FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) of (g) of the Securities Exchange Act of 1934
Utah 87-022171
________________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
P.O. Box 190, R.R. 5, Warkworth, Ontario CANADA K0K 3K0
_______________________________________ __________
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (705) 924-2303
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered Each class is to be registered
None None
______________________ ______________________________
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Securities to be registered under Section 12(g) of the Act:
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Diamond Lake Minerals, Inc. (the "Company" was incorporated under the laws
of the State of Utah on January 5, 1954 as Garden & Lawn Equipment Company for
the purpose of buying and selling lawn and garden equipment and accessories.
The Company amended its Article of Incorporation changing its name to G & L
Equipment Company in 1958. In 1961, it amended its Articles to exist in
perpetuity, to expand its business purpose to any "lawful activity" and to
increase it authorized capital to 22,000 shares of common stock. In 1971, it
amended its Articles of Incorporation twice: increasing its authorized capital
to 50,000,000 common shares at a par value per share of one-mill ($0.001),
changing its business purpose, and eliminating preemptive rights, among other
changes. In 1972, the Company completed a public offering of its common stock
under the exemption from registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "Act") as promulgated under Section
3(b), Regulation A. The Company completed its offering with 8,000,000 shares
sold to the public at $0.05 per share for gross proceeds of $400,000 which
were used to expand its retail business. The Company's amended its Articles
again in August of 1982 changing its name to G & L Energy, Inc. The Company's
expanded retail efforts failed, however, and it became non-operational. In
1993, the Company began looking for a new business purpose or opportunity and
amended its articles in September of 1993 to effect a reverse split by
decreasing authorized capital to 15,000,000 shares of common stock.
On November 30, 1993, the Company effected a change in control, which was ratified by the Company's shareholders at a special meeting. The change in control resulted in the following: (1)a name change to Diamond Lake Minerals, Inc; (2) the election of a new Board of Directors; (3) the ratification of an Agreement and Plan of Reorganization whereby the Company acquired Graphite Mountain, Inc., an Ontario, Canada corporation ("Graphite") as its wholly owned subsidiary by issuing to the shareholders of Graphite Mountain an aggregate of 16,812,000 of its common shares in exchange for all of the issued and outstanding shares of Graphite; and (4) an increase in authorized capital by increasing the authorized common shares to 50,000,000 and the addition of a class of 50,000,000 preferred shares whose rights and preferences may be determined at the discretion of the Board of Directors. In connection with the acquisition, the Company also changed its business purpose to that of the acquisition, exploration and development of mining properties in Southern Ontario, Canada with the intent to put the same into graphite production and other minerals, if warranted. The Company also became the beneficial owner of Graphite's 41 contiguous mining claims comprising 2,100 acres in Bedford Township, Ontario, Canada (the "Bedford Claims"). In late 1994, the Company acquired 39 additional mining claims located in South Burgess Township, Southern Ontario, Canada (the "Timmins Claims") from P & G Development, an Ontario, Canada company, through the issuance of an additional 4,000,000 shares of its common stock. The Company also staked claims in Keith Township, Ontario, Canada, but abandoned them in late 1998 in order to focus its efforts on maintaining the Timmins Claims in good standing and proving its Bedford Claims. The Company holds a total of 80 mining claims. (See this PART I, ITEM
1. BUSINESS OF THE COMPANY and ITEM 3. DESCRIPTION OF PROPERTY.)
The following schedule sets forth certain information as of the December 31, 1998 and for the interim period ended September 30, 1999. See Part F/S for the Company's financial statements for those periods, the auditor's report, and related notes.
September 30 December 31
1999 1998
(Unaudited)
-------------- ------------
Total Assets.................. $ 104,710 $ 30,145
Total Liabilities............. $ 85,353 $ 211,612
Stockholder's Equity ......... $ 19,357 $ (181,467)
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The Company has elected to file this Form 10-SB registration statement on
a voluntary basis in order to become subject to the reporting requirements of
Section 13 of the Securities and Exchange Act of 1934, as amended (the "1934
Act"). The primary purpose for this is the Company's intention to reapply for
listing on the National Association of Securities Dealers ("NASD") Over-the
Counter Bulletin Board ("OTCBB"). Under current NASD rules, an issuer cannot
maintain a listing (or apply for a listing) unless it is current in its
reporting obligations under Sections 13 or 15(d) of the 1934 Act. Issuers
listed on the OTCBB prior to the rule change, such as the Company, were given
a phase-in date for completion of the necessary Securities and Exchange
Commission required filings. The phase-in date was based on its trading
symbol at January 4, 1999 which was "DLMI", and, as a result, its phase-in
date was November 1, 1999. This means that the Company had to file its
registration statement and clear S.E.C. comments, on or before that date, or
it would no longer be quoted on the OTCBB. The Company because of its
failure to become subject to the reporting requirements is not quoted on the
OTCBB but appears on the "pink sheets" where it currently trades under the
symbol of "DLMI". The filing of this registration statement will trigger
reporting obligations for the Company sixty (60) days from the filing date.
Once the Company has cleared comments on the within registration statement, it
intends to reapply to the OTCBB for listing.
This registration statement contains certain forward-looking statements information relating to the Company that are based upon beliefs of the Company's Management as well as assumptions made by and information currently available to the Management. When used in this registration statement, the words anticipate, believe, estimate, expect, and similar expressions, as they related to the Company and the Company's Management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company with respect to the future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward looking statements.
THE COMPANY'S LACK OF REVENUES FROM OPERATIONS/ABILITY TO OPERATE AS A GOING CONCERN - Although the Company has been in business since 1954, it failed in its initial business purpose and became non-operational until late 1993. Since 1993, the Company has had a limited operating history and is subject to all risks inherent in a developing business enterprise. The likelihood of success of the Company must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with a new business in general and those specific to the natural resource industry and the competitive and regulatory environment in which the Company will operate. The Company has seen no revenues from operations and has only limited assets, approximating $104,710 US. Because the Company has not been able to determine the recoverability of mineral property investments and deferred exploration costs, during 1998 it booked the entire amount as an expense loss on impaired assets. The Company's assets have been reduced accordingly by over $1,300,000 US in its year ended December 31, 1998 from its fiscal year ended December 31, 1997. The Company had a Net Comprehensive Loss of $2,747,533 US at from inception (November 1, 1990) to September 30, 1999. The Company's inability to generate revenue has been acknowledged by the Company's certified public accountants, Jones Jensen & Company, raising doubts as to whether or not the Company can operate as an on-going concern. (See PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.)
HIGH DEGREE OF RISK FOR THE COMPANY'S MINING /EXPLORATION BUSINESS -THE COMPANY STILL CONSIDERED AN EXPLORATION STAGE MINING COMPANY. Mineral exploration is highly speculative in nature, frequently is nonproductive, and involves many risks, often greater than those involved in the actual mining of mineralization. Such risks can be considerable and may add unexpected expenditures or delays to the Company's plans. There can be no assurance that the Company's mineral exploration activities, which it has been conducting since late 1993, particularly its exploration for graphite, will be successful or profitable. Once mineralization is discovered, it can take a number of years from the initial phase of proving a property until production is possible, during which time the economic feasibility of production may change. The Company has spent the years since its reorganization with Graphite attempting to prove the presence of economically recoverable graphite on its Bedford Claims. A related factor is that exploration stage companies use the evaluation work of professional geologists, geophysicists, and engineers for estimates in determining whether to acquire an interest in property or to commence exploration or development work. These estimates generally rely on scientific estimates and economic assumptions, and in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a property before it can be determined whether or not the property contains economically recoverable mineralization. The economic viability of a property cannot be determined until extensive exploration and development has been conducted and a comprehensive feasibility study performed. To date, the Company has spent approximately $685,400 on exploration of its properties. As of this date, the Company has no sufficiently proven reserves on any of its claims. Moreover, the market prices of any minerals produced are subject to fluctuation, which may negatively affect the economic viability of properties on which expenditures have been made. (See this PART I, ITEM 1. DESCRIPTION OF BUSINESS AND ITEM 3. DESCRIPTION OF PROPERTY.)
MARKETABILITY OF THE GRAPHITE -The availability of a ready market for graphite, should the Company's exploration and development prove successful and it begins mining, producing and marketing the same, as well as the
availability of a market for secondary and micronutrient byproducts, and the prices obtained therefor, will depend on numerous factors beyond the Company's control. (See this PART I, ITEM 1. DESCRIPTION OF BUSINESS, "Principal Products and Services and their Markets.")
AVAILABILITY OF EQUIPMENT Periodically, it its efforts to conduct assessment, exploration, and diamond drilling, as well as future development and production efforts, the Company is required to utilize certain equipment. The Company does not own any equipment and retains the services of companies which have the equipment, manpower and expertise to perform the needed services. Although the Company has experienced no difficulty in obtaining necessary equipment, a delay or inability to obtain equipment or man power would cause delays in completion of the Company's business plan.(See this PART I, ITEM 1. DESCRIPTION OF BUSINESS, "Sources and Availability of Raw Materials and Name of Principal Suppliers".)
GOVERNMENTAL REGULATIONS The area of mining operations is regulated by the Ministry of Northern Development and Mines in the Province of Ontario under the provisions of the Ontario Mining Act. This statute has been considerably revised within the last decade and the expressed purpose of the Act is to encourage prospecting, staking and exploration for the development of mineral resources and to minimize the impact of these activities on public health and safety and the environment through the rehabilitation of mining lands in Ontario. Before the Company's property(s) can be put into production, the Company must file a closure plan which describes how the site is to be continually rehabilitated and how the funds are to be provided therefor. The holders of surface rights on the same property(s) are entitled to prevent the holder of the mineral rights from carrying out the exploration. (See this PART I, ITEM 1. DESCRIPTION OF BUSINESS, "Effect of Existing or Probable Government Regulations".)
DEPENDENCE ON THE COMPANY'S OFFICERS/DIRECTORS/ADVISORY BOARD. The Company is dependent on the services of its officers and directors, especially A.D. Houston, its President and Chief Executive Officer. A.D. Houston has dedicated the majority of his time since 1993 to the business of the Company often taking stock in exchange for a large portion of his salary and working for rates below what he could command if he worked elsewhere in the industry. The loss of any one of the officers and directors services, especially A.D. Houston's, or an inability to attract or retain qualified personnel, could have a material adverse effect on the Company. A.D. Houston has been involved with the Company's properties, as has Brian King, a director, since long before his involvement with the Company and has had years of experience and exploration on such property and in the mining business in Canada, in general. He has also developed numerous relationships with related entities, and is familiar with local, provincial and national regulations. The Company does have an advisory board with experience in mining and mining related businesses which it would be able to rely on if it lost the services of one or more of its Board members. The Company has no plans to obtain key person life insurance for its officers and directors. (See PART I, ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.)
ADDITIONAL FINANCING REQUIRED In order to complete its plan of operation to explore, prove and ultimately put certain of its mining property into production of graphite, the Company will need substantial additional funding over and above the cash available to it at its third quarter end of approximately $80,000. The Company is conducting a private placement of stock and warrants which is raising sufficient funds to cover day to day operating expenses and expenses related to the diamond drilling program which commenced
in late November. However, such funds are inconsistent and may not be
sufficient to complete its 12 month plan of operation involving the "Meadow
Zone" and provide for the remainder of its cash requirements over the next 12
months. There is no assurance that additional funds will be available from
any source when needed by the Company. The Company will likely require
substantial additional funding to continue exploration and development. (See
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS, "Plan of
Operation.")
BUSINESS OF REGISTRANT
*Introduction*
The Company is in the mining business whereby it holds 80 mining claims in Southern Ontario, Canada, for the purpose of exploration, development and subsequent mining production of graphite.
The Company is an exploration stage mining company and has yet to conduct
any mining operations on any of its properties. The Company general business
plan is to: (1) continue with exploration and assessment work on its 80 claims
(required to maintain them in good standing; (2)identify certain of its
claims, which, because of history, geology, and the Company's preliminary
exploration, warrant further exploration and testing in order to prove
reserves (currently portions of its Bedford Claims); (3) conduct and analyze
a diamond drilling program in an effort to indicate proven (measured) reserves
or probable (indicated) reserves thus identifying priority properties for
development (currently on the "Meadow Zone" of the Bedford Claims); (4)
complete survey and contour maps as well as complete and receive approval of
Mine Closure Plans for those properties it intends to mine; (5) commence
development and mining operations on such commercially mineable reserves; and
(6) refine ores mined from such properties at a processing plant owned and
operated by a wholly-subsidiary of the Company for sale of natural graphite
and certain byproducts into the market place.
The Company has identified the "Meadow Zone" area of the Bedford Claims as an area that warrants development. It has conducted various exploration work on that area over the past few years including trenching, percussion drilling and its recently completed diamond drilling program. In addition, bulk samples have been milled at a pilot plant on an ongoing basis over the past three years and samples have been supplied to the industry. On December 4, 1999, the Company completed a 3,000 foot diamond drilling program on the Bedford Claims "Meadow Zone". Because the Company has identified the claims in the "Meadow Zone" as likely to contain recoverable reserves, its current priority is to complete logging of the core, ship the core samples to Lakefield Research for analysis, and confirm the results by a mining engineer. It will then proceed to the completion of mine closure plans and commencement of mining operations. (See Item 1. BUSINESS OF THE REGISTRANT, "Current Status of the Company's Business", for further discussion on the Company's diamond drilling program and Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, "Plan of Operation".)
*The Characteristics of Graphite*
Graphite is one of three known mineral forms of carbon (the other two being diamonds and coal) occurring naturally in the earths crust in metamorphic rocks such as crystalline limestone, schist and gneiss. Natural
graphite is a soft mineral having a hardness of one to two on the Mohs scale, and, depending on the purity, a specific gravity of 2.20 - 2.30. It is optically opaque even on its thinnest edge. It has a perfect basil cleavage, and this, coupled with its extreme softness, gives it an unctuous slippery feel. It is flexible but not elastic, has high thermal and electrical conductivity, is highly refractory, and chemically inert.
Natural graphite is formed in either igneous or metamorphic rock formations. (See ITEM 3. DESCRIPTION OF PROPERTY for a discussion of the geological composition of the Company's claims.) Most commercial deposits of natural graphite are of metamorphic origin. In the graphite industry, natural graphite is classified into three types: flake, high-crystalline and amorphous. These are then sub-divided into numerous grades for commercial purposes on the basis of such factors as graphite content, particle size, and impurity types. It is found in many localities worldwide such a Canada, Madagascar, Mozambique, Zimbabwe, China and Mexico.
Graphite is mined from open pit and underground mine operations. Open pit operations are more economical and preferred where overburden is thin enough to remove. The Company's properties contain flake graphite and will be mined through an open pit operation.
*Market for Graphite/Consumption*
Graphite is used in a wide variety of industrial applications. It is unique in that it has the properties of a both a metal and a non-metal. Metallic properties include thermal and electrical conductivity; non-metallic properties include inertness, extremely high temperature resistence, and anisotropy. Graphite is also an excellent lubricant. Lubricity, when combined with its thermal conductivity, makes it very desirable in high temperature applications because it results in a material which provides a thin film lubrication at a friction interface while furnishing a thermally conductive matrix to remove heat from that same interface. Graphite, therefore, is a substitute for asbestos in brake lining manufacture. Graphite also has a unique combination of lubrication and electrical conductivity making it one of the primary components in the manufacture of brushes for electric motors.
The refractory industry is one of the major consumers of crystalline graphite. Applications in that industry include castable ramming, gunning mixtures and shaped carbon-bonded brick. Carbon-manganese bricks containing flake graphite have applications in high-temperature corrosive environments such as steel furnaces, ladles and blast furnaces. Carbon-alumina linings are principally used in continuous steel casting operations. One of the Company's potential markets for its graphite, the United States, utilized 27% of its imported graphite for refractories in 1995, 25% in 1996 and 1997 and 22% in 1998.
While refractories industries and manufacture of brake linings are the major consumers of graphite, other significant uses of the mineral include manufacture of low current, long life batteries, steelmaking, manufacture of rubber, and powder metallurgy, although its use in the low-current, long-life batteries is decreasing in favor of carbon black. Some of its other applications include: electrically conducive composites, pencils, foundry facings, additives for iron and steel, solid carbon shapes, static and dynamic seals, valve and stem packing, fire retardant, plastics, chemically resistant coatings, paints, greases and oils, and flexible gaskets.
*Price of Graphite in the Marketplace*
Information derived from United States government sources indicate that graphite prices have remained constant during the last five years and demonstrated a near to supply/demand balance. Crystalline flake graphite concentrates ranged from $480 - $550 per ton and command higher prices than the amphorous type which priced at approximately $220 - $235 per ton. Carbon content, flake and crystal size, size distribution, and ash content affect the price of graphite. Natural graphite prices are subject to negotiations between buyer and seller leading to a wide price range throughout a year.
*World Resources/Production/Competition*
The world's inferred reserve based exceeds 800 million tons of recoverable graphite. In 1998 world production of graphite was estimated at 578,000 tons, with China being the world's leading graphite producer at 200,000 tons, India in second place at 125,000 tons, followed by Brazil, Mexico and North Korea. These five countries accounted for 3/4 of the world's production. Sri Lanka has accounted for nearly all the high-crystalline graphite produced. During the 1990's a combination of a decrease in world demand as well as competition from cheap Chinese material forced many non-Chinese producers to reduce production or leave the market altogether. China accounted for 1/3 of world production. Economic recovery has encouraged the opening of new operations that produce high crystalline flake in Canada, Mozambique, and Tanzania. This economic recovery gives the Company an opportunity, should it prove successful in its mining operations, to capitalize on both manufacturers' demands in Canada as well as in the United States, which imports almost 100% of its graphite. During 1998, the United States imported 13,400 tons of crystalline flake graphite from Canada, and in 1997 it imported 15,500 tons of graphite from Canada. This accounted for 27% and 21% of its imports for consumption of natural graphite in 1997 and 1998, respectively, with an overall percentage average from 1994 through 1997 of 27%. Natural graphite in the U.S. was consumed by approximately 200 manufacturing firms primarily in the Northeastern and Great Lakes regions thus positioning the Company for marketing to the United States. Although the Company's first market could well be localized Canadian manufacturing firms, it may also target the US market for its refined graphite.
*New Uses/Current Research and Technology/Trends*
Most new graphite products, are being developed through advances in graphite thermal technology. It is likely that the ability to refine and modify graphite and carbon products will be the key to future growth and new markets in the graphite industry. Innovative refining techniques have enabled the use of improved graphite in friction materials, electronics, and foil and lubrication applications. Although graphite electrode consumption in steelmaking has been down due to increased efficiency of iron and steel producers and the substitution of competing products such as manufactured graphite powder, scrap from discarded machined shapes, and calcined petroleum coke, it is anticipated that graphite consumption in the near future will be high temperature applications in the iron and steel industry as the industry modernizes production facilities. Brake linings and other friction materials will steadily consume graphite as new auto production increases and more replacement parts are required on existing vehicles. Lubrication applications have been down, however, due to changes in requirements for lubricant compositions and in processing technologies. Foundry operations will remain a steady user of graphite despite potential competition from finely ground coke with olivine. Flexible graphite product lines such as grafoil (a thin
graphite cloth) will probably be one of the fastest growing markets although comparatively speaking it will only consume small amounts of natural graphite compared with major end-users.
Chinese production will continues to influence the market. In the event of any prices increases, China may increase its production to take advantage of potentially high profits which could lead to a price decline in certain grades and possibly to production stoppage in certain countries. If, however, Chinese iron and steel industry expands its own consumption of natural graphite, then their exports may actually decline encouraging new producers to enter the market. Industry trends that appear to be common to advances in graphite technology and markets include higher purity of graphite, using thermal processing and acid leaching techniques for such applications as advanced carbon-graphite composites continues to be a trend. The Company's responses to the market and trends will be dictated by the market when and if the Company is able to enter it.
*Fertilizer By-Product*
The Company's processing plan for the recovery of graphite separates micronutrient and secondary plant nutrients along with the recovery of graphite. Analysis of ore samples sent to Lakefield Research Limited demonstrates the presence of secondary plant nutrients utilized in fertilizers such as calcium and magnesium, as well as micronutrients. Both secondary plant nutrients, which are required by plants in smaller amounts than primary nutrients, and micronutrients, which are required in only minute amounts, are essential to plant life. Increased crop yields, sandy soils, and leaching due to high rainfall or irrigation are factors influencing the use of secondary nutrients in fertilizers such as magnesium and sulphurs. The use of calcium is dictated by special crop needs and unusual soil conditions. Common fertilizers containing these secondary nutrients are potassium sulphate, sulfate of potash magnesia, gypsum, normal superphosphate, magnesium sulfate, elemental sulphur, and calcium nitrate. Analysis of samples sent to Lakefield Research in February of 1999, indicate the presence of 550 lbs of calcium per ton, and 59 lbs. of magnesium per ton. Although these are only estimates, prior assays of samples sent to Lakefield have also confirmed the presence of these and other secondary nutrients in the tailings.
Increased crop production, high yield goals, and diminished soil reserves have combined to increase the consumption of micronutrient fertilizers in recent years. Micronutrients, which must be added to certain soils as fertilizers, include boron, copper, iron, manganese, molybdenum and zinc. Use of manganese and zinc is much higher than the use of other micronutrients because these are mainly applied to corn, wheat, soybeans, cotton, and rice which are grown over the largest acreage in the United States. Because of dramatic increases in the uses of these two micronutrients between 1967 (when the USDA first began obtaining information on U.S. micronutrient consumption) and 1980, has resulted in a change in reporting procedures to include industrial byproducts containing manganese or zinc for fertilizers. The February 1999 Lakefield analysis indicates both the presence of zinc and manganese in the samples sent by the Company.
Because demands for higher crop yields can no longer be met by putting new lands into cultivation, agriculture has shifted to increasing crop yields through fertilization and improved crop varieties and cultural practices. As a result, the growth of the fertilizer industry has been phenomenal especially in the 1960's and 1970's when the growing world population stimulated crop production in the United States. Despite the fall of farm commodity prices in
subsequent years in the face of over production, crop yields have continued to set records as farmers increased the efficiency of fertilizer use. World population forecasts of 6 billion people have now become a reality. Up until now, world capita food production has kept pace with population growth much of it due to proper use of fertilizers. As nutrient removal becomes a critical factor in future crop production, the use of fertilizers and other agricultural inputs will remain a keystone to successful world agriculture. The Company sees this demand as a way to increase the profitability of its mining operations by reducing the amount of overburden which must be disposed of and increasing the potential profitability of its refining operations through its ability to market both natural graphite and the separated secondary and micronutrients which it will market to the agriculture industry.
The Company, once it reaches production stage, will market its graphite to the following types of industries:
* Manufacturers of graphite pucks used in the manufacture of steel
* Refractory manufacturers
* Brake lining manufacturers
* Specialty manufacturers
It also intends to market micronutrients and secondary nutrients, which it will produce as a byproduct of graphite production, to the fertilizer/ agriculture industry.
The Company's ultimate marketing plan will be dictated by many of the factors discussed under "World Resources/Production/Competition", including the world market at the time it begins mining and refining natural graphite, as well as the type and quality of its product. It will also be dictated by some of the various trends discussed under "New Uses/Current Research and Technology/Trends." Before the Company can begin making specific marketing plans, it must establish the size and type of its reserves. The Company will likely refine its graphitic ore in accordance to specifications of its various end-users and will be required to meet certain performance guarantees. Its ability to meet any established performance guarantees and production capacities will also influence its marketing plans.
The Company has had preliminary discussions with various entities such as Krystar International, a company which is supplying formulations and materials throughout the world to the brake lining industry. The Company preliminary marketing plans are to market a large percentage of its graphite to the brake lining industry either directly to local Canadian manufacturing companies, through distributors, or through selling agents. The Company's officers and directors have been involved in the mining industry for many years and have many contacts in the industry. The Company does not believe that it will have any difficulty in marketing its graphite, if it reaches production stage unless: (1)world demand for graphite changes dramatically, (2)it is unable to meet production specifications and capacities, or (3) it is unable to refine its ore in a profitable manner.
