or exercises
control or direction over shares carrying more than 10% of the voting rights
attached to all outstanding shares of the Company is:
- ---------------------- ---------------------- =======================
Name No. of Shares Percentage
- ---------------------- ---------------------- =======================
- ---------------------- ---------------------- =======================
CDS & Co.(1) ............. 4,694,617 34.74%
Tomasovich Family Trust(2) 3,598,142 26.62%
CEDE & Co.(1) ............ 1,720,334 12.73%
Delbert W. Steiner ....... 1,431,782 10.59%
- -------------------------- ------------------ =======================
NOTES:
(1) The Company has no knowledge of the beneficial ownership of these shares.
(2) The Tomasovich Family Trust is controlled by Theodore Tomasovich, a director
of the Company.
At the Annual and Extraordinary General Meeting of the Members held on June 17,
1998, the members approved the possible change of control of the Company to the
Tomasovich Family Trust (the "Trust") and Theodore Tomasovich, a director of the
Company of 600 Wilshire Blvd., Suite 1410, Los Angles, California, 90017 which
at that time might have occured as a result of the acquisition of convertible
securities of the Company by the Tomasovich Family Trust by private placement.
Theodore Tomasovich, a director of the Company, is the trustee of the Trust and
has voting control of the Trust. Over the past year, the Trust has participated
in a number of private placements to finance the Company. As at the date hereof,
the Trust together with Theodore Tomasovich who is acting jointly or in convert
with the Trust beneficially own or exercise control or direction over 3,598,142
common shares in the capital stock of the Company being 26.62% of the present
issued capital. In addition, the Trust holds warrants and convertible securities
to purchase a total of 14,741,529 common shares in the capital stock of the
Company. The Information Circular of the Company dated May 13, 1998 disclosed
convertible loans aggregating US$360,000 being made by the Trust to the Company.
The Vancouver Stock Exchange approved these three convertible loans effective
June 22, 1998. The principal amount of each of these three convertible loans was
converted into common shares and warrants to purchase common shares as follows:
(a) US$100,000 converted on January 20, 1999 on the basis of one common
share and warrant for each Cdn$0.26 of indebtedness into 546,154 common
shares and a warrant to purchase an additional 546,154 common shares in
the capital stock of the Company which is currently exercisable at a
price of Cdn$0.31 per share until January 23, 2000;
<PAGE>
(b) US$110,000 converted on March 23, 1999 on the basis of one common share
and warrant for each Cdn$0.26 of indebtedness into 600,769 common
shares and a warrant to purchase an additional 600,769 common shares in
the capital stock of the Company which is currently exercisable at a
price of Cdn$0.31 per share until March 31, 2000;
(c) US$150,000 converted on May 13, 1999 on the basis of one common share
and warrant for each Cdn$0.23 of indebtedness into 932,608 common
shares and a warrant to purchase an additional 932,608 common shares in
the capital stock of the Company exercisable for a term of two years at
a price of Cdn$0.23 per share until May 16 , 1999 and at a price
Cdn$0.27 from May 17, 1999 until May 15, 2000;
Subsequent to that date, the Trust has made convertible loans to the Company of
US$250,000, US$322,000 and US$115,000 on September 10, 1998, October 1, 1998 and
January 28, 1999 respectively. See "Interest of Insiders in Material
Transactions" below for further details.
AUTHORIZATIONS FOR APPROVAL
Any matter submitted at the Meeting for approval of the members shall require a
majority vote of more than 50% of the members present at the meeting and voting
either in person or by proxy concerning said issues.
Shares that abstain or withhold from voting as to a particular matter and shares
held in "street name" through a clearing firm, brokerage firm or similar nominee
which indicates on its proxy that such nominee does not have discretionary
authority to vote such shares as to a particular matter will be counted for
purposes of determining whether sufficient shares are represented to constitute
a quorum authorized to conduct an annual general meeting of the members.
Directors are elected and auditors are appointed by a plurality of the votes
cast. With respect to the election of directors, the number of nominees
equivalent to the number of directors to be elected who receive the highest
number of votes cast are elected. With respect to the appointment of auditors,
the auditors receiving the highest number of votes cast are appointed. In both
cases, shares that abstain or withhold from voting and broker non-votes are not
counted, and will have no effect on the outcome of such votes.
Ordinary resolutions, as defined by law, are adopted if approved by a majority
of the votes cast, and shares that abstain or are withheld from voting and
broker non-votes are not counted. Therefore, shares that abstain or withhold
from voting and broker non-votes have the effect of a vote against such ordinary
resolutions.
FINANCIAL STATEMENTS
The audited comparative financial statements of the Company for the year ended
December 31, 1998 and the auditors' report thereon accompanying this circular
will be placed before the meeting for consideration by the members.
ELECTION OF DIRECTORS
The Board of Directors presently consists of four directors and it is intended
to elect four directors for the ensuing year.
The term of office of each of the present directors expires at the Meeting. The
persons named below will be presented for election at the Meeting as
management's nominees and the persons named in the accompanying form of proxy
intend to vote for the election of these nominees. Management does not
contemplate that any of these nominees will be unable to serve as a director.
Each director elected will hold office until the next annual general meeting of
the Company or until his successor is elected or appointed, unless his office is
earlier vacated in accordance with the Articles of the Company, or with the
provisions of the Company Act of British Columbia.
<PAGE>
Pursuant to Section 187 of the Company Act of British Columbia, the Company is
required to have an Audit Committee. As at the date hereof, the members of the
Audit Committee are Delbert W. Steiner, Theodore J. Tomasovich and Jag Vyas. The
Company does not have nominating or compensation committees, or committees
performing similar functions.
The following table sets out the names of the nominees for election as
directors, the country in which each is ordinarily resident, all offices of the
Company now held by each of them, their principal occupations, the period of
time for which each has been a director of the Company, and the number of Common
shares of the Company or any of its subsidiaries beneficially owned by each,
directly or indirectly, or over which control or direction is exercised, as at
the date hereof.
<TABLE>
- ----------------------------------- ----------------------------------------------- ------------------------ =================
Name, Position and Period as a Director No. of
Country of Residence Principal Occupation or Employment(1) of the Company Shares(1)
- ----------------------------------- ----------------------------------------------- ------------------------ =================
<S> <S> <C> <C>
DELBERT W. STEINER President and Chief Executive Officer of the September 15, 1988 to 1,431,782
Director, President, Chairman and Company; Attorney-at-Law present
Chief Executive Officer
Resident of United States
- ----------------------------------- ----------------------------------------------- ------------------------ =================
THEODORE J. TOMASOVICH President, PYJ Corporation, a private real July 22, 1997 to 3,598,142(2)
Director estate/ equities corporation located in Los present
Resident of United States Angeles, CA
- ----------------------------------- ----------------------------------------------- ------------------------ =================
ROBERT A. YOUNG President, Robert A. Young & Associates, a July 23, 1997 to 11,500
Director private corporate finance and development present
Resident of Canada company located in Vancouver, B.C.
- ----------------------------------- ----------------------------------------------- ------------------------ =================
JAG VYAS Accountant, self employed July 22, 1997 to Nil
Director present
Resident of Canada
- ----------------------------------- ----------------------------------------------- ------------------------ =================
</TABLE>
NOTES:
(1) The information as to principal occupation, and shares beneficially
owned is not within the knowledge of the management of the Company and
has been furnished by the respective nominees.
(2) Shares owned by the Tomasovich Family Trust, of which Theodore
Tomasovich is the trustee and exercisesvoting control
DIRECTORS AND EXECUTIVE OFFICERS
The following is a listing of the current directors and executive officers of
the Company:
Delbert W. Steiner [52] - President, Chairman, Chief Executive Officer
and Director
Theodore J. Tomasovich [51] - Director
Jag Vyas [55] - Director
Robert A. Young [49] - Director
Wilfried J. Struck [39] - Vice-President, Chief Operating Officer,
Mining and Exploration
Kenneth Scott [40] - Chief Financial Officer
Directors have been elected to serve until the next annual general meeting of
the members. Based upon Canadian corporate regulatory provisions, a majority of
the Company's directors must be Canadian residents.
Delbert W. Steiner, Theodore J. Tomasovich and Jag Vyas were appointed to serve
as the Company's audit committee. The audit committee recommends the appointment
of PricewaterhouseCoopers LLP as auditors for the Company for 1999. This
committee reviews internal accounting and auditing policies and procedures,
budgets, scope of audit and programs to comply with applicable regulatory and
other accounting and income tax requirements relating to financial matters.
These functions were accomplished during regular directors' meetings held
throughout the year.
<PAGE>
During 1998, there were ten directors' meetings held, all of which were
telephone meetings. None of the directors attended fewer than 75% of the
meetings called. In addition to formal actions of the board of directors, the
directors participated in separate matters during the year which were documented
by unanimous consent forms, together with numerous informal discussions held
among the directors concerning other business matters. The directors have not
appointed a nominating committee.
BUSINESS BIOGRAPHIES
Directors and Executive Officers
DELBERT W. STEINER is a graduate from Lewis-Clark State College with a
bachelor's degree. He is also a graduate of the University of Idaho with a J.D.
degree in law. He has over 17 years experience in all facets of the legal field
as it pertains to mining and environmental law. He has been the President of the
Company from September 15, 1988 to June 27, 1997 and from July 23, 1997 to
present. He has been the Chief Executive Officer for the Company from June 24,
1996 to June 27, 1997 and from July 23, 1997 to present.
THEODORE TOMASOVICH is a graduate of Georgia with a B.S. in Industrial
Management. Mr. Tomasovich played professional baseball for the Cincinnati Reds
for a short time before getting into real estate with Cabot, Cabot and Forbes in
San Francisco. Cabot, Cabot and Forbes was one of the largest real estate
development entities on the West Coast in September 199, Mr. Tomasovich became
Vice-President and Southern California Regional Manager for Cabot, Cabot and
Forbes and was located in Los Angeles. He has been a director of the Company
since July 22, 1997. Mr. Tomasovich has been the President of PYJ Corporation, a
real estate development company since October 1988.
JAG VYAS has been a self-employed Chartered Accountant with over 20 years of
experience in Vancouver junior resource market companies. Mr. Vyas has been a
director of the Company from July 22, 1997.
ROBERT A. YOUNG for the past 16 years has been involved in a series of corporate
finance and corporate development projects including for several mining
companies listed on the TSE and the VSE. Since 1991, he has been a partner in
Robert A. Young & Associates, a public relations company. He has been a director
of the Company since July 23, 1997.
WILFRIED J. STRUCK is a graduate of the University of British Columbia with a
BASc in Geological Engineering. He has over 20 years experience working in the
exploration and mining industry and on a continual basis since 1985 for a number
of public companies. He has been Vice-President Mining and Exploration and Chief
Operating Officer of the Company since August 29, 1995. Mr. Struck has been a
self employed consulting geological mining engineer since July, 1991.
KENNETH SCOTT is a Chartered Accountant, admitted to the Institute of Chartered
Accountants of British Columbia in 1982. He has been involved in public practice
accounting and audit for 19 years. He has been a partner of Staley, Okada,
Chandler & Scott, Chartered Accountants for over 11 years. Mr. Scott has been
the Chief Financial Officer since March 25, 1995.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all compensation paid in respect of the
individual who was, at December 31, 1998, the Chief Executive Officer of the
Company. There were no executive officers of the Company whose total salary and
bonus exceeded $100,000 during the financial year ended December 31, 1998.
