As filed with the Securities and Exchange Commission on October 31, 2001
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
[_] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended April 30, 2001
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-29142
API ELECTRONICS GROUP INC.
(formerly InvestorLinks.com Inc.)
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(Exact name of Registrant as specified in its charter)
Province of Ontario, Canada
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(Jurisdiction of incorporation or organization)
505 University Ave., Suite 1400, Toronto, Ontario M5G 1X3
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares, no par value
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of
the close of the period covered by the annual report:
13,179,020 Common Shares as of April 30, 2001
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_] Inapplicable [_]
Indicate by check mark which financial statement item the registrant has elected
to follow:
Item 17 [x] Item 18 [_]
2
PART I
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ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable
ITEM 3. KEY INFORMATION
A. SELECTED FINANCIAL DATA
General
The selected consolidated statement of operations data set forth below for the
one year period ended April 30, 2001, and the selected consolidated balance
sheet data set forth below at April 30, 2001 are derived from the consolidated
financial statements of the Company included in Part III, Item 17 of this Annual
Report, which consolidated financial statements have been audited by BDO
Dunwoody LLP.
Note 1(b) to the consolidated financial statements included in Part III, Item 17
of this Annual Report describes the Company's acquisition of IL Canada, Inc. and
the accounting for the business acquisition. Since IL Canada, Inc. is a newly
incorporated company and is deemed to be the acquirer for Canadian generally
accepted accounting purposes ("Cdn. GAAP") no comparative figures have been
presented in the Company's financial statements. The standard of the U.S.
Securities and Exchange Commission for Item 3A requires selected historical
financial data "for the five most recent financial years (or such shorter period
that the [C]ompany has been in operation)...." Because of the reverse take-over
transaction described above, the Company has only been in operation since May
10, 2000.
For purposes of United States generally accepted accounting principles ("US
GAAP"), since IL Data Canada, Inc. had no operations, Investorlinks.com LLC, the
company that owned and operated the Investment Web site www.InvestorLinks.com
prior to the June 6, 2000 acquisition transactions, would be considered the
predecessor and audited information for the previous three years would normally
be disclosed. However, the operations of Investorlinks.com LLC have been closed
and the previous years' information would not be relevant or informative.
Because of the foregoing, selected financial data for prior years is not
included in this Annual Report.
See "Exchange Rate Information" in this Item 3A below for historical exchange
rate information. The selected financial data should be read in conjunction
with the consolidated financial statements of the Company and the notes thereto
included in Part III, Item 17 of this Annual Report, and "Item 5 -- Operating
and Financial Review and Prospects" herein.
The information set forth in this Annual Report is current as of October 26,
2001, unless an earlier or later date is indicated, and references to the "date
of this Annual Report" shall be deemed to refer to such date.
3
The Company's accounts are maintained in Canadian dollars. In this Annual
Report, all dollar amounts are expressed in Canadian dollars except where
otherwise indicated.
Selected Consolidated Financial Data
API Electronics Group Inc.
(formerly known as InvestorLinks.com Inc.)
Prepared Pursuant to
United States Generally Accepted Accounting Principles
(In thousands of Cdn. $, except per share data)
Fiscal Year Ended April 30, 2001/(1)/
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2001
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Income Statement Data:
Revenue.............................. $ 133
Loss for operations.................. ($2,293)
Net loss............................. ($2,346)
Net loss per common share............ ($0.41)/(2)/
Balance Sheet Data:
Current assets....................... $ 2,291
Investments.......................... 146
Capital assets....................... 130
Total assets......................... 2,567
Current liabilities.................. 489
Shareholders' equity................. $ 2,078
/(1)/ For purposes of United States generally accepted accounting principles
("US GAAP"), since IL Data Canada, Inc. had no operations, Investorlinks.com
LLC, the company that owned and operated the Investment Web site
www.InvestorLinks.com prior to the June 6, 2000 acquisition transactions, would
be considered the predecessor and audited information for the previous three
years would normally be disclosed. However, the operations of Investorlinks.com
LLC have been closed and the previous years' information would not be relevant
or informative. Because of the foregoing, selected financial data for prior
years is not included in this Annual Report.
/(2)/ Net loss per common share has been restated to reflect the consolidation
of Common Shares of the Company on the basis of one for three.