The demand for graphite in the world market is high, and, to the best knowledge of the Company, there is only one producing graphite mine in North America. The Company, therefore, believes that it will have little difficulty
marketing its graphite when it reaches production stage. The Company may be required to compete, however, with other producers of graphite which market graphite internationally and have larger name recognition, more experience in commercial mining operations, and better capability to withstand price fluctuations in the market place. Such international marketers/producers of graphite are from countries such as Sri Lanka (which produces both lump and chip graphite), China, Madagascar and Brazil. It will also be dependent on the prices established in the market by product demand and will need to establish relationships with graphite end-users and product manufacturers which are already dealing with known mining companies/graphite distributors in the industry as well as keep production costs as low as possible. The United States produces no graphite and the Company will be in a position to supply not only manufacturers which require natural graphite in Canada, but also manufacturing firms in the Northeastern United States and the Great Lake region. The Company intends to compete by: (1) its belief that its graphite reserve will prove to be rich; (2) preliminary indications that tailings will be useful in the fertilizer industry thus giving the Company an extra source of revenue and reducing costs of tailings removal; (3) existing demands in Canada and the United States (which does not produce graphite) and its proximity to high demand areas in the United States; and (4) long years of contacts in the industry developed by officers, directors, and advisors of the Company. The Company's major target market will be the puck manufacture of graphite pucks for the steel industry. The demand for graphite in this market is greater than all other combined users.
The Company will also suffer competition from other industries which produce and market secondary and micronutrients to the agriculture industry. The Company continues to have samples analyzed for content of the foregoing to better decide on both production and marketing strategies for micro and secondary nutrients. The Company also is establishing relationships with persons/entities which can help position the Company to compete successfully in the fertilizer market when and if it goes into actual mining and production.
In its efforts to conduct assessment, exploration, and diamond drilling, as well as future development and production efforts, the Company is required to utilize certain equipment. The Company does not own any equipment and retains the services of companies which have the equipment, manpower and expertise to perform the needed services. Such equipment includes, but is not limited to, rock drills, excavators, float movers and vehicles. The Bedford Claims are located in an area of Ontario that has sufficient equipment available to the Company as well as contractors available to provide those services needed by the Company as they are needed. Both Brian King and A.D. Houston have numerous local contacts in the industry. To date, the Company has experienced little or no difficulty in locating and hiring various equipment as needed, and has suffered no material delays for lack of available equipment or contractors. Gordan Barr Ltd. of Kingston, Ontario and Roncor Drilling of Sudbury, Ontario, are two of the entities which have provided services to the Company. Upon approval of the regulatory bodies governing mining operation, the Company will contract the open pit mining and crushing to approved contractors.
The Company has no customers to date and does not expect to depend on a few major customers when and if it begins the actual commencement of mining operations.
There are no patents, trademarks, licenses, franchises, concessions, or labor contracts in effect. The Company does have agreements in effect which guarantee various production royalties. Certain individuals will receive royalties of 1% of net proceeds of sales of any and all products extracted from the Bedford Claims up to $566,800 US pursuant to an option agreement effectuating the transfer of title of the 41 Bedford Claims to A. D. Houston in 1988. An additional 3% net smelter return on the subject claims will be paid to A.D. Houston and various grubstakers as part of the transfer of interest of the Bedford Claims to Graphite in 1993. Also, the Company's acquisition of the Timmins Claims through an agreement with P&G Development provided for the reservation by P&G of a 3% net smelter return in favor of P&G of any and all minerals mined and drilled from and of the Timmins Claims. (See ITEM 3. DESCRIPTION OF PROPERTY, "Brief Description of Title and Claim to Properties" for a discussion on the foregoing transfers of ownership and royalties.)
The area of mining operations is regulated by the Ministry of Northern Development and Mines in the Province of Ontario under the provisions of the Ontario Mining Act (the "Mining Act"). This statute has been considerably revised within the last decade and the expressed purpose of the Mining Act is to encourage prospecting, staking and exploration for the development of mineral resources and to minimize the impact of these activities on public health and safety and the environment through the rehabilitation of mining lands in Ontario. Only if the mineral mined is deemed to be a strategic mineral, or if mining operations affect federal territory such as navigable waters, does the government of Canada have jurisdiction. The Mining Act provides that all lands on which mineral rights are reserved to the province are open for staking by the holder of a prospector's license. The licensed holder of a properly staked mining claim has the right, subject to the other provisions of the Mining Act, to work such claim, bring the same to lease and transfer his or her interest to another person but, where surface rights on the land have been granted to another person, the holder may be required to compensate such person for any damage done by such work.
The holder of the mining claim must perform and record assessment work over a five year period. If the holder fails to do so, the claims are forfeited to the province and will be again open for staking.
The question of compensation for surface rights and all questions and disputes relating to mining claims are determined by the Mining and Lands Commission appointed under the Mining Act. When the necessary assessment work has been completed in accordance with the provisions of the Mining Act, and a survey prepared of the mining claim, if it is unsurveyed territory, and payment of the first year's rent made, the holder of the mining claim is entitled to lease of the claim from the province. The original term of the mining lease is for 21 years, and the same can be renewed for a further 21 year term but only if the claim is being worked for mining purposes.
Before the advanced exploration is carried out on any mining claim, however, or it is brought into production, notice must be given to the director under the Mining Act and to the public and a proposed closure plan submitted which provide for the method and the funding of the environmental
rehabilitation of the lands in question.
The Company has applied to take ten claims to lease and has come to an agreement with the surface rights holder regarding a yearly compensation of $20,000 CDN. (See "Current Status of the Company's Business, Lease Applications", below.) It intends to complete its mine closure plans during the next 12 months.
Current Status of the Company's Business
-Exploration and Diamond Drilling Program on the "Meadow Zone" -
Since 1993, and the acquisition of its Bedford Claims, the majority of the
Company's efforts have been in performing exploration on its claims,
maintaining the same in good standing through assessment work, and identifying
those properties which warrant further exploration in order to prove reserves.
Prior exploration and the results of its own exploration and assessment work
has shown strong evidence that some of the properties have sufficient
mineralization to warrant the commencement of mining operations. The Company
has specifically identified a portion of the Bedford Claims in an area known
as the "Meadow Zone" which is located on four of the Bedford Claims being part
of a block of 12 claims or 600 acres, for development. In 1997 the Company
conducted an 16 hole air-drilling program on the Meadow Zone with favorable
results. During this year, the Company has conducted additional air drilling
on that area with 22 more holes. The Company does not yet have the results
from the 600 samples acquired. On November 22, 1999 the Company conducted a
3,000 foot diamond drilling on the Meadow Zone to prove ore reserves. The
drilling was contracted to Roncore Drilling of Sudbury, Ontario and was
completed on December 4, 1999. On the completion of the logging of the cores
of the diamond drill holes, the mineralized section of the core will be split:
half for assaying and half kept for reference. The half core for assaying
will be shipped to an analytical assayer, Lakefield Research at Lakefield,
Ontario Canada in order to establish the total carbon content as well as the
graphitic carbon. Upon receipt of the assays from Lakefield research, a
geological report will be prepared showing the assay results of the total
sections of each hole. This information will be compiled to establish the
proven ore in each of two areas of the Meadow Zone. The final geological
report will be confirmed by a an approved mining engineer acceptable to the
regulatory bodies. (For detailed information on exploration and development
work on the Bedford Claims, see this PART I, ITEM 3. DESCRIPTION OF PROPERTY,
"History of Claims/Operations/Exploration".)
- Lease Applications -
The Company is required to take any mining claims which it intends to operate to lease before a license will be granted to operate the claims. The Company has submitted its application to Ministry of Northern Development and Mines to take the 10 claims to lease which will be the subject of its initial mining operations. The Company has applied to take the following 10 claims to lease: SO1037728, SO1037727, SO1037726, SO1037725, SO1037717, SO1037718, SO1037719, SO1037720, SO1037692, and SO1191264. As required under the Mining Act, compensation has been determined and paid to the holder of the surface rights to the foregoing claims, entitling the Company to continue with operations. The Company has agreed upon compensation of $20,000 CDN per year to the surface rights owner. (For a full discussion on the Company's mining claims, see PART I, ITEM 3. DESCRIPTION OF PROPERTY, and the various subcategories thereunder which include: Brief Description of Title and Claim to Properties; Property Location and Access; History of Claims/Operations/ Exploration; Geology and Mineralization; and Reserve Estimates.)
-The Company's Wholly Owned Subsidiaries -
GRAPHITE MOUNTAIN INC. Graphite was incorporated on November 1, 1990 under the Business Corporations Act of the Province of Ontario as a private company and was acquired by the Company in November of 1993 through issuance of 16.8 Million of its common shares. Of the 16.8 Million shares issued, 16.3 were issued to the existing shareholders of Graphite on a pro rata basis of 3 shares of the Company for each 1 outstanding share of Graphite, with Graphite's total outstanding shares at the time of the reorganization being 5,433,333 shares. The balance of the 500,000 shares were issued to certain individuals for services rendered in connection with the reverse acquisition transaction. As a result, Graphite became a wholly owned subsidiary of the Company. Of the 80 claims currently owned by the Company, all are recorded in the named of Graphite. (For information on Graphite's title to the claims, see this PART I, ITEM 3. DESCRIPTION OF PROPERTY, "Brief Description of Property and Title to Claims.
ENVIRONMENTAL CARBONATES, INC. Environmental Carbonates, Inc. ("ECI") was incorporated in August of 1996, under the Business Corporations Act of the Province of Ontario as a private company and a subsidiary of the Company. It was founded as an operating entity of the Company for the purpose of owning and running a production facility. ECI purchased real property in Perth Ontario, for $19,196 US during 1997. Certain equipment on the premises was not included in the purchase price and was to be removed by the bank which owned the equipment. The bank gave the Company full title to the equipment which the Company intends to sell. The production facility will be made operational upon commencement of bulk sampling.
-The Company's Production Facility-
An industrial building for the production of graphite was purchased on May 28, 1997 by the Company's subsidiary, Environmental Carbonates, Inc for $19,196 US. The plant is 5,000 feet square and sufficient for two lines of production equipment capable of processing 500 plus tons of ore per 24 hour day. The facility is not operational. The Company will need to purchase and install the necessary production equipment which would basically be a mechanical-pneumatic system comprised of such components as a hopper/feeder, a blower assembly, a rear accelerator, a screw auger, a discharge system, and a production flow line. The Company intends to eventually install two lines of equipment. The Company estimates it will require approximately $4 Million CDN to purchase equipment and begin graphite production and will not make the facility operational unless it proves economically recoverable reserves on its properties. (See "The Company's Wholly Owned Subsidiaries", above.)
The majority of the Company's development activities in the past two years is discussed under ITEM 3. DESCRIPTION OF PROPERTIES which details exploration activities on its claims.
The Company has two full-time employees including A.D. Houston (See ITEM
6. EXECUTIVE COMPENSATION, for further information on A.D. Houston.) The
second employee is actually employed by Graphite, the Company's wholly owned
subsidiary.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For purposes of this registration statement, the Company is considered an exploration stage company within the meaning of Guide 7 (for mining companies) of the United States Securities Act Industry Guides; however, for purposes of its financial statements, it is considered a development stage company and complies with FASB Statement No.7.
In the course of acquiring mining claims and conducting exploration and assessment work, the Company issued 16,812,000 shares of its common stock in a reverse acquisition transaction which resulted Graphite becoming its wholly owed subsidiary and its ownership of the Bedford Claims. The consideration for the property acquisition was valued at the predecessor cost of the cash paid in the option payments made on the claims of $200,000 CDN ($120,978 US). The Company also issued 4,000,000 common shares in the acquisition of its Timmins Claims at $.25 per share or $720,523. Mineral property acquisition has therefore been funded mainly through issuance of common stock.
The Company's mineral properties are valued at the acquisition cost or $851,501, and, up until 1997, the Company booked its deferred exploration as part of additional valuation to its mineral properties at $659,595. The recovery of amounts shown as the cost of acquisition and related exploration costs is dependent on discovery of economically recoverable reserves, confirmation of the Company's interest in the underlying claims, and the ability of the Company to obtain necessary financing to complete development of the properties as well as future profitable production. Because Management is not able to determine what the recoverability of the such costs, a reserve impairment was recorded during the 1998 fiscal year for the full amount of the capitalized costs.
The Company has consistently shown operating losses since 1990 and no revenues, and since inception, the Company has incurred a net comprehensive loss of $2,747,533 US (at September 30, 1999). During the first 3 quarters of 1999, the Company had a net operating loss of $178,982 US; at its year ended December 31, 1998 it showed a net operating loss of $ 1,582,939 US; and, at December 31, 1997 it showed a net operating loss of $ 174,105 US. The large increase in its net loss in 1998 was due to the Company showing mineral acquisition and deferred exploration costs previously booked on the Company's Balance Sheet as expensed to impaired assets during that fiscal year. Expenses incurred each year are those associated with general and administrative costs including legal and accounting related to offerings of its common stock and reporting requirements, as well as exploration and maintaining the currency of its mining claims through assessment work, and compensation to the Company's Chief Executive Officer. Since the Company's acquisition transaction with Graphite in 1993, the Company has been dependent on sales of its common stock and cash advances by the Company's officers and directors and certain shareholders, especially those shareholders on the Company's advisory board (all "accredited investors") who have consistently purchased shares of the Company's common stock to fund its exploration and day to day operations. To date, those individuals who have advanced funds to the Company, mostly A.D. Houston or a company controlled by A.D. Houston, have been willing to take stock in repayment of the advances/loans. At September 30, 1999, these related parties are currently due $37,266 US and the advances/loans are interest free and have no set terms of repayment. In addition, the Company has relied on the willingness of A.D. Houston to take a large portion of his salary, which is usually deferred, in shares of common stock.
On December 4, 1999, the Company completed a 3,000 foot diamond drilling program on the Meadow Zone to prove ore reserves. During the next 12 months, the Company will complete logging of the cores of the diamond drilling holes; send half of the mineralized section of the core to Lakefield Research to establish total carbon content and graphitic carbon; prepare a geological report showing assay results of the total sections of each hole; confirm the geological report by an approved mining engineer; complete geological mapping (MDX GeoServices); and begin working on Mine Closure Plans.
The Company has paid in full for the diamond drilling itself and has advanced $25,000 CDN to MDX for geological mapping. In addition, the Company expects to expend the following on its plan of operation in the next year, all of which are estimated.
Core analysis estimate $ 15,000 CDN
Preparation of samples 15,000 CDN
Engineers report 12,000 CDN
Miscellaneous 8,000 CDN
Payment to surface rights owner 20,000 CDN
---------
Total $ 70,000 CDN (approximately $47,000US)
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The Company, therefore, expects to expend approximately $47,000 US in order to reach the stage where it can begin working on Mine Closure Plans. The Company has also will require approximately $150,000 US for general administrative expenses which include office rent, assessment work, secretarial services and automobile lease payments on two Company vehicles as well as A.D. Houston's salary of $120,000 US per year. The Company will incur higher than normal legal and accounting expenses related to the filing of this registration statement and periodic filing requirements over the next year which it estimates at $ 40,000 US over the next 12 months. The Company's estimate of cash requirements over the next 12 months are a total of approximately $ 237,000 US.
The Company does not have sufficient cash to satisfy these requirements and will need to raised additional funds. The Company expects that A.D. Houston will, as usual, advance the funds for office rent, car leases, and secretarial and that he will defer his compensation, a large portion of which will be compensated in stock at a later date. Therefore, the Company can expect to fund a portion of its expenses through stock issuance. Another portion of the balance of the expected cash requirements will be funded through its current private placement of stock and warrants which will close on or before 60 days from the filing of this registration statement. The Company can expect to raise additional funds in the offering in two ways: the Company may sell additional Units; or, once the geological report establishing tonnage of proven ore on the two areas of the Meadow Zone has been completed, the Company will notify warrant holders and send them a copy of the report enabling them to exercise their warrants in accordance with the terms of their purchase of the Units. Because this private placement is being made in reliance on Regulation D, Rule 504, and the Company is integrating the offering with a prior 504 offering conducted earlier this year, the Company is limited in how much it can raise in the offering to an additional approximate $400,000 US. In addition, the Company will be required to complete the offering within sixty days of this registration statement or rely on an alternative exemption from registration under United States securities laws to complete the offering. The Company believes the maximum proceeds of $400,000 it can raise under the current offering will be sufficient to complete its
plan of operation over the next 12 months with any additional funds it raises over and above its estimated cash flow requirements of $237,000 US to be dedicated to working on mine closure plans.
The Company does not anticipate hiring any additional employees or purchasing any property or equipment in the next 12 months unless it completes its plan of operation sooner than scheduled and is able to move on to its next phase: the actual commencement of mining operations.
The Company's 12 month plan of operation will be subject to certain risk factors, many which will be beyond the Company's control. These include, but are not limited to, those risk factors set forth under "RISK FACTORS", "Business Development" section of PART I, ITEM 1. DESCRIPTION OF BUSINESS.
Once the Company has established proven reserves, it plans to begin the development phase of its operations during the latter 2000 or early 2001. The Company estimated cost to the Company is a minimum of $4 Million CDN (approximately $2.65 Million US). This estimate includes the Company's anticipated expenses in making its production facility operational including the purchase of equipment for at least one production line.
Because of the nature of the Company's operations, it is believed that the Year 2000 issues will not affect the Company. The Company and those entities it associates with in the conduct of exploration and development of its claims do not utilize computer systems which would be affected by Year 2000 issues. The Company itself has updated its own computer systems, both software and hardware, to be Y2K compliant.
Item 3. DESCRIPTION OF PROPERTY
* Bedford Claims *
The 41 claims known as the Bedford Claims are located in Bedford Township,
Frontenac Township, Southern Ontario Mining District, and were originally
acquired through an option agreement, dated December 1, 1988 between two
individuals (referred to as the "Optionors") and the Company's now President,
A. D. Houston as the optionee, whereby, Mr. Houston agreed to pay Optionors an
aggregate of $200,000CDN ($120,978US) for the claims. In addition, Optionors
would receive royalties of 1% of net proceeds of sales of any and all products
extracted from the claims up to $566,800US. A.D. Houston paid the agreed upon
cash consideration and between 1989 and 1992, he sold approximately 49% of his
acquired interest to approximately 27 Canadian individuals (the
"Grubstakers"). In November of 1993, Graphite was assigned all of the
interest in the claims for consideration of the allotment to A.D. Houston and
the Grubstaker group of 2,000,000 shares of Graphite at a deemed price of $.25
per share on a pro-rata basis. The group is also to receive, on a pro rata
basis, a 3% net smelter return on the subject claims. The issuance of the
2,000,000 shares of Graphite for the Bedford Claims resulted in 5,433,333
Graphite shares subscribed for and allotted. The 41 Bedford Claims were
officially transferred and recorded in the name of Graphite on November 10,
1993. On November 30, 1993, the Company acquired Graphite Mountain as a wholly
owned subsidiary by issuing an aggregate of 16,800,000 shares of its
unregistered common shares on a pro rata basis to the shareholders of
Graphite, in exchange for all of the issued and outstanding shares of Graphite (5,433,333 shares). The Company, as the owner of all of the issued and outstanding shares of Graphite, is the beneficial owner of the 41 Bedford Claims. (For a full list of the 41 Bedford Claims, see Exhibit 99.)
Various individuals hold the surface rights to the various mining claims but such rights will not interfere with the mining operations, when and if conducted, if appropriate compensation is made in accordance with the provisions of the Mining Act. The following is a list of the Bedford Claims, located in central Bedford Township, Frontenac County. They can be located on NTS map 31 C/9 and 31 C/10: EO1037688 through EO1037712 and EO1037717 through EO1037732 (see Exhibit 99.)
*Timmins Claims*
On December 17, 1994, the Company entered into an agreement with P&G Development, Inc., a Canadian corporation formed under the Prospecting and Grubstakers Act ("P&G"), whereby P&G conveyed all of its right, title and interest in 39 mining claims located in North Burgess Township, County of Lanark, Southern Ontario, Canada, to the Company (recorded in the name of Graphite), in exchange for the issuance of 4,000,000 unregistered common shares of the Company, and the sum of $90,000 US. The foregoing constituted full payment for the 39 Timmins Claims except for the reservation by P&G of a 3% net smelter return in favor of P&G of any and all minerals mined and drilled from and of the Timmins Claims. For a full list of 39 Timmins Claims, see Exhibit 99. List of the Company's Mining Claims. The Timmins property is located near the Bedford Claims and consists of a similar geology. Various individuals hold the surface rights to the various mining claims but such rights will not interfere with the mining operations, when and if conducted, if appropriate compensation is made in accordance with the provisions of the Mining Act. The following are a list of the Timmins Claims: EO 84066 - EO 840574; SI 748510 - SO 748519; and SO 748709 - SO 748728. (See Exhibit 99)
The Bedford Claims are located approximately 45km north of the City of Kingston in central Bedford Township, Frontenac County, Ontario, Canada. They are accessed by County Road #8 & 12 leading to Highway 38 which connects to the Trans Canada Highway linking Toronto to Ottawa. In addition, the Bedford Claims are located about 30 minutes north of Highway 401 and one hour from the Canada/United States border crossing near Gananoque, Ontario. On a National Topographic Maps System map, the Bedford Claims can be located on maps NTS 31 C/9 and 31 C/10 and on the Ontario Department of Mines Map 1947-5, map 2054 and Ontario Mineral Potential Map P-1505.
The Timmins Claims are located on 1,950 acres approximately 25 miles northeast of Bedford Claims near the village of Westport, vicinity of Lot 25, Concession V, North Burgess Township, Lanark County, Southern Ontario, Canada. The Timmins Claims can be accessed by taking Highway #401 to Kingston, Ontario and exiting at exit #617 north onto highway #10 to Westport, Ontario.
There have been no operations conducted on any of the Company's claims by the Company and/or Graphite, other than the required assessment work preliminary exploration including certain trenching and drilling programs. As of the date hereof, all of the assessment work has been completed and the each of the claims is considered in compliance. The Company intends to have engineering reports completed on certain of the following properties. If the
reports indicate probable or proven reserves, the Company intends to develop and subsequently exploit the same. The following discussion on each of Company's properties takes into account each group of claims history, operations and exploration.
*Bedford Claims *
HISTORY - The Company's acquisition of the Bedford Claims was based upon exploration by the Company's President who began prospecting the Bedford Claims in 1988, prior to his involvement in the Company, private reports by Mr. Brian King, a geologist, prior to his becoming affiliated with the Company, and such historical information as was available. The Bedford Claims have little recorded history of mineral exploration. There are numerous pits, trenches and shafts throughout the district, these having been put down on galena prospects prior to l915. Galena occurrences are found in late stage fault related calcite fissure veins that are situated throughout the Kingston- Madoc-Bancroft region. Several galena deposits were mined extensively during the early part of the 20th century with production reaching several million pounds of lead. There is a graphite occurrence recorded in Lot 18, Conc. VIII but there is little documented other than the existence of several small pits. Only minor graphite exploration has been carried out in the area since operations ceased on the Black Donald Mine in 1954. South of the Bedford Claims, a graphite deposit consisting of several hundred thousand tons has been partially developed as an underground mine in the south part of Bedford Township (known as the Kirkham Graphite Deposit, fka Stewart Lake Resources) .
CURRENT EXPLORATION/WORK PERFORMED - Throughout 1997, a 2-phased exploration program consisting of surface stripping, trenching and sampling followed by a limited drilling program was completed within the "Meadow Zone", located in Lot 16 of Concession V. The "Meadow Zone" was selected for this program based on the results of several years of prospecting about the claim group, although four other zones were identified which the Company believes merit further exploration:
1. The Houston Zone (Lot 13, Concession IV),
2. The Sangster Zone (paralleling the Westport Highway from Lot 14
northeast to Lot 15, Concession V)
3. The Robinson Zone (centered on Lots 18 and 19, Concession VII
including the abandoned Robinson Barite/Galena Mine
4. The Central Zone (on Lot 17, Concession VI near the abandoned
Murphy/Hickey Barite-Galena Mine
Through conventional prospecting methods, the "Meadow Zone" was determined to have a high exploration priority. A total of 11 major trenches were excavated. The trenching exposed a graphitic schist in numerous locations along the 350+ meter strike length which commonly exceed 10m of continuous mineralization with bands of marble, generally containing disseminate flake graphite above and below the graphitic schist. During the trenching program selected mineralized zones were sampled. A total of 16 samples were submitted to Lakefield Research for graphitic carbon assay. The assay values were in the range of 6-10%. Apatite (which can be sold as a natural micronutrient fertilizer) recovery was estimated at 70 - 80%. The trench results appear to demonstrate the apparent continuity of mineralized zones and also suggest that the grade of mineralization is relatively consistent.
Once stripping and trenching was completed, a limited percussion borehole program drilling program was undertaken in September of 1997 to confirm overall continuity of the mineralized zone. The operator of the "air
track" drill was Gordon Barr Limited of Kingston Ontario and the drilling, log maintenance, and sample handling and data analysis was supervised by Brian King, a director of the Company and the owner of MDX GeoServices. A total of 16 vertical boreholes were advanced, most of which intersected the near surface part of the main graphitic zone. Several of the bore holes ended in significant mineralization at the limit of the drilling equipment's reach (approximately 30m). The results of the percussion drilling program indicated 3,263,150 tons of material at 3.72%G(c) (graphitic carbon) 87,909 tons of graphite contained. This preliminary estimate covers only a comparatively small part of the Company's claim group (approximately 6 hectares) and relates only to one of several mineralized zones throughout the property. Although not yet explored, likely extensions of the Meadow Zone have been identified and prospected south and northeast of the tested area. A significant potential for discovery of further graphite resources is indicated in these areas. (See this ITEM 3. DESCRIPTION OF PROPERTY, "Reserve Estimates", below.)