<TABLE>
- --------------------- ======== =============================== ---------------------------------- ========================
Annual Compensation Long Term Compensation
--------- ----------- ------------ --------------- ---------------
AWARDS PAYOUTS
Other Securities
Annual Under Options Long Term
Compen-sation Granted Incentive All Other
<PAGE>
Name and Principal Salary Bonus ($) (#) Plan Payouts Compensation
Position Year ($) ($) ($) ($)(2)
- --------------------- -------- --------- ----------- ------------ --------------- --------------- ========================
- --------------------- -------- --------- ----------- ------------ --------------- --------------- ========================
<S> <C> <C> <C> <C> <C> <C> <C>
DELBERT W. STEINER 1998 69,000 N/A N/A N/A N/A N/A
President, Chairman
and 1997 69,000 N/A N/A 150,000(1) N/A N/A
Chief Executive
Officer 1996 49,012 N/A N/A N/A N/A N/A
- --------------------- -------- --------- ----------- ------------ --------------- --------------- ========================
</TABLE>
NOTE:
(1) Option to purchase 150,000 shares at $0.26 per share exercisable until
February 13, 2001.
Stock Options
No stock options were granted to or exercised by the Chief Executive Officer
during the financial year ended December 31, 1998.
The following table sets forth the financial year end value of stock options
held by the Chief Executive Officer as at December 31, 1998:
Aggregated Option Exercises During the Financial Year Ended December 31, 1998
And Financial Year-End Option Values
<TABLE>
- ---------------------- --------------------- -------------------- ------------------------ ===============================
Unexercised Value of Unexercised in the
Securities Acquired Aggregate Value Options at FY-End Money-Options at FY-End
on Exercise Realized (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable(3)
- ---------------------- --------------------- -------------------- ------------------------ ===============================
<S> <C> <C> <C> <C>
DELBERT W. STEINER Nil Nil 60,000(1) N/A
(Exercisable)
Nil Nil 150,000(2) N/A
(Exercisable)
- ---------------------- --------------------- -------------------- ------------------------ ===============================
</TABLE>
NOTES:
(1) Stock option to purchase 60,000 Common shares at $0.26 per share,
exercisable until October 30, 1999. (2) Stock option to purchase 150,000 Common
shares at $0.26 per share, exercisable until February 13, 2001. (3) Based on the
closing price of $0.20 for the shares of the Company on the Vancouver Stock
Exchange on
December 31, 1998, the unexercised stock options were not in-the-money.
The net aggregate value was a loss of $3,600 and $9,000 for a total
loss of $12,600.
Pension Arrangements
The Company and its subsidiaries do not have any pension arrangements in place
for the Chief Executive Officer.
Termination of Employment, Change in Responsibilities and Employment Contracts
There are no employment contracts between the Company or its subsidiary and the
Chief Executive Officer nor are there any arrangements with the Chief Executive
Officer for compensation in the event of resignation, retirement or any other
termination with the Company or change in the Chief Executive Officer's'
responsibilities following a change in control.
Compensation of Directors
During the financial year ended December 31, 1998, the Company paid Robert A.
Young & Associates, a company controlled by Robert A. Young, a director of the
Company, a fee of US$1,952 for consulting services provided to the Company by
Robert A. Young & Associates.
<PAGE>
The Company has no pension plan or other arrangement for cash or non-cash
compensation to directors of the Company (other than the Chief Executive
Officer) ("Other Directors"), except stock options. No stock options were
granted to the Other Directors during the financial year ended December 31,
1998.
The exercise price of stock options must not be lower than the average of the
closing market prices of the Company's shares for the 10 trading days
immediately preceding the date of granting of the options, in accordance with
the rules of the Vancouver Stock Exchange. The terms of any stock option
agreements must provide that the options will terminate 30 days after the
optionee ceases to be a director or employee of the Company, except by reason of
his death, in which case his personal representative may exercise the options
within one year following the date of death or the expiry date, whichever occurs
first.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the Company's security ownership information as
of May 12, 1999 for each director, for all officers of the Company as a group,
and all shareholders believed by the Company to own beneficially more than 5% of
the Company's common shares.
<TABLE>
- -------------------------------- --------------------------- --------------------------------- ==============================
Name and Address of Beneficial Nature of Ownership (1) Number of Shares/Options (3) Percentage of Ownership (2)
Owner
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
<S> <C> <C> <C>
DELBERT W. STEINER Common Stock 1,431,782 10.59%
3555 Country Club Drive Options and other rights 1,018,000 7.00%
Lewiston, Idaho Total 2,449,782 16.85%
USA 83501
Director and Named Executive
Officer
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
THEODORE TOMASOVICH Common Stock 3,598,142(4) 26.62%
2641 Lombardy Road Options and other rights 14,841,529(4) 52.34%
San Marino, California Total 18,439,671 65.03%
USA 91108
Director
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
JAG VYAS Common Stock Nil 0%
#1908 - 777 Cardero Street Options and other rights 100,000 1.36%
Vancouver, B.C. Total 100,000 0.73%
V6G 2G3
Director
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
ROBERT A. YOUNG Common Stock 11,500 0.09%
307 - 1360 Hornby Street Options and other rights 200,000 1.46%
Vancouver, B.C. Total 211,500 1.54%
V6Z 2L8
Director
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
ALL EXECUTIVE OFFICERS AND Common Stock 5,283,501 39.10%
DIRECTORS AS A GROUP Options and other rights 16,509,529 54.99%
Total 21,793,030 72.59%
- -------------------------------- --------------------------- --------------------------------- ==============================
- -------------------------------- --------------------------- --------------------------------- ==============================
5% SHAREHOLDERS:
Tomasovich Family Trust Common Stock 3,598,142(4) 26.62%
600 Wilshire Boulevard Options and other rights 14,741,529(4) 52.17%
Suite 1410 Total 18,339,671 64.90%
Los Angeles, CA 90017
- -------------------------------- --------------------------- --------------------------------- ==============================
</TABLE>
<PAGE>
NOTES:
(1) Unless other indicated, all securities are owned beneficially and of
record, and such record stockholder has sole voting, investment and
dispositive power.
(2) Calculations of total percentages of ownership outstanding for each
individual assumes the exercise of options and other rights held by
that individual to which the percentage relates. Percentages calculated
for totals of all executive officers and directors as a group assume
the exercise of all options and other rights held by the indicated
group.
(3) These options figures only include the number of options and other rights
that are exercisable as of the date hereof. (4) Includes common shares, options
and other rights in the name of the Tomasovich Family Trust, over which
Theodore Tomasovich has voting control.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Other than as disclosed in this Information Circular or the Information Circular
of the Company dated May 13, 1998, no insider, proposed nominee for election as
a director, or any associate or affiliate of the foregoing, had any material
interest, direct or indirect, in any transaction or proposed transaction since
January 1, 1998 which has materially affected or would materially affect the
Company or any of its subsidiaries.
Convertible Loan #4
On September 10, 1998, the Company entered into a Convertible Loan Agreement
with the Tomasovich Family Trust (the "Trust"), which is controlled by Theodore
Tomasovich, a director of the Company, whereby the Company issued convertible
promissory notes in the aggregate principal amount of US$250,000 (Cdn$3787,750)
maturing on September 10, 2000. The outstanding principal amount of the loan may
be converted into Units of the Company at any time prior to maturity by the
holder on the basis of one Unit for each Cdn$0.17 of indebtedness in the first
year escalating to Cdn$0.22 per Unit in the second year. The outstanding
principal amount may be repaid at any time by the Company on or before September
10, 2000. Each Unit consists of one common share and one non-transferable
warrant. A maximum of 2,227,941 Units will be issued if the convertible loan is
converted in its entirety in the first year and a maximum of 1,721,590 Units
will be issued if the convertible loan is converted in its entirety in the
second year. The warrants, if any, will entitle the holder to purchase a maximum
of 2,227,941 shares in the capital stock of the Company (if the convertible loan
is converted in its entirety to Units in the first year) for a term of two years
commencing on the date of conversion at a price of Cdn$0.17 per share in the
first year and Cdn$0.22 per share in the second year.
Convertible Loan #5
On October 1, 1998, the Company entered into a Convertible Loan Agreement with
the Trust, whereby the Company issued convertible promissory notes in the
aggregate principal amount of US$322,000 (Cdn$493,336.20) maturing on October 1,
2000. The outstanding principal amount of the loan may be converted into Units
of the Company at any time prior to maturity by the holder on the basis of one
Unit for each Cdn$0.20 of indebtedness in the first year escalating to Cdn$0.25
per Unit in the second year. The outstanding principal amount may be repaid at
any time by the Company on or before October 1, 2000. Each Unit consists of one
common share and one non-transferable warrant. A maximum of 2,244,681 Units will
be issued if the convertible loan is converted in its entirety in the first year
and a maximum of 1,973,344 Units will be issued if the convertible loan is
converted in its entirety in the second year. The warrants, if any, will entitle
the holder to purchase a maximum of 2,466,681 shares in the capital stock of the
Company (if the convertible loan is converted in its entirety to Units in the
first year) for a term of two years commencing on the date of conversion at a
price of Cdn$0.20 per share in the first year and Cdn$0.25 per share in the
second year.
Convertible Loan #6
On January 28, 1999, the Company entered into a Convertible Loan Agreement with
the Trust, whereby the Company issued convertible promissory notes in the
aggregate principal amount of US$115,000 (Cdn$175,927) maturing on January 28,
2001. The outstanding principal amount of the loan may be converted into Units
of the Company at any time prior to maturity by the holder on the basis of one
Unit for each Cdn$0.15 of indebtedness in the first year escalating to Cdn$0.20
per Unit in the second year. The outstanding principal amount may be repaid at
any time by the Company on or before January 28, 2001. Each Unit consists of one
common share and one non-transferable warrant. A maximum of 1,172,846 Units will
be issued if the convertible loan is converted in its entirety in the first year
and a
<PAGE>
maximum of 879,635 Units will be issued if the convertible loan is converted in
its entirety in the second year. The warrants, if any, will entitle the holder
to purchase a maximum of 1,172,846 shares in the capital stock of the Company
(if the convertible loan is converted in its entirety to Units in the first
year) for a term of two years commencing on the date of conversion at a price of
Cdn$0.15 per share in the first year and Cdn$0.20 per share in the second year.
Private Placement - 1999
On March 29, 1999, the Company issued by way of private placement a total of
2,000,000 units at Cdn$0.15 (US$0.10) per unit. Each unit consisted of one
common share and one non-transferable common share purchase warrant. One whole
warrant entitles the holder to purchase one common share at Cdn$0.15 (US$0.10)
per share in the first year and Cdn$0.18 (US$0.12) per share in the second year
until March 29, 2001. The following insiders of the Company participated in this
private placement:
<TABLE>
- -------------------------------------- ---------------------------------------- ------------------------------------
Name Relationship Number of Units
- -------------------------------------- ---------------------------------------- ------------------------------------
- -------------------------------------- ---------------------------------------- ------------------------------------
<S> <C> <C>
Delbert W. Steiner President, Chief Executive Officer and 758,000
Director of the Company
- -------------------------------------- ---------------------------------------- ------------------------------------
- -------------------------------------- ---------------------------------------- ------------------------------------
Kenneth Scott, Inc. a company controlled by the Chief 100,000
Financial Officer of the Company
- -------------------------------------- ---------------------------------------- ------------------------------------
</TABLE>
APPOINTMENT OF AUDITORS
The management of the Company will recommend to the Meeting to appoint
PricewaterhouseCoopers LLP as auditors of the Company and to authorize the
directors to fix their remuneration. Coopers & Lybrand, a predecessor firm of
PricewaterhouseCoopers LLP were first appointed auditors of the Company in June,
1995. A representative of PricewaterhouseCoopers LLP will be present at the
Meeting, will have the opportunity to make a statement if they desire to do so
and will available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION
OF PRICEWATERHOUSECOOPERS LLP AS AUDITORS FOR FISCAL YEAR 1999.