4
Selected Consolidated Financial Data
API Electronics Group Inc.
(formerly known as InvestorLinks.com Inc.)
Prepared Pursuant to
Canadian Generally Accepted Accounting Principles
-------------------------------------------------
(In thousands of Cdn. $, except per share data)
Fiscal Year Ended April 30, 2001/(1)/
--------------------------------------------
2001
------
Income Statement Data:
Revenue................................. $ 133
Loss for operations..................... ($2,484)
Net loss................................ ($2,538)
Net loss per common share............... ($0.44)/(2)/
Balance Sheet Data:
Current assets.......................... $ 2,291
Investments............................. 144
Capital assets.......................... 130
Total assets............................ 2,565
Current liabilities..................... 489
Shareholders' equity.................... $ 2,076
/(1)/ Note 1(b) to the consolidated financial statements included in Part III,
Item 17 of this Annual Report describes the Company's acquisition of IL Data
Canada, Inc. and the accounting for the business acquisition. Since IL Data
Canada, Inc. is a newly incorporated company and is deemed to be the acquirer
for Cdn. GAAP purposes; no comparative figures have been presented in the
Company's financial statements.
/(2)/ Net loss per common share has been restated to reflect the consolidation
of Common Shares of the Company on the basis of one for three.
Reconciliation to United States Generally Accepted Accounting Principles
The consolidated financial statements of the Company have been prepared in
accordance with Cdn. GAAP, which differ materially in certain respects from US
GAAP. For a description of these differences see note 10 to the consolidated
financial statements of the Company for its fiscal year ended April 30, 2001
included in Item 17 of this Annual Report.
Dividend Policy
The Company does not intend to pay dividends in cash or in kind in the future.
The Company expects to retain its earnings to finance the further growth of the
Company. The directors of the Company will determine if and when dividends
should be declared and paid in the future based upon the earnings and financial
conditions of the Company at the relevant time and such other factors as the
directors may deem relevant. All of the Common Shares of the Company are
entitled to an equal share in any dividends
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declared and paid.
EXCHANGE RATE INFORMATION
The rate of exchange as of October 25, 2001 for the conversion of Canadian
dollars ("Cdn. $") into United States dollars ("U.S. $") was U.S. $0.6357. The
following table sets forth the exchange rates for the conversion of one dollar
Canadian into one dollar United States at the end of the following fiscal
periods, the high and low rates of exchange for such periods, and the average
exchange rates (based upon the average of the exchange rates on the last day of
each month during the periods). The rates of exchange set forth herein are
shown as, or are derived from, the reciprocals of the noon buying rates in New
York City for cable transfers payable in Canadian dollars, as certified for
customs purposes by the Federal Reserve Bank of New York. The sources of this
data are the Federal Reserve Statistical Release and exchange rate information
published by Oanda Corporation, a global leader in currency conversion.
Fiscal Year Ended April 30
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
Period End............. .65 .67 .69 .70 .72 .73
Low.................... .63 .66 .63 .68 .71 .72
High................... .68 .70 .70 .73 .75 .75
Average*............... .66 .68 .66 .71 .73 .73
Sept. 2001 Aug. 2001 July 2001 June 2001 May 2001 April 2001
---------- --------- --------- --------- -------- ----------
Low .63 .64 .65 .64 .64 .63
High .65 .66 .66 .66 .65 .65
*Calculated by using the average of the exchange rates on the last day of each
month during the period.
The rate of exchange as of October 25, 2001 for the conversion of United States
dollars into Canadian dollars was 1.574.