In 1998, the Company performed additional stripping and trenching of the "Meadow Zone" and uncovered surface deposits of graphite along a strike length of 500 meters.
In October 1999, the Company conducted additional percussion drilling with 22 additional vertical bore holes. The Company has not yet received the results of the approximately 600 samples available for assay.
In November of 1999, the Company began a 3,000 foot diamond drilling program on the Meadow Zone which was completed on December 4, 1999. The purpose of this program is to confirm the results of the previously completed percussion drilling in 1997 and 1999, and to establish an initial estimate of it. (See "Current Status of the Company's Business" under Item 1. BUSINESS OF THE REGISTRANT for a detailed discussion on the recently completed diamond drilling program.)
*The Timmins Claims *
The Company's acquisition of the Timmins Claims was based on an independent geologist report by John R. Goodwin of Goodwin Minerals Exploration completed in 1989 and additional reports conducted by MDX GeoServices, an affiliate of the Company. Both reports indicate probable graphite reserves and similar geology to the Bedford Claims. The Company also received a reserve report from J.E Tilsley & Associates Ltd. in March of 1998.
HISTORY - Historical record of the property indicates that a graphite deposit was discovered in 1917 by Mr. Frank Hines in lots 24 and 25, Concession V in North Burgess Township. The property was initially explored from 1918 to 1923 by Noah Timmins who completed 6 shallow diamond holes and numerous exploratory pits. In 1951, was the property was further explored by Frobisher Ltd through drilling an additional 5 diamond drill holes which outlined a part of the ore body containing approximately 55,000 tons with an average grade if 7.5% carbon over a length of 100m. In another zone, 15 additional diamond drill holes were completed indicated the presence of a 140m long ore body with an average grade of 8.4% Carbon. A test milling of ore obtained from surface pits was also conducted at the Black Donald Mine a graphite mine which was operating in the region at the time. In 1981, Orrwell Energy Corporation completed a comprehensive compilation of the known drilling and trenching results in lots 23 to 26 , Concession V. Orrwells' consulting engineer located many of the recorded trenches and assembled data with the drill plans from previous work. Samples from on-site stock piles were collected and submitted to F. Baril & Associates for test purposes to determine whether the economic graphite concentrates could be produced from
the Timmins properties ores. In 1989, Lodi Metals-Black Hawk Mining Inc. completed an exploration program concentrated on the general area as previous workers, although the area explored was substantially larger, consisting of 39 claims (the current Timmins Claims) or roughly 2,000 acres. The work included 13,365.5 feet of diamond drilling, excavating of 69 trenches about the claim group and geophysical surveys and geological mapping. At completion, Lodi- Black Hawk's consultant recommended further expenditure of $500,000 for additional, more detailed follow-up exploration.
WORK PERFORMED AND CURRENT EXPLORATION - Other than assessment work to maintain the Timmins Claims in good standing, the Company has not conducted any other current exploration on the claims. The Company intends to put the Timmins Claims into production if it can prove recoverable reserves are located on the claims. The Company, as of the date hereof, has not scheduled drilling and sampling sufficient for reserve analysis because it is concentrating its efforts on the meadow zone located on the Bedford Claims.
* Bedford Claims *
For the most part the Bedford Claims are typical of Southern Ontario's Precambrian Shield terrain with small area being cultivated (primarily on carbonate bearing bedrock) and the remaining forest covered. In general the claim area has poor soil development with portions supporting minor agriculture, mostly pasture and containing numerous rocky ridges. Overall average relief is less than 5 metres and locally reaches about 15 meters. Overburden is mostly glacial debris and outwash and not particularly thick, between 1 - 5 meters in depth. Small wetlands commonly occupy areas between the ridges in the forested area.
The Bedford Claims generally contain three types of rock: Grenville marbles, intercalated rusty and siliceous Paragneisses, and granitic sills and other small intrusives. The metasedimentary units appear to overlie and have been intruded by granites and granitic gneisses. Minor mafic and intermediate dikes are found locally within the region although these make up a very small portion of the bedrock exposures. The claim group contains very coarsely crystalline Grenville marbles which have been intruded with gneiss and remobilized granitic basement rocks. The marble units are considered to be thin sequences which were at one time carbonate shelf sediments. More than 50% of the Bedford Township region is underlain by granitic gneisses which have undergone considerable upwelling. These rocks and the overlying marbles represent the lower portions of the stratigraphic column in this area and have endured very deep burial. This has resulted in upper amphibolite grade (and perhaps higher) metamorphic effects. The rusty paragneisses apparently occur in comparatively narrow zones within the marbles and are thought to represent more siliceous sediments. These generally do have a carbonate component and were likely formed in an environment of higher energy. These may have a minor volcanic component or may simply be muddy near shore deposits. Often, the rusty paragenisses contain significant graphite content, commonly exceeding 5% (by weight) graphitic carbon.
*Timmins Claims*
Graphite at the Timmins Property seems to occur in much the same way as seen a the Bedford Claims, namely as disseminated flakes within the Granville marble and silicated marble. Pyroxenes, micas and minor sulphide minerals are common. Interbanded with the marbles are a series of pegmatites, granite sills and/or paragneiss. Differentiating between the various granitic units
is difficult and many variations are noted in the field. The marble units are typically lenticular and highly contorted due to the intense folding and other structures present in these high grade metamorphic terrains. The strong deformation has produced highly enriched graphitic zones especially at the apexes of folded units. Since the folding pattern is complex, the enriched zones are likely to be somewhat irregular in dimension, and repeated throughout the property.
The Company has no reserve estimates on either proven or probable reserves on any of its claims by independent mining engineers. The only reserve estimates the Company has are contained in various reports giving assay data from the Company's exploration of the claims. These estimates were made by the Company itself based on information derived from analysis of assessment and drilling work performed on its claims. The majority of the reports on assessment work were performed by MDX GeoServices which is affiliated with the Company through Brian King who is a principal in both MDX and the Company. Although the Company has hired outside consultants to provide analysis of potential reserves on its properties, the main purpose of these reports was to provide the Company with independent opinions on whether there was sufficient indication of mineralization on specific properties to warrant further and more in depth exploration due to a potential commercially recoverable mineralization.
The Company's 16 percussion borehole program conducted in 1997 was intended to confirm continuity of mineralization; however, sufficient data was obtained for it to prepare a preliminary estimate of graphite resources present in the "Meadow Zone". The following are the estimated geological resource tonnages for the "Meadow Zone", as estimated in September of 1997:
Section B 981,750 tons @ 3.92% C(g)
Section C 760,650 tons @ 3.18% C(g)
Section D 1,034,000 tons @ 3.93% C(g)
Section E(east) 297,000 tons @ 3.79% C(g)
Section E(west) 189,750 tons @ 3.66% C(g)
--------------- ----------------------------- Total All 3,263,150 tons @ 3.72% C(g) Sections approx. 87,909 tons graphite contained |
The above preliminary resource estimates cover only a comparatively small part of the claim group (approximately 6 hectares) and relates to only one of several mineralized zones.
MDX has recently completed a Preliminary Geological Report on the diamond drilling completed in December of 1999 on the Meadow Zone. The preliminary report will be subject to assay results from Lakefield Research and subsequent confirmation by an approved mining engineer.
The Company and its subsidiaries currently rent office and storage space from Dartford Corporation, a company controlled by A.D. Houston. The Company pays A.D. Houston $850 CDN per month, on a month to month basis. There is no written contract and such payments are accrued to Dartford Corporation and paid in cash or restricted shares of the Company. The office space is comprised of 800 square feet and the storage space is approximately 1,200 square feet. The Company also has the use of an outside storage building comprised of 1,000 square feet for the preparation of samples and the storage
of diamond drill cores.
Item 4. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following tables set forth: Table 1 - the amount and nature of beneficial ownership of each person known to a beneficial owner of more than five percent of the issued and outstanding shares of the Company and Table 2 - the amount and nature of beneficial ownership of each of the executive officers and directors of the Company. The following information is based on 37,129,870 shares issued and outstanding as of September 30, 1999.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner Class
--------- ------------- -------------- ----------
A. David Houston President 13,381,764(1) 36.04%(1)
P.O. Box 190, R.R. 5 Chairman of
Warkworth Ontario the Board
Canada K0K 3K 5% shareholder
Chief Executive
Officer
_____________________________________________________________________________
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(1) Includes 160,000 shares held in the name of Mary Houston, the wife of
A.D. Houston; and 400,000 shares held in the name of Dartford Corporation a
corporation controlled by A. David Houston. A. David Houston typically
receives shares for a large portion of his salary of $120,000 US per year as
well as for advances made on behalf of the Company. Such shares are
restricted and issued at the price being paid by investors in any offering
being conducted at the time of the conversion of the debt (generally, the
average price in the market). As of September 30, 1999, the Company owed A.D.
Houston $13,900 US in deferred compensation, A.D. Houston or a related party,
$37,266 US for accrued advances/loans. Because the Company is conducting an
offering at $.10 US per share, if he converted his deferred compensation and
advances owing within the next 60 days, he would own an additional 511,740
shares. A.D. Houston also has a warrant to purchase 600,000 shares at $.10 US.
The provisions of the warrant agreement specify that it may not be exercised
until the Company's gives notice of its diamond drilling results. If A.D.
Houston is able to exercise his warrants and converts monies currently owed
him in the next 60 days, his beneficial ownership position would increase to
14,493,504 or 37.9% of the then issued and outstanding shares. Because it is
unlikely that he will covert the same within the next 60 days, this amount is
not included in the above table but footnoted here. The $13,900 US due and
owing Houston at the end of the third quarter will increase by $30,000 US by
the end of the Company's fiscal year.
The following table sets forth ownership position of the Company's executive officers and directors, as well as all of them as a group; it is based on 37,129,870 shares issued and outstanding as September 30, 1999.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent of
Class Owner Owner(1) Class
-------- ------------------- ---------------- ------------
A. David Houston(2) President 13,381,764(2) 36.04%
P.O. Box 190, R.R. 5 Chairman of
Warkworth Ontario the Board
Canada K0K 3K0 5 % shareholder
Chief Executive
Officer
William Houston Director 919,000 2.47%
Box 689 Treasurer
Madoc Ontario
Canada
Brian King(3) Director 756,775(3) 2.04%
528 Bonaccord St.
Peterborough, Ontario
Canada K9H 3A6
Michael Armstrong Secretary 133,333(4) .36%
209 Glendora Ave.
Toronto, Ontario
Canada M2N 2W6
______________________________________________
Officers and
|
Directors as a group (4 Persons) 15,190,872 40.91%
(1) None of the Company's officer or directors have any rights to acquire additional shares of the Company's common stock, beneficially or otherwise, excepting AD Houston. Mr. Houston may have the right to acquire within the next 60 days sufficient shares to increase his position to 37.9% provided he elected to convert monies owing him into commons hares of the Company and further provided he is able to exercise certain warrants, which cannot, as of this date be exercised. (See Footnote (1) to Table 1: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS (5%), above for a full discussion.)
(2) Includes 160,000 shares held in the name of Mary Houston, the wife of A.D. Houston; and 400,000 shares held in the name of Dartford Corporation, a company controlled by A. D. Houston.
(3) Includes 116,775 shares held in the name of Oakridge Environmental Ltd., a partnership controlled by Brian King.
(4) Includes 33,000 shares held in his record name and 100,000 shares beneficially owned by Michael Armstrong.
Change in Control Arrangements
None.
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Officers and Directors
The names and ages of all directors and executive officers of the Company, along with their respective positions, term of office and period such position(s) was held, is as follows:
Name Age Positions Held Director Since
____________________ ____ _____________________________ ______________
A. David Houston 79 Chairman of the Board of Since 11/1993
P.0. 190, R.R. 5 Directors, Chief Executive
Warkworth, Ontario Officer, Chief Financial
CANADA K0K 3K0 Officer, President.
Also President of Graphite
Mountain Inc. and
Environmental Carbonates, Inc.
William Houston 76 Director, Treasurer Since 11/1993
Box 689
Madoc, Ontario
CANADA
Brian King 42 Director Since 11/1993
528 Bonaccord St.
Peterborough, Ontario
|
CANADA K9H 3A6
Michael Armstrong Q.C. 67 Secretary Since 12/97
209 Glendora Avenue
Toronto, Ontario,
Canada M2N 2W6
A. DAVID HOUSTON, President, Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer. For the past 34 years, A.D. Houston has been actively engaged in executive and management capacity in the raising of capital for exploration and development of mining properties as well as the field supervision of exploration crews and mine development. He was the founder of the Bedford Claims grubstaker group, and of Graphite Mountain, Inc. in 1990, of which he was and still is President. Graphite is a wholly owned subsidiary of the Company. He is also the founder and President of Environmental Carbonates, Inc., another subsidiary of the Company. A.D. Houston formerly was the founder and president of Native Mines Ltd. and Native Exploration Ltd. Both of the foregoing companies were exploration and mining joint ventures which prospected and developed mining properties in British Columbia. He is a member of the Society of Mining and Metallurgy and Exploration and a member of the Society of the American Institute of Mining and Metallurgical and Petroleum Engineers.
WILLIAM HOUSTON, Director and Treasurer. Although Mr. William Houston is now retired, he worked from 1950 through 1964 in various capacities for the following: Valdor Lamaque Gold Mines, Valdor, Quebec; Ogama Rockland Gold Mines, Central Manitoba; Nesbit Labine Uranium Mine, Lake Athabaska,
Saskatchewan ; Britannia Beach Mine, British Columbia; Gunner Mines (as chief engineer), Lake Athabaska, Saskatchewan; Arcadia Nickel Mines, Sudbury, Ontario; and Temagami Copper Mine Ltd. as chief engineer and mine manager. William Houston is a graduate of the University of Toronto where he received a Mining Engineering Degree in 1950. He is also a majority stockholder in Stockloser Marble of Madoc Ontario, from 1964 through 1996.
BRIAN KING, Mr. Brian King is a director of the Company and currently is the
owner/manager of MDX GeoServices, an applied earth science company founded in
1985 and a division of Oakridge Environmental LTD. He is also the Company's
geologist. From 1991 - 1994, he acted was an Environmental Geologist,
Hydrologist and Project Manager for Terraspec (a division of The Greer
Galloway Group, Inc.) From 1989 through 1991, Brian King worked for Walter H.
Gibson & Associates Ltd., as an Associate-Hydrologist, Environmental Geologist
and Project Manager. From 1985 through 1989 he worked as an independent
consulting geologist, and from 1983 though 1985, he worked for Sherritt Gordon
Mines Ltd. as Chief Geologist at the Fox Lake Copper-Zinc Mine at Lynn Lake,
Manitoba. In addition to his project experience, Mr. King has successfully
completed approximately 60 hydrogeological investigations for Landfill Site
Studies and numerous privately serviced developments throughout Ontario,
Canada. His professional development includes studies at the Waterloo Centre
for Groundwater Research: Dense Immiscible Phase Liquid Contaminants in Porous
and Fractured Media, November 1990; Waterloo Centre for Groundwater Research:
Behavior of Dissolved Organic Contaminants in Groundwater, February 1991; and
Ontario Ministry of Environment and Energy: Hydrogeological Technical
Information Requirements For Land Development Applications, June 1995. Mr.
King has a Geological Sciences degree from Brock University of St. Catherine,
Ontario where he also completed graduate studies in hydrothermal ore deposits
and geochemical systems. He is also a member of the International
Association of Hydrogeologists, a Fellow of the Geological Association of
Canada, and a Member of the Association of Geoscientists of Ontario, Canada.
MICHAEL ARMSTRONG, is currently serving as the Company's secretary, a position he has held since December of 1997. Mr. Armstrong is currently associate with Lafleur Brown, Barristers and Solicitors, Toronto, Ontario, which he joined in 1999. Prior to that he was with Armstrong, Dunn, Barristers and Solicitors also in Toronto, Canada where he was employed for more than five years.
In 1998, the Company established an advisory board consisting of three individuals with extensive experience in the mining industry. Each of the these advisory members is also a stockholder of the Company although none owns 5% or more of the Company's common stock beneficially or otherwise. The purpose of the Board is to advise the Company in areas of mining operations and development, marketing and promotion and financing. The Board receives no compensation for their services in an advisory capacity although member will be compensated for services rendered to the Company in other capacities.
HERB HARMER, is the President and a director of Bechtel Canada Ltd., and Bechtel Quebec Ltd. He is also a former head of the worldwide operations of the Mining and Metals group of Bechtel Corporation, San Francisco, one of the world's foremost consulting and engineering firms. He is a graduate of the University of Western Ontario and Queen's University and a member of the Energy Council of Canada, the Canadian Institute of Mining and Metallurgy, the Professional Engineers of Ontario, and l'Orere des Ingenieurs du Quebec, among other national and provincial associations. He is Chairman of the Canadian Environmental Energy Corporation, and its subsidiaries: Cochrane Power Corporation, Kirkland Power Corp., Whitehouse Power Corp., and Chapais
Electrique Limitee. Mr. Harmer serves as a director of Conner Clark Private Trust Company and Enserve Power Corporation.
ROBERT PAUL is the President of Edmond Enterprises Ltd. and a director of I- Fax International Limited and its associated companies. He served formerly as President and a director of Bechtel Canada Ltd, Bechtel Quebec Limitee and as Chairman of Acres Canadian Bechtel of Churchill Falls. He also served as a director of the principal operating companies of the Bechtel Group of San Francisco. He is an active member of several Canadian engineering associations including the Canadian Institute of Mining and Metallurgy.
E. BOYD MARSH acted as senior partner of Price Waterhouse Quebec from 1965 through 1980.While there he was senior audit partner of some of Canada's largest corporations, and was responsible for numerous and diverse consulting assignments. He retired in 1980 as a senior regional partner. He now acts as an independent consultant in areas of mergers and acquisitions, financing projects, pension funds, real estate development, investment strategies, and executive compensation and corporate restructuring. He is a chartered accountant and a member of the Institute of Chartered Accountants of Ontario and Quebec. He is also president of Saville Financial Services, Inc. a private consulting firm and a director of MTC Mortgage Investment Corporation, Saville Financial Services, Inc., Sovereign Alliance Investment Corporation, Sovereign Securities Corporation, and SynRoc Capital Corporation.
There are no familial relationships between the Company's officers and directors.
There are no significant employees other than A.D. Houston, previously discussed above.
None of the Company's directors are involved in any other company which is a United States "reporting company". Michael Armstrong is a director of Environmental Reclamation Incorporated, a Canadian reporting issuer which is listed on the Toronto Stock Exchange.
Except as indicated below and/or hereinbefore, to the knowledge of Management, during the past five years, no present or former director, executive officer, or person nominated to become a director or executive officer of the Company:
(1) Filed a petition under federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) Was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offences);
(3) Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from or otherwise limiting his/her involvement in any type of business, securities or banking activities;
(4) Was found by a court of competent jurisdiction in a civil action, by the Securities and Exchange Commission or the Commodity Futures Trading Commission, to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated.
Item 6. EXECUTIVE COMPENSATION
Any compensation received by officers and directors of the Company is determined from time to time by the Board of Directors. Officers and Directors are reimbursed for out-of-pocket expenses incurred on behalf of the Company. There are no written employment contracts in effect with any of the officers and directors who act as consultants when performing services on an as needed basis except A.D. Houston whom the Company has agreed to compensate at $120,000 US which is nearly always accrued as unpaid services and a portion of which is frequently paid in unregistered common shares of the Company. (See below.) Mr King provides services to the Company through MDX GeoServices and/or Oakridge Environmental, Ltd. In 1998 MDX GeoServices was paid in common shares received approximately $15,000 CDN for such services and to date in the firm has received $25,000 CDN.
The following table sets forth certain information as to compensation received by the Company's Chief Executive Officer who is also a director of the Company and its President and Secretary, as of December 31, 1996, 1997 and 1998. Of the Company's executive officers, only A.D. Houston receives more than $100,000 US per year.
SUMMARY COMPENSATION TABLE
---------------------------------
Long Term Compensation
----------------------------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compensa- Stock Underlying LTIP Compensa-
Principal sation Award Options/ Payouts tion
Position Year Salary($) Bonus($) ($)(1) ($) SAR's(#) ($) ($)(2)
------------------------------------------------------------------------------------------------
A. David Houston 1996 $ 0 $ 0 $ 90,000US $ 0 $ 0 $ 0 $ 0
Chairman of the Board, 1997 $ 0 $ 0 $ 90,000US $ 0 $ 0 $ 0 $ 0
President and Chief 1998 $ 0 $ 0 $120,000US $ 0 $ 0 $ 0 $ 0
Executive Officer
------------------------------------------------------------------------------------------------
(1) Up until 1998, the Company compensated A.D. Houston $ 90,000 US per year for management and
consulting services. In 1998, his compensation was increased by the Board of Directors to
$120,000 US. Because A.D. Houston often defers his compensation and takes much of such deferred
compensation in stock (about 70%), his salary has been listed under the all other annual
compensation category. In each year, the full amount of the agreed upon salary is disclosed even
if the payment thereof in unregistered shares/or cash was deferred to the following year. The
above table does not include A.D. Houston's salary of $120,000 US for the FYE 1999 of which
approximately $13,900 US remained due and owing at September 30, 1999. Shares issued to A.D.
Houston are not discounted. In each instance that A.D. Houston is issued shares, they are issued
at a price per share which is the same as what is being paid by other investors during the year
in which issued, which is at or about the average price of the Company's stock in the over-the-
counter market and is therefore deemed to be issued at the fair market value. Normally such stock
28
|
is restricted. However, during 1999 Mr. Houston was compensated $ 60,000 US of his deferred salary for 1998 in common stock which was a part of the shares sold in the Company's recent offering conducted pursuant to the exemption provided for under Rule 504. Such stock, when issued, did not require a holding period under previous provisions of Rule 504 of the Act although it is subject to restrictions on transfer applicable to affiliate transactions. Amounts indicated do not include reimbursed cash advances, lease payments on a Company vehicle which A.D. Houston drives, nor payments made to him for the use of office and storage space by the Company in his home. A.D. Houston, at his election, averages approximately 30% of his deferred compensation taken in cash and 70% taken in shares of the Company's stock. (2) A.D. Houston does not receive perquisites other than the use of the Company leased vehicles which he uses for Company business. |
None.
None
There are no long term incentive plans in effect and therefore no awards have been given to any executive officer in the past year.
The Company pays no fees to members of the Company's Board of Directors for the performance of their duties as directors. The Company has not established committees of the Board of Directors.
None
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the past two years, there have been no material transactions or series of transactions or currently proposed transactions, to which the Company, or any its subsidiaries was or is to be a party, in which the amount exceeds $60,000 and in which any executive officer or director or any 5% security holder or any member of the immediate family of any of the foregoing persons had a material interest.
One of these directors, A.D. Houston performs substantial management and
promotion contract services for which he is compensated at $120,000 US per
year and is further discussed under PART I, ITEM 6. EXECUTIVE COMPENSATION.
Occasionally, Mr. A.D. Houston advances funds to the Company on a non-interest
basis with no fixed terms of repayment, when the Company requires operating
capital. In addition, each year on a regular basis the following are accrued
as payable to A.D. Houston having been paid by him on behalf of the Company:
approximately $7,500 US for assessment work which are accrued to Houston
(and/or Dartford, a Company in which A.D. Houston is a principal); $12,157 US
for lease payments on two vehicles; $7,434 US ($619 US per month) for office
rent (which is a portion of A.D. Houston's home); and approximately $15,000 US
per year for secretarial services. Consistently, in the past, these advances
as well as his yearly compensation are partially repaid in common stock of the
Company. During the last three years A.D. Houston received the following: in
November of 1997, 1,954,580 shares were issued at $.0668 per share to satisfy $130,651 US in accrued advances and compensation); in February 1998, he received 400,000 unregistered common shares to satisfy approximately $39,804 US in advances; and in March of 1999, 1,000,000 unregistered common shares at $.10 per share to satisfy $98,000 US in accrued advances and compensation; and in October of 1999, he received 400,000 commons shares at $.10 per share to satisfy an additional $39,204 US in partial satisfaction of accrued advances and compensation owing him at September 30, 1999. Mr. Houston repayment in stock is calculated at a rate that is equal to what investors in contemporaneous offerings are paying at that time which is approximately the average price of the Company's shares in the over-the-counter market. Mr. Houston averages 30% of his compensation in cash and 70% in shares of the Company although the amount of cash vs. shares that A.D. Houston receives for deferred compensation and accrued advances is at his discretion and may vary. As of the end of the Company's third quarter, the Company owed A.D. Houston approximately $13,900 US for deferred compensation. It also owed A.D. Houston and/or a related party $37,266 in accrued advances.