PARTICULARS OF OTHER MATTERS TO BE ACTED UPON
Director & Employee Stock Options
The Vancouver Stock Exchange requires shareholder approval to the alteration of
the material terms of outstanding stock options held by insiders of the Company
as well as to the granting of new stock options to insiders of the Company prior
to the exercise thereof. The Company does not have a stock option plan, however,
from time to time grants individual stock options to its directors, senior
officers and employees in accordance with the policies of the Vancouver Stock
Exchange. The Company may wish to alter the terms of outstanding stock options
presently held by insiders and grant new stock options to insiders at any time
prior to the next annual general meeting. Any new stock options granted, or any
alterations made to outstanding stock options, will be in accordance with the
policies of the Vancouver Stock Exchange in effect at the time of granting or
alteration. The present material terms of the policies of the Vancouver Stock
Exchange are summarized as follows:
(a) the aggregate number of shares that may be reserved for issuance pursuant
to the director and employee stock options shall not exceed 10% of the
issued shares at the time the time of granting of the options and the
aggregate number of shares that may be reserved for issuance to any one
optionee shall not exceed 5% of the issued shares. In the case of optionees
who are independent consultants or who are employed in an investor
relations capacity, the aggregate number of options granted in each of
these categories is limited to 2% of the issued shares;
(b) all options shall be non-assignable and non-transferable except as between
an optionee and a wholly owned personal corporation with the consent of the
Vancouver Stock Exchange;
<PAGE>
(c) the exercise price of the stock options shall not be less than the average
closing price of the Company's shares on the 10 trading days immediately
preceding the day of granting less any allowable discount, or $0.15 per
share, whichever is the greater. The average must not include a closing
price that occurs earlier than the trading day following the day on which a
material change was announced. If the options are granted within six months
of a public distribution, the exercise price shall be not less than the per
share price paid by the investing public for shares acquired under such
public distribution. If the stock options are granted to a permitted
consultant, the exercise price must be at least equal to the greater of the
market price on the date of grant and $0.15 per share;
(d) the term of exercise of the options shall be for a maximum of five years.
As the Company wishes insiders to be in a position to exercise altered or new
stock options if they so desire, the members will be asked at the Meeting to
pass an ordinary resolution in the following terms:
"RESOLVED that any alterations to outstanding stock options held by
insiders of the Company and the granting of new stock options to
insiders of the Company at any time until the next annual general
meeting, on terms within the policies of the Vancouver Stock Exchange
in effect at the time of alteration or granting, be and the same are
hereby approved."
MISCELLANEOUS
Compliance with Section 16(a) of the United States Securities and Exchange Act
of 1934
Based solely upon a review of Forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, the
following persons who, at any time during the most recent fiscal year, were
Directors, officers, beneficial owners of more than 10% of any class of equity
securities of the Company or any other persons known to be subject to Section 16
of the Exchange Act failed to file, on a timely basis, reports required by
Section 16(a) of the Exchange Act: Delbert W. Steiner, Chairman, President and
Chief Executive Officer, filed a late Form 4 reporting a single transaction;
Kenneth A. Scott, Chief Financial Officer, filed three late Form 4s and a late
Form 5 reporting an aggregate of six transactions; Wilfried J. Struck,
Vice-President, Mining and Exploration, filed three late Form 4s and a late Form
5 reporting an aggregate of nine transactions; Theodore Tomasovich, Director,
filed eight late Form 4s reporting an aggregate of eleven transactions; the
Tomasovich Family Trust, a 10% shareholder, filed a late Form 3 and five late
Form 4s reporting an aggregate of seven transactions; Jag Vyas, Director, filed
one late Form 4 and a late Form 5 reporting an aggregate of three transactions;
and Robert A. Young, Director, filed three late Form 4s and a late Form 5
reporting an aggregate of seventeen transactions.
The Company has assisted the reporting officers, directors and greater than 10%
shareholders in bringing their Section 16(a) reports current and has provided
information to help the Company's officers, directors and greater than 10%
shareholders in complying with their reporting obligations.
Member Proposals
Member proposals intended to be presented at the 2000 Annual General Meeting of
Members of the Company must be received by the Company by December 30, 1999 to
be considered by the Company for inclusion in the Company's information circular
and form of proxy relating to the 2000 Annual General Meeting. Such proposals
should be directed to the attention of the Secretary of the Company at P.O. Box
1124, 504 Main Street, Suite 470, Lewiston, Idaho, USA, 83501.
Management of the Company knows of no matters to come before the Meeting other
than those referred to in the Notice of Meeting accompanying this Information
Circular. However, if any other matters properly come before the Meeting, it is
the intention of the persons named in the form of proxy accompanying this
Information Circular to vote the same in accordance with their best judgment of
such matters.
DATED at Vancouver, British Columbia, this 18th day of May, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
<PAGE>
"DELBERT W. STEINER"
Delbert W. Steiner,
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
A number of companies (Henrietta Mines, Inc., U.S. Borax, Midwest Oil
Corporation and Kerr-McGee Corporation) have collected samples on the
property. The assays have ranged in value from nil to 1.7 ounces of gold
per ton across a 6 inch vein (John S. Vincent, 1984). The exact location of
all of the sampling is not known.
2. For more information, please see the Consolidated Statement of Changes in
Shareholders' Equity in the Company's December 31, 1998 Financial
Statements.
3. For more information, please see the Consolidated Statement of Changes in
Shareholders' Equity in the Company's December 31, 1998 Financial
Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 50,407
<SECURITIES> 0
<RECEIVABLES> 2,063
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,470
<PP&E> 1,507,952
<DEPRECIATION> 41,753
<TOTAL-ASSETS> 1,608,669
<CURRENT-LIABILITIES> 365,922
<BONDS> 0
0
0
<COMMON> 7,508,593
<OTHER-SE> 249,862
<TOTAL-LIABILITY-AND-EQUITY> 1,608,669
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,396,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135,023
<INCOME-PRETAX> (2,396,731)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,396,731)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,396,731)
<EPS-BASIC> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
IDAHO CONSOLIDATED METALS CORP.
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
U.S. Funds
<PAGE>
Auditors' Report
Board of Directors and Shareholders
Idaho Consolidated Metals Corp.
We have audited the accompanying balance sheets of Idaho Consolidated Metals
Corp. and subsidiary (an exploration stage company) as of December 31, 1998 and
1997 and the related consolidated statements of operations and cash flows for
each of the three years in the period ended December 31, 1998 and cumulative
from inception (September 15, 1988) through December 31, 1998, and the
consolidated changes in shareholders' equity from inception (September 15, 1988)
through December 31, 1998, which as described in Note 1, have been prepared on
the basis of accounting principles generally accepted in Canada. 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 auditing standards generally accepted
in the United States. 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 the
opinion expressed above.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Idaho
Consolidated Metals Corp. as of December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 and cumulative from inception (September 15,
1988) through December 31, 1998 and the changes in shareholders' equity from
inception (September 15, 1988) through December 31, 1998 in conformity with
accounting principles generally accepted in Canada.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has incurred significant losses
since its inception and has a working capital deficiency at December 31, 1998.
In addition, as described in Note 1, uncertainties exist regarding the Company's
ability to obtain necessary financing to successfully develop economic ore
reserves on its properties and realize profitable production levels or proceeds
from their disposition. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans as to these
matters are also described in Note 1 to the consolidated financial statements.
The consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
"PricewaterhouseCoopers LLP"
Spokane, Washington PRICEWATERHOUSECOOPERS LLP
May 14, 1999
<PAGE>
Idaho Consolidated Metals Corp. Statement 1
(An Exploration Stage Company)
Consolidated Balance Sheets
As at December 31, 1998 and 1997
U.S. Funds
<TABLE>
ASSETS 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Current
Cash and cash equivalents ........................... $ 407 $ 78,885
Cash in trust ....................................... 50,000 50,000
Other ............................................... 2,063 3,988
----------------------------
52,470 132,873
Restricted Investments .................................. 90,000 90,000
Property Rights, Plant and Equipment, net (Note 3) ...... 1,466,199 3,022,036
----------------------------
$ 1,608,669 $ 3,244,909
- ----------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------
Current
Accounts payable - Related parties .................. $ 128,687 $ 180,992
Other accounts payable .............................. 227,708 154,574
Notes payable to shareholders, due currently (Note 4) 9,527 254,150
----------------------------
365,922 589,716
Notes Payable to Shareholders, non-current (Note 4) ..... 747,493 13,070
----------------------------
1,113,415 602,786
----------------------------
Commitments and Contingencies (Notes 1, 3, 13 and 15)
SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------
Share Capital (Note 5)
Authorized:
100,000,000 common shares with no par value
Issued and outstanding:
9,434,650 (9,434,650) shares ................. 7,508,593 7,508,593
Convertible Securities (Note 6) ......................... 249,862 --
Deficit Accumulated During the Exploration Stage ........ (7,263,201) (4,866,470)
----------------------------
495,254 2,642,123
----------------------------
$ 1,608,669 $ 3,244,909
- ----------------------------------------------------------------------------------------
</TABLE>
ON BEHALF OF THE BOARD:
"Del Steiner", Director
"Robert Young", Director
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 2a
(An Exploration Stage Company)
Consolidated Statements of Changes in Shareholders' Equity
U.S. Funds
<TABLE>
Deficit
Accumulated
During the
Common Shares Convertible Exploration
Shares Amount Securities Stage Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at inception (September
15, 1988) ..................... 2 $ 2 $ - $ - $ 2
Issuance of shares for cash
($0.21 per share) ............ 288,000 60,352 - - 60,352
Loss for the period ............. - - - (1,835) (1,835)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1988 ....... 288,002 60,354 - (1,835) 58,519
Issuance of shares for cash
($0.21 per share) ............ 372,000 79,747 - - 79,747
Loss for the year ............... - - - (18,799) (18,799)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1989 ....... 660,002 140,101 - (20,634) 119,467
Issuance of shares for cash
($0.05 per share) ............ 966,000 51,414 - - 51,414
Loss for the year ............... - - - (53,953) (53,953)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1990 ....... 1,626,002 191,515 - (74,587) 116,928
Issuance of shares for cash
($0.48 per share), net of
$37,555 of issuance costs .... 750,000 322,793 - - 322,793
Exercise of warrants ($0.57
per share) .................... 550,000 311,955 - - 311,955
Exercise of options ($0.48
per share) .................... 30,000 14,398 - - 14,398
Issuance of shares for
property rights ($0.48 per
share) ........................ 70,000 33,595 - - 33,595
Loss for the year ............... - - - (150,464) (150,464)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1991 ....... 3,026,002 874,256 - (225,051) 649,205
Issuance of shares for
exercise of options ($0.43
per share) ................... 55,000 23,633 - - 23,633
Issuance of shares for
property rights ($1.09 per
share) ........................ 700,000 765,625 - - 765,625
Loss for the year ............... - - - (244,310) (244,310)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1992 ....... 3,781,002 1,663,514 - (469,361) 1,194,153
Issuance of shares for cash
in May and August ($0.97
per share) ................... 166,330 161,173 - - 161,173
Issuance of shares for cash
in December ($1.55 per
share) ......................... 280,212 433,350 - - 433,350
Loss for the year ................ - - - (180,570) (180,570)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1993 ........ 4,227,544 2,258,037 - (649,931) 1,608,106
Issuance of shares for
exercise of options ($0.68
per share) .................... 212,500 143,523 - - 143,523
Issuance of shares for
exercise of warrants ($2.19
per share) ..................... 270,000 591,240 - - 591,240
Issuance of shares for
equipment and process
($1.25 per share) .............. 600,000 750,000 - - 750,000