B. CAPITALIZATION AND INDEBTEDNESS
Not Applicable
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not Applicable
D. RISK FACTORS
Uncertainties and Risk Factors
The Company is subject to a number of significant uncertainties and risks
including, but not limited to, those described below and those described
elsewhere in this Annual Report, which may ultimately affect the Company in a
manner and to a degree that cannot be foreseen at this time. On August 31,
2001, the Company completed an acquisition by which the primary business of the
Company became the manufacture
6
and supply of semiconductors and microelectronic circuits for military,
aerospace, and commercial applications through its newly-acquired, wholly-owned
subsidiary API Electronics, Inc. ("API"). On June 6, 2000, the Company completed
an acquisition by which the primary business of the Company became and remained,
for the period beginning June 6, 2000 and ending August 31, 2001, the operation
of the Internet investment site www.InvestorLinks.com through its wholly-owned
subsidiary IL Data Canada, Inc. ("IL"). Prior to June 6, 2000, the Company had
been engaged in developing and exploiting mineral properties. Because of the
significant change in the Company's business resulting from the August 31, 2001
acquisition of API, the list of risk factors below is separated into two primary
groups: risks inherent in the Company's semiconductor and microelectronic
circuit business (now the Company's primary business), and those inherent in the
Company's Internet-related business (which, as of the date of this Annual
Report, constitutes only a very minor part of the Company's business). Because,
as of the date of this Annual Report, other than holding a minority equity
interest in Stroud Resources Ltd. as a passive investment, the Company is no
longer involved in the business of exploiting mineral properties, risks related
to the exploitation of mineral properties are not described in this Item 3D.
General Risks and Risks Relating to an Investment in the Securities of the
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Company
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Stock Market Price and Volume Volatility
The market for the common stock of the Company may be highly volatile for
reasons both related to the performance of the Company or events pertaining to
the industry, as well as factors unrelated to the Company or its industry.
Shares of the Company's Common Stock can be expected to be subject to volatility
in both price and volume arising from market expectations, announcements and
press releases regarding the Company's business, and changes in estimates and
evaluations by securities analysts or other events or factors. In recent years,
the securities markets in the United States and Canada have experienced a high
level of price and volume volatility, and the market price of securities of many
companies, particularly small-capitalization companies such as the Company, have
experienced wide fluctuations which have not necessarily been related to the
operations, performances, underlying asset values, or prospects of such
companies. For these reasons, the shares of the Company's Common Stock can also
be expected to be subject to volatility resulting from purely market forces over
which the Company will have no control. Further, despite the existence of a
market for trading the Company's Common Stock in the United States and Canada,
stockholders of the Company may be unable to sell significant quantities of
Common Stock in the public trading markets without a significant reduction in
the price of the stock.
Dilution Through Employee, Director and Consultant Options and Warrants
Because the success of the Company is highly dependent upon its employees,
directors and consultants, the Company may in the future grant to some or all of
its key employees, directors and consultants options or warrants to purchase
shares of its Common Stock as non-cash incentives. Subject to certain
limitations, those options may be granted at exercise prices below those for the
Common Stock prevailing in the public trading market at the time, or may be
granted at exercise prices equal to market prices at times when the public
market is depressed. The Company's Common Shares traded on the Canadian Venture
Exchange until August 8, 2001. The rules of the Canadian Venture Exchange
prohibit the grant of options at exercise prices below those for the Common
Stock prevailing in the public trading market at the time of grant. However,
these regulations will no longer prohibit the Company from making such grants
because the Company has requested to be voluntarily delisted from the Canadian
Venture Capital Exchange. To the extent that significant numbers of such
options may be granted and exercised, the interests of the other stockholders of
the Company may be diluted. As of the date of this Annual Report, the Company
has granted options to purchase 510,000 Common Shares to employees, directors,
and consultants, and has issued warrants to purchase 6,976,667 Common Shares.
7
Dividends
The Company intends to invest all available funds to finance the growth of the
Company's business and therefore investors cannot expect to receive a dividend
on the Common Stock of the Company in the foreseeable future. Even were the
Company to determine a dividend could be declared, the Company could be
precluded from paying dividends by restrictive provisions of loans, leases or
other financing documents or by legal prohibitions under applicable corporate
law.
Directors and Assets Outside Canada
Since certain of the Company's past directors and one of its current directors
are domiciled outside of Canada, it may not be possible to effect service of
process upon such directors, and since all or a substantial portion of the
assets of such directors are located outside Canada, there may be difficulties
in enforcing against such directors judgments obtained in Canadian courts.
Similarly, because certain of the Company's assets are located outside Canada,
there may be difficulties in enforcing against the Company judgments obtained in
Canadian courts.