Brian King, an officer and director of the Company, is the founder and manager of MDX GeoServices, Inc.("MDX"), a subsidiary of Oakridge Environment Limited, which performs various geological services for the Company on a consistent basis. Both Oakridge and MDX charge fees to the Company for its services which it considers to be fair and usual in the industry although MDX has also provided services to the Company at no charge in the past. Services provided by MDX GeoServices have the disadvantage of not being performed by an independent third party due to Mr. King's relationship with both companies. The Company pays approximately $15,000 CDN per year or less to MDX GeoServices and/or Oakridge Investments for its services.
None.
Item 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000 shares of stock: 50,000,000 shares of common stock and 50,000,000 shares of preferred stock, all at a par value of $0.001
The authorized common stock of the Company consists of 50,000,000 shares of Common Stock, $0.001 par value per share. The holders of Common Stock (i) have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by the Board of Directors of the Company; (ii) are entitled to share ratably in all of the assets of the Company available for distribution or winding up of the affairs of the Company; (iii) do not have preemptive subscription or conversion rights and there are no redemption or sinking fund applicable thereto; and (iv) are entitled to one non-cumulative vote per share, on all matters which shareholders may vote on at all meetings of shareholders.
The Company, however, does not anticipate paying dividends on its Common Stock in the foreseeable future but plans to retain earnings, if any, for the operation and expansion of its business.
The Company also has 50,000,000 Preferred Shares authorized, par value $0.001. The preferred shares may be issued in series and from time to time, with designations, preferences, and relative participating, optional, or other rights, qualifications, limitations, or restrictions thereof as shall be stated and expressed in the resolutions or resolutions providing for the issue of such class, classes or series adopted by the Board of Directors, pursuant to the authority granted to it and as provided for under Utah statute. Each class or series may be made subject to redemption at such time and at such price as such resolution providing for the issue of the stock shall state. The holders of the preferred stock or any class or series shall be entitled to receive dividends at such rates and on such conditions and at such times , and shall be entitled to such rights upon dissolution of, or upon distribution of, the assets of the corporation, and the preferred stock of any class or series may be convertible or exchangeable for shares of any other class, classes, or series of the capital stock of the Company, at such price or prices, or at such rates of exchange, and with such adjustments, as shall be stated and expressed in the resolution providing for the issuance thereof. In order for the Company effect the issuance of a class or series of preferred shares, once the rights and preferences have been established by resolution of the Board of Directors for a series of preferred shares, a statement containing the designation of the class or series must be filed with the Utah Secretary of State. There are no preferred shares outstanding. As of the date hereof, the Company has not designated a class or series of preferred shares.
The holders of shares of Common Stock of the Company do not have cumulative voting rights which means that the holders of more than fifty percent (50%) of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares will not be able to elect any of the Company's directors. The Board of Directors holds approximately 40.65% of the issued and outstanding shares of the Company, insufficient to control the election of directors unless they are able to solicit the vote of other shareholders.
None.
PART II
Item 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Up until November 1, 1999, shares of the Company's common stock were traded on the NASD OTC Bulletin Board ("OTCBB") under the symbol of "DLMI". The following contains information on the high and low bid for the Company's common stock as traded in each of the four quarters for the last two years and any interim period covered by the financial statements contained in this registration statement. Quotations reflect inter-dealer prices without retail mark-up, mark-down, commission and may not represent actual transactions.
Year High(in US Dollars) Low (in US Dollars) ----- ------------------- ------------------- 1999 ---- March 31 0.1 0.04 June 30 0.06 0.03 September 30 0.16 0.025 1998 ---- March 31 0.18 0.05 June 30 0.21 0.06 September 30 0.18 0.03125 December 31 0.08 0.04 1997 ---- March 31 0.05 0.03 June 30 0.12 0.025 September 30 0.07 0.025 December 31 0.08 0.05 |
Under current NASD rules, an issuer cannot maintain a listing (or apply for a listing) unless it is current in its reporting obligations under Sections 13 or 15(d) of the 1934 Act. The Company's phase-in date for completion of the necessary Securities and Exchange Commission required filings was November 1, 1999. This means that the Company had to file its registration statement and clear S.E.C. comments on or before that date, or it would be delisted from the OTCBB. The Company did not become subject to the reporting requirements by the phase in date and temporarily trades on the "pink sheets" where it currently still trades under the symbol of "DLMI". The filing of this registration statement will trigger reporting obligations for the Company sixty (60) days from the filing date. Once the Company has cleared comments on the within registration statement, it intends to reapply to the OTCBB to resume trading on the electronic bulletin board.
At September 30, 19999, the Company has approximately 387 shareholders.
The payment by the Company of dividends, if any, in the future, rests within the discretion of its Board of Directors and will depend among other things, upon the Company's earnings, its capital requirements and its financial condition, as well as other relevant factors. The Company has not paid or declared any dividends to date due to its present financial status. The Company does not anticipate paying dividends on its Common Stock in the foreseeable future but plans to retain earnings, if any, for the operation and expansion of its business.
Item 2. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings and, to the best of its knowledge, no such action by or against the Company has been threatened. None of the Company's officers, directors, or beneficial owners of 5% or more of the Company's outstanding securities is a party to a proceeding adverse to the Company nor do any of the foregoing individuals have a material interest in a proceeding adverse to the Company.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued the following unregistered common shares in the ast three years.
During 1997 the Company issued an aggregate of 4,121,245 unregistered common shares as follows:
1. 1,733,332 shares were issued to 7 investors through September of 1997, for gross proceeds of $104,000 US in completion of an offering the Company made in reliance upon the exemption provided for under Section 3(b) Rule 504 of the Act; one of the investors in the offering was a director of the Company, William Houston.
2. An additional 1,954,580 common shares were issued to the Company's President, A.D. Houston for $130,051 in accrued advances and deferred compensation and were issued in reliance on Section 4(2) of the Act as "a transaction not involving a public offering".
3. The balance of the unregistered common shares issued in 1997, 433,333 shares, were issued to 4 individuals (three of whom also purchased in the 504 offering) for additional proceeds of $26,000 US. The Company issued the foregoing shares in reliance upon the exemption provided for under Regulation S and the same were issued with a restrictive legend. The Regulation S offering continued into 1998.
All shares offered and sold during 1997 were sold at approximately $.06 per share. The Company's President paid the same amount for his shares as did the investors in the other two offerings. In that year, of the twelve investors, all were existing shareholders except one, all were residents of Canada, and all were considered "sophisticated" and/or "accredited". The majority had a prior relationship with the Company. The Company believes it met the provisions of the relied upon exemptions: in the case of the Regulation S offers and sales all were made to non-US residents and the acquired securities were restricted for resale into the United States; in the case of the completion of the 504 offering, the Company believes it was entitled to rely upon the exemption because it was not a "reporting company", not an investment company, and it was raising funds for a specific purpose. In addition, it did not raise more than the maximum allowed proceeds of $1,000,000 in the offering when aggregated with all other proceeds from other offerings conducted in reliance upon Section 3(b) of the Act. Proceeds from the Regulation S offering were not aggregated with those of the 504 offering as this is specifically exempted from aggregation principles under the rules.
1. During 1998, the Company completed its offering under Regulation S, (which commenced during the prior year) with the sale of an additional 800,000 shares to 6 investors for proceeds of $80,000 US. All shares issued in reliance on this exemption were issued with the appropriate restriction. Of the six investors, only one was not a prior investor in the Company.
2. The Company also issued 400,000 shares to A.D. Houston to satisfy
$39,804 in accrued advances. The 400,000 shares were issued in reliance upon
Section 4(2) and at a deemed value of approximately $.10 US per share.
3. In the latter part of 1998, the Company commenced a new offering in reliance upon the exemption provided for under Section 3(b), Regulation D, Rule 504. It offered up to $1,000,000 of its common equity at $.15 CDN ($.10 US) per shares. During 1998, 900,000 shares were subscribed for, with proceeds to the Company of $90,000 US although the shares were not issued until 1999. The offering continued into 1999.
The Company continued to rely upon Regulation S for the sale of the additional 800,000 shares in 1999. All of the investors were non-US residents. The Company also believes it was entitled to rely upon Rule 504 for its offering commenced in late 1998. It was still a non-reporting company and had a specific purpose for its proceeds. Eleven months had elapsed since the close of its last 504 offering so it had a clear safe harbor so the two offerings would not be integrated.
1. During 1999, the Company sold 2,783,441 unregistered common shares in its 504 offering, which closed in early June 1999, for gross proceeds during 1999 of $278,344 US and total gross proceeds in the offering of $368,344 US with an aggregate of 3,683,441 shares sold. Shares subscribed for after April 6, 1999, the date new provisions of Rule 504 went into effect, were issued as "restricted" shares. There were a total of 13 investors in the offering, the majority of which have frequently provided funding for the Company in the past. Two of the investors in the offering were directors of the Company: A.D. Houston and Brian King who received shares in exchange for monies owing.
2. The Company commenced another offering under Rule 504 structured to comply with the new rules, in the latter part of June 1999. Because the proceeds were for the same business purpose and the same type of security was offered (common shares), for the purpose of the Company's compliance with the provisions of the Section 3(b), Regulation D, Rule 504 exemption, the private placement was considered "integrated" with the Company's 504 offering of 1998- 1999. The Company commenced the new offering in response to rule changes which required that shares offered in a 504 offering be "restricted" or registered in a state that requires registration to be issued as unrestricted. The Company elected to issue "restricted" securities in the new offering, and, as an inducement to invest, it structured the offering in units. Each unit is comprised of 400,000 common shares at $15 CDN ($.10 US) per share and a warrant to purchase 600,000 commons shares at the same price. The warrants cannot be exercised until the Company announces the results of its diamond drilling program and then the exercise period is for 60 days thereafter. The Company, to date has sold 5 units (only 4 units as of September 30, 1999) for proceeds to date of $200,000 US. One additional unit was sold to A.D. Houston for approximately $40,000 US of deferred compensation and accrued advances. Although the Company is relying on Section 4(2) for such issuance as a "transaction not involving a public offering," it will aggregate proceeds with those in the offering. The Company intends to close the offering on or before 60 days from the filing of this registration statement.
In each of the transactions discussed under this item, the Company did not publicly solicit investors which were largely individuals or entities which had previously invested in the Company. Many of the investors have invested on numerous occasions, including the members of the Company's Board of Directors and its advisory board. In each instance, the Company believes that the investors: (1) had access to or were provided with information regarding the Company; (2) was aware that the securities were not registered under US securities laws; (3) acquired the securities for his/her own account
for investment purposes only; (4) understood that the securities would need to be held indefinitely unless registered or unless an exemption from registration applied to a proposed disposition; and (5) were aware that the certificates (excepting those issued under Rule 504 prior to April 4, 1999) would bear a restrictive legend. The Company also believes that each of the investors was a legitimate non-US resident and that each was "accredited" and/or "sophisticated" having sufficient knowledge of Company and sufficient investment experience to make investment decisions.
The Company has paid no commissions on any of its sales of securities discussed herein.
Although the Company's believes its offer and sale of certain of its
securities were exempt under Section 3(b) Regulation D, Rule 504, and that it
met all of the terms and conditions of such exemption, when relied on,
including the $1,000,000 in proceeds limitation imposed under Rule 504, the
possibility arises that certain of the Company's sales it the past three years
would be considered "integrated" with the sales of the shares offered and sold
pursuant to the 504 exemption, specifically those issued in reliance on
Section 4(2). Although the rules seem clear that shares sold pursuant to
Regulation S need not be integrated when determining what is "part of an
offering", the shares sold by the Company in reliance on Section 4(2) of the
1933 Act as "not involving a public offering" could be construed as
"integrated" with a Regulation D, Rule 504 concurrently being conducted.
Generally, when conducting an offering under any exemption under Section 3(b)
of the 1933 Act, all securities offered and sold by the issuer during the
offering and within the prior and subsequent 6 month periods of the offering,
which involve the same type of security, and which are sold for similar
purpose [excluding shares sold under Regulation S] may be aggregated with the
shares sold in the offering for purposes of determining the amount. The
Company has made only 3 issuances in the last three years where is claims
reliance on Section 4(2) and each time it was to the Company's President as
discussed above.
Item 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 16-10a-902(1) of the Utah Revised Business Corporation Act authorizes a Utah corporation to indemnify any director against liability incurred in any proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 16-10a-902(4) prohibits a Utah corporation from indemnifying a director in a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or in a proceeding in which the director was adjudged liable on the basis that he or she improperly received a personal benefit. Otherwise, Section 16-10a-902(5) allows indemnification for reasonable expenses incurred in connection with a proceeding by or in the right of the corporation.
Unless limited by the Articles of Incorporation, Section 16-10a-905 authorizes a director to apply for indemnification to the court conducting the proceeding or another court of competent jurisdiction. Section 16-10a-907(1) extends this right to officers of a corporation as well.
Unless limited by the Articles of Incorporation, Section 16-10a-903 requires that a corporation indemnify a director who was successful, on the merits or otherwise, in defending any proceeding to which he or she was a
party against reasonable expense incurred in connection therewith. Section 16-10a-907(1) extends this protection to officers of a corporation as well.
Pursuant to Section 16-10a-904(1), the corporation may advance a director's expenses incurred in defending any proceeding upon receipt of an undertaking and a written affirmation of his or her good faith belief that he or she has met the standard of conduct specified in Section 16-10a-902. Unless limited by the Articles of Incorporation, Section 16-10a-907(2) extends this protection to officers, employees, fiduciaries and agents of a corporation as well.
Regardless of whether a director, officer, employee, fiduciary or agent
has the right to indemnify under the Utah Revised Business Corporation Act,
Section 16-10a-908 allows the corporation to purchase and maintain insurance
on his or her behalf against liability resulting from his or her corporate
role.
Neither the Articles of Incorporation of the Company, as amended, nor the By-laws of the Company, provide for any specific indemnification of officer, directors or employees of the Company nor do they provide for any limitations on indemnification.
PART F/S
The following financial statements are included herewith: the Company's audited financial statements for the year ended December 31, 1998 and 1997 and the audited financial statements for the interim period ended September 30, 1999.
DIAMOND LAKE MINERALS, INC.
AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Financial Statements
September 30, 1999 and December 31, 1998
C O N T E N T S
Independent Auditors' Report.....................................3 Consolidated Balance Sheets.............................. .......4 Consolidated Statements of Operations........................... 6 Consolidated Statements of Stockholders' Equity (Deficit)....... 7 Consolidated Statements of Cash Flows...........................12 Notes to Consolidated Financial Statements..................... 13 |
JONES, JENSEN & COMPANY, LLC
Certified Public Accountants and Consultants
50 South Main Street, Suite 1450
Salt Lake City, Utah 84144
Telephone (801) 328-4408
Facsimile (801) 328-4461
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Diamond Lake Minerals, Inc. and Subsidiaries
(A Development Stage Company)
Warkworth, Ontario Canada
|
We have audited the accompanying consolidated balance sheet of Diamond Lake Minerals, Inc. and Subsidiaries (a development stage company) as of December 31, 1998 and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 1998 and 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Diamond Lake Minerals, Inc. and Subsidiaries (a development stage company) as of December 31, 1998 and the consolidated results of their operations and their cash flows for the years ended December 31, 1998 and 1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 7 to the consolidated financial statements, the Company has no established sources of revenues and has no agreements, commitments or other sources of financing. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 7. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Jones Jensen & Company Jones, Jensen & Company Salt Lake City, Utah March 23, 1999 |
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
September 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
CURRENT ASSETS
Cash $ 79,112 $ 1,380
--------------- ---------------
Total Current Assets 79,112 1,380
--------------- ---------------
PROPERTY AND EQUIPMENT, Net (Notes 1 and 2) 25,598 28,765
--------------- ---------------
OTHER ASSETS
Mineral properties (Notes 3 and 4) - -
Deferred exploration costs (Note 3) - -
--------------- ---------------
Total Other Assets - -
--------------- ---------------
TOTAL ASSETS $ 104,710 $ 30,145
=============== ===============
|
The accompanying notes are an integral part of these consolidated financial statements.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
September 30, December 31,
1999 1998
--------------- ---------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 34,179 $ 69,933
Accrued expenses 13,908 64,993
Loans from related parties (Note 5) 37,266 76,686
--------------- ---------------
Total Current Liabilities 85,353 211,612
--------------- ---------------
Total Liabilities 85,353 211,612
--------------- ---------------
|
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per share; 50,000,000 shares authorized, 37,129,870
and 33,246,429 shares issued and
outstanding, respectively 37,130 33,246
Additional paid-in capital 2,729,760 2,353,028
Deficit accumulated during the
development stage (2,746,723) (2,567,741)
Other comprehensive income (810) -
--------------- ---------------
Total Stockholders' Equity (Deficit) 19,357 (181,467)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 104,710 $ 30,145
=============== ===============
|
The accompanying notes are an integral part of these consolidated financial statements.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
From
For the Inception on
Nine Months For the Years Ended November 1,
Ended December 31, 1990 Through
September 30, ---------------------- September 30,
1999 1998 1997 1999
------------- -------------- ------------- -------------
(Unaudited) (Unaudited)
REVENUE $ - $ - $ - $ -
EXPENSES
General and administrative 175,815 243,025 169,294 1,389,741
Depreciation 3,167 4,223 4,811 21,291
------------- -------------- ------------- -------------
Total Expenses 178,982 247,248 174,105 1,411,032
------------- -------------- ------------- -------------
OPERATING LOSS (178,982) (247,248) (174,105) (1,411,032)
OTHER INCOME (EXPENSE)
Loss on impaired assets - (1,335,691) - (1,335,691)
------------- -------------- ------------- -------------
Total Other Income (Expense) - (1,335,691) - (1,335,691)
------------- -------------- ------------- -------------
NET LOSS (178,982) (1,582,939) (174,105) (2,746,723)
OTHER COMPREHENSIVE INCOME (LOSS) (810) 191,206 (176,331) (810)
------------- -------------- ------------- -------------
NET COMPREHENSIVE (LOSS) $ (179,792) $ (1,391,733) $ (350,436) $ (2,747,533)
============= ============== ============= =============
BASIC NET LOSS PER COMMON SHARE $ (0.01) $ (0.05) $ (0.01)
============= ============== =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 34,288,505 33,298,400 28,013,810
============= ============== =============
The accompanying notes are an integral part of these
consolidated financials statements.
F-6
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the Other
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Income
------------- ------------- ------------ ------------ -------------
Balance, November 1, 1990 - $ - $ - $ - $ -
Net (loss) for the year ended
December 31, 1990 - - - - -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1990 - - - - -
Common stock issued for cash
at approximately $0.07 per share 247,362 247 17,061 - -
Common stock issued for mineral
claims at approximately $0.07
per share 6,184,049 6,184 426,516 - -
Common stock issued for services
at approximately $0.07 per share 123,681 124 8,530 - -
Net (loss) for the year ended
December 31, 1991 - - - (17,817) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1991 6,555,092 6,555 452,107 (17,817) -
Common stock issued for cash at
approximately $0.06 per share 587,485 587 36,919 - -
Common stock issued for services at
approximately $0.06 per share
rendered 123,681 124 7,772 - -
Net (loss) for the year ended
December 31, 1992 - - - (18,706) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1992 7,266,258 $ 7,266 $ 496,798 $ (36,523) $ -
------------- ------------- ------------ ------------ -------------
The accompanying notes are an integral part of these
consolidated financials statements.
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the Other
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Income
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1992 7,266,258 $ 7,266 $ 496,798 $ (36,523) $ -
Common stock issued for cash at
approximately $0.06 per share 4,724,613 4,725 282,806 - -
Common stock issued for services at
approximately $0.06 per share 4,809,129 4,809 287,866 - -
Recapitalization of Graphite
Mountain, Inc. (Note 1) 1,011,000 1,011 (457,785) 3,550 -
Net (loss) for the year ended
December 31, 1993 - - - (181,382) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1993 17,811,000 17,811 609,685 (214,355) -
Common stock issued for services at
approximately $0.15 per share 520,320 520 77,404 - -
Common stock issued for mineral
property at approximately $0.18
per share 4,000,000 4,000 716,523 - -
Foreign currency translation for the
year ended December 31, 1994 - - - - 22,153
Net (loss) for the year ended
December 31, 1994 - - - (197,782) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1994 22,331,320 $ 22,331 $ 1,403,612 $ (412,137) $ 22,153
------------- ------------- ------------ ------------ -------------
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the Other
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Income
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1994 22,331,320 $ 22,331 $ 1,403,612 $ (412,137) $ 22,153
Common stock issued for services
rendered at approximately $0.10
per share 1,952,500 1,953 191,871 - -
Common stock issued for cash at
approximately $0.10 per share 1,172,364 1,172 117,867 - -
Foreign currency translation for
the year ended December 31, 1995 - - - - 11,918
Net (loss) for the year ended
December 31, 1995 - - - (321,060) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1995 25,456,184 25,456 1,713,350 (733,197) 34,071
Common stock issued for cash at
approximately $0.11 per share 1,433,000 1,433 156,247 - -
Common stock issued for services
rendered at $0.12 per share 136,000 136 15,724 - -
Foreign currency translation for the
year ended December 31, 1996 - - - - (19,196)
Net (loss) for the year ended
December 31, 1996 - - - (77,500) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1996 27,025,184 $ 27,025 $ 1,885,321 $ (810,697) $ 14,875
------------- ------------- ------------ ------------ -------------
The accompanying notes are an integral part of these
consolidated financial statements
F-9
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the Other
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Income
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1996 27,025,184 $ 27,025 $ 1,885,321 $ (810,697) $ 14,875
Common stock issued for cash at
approximately $0.06 per share 1,300,000 1,300 80,630 - -
Common stock issued for cash at
approximately $0.06 per share 866,665 866 51,510 - -
Common stock issued in lieu of debt
at $0.06 per share 1,954,580 1,955 128,696 - -
Foreign currency translation for the
year ended December 31, 1997 - - - - 176,331
Net (loss) for the year ended
December 31, 1997 - - - (174,105) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1997 31,146,429 31,146 2,146,157 (984,802) 191,206
Common stock issued for cash
at approximately $0.10 per share 1,700,000 1,700 167,467 - -
Common stock issued for services
at approximately $0.10 per share 400,000 400 39,404 - -
Foreign currency translation for the
year ended December 31, 1998 - - - - (191,206)
Net (loss) for the year ended
December 31, 1998 - - - (1,582,939) -
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1998 33,246,429 $ 33,246 $ 2,353,028 $(2,567,741) $ -
------------- ------------- ------------ ------------ -------------
The accompanying notes are an integral part of these
consolidated financial statements.
F-10
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Deficit
Accumulated
Additional During the Other
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Income
------------- ------------- ------------ ------------ -------------
Balance, December 31, 1998 33,246,429 $ 33,246 $ 2,353,028 $(2,567,741) $ -
Common stock issued for cash
at $0.10 per share (unaudited) 200,000 200 19,402 - -
Common stock issued in lieu of
outstanding debt at $0.10 per
share (unaudited) 1,116,775 1,117 108,338 - -
Common stock issued for cash
at $0.10 per share (unaudited) 466,666 467 45,271 - -
Common stock issued for cash
at $0.10 per share (unaudited) 1,700,000 1,700 164,917 - -
Common stock issued in lieu of
outstanding debt at $0.10 per
share (unaudited) 400,000 400 38,804 - -
Foreign currency translation for
the nine months ended
September 30, 1999 (unaudited) - - - - (810)
Net (loss) for the nine months
ended September 30, 1999
(unaudited) - - - (178,982) -
------------- ------------- ------------ ------------ -------------
Balance, September 30, 1999
(unaudited) 37,129,870 $ 37,130 $ 2,729,760 $(2,746,723) $ (810)
============= ============= ============ ============ =============
The accompanying notes are an integral part of these
consolidated financial statements.