Loss for the year ................ - - - (641,466) (641,466)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1994 ........ 5,310,044 $ 3,742,800 $ - $ (1,291,397) $ 2,451,403
----------- ----------- ------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 2b
(An Exploration Stage Company)
Consolidated Statements of Changes in Shareholders' Equity
U.S. Funds
<TABLE>
Deficit
Accumulated
During the
Common Shares Convertible Exploration
Shares Amount Securities Stage Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1994 ....... 5,310,044 $ 3,742,800 $ - $ (1,291,397) $ 2,451,403
Issuance of shares for cash
($1.50 per share) ............ 628,264 942,396 - - 942,396
Issuance of shares for
exercise of warrants ($2.23
per share) .................... 30,000 66,900 - - 66,900
Loss for the year ............... - - - (556,503) (556,503)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1995 ....... 5,968,308 4,752,096 - (1,847,900) 2,904,196
Issuance of shares for cash
in May ($1.50 per share) ..... 100,000 150,000 - - 150,000
Issuance of shares for cash
in June ($1.75 per share) ..... 755,900 1,322,825 - - 1,322,825
Issuance of shares for
exercise of options ($1.32
per share) .................... 30,000 39,520 - - 39,520
Loss for the year ............... - - - (1,294,351) (1,294,351)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1996 ....... 6,854,208 6,264,441 - (3,142,251) 3,122,190
Issuance of shares for
resource property in March
($0.83 per share) ............ 125,000 104,000 - - 104,000
Issuance of shares for
resource property in
September ($0.65 per share) ... 125,000 81,250 - - 81,250
Allotment of shares for debt
settlement in September
($0.53 per share) ............. 567,209 299,842 - - 299,842
Allotment of shares for cash
in November ($0.43 per
share) ........................ 1,763,233 759,060 - - 759,060
Loss for the year ............... - - - (1,724,219) (1,724,219)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1997 ....... 9,434,650 7,508,593 - (4,866,470) 2,642,123
Equity component on issuance
of convertible securities ..... - - 249,862 - 249,862
Loss for the year ............... - - - (2,396,731) (2,396,731)
----------- ----------- ------------ ------------- ------------
Balance - December 31, 1998 ....... 9,434,650 $ 7,508,593 $ 249,862 $ (7,263,201) $ 495,254
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 3
(An Exploration Stage Company)
Consolidated Statements of Operations
U.S. Funds
<TABLE>
Cumulative from
Inception
(September 15,
1988) through
Year Ended December 31, December 31,
1998 1997 1996 1998
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Property option receipts .......... $ -- $ 165,000 $ -- $ 165,000
Cost of property options .......... -- (72,588) -- (72,588)
-----------------------------------------------------------
-- 92,412 -- 92,412
Interest .......................... 6,016 5,627 8,316 52,276
-----------------------------------------------------------
6,016 98,039 8,316 144,688
-----------------------------------------------------------
Operating Expenses
General and administrative ........ 562,557 830,681 639,429 3,868,778
Write-off processing equipment and
related costs ................... -- 1,017,883 419,440 1,437,323
Abandonment of property rights .... 1,705,167 345,622 200,279 2,255,887
Loss on disposal of equipment ..... -- -- -- 4,576
Interest costs .................... 135,023 58,502 67,622 331,554
Less interest capitalized ......... -- (27,346) (24,103) (87,145)
-----------------------------------------------------------
2,402,747 2,225,342 1,302,667 7,810,973
-----------------------------------------------------------
Loss Before the Following ............. 2,396,731 2,127,303 1,294,351 7,666,285
Gain on settlement of lawsuit
(Note 8) ........................ -- 223,946 -- 223,946
Gain on settlement of debt (Note 9) -- 179,138 -- 179,138
-----------------------------------------------------------
Net Loss .............................. $ 2,396,731 $ 1,724,219 $ 1,294,351 $ 7,263,201
- -----------------------------------------------------------------------------------------------------
Net Loss per Share - Basic ............ $ 0.25 $ 0.23 $ 0.22
- -----------------------------------------------------------------------------------------------------
Weighted Average Shares - Basic ....... 9,434,650 7,446,141 5,989,371
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 4a
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
U.S. Funds
<TABLE>
Cumulative from
Inception
(September 15,
1988) through
Year Ended December 31, December 31,
1998 1997 1996 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Activities
Net Loss ............................ $(2,396,731) $(1,724,219) $(1,294,351) $(7,263,201)
Adjustments to reconcile net loss to
net cash used by operating
activities
Amortization ..................... 9,104 12,577 8,026 48,212
Amortization of interest discount 56,812 -- -- 56,812
Gain on settlement of lawsuit .... -- (223,946) -- (223,946)
Gain on settlement of debt ....... -- (179,138) -- (179,138)
Loss on disposal of equipment .... -- -- -- 4,576
Write-off of inventory and
equipment ...................... -- 1,017,883 415,254 1,433,137
Abandonment and sale of property
rights ......................... 1,705,167 418,210 200,279 2,328,475
Change in:
Inventory ...................... -- -- (40,000) (164,416)
Other assets ................... 1,925 (1,238) (2,662) (2,063)
Accounts payable - Related
parties ...................... (52,305) 141,504 55,483 454,183
Other accounts payable ......... 73,134 17,850 76,965 526,141
-----------------------------------------------------------
Net cash used in operating activities (602,894) (520,517) (581,006) (2,981,228)
-----------------------------------------------------------
Investing Activities
Property rights, plant and equipment
Acquisition costs ................ (75,671) (105,585) (312,993) (1,338,118)
Exploration costs ................ (82,763) (268,857) (370,823) (1,913,596)
Proceeds from sale of option on
property ....................... -- -- 50,000 50,000
Deposit on property rights ....... -- -- -- (100,000)
Cash in trust ....................... (50,000) -- (50,000)
Purchase of investment for
reclamation bond ................. -- (5,000) (75,000) (90,000)
-----------------------------------------------------------
Net cash used in investing activities (158,434) (429,442) (708,816) (3,441,714)
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 4b
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
U.S. Funds
<TABLE>
Cumulative from
Inception
(September 15,
1988) through
Year Ended December 31, December 31,
1998 1997 1996 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financing Activities
Proceeds from note payable to bank ... $ -- $ -- $ -- $ 35,408
Repayments on note payable to bank ... -- (22,173) (13,235) (35,408)
Proceeds from related party notes
payable ........................... 687,138 24,815 -- 1,496,953
Repayments on related party notes
payable ........................... (254,150) -- (143,597) (797,747)
Net proceeds from issuance of
convertible securities ............ 249,862 -- -- 249,862
Net proceeds from sale of common stock -- 759,060 1,546,495 5,474,281
------------------------------------------------------------
Net cash provided by financing
activities ........................ 682,850 761,702 1,389,663 6,423,349
------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents ..................... (78,478) (188,257) 99,841 407
Cash and cash equivalents - Beginning
of period ......................... 78,885 267,142 167,301 --
------------------------------------------------------------
Cash and Cash Equivalents - End of
Period ............................... $ 407 $ 78,885 $ 267,142 $ 407
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp. Statement 4c
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
U.S. Funds
<TABLE>
Cumulative from
Inception
(September 15,
1988) through
Year Ended December 31, December 31,
1998 1997 1996 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for
interest, net of amount
capitalized ..................... $ 101,703 $ 12,953 $ 29,604 $ 130,648
- ----------------------------------------------------------------------------------------------
Schedule of Non-Cash Investing and
Financing Activities:
Claim rental fees accrued
(reversed) as capitalized
exploration costs ............... $ -- $ -- $(183,300) $ --
Deposit used to acquire property
rights .......................... -- -- -- 100,000
Debt incurred for equipment and
process rights .................. -- -- -- 80,000
Common stock issued for property
rights .......................... -- 185,250 -- 984,470
Common stock issued for equipment
and process rights .............. -- -- -- 750,000
Common stock issued upon conversion
of accounts payable to related
parties ......................... -- 172,145 -- 172,145
Common stock issued upon conversion
of other accounts payable ....... -- 86,923 -- 86,923
Common stock issued for conversion
of notes payable to shareholders -- 40,774 -- 40,774
Conversion of accounts payable to
notes payable ................... -- -- -- 225,000
Share subscriptions receivable .... -- -- -- 34,150
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
1. The Company and Basis of Presentation of Consolidated Financial Statements:
Idaho Consolidated Metals Corp. (the Company) was incorporated in British
Columbia, Canada on September 15, 1988 to engage in mineral exploration,
development and processing. The Company is presently in the exploration
stage as revenue-producing activities have not commenced. The Company's
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles as practiced in Canada and are
stated in U.S. dollars.
During 1996, the Company established a wholly owned subsidiary, Idaho
Consolidated Metals International, Ltd. (ICMI) in the British Virgin
Islands. ICMI does not have any operations as of December 31, 1998. All
intercompany accounts and transactions have been eliminated in
consolidation.
These consolidated financial statements have been prepared assuming the
Company will continue as a going concern and be able to realize assets and
liquidate liabilities in the normal course of business. Since its
inception, the Company has incurred significant losses during the
exploration stage and at December 31, 1998 has a net working capital
deficiency of approximately $313,000. These factors, along with the
uncertainties regarding the Company's ability to obtain necessary financing
to develop its properties and to successfully develop economic ore reserves
on these properties and realize profitable production levels or proceeds
from their disposition, raise substantial doubt about the Company's ability
to continue as a going concern. These consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
Management of the Company continues to seek additional sources of financing
to fund its ongoing capital needs and mitigate its working capital
deficiency (Note 14). The Company is presently considering additional
funding sources including the sale of its common stock. Additionally, the
Company is seeking additional joint venture partners to assist in the
development of certain of its other properties. There can be no assurance
that the Company will be successful in obtaining additional funds or in
locating suitable joint venture partners to assist in the development of
its mineral properties.
- --------------------------------------------------------------------------------
2. Significant Accounting Policies
a) Property Rights, Plant and Equipment
Property rights, plant and equipment are stated at the lower of cost
(or the predecessor's cost basis if acquired from an affiliate) or
estimated net realizable value. Maintenance, repairs and renewals are
charged to operations. Major betterments are capitalized. When assets
are retired or sold, the costs and related accumulated amortization
are eliminated and any resulting gain or loss is reflected in
operations. Proceeds received from the sale of any interest in the
property will first be credited against the carrying value of the
property with any excess included in operations for the period.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
2. Significant Accounting Policies - Continued
a) Property Rights, Plant and Equipment - Continued
The Company is in the process of exploring its mineral properties and
has not yet determined whether these properties contain ore reserves
that are economically recoverable.
Acquisition, development and exploration costs are capitalized on an
individual property basis until such time as an economic ore body is
defined or the property is abandoned. Capitalized costs associated
with a producing property will be amortized on a unit-of-production
method based on the estimated life of the ore reserves while costs for
abandoned properties are written off in the period in which a decision
is made to abandon such property. During the years ended December 31,
1998, 1997 and 1996, the Company abandoned certain properties and,
therefore, wrote off approximately $1,705,000, $346,000 and $200,000,
respectively, of costs which had previously been capitalized.
Amortization of furniture and fixtures is based on the estimated lives
of the assets using accelerated methods. No amortization is recorded
for buildings and equipment, as the assets are no longer in use.
Buildings and equipment have been recorded at their estimated net
realizable value. During the years ended December 31, 1998, 1997 and
1996, the building, equipment and related costs were written down
approximately $0, $1,018,000 and $255,000, respectively.
Management periodically reviews and obtains independent geologist
reports in determining if adjustments to the carrying values of each
of its mineral properties, on a property-by-property basis, are
required to record those properties at net recoverable value. The
ultimate recoverability of the amounts capitalized for the mineral
properties is dependent upon the delineation of economically
recoverable ore reserves, the Company's ability to obtain the
necessary financing to complete their development and realize
profitable production or proceeds from the disposition thereof.