Certain Forward-looking Statements
This Annual Report (including the documents incorporated or deemed to be
incorporated by reference herein) contains certain forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995) and information relating to the Company that are based on the beliefs of
the management of the Company as well as assumptions made by and information
currently available to the management of the Company. When used in this Annual
Report, the words "anticipate," "believe," "estimate," "expect," "intend,"
"plan" and similar expressions, as they relate to the Company or the management
of the Company, identify forward-looking statements. Such statements reflect
the current views of the Company with respect to future events, the outcome of
which is subject to certain risks, including among others general economic and
market conditions, the state of the international, federal, state and local
regulatory environment, lack of demand for the Company's services, and other
risks described in this Item 3D of this Annual Report and elsewhere. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially from
those described herein as anticipated, believed, estimated, expected, intended
or planned.
Future Capital Needs
The Company may require additional funds for future capital expenditures.
Adequate funds for these purposes, whether from additional financings,
collaborative arrangements with other companies, or other sources, may not be
available when needed or on favorable terms.
Conflicts of Interest
Certain of the directors and officers of the Company are also directors and/or
officers and/or shareholders of other companies. Such associations may give
rise to conflicts of interest from time to time. The directors of the Company
are required by law to act honestly and in good faith with a view to the best
interests of the Company and to disclose any interest, which they may have in
any project or opportunity of the Company. If a conflict of interest arises at
a meeting of the board of directors, any director in a conflict must disclose
his interest and abstain from voting on such matter. In determining whether or
not the Company will participate in any project or opportunity, the directors
will primarily consider the degree of risk to which the Company may be exposed
and its financial position at the time.
8
Risks Related to Potential Acquisitions
The Company may in the future pursue strategic acquisitions of businesses and
technologies. Acquisitions may entail numerous risks, including:
. difficulties in assessing values for acquired businesses and
technologies;
. difficulties in the assimilation of acquired operations and products;
. diversion of management's attention from other business concerns;
. assumption of unknown material liabilities of acquired companies;
. amortization of acquired intangible assets, which could reduce future
report earnings; and
. potential loss of customers or key employees of acquired companies.
The Company may not be able to integrate successfully any operations, personnel,
services or products that it acquires in the future.
Control by Principal Stockholders, Officers and Directors Could Adversely Affect
the Company's Stockholders
The Company's officers, directors and greater-than-five-percent stockholders
(and their affiliates), acting together, have the ability to control
substantially all matters submitted to the Company's stockholders for approval
(including the election and removal of directors and any merger, consolidation
or sale of all or substantially all of the Company's assets) and to control the
Company's management and affairs. Accordingly, this concentration of ownership
may have the effect of delaying, deferring or preventing a change in control of
the Company, impeding a merger, consolidation, takeover or other business
combination involving the Company or discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of the Company,
which in turn could materially adversely affect the market price of the
Company's stock.
Risks Related to the Company's Primary Business, the Operation of API
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Electronics, Inc. ("API")
-------------------------
Downturns in the Highly Cyclical Semiconductor Industry Would Adversely Affect
API's Operating Results and the Value of API's Business
The semiconductor industry is highly cyclical, and the value of API's business
may decline during the "down" portion of these cycles. The markets for API's
products depend on continued demand in the aerospace, military defense systems,
and commercial end-markets, and these end-markets may experience changes in
demand that could adversely affect our operating results and financial
condition.
The Semiconductor Business is Highly Competitive and Increased Competition Could
Reduce the Value of an Investment in the Company
The semiconductor industry, including the areas in which API does business, is
highly competitive. API expects intensified competition from existing
competitors and new entrants. Competition is based on price, product
performance, product availability, quality, reliability and customer service.
Even in strong markets, pricing pressures may emerge. For instance, competitors
may attempt to gain a greater market share by lowering prices. The market for
commercial products is characterized by declining selling prices. API
anticipates that its average selling prices will continue to decrease in future
periods, although the timing and amount of these decreases cannot be predicted
with any certainty. API competes in
9
various markets with companies of various sizes, many of which are larger and
have greater financial and other resources than API has, and thus may be better
able to pursue acquisition candidates and to withstand adverse economic or
market conditions. In addition, companies not currently in direct competition
with API may introduce competing products in the future. API has numerous
competitors. Some of API's current major competitors include Microsemi
Corporation (NASDAQ National Market Symbol "MSCC"), Semtech Corp. (NASDAQ:
"SMTC"), International Rectifier Corp. (NYSE: "IRF"), Knox Semiconductor,
National Hybrid, Aeroflex Incorporated, and Alpha Industries. API may not be
able to compete successfully in the future or competitive pressures may harm
API's financial condition or operating results.