F-11
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
From
For the Inception on
Nine Months For the Years Ended November 1,
Ended December 31, 1990 Through
September 30, --------------------------- September 30,
1999 1998 1997 1999
------------- -------------- ------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (178,982) $ (1,582,939) $ (174,105) $ (2,746,723)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Depreciation 3,167 4,223 4,811 21,291
Loss on impaired assets - 1,335,691 - 1,335,691
Other comprehensive income (810) - 206,313 207,045
Common stock issued for services - 39,804 - 323,091
Changes in operating assets and liabilities:
(Increase) decrease in prepaid expenses - - 365 -
Increase (decrease) in accrued expenses 46,709 36,202 28,791 110,082
Increase (decrease) in accounts payable (24,309) 19,585 28,952 63,322
------------- -------------- ------------- -------------
Net Cash Provided (Used) by
Operating Activities (154,225) (147,434) 95,127 (686,201)
------------- -------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment - - (22,070) (44,802)
Cash paid for deferred exploration costs
and mineral properties - (25,831) (135,843) (788,139)
------------- -------------- ------------- -------------
Net Cash (Used) in
Investing Activities - (25,831) (157,913) (832,941)
------------- -------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 231,957 169,167 134,306 1,537,628
Cash advances from shareholders - 731 (70,582) 60,626
------------- -------------- ------------- -------------
Net Cash Provided by
Financing Activities 231,957 169,898 63,724 1,598,254
------------- -------------- ------------- -------------
INCREASE (DECREASE) IN CASH 77,732 (3,367) 938 79,112
CASH BALANCE, BEGINNING OF PERIOD 1,380 4,747 3,809 -
------------- -------------- ------------- -------------
CASH BALANCE, END OF PERIOD $ 79,112 $ 1,380 $ 4,747 $ 79,112
============= ============== ============= =============
CASH PAID FOR:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Acquisition of mineral properties for
common stock recorded at predecessor
cost $ - $ - $ - $ 720,523
Common stock issued for services $ - $ 39,804 $ - $ 40,134
Common stock issued in lieu of debt $ 148,659 $ - 120,957 $ 269,616
The accompanying notes are an integral part of these
consolidated financial statements.
F-12
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Diamond Lake Minerals, Inc. (the Company) was incorporated in the State of Utah on January 5, 1954 under the name of G & L Equipment Co., Inc. It later changed its name to G & L Energy, Inc. on August 10, 1982. The Company operated as a Yamaha motorcycle dealership and ceased doing business in 1983. All assets and liabilities were liquidated by 1985 and the Company became inactive.
On November 30, 1993, the Company acquired all of the issued and outstanding stock of Graphite Mountain, Inc. (the Subsidiary) (an Ontario, Canada corporation) by issuing 16,812,000 shares of common stock. It was formed on November 1, 1990 and changed its name to Diamond Lake Minerals, Inc. The acquisition of Graphite Mountain, Inc. was recorded as a recapitalization of Graphite Mountain, Inc., whereby the acquired company is treated as the surviving entity for accounting purposes. The Subsidiary owns 41 mineral claims in Bedford Township, Southern Ontario Mining District, Canada. The Subsidiary is engaged in exploring and developing its graphite resource properties, and is considered a development stage company per Statement on Financial Accounting Standards #7.
In 1996, the Company started a new company named Environmental Carbonents Incorporated (ECI). ECI has purchased real property in the amount of $19,196. ECI is considered a developmental stage company per Statement on Financial Accounting Standards #7.
b. Accounting Method
The Company's consolidated financial statements are prepared using the accrual method of accounting. The Company has adopted a calendar year end.
c. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
d. Principles of Consolidation
The consolidated financial statements include the accounts of Diamond Lake Minerals, Inc. and its wholly-owned Canadian subsidiaries, Graphite Mountain, Inc. and Environmental Carbonents Incorporated. All intercompany transactions and balances have been eliminated.
e. Basic Loss Per Share Calculations
Computations of basic loss per share of common stock are based on the weighted average number of shares outstanding during the period of the consolidated financial statements.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
f. Foreign Currency Translations
The Company's functional currency is the U.S. dollar, however, the subsidiary's functional currency is the Canadian dollar. Remeasurement of the Canadian assets, liabilities and operations into U.S. dollars results in the foreign currency translation adjustment reported in the consolidated statements of operations and stockholders' equity.
The Canadian subsidiary has some transactions involving the receipt and disbursement of U.S. funds. Remeasurement of U.S. assets into Canadian dollars by the subsidiary results in foreign currency gains or losses which are reflected in the consolidated statements of operations.
g. Property and Equipment
Property and equipment is recorded at cost. The Company provides for depreciation on the declining balance method over 5 years.
In the year of acquisition of a capital asset, depreciation is recorded at one-half of the normal annual rate.
h. Mineral Properties and Deferred Exploration Costs
Mineral properties owned by the Company are recorded at the lower of cost or net realizable value.
i. Provision for Taxes
At December 31, 1998, the Company and its subsidiaries had net operating loss carryforwards of approximately $2,500,000 that may be offset against future taxable income through 2013. No tax benefit has been reported in the consolidated financial statements, because the Company believes there is a 50% or greater chance the loss carryforwards will expire unused. Accordingly, the potential tax benefits of the net operating loss carryforwards are offset by a valuation allowance of the same amount.
j. Use of 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 date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
k. Change in Accounting Principle
In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. This statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. The Company has retroactively applied the provisions of this new standard by showing the other comprehensive income (loss) for all years presented.
l. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the adjustments which, in the opinion of management, are necessary for a fair presentation. Such adjustments are of a normal, recurring nature.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30, 1999 and December 31, 1998:
September 30, December 31,
1999 1998
(Unaudited)
Office furniture $ 1,191 $ 1,191
Office equipment 13,036 13,036
Mining equipment 5,303 5,303
Motor equipment 5,289 5,289
Real property 19,196 19,196
Leasehold improvements 2,879 2,879
Accumulated depreciation (21,296) (18,129)
----------- -----------
Net book value $ 25,598 $ 28,765
=========== ===========
|
Depreciation expense for the nine months ended September 30 1999 and for
the years ended December 31, 1998 and 1997 was $3,167, $4,223 and $4,811,
respectively.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 3 - DEFERRED EXPLORATION COSTS
Deferred exploration costs consist of the following at September 30, 1999 and December 31, 1998:
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
Capitalized exploration costs $ 685,396 $ 685,396
Less: impairment reserve (685,396) (685,396)
------------- -------------
Net deferred exploration costs $ - $ -
============= =============
|
The Company is in the process of exploring and developing its graphite resource properties and is determining whether or not the properties contain ore reserves that are economically recoverable. The recoverability of amounts shown in the consolidated financial statements as the cost of acquisition of mineral properties and related deferred exploration costs, is dependent upon the discovery of economically recoverable reserves and confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain necessary financing to satisfy the expenditure requirements to complete the development of properties, and upon future profitable production or proceeds from the disposition thereof. Since management is unable to determine what the recoverability of the deferred costs will be, a reserve for impairment has been recorded during the year ended December 31, 1998 for the full amount of the capitalized costs.
NOTE 4 - MINERAL PROPERTIES
Mineral properties consist of the following at September 30, 1999 and December 31, 1998:
September 30, December 31,
1999 1998
------------- -------------
(Unaudited)
Property costs - 41 claims in Bedford Township
Southern Ontario Mining District
Consideration for acquisition:
- 2,000,000 shares allotted to prospector and
grubstakers recorded at predecessor cost - $ -
- Cash option payments $ 120,978 120,978
Property costs - 39 claims in North Burgess
Township, Southern Ontario Mining District
Consideration for acquisition:
- 4,000,000 shares issued at a deemed price
of $025 CDN per share 720,523 720,523
------------- -------------
841,501 841,501
Less: impairment reserve (841,501) (841,501)
------------- -------------
Net mineral properties $ - $ -
============== ==============
F-16
|
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 4 - MINERAL PROPERTIES (Continued)
In addition to the cash payments, the optionors are to receive royalties of 1% of net proceeds of sales of any and all products extracted from the claims, to a total amount for royalties of $566,800.
Upon incorporation, the Subsidiary was assigned the optionee's position in the agreement, for consideration of allotment to the shareholder-prospector and grubstakers of 2,000,000 shares of the Subsidiary's common stock at a deemed price of $0.18 per share. The group is also to receive on a pro-rata basis, a royalty of 3% of net smelter returns from the property.
39 Claims in North Burgess:
The acquisition is subject to a 3% net smelter interest, which is defined as 3% of gross receipts from sales of minerals from the properties.
NOTE 5 - RELATED PARTY TRANSACTIONS
Loans from shareholders, (substantially from the Company's principal shareholder), are non-interest bearing and have no fixed terms of repayment. In December 1994, by agreement, 340,320 shares were allocated to shareholders at a price of $0.09 per share for conversion of $30,640 of the shareholders' loans. In December 1995, by agreement, 146,667 shares were allocated to shareholders at a price of $0.11 per share for conversion of $15,129 of the shareholders' loans. In November 1997, 1,954,580 shares were allocated to a shareholder at a price of $0.06 per share for conversion of $130,651 of the related party loans. In March 1999, 400,000 shares were allocated to a shareholder at a price of $0.10 per share for conversion of $39,420 of the related party loans. The total amount owed to shareholders at September 30, 1999 and December 31, 1998 was $37,266 and $76,686, respectively.
Additional shares have been issued to the Company's principal shareholder in lieu of unpaid services. In March 1998, 400,000 shares were issued to the shareholder at a price of $0.10 per share for services valued at $39,804. In March 1999, 600,000 shares were issued to the shareholder at a price of $0.10 per share for services valued at $58,806 and in September 1999, 400,000 shares were issued to the shareholder at a price of $0.10 per share for services valued at $39,204.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
During 1995, the Company entered into an agreement with Richland Mines, Inc. (Richland) on behalf of the Subsidiary. Richland has already paid the option price (included in the Company's income) which will allow it the necessary time to investigate the potential for developing the mineral claims held by the Subsidiary. Richland must expend $150,000 CDN in exploration costs and pay the Company another $5,000 CDN to be able to acquire a 50% ownership of certain mineral rights (not including graphite) on the properties located in Bedford Township in Ontario, Canada.
DIAMOND LAKE MINERALS, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements September 30, 1999 and December 31, 1998
NOTE 7 - GOING CONCERN
The consolidated financial statements have been prepared on a going concern basis. The Companies, and their abilities to continue as a going concern, are dependant upon the ability of the Company to obtain the necessary financing to meet its obligations and to repay its liabilities arising from normal business operations when they come due. The Company has no established sources of revenues and has no agreements, commitments or other sources of financing. The Company plans to obtain financing through a secondary offering of its previously authorized but unissued common stock.
NOTE 8 - ACQUIRED EQUIPMENT
During 1997, the Company acquired equipment that was in the building purchased in 1997. The equipment was not included in the purchase price, but was to be removed by the bank which owned the equipment. The bank gave the Company full title to this equipment and the Company is currently trying to sell this equipment.
PART III
Item 1. Index to Exhibits
Exhibit No. Description
---------- ------------
2.1 Reorganization between the Company and Graphite
Mountain Inc., dated November 30, 1993
2.2 Agreement re: Acquisition of Timmins Properties, dated
Dec. 17, 1994
3.1.1 Articles of Incorporation, Jan. 5, 1954
3.1.2 Amendment to Articles of Incorporation, Nov. 28, 1958
3.1.3 Amendment to Articles of Incorporation, June 1961
3.1.4 Amendment to Articles of Incorporation, Jan. 18, 1972
3.1.5 Amendment to Articles of Incorporation, Feb. 1972
3.1.6 Amendment to Articles of Incorporation, Aug. 10, 1982
3.1.7 Amendment to Articles of Incorporation, Sept. 15, 1993
3.1.8 Amendment to Articles of Incorporation, Dec. 2, 1993
3.1.9 Amendment to Articles of Incorporation, Dec. 21, 1993
3.2 Bylaws
21 List of Subsidiaries
27 Financial Data Schedule
99.1 List of Mining Claims: Bedford Claims
99.2 List of Mining Claims: Timmins Claims
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
DIAMOND LAKE MINERALS, INC.
(Registrant)
Date: December 21, 1999 By: /s/ A. David Houston
________________________________
A. David Houston, President
Chairman of the Board of
Directors, Chief Financial
Officer, Chief Executive
Officer
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT (the "Plan") is made this 30th day of November, 1993, between G & L ENERGY, INC., a corporation incorporated under the laws of the State of Utah ("G&L"), GRAPHITE MOUNTAIN, INC., an Ontario, Canada corporation ("GRAPHITE"), and the shareholders of GRAPHITE whose beneficial ownership is represented by Mr. A. David Houston as Attorney in Fact and are collectively hereinafter referred to as the "Shareholders".
G&L wishes to acquire all the issued and outstanding stock of GRAPHITE in exchange for stock of G&L in a stock for stock transaction.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, IT IS AGREED:
SECTION 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the Shareholders of GRAPHITE agrees to assign, transfer, and deliver to G&L, free and clear of all liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature or description all their shares of GRAPHITE stock which constitutes all of the issued and outstanding shares of GRAPHITE aggregating Five-Million-Four-Hundred-Thirty-Three-Thousand-Three-Hundred-Thirty-Three (5,433,333) common shares, and G&L agrees to acquire such shares on the date hereof, or as soon as practicable thereafter, by issuing and delivering in exchange therefore solely common shares of G&L's stock, par value $0.001, in the aggregate of Sixteen-Million-Eight-Hundred-Thousand (16,800,000) shares, as subject to the provisions of this Plan which shall represent as a result thereof, approximately 94% of the then issued and outstanding shares of G&L. Subsequent to the date hereof, the Shareholders shall, upon the surrender of the GRAPHITE certificates representing their respective beneficial and record ownership of all of the issued and outstanding shares of GRAPHITE to G&L, as soon as practicable hereafter, the Shareholders shall be entitled to receive a certificate(s) evidencing shares of the exchanged G&L stock as provided for herein. Upon the consummation of the transaction contemplated herein, G&L shall be the beneficial and record owner of all of the issued and outstanding stock of GRAPHITE.
1.2 Further Assurances. Subsequent to the execution hereof, and from time to time thereafter, the Shareholders shall execute such additional instruments and take such other action as G&L may request in order to more effectively sell, transfer and assign clear title and ownership in the GRAPHITE shares to G&L.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
Closing
The Closing contemplated by Section 1.1 shall be held at the office of Robert J. Nielson, Esq., at the hour of 3:00 P.M., Mountain Time, on November 30, 1993, whose address is 3098 South Highland Dr., Suite 300, Salt Lake City, Utah, 84106, or in any event no later than December 31, 1993, unless another place or time is agreed upon in writing by the parties. The Closing may also be accomplished by wire, express mail or other courier service, conference telephone communications or as otherwise agreed by the respective parties or their duly authorized representatives.
SECTION 3
Representations, Warranties and Covenants of G&L
G&L represents and warrants to, and covenants with, the Shareholders and GRAPHITE as follows:
3.1 Corporate Status. G&L is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah, incorporated on the 5th day of January, 1954.
3.2 Capitalization. The authorized capital stock of G&L as of the Closing Date consists of 50,000,000, par value of $0.001. As of the date hereof there are 999,000 common shares of G&L issued and outstanding. The foregoing shares constitute fully paid, non-assessable shares. There are no outstanding options, warrants, or calls or any understandings, agreements, commitments, contracts or promises with respect to the issuance of G&L's common stock or with regard to any option, warrants or other contractual rights to acquire any of G&L's authorized but unissued common shares.
3.3 Financial Statements. G&L hereby warrants and covenants to GRAPHITE that the audited balance sheets of G&L for its years ended December 31, 1992, and 1991, and for interim period ended May 31, 1993, and the related statements of operations, stockholders' equity, and cash flows for the periods then ended, together with the notes for such periods, have been prepared by G&L's certified public accountants and have been prepared in accordance with the generally accepted accounting principles, consistently applied throughout the periods involved. G&L further warrants and represents that it can deliver balance sheets for its years ended December 31, 1985 through December 31, 1989.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
3.4 Litigation. There are no material actions, suits, or proceedings pending or, to best knowledge of G&L, threatened by or against or affecting G&L at law or in equity, or before any governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind; G&L does not have any knowledge of any default on its part with respect to any judgement, order, writ, injunction, decree, warrant, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.
3.5 Books and Records. From the date hereof, and for any reasonable period subsequent thereto, G&L and its present Management will (i) give to the Shareholders and GRAPHITE or their duly authorized representatives full access during normal business hours to all of its books, records, contracts and other corporate documents and properties so that the Shareholders and GRAPHITE or their duly authorized representatives may inspect and audit them; and (ii) furnish such information concerning the properties and affairs of G&L as the Shareholders and GRAPHITE or their duly authorized representatives may reasonably request. Any such request to inspect G&L's books and records should be directed to G&L's President, Mr. Thomas Warren, at G&L's offices located at 2220 East 4800 South, Suite 442, Salt Lake City, Utah, USA 841117.
3.6 Confidentiality. Until the Closing (and thereafter if there is no Closing), G&L and its representatives will keep confidential any information which they obtain from the Shareholders or from GRAPHITE concerning its properties, assets and the proposed business operations of GRAPHITE. If the terms and conditions of this Plan imposed on the parties hereto are not consummated on or before 5:00 pm MST on December 31, 1993 or otherwise waived or extended in writing to a date mutually agreeable to the parties hereto, G&L will return to GRAPHITE all written matter with regard to GRAPHITE obtained in connection with the negotiation or consummation of this Plan.
3.7 Conflict with Other Instruments. The transactions contemplated by this Plan will not result in the breach of any term or provision of, or constitute a default under any indenture, mortgage, deed of trust, or other material agreement or instrument to which G&L was or is a party, or to which any of its assets or operations are subject, and will not conflict with any provision of the Articles of Incorporation or Bylaws of G&L.
3.8 Corporate Authority. G&L has full corporate power and authority to enter into this Plan and to carry out its obligations hereunder and will deliver to the Shareholders and GRAPHITE, or their respective representatives, at the Closing a certified copy of resolutions of its Board of Directors authorizing execution of this Plan by its officers and performance thereunder.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
3.9 Special Meeting of Shareholders. G&L hereby warrants and
represents that it has called a Special Meeting of the Shareholders of G&L to
be held on November 30, 1993, at 11:00 A.M. MST at the Red Lion Hotel, 255
South West Temple, Salt Lake City, Utah 84101, for the purposes of ratifying
and adopting the within Plan, and to further adopt resolutions enabling G&L
(i) to change the name of G&L to DIAMOND LAKE MINERALS, INC.; (ii) to elect A.
David Houston, William P. Houston and Brian King as members of G&L's Board of
Directors to serve until G&L's next Annual Meeting or until their successors
are duly elected and qualified; (iii) to adopt and ratify an Agreement and
Plan of Reorganization as between G&L and GRAPHITE; and (iv) to transact any
other business which may properly come before the Meeting.
3.10 Resignation of Directors. At the Closing, the current
Directors of G&L will submit their resignations as directors, seriatim, and
A. David Houston, William Houston and Brian King, will be appointed as
Directors to fill the vacancies created thereby.
3.11 Special Covenants and Representations Regarding the Exchanged G&L Stock. The consummation of this Plan and the transactions herein contemplated include the issuance of the exchanged G&L shares to the Shareholders, which constitutes an offer and sale of securities under the Securities Act of 1933, as amended, and applicable states securities laws, if any. Such transaction shall be consummated in reliance on exemptions from the registration and prospectus delivery requirements of such statutes which depend interalia on the circumstances under which the Shareholders acquire such securities.
SECTION 4
Representations, Warranties and Covenants of GRAPHITE and the Shareholders
GRAPHITE and the Shareholders (to their best knowledge, information and belief) represent and warrant to, and covenant with, G&L as follows:
4.1 GRAPHITE Shares. The Shareholders are the beneficial owners of all of the issued and outstanding shares of GRAPHITE, of whatever class or series, and warrants and covenants it has full right, title and interest in and to the same, free and clear of any encumbrances, liens or adverse claims of whatever kind or nature.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
4.2 Corporate Status. GRAPHITE is a corporation duly organized, validly existing and in good standing under the laws of Ontario, Canada.
4.3 Capitalization. GRAPHITE has no maximum on the number of common shares it is authorized to issue; its current issued and outstanding consists 5,433,333 shares of common stock with all of which are owned beneficially by the Shareholders.
4.4 Financial Statements. GRAPHITE hereby represents, warrants and covenants that the financial condition of GRAPHITE as represented by GRAPHITE both orally and in writing, is a true and correct representation of the financial condition of GRAPHITE, and that when the books and records of GRAPHITE are audited, the audited financial statements shall not differ in any material way with the representations heretofore made by GRAPHITE to G&L. GRAPHITE hereby acknowledges its understanding that, as a condition precedent to the Closing, that GRAPHITE shall have its books and records audited for submission to G&L's independent public accountants in order that the be same ready for consolidation as of the Closing Date, but in any event, no later than thirty days from the Date of Closing, unless otherwise agreed to in writing by the parties. GRAPHITE further certifies that the audited balance sheet of GRAPHITE, shall reflect an approximate minimum of $ 1,000,000 (Canadian) in assets, and $ 180,000 (Canadian) in liabilities.
4.5 Undisclosed Liabilities. As of the date hereof, GRAPHITE has no material or contingent liabilities of any nature, whether accrued, absolute, or otherwise, except as disclosed to G&L.
4.6 Title to Property. GRAPHITE has good and marketable title to all of its properties and assets, real and personal, proprietary or otherwise, as will be reflected in the balance sheets of GRAPHITE, and the properties and assets of GRAPHITE are subject to no mortgage, pledge, lien or encumbrance.
4.7 Litigation. There are no actions, suits, or proceedings pending or, to best the knowledge of GRAPHITE, threatened by or against or affecting GRAPHITE at law or in equity, or before any governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind; GRAPHITE does not have any knowledge of any default on its part with respect to any judgement, order, writ, injunction, decree, warrant, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality.
4.8 Books and Records. From the date hereof, and for such reasonable period thereafter as may be deemed appropriate, GRAPHITE will (i) give to G&L or its duly authorized representatives full access during normal business hours to all of its offices, books, records, contracts and other corporate documents and properties so
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
that G&L or its duly authorized representatives may inspect and audit them; and (ii) furnish such information concerning the properties and affairs of GRAPHITE as G&L or its duly authorized representatives may reasonably request, including, but not limited to, all information on GRAPHITE's chief asset, the mining rights to 41 unpatented mining claims, located in Bedford Township, Ontario, Canada, which claims contain a high concentration of graphite and graphite associated minerals. A list of the foregoing claims is attached hereto as Exhibit A, and incorporated herein by reference.
4.9 Confidentiality. Prior to the date of Closing (and continuously if there is no Closing), GRAPHITE and the Shareholders and their duly authorized representatives will keep confidential any information which they obtain from G&L concerning its assets, liabilities, and business affairs. If the transactions contemplated by this Plan are not consummated on or before 5:00 pm MST on December 31, 1993, or some other mutually agreed upon date, GRAPHITE and the Shareholders agree to return to G&L all written matter with respect to G&L obtained by them in connection with the negotiation or consummation of this Plan.
4.10 Acquisition of Shares. The Shareholders represent and covenant that they are acquiring the unregistered common shares of G&L to be delivered to them under this Plan for through one or more exemptions as provided for under the Securities Act of 1933, as amended, including the exemption provided thereunder by Regulation D, Rule 504.
4.11 Title to Shares. The Shareholders are the beneficial and record owners, free and clear of any liens and encumbrances, of whatever kind or nature, of all of the shares of GRAPHITE of whatever class or series, which the Shareholders has contracted to exchange.
SECTION 5
Special Covenants
5.1 GRAPHITE Information Incorporated in G&L's Reports. GRAPHITE represents and warrants to G&L that all the information furnished under this Plan shall be true and correct in all material respects and that there is no omission of any material fact required to make the information stated not misleading. GRAPHITE agrees to indemnify and hold G&L harmless, including each of its Directors and Officers, and each person, if any, who controls such party, under any applicable law from and against any and all losses, claims, damages, expenses or liabilities to which
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
any of them may become subject under applicable law, or reimburse them for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such actions, whether or not resulting in liability, insofar as such losses, claims, damages, expenses, liabilities, or actions arise out of or are based on any untrue statement, alleged untrue statement, or omission of a material fact contained in such information delivered hereunder.
5.2 Action Subsequent to Closing. Upon the execution hereof, GRAPHITE will: (i) perform all of its obligations under material contracts, leases, insurance policies, royalty contracts, and or documents relating to its assets and business; (ii) use its best efforts to maintain and preserve its business organization intact, to retain its key employees, and to maintain its relationship with existing potential customers and clients; and (iii) fully comply with and perform in all material respects all obligations and duties imposed on it by the Ontario Department of Northern Affairs & Mines, including, but not limited to keeping the assessment of GRAPHITE's 41 claims up to date, and continue to do any all things necessary and requisite for the actual commencement of mining operations on the claims set forth in Exhibit A attached hereto and incorporated herein by reference and more particularly described in the Report on Exploration Activities and Geological Compilation report prepared for GRAPHITE by MDX GeoServices of Bridgenorth, Ontario.