Management's estimates of recoverability of the Company's investment
in various projects have been based on current conditions. However, it
is reasonably possible that changes could occur in the near term which
could adversely affect management's estimates and may result in future
write-downs of capitalized property carrying values.
Management reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. If the sum of the expected future net
cash flows to be generated from the use or disposition of the
long-lived asset (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is
recognized.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
2. Significant Accounting Policies - Continued
b) Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash and
cash equivalents to include amounts held in banks and highly liquid
investments with remaining maturities at point of purchase of three
months or less. Restricted investments represent certificates of
deposit which were purchased for reclamation bond requirements. The
Company places its cash and cash investments with institutions of
high-credit worthiness. At times, such investments may be in excess of
federal insurance limits.
c) Net Loss Per Common Share
Net loss per share-basic is computed by dividing net loss by the
weighted-average number of common shares outstanding during the
period. Net loss per share fully-diluted is computed by increasing the
weighted-average number of common shares outstanding by the additional
common shares that would have been outstanding if the dilutive
potential common shares had been issued. Due to the losses incurred
during the years ended December 31, 1998, 1997 and 1996, the dilutive
securities (stock options, warrants and convertible promissory notes
payable) of 15,956,539, 2,806,183 and 1,191,850, respectively, have
been excluded from the computation as their effect would be
anti-dilutive.
d) Foreign Currency Translation
The accounts of the Company's Canadian operations have been translated
into U.S. dollars as follows:
i) Monetary assets and liabilities at year-end rates,
ii) All other assets and liabilities at historical rates, and
iii) Revenue and expense and exploration and development items at the
average rate of exchange prevailing during the year.
e) Management's Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
2. Significant Accounting Policies - Continued
f) Financial Instruments - Convertible Security Instruments
The Company allocates convertible security instruments, including
their component parts, as a liability or as equity in accordance with
the substance of the related contractual arrangement. The fair value
of the equity component is estimated on the inception of the related
contractual obligation using the Black-Scholes option-pricing model.
g) Reclassifications
Certain 1997, 1996 and cumulative amounts have been reclassified to
conform to the 1998 presentation. These reclassifications had no
effect on the net loss or deficit accumulated during the exploration
stage as previously reported.
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment
Following are the major components of property rights, plant and equipment:
<TABLE>
1998 1997
----------------- -----------------
<S> <C> <C>
Mining property rights .............................................. $ 971,670 $ 2,518,403
Building and equipment, including capitalized interest
of $87,145 and $87,145 ............................................. 473,285 473,285
Furniture and fixtures .............................................. 62,997 62,997
----------------- -----------------
1,507,952 3,054,685
Less: Accumulated amortization ..................................... (41,753) (32,649)
----------------- -----------------
$ 1,466,199 $ 3,022,036
----------------- -----------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
The details by major area of interest of the Company's investments in
mining property rights are as follows:
<TABLE>
1998 1997
---------------- ----------------
<S> <C> <C>
Petsite Project ...................... $ 316,778 $ 646,777
Deadwood Project ..................... 1 1
Buffalo Gulch Property ............... 600,175 477,543
Eckert Hill Property ................. - 656,454
Other properties ..................... 54,716 737,628
---------------- ----------------
$ 971,670 $ 2,518,403
---------------- ----------------
</TABLE>
A number of the properties are located within the Nez Perce National
Forest, on land administered by the U.S. Forest Service. Permits must be
obtained for all exploration and development work to be carried out on
these properties. There can be no assurances that the Company will be able
to obtain all necessary permits in order to place its mineral properties
into production.
Following is a summary of the agreements associated with the Company's
major mineral property projects and acquisition of its mineral rights.
a) Petsite Project
By an agreement dated May 20, 1996, the Company granted Cyprus Gold
Exploration Corporation (Cyprus) the right to participate in a joint
venture to earn up to a 70% working interest in certain unpatented
mineral claims located in Idaho County, Idaho.
Cyprus has earned its 70% working interest in the project by:
* Making a cash payment of $50,000 to the Company on execution of
the agreement (completed).
* Contributing to the joint venture certain of its unpatented
mineral claims in the area of the joint venture (completed).
* Completing $1,500,000 of cumulative exploration and development
expenditures by May 20, 2000 (completed by December 31, 1997).
* Maintaining the unpatented claims within the project during the
earn-in period.
On February 23, 1998, Cyprus notified the Company that it had
completed its earn-in of the 70% interest with initial deemed
expenditures of $1,500,000 by Cyprus and $642,857 by the Company for
purposes of future joint venture contributions or dilution
calculations.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
a) Petsite Project - Continued
During 1998, the Company elected to participate in the joint venture
and be carried by Cyprus. The Company's carried share is treated as a
loan and bears interest at bank prime plus 2% compounded quarterly.
The principal together with accrued interest is only repayable from
85% of the Company's share of the proceeds of production or from its
share of proceeds on sale of the joint venture property, if any.
Should the Company's share of any such proceeds be insufficient to
repay the loan then the balance shall be forgiven. Such loan is
secured by the Company's interest in the joint venture.
During 1998, Cyprus assigned its interest in the joint venture to
Kinross Gold U.S.A., Inc. ("Kinross"). The Company also received
notification from Kinross of its determination to drop the bulk of the
Golden Eagle Property and the unpatented mineral claims originally
contributed by Cyprus from the joint venture.
During 1998, Kinross completed $362,256 of exploration and development
expenditures during the joint venture phase of the project. In order
to allow Kinross to meet its expenditure requirements on the Deadwood
Project, $10,592 of the amount spent on the Petsite Project was
credited to the Deadwood Project. After this transfer, Kinross is
deemed to have spent $351,664 and the Company's carried share of these
expenditures amounts to $105,499.
The underlying Company claims subject to the joint venture arrangement
are the Petsite Property, the Golden Eagle Property and the Friday
Property.
Petsite Property
The Company originally acquired these unpatented lode mining claims
for cash in the amount of $10,000 during 1989, cash in the amount of
$10,000 during 1991 and the issuance of 20,000 common shares during
1991 at a deemed price of $9,599. The optionor retained a 5% net
profits interest in the claims. The President of the Company had a
minority interest in the entity which controlled the Petsite Property.
Accordingly, the Petsite Property has been carried in the consolidated
financial statements at the lower of cost or the predecessor's cost
basis.
Golden Eagle Property
By agreements dated October 15, 1992, the Company acquired a 60%
undivided working interest in the Golden Eagle Property by issuing
150,000 common shares at the estimated fair market value of the shares
issued ($1.09 per share) aggregating $163,500 from Idaho Mining and
Development Company (IMD), a stockholder. The Company was also
contingently required to issue an additional 150,000 common shares
upon completion of $180,000 of exploration expenditures on these
properties with the recommendation of a qualified engineer or
geologist to proceed with further exploration. The Company was also
granted a right of first refusal to acquire the remaining 40%
undivided interest on these properties from IMD.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
a) Petsite Project - Continued
Golden Eagle Property - Continued
Pursuant to the terms of a Global Settlement Agreement with IMD
(reached in 1997), the Company has terminated any requirement to issue
the 150,000 contingent common shares. During 1998, the Company
received notification from Kinross of its determination to drop the
bulk of the Golden Eagle Property from the Petsite Joint Venture. Due
to current market conditions, management elected to drop all of the
claims released from the joint venture and notified IMD. Accordingly,
the related acquistion, exploration and development costs of $332,077
have been written-off in 1998.
Friday Property
By an agreement effective December 11, 1995, the Company acquired a
lease on certain patented claims in Idaho for an initial term of 5
years from Idaho Gold Corporation (IGC). In order to obtain the lease,
the Company completed the following:
* Issued IGC 30,000 common shares on the closing date of the
agreement.
* Issued IGC an additional 30,000 common shares by July 19, 1997.
* Completed exploration and development expenditures of $135,000 by
July 19, 2001.
IGC retains a 3% net smelter royalty to a maximum of $1,000,000. IGC
has also been granted an option, expiring July 19, 2001, to reacquire
a 49% interest in the property by paying to the Company 115% of
expenditures on the property from January 1, 1996 to the date of
delivery of such payment. If IGC exercises the option, then a formal
joint venture will be drawn and the 3% net smelter royalty will be
terminated. The Company may purchase IGC's option to reacquire the 49%
interest for $300,000 Cdn. within 21 days of receipt of notice from
IGC of its intention to reacquire.
The Company is also responsible on an underlying agreement for a 3%
net smelter royalty payable at $3,000 per quarter to a maximum of
$300,000 covering certain claims within the property. As of December
31, 1998, a total of $156,000 advance royalty payments have been made
and are currently funded by Kinross under this joint venture.
b) Deadwood Project
By an agreement dated June 13, 1997 and subsequent amendments, the
Company granted Cyprus the right to participate in a joint venture to
earn up to an 80% working interest in certain unpatented mineral
claims located in Idaho County, Idaho. During 1998, Cyprus assigned
its interest in the joint venture to Kinross.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
b) Deadwood Project - Continued
Subsequent to December 31, 1998, the Company received notice from
Kinross of its withdrawal from the joint venture prior to earning any
interest in the property.
Prior to withdrawing from the joint venture, Kinross or Cyprus
completed the following:
* Made a cash payment of $65,000 to the Company on execution of the
agreement (completed in 1997).
* Deposited in trust $50,000 to be released to the Company upon
resolution of the title issues on the Golden Eagle Property -
(completed in 1997).
* Made a cash payment of $50,000 to the Company by December 13,
1997 (completed in 1997).
* Contributed to the joint venture certain of its unpatented
mineral claims in the area of the joint venture (completed in
1997).
* Completed $305,344 of cumulative exploration and development
expenditures to December 31, 1998.
The underlying Company claims are the Deadwood Property.
Deadwood Property
By an agreement effective December 11, 1995, the Company acquired a
lease on certain unpatented claims in Idaho for an initial term of
five years from IGC. In order to obtain the lease, the Company
completed the following:
* Issued IGC 35,000 common shares on the closing date of the
agreement.
* Issued IGC an additional 35,000 common shares by July 19, 1997.
* Completed exploration and development expenditures of $135,000 by
July 19, 2001.
IGC retains a 3% net smelter royalty to a maximum of $2,000,000. IGC
has also been granted an option, expiring July 19, 2001, to reacquire
a 49% interest in the property by paying to the Company 115% of
expenditures on the property from January 1, 1996 to the date of
delivery of such payment. If IGC exercises the option, then a formal
joint venture will be drawn and the 3% net smelter royalty will be
terminated. The Company may purchase IGC's option to reacquire the 49%
interest for $100,000 Cdn. within 21 days of receipt of notice from
IGC of its intention to reacquire.
The Company is also responsible on certain underlying agreements for:
* A 3% net smelter royalty payable at $3,000 per quarter to a
maximum of $300,000 covering certain claims within the property
known as the Deadwood claims. As of December 31, 1998, a total of
$156,000 of advance royalty payments have been made and are
currently being paid by Kinross pursuant to the Petsite
Project-Friday Property upon which this agreement also underlies.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
b) Deadwood Project - Continued
Deadwood Property - Continued
* A 3% net smelter royalty payable at $6,000 per quarter to a
maximum of $500,000 covering certain claims within the property
known as the Orogrande claims. As of December 31, 1998, a total
of $288,000 of advance royalty payments have been made and are
currently funded by Kinross under this joint venture.
c) Buffalo Gulch Property
By an agreement effective December 11, 1995, the Company acquired a
lease on certain unpatented claims in Idaho for an initial term of
five years from IGC. In order to obtain the lease, the Company
completed the following:
* Issued IGC 60,000 common shares on the closing date of the
agreement.
* Issued IGC an additional 60,000 common shares by July 19, 1997.
* Completed exploration and development expenditures of $310,000 by
July 19, 2001.