New Technologies Could Result in the Development of Competing Products and a
Decrease in Demand for API's Products
API's failure to develop new technologies or to react to changes in existing
technologies could materially delay its development of new products (which are
typically adaptations of existing products formerly manufactured by others),
which could result in decreased revenues and/or a loss of API's market share to
competitors. Rapidly changing technologies and industry standards, along with
frequent new product introductions, characterize much of the semiconductor
industry. API's financial performance depends on its ability to design,
develop, manufacture, assemble, test, market and support new products (which,
again, are typically adaptations of existing products formerly manufactured by
others), and enhancements on a timely and cost-effective basis. A fundamental
shift in technologies in API's product markets could have a material adverse
effect on its competitive position within the industry.
Growth-Related Risks
API may be subject to growth-related risks, including capacity constraints and
pressure on its internal systems and controls. The ability of API to manage its
growth effectively will require it to continue to implement and improve its
operational and financial systems and to expand, train and manage its employee
base. The inability of API to manage this growth could have a material adverse
impact on its business, operations and prospects.
Risks Related to Complexity of Manufacturing Processes
API's manufacturing processes are highly complex, require advanced and costly
equipment and are continuously being modified in an effort to improve yields and
product performance. Impurities or other difficulties in the manufacturing
process can lower yields. API's operations could be materially adversely
affected if production at its facility were interrupted for any reason. API may
experience manufacturing difficulties in the future.
API May Not be Able to Develop New Products to Satisfy Changes in Demand
API cannot assure investors that it will successfully identify new product
opportunities and develop and bring products to market in a timely and cost-
effective manner, or that products or technologies developed by others will not
render API's products or technologies obsolete or noncompetitive. In addition,
to remain competitive API must continue to reduce package sizes, improve
manufacturing yields and expand sales. API may not be able to accomplish these
goals.
Failure to Protect API's Proprietary Technologies or Maintain the Right to Use
Certain Technologies May Negatively Affect API's Ability to Compete
10
API relies heavily on its proprietary technologies, which consist primarily of
drawings, specifications, and processes purchased from others. API's future
success and competitive position may depend in part upon its ability to obtain
or maintain protection of certain proprietary technologies used in principal
products. API generally does not have, nor does it generally intend to apply
for, patent protection on any aspect of its technology or its business processes
or methods. API's reliance upon protection of some of its technology as "trade
secrets" will not necessarily protect API from the use by other persons of its
technology, or their use of technology that is similar or superior to that which
is embodied in API's trade secrets. Others may be able independently to
duplicate or exceed API's technology in whole or in part. API cannot assure
investors that it will be able to maintain the confidentiality of its
technology, dissemination of which could have a material adverse effect on its
business. In addition, litigation may be necessary to determine the scope and
validity of API's proprietary rights. Obtaining or protecting API's proprietary
rights may require API to defend claims of intellectual property infringement by
its competitors. While API is not currently engaged as a defendant in
intellectual property litigation that it believes will have a material adverse
effect on its business, API could become subject to lawsuits in which it is
alleged that API has infringed upon the intellectual property rights of others.
If any such infringements exist, arise or are claimed in the future, API may be
exposed to substantial liability for damages and may need to obtain licenses
from patent owners, discontinue or change its processes or products or expend
significant resources to develop or acquire non-infringing technologies. API
cannot assure investors that it would be successful in such efforts or that such
licenses would be available under reasonable terms. API's failure to develop or
acquire non-infringing technologies or to obtain licenses on acceptable terms or
the occurrence of related litigation itself could have a material adverse effect
on API's operating results and financial condition.
API Must Commit Resources to Product Production Prior to Receipt of Purchase
Commitments and Could Lose Some or All of the Associated Investment
API sells products primarily pursuant to purchase orders for current delivery,
rather than pursuant to long-term supply contracts. Many of these purchase
orders may be revised or canceled without penalty. As a result, API must commit
resources to the production of products without any advance purchase commitments
from customers. API's inability to sell products after it has devoted
significant resources to them could have a material adverse effect on API's
business, financial condition and results of operations.
Variability of API's Manufacturing Yields May Affect API's Gross Margins
API's manufacturing yields vary significantly among products, depending on the
complexity of a particular integrated circuit's design and API's experience in
manufacturing that type of integrated circuit. In the past, API has experienced
difficulties in achieving planned yields, which have adversely affected API's
gross margins.