SECTION 6
Conditions Precedent to Obligations of GRAPHITE and the Shareholders
All obligations of GRAPHITE and the Shareholders under this Plan are subject to the satisfaction, on or before the Closing Date, except as otherwise provided for herein, or waived or extended in writing by the parties hereto, of the following conditions:
6.1 Accuracy of Representations. The representations and warranties made by G&L in this Plan were true when made and shall be true as of the Closing Date (except for changes therein permitted by this Plan) with the same force and effect as if such representations and warranties were made at and as of the Closing Date; and, G&L shall have performed and complied with all covenants and conditions required by this Plan to be performed and complied with by G&L prior to or at the Closing, unless waived or extended in writing by the parties hereto. GRAPHITE shall have been furnished with a certificate, signed by a duly authorized executive officer of G&L and dated the Closing Date, to the foregoing effect.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
6.2 Officers' Certificate. GRAPHITE and the Shareholders shall have been furnished with a certificate dated the Closing Date and signed by a duly authorized executive officer of G&L, to the effect that no litigation, proceeding, investigation, or inquiry is pending, or to the best knowledge of G&L, threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Plan, or which might result in any material adverse change in the assets, properties, business, or operations of G&L.
6.3 No Material Adverse Change. Prior to the Closing Date, there shall have not occurred any material adverse change in the financial condition, business, or operations of G&L, nor shall any event have occurred which, with lapse of time or the giving of notice or both, may cause or create any material adverse change in the financial condition, business or operations of G&L, except as otherwise disclosed to GRAPHITE.
6.4 Accuracy of Financial Information and Completion of Audited Financial Statements. That the audited financial statements dated December 31, 1992, and 1991 and for the interim period dated May 31, 1993, accurately represent the financial condition of G&L for that same period, and that no material adverse change shall have occurred during that interim period through the Date of Closing.
6.5 Opinion of Counsel of G&L. G&L shall furnish to GRAPHITE and the Shareholders an opinion dated as of the Closing Date and in form and substance satisfactory to GRAPHITE and the Shareholders to the effect that:
(a) G&L is a corporation duly organized, validly existing, and in good standing under the laws of the State of Utah with all requisite corporate power to perform its obligations under this Plan;
(b) the business of G&L, as presently conducted, including the upon the consummation hereof, the ownership of all of the issued and outstanding shares of GRAPHITE, does not require it to register it to register it as a foreign corporation in any jurisdiction other than under the jurisdiction of the State of Utah, USA. G&L is not in violation of any provision of its Articles of Incorporation or Bylaws and G&L has complied to the best of its knowledge in all material respects with all the laws, regulations, licensing requirements and orders applicable to its business activities and has filed with the proper authorities, including the Department of Commerce, Corporations Division, State of Utah, all statements and reports required to be filed.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
(c) the authorized and outstanding capital stock of G&L as set forth in Section 3.2 above, and all issued and outstanding shares have been duly and validly authorized and issued and are fully paid and non-assessable;
(d) there are no material claims, suits or other legal proceedings pending or threatened against G&L of any court or before or by any governmental body which might materially affect the business of G&L or the financial condition of G&L as a whole and no such claims, suits, or legal proceedings are contemplated by governmental authorities against G&L;
(e) G&L's initial public distribution of its common stock, sold pursuant to a prospectus, which was granted an effective date by the United States Securities Exchange Commission on February 25, 1972, was done in accordance and in compliance with the rules and regulations as promulgated under the Securities Act of 1933, as amended, (the "Act"), and complies with the federal exemption from the registration provisions of the Act, as provided therefor, and in compliance with the rules and regulations as promulgated by the Securities Division of the State of Utah in which the public distribution was made. Subsequent to the termination of its public offering, no stop orders suspending the effectiveness of the distribution is or was in effect, and no proceeding since the termination thereof for that purpose are pending before or threatened by any state or federal agency or authority.
(f) G&L's common stock was distributed in compliance with an exemption from the registration provisions as promulgated under Section 3(b) of the Act, Regulation A, and represent and warrant, in connection therewith, that the shares of common stock distributed pursuant to the foregoing exemption are now freely tradeable in the over-the-counter market except as to common shares of G&L beneficially owned by any "controlling person" of G&L or any "affiliate" thereof, as those terms are defined under the Act.
(g) to the best knowledge of such counsel, the consummation of the transactions contemplated by this Plan will not violate or contravene the provisions of the Articles of Incorporation or Bylaws of G&L, or any contract, agreement, indenture, mortgage, or order by which G&L is bound; and
(h) this Plan constitutes a legal, valid and binding obligation of G&L enforceable in accordance with its terms, subject to the affect of any
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors' rights generally and general principles of equity (regardless of whether such principles are considered in a proceeding in equity or law).
(i) the execution and delivery of this Plan and the consummation of the transactions contemplated hereby have been ratified by the shareholders of G&L and have been duly authorized by its Board of Directors.
6.6 Other Items. GRAPHITE and the Shareholders shall have received such further documents, certificates or instruments relating to the transactions contemplated hereby as GRAPHITE and the Shareholders may reasonable request.
SECTION 7
Conditions Precedent to Obligations of G&L
All obligations of G&L under this Plan are subject, at its option, to the fulfillment, before or at the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties made by GRAPHITE and the Shareholders under this Plan were true when made and shall be true at the Closing Date with the same force and effect as if such representations and warranties were made at and as of the Closing Date (except for changes therein permitted by this Plan), and GRAPHITE and the Shareholders shall have performed or complied with all covenants and conditions required by this Plan prior to or at Closing. G&L shall have been furnished with a certificate(s), signed by duly authorized officers of GRAPHITE and the Shareholders and dated the Closing Date, to the foregoing effect.
7.2 Officers' Certificate. G&L shall have been furnished with a certificate dated the Closing Date and signed by a duly authorized executive officer of GRAPHITE to the effect that no litigation, proceeding, investigation, or inquiry is pending, or to the best knowledge of GRAPHITE, threatened, which might result in an action to enjoin or prevent the consummation of the transactions contemplated by this Plan, or which might result in any material adverse change in the assets, properties, business, or operations of GRAPHITE.
7.3 No Material Adverse Change. Prior to the Closing Date, there shall have not occurred any material adverse change in the financial condition, business, or operations of GRAPHITE, nor shall any event have occurred which, with lapse of time
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AGREEMENT AND PLAN
or the giving of notice or both, may cause or create any material adverse change in the financial condition, business or operations of GRAPHITE.
7.4 Opinion of Counsel as of Closing Date. An opinion of counsel shall be provided to G&L by counsel for GRAPHITE representing that:
(a) GRAPHITE is duly incorporated, validly existing and in good standing under the laws of Ontario, Canada;
(b) GRAPHITE holds all requisite power and authority to own its properties and carry on its business as conducted on the Closing Date;
(c) the authorized and outstanding capital of GRAPHITE as set forth in Section 4.3 above and all issued and outstanding shares of its capital stock have been duly and validly authorized and issued, and are fully paid and non-assessable;
(d) the Shareholders are the beneficial and registered owners of GRAPHITE's issued and outstanding securities according to the books and records;
(e) to the best knowledge and belief of counsel, no options, warrants or other rights to acquire shares are outstanding with respect to the shares of capital stock of GRAPHITE.
(f) this Plan has been duly and validly authorized, executed, and delivered by GRAPHITE and constitutes the legal and binding obligation of GRAPHITE, subject to effect of any bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors' rights generally, and general principles of equity, (regardless of whether such principles are considered a proceeding in equity or law);
(g) except as otherwise disclosed to G&L or as set forth in this Plan, such counsel does not have knowledge of any litigation, proceeding, or governmental investigation threatened against or relating GRAPHITE or its properties and business or against or relating to the transactions contemplated by this Plan.
7.5 Other Items. G&L shall receive further documents, certificates, or instruments relating to the transactions contemplated hereby as G&L may reasonably request.
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
SECTION 8
Termination
8.1 Termination by GRAPHITE or the Shareholders. This Plan may be terminated at any time prior to the Closing Date by action of the GRAPHITE or the Shareholders, if G&L shall fail to comply in any material respect with any of the covenants or agreements contained in this Plan or if any of its representations and warranties contained herein shall be inaccurate in any material respect.
8.2 Termination by G&L. This Plan may be terminated at any time prior to the Closing Date by any action of the Board of Directors of G&L if either the Shareholders or GRAPHITE shall fail to comply in any material respect with any of the covenants and agreements contained in this Plan or if any of its representations and warranties contained herein shall be inaccurate in any material respect.
8.3 Termination by Mutual Consent. This Plan may be terminated at any time prior to the Closing Date by mutual consent of G&L, expressed by action of its Board of Directors, GRAPHITE, or its sole Shareholders, the Shareholders.
If this Plan is terminated pursuant to Section 8, this Plan shall be of no further force and effect and no obligation, right or liability shall arise hereunder. Each party shall bear its own costs in connection herewith.
SECTION 9
General Provisions
9.1 Further Assurances. At any time, and from time to time, after the Closing, each party will execute such additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Plan.
9.2 Payments of Estimated Costs and Fees. As G&L and GRAPHITE may mutually determine, G&L and GRAPHITE agree, at their expense, to divide and pay the estimated costs and fees incurred in connection with the execution and consummation of the Plan all the parties hereto.
9.3 Press Release and Shareholders Communications. On the Date of Closing, or as soon thereafter as practicable, G&L, GRAPHITE, and the Shareholders
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
shall cause to have promptly prepared and disseminated a news release concerning the execution and consummation of the Plan, such press release and communication to be released promptly and within the time required by the laws, rules and regulations as promulgated by the United States Securities and Exchange Commission, and concomitant therewith to cause to be prepared a full and complete letter to G&L's shareholders which shall contain information required by Regulation 240.14f-1 as promulgated under section 14(f) as mandated under the Securities and Exchange Act of 1934, as amended.
9.4 Notices. All notices and other communications required or permitted hereunder shall be sufficiently given if personally delivered to its of sent by registered mail, or certified mail, return receipt requested, postage prepaid, or by prepaid telegram addressed as follows:
If to G&L, to: G&L ENERGY, INC.
2220 East 4800 South, Suite 422
Salt Lake City, Utah 84117
With a copy to: _______________________________
________________________________
________________________________
If to GRAPHITE, to: GRAPHITE MOUNTAIN, INC.
P.O. Box 190
Warkworth, Ontario, CANADA K0K 3K0
If to the Shareholders: C/O A. David Houston
same address as above
With a copy to: Robert J. Nielson, Esq.
3098 So. Highland Dr., Suite 350
Salt Lake City, Utah 84106
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or at such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given as of the date so delivered, mailed, sent by facsimile transmission, or telegraphed.
9.5 Entire Agreement. This Plan represents the entire agreement between the parties relating to the subject matter hereof, including any previous letters of intent, understandings, or agreements between G&L, GRAPHITE and the Shareholders with
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
respect to the subject matter hereof, all of which are hereby merged into this Plan, which alone fully and completely expresses the agreement of the parties relating to the subject matter hereof. There are no other courses of dealing, understandings, agreements, representations, or warranties, written or oral, except as set forth herein.
9.6 Governing Law. This Plan shall be governed by and construed and enforced in accordance with the laws of the State of Utah.
9.7 Tax Treatment. GRAPHITE and G&L acknowledge that each are being by their own tax advisors in connection with this transaction, and neither has made any representation or warranties to the other with respect to treatment of such transaction or any part or effect thereof under applicable tax laws, regulations, or interpretations; and no attorney's opinion or tax revenue ruling has been obtained with respect to the tax consequences under the hereunder.
9.8 Attorney's Fees. In the event that any party prevails in any action or suit to enforce this Plan, or secure relief from any default hereunder or breach hereof, the non-prevailing party or parties shall reimburse the prevailing party or parties for all costs, including reasonable attorney's fees, incurred in connection therewith.
9.9 Amendment or Waiver. Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law or in equity, and may be enforced concurrently or separately, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. Any time prior to the expiration of thirty (30) days from the date hereof, this Plan may be amended by a writing signed by all parties hereto, with respect to any of the terms contained herein, and any term or condition of this Plan may be waived or the time for performance thereof may be extended by a writing signed by the party or parties for whose benefit the provision is intended.
9.10 Counterparts. This Plan may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
9.11 Headings. The section and subsection headings in this Plan are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Plan.
9.12 Parties in Interest. Except as may be otherwise expressly provided herein, all terms and provisions of this Plan shall be binding upon and inure to the benefit of
G & L Energy, Inc./Graphite Mountain, Inc.
AGREEMENT AND PLAN
the parties hereto and their respective heirs, beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of Reorganization effective the day and year first above written.
G&L ENERGY, INC.
By: /s/ Thomas R. Warren Attest: /s/ Greg Markham
--------------------------- ----------------------------
Thomas R. Warren, President Greg Markham, Asst. Secretary
GRAPHITE MOUNTAIN, INC.
By: /s/ A. David Houston Attest: /s/ A. Patterson
--------------------------- -----------------------------
A. David Houston, President
The Shareholders:
By: /s/A. David Houston Attest: /s/ A. Patterson
---------------------------
A. David Houston
Attorney-in-Fact
|
AGREEMENT
This AGREEMENT, made and entered into this 17th day of Dec., 1994, by and between Diamond Lake Minerals, Inc., a publicly held Utah corporation ("DLMI") and P. & G. Development (P & G), a Canadian company, formed under the Prospecting and Grubstaker's Act, of the Province of Ontario, Canada.
For and in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the adequacy and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Assignment of Property and Consideration. P & G hereby assigns, sells, transfers, and conveys all of its right, title and interest in those thirty-nine (39) mining claims located in the North Burgess Township, County of Lanark, Southern Ontario, Canada, a description of which is attached hereto as Exhibit "A" and incorporated herein by reference, and hereinafter referred to as the "Timmins" graphite property.
(a) As consideration for the foregoing sale, transfer and conveyance of all of P & G's mining rights in the thirty-nine (39) mining claims to DLMI, DLMI shall, upon execution hereof, issue an aggregate of FOUR-MILLION (4,000,000) DLMI common shares, to be issued to P & G or its designees as set forth in Exhibit "B", attached hereto, and incorporated herein by reference, and in addition, the sum of NINETY-THOUSAND UNITED STATES DOLLARS ($90,000 US). P & G agrees to accept, however, in lieu of the $90,000 US, 360,000 shares, which 360,000 shares shall be part of the total of the 4,000,000 shares to be delivered hereunder, and shall constitute shares issued pursuant to an exemption provided therefor under Rule 504, Regulation D, as promulgated under the Sewcurities Act of 1933, as amended, with the balance of the 4,000,000 shares, or 3,640,000 common shares, to be issued under the exemption provided for under Seciton 4(2) of the Securities Act of 1933, as shares issued "in a transaction not involving a public offering." The issuance of the 4,000,000 shares, that is 360,000 common shares to be issued pursuant to Rule 504 and in lieu of the $90,000, and 3,640,000 common shares issued pursuant to Section 4(2) of the Securitie Act, shall constitute the full and complete consideration for the transfer of the foregoing claims, excepting reservation by P & G of a Three Percent (3%)smelter return in favor of P & G of any and all minerals mined and drilled from and of the foregoing thirty- nine (39) mining claims.
(b) It is understood and agreed by the parties, that the parties have agreed that the common shares of DLMI to be issued to P & G as a consideration for this transaction, will be issued with an agreed upon value of Twenty-Five Canadian Cents ($0.25 Canada) per share, which approximates the average bid price of the DLMI common stock as traded on the NASD Bulletin Board over-the- counter-market in the United States as of the date hereof.
2. Authority of P & G. P & G warrants, covenants and represents that it owns 100% of the interest in the Timmins property, and that the same is free and clear of any liens and encumbrances, and P & G has, pursuant to a resolution adopted by its Managing Members, and subsequently unanimously approved by its Members, the full power and authority to execute this Agreement and to transfer all its rights in the Timmins property to DLMI, reserving however, a 3% net smelter interest in favor of P & G.
3. Definition of 3% Smelter Return/Determination of Market Price. A 3% smelter return, retained by P & G, shall be defined as the amount equal to 3% of the gross proceeds of the sale of any minerals or mineral products from the Timmins property. The average price obtained by DLMI for graphite or other mineral products products sold, will be the average price of graphite ore determined as of three days prior to delivery of the same to any processor, purchaser or refiner thereof. The weighing or sampling of the ore, at which a representative of P & G may be present or a designee thereof, prior to the delivery, will be accepted as final. The absense of a representative of P & G to witness and verify any such sampling or weighing shall constitute a waiver of the right in each instance. After weighing and sampling of any graphite ore or other mineral ores, the same may be placed in process, co-mingled, or otherwise disposed of by DLMI.
4. Revenues Due P & G by DLMI. Any revenues due as a result of the sale of graphite products or other mineral products by DLMI shall be paid on a quarterly basis to P & G or on some other date as may be mutually agreed upon by the parties. Any monies paid, shall be due when DLMI has received the actual receipts from sale of graphite or any other mineral products. P & G shall be entitled, upon a reasonable request by P & G, to the books and records of DLMI for purposes of reviewing sales of graphite or other ores and the receipt of any and all revenues in connection therewith.,
5. Conduct of Mining and Restoration by DLMI. DLMI shall conduct all of its mining operations in such a manner as not to unduly damage the lands conveyed hereunder and otherwise agrees to restore said lands as near to their present condition as reasonably possible, and to otherwise comply with any and all terms, conditions and statutes and laws as may be enacted referencing environmental or other restoration procedures applicable to the subject property in a timely manner and in compliance with such laws, ordinances or regulations. DLMI shall conduct all operations in such a manner as not to obstruct, impair or interfere with the natural drainage of the lands, or the streams or the other bodies of water on or in the vicinity of the lands, except as may be necessary to effect its mining operations. DLMI agrees to not leave on such lands pits or lakes of an area of more than 40 acres.
6. P & G's Title to Property. P & G hereby warrant and agrees
(a) to furnish DLMI a preliminary title report, title report, and title insurance, as mutually agreed upon by the parties, for the 39 claims described in Exhibit "A" . P & G shall otherwise permit DLMI, its representatives and counsel
to examine all abstracts of title, title opinions, title files, ownership maps, records, surveys, and al other material which P & G has or which are pertinent to the title, condition and memorandum or any business activity concerning mining operations on the property or that have been performed on the property in the past and any other material which P & G has and which are pertinent to the title and mining operations to any of the Timmin's property.
(b) that the delivery by P & G of any such abstracts, surveys, and other title information and curative material to DLMI's title counsel as he may reasonably request for the purpose of showing that P & G has good and marketable title to the Timmin's property, and any transfer hereunder, shall be subject to a favorable opinion by DLMI's title counsel as to the status of P & G's title to the Timmin's property.
(c) that prior to the execution hereof, P & G will undertake the necessary measures to cure any title defects or encumbrances to which DLMI takes exception and that otherwise in the opinion of DLMI would materially interfere with the proposed operation and use of the Timmin's property by DLMI.
(d) that all warranties, representations and covenants with respect to the nature and condition of P & G's good and marketable title to the Timmin's property shall survive the execution hereof.
7. Acknowledgment of Investment Intent. P & G and its members understand, acknowledge and agree that the 3,640,000 of the 4,000,000 DLMI common shares to be issued pursuant hereto, as part of the consideration for the purchase by DLMI of P & G's Timmin's property, constitute "restricted shares" as that term is defined under the Securities Act of 1933, as amended; and, that P & G and its members are taking the DLMI shares for "investment purposes and not with a view to subsequently distribute the same". P & G and its members agree to execute and deliver to DLMI a letter similar in form to the letter attached hereto as Exhibit "C", and incorporated herein by reference, representing and warranting that the DLMI shares are being received for investment purposes and that under present U.S. law, any subsequent transferability thereof is restricted for a period of no less than two years. The DLMI shares being delivered hereunder shall have a restrictive legend imprinted thereon indicating the DLMI shares are subject to restrictions on transferability and that "stop transfer" instructions shall be submitted to DLMI's transfer agent, American Registrar and Transfer Company, Inc. of Salt Lake City, Utah, for the purpose of indicating in DLMI's transfer records the restrictive nature of the DLMI stock, together with instructions that the same may not be transferred unless the same are the subject of a Registration Statement in effect or pursuant to an exemption from the registration provisions, and further pursuant to an opinion of counsel satisfactory to DLMI that the shares can be transferred in a manner contemplated or requested by P & G or any one of its members.
8. Conditions Precedent to the Obligations of DLMI. All obligations of DLMI under this Agreement are subject to the fulfillment, prior to or upon the execution hereof, of each of the following conditions:
a) The representations and warranties of P & G set forth in this Agreement shall be true and correct in all material respects as of the date when made and shall be deemed to have been made again at and as of the date hereof.
b) P & G shall have duly performed and complied with, in all material respects, all things required by the Agreement, to be performed or complied with by it prior to or upon the execution hereof.
c) P & G shall have delivered to DLMI a certificate of the Managing Member of P & G dated as of the execution date, certifying, to the best of his knowledge and belief, as to the fulfillment of the conditions imposed according to the foregoing paragraphs.
d) P & G shall deliver to DLMI the favorable written memorandum dated upon the execution hereof, to the effect that (i) P & G is an organization duly organized and validly existing and in good standing under the laws of the Province of Ontario, Canada and was duly organized and qualified under the Prospector and Grubstaker's Act, as then in effect, and as is now presently constituted, and has the proper authority to own and operate its properties and assets and to conduct its business as it is now conducted; (ii) all necessary proceedings by P & G, including unanimous approval by its members, have been taken to authorize the consummation of the transactions contemplated hereby and the performance by P & G of its obligations hereunder and the execution and delivery by P & G of all instruments of conveyance and other documents contemplated hereby, and the execution of this shall constitute valid and binding agreements of P & G in accordance with their respective terms; (iii) the manner in which P & G is conducting its business is not in violation of any applicable law or regulation materially affecting the Timmin's property or the operation thereof; (iv) P & G's Management knows of no impediment, legal or otherwise, with respect to any provision, law, ordinance or enactment, either Provincial or Federal, referencing the Prospector's and Grubstaker's Act and to P & G's consummating the transactions contemplated in this Agreement; and (v) such matters incident to the transactions contemplated hereby as DLMI may reasonably request.
9. Governmental Consents.
(a) Except and unless as DLMI shall agree, in writing, need not be obtained, there shall have been obtained, each consent of governmental authorities "other than consents required in connection with the transfer of mining claims under township, Ontario Provincial or any Federal law, or consent to the transfer is limited
exclusively to such consent as is prescribed by the applicable laws, rules and regulations, and other than consents customarily obtained after closing" and each consent and waiver of preferential right to purchase necessary to permit the valid sale and transfer to and be purchased by DLMI of the Timmin's graphite property.
(b) There shall not have been introduced in, or enacted or voted by any township, Canadian Province, or legislation, which, in DLMI's judgement, would be materially prejudicial to the income tax consequences to DLMI with respect to transactions contemplated by this Agreement.
10. Conditions Precedent to P & G's Obligations. All obligations of P & G under this Agreement are subject to the fulfillment as conditions precedent, prior to or upon the execution hereof, of each of the following conditions:
a) The representations and warranties of DLMI set forth in this Agreement shall be true and accurate in all material respects as of the date hereof, and, except to the extent necessary to reflect the consummation of any transactions provided for herein or consented to or approved in writing by P & G, shall then be true in all material respects.
b) DLMI shall have duly performed and complied with, in all material respects, all things required by this Agreement to be performed or complied with by it prior to or upon the execution hereof.
c) This Agreement, and the proposed purchase of the Timmin's property by DLMI has been approved and adopted at a special meeting of DLMI's Board of Directors duly called and held for such purpose by the vote of a majority of its Board of Directors entitled to vote at such a meeting.
d) DLMI shall have delivered to P & G the favorable written opinion of Robert J. Nielson, Attorney at Law, special securities counsel for DLMI, prior to or upon the execution hereof, to the effect that (i) DLMI is a corporation duly organized, validly existing and in good standing in the state of Utah, and has the corporate power to own and operate its properties and assets and to conduct its business as it is now conducted; (ii) the execution of this Agreement and the issuance 4,000,000 of DLMI's common shares, has been duly and validly authorized, and when issued and delivered, shall constitute fully paid and non-assessable shares; (iii) counsel knows of no impediment, legal or corporate, to DLMI's concluding the transactions called for in this Agreement, and (iv) such other matters incident to the transaction contemplated hereby as P & G may reasonably request.
e) It is not contemplated that DLMI will request from the United States Internal Revenue Service a ruling, or rulings, in form and substance concerning any gain or loss of income, capital gains or with respect to any tax consequence that may
or may not be recognized by P & G or DLMI as a result of the contemplated sale by P & G of the Timmin's property to DLMI in the matter contemplated herein. Further, each of the parties hereto agrees to consult with their own tax counsel to the gain, income, Canadian and U.S. tax provisions and tax consequences applicable to the within contemplated transaction.