IGC retains a 3% net smelter royalty to a maximum of $3,000,000. IGC
has also been granted an option, expiring July 19, 2001, to reacquire
a 49% interest in the property by paying to the Company 115% of
expenditures on the property from January 1, 1996 to the date of
delivery of such payment. If IGC exercises the option, then a formal
joint venture will be drawn and the 3% net smelter royalty will be
terminated. The Company may purchase IGC's option to reacquire the 49%
interest for $300,000 Cdn. within 21 days of receipt of notice from
IGC of its intention to reacquire.
The Company is also responsible on three underlying agreements as
follows:
Black Bear Agreement
By an agreement dated August 1, 1996, the Company renegotiated an
underlying agreement related to the property by making cash payments
of $6,900 prior to December 31, 1996 and $2,400 by April 1, 1997. The
Company must, at its option, make staged quarterly payments to a
cumulative total of $120,000 as follows:
* $2,400 per quarter commencing August 1, 1997 (paid).
* $3,600 per quarter commencing August 1, 1998 (paid to date).
* $4,800 per quarter commencing August 1, 1999.
* $6,000 per quarter commencing August 1, 2000.
* $7,200 per quarter commencing August 1, 2001.
* A final payment of $24,000 by July 31, 2002.
The Company must also complete a minimum of $3,000 annually in
exploration and development expenditures on the property.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
c) Buffalo Gulch Property - Continued
Whiskey Jack Agreement
By an agreement dated August 29, 1998, the Company was granted an
option to acquire a 100% working agreement interest in certain
upatented mineral claims in Idaho. In order to complete the option,
the Company shall, at its option, make quarterly payments to a
cumulative total of $65,000 as follows:
* $1,000 per quarter commencing July 1, 1998 (paid to date).
* $1,400 per quarter commencing July 1, 1999.
* $1,800 per quarter commencing July 1, 2000.
* $2,000 per quarter commencing July 1, 2001.
* $2,400 per quarter commencing July 1, 2002.
* A final payment of $30,600 by July 1, 2003.
The Company must also complete a minimum of $1,000 annually in
exploration and development expenditures on the property.
The agreement supersedes the Company's assumption of an agreement
dated July 1, 1988 with the optionor under which a total of $23,400
was paid.
Gray Estates Agreement
The Company has assumed the obligation of an underlying agreement
dated May 21, 1984 which requires quarterly advance royalty payments
of $6,000 or a 5% net smelter royalty upon commencement of commercial
production, to a maximum of $500,000. As of December 31, 1998, a total
of $348,000 of advance royalty payments have been made.
The Company has also entered into the following agreement on a
contiguous property:
Gallaugher Property
By an agreement dated September 5, 1996 the Company was granted an
option to acquire a 100% working interest in certain unpatented
mineral claims in Idaho. In order to complete the option, the Company
shall, at its option, make staged quarterly payments to a cumulative
total of $150,000 as follows:
* $2,400 per quarter commencing March 5, 1997 (paid).
* $3,600 per quarter commencing March 5, 1998 (paid).
* $4,800 per quarter commencing March 5, 1999 (paid to date).
* $6,000 per quarter commencing March 5, 2000.
* $7,200 per quarter commencing March 5, 2001.
* A final payment of $54,000 by March 5, 2002.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
c) Buffalo Gulch Property - Continued
Gallaugher Property - Continued
A third party receives a 10% finder's fee deducted from all option
payments made by the Company to the optionor.
The Company is currently renegotiating the contract to substantially
reduce the quarterly property payments.
d) Eckert Hill Property
By a mineral lease agreement dated June 28, 1993, the Company leased
certain property located in Idaho County, Idaho for an initial term of
five years. In order to maintain the lease, the Company paid $148,000
in minimum rental and advance royalty payments.
During 1998, the Company terminated the lease and has written-off
cumulative acquisition, exploration and development costs of $662,253.
e) Other Properties
Tuxedo Property
Pursuant to an option agreement dated December 28, 1993 and an
addendum dated April 27, 1994, the Company acquired the right to
certain mineral rights on property located in Deer Lodge and
Silver-Bow Counties of Montana for a cash payment of $100,000. The
Company was also granted the right to negotiate for additional mineral
rights on the property.
Pursuant to an assignment dated September 30, 1994 and an underlying
purchase and sale agreement dated June 1, 1994, the Company acquired
the mineral rights to 1,380 acres in Silver-Bow County, Montana for a
cash payment of $43,000. The underlying vendor retains a 3% net
smelter return on the property.
During 1998, due to current market conditions, management determined
to continue to hold this patented property but no ongoing work
programs are contemplated. Accordingly, the property has been
written-down by $205,907 to a nominal carrying value.
Dean Mine and Mill Site
By an agreement dated October 15, 1996, the Company acquired certain
property, data base and equipment located in Battle Mountain, Nevada
for a cash payment of $25,000 and acceptance by the vendor of the
$50,000 in prior option payments made under an earlier option
agreement dated August 2, 1995.
During 1998, due to current market conditions, management determined
to continue to hold this unpatented property and to continue to pay
annual claim rental fees. However, no ongoing work programs are
currently contemplated. Accordingly, the property has been
written-down by $86,644 to a nominal carrying value.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
3. Property Rights, Plant and Equipment - Continued
e) Other Properties - Continued
Claim Blocks
By agreements dated October 15, 1992, the Company acquired a 60%
undivided working interest in 10 claim blocks and a 100% undivided
interest in 2 additional claim blocks by issuing 550,000 common
shares, upon receipt of regulatory approval, at the estimated fair
market value of the shares issued ($1.09 per share) aggregating
$602,125 from IMD and Silver Crystal Mines, Inc. (Silver Crystal). The
Company was also contingently required to issue a further 650,000
common shares to IMD upon completion of $780,000 of exploration
expenditures on these properties with the recommendation of a
qualified engineer or geologist to proceed with further exploration.
Pursuant to a Global Settlement Agreement with IMD reached in 1997,
the Company has terminated any responsibility to issue the 650,000
contingent common shares.
Prior to 1998, the Company had dropped many of the claims from these
claim blocks retaining only the key claims based upon review of the
properties by management. As a result, the Company had written-off the
related costs of $274,672 and $200,279 in 1997 and 1996, respectively.
During 1998, due to current market conditions and title concerns,
management has dropped all remaining claims and signed a quitclaim
deed of these claims in favor of IMD. Accordingly, the related
acquisition, exploration and development costs of $417,832 have been
written-off.
Mineral Zone Property
By an agreement dated December 1, 1995, subject to regulatory
approval, the Company agreed to acquire a property located in the Elk
City Mining District, Idaho County, Idaho from two shareholders of the
Company. Regulatory approval of this agreement was held in abeyance by
the regulatory authorities pending resolution of legal disputes with
IMD. During 1997, the Company restaked the property due to title
concerns over certain claims covered by the December 1, 1995
agreement.
Pursuant to the terms of a Global Settlement Agreement, reached in
1997, the Company terminated the agreement dated December 1, 1995 and
the parties agreed to enter into a new agreement by which the Company
would purchase the property from IMD and Mr. D. Steiner, the Company's
president and director, based upon a price to be determined by a
mutually agreed upon qualified appraiser.
During 1998, IMD failed to provide proof of title and negotiations for
purchase of the claims from IMD have been terminated. The Company is
continuing to negotiate a mutually agreeable price on the claims of
Mr. D. Steiner, subject to regulatory approval.
Mallard and Snowstorm Properties
During 1997, management determined that title to these properties was
in question and no significant work program was planned for these
properties. Accordingly, these properties were written-down by $70,950
to a nominal carrying value.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
4. Notes Payable to Shareholders
Details of notes payable to shareholders are as follows at December 31,
1998 and 1997:
<TABLE>
1998 1997
------------- -------------
<S> <C> <C>
Note payable, bearing interest at the bank's prime rate plus 2.5% due on
demand .................................................................... $ - $ 250,000
Uncollateralized note payable, due in monthly payments of $460 including
interest at 9.0% per annum ................................................ 13,070 17,220
Uncollateralized note payable, bearing interest at 9% per annum, due on
demand .................................................................... 5,000 -
Convertible promissory note payable #1, uncollateralized, due on or before
January 23, 2000, bearing interest at 9% per annum. The lender may
require the Company to convert all or any portion of the principal amount
of the loan advanced and then outstanding into 546,154 units at a
conversion price of one unit for each CDN $0.26 of indebtedness until and
including January 23, 1999 or into 458,065 units at a conversion price of
one unit for each CDN $0.31 of indebtedness during the period from
January 24, 1999 until January 23, 2000. Each unit consists of one
common share and one non-transferable warrant with each warrant being
exercisable at a price of $0.26 per share until January 23, 1999 or at
$0.31 per share from January 24, 1999 to January 23, 2000 (Note 14c) ...... 100,000 -
Convertible promissory note payable #2, uncollateralized, due on or before
March 31, 2000, bearing interest at 9% per annum. The lender may require
the Company to convert all or any portion of the principal amount of the
loan advanced and then outstanding into 600,769 units at a conversion
price of one unit for each CDN $0.26 of indebtedness until and including
March 31, 1999 or into 503,870 units at a conversion price of one unit
for each CDN $0.31 of indebtedness during the period from April 1, 1999
until March 31, 2000. Each unit consists of one common share and one
non-transferable warrant with each warrant being exercisable at a price
of $0.26 per share until March 31, 1999 or at $0.31 per share from April
1, 1999 to March 31, 2000 (Note 14d) ...................................... 110,000 -
------------- -------------
Balance carried forward ....................................................... $ 228,070 267,220
------------- -------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
4. Notes Payable to Shareholders - Continued
<TABLE>
1998 1997
------------- -------------
<S> <C> <C>
Balance carried forward ....................................................... $ 228,070 $ 267,220
Convertible promissory note payable #3, uncollateralized, due on or before
May 15, 2000, bearing interest at 9% per annum. The lender may require
the Company to convert all or any portion of the principal amount of the
loan advanced and then outstanding into 932,608 units at a conversion
price of one unit for each CDN $0.23 of indebtedness until and including
May 15, 1999 or into 766,071 unints at a conversion price of one unit for
each CDN $0.28 of indebtedness during the period from May 16, 1999 until
May 15, 2000. Each unit consists of one common share and one
non-transferable warrant with each warrant being exercisable at a price
of $0.23 per share until May 15, 1999 or at $0.28 per share from May 16,
1999 to May 15, 2000 ...................................................... 150,000 -
Convertible promissory note payable #4, uncollateralized, due on or before
September 10, 2000, bearing interest at 9% per annum. The lender may
require the Company to convert all or any portion of the principal amount
of the loan advanced and then outstanding into 2,227,941 units at a
conversion price of one unit for each CDN $0.17 of indebtedness until and
including September 10, 1999 or into 1,721,590 units at a conversion
price of one unit for each CDN $0.22 of indebtedness during the period
from September 11, 1999 until September 10, 2000. Each unit consists of
one common share and one non-transferable warrant with each warrant being
exercisable at a price of $0.17 per share until September 10, 1999 or at
$0.22 per share from September 11, 1999 to September 10, 2000 ............. 250,000 -
------------- -------------
Balance carried forward ........................................................ $ 628,070 $ 267,220
------------- -------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
4. Notes Payable to Shareholders - Continued
<TABLE>
1998 1997
------------- -------------
<S> <C> <C>
Balance carried forward ....................................................... $ 628,070 $ 267,220
Convertible promissory note payable #5, uncollateralized, due on or before
October 1, 2000, bearing interest at 9% per annum. The lender may
require the Company to convert all or any portion of the principal amount
of the loan advanced and then outstanding into 2,466,681 units at a
conversion price of one unit for each CDN $0.20 of indebtedness until and
including October 1, 1999 or into 1,973,732 units at a conversion price
of one unit for each CDN $0.25 of indebtedness during the period from
October 2, 1999 until October 1, 2000. Each unit consists of one common
share and one non-transferable warrant with each warrant being
exercisable at a price of $0.20 per share until October 1, 1999 or at
$0.25 per share from October 2, 1999 to October 1, 2000 ................... 322,000 -
------------- -------------
950,070 267,220
Current portion ............................................................... (9,527) (254,150)
------------- -------------
940,543 13,070
Equity component on issuance of convertible securities (Note 6) ............... (249,862) -
------------- -------------
690,681 13,070
Amortization of interest discount ............................................. 56,812 -
------------- -------------
$ 747,493 $ 13,070
------------- -------------
</TABLE>
The effective interest rate on the convertible promissory notes payable is
22.4%, after giving effect to the interest discount or equity component on
issuance of convertible securities of $249,862.