The fabrication of integrated circuits is a highly complex and precise process.
Problems in the fabrication process can cause a substantial percentage of wafers
to be rejected or numerous integrated circuits on each wafer to be
nonfunctional, thereby reducing yields. These difficulties include:
. defects in masks, which are used to transfer circuit patterns onto API's
wafers;
. impurities in the materials used;
. contamination of the manufacturing environment; and
. equipment failure.
11
Because a large portion of API's costs of manufacturing are relatively fixed, it
is critical for API to improve the number of shippable integrated circuits per
wafer and increase the production volume of wafers in order to maintain and
improve API's results of operations. Yield decreases can result in substantially
higher unit costs, which could materially and adversely affect API's operating
results and have done so in the past. Moreover, API cannot assure investors that
it will be able to continue to improve yields in the future or that it will not
suffer periodic yield problems, particularly during the early production of new
products or introduction of new process technologies. In either case, API's
results of operations could be materially and adversely affected.
Risks Related to Supply of Materials and Services
API purchases most of its raw materials, including silicon wafers, on a purchase
order basis from a number of vendors. If any subcontractors or vendors are
unable to provide these materials in the future, the relationships with API's
customers could be seriously affected and its revenues, financial condition and
cash flows could be severely damaged. Although API seeks to reduce its
dependence on sole and limited source suppliers both for services and for
materials, disruption or financial, operational, production or quality assurance
difficulties at any of these sources could occur and cause API to have severe
delivery problems.
API's Inventories May Become Obsolete
The life cycles of some of API's products depend heavily upon the life cycles of
the end products into which these products are designed. Products with short
life cycles require API to manage closely its production and inventory levels.
Inventory may also become obsolete because of adverse changes in end-market
demand. API may be adversely affected in the future by obsolete or excess
inventories which may result from unanticipated changes in the estimated total
demand for API's products or the estimated life cycles of the end products into
which API's products are designed.
API's International Operations and Sales Expose API to Material Risks
API expects revenues from foreign markets to continue to represent a significant
portion of total revenues. API maintains contracts with entities in the United
States, Canada, Israel and certain other countries that are members of the North
Atlantic Treaty Organization. There are risks inherent in doing business
internationally, including:
. changes in, or impositions of, legislative or regulatory requirements,
including tax laws in the countries in which API sells its products;
. trade restrictions;
. transportation delays;
. work stoppages;
. economic and political instability;
. changes in import/export regulations, tariffs and freight rates;
. difficulties in collecting receivables and enforcing contracts
generally; and
. currency exchange rate fluctuations.
In addition, the laws of certain foreign countries may not protect API's
products or intellectual property rights to the same extent as do Canadian and
U.S. laws. Therefore, the risk of piracy of API's technology and products may
be greater in these foreign countries. Although API has not experienced any
material adverse effect on its operating results as a result of these and other
factors, API cannot assure investors
12
that such factors will not have a material adverse effect on API's financial
condition and operating results in the future.
Delays in Production, Implementing New Production Techniques or Resolving
Problems Associated with Technical Equipment Malfunctions Could Adversely Affect
API's Manufacturing Efficiencies
API's manufacturing efficiency will be an important factor in its future
profitability, and API cannot assure investors that it will be able to maintain
or increase its manufacturing efficiency. API's manufacturing processes are
highly complex, require advanced and costly equipment, and are continually being
modified in an effort to improve yields and product performance. API may
experience manufacturing problems in achieving acceptable yields or experience
product delivery delays in the future as a result of, among other things,
capacity constraints, construction delays, upgrading or expanding existing
facilities, or changing process technologies, any of which could result in a
loss of future revenues. API's operating results also could be adversely
affected by the increase in fixed costs and operating expenses related to
increases in production capacity if revenues do not increase proportionately.
Interruptions, Delays or Cost Increases Affecting API's Materials, Parts,
Equipment or Subcontractors May Impair API's Competitive Position
API's manufacturing operations depend upon obtaining adequate supplies of
materials, parts and equipment, including silicon, mold compounds, and lead
frames on a timely basis from third parties. API's results of operations could
be adversely affected if it is unable to obtain adequate supplies of materials,
parts and equipment in a timely manner, or if the costs of materials, parts or
equipment increase significantly. From time to time, suppliers may extend lead
times, limit supplies or increase prices due to capacity constraints or other
factors. Although API generally uses materials, parts and equipment available
from multiple suppliers, it has a limited number of suppliers for some
materials, parts and equipment. While API believes that alternate suppliers for
these materials, parts and equipment are available, an interruption could
materially impair API's operations.