11. Conveyance and Transfer of Title. Upon the execution hereof, P & G shall also execute the instruments conveying and transferring all of P & G's title and interest in the Timmin's property to DLMI, which shall contain the general warranties and covenants and an adequate description of the Timmin's property to be delivered to DLMI with the required documentary tax stamps affixed thereto by P & G and cancelled, if any there be. P & G further agrees, that, from time to time, at DLMI's request, and without further consideration, P & G shall execute and deliver such further documents and take such further action as DLMI reasonably may require to more effectively convey, transfer to, and vest in DLMI, good title to the Timmin's property.
12. DLMI's Title to Timmin's Property. Upon execution hereof, and by the execution of the conveyance referred to above, DLMI shall have good and marketable title to all of the Timmin's property, as described in Exhibit "A" attached hereto, free of all liens, charges and encumbrances, except as otherwise disclosed and agreed to by DLMI pursuant to written waivers, excepting (i) taxes constituting a lien but not yet due and payable (ii) defects or irregularities of title or encumbrances which are not such as to interfere materially with the operation, value or use of any of the Timmin's property or materially affect title thereto.
13. Delivery of DLMI Shares to P & G. Upon the execution hereof, and concomitant with the transfer and execution of the conveyance of the Timmin's property to DLMI, DLMI shall, as soon as practicable, deliver to P & G and its members identified in Exhibit "B" attached hereto, 4,000,000 DLMI common shares, which shares will be issued pursuant to certain exemptions from the registration provisions of the Securities Act of 1933, as amended and as further discussed in Paragraph 1(a).
14. Execution of Investment Letters. In connection with the delivery of 3,640,000 of the 4,000,000 forgoing DLMI shares, P & G, and each member thereof, agrees to execute an "investment letter" in a form similar to that attached hereto as Exhibit C.
15. Neither party has employed or entered into any agreement, arrangement or understanding with any broker or finder in connection with this Agreement or the transactions contemplated hereby, and each party so represents and warrants to the other. Each party hereby agrees to indemnify, save and hold harmless the other party, its shareholders, members, directors and officers from and against any and all claims, losses, damages, costs or expenses of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by it with any broker or finder in connection with this Agreement or the transactions contemplated hereby.
16. Termination. In the event of the termination of this Agreement, pursuant to the terms and provisions hereof, neither party shall have any liability hereunder, of any nature whatever, to the other, including any liability for damages; provided that this paragraph shall not preclude liability attaching to a party who has caused a termination hereof by an act, or by its failure to act, in violation of the terms and provisions hereof, and in the event of suit, a violation of any other term or provision hereof, the prevailing party shall be entitled to costs incurred in connection therewith, and reasonable attorney fees.
17. Notices. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been given if delivered or mailed, first class postage prepaid:
If to DLMI, to: Diamond Lake Minerals, Inc.
Box 190
Warkworth, Ontario CANADA K0K 3K0
ATTN: Mr. A.D. Houston, President
With a copy to: Robert J. Nielson, Esq.
3098 Highland Drive, Suite 350
Salt Lake City, Utah 84106
|
If to P & G Development:
18. Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties named herein and their respective successors and assigns; nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies under or by reason of this Agreement.
19. Claims. Neither the conveyance of the Timmin's property, nor
the delivery of the DLMI shares pursuant to this Agreement, shall operate to
extinguish any claim, representation, warranty or agreement hereunder, unless
such representation, warranty or agreement shall survive the expiration of one
year from the date hereof, unless (a) a claim in respect thereof has been
asserted in writing prior to, or at least one month prior to such expiration,
(b) it relates to obligations of the parties which are to continue after the
execution hereof as distinguished from the representations and warranties of
the parties contained in this Agreement and in certificates and documents
delivered hereunder, or (c) it is contained in an instrument of conveyance,
assignment or transfer executed and on delivery in accordance with this
Agreement.
20. Amendments. This Agreement may not be amended, supplemented or
otherwise modified except by an instrument in writing signed by both P & G and
DLMI. This Agreement cannot be assigned in any manner by either P & G or DLMI
without the express written permission of the other, which permission shall
not be unreasonably
withheld. This Agreement contains the entire agreement of the parties hereto with respect to the transactions covered hereby and there are no representations, warranties, agreements, undertakings or conditions, express or implied, except as set forth herein.
21. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
22. Governing Law. The parties agree that without regard to conflicts of law considerations, this Agreement shall be construed and governed by the law of the Province of Ontario, Canada.
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this Agreement as of the date first above written.
P & G DEVELOPMENT, INC.
/s/ A. David Houston
By:__________________________________
, Managing Member
/s/ Diane Greer
ATTEST:____________________________
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DIAMOND LAKE MINERALS, INC.
/s/ A. David Houston
By:__________________________________
A. David Houston, President
/s/ Diane Greer
ATTEST:_____________________________
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Exhibit A
List of Timmins Mining Claims
Exhibit B
List of Shareholders of Designees to
Receive stock in the Transaction
Between the Company and P&G
Exhibit C
Sample Investment Letter
Exhibit D
Exploration Strategy/Geology Report by MDX Geoservices
<Stamped with the seal of Secretary of State of Utah As received on Jan 5 1954>
GARDEN & LAWN EQUIPMENT COMPANY
We, the undersigned, for the purpose of forming a corporation under the laws of the State of Utah, do hereby associate ourselves and agree as follows, to-wit:
ARTICLE I
The name of this corporation hereby formed shall be "Garden & Lawn Equipment Company".
ARTICLE II
This corporation is hereby organized at Salt Lake City, Salt Lake County, State of Utah.
ARTICLE III
The names of the incorporators and their respective places of residence are as follows, to-wit:
Name Address W. A. McCormick Salt Lake City, Utah Pam G. McCormick Salt Lake City, Utah W. W. McCormick Salt Lake City, Utah Louis* M. McCormick Salt Lake City, Utah L. H. Keeler Salt Lake City, Utah |
ARTICLE IV
This corporation shall exist for One hundred years unless sooner dissolved according to law.
ARTICLE V
The general nature of the business of this corporation shall be to buy, and to sell and distribute, both wholesale and retail, all kinds of powered equipment and garden and lawn accessories; to buy, lease, acquire, hold, own, sell, let, or otherwise dispose of such property, both real and personal, as is necessary to carry an the above stated business; to make and enter into contracts of every kind and nature incidental to the aforesaid business with any individual, firm, association, or corporation, private, public, or municipal, and with the government or public authorities of the United States or any state or division thereof; to do any and all of the things hereinabove set forth and such other things as are incidental or conducive to the attainment of the above business objects.
ARTICLE VI
The principal place of business of this corporation @hall. be at 1626 South State Street, Salt Lake City, Utah, but business, finance, and transfer offices may be established by the Board of Directors, and business may be transacted at any place or places in the United States, and meetings of the Board of Directors may be held for the transaction of any business of the corporation at such places outside of the State of Utah and elsewhere within said state than at its principal place of business as the Board of Directors may by resolution or by by-law provide.
ARTICLE VII
The amount of stock each party has subscribed is an follows:
Name Amount of Stock W. A. McCormick 497 shares W. W. McCormick 497 shares Erma G. McCormick 2 shares Louise M. McCormick 2 shares L. H. Kesler 2 shares |
TOTAL 1,000 shares
ARTICLE VIII
This corporation is authorized to issue only one class of shares of stock; the total number of such shares is 1,000, with which total number it shall commence business: and all of such shares are to be without par value.
ARTICLE IX
In case a stockholder desires to son his share or shares of stock, he must first offer them for sale to the remaining stockholders, it being the intention hereof to give them a preference in the purchase of the same, and any attempted sale in violation of this provision is null and void. A stockholder desiring to sell his stock shall file notice in writing of his intention with the secretary of the corporation, stating the terms of sale, and unless his terms are accepted by any or all of the other stockholders within 30 days thereafter, they shall be deemed to have waived their privilege of purchasing and he shall be at liberty to sell to anyone else.
ARTICLE X
This corporation shall consist of a Board of Directors, and of the following officers: a President, a Vice-President, and a Secretary-Treasurer. Said Board of Directors shall consist of five members, each of whom shall be the holder of at least one share of stock of this corporation in his own right as shown by the books of the company.
A director may hold more than one office and may be an officer of the corporation concurrently with his directorship tenure.
All directors of the corporation shall be elected annually by the holders of the stock of this corporation at the annual meeting hereinafter provided for and the directors shall choose and elect the officers of this corporation.
Until the first annual meeting of the stockholders of this corporation hereinafter provided for and the election and qualification of their successors, W. A. McCormick shall be President and Director, W. W. McCormick shall be Vice-President and Director, L. H. Kesler shall be Secretary- Treasurer and Director, Erma G. McCormick shall be a Director and Louise M. McCormick shall be a Director.
The term of office of the officers of this corporation shall be one year and until their successor or successors shall be elected and qualified.
Any vacancy caused by death, resignation, or removal shall be filled by the Board of Directors though less than a quorum, and any person or persons so appointed shall hold office until the next annual meeting of the stockholders of this corporation and until the election and qualification of their successor or successors.
Any officer or director may resign at any time by filing with the President a written resignation.
ARTICLE XI
Three members of the Board of Directors shall constitute a quorum and shall be authorized to transact business and exercise the corporation powers of this corporation.
The general management of this corporation shall rest with the Board of Directors of this corporation which may adopt such by-laws as they deem proper, not inconsistent with this agreement or the laws of the State of Utah, and may appoint such committees and agents for the carrying out of the work of this corporation as they deem for the best interests of the corporation and may vest such committees and agents with such powers in the management of such corporation an the Board may deem for the best interest of the corporation; the Board of Directors shall have the power and authority to prescribe the duties of the officers of the corporation, fix their salaries, and generally conduct, control, and regulate the company's business and its affairs. The Board of Directors by resolution shall have the power to sell, mortgage, or otherwise dispose of the property of this corporation without the consent, ratification, or approval of the stockholders.
ARTICLE XIII
The private property of the stockholders of this corporation shall not be liable for the debts and obligations of this corporation.
ARTICLE XIII
The annual meeting of the stockholders of this corporation for the election of directors and for the transaction of business coming on regularly before such meeting shall be held in the first week of February, 1954, at the principal place of business of the corporation, and annually thereafter at the same time and place unless otherwise provided in the by-laws of this corporation. A representation or majority of the issued out-standing stock of the corporation shall be necessary to hold such meeting.
The directors shall be elected by ballot and each holder of the stock of this corporation shall be entitled to one vote for each share of stock standing in his name upon the books of the company at the time of the meeting, provided, however, that any stockholder may vote either in person or by agent or proxy.
ARTICLE XIV
This corporation hereby takes and receives in full payment of 994 shares of the above subscribed non-par stock an assignment from W. A. McCormick and W. W. McCormick of all their right, title and interest in and to all and every asset of every description of the Garden & Lawn Equipment Company of which company the said assignors are the solo owners.
The above assets are necessary to the business of this corporation and the fair cash value of the same is or exceeds the sum of Ten Thousand Dollars ($10,000.00).
IN WITNESS WHEREOF, the parties hereto respectively subscribed their names this 28 day of December 1953.
/s/ W.A. McCormick
/s/ W.W. McCormick
/s/ L.H. Kesler
/s/ Erma G. McCormick
/s/ Louise M. McCormick
STATE OF UTAH )
)SS
COUNTY OF SALT LAKE )
|
W. A. McCormick, W. W. McCormick and L. H. Kesler, being each duly sworn, depose and say that they are acquainted with the assets mentioned in Article XIV of the foregoing Articles of Incorporation, transferred to and accepted by this corporation in full payment of 994 shares of its stock: that in their judgment said properties and interests are reasonably worth the amount in cash for which they wore accepted by the corporation, to-wit, the sum of Ten Thousand Dollars ($10,000.00).
/s/ W.A. McCormick
/s/ W.W. McCormick
/s/ L.H. Kesler
Subscribed and sworn to before me this 28th day of December,1953,
/s/ signature illegible
Notary Public
Residing in Salt Lake City, Utah
|
My commission expires Jan. 3 1956
State OF UTAH )
)
COUNTY Of SALT LAKE )
|
W. A. McCormick, W. W. McCormick and L. H. Kesler being first duly sworn on his oath and not one for the other, deposes and says: That he is one of the incorporators named in and who subscribed the foregoing Articles of Incorporation of the Garden & Lawn Equipment Company; that it is bona fide their intention to commence and carry on the business mentioned in the said Articles of Incorporation, and that the affiants verily believe that each party to the Articles of Incorporation has paid or is able to and will pay the amount of stock subscribed for by him; and that at least ten percent of the stock subscribed by each stockholder and not less than ten percent of the total stock of the company has been paid in.
Subscribed and sworn to
before this 28 day
of December, 1953
/s/ Signature illegible Notary Public residing in Salt Lake City, Utah My commission expires$ Jan 3, 1956 |
<Stamp of Secretary
Of State of State
Of Utah -Received
NOV 28 1958>
CERTIFICATE OF AMENDMENTS
STATE OF UTAH )
)ss
County of Salt Lake )
|
MAURICE MORTON AND MURRAY WILLIAMS, President and Secretary respectively of the Garden & Lawn Equipment Corporation, a corporation organized and existing under the laws of the State of Utah, do hereby certify that said corporation at a special meeting of the stockholders thereof held in Salt Lake City, Utah, on the 12th day of October, 1958, amended its Articles of Incorporation so that hereafter Article I and Article VIII shall read as follows:
ARTICLE I
The name of this corporation hereby formed shall be "G & L Equipment Company".
ARTICLE VIII
This corporation is authorized to issue only one class of shares of stock; the told number of such shares is 11,000, with which total number it shall commence business and all of such shares are to be without par value.
We further certify that all at the stock entitled to vote was represented at said meeting and voted in favor of said amendments.
/s/ Maurice E. Morton
President
/s/ Murray Williams
Secretary
|
STATE OF UTAH )
)ss
County of Salt )
|
On the 21 day of October, 1958, personally appeared before me MAURICE MORTON and MURRAY WILLIAMS, the signers of the foregoing certificate of amendments, known to me to be the President and Secretary of Garden and Lawn Equipment Company, who duly acknowledged to me that they executed said certificate of amendments.
Subscribed and sworn to before me this 21 day of October,1958.
/s/ signature illegible
My Commission expires Notary Public, residing at
August 27, 1961 Salt Lake City, Utah
|
<Stamp of the
Secretary of
State of Utah
Received
JUN 9 1961>
CERTIFICATE OF AMENDMENTS
STATE OF UTAH )
)ss
County of Salt Lake )
|
MAURICE MORTON AND MURRAY WILLIAMS, President and Secretary respectively of the Garden & Lawn Equipment Corporation, a corporation organized and existing under the laws of the State of Utah, do hereby certify that said corporation at a special meeting of the stockholders thereof held in Salt Lake City, Utah, on the 8 day of May 1961, amended its Articles of Incorporation so that hereafter Article IV, and Article V , and Article VIII, shall read as follows:
ARTICLE IV
This corporation shall exist in Perpetuity unless dissolved or duly unincorporated pursuant to the laws of Utah.
ARTICLE V
Paragraph 2. To engage in any other business or activity for profit which is permitted to a corporation by law, provided that the Board of Directors shall by resolution specify such business, businesses, activity or activities, and should special licenses or permits be required, such licenses or permits shall be secured prior to commencement of such business or activities.
ARTICLE VIII
This corporation is authorized to issue only one class of shares of stock; the total number of such shares is 22,000, with which total number it shall commence business and all of such shares are to be without par value.
We further certify that all of the stock entitled to vote was represented at said meeting and voted in favor of said amendments.
/s/ Maurice Morton
President
/s/ Murray Williams
Secretary
STATE OF UTAH )
)ss
County of Salt Lake )
|
On the 8th day of May, 1956, personally appeared before me MAURICE MORTON and MURRAY WILLIAMS, the signers of the foregoing certificate of amendments, known to me to be the President and Secretary of Garden and Lawn Equipment company, who duly acknowledged to me that they executed said Certificate of Amendment.
Subscribed and sworn to before me this 8th day of May, 1961.
/s/ Robert Ryberg
My Commission Expires 11-2-62
Notary Public, residing
at Salt Lake City, Utah
|
<Stamped Office of Secretary of State 1972 JAN 18 APR 8 03 #29114>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
G & L EQUIPMENT COMPANY
Pursuant to the Provisions of Section 16-10-54 of the Utah Business Corporation Act, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is: G & L Equipment Company.
SECOND: The following amendments of the Articles of Incorporation were adopted by the shareholders of the corporation on Dec. 15 1971, in the manner prescribed by the Utah Business Corporation Act:
Article Eight of the Articles of Incorporation presently provides as follows:
ARTICLE VIII
This corporation is authorized to issue only one class of shares of stock; the total number of such shares is 22,000, with which total number it shall commence business; and all of such shares are to be without par value.
Article Eight of the Articles of Incorporation is amended to read as follows:
ARTICLE VIII
The total authorized stock of this corporation shall be divided into fifty million (50,000, 000) shares, each having a par value of $. 001, to be issued by the Board of Directors without any pre-emptive rights whatsoever and each share outstanding shall be entitled to one vote without cumulative voting.
THIRD: The number of shares of the corporation outstanding at the time of such adoption was 8,079, and the number of shares entitled to vote thereon was 8,079.
FOURTH: The designation and number of outstanding shares of each class entitled to vote thereon as a class were as follows:
Number of
Class Shares
No par value Common 8,079
|
FIFTH: The number of shares voted for such amendment was 8,079, and the number of shares voted against such amendment was none.
SIXTH: The number of shares of each class entitled to vote thereon as a class voted for and against such amendment, respectively, was:
Class Number of Shares Voted
For Against
------------------- ---------- ------------
No Par value Common 8,079 None
|
SEVENTH: The manner, if not set forth in such amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the amendment shall be effected, is as follows:
The exchange of one share of the old no par value common stock presently issued and outstanding for 618.8884 shares of the new $. 001 par value common stock.
EIGHTH: The manner in which such amendment shall effect a change in the amount of stated capital, and the amount of stated capital as changed by such amendment, are as follows:
The capital goal was previously unstated. Such capital was divided into 22,000 shares of no par value common stock. By virtue of such amendment, the stated capital is now $50,000 divided into an authorized 50,000,000 shares of $.001 par value common stock.
Dated this 15 day of DEC. 1971.
G & L EQUIPMENT COMPANY
By /s/ M.E. Morton
Its President
By /s/ Murray Williams
Its Secretary
STATE OF UTAH )
)ss
County of Salt Lake )
|
I, Jay D. Edmonds, a notary public, do hereby certify Maurice E. Morton, who being by me first duly sworn, declared that he is the President of G & L Equipment Company, that he signed the foregoing document as President of the corporation, and that the statements therein contained are true.
/s/ Jay D. Edmonds
Notary Public
Residing at Salt Lake City,
Utah
My commission expires: 4/28/73
|
<Stamped received Office Of Secretary of State 1972 FEB 24 Apr 7 44 #29114>
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
G & L EQUIPMENT COMPANY
Pursuant to the Provisions of Section 16-10-54 of the Utah Business Corporation Act,the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation:
1. Article V of the Articles of Incorporation lion presently provides as follows:
The general nature of the business of this corporation shall be to buy, and to sell and distribute, both wholesale and retail, all kinds of powered equipment and garden and lawn accessories; to buy, lease, acquire, hold, own, sell, let, or otherwise dispose of such Properly, both real and personal, as is necessary to carry on the above-stated business; to make and enter into contracts of every kind and nature incidental to the aforesaid business with any individual, firm, association, or corporation, private, public, or municipal, and with the government or public authorities of the United States or any state of division thereof, to do any and all of the things hereinabove set forth and such other things as are incidental or conducive to the attainment of the above business objects.
To engage in any other business or activity for profit which is permitted to a corporation by law, provided that the Board of Directors shall by resolution specify such business, businesses, activity or activities, and should special licenses or permits be required, such licenses or permits shall be secured prior to commencement of such business or activities.
Article V of the Articles of Incorporation is hereby amended to provide as follows:
The general nature of the business of this corporation shall be as follows:
1. To buy and to sell, or otherwise acquire or dispose of, both wholesale and retail, motorcycles, snowmobiles and other types of recreational or commercial vehicles and equipment.
2. To buy and to sell, or otherwise acquire or dispose of, both wholesale and retail, such parts, accessories and other items as may be related to recreational and commercial vehicles and equipment.
3. To service and to repair all types of recreational and commercial vehicles and equipment.
4. To buy, sell, acquire or dispose of, and to service or repair such other vehicles or equipment as may be related to the stated business of the corporation.
5. To acquire, by purchase, lease or otherwise, and to sell, convey or otherwise dispose of such property, both real and personal, as may be necessary to carry out the stated business of the corporation.
6. To transact such other business as may be necessary to carry out the business of the corporation.
2. Article VI of the Articles of Incorporation presently provides as follows:
The principal place of business of this corporation shall be at 1626 South State Street, Salt Lake City, Utah, but business, finance, and transfer offices may be established by the Board of Directors, and business may be transacted at any place or places in the United States, and meetings of the Board of Directors may be held for any transaction of any business of the corporation at such places outside of the State of Utah and elsewhere within said state than at its principal place of business as the Board of Directors may by resolution or by by-law provide.
Article VI of the Articles of Incorporation is hereby amended to provide as follows:
The principal place of business of this corporation shall be at 1522 South State Street, Salt Lake City, Utah 84115, but business, finance, and transfer offices may be established by the Board of Directors, and business may be transacted at any place or places in the United States, and meetings of the Board of Directors may be held for the transaction of any business of the corporation at such places outside of the State of Utah and elsewhere within said state than at its principal place of business as the Board of Directors may by resolution or by by-law provide.
3. Article IX of the Articles of Incorporation presently provides as follows:
In case a stockholder desires to sell his share or shares of stock, he must first offer them for sale to the remaining stockholders, it being the intention hereof to give them a preference in the purchase of the same, and any attempted sale in violation of this provision is null and void. A stockholder desiring to sell his stock shall file notice in writing of his intention with the secretary of the corporation, stating the terms of sale, and unless his terms are accepted by any or all of the other stockholders within 30 days thereafter, they shall be deemed to have waived their privilege of purchasing and he shall be at liberty to sell to anyone else.
Article IX of the Articles of Incorporation is hereby amended to provide:
There shall be no pre-emptive rights by existing shareholders to purchase the shares of stock of the corporation, and such shares may be sold by any shareholder lawfully entitled to sell said shares, and without any preference to existing shareholders.
4. A Article X of the Articles of Incorporation presently provides as follows:
This Corporation shall consist of a Board of Directors, and of the following officers: a President, a Vice-President, and a Secretary Treasurer. Said Board of Directors shall consist of five members, each of whom shall be the holder of at least one share of stock of this corporation in his own right as shown by the books of the company.
A director may hold more than one office and may be an officer of the corporation concurrently with his directorship tenure.
All directors of the corporation shall be elected annually by the holders of
the stock of this corporation at the annual meeting hereinafter provided for
and the directors shall choose and elect the officers of this corporation.
Until the first annual meeting of the stockholders of this corporation
hereinafter Provided for and the election and qualification of their
successors, W. A. McCormick shall be President and Director, W. W.
McCormick shall be Vice-President and Director, L. H. Kesler shall be
Secretary -Treasurer and Director, Erma G. McCormick shall be a Director and
Louise M. McCormick shall be a Director.
The term of office of the officers of this corporation shall be one year and until their successor or successors shall be elected and qualified.
Any vacancy caused by death, resignation, or removal shall be filled by the Board of Directors though less than a quorum, and any person or persons so appointed shall hold office until the next annual meeting of the stockholders of this corporation and until the election and qualification of their success or successors.
Any officer or director may resign at any time by filing with the President a
written resignation.
Para. 1, Article X of the Articles of Incorporation is hereby amended to
provide as follows:
This corporation shall consist of a Board of Directors, and of the following officers: a President, a Vice-President, and a Secretary-Treasurer. Said Board of Directors shall consist of three members none of which shall be required to be a shareholder of the corporation.
Dated this 28 day of December 1971.
G & L EQUIPMENT COMPANY
by /s/Maurice E. Morton
Maurice E. Morton,President
by /s/ Murray S. Williams
Murray S. Williams.
Secretary Treasurer
|
CERTIFICATE OF AMENDMENTS
I, Murray S. Williams, hereby certify that I am the duly elected Secretary - Treasurer of G & L Equipment Company, and that the foregoing Amendments to the Articles of Incorporation of G & L Equipment Company were adopted by the shareholders of the corporation on December 28, 1971, in the manner prescribed by law.