The principal payments on notes payable to shareholders become due as
follows:
Year Ending December 31, Amount
- --------------------------------------------------------- ----------------
1999 ................................................... $ 9,527
2000 ................................................... 936,953
2001 ................................................... 3,590
----------------
$ 950,070
----------------
During 1999, $210,000 of the amount due in the year 2000 was converted to
common stock (see Note 14).
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
5. Common Shares
The Company has a stock option plan which covers its officers and
directors. The options are granted for varying terms ranging from two to
seven years and are immediately vested upon the date of grant. No
compensation expense was recognized in connection with the stock option
plan in 1998, 1997 or 1996. Following is a schedule of the activity
pursuant to this stock option plan.
<TABLE>
Exercise Price
Number per Share (CDN $) Expiry Date
- ---------------------------------------------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C>
Balance - January 1, 1989 and
December 31, 1989 ........................ -
Options granted .......................... 235,000 $ 0.55 April 1996
--------------------- ------------------ --------------------------
Balance - December 31, 1990 ................. 235,000 0.55 April 1996
Options exercised ........................ (30,000) 0.55
--------------------- ------------------ --------------------------
Balance - December 31, 1991 ................. 205,000 0.55 April 1996
Options granted .......................... 17,500 1.85 September 1993
Options granted .......................... 62,500 1.85 September 1994
Options exercised ........................ (55,000) 0.55
--------------------- ------------------ --------------------------
0.55 September 1993 to
Balance - December 31, 1992 ................. 230,000 to 1.85 April 1996
Options expired .......................... (17,500) 1.85
--------------------- ------------------ --------------------------
0.55 September 1994 to
Balance - December 31, 1993 ................. 212,500 to 1.85 April 1996
Options exercised ........................ (150,000) 0.55
Options exercised ........................ (62,500) 1.85
--------------------- ------------------ --------------------------
Balance - December 31, 1994 ................. -
Options granted .......................... 250,000 1.80 October 1999
--------------------- ------------------ --------------------------
Balance - December 31, 1995 ................. 250,000 1.80 October 1999
Options exercised ........................ (30,000) 1.80
Options granted .......................... 325,000 3.30 May 2000
--------------------- ------------------ --------------------------
1.80 October 1999 to
Balance - December 31, 1996 ................. 545,000 to 3.30 May 2000
Options cancelled ........................ (220,000) 1.80 October 1999
Options cancelled ........................ (325,000) 3.30 May 2000
Options regranted ........................ 220,000 1.15 October 1999
Options regranted ........................ 55,000 1.15 May 2000
Options granted .......................... 410,000 1.15 February 2001
Options granted .......................... 150,000 0.56 August 2001
Options expired .......................... (60,000) 1.15 October 1999
Options expired .......................... (110,000) 1.15 February 2001
--------------------- ------------------ --------------------------
$ 0.56 October 1999 to
Balance - December 31, 1997 ................. 665,000 to 1.15 August 2001
--------------------- ------------------ --------------------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
5. Common Shares - Continued
<TABLE>
Exercise Price
Number per Share (CDN $) Expiry Date
- ---------------------------------------------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C>
$ 0.56 October 1999 to August
Balance - December 31, 1997 ................. 665,000 to 1.15 2001
Options granted ........................ 45,000 0.26 April 2002
Options expired ........................ (50,000) 1.15 October 1999
Options cancelled ...................... (110,000) 1.15 October 1999
Options cancelled ...................... (55,000) 1.15 May 2000
Options cancelled ...................... (300,000) 1.15 February 2001
Options cancelled ...................... (150,000) 0.56 August 2001
Options regranted ...................... 110,000 0.26 October 1999
Options regranted ...................... 55,000 0.26 May 2000
Options regranted ...................... 300,000 0.26 February 2001
Options regranted ...................... 150,000 0.26 August 2001
Options expired ........................ (15,000) 0.26 April 2002
--------------------- ------------------ --------------------------
October 1999 to April
Balance - December 31, 1998 ................. 645,000 $ 0.26 2002
--------------------- ------------------ --------------------------
</TABLE>
During 1998, the Company cancelled certain options ranging in exercise
price from $0.56-$1.15 and regranted these options at $0.26 per option. As
of December 31, 1998, all options are exercisable. At December 31, 1998,
the weighted average exercise price per option was $0.26. The weighted
average remaining contractual life of the options was 2.5 years.
Under U.S. GAAP, Statement of Financial Accounting Standards No. 123 (SFAS
No. 123), "Accounting for Stock-Based Compensation", establishes financial
accounting and reporting standards for stock-based employee compensation
plans. The statement encourages all entities to adopt a fair value based
method of accounting, but allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued
to Employees." The disclosure only provisions of SFAS No. 123 are as
follows:
<TABLE>
1998 1997 1996
-------------- ------------- -------------
<S> <C> <C> <C>
Loss U.S. basis before extraordinary items and cumulative
effect of accounting change (Note 12)
As reported .......................................... $ 1,845,678 $ 2,127,303 $ 1,646,036
Pro forma ............................................ 1,939,028 2,503,203 2,204,514
Loss per share U.S. basis before extraordinary items and
cumulative effect of accounting change (Note 12)
As reported .......................................... $ 0.20 $ 0.29 $ 0.27
Pro forma ............................................ 0.21 0.34 0.37
Net loss U.S. basis (Note 12)
As reported .......................................... $ 2,943,209 $ 1,724,219 $ 1,646,036
Pro forma ............................................ 3,036,559 2,100,119 2,204,514
Net loss per share U.S. basis (Note 12)
As reported ........................................... $ 0.31 $ 0.23 $ 0.27
Pro forma ............................................. 0.32 0.28 0.37
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
5. Common Shares - Continued
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
1998 1997 1996
----------------- ---------------- -----------------
<S> <C> <C> <C>
Expected dividend yield ................ 0.00% 0.00% 0.00%
Expected stock price volatility ........ 87.74% 87.82% 60.53%
Risk-free interest rate ................ 5.57% 6.05% 5.65%
Expected life of options ............... 2 years 2 years 2 years
</TABLE>
The weighted average grant-date fair value of options granted in 1998, 1997
and 1996 was $0.17, $0.76 and $1.72, respectively.
In connection with sales of common stock during 1994, 1995, 1996 and 1997,
the Company has also issued warrants to acquire common stock. The warrant
activity is as follows:
<TABLE>
Number of Price per
Warrants Share Expiry Date
- ---------------------------------------------- --------------------- ------------------ -----------------
<S> <C> <C> <C>
Balance - December 31, 1993 ................ - $ -
Warrants issued ....................... 300,000 3.00 CDN 1995
Warrants exercised .................... (270,000) 3.00 CDN
--------------------- ------------------ -----------------
Balance - December 31, 1994 ................ 30,000 3.00 CDN 1995
Warrants issued ....................... 168,900 2.00 U.S. 1997
Warrants exercised .................... (30,000) 3.00 CDN
--------------------- ------------------ -----------------
Balance - December 31, 1995 ................ 168,900 2.00 U.S. 1997
Warrants issued ....................... 100,000 2.00 U.S. 1997
Warrants issued ....................... 377,950 2.75 U.S. 1998
--------------------- ------------------ -----------------
2.00 to
Balance - December 31, 1996 ................ 646,850 2.75 U.S. 1997 to 1998
Warrants issued ....................... 1,763,233 (A) 2000
Warrants expired ...................... (168,900) 2.00 U.S. 1997
Warrants expired ...................... (100,000) 2.00 U.S. 1997
--------------------- ------------------ -----------------
0.60 CDN to
Balance - December 31, 1997 ................ 2,141,183 2.75 U.S. 1998 to 2000
Warrants expired ...................... (377,950) 2.75 U.S. 1998
------------------- -------------------- -----------------
Balance - December 31, 1998 ................ 1,763,233 $0.70 CDN March 2000
------------------- -------------------- -----------------
</TABLE>
(A) Warrants are exercisable at $0.60 (CDN) per warrant during the first year
and at $0.70 (CDN) during the second year and expire March 18, 2000.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
5. Common Shares - Continued
In conjunction with the Company's initial public offering, certain Company
officers and directors were required to place 750,000 common shares of the
Company in escrow in accordance with policies of the Vancouver Stock
Exchange (VSE). The shares are subject to release from escrow as the
Company expends funds on exploration and development of its mineral
properties and with VSE approval. If the shares have not been released from
escrow pursuant to the release provisions by the year 2001, the remaining
shares in escrow will be surrendered to the Company for cancellation. At
December 31, 1998, 562,500 shares remain in escrow pursuant to this
arrangement; however, the Company has not as yet requested release of
eligible shares pertaining to 1994 through 1996's expenditures for
exploration and development which, when requested and approved by the VSE,
would allow for the release of the remaining 562,500 common shares.
- --------------------------------------------------------------------------------
6. Convertible Securities
The Company has allocated the equity component of the convertible
promissory notes payable (Note 4) based upon the fair value of the
underlying securities. The fair value is estimated on the date of the
related contractual obligation, using the Black-Scholes option-pricing
model, with the following assumptions:
Expected dividend yield 0.00%
Expected stock price volatility 87.74%
Risk-free interest rate 5.57%
Expected life of convertible security 1 year
Discount factor for trading restrictions on
control block of shares 70.00%
Details are as follows:
<TABLE>
Number Amount
---------------------------- --------------------------------------------------
Common Common
Shares Warrants Shares Warrants Total
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Convertible Note #1 ...... 546,154 546,154 $ 13,108 $ 13,108 $ 26,216
Convertible Note #2 ...... 600,769 600,769 14,419 14,419 28,838
Convertible Note #3 ...... 932,608 932,608 19,585 19,585 39,170
Convertible Note #4 ...... 2,227,941 2,227,941 33,419 33,419 66,838
Convertible Note #5 ...... 2,466,681 2,466,681 44,400 44,400 88,800
-------------- ------------- ------------- ------------- -------------
6,774,153 6,774,153 $ 124,931 $ 124,931 $ 249,862
-------------- ------------- ------------- ------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
7. Related Party Transactions
In addition to related party transactions disclosed elsewhere herein, the
Company has paid or accrued for payment the following amounts to related
parties:
<TABLE>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Fees to a company controlled by a former director ......... $ - $ 2,500 $ -
Fees to a company controlled by a director ................ 1,952 6,100 -
Management fees to the president and director ............. 69,000 69,000 34,129
Management fees to a former director - 3,868 164
Management fees to a company controlled by a former
director ............................................. - 35,300 1,250
Office rent to directors .................................. - - 1,773
Interest expense on notes payable to shareholders ......... 130,858 50,296 52,765
Fees to a company controlled by a former shareholder for
assessment work on mineral properties ................ - - 73,333
------------- ------------- -------------
$ 201,810 $ 167,064 $ 163,414
------------- ------------- -------------
Purchase of furniture and fixtures from the president and
director ............................................. $ - $ - $ 27,050
------------- ------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
8. Global Settlement Agreement
During 1998, a Global Settlement Agreement was concluded which caused all
claims and counter-claims between Mr. J. Swisher, IMD and the Company to be
dismissed. In full and final settlement of all existing and potential
claims between and amongst the parties, the Company paid $100,000 to IMD.