STATE OF UTAH )
: ss. /s/ Murray Williams
County of Salt Lake ) MURRAY WILLIAMS
|
I, Jay D. Edmonds, a notary public, do hereby certify that on the 28 day 1971, personally appeared before me Maurice E. Morton and Murray S. Williams, who being first duly sworn, declared that they were the President and Secretary -Treasurer, respectively, of G & L Equipment Company; that they signed the foregoing and that the statements therein contained are true.
/s/ Jay D. Edmonds
Jay D. Edmonds, Notary Public
Residing at Salt Lake City,Utah
My commission expires April 28, 1973
|
#29114
Filed in the office of the Lt. Gov./Sec. Of
State, of the State of Utah on the 10th
day of Aug A.D. 1982
David S. Monson
Lt. Gov/Sec. Of State
Filing Clerk MC $25
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
G & L EQUIPMENT COMPANY
These Articles of Amendment and the Certificate thereon are made and executed pursuant to Section 16-10-54 and 16-10-55, Utah Code Annotated, for the purpose of amending the Articles of Incorporation of G & L Equipment Company, a Utah corporation, as indicated hereunder.
The undersigned Blaine C. Taylor, Ray E. Warren, and Thomas R. Warren being all of the directors of said corporation, do hereby respectively certify as follows:
I .
That a meeting of the Board of Directors of G & L Equipment Company was held on the 22nd day of June, 1982, at Salt Lake City, Utah wherein the Board of Directors voted unanimously to amend the Articles of incorporation of G & L Equipment Company as indicated below.
II.
That a meeting of all the stockholders of G & L Equipment Company was held on the 22nd day of June, 1982 at 2:35 p.m. in Salt Lake City, Utah, pursuant to notice to all the stockholders of G & L Equipment Company.
III.
That there are 8,120,000 shares issued, outstanding and entitled to Vote as of the date of the meeting of stockholders. That there Were 6,817,000 shares present or by proxy at the meeting on June 22, 1982, and at such meeting the following resolution was presented, and upon motion duly made and seconded, the same was adopted with 4,164,000 shares voting in favor of the resolution; 2,593,000 voting against; and 60,000 shares abstaining.
RESOLVED, that Article I of the Articles of Incorporation of G & L Equipment Company, be amended to read as follows:
ARTICLE I. The name of this corporation is
G & L ENERGY, INC.
We further certify that Blaine C. Taylor, Ray E. Warren and Thomas R. Warren are the officers and directors of the corporation and we, therefore, execute these Articles of Amendment to the Articles of Incorporation of said corporation.
IN WITNESS WHEREOF, we have hereunto set our hands this 30 day of July, 1982.
/s/ Blaine C. Taylor Blaine C. Taylor, President and Director /s/ Thomas R. Warren Thomas R. Warren Vice President & Director /s/ Ray E. Warren Ray E. Warren Secretary Treasurer & Director |
STATE OF UTAH )
:ss
County of Salt Lake )
|
On the 30 day of July, 1982, personally appeared before me Blaine C. Taylor, Ray E. Warren and Thomas R. Warren, who, being first duly sworn, acknowledged to me that they are the officers and directors of G & L Energy, Inc., formerly G & L Equipment Company, and that they signed the foregoing document for the purposes stated therein.
/s/ NOTARY PUBLIC Residing at Salt Lake County, Utah My Commission Expires: 8/13/82 |
State of Utah Stamped RECEIVED
Department of Commerce 1993 SEP 15 PM 1:56
Division of Corporations and Commercial Code Division of Corpora.
Hereby certify that the foregoing has been filed State of Utah
and approved on the 15th day of Sept 1993
at the office of this Division and hereby issue
this Certificate thereof
Examiner JS Date 9/15/93
/s/Korla T. Woods Division Director |
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
G & L ENERGY, INC.
The Articles of Incorporation and Amendments thereto, of G & L ENERGY, INC., are hereby amended, pursuant to 16-1 0a-1 006 Utah Code Annotated, as follows:
I
The name of the corporation is: G & L ENERGY, INC.
II.
The capitalization of the corporation shall be amended as follows:
The aggregate number of shares which this corporation shall have to issue is 15,000,000 shares of $0.001 par stock. All stock of the corporation shall be of the same class, common, and shall have the same rights and privileges. All shares issued by the corporation prior to this Amendment, when returned to the company for transfer, shall be issued at a rate of one share for each twenty shares, thus effecting a reverse split of one for twenty.
III
The aforesaid Amendment was adopted by the shareholders of the corporation on July 15, 1992. The total shares outstanding at the time of said vote was 19,980,000 and the number of shares voting in aforesaid Amendment was 12,352,000. <handwritten: unanimous vote /s/ RJN>
G & L ENERGY, INC.
By: /s/ Tom Warren TOM WARREN Secretary |
State of Utah Stamped RECEIVED
Department of Commerce 1993 DEC 2 AM 8:28
Division of Corporations and Commercial Code Division of Corpora.
Hereby certify that the foregoing has been filed State of Utah
and approved on the 2nd day of DEC 93
at the office of this Division and hereby issue
this Certificate thereof
Examiner BS Date 12/2/93
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
G&L ENERGY, INC.
A Special Meeting of Shareholders of G&L ENERGY, INC. the "Company") was held on the 30th day of November, 1993 at the Red Lion Hotel, 255 South West Temple, Salt Lake City, Utah 84101, at 11:00 A.M. Mountain Standard Time pursuant to notice thereof. On the date of the Meeting there were 999,000 common shares issued and outstanding, and there were present or represented by proxy at the Meeting common shares, all of which voted in favor of adopting a resolution authorizing the Company's Board of Directors to amend the Company's Articles of Incorporation as follows:
Article I - NAME is proposed to be amended as follows:
ARTICLE I
NAME
The name of the corporation is DIAMOND LAKE MINERALS, INC.
WHEREFORE, the Corporation has hereunto set its hand this the day of November, 1993.
G&L ENERGY, INC.
/s/ Thomas R. Warren --------------------- Thomas R. Warren, President /s/ Greg Markham ---------------- Greg Markham, Secretary |
State of Utah Stamped RECEIVED
Department of Commerce 1993 DEC 21 PM 4:17
Division of Corporations and Commercial Code Division of Corpora.
Hereby certify that the foregoing has been filed State of Utah
and approved on the 21st day of Dec 1993
at the office of this Division and hereby issue
this Certificate thereof
Examiner BS Date 12/21/93
CERTIFICATE OF AMENDMENT
TO OF THE ARTICLES OF INCORPORATION
DIAMOND LAKE MINERALS, INC.
(fka G&L ENERGY, INC.)
A Special Meeting of Shareholders of G&L Energy, INC. (the "Company") was held on the 30th of November, 1993 at the Red Lion Hotel, 255 South West Temple, Salt Lake City, Utah, 84101, at 11:00 a.m. Mountain Standard Time pursuant to notice thereof. On the date of the Meeting there were 999,000 common shares issued and outstanding, and there were present or represented by proxy at the Meeting 716,500 common shares, all of which voted in favor of adopting a resolution authorizing the Company's Board of Directors to amend the Company's Articles of Incorporation as follows:
Article VIII - STOCK is proposed to be amended as follows:
ARTICLE VIII
STOCK
(a) The Corporation is authorized to issue two classes of shares to be designated respectively "preferred" and "common". The total number of shares which the corporation is authorized to issue is One-Hundred Million (100,000,000) shares. The number of preferred shares authorized is Fifty- Million (50,000,000) shares, and the par value of each such share is $.001. The number of common shares authorized is Fifty-Million (50,000,000) shares, and the par value of each such share is $.001.
(b) The authorized common stock of this corporation may be issued at such time, upon such terms and conditions, and for such consideration as the Board of Directors shall determine.
(c) The preferred shares may be issued in series and from time to time with such designations, preferences, and relative participating, optional, or other rights, qualifications, limitations, or restrictions thereof as shall be stated and expressed in the resolution or resolutions providing for the issue of such class, classes or series adopted by the Board of Directors, pursuant to the authority hereby given as provided by statute. Each class or series may be made subject to redemption as such time and at such price or prices as such resolution or resolutions providing for the issue of such stock shall state and express. The holders of the preferred stock of any class or series shall be entitled to receive dividends at such rates, on such conditions, and at such times, and shall be entitled to such rights upon the dissolution of, or upon any distribution of, the assets of the corporation, and the preferred stock of any class or series may be convertible into or exchangeable for shares of any other class, classes, or series of capital stock of the corporation, at such price or prices, or at such rates of exchange, and with such adjustments, and shall be stated and expressed in the resolution or resolutions of the Board of Directors providing for the issuance thereof.
WHEREFORE, the Corporation has hereunto set its hand this 30th day of November, 1993.
DIAMOND LAKE MINERALS, INC.
/s/ Thomas R. Warren --------------------- Thomas R. Warren, President /s/ Greg Markham ---------------- Greg Markham, Secretary |
BY-LAWS OF
G & L EQUIPMENT COMPANY
The principal office of the corporation in the State of Utah shall be located in the City of Salt Lake, County of Salt Lake. The corporation may have such other offices, either within or without the state of incorporation as the Board of Directors may designate or as the business of the corporation may from time to time require.
2.1 ANNUAL MEETING.
The annual meeting of the stockholders shall be held on the third Tuesday
of June in each year, beginning with the year 1983 at the hour of 2:00 o'clock
p. m. for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the next
succeeding business day.
2.2 SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by the Directors, and shall be called by the President at the request of the holders of not less than fifty-one percent (51%) of all the outstanding shares of the corporation entitled to vote at the meeting.
2.3 PLACE OF MEETING.
The Directors may designate any place, either within or without the state unless otherwise prescribed by statute, as the place of meeting for any annual meeting or for any special meeting called by the Directors. A waiver of notice signed by all stockholders entitled to vote at a meeting may designate any place, either within or without the state, unless otherwise prescribed by statute, as the place for holding such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the corporation.
2.4 NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than fifteen (15) days before the date of the meeting, either personally or by mail, by or at the direction of the President or Secretary, or the officer or persons calling the meeting to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the stockholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid.
2.5 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Directors of the corporation may provide that the stock transfer books shall be closed for a number of days to be designated by the Board of Directors. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for a number of days determined by the Board of Directors immediately preceding such meeting. In lieu of closing the stock transfer books, the Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than twenty (20) days and, in case of a meeting of stockholders, not less than the date of the meeting of stockholders. 'If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof.
2.6 VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least fifteen (15) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of fifteen (15) days prior to such meeting, shall be kept on file at the principal office of the corporation and shall be subject to inspection by any stockholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. The original stock transfer book shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer books or to vote at the meeting of stockholders.
2.7 QUORUM.
At any meeting of stockholders forty percent (40%) of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than said number of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
2.8 PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting.
2.9 VOTING.
Each stockholder entitled to vote in accordance with the terms and provisions of the certificate of incorporation and these by-laws shall be entitled to one (1) vote, in person or by proxy, for each share of stock entitled to vote held by such
stockholders. Upon the demand of any stockholder, the vote for Directors and upon any question before the meeting shall be by ballot. All elections for Directors shall be decided by plurality vote; all other questions shall be decided by majority vote except as otherwise provided by the Certificate of Incorporation or the laws of this state.
2.10 ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
B. New Business.
2.11 INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.
3.1 GENERAL POWERS.
The business and affairs of the corporation shall be managed by its Board of Directors. The Directors shall in all cases act as a board, and they may adopt such rules and regulations for the conduct of their meetings and the management of the corporation, as they may deem proper, not inconsistent with these by-laws and the laws of this State.
3.2 NUMBER, TENURE AND QUALIFICATIONS.
The number of Directors of the corporation shall be not more than nine
(9) nor less than three (3). Each Director shall hold office until the next
annual meeting of stockholders and until his successor shall have been elected
and qualified.
3.3 REGULAR MEETINGS.
A regular meeting of the Directors, shall be held without other notice than this by-law immediately after, and at the same place as the annual meeting of stockholders. The Directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution.
3.4 SPECIAL MEETINGS.
Special meetings of the Directors may be called at the request of the President or any two Directors. The person or persons authorized to call special meetings of the Directors may fix the place for holding any special meeting of the Directors called by them.
3.5 NOTICE.
Notice of any special meeting shall be given at least ten (10) days previously thereto by written notice delivered personally, or by telegram or mailed to each Director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. The attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.
3.6 QUORUM.
At any meeting of the Directors two-thirds (2/3rds) shall constitute a quorum for the transaction of business, but if less than said number is present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice.
3.7 MANNER OF ACTING.
The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Directors.
3.8 NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of Directors and vacancies occurring in the Board
for any reason except the removal of Directors without cause may be filled by a vote of a majority of the Directors then in office, although less than a quorum exists. Vacancies occurring by reason of the removal of Directors without cause shall be filled by vote of the stockholders. A Director elected to fill a vacancy caused by resignation, death or removal shall be elected to hold office for the unexpired term of his predecessor.
3.9 REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause by vote of the stockholders or by action of the Board. Directors may be removed without cause only by vote of the stockholders.
3.10 RESIGNATION.
A Director may resign at any time by giving written notice to the Board, the President or the Secretary of the corporation. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Board or such officer, and the acceptance of the resignation shall not be necessary to make it effective.
3.11 COMPENSATION.
No compensation shall be paid to Directors, as such, for their services, but by resolution of the Board a fixed sum and expenses for actual attendance at each regular or special meeting of the Board may be authorized. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity and receiving compensation therefor.
3.12 PRESUMPTION OF ASSENT.
A Director of the corporation who is present at a meeting of the Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favor of such action.
3.13 EXECUTIVE AND OTHER COMMITTIES.
The Board, by resolution, may designate from among its members an executive committee and other committees, each consist
ing of three (3) or more Directors. Each such committee shall., serve at the pleasure of the Board.
4.1 NUMBER.
The officers of the corporation shall be a President, a Vice-President, a Secretary and a Treasurer, each of whom shall be elected by the Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Directors.
4.2 ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the Directors shall be elected annually at the first meeting of the Directors held after each annual meeting of the stockholders. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided.
4.3 REMOVAL.
Any officer or agent elected or appointed by the Directors may be removed by the Directors whenever in their judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
4.4 VACANCIES.
A vacancy in any office because of death, resignation, removal., disqualification or otherwise, may be filled by the Directors for the unexpired portion of the term.
4.5 PRESIDENT.
The President shall be the principal executive officer of the corporation, and subject to the control of the Directors, shall in general supervise and control all of the business and affairs of the corporation. He shall, when present, preside at all meetings of the stockholders and of the Directors. He may sign, with the Secretary or any other proper officer of the
corporation thereunto authorized by the Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the Directors have authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Directors or by these by-laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of President and such other duties as may be prescribed by the Directors from time to time.
4.6 VICE-PRESIDENT.
In the absence of the President or in event of his death, inability or refusal to act, the Vice-President shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice-President shall perform such other duties as from time to time may be assigned to him by the President or by the Directors.
4.7 SECRETARY.
The Secretary shall keep the minutes of the stockholders' and of the Directors' meetings in one or more books provided for that purpose, see that all notices are duly given in accordance with the provisions of these by-laws or as required, be custodian of the corporate records and of the seal of the corporation and keep a register of the address of each stockholder which shall be furnished to the Secretary, have general charge of the stock transfer books of the corporation and in general perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Directors.
4.8 TREASURER.
If required by the Directors, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Directors shall determine. He shall have charge and custody of and be responsible for all funds and securities of the corporation; receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with these by-laws and in
general perform all of the duties incident to the office of Treasurer and such other duties as from time to time as may be., assigned to him by the President or by the Directors.
4.9 SALARIES.
The salaries of the officers shall be fixed from time to time by the Directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the corporation.
5. 1 CONTRACTS.
The Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances.
5.2 LOANS.
No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Directors. Such authority may be general or confined to specific instances.
5.3 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the directors.
5.4 DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the Directors may elect.
6.1 CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form as shall be determined by the Directors.
Such certificates shall be signed by the President and by the Secretary or by such other officers authorized by law and by the Directors. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the stockholders, the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the Directors may prescribe.
6.2 TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, and cancel the old certificate; every such transfer shall be entered on the transfer book of the corporation which shall be kept at its principal office.
(b) The corporation shall be entitled to treat the holder of record of any share as the holder in fact thereof, and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of this State.
The fiscal year of the corporation shall begin on the 1st day of January in each year.
The Directors may from time to time declare, and the corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law.
The Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation, year of incorporation and the words, "Corporate Seal".
Unless otherwise provided by law, whenever any notice is required to be given to any stockholder or Director of the corporation under the provisions of these by-laws or under the provisions of the Articles of Incorporation, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein shall be deemed equivalent to the giving of such notice.
These by-laws may be altered, amended or repealed and new by-laws may be adopted by a vote of the stockholders representing a majority of all the shares issued and outstanding, at any annual stockholders' meeting or at any special stockholders' meeting when the proposed amendment has been set out in the notice of such meeting.
SIGNATURE
The undersigned Directors of the corporation have reviewed these by-laws, voted upon their acceptance, and by entering their signatures hereinbelow accept these by-laws as the by-laws of their corporation.
/s/ signature illegible /s/ R.E. Warren /s/ signature illegible /s/ Murray Williams |
Exhibit 21
Subsidiaries of Diamond Lake Minerals Inc.
Name Jurisdiction of Incorporation -------- ------------------------------- Graphite Mountain, Inc. Province of Ontario, Canada Environmental Carbonates, Inc. Province of Ontario, Canada |
| ARTICLE 5 |
| PERIOD TYPE | 9 MOS | YEAR |
| FISCAL YEAR END | DEC 31 1999 | DEC 31 1998 |
| PERIOD END | SEP 30 1999 | DEC 31 1998 |
| CASH | 79,112 | 1,380 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 0 | 0 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 0 | 0 |
| CURRENT ASSETS | 79,112 | 1,380 |
| PP&E | 46,894 | 46,894 |
| DEPRECIATION | (21,296) | (18,129) |
| TOTAL ASSETS | 104,710 | 30,145 |
| CURRENT LIABILITIES | 85,353 | 211,612 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 0 | 0 |
| COMMON | 37,130 | 33,246 |
| OTHER SE | (17,773) | (214,713) |
| TOTAL LIABILITY AND EQUITY | 104,710 | 30,145 |
| SALES | 0 | 0 |
| TOTAL REVENUES | 0 | 0 |
| CGS | 0 | 0 |
| TOTAL COSTS | 178,982 | 247,248 |
| OTHER EXPENSES | 0 | (1,335,691) |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 0 | 0 |
| INCOME PRETAX | (178,982) | (1,582,939) |
| INCOME TAX | 0 | 0 |
| INCOME CONTINUING | (178,982) | (1,582,939) |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (179,982) | (1,582,939) |
| EPS BASIC | (0.01) | (0.05) |
| EPS DILUTED | (0.01) | (0.05) |
BEDFORD CLAIMS
SO 1037688 SW/4 LOT 17, CONC. VI April 26, 1988 SO 1037689 NE/4 LOT 20, CONC. VIII April 26, 1988 SO 1037690 SW/4 LOT 18, CONC. VI April 26, 1988 SO 1037691 SE/4 LOT 18, CONC. VI April 26, 1988 SO 1037692 NE/4 LOT 17, CONC. VI April 26, 1988 SO 1037693 SE/4 LOT 17, CONC. VI April 26, 1988 S0 1037694 SW/4 LOT 17, CONC. VII April 26, 1988 S0 1037695 NW/4 LOT 17, CONC. VII April 26, 1988 SO 1037696 SW/4 LOT 18, CONC. VII April 26, 1988 SO 1037697 NW/4 LOT 18, CONC. VII April 26, 1988 SO 1037698 NE/4 LOT 18, CONC. VII April 26, 1988 SO 1037699 SE/4 LOT 18, CONC. VII April 26, 1988 SO 1037700 SW/4 LOT 18, CONC. VIII April 26, 1988 S0 1037701 NW/4 LOT 18, CONC. VIII April 26, 1988 S0 1037702 SE/4 LOT 19, CONC. VI April 26, 1988 SO 1037703 NE/4 LOT 19, CONC. VI April 26, 1988 SO 1037704 NW/4 LOT 19, CONC. VII April 26, 1988 S0 1037705 SW/4 LOT 19, CONC. VII April 26, 1988 S0 1037706 SE/4 LOT 19, CONC. VII April 26, 1988 S0 1037707 NE/4 LOT 19, CONC. VII April 26, 1988 |
SO 1037708 W/2 OF E/2 LOT 20, CONC. VII April 26, 1988 SO 1037709 E/2 OF W/2 LOT 20, CONC. VII April 26, 1988 SO 1037710 W/2 OF W/2 LOT 20, CONC. VII April 26, 1988
SO 1037711 NW/4 LOT 20, CONC. VIII April 26, 1988 S0 1037712 SW/4 LOT 20, CONC. VIII April 26, 1988 SO 1037717 NE14 LOT 16, CONC. V April 26, 1988 SO 1037718 SE/4 LOT 16, CONC. V April 26, 1988 S0 1037719 NE/4 LOT 15, CONC. V April 26, 1988 SO 1037720 SE/4 LOT 15, CONC. V April 26, 1988 SO 1037721 NE/4 LOT 14, CONC. V April 26, 1988 SO 1037722 SE/4 LOT 14, CONC. V April 26, 1988 SO 1037723 SW/4 LOT 14, CONC. V April 26, 1988 SO 1037724 NW/4 LOT 14, CONC. V April 26, 1988 SO 1037725 SW/4 LOT 15, CONC. V April 26, 1988 SO 1037726 NW/4 LOT 15, CONC. V April 26, 1988 SO 1037727 SW/4 LOT 16, CONC. V April 26, 1988 SO 1037728 NW/4 LOT 16, CONC. V April 26, 1988 S0 1037729 NW/4 LOT 15, CONC. VI April 26, 1988 SO 1037730 SW/4 LOT 15, CONC. VI April 26, 1988 SO 1037731 NW/4 LOT 14, CONC. VI April 26, 1988 SO 1037732 SW/4 LOT 14, CONC. VI April 26, 1988 |
Exhibit 99
PROPERTY NORTH BURGESS TOWNSHIP
"TIMMINS CLAIMS"
N/W 1/4 Lot 25 Conc. IV SO 748722 N/E 1/4 Lot 23 Conc. IV claim # SO 748721 N/E 1/4 Lot 25 Conc. V claim # EO 840568 S/E 1/4 Lot 23 Conc. V claim # SO 748514 N/E 1/4 Lot 23 Conc. V SO 748517 N/W 11/4 Lot 23 Conc. V S0 748518 S/W 1/4 Lot 22 Conc. VI SO 748715 S/E 1/4 Lot 22 Conc. VI S0 748716 N/W 1/4 Lot 26 Conc. V claim # SO 840571 N/E 1/4 Lot 26 Conc. V claim # EO 840570 N/W 1/4 Lot 24 Conc. IV SO 748720 S/E 1/4 Lot 25 Conc. V claim # SO 840574 S/W 1/4 Lot 26 Conc. V SO 748510 S/E 1/4 Lot 26 Conc. V SO 748511 S/W 1/4 Lot 25 Conc. V SO 748512 N 1/4 of South Half Lot 21 Conc. V - claim # SO 748519 S/W 1/4 Lot 24 Conc. V1 - claim # SO 749711 S/E 1/4 Lot 24 Conc. VI SO 748712 S/E 1/4 Lot 21 Conc. V1 SO 748724 S/W 1/4 Lot 20 Conc. VI SO 748725 S/E 1/4 Lot 20 Conc. VI SO 748726 S/W 1/4 Lot 21 Conc. VI - claim # SO 748723 S/W 1/4 Lot 19 Conc. VI - claim # SO 748727 S/E 1/4 Lot 19 Conc. VI SO 748728 N/W 1/4 Lot 25 Conc. V EO 840569 S 1/4 of North half Lot 21 Conc. V S0 748718 N 1/4 of North half Lot 12 Conc. V SO 748717 S/W 1/4 Lot 25 Conc. VI SO 748709 S/E 1/4 Lot 25 Conc. VI S0 748710 S/W 1/4 Lot 23 Conc. VI S0 748713 S/E 1/4 Lot 23 Conc. VI SO 748714 N/E 1/4 Lot 24 Conc. V EO 840566 N/W 1/4 Lot 24 Conc. V EO 840567 S/E 1/4 Lot 24 Conc. V EO 840572 S/W 1/4 Lot 24 Conc. V EO 840573 S/W 1/4 Lot 23 Conc. V SO 748513 N/E 1/4 Lot 24 Conc. IV SO 748719 S/W 1/4 Lot 23 Conc. V SO 748515 S/E 1/4 Lot 18 Conc. VI SO 748516 1 |