During 1997, the Company recorded a gain on settlement of debt as a result
of the settlement of the lawsuit as follows:
<TABLE>
<S> <C>
Trade accounts payable owing to IMD and Silver Crystal prior to the settlement ......... $ 60,722
Notes payable to IMD prior to the settlement ........................................... 263,224
----------------
323,946
Settlement paid to IMD ................................................................. (100,000)
----------------
Gain on settlement ..................................................................... $ 223,946
----------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
9. Gain on Settlement of Debt
During 1997, the Company and certain noteholders reached an agreement and
allotted 567,245, common shares to settle debts in the amount of $299,842.
In addition to the debt settlement, the Company negotiated a reduction of
previously invoiced and accrued legal fees of $179,138 from the Company's
former U.S. securities counsel.
- --------------------------------------------------------------------------------
10. Income Taxes
No income tax provision or benefit has been provided for any of the periods
presented due to the Company's net operating loss carryforward position.
Net deferred tax assets consist of the following as at December 31, 1998,
1997 and 1996:
<TABLE>
1998 1997 1996
---------------- -------------- ---------------
<S> <C> <C> <C>
Deferred tax assets .............. $ 1,773,612 $ 1,755,000 $ 1,145,700
Valuation allowance .............. (1,773,612) (1,755,000) (1,145,700)
---------------- -------------- ---------------
Net deferred tax assets .......... $ - $ - $ -
---------------- -------------- ---------------
</TABLE>
The deferred tax assets are primarily comprised of the tax effect of net
operating loss carryforwards. The Company has recorded a valuation
allowance equal to the net deferred tax asset as it is uncertain that these
benefits will be realized through the generation of future taxable income.
The net change in the valuation allowance for 1998, 1997 and 1996 was due
to the increase in net operating loss carryforwards and the uncertainty of
their realization.
The Company has recorded the above valuation allowance to reflect the
estimated amount of the deferred tax asset which may not be realized
principally due to uncertainty regarding the generation of future taxable
income to utilize existing net operating losses. If it becomes more likely
than not that the Company will generate future taxable income, the
valuation allowance could be adjusted in the near term.
The Company is subject to income tax filing requirements in Canada and the
United States. As of December 31, 1998, the Company had income tax losses
carried forward available to reduce future taxable income, if any, which
expire as follows:
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
10. Income Taxes - Continued
United States
Year (U.S. $) Canada (CDN $)
- ----------------------------------- ----------------- -----------------
1999 $ - $ 271,800
2000 - 229,400
2001 - 902,700
2002 - 722,000
2003 - 1,496,300
2004 - 507,900
2005 - 1,001,400
2012 1,724,200 -
2013 2,943,200 -
----------------- -----------------
$ 4,667,400 $ 5,131,500
----------------- -----------------
- --------------------------------------------------------------------------------
11. Fair Value of Financial Instruments
The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgement is required to interpret market data and to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company could
realize in a current market exchange.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to
estimate that value. Potential income tax ramifications related to the
realization of unrealized gains and losses that would be incurred in an
actual sale or settlement have not been taken into consideration.
The carrying amounts for cash and cash equivalents and the restricted
investments are a reasonable estimate of their fair value. Due to the due
dates and interest rates of the notes payable to shareholders, the carrying
value of these notes is a reasonable estimate of their fair value.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
11. Fair Value of Financial Instruments - Continued
The estimated values of financial instruments as at December 31, 1998 and
1997 are as follows:
<TABLE>
1998 1997
--------------------------------- ----------------------------------
Carrying Carrying
Amounts Fair Value Amounts Fair Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents ......... $ 407 407 $ 78,885 $ 78,885
Cash in trust ..................... 50,000 50,000 50,000 50,000
Restricted investments ............ 90,000 90,000 90,000 90,000
Financial liabilities
Notes payable to shareholders ..... 757,020 757,020 267,220 267,220
</TABLE>
- --------------------------------------------------------------------------------
12. Differences Between United States and Canadian Generally Accepted
Accounting Principles (GAAP)
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada. The significant
differences between Canadian and U.S. GAAP are as follows:
Under Canadian GAAP, no value is attributed to the release of escrowed
shares and no compensation expense is recorded. Under U.S. GAAP, stock
compensation expense is recorded as such shares become eligible for release
based upon the number of shares eligible for release and the market value
of the shares at that time (Note 5).
Under Canadian GAAP, the Company is not required to disclose the proforma
effect of stock option based compensation expense in the notes to the
consolidated financial statements. See Note 5 for U.S. GAAP disclosures.
Under Canadian GAAP, convertible security instruments are allocated between
liability and equity based upon the fair value of the components at the
inception of the related contractual obligation. Further, additional
interest expense is recorded on amortization of the related interest
discount over the term of the related debt. Under U.S. GAAP, no allocation
is calculated unless the equity component is detachable from the liability
component and no amortization of the interest discount is required.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
12. Differences Between United States and Canadian Generally Accepted
Accounting Principles (GAAP) - Continued
Under Canadian GAAP, exploration costs are capitalized on an individual
property basis until such time as an economic ore body is defined or the
property is abandoned. Prior to January 1, 1998, under U.S. GAAP, the
Company also capitalized these costs, subject to management's review of the
recoverability of these costs. Effective January 1, 1998, for U.S. GAAP,
the Company changed its method of accounting for these costs to be expensed
as incurred. This accounting change would be recorded as the cumulative
effect of an accounting change in the U.S. GAAP consolidated statement of
operations for the year ended December 31, 1998.
Under Canadian GAAP, events such as gains on settlement of lawsuits and
debts are considered to be unusual events which may receive separate
disclosure but they are not considered to be extraordinary items. Under
U.S. GAAP, such items meet the criteria for disclosure as extraordinary
items.
A reconciliation of the consolidated statements of operations from Canadian
presentation to U.S. presentation is as follows:
<TABLE>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Net loss - Canadian basis .......................... $ 2,396,731 $ 1,724,219 $ 1,294,351
Stock compensation expense ......................... - - 351,685
Amortization of interest discount .................. (56,812) - -
Current year exploration costs ..................... 82,763 - -
Current year abandonments .......................... (577,004) - -
Gain on settlement of lawsuit and debts ............ - 403,084 -
--------------- --------------- ---------------
Loss before extraordinary items and cumulative effect
of accounting change .......................... 1,845,678 2,127,303 1,646,036
Gain on settlement of lawsuit and debts ............. - (403,084) -
Cumulative effect of change in accounting for
exploration costs ................................. 1,097,531 - -
--------------- --------------- ---------------
Net loss - U.S. basis ............................... $ 2,943,209 $ 1,724,219 $ 1,646,036
--------------- --------------- ---------------
Net Loss U.S. basis per share - Basic and Diluted
Before extraordinary items and cumulative effect
of accounting change ......................... $ 0.20 $ 0.29 $ 0.27
Extraordinary items and cumulative effect of
accounting change ............................. 0.11 (0.06) -
--------------- --------------- ---------------
Net loss U.S. basis per share ....................... $ 0.31 $ 0.23 $ 0.27
--------------- --------------- ---------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
12. Differences Between United States and Canadian Generally Accepted
Accounting Principles (GAAP) - Continued
A reconciliation of certain consolidated balance sheet accounts from
Canadian presentation to U.S. presentation is as follows:
<TABLE>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Deficit accumulated during the exploration stage -
Canadian basis ................................... $ 7,263,201 $ 4,866,470 $ 3,142,251
Stock compensation expense, current year - - 351,685
Stock compensation expense, prior year's cumulative ... 1,201,736 1,201,736 850,051
Amortization of interest discount ..................... (56,812) - -
Cumulative effect of change in accounting for
exploration costs ................................ 1,097,531 - -
Current year exploration costs ........................ 82,763 - -
Current year abandonments ............................. (577,004) - -
--------------- --------------- ---------------
Deficit accumulated during the exploration stage -
U.S. basis ....................................... $ 9,011,415 $ 6,068,206 $ 4,343,987
--------------- --------------- ---------------
Notes payable to shareholders, non-current-Canadian
basis ............................................. $ 747,493 $ 13,070 $ 17,209
Non-detachable convertible security instruments ........ 249,862 - -
Amortization of interest discount ...................... (56,812) - -
--------------- --------------- ---------------
Notes payable to shareholders, non-current-U.S.
basis ............................................. $ 940,543 $ 13,070 $ 17,209
--------------- --------------- ---------------
Property rights, plant and equipment - Canadian basis .. $ 1,466,199 $ 3,022,036 $ 3,911,015
Current year abandonments .............................. 577,004 - -
Cumulative effect of change in accounting for
exploration costs ................................. (1,097,531) - -
Current year exploration costs ......................... (82,763) - -
--------------- --------------- ---------------
Property rights, plant and equipment - U.S. basis ...... $ 862,909 $ 3,022,036 $ 3,911,015
--------------- --------------- ---------------
</TABLE>
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
- --------------------------------------------------------------------------------
13. Commitments
The Company has entered into a one year operating lease for office space at
$1,500 per month expiring January 31, 2000 and a five year lease for office
equipment at $301 per month expiring January 31, 2003. Total rent expense
recognized during the years ended December 31, 1998, 1997 and 1996 was
approximately $18,000, $18,000 and $13,201, respectively. The minimum
annual future lease commitments are as follows:
Years Ending December 31, Amount
- -------------------------------------------------- -----------------
1999 $ 21,612
2000 5,112
2001 3,612
2002 3,612
2003 301
-----------------
$ 34,249
-----------------
- --------------------------------------------------------------------------------
14. Subsequent Events
In addition to items disclosed elsewhere in these financial statements, the
following significant events occurred between January 1, 1999 and May 17,
1999:
a) The Company received cash in the amount of $115,000 and issued a
convertible promissory note to a related party in the amount of
$115,000 bearing interest at 9% per annum and due in full on January
28, 2001. The note may be converted into 1,172,847 units of the
Company at the option of the lender at CDN $0.15 during the first year
and into 879,635 units at CDN $0.20 during the second year. Each unit
consists of one common share and one common share purchase warrant.
The convertible security instrument will be allocated $72,778 as debt
and $42,222 as equity based upon the fair value of the equity
component.
b) The Company issued 2,000,000 common shares and warrants to purchase
2,000,000 common shares pursuant to a private placement for proceeds
of $200,000. The warrants allow the holder to acquire an additional
common share for each warrant at $0.10 ($0.15 CDN) in the first year
and $0.15 ($0.18 CDN) in the second year. Included in the private
placement are 858,000 shares subscribed by insiders of the Company.
c) The Company issued to a related party, 546,154 common shares and
warrants to purchase 546,154 common shares on conversion of note
payable #1 in the amount of $100,000 (Note 4). The warrants allow the
holder to acquire an additional common share for each warrant at CDN
$0.31 to January 23, 2000.
d) The Company issued to a related party, 600,769 common shares and
warrants to purchase 600,769 common shares on conversion of note
payable #2 in the amount of $110,000 (Note 4). The warrants allow the
holder to acquire an additional common share for each warrant at CDN
$0.31 to March 31, 2000.
<PAGE>
Idaho Consolidated Metals Corp.
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
U.S. Funds
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14. Subsequent Events - Continued
e) The Company granted 365,000 incentive stock options to insiders of the
Company, subject to regulatory approval, which are exercisable at a
price of CDN $0.20 per share until April 7, 2004.
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15. Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
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