Some of API's products are assembled and tested by third-party subcontractors.
API does not have any long-term agreements with these subcontractors. As a
result, API may not have assured control over its product delivery schedules or
product quality. Due to the amount of time typically required to qualify
assemblers and testers, API could experience delays in the shipment of its
products if it is forced to find alternative third parties to assemble or test
them. Any product delivery delays in the future could have a material adverse
effect on API's operating results and financial condition. API's operations and
ability to satisfy customer obligations could be adversely affected if its
relationships with these subcontractors were disrupted or terminated.
Although API seeks to reduce its dependence on its sole and limited source
suppliers, disruption or termination of any of these sources could occur, and
such disruptions or terminations could harm API's business and operating
results. In the event that any of API's subcontractors were to experience
financial, operational, production or quality assurance difficulties resulting
in a reduction or interruption in supply, its operating results would suffer
until alternate subcontractors, if any, became available.
Risks Related to Reliance on Sales to Military and Aerospace Markets
A significant portion of API's sales are to military and aerospace markets,
which are subject to the business risks of changes in governmental
appropriations and changes in national defense policies and
13
priorities. All of API's contracts with prime U.S. Government contractors
contain customary provisions permitting termination at any time, at the
convenience of the U.S. Government or the prime contractors upon payment to API
for costs incurred plus a reasonable profit. If API experiences significant
reductions or delays in procurements of its products by the U.S. Government, or
terminations of government contracts or subcontracts, its operating results
could be materially and adversely affected. Certain contracts are also subject
to price re-negotiation in accordance with U.S. Government sole source
procurement provisions.
Environmental Liabilities Could Adversely Impact API's Financial Position
United States federal, state and local laws and regulations impose various
restrictions and controls on the discharge of materials, chemicals and gases
used in API's semiconductor manufacturing processes. In addition, under some
laws and regulations, API could be held financially responsible for remedial
measures if its properties are contaminated or if it sends waste to a landfill
or recycling facility that becomes contaminated, even if API did not cause the
contamination. Also, API may be subject to common law claims if it releases
substances that damage or harm third parties. Further, future changes in
environmental laws or regulations may require additional investments in capital
equipment or the implementation of additional compliance programs in the future.
Any failure to comply with environmental laws or regulations could subject API
to serious liabilities, and could have a material adverse effect on its
operating results and financial condition.
In the conduct of API's manufacturing operations, it has handled and does handle
materials that are considered hazardous, toxic or volatile under U.S. federal,
state and local laws. The risk of accidental release of such materials cannot be
completely eliminated. In addition, contaminants may migrate from or within, or
through property. These risks may give rise to claims. Where third parties are
responsible for contamination, the third parties may not have funds, or make
funds available when needed, to pay remediation costs imposed under
environmental laws and regulations.
Potential Effects of System Outages
Risks are presented by electrical or telecommunications outages, computer
hacking or other general system failure. To try to manage API's operations
efficiently and effectively, it relies heavily on its internal information and
communications systems and on systems or support services from third parties.
Any of these are subject to failure. System-wide or local failures that affect
API's information processing could have material adverse effects on its
business, financial condition, results of operations and cash flows. In
addition, insurance coverage for the risks described above may be unavailable.
Dependence on Key Personnel
API is dependent upon a small number of key personnel. For example, Thomas W.
Mills, President and Chief Operating Officer of API, has held these positions
since 1991, has been employed by API since 1981, is extremely familiar with all
aspects of API's business, and has a proven track record of capable leadership.
Jerry Roth, Vice President of Sales and Marketing, has increased sales
dramatically since he started with API in 1998. The loss of the services of one
or more of such personnel could have a material adverse effect on API. API's
success will depend in large part on the efforts of these individuals. It is
not currently proposed that there will be any long-term employment agreements or
key-man insurance in respect of API's key personnel. API will face intense
competition for qualified personnel, and there can be no assurance that API will
be able to attract and retain such personnel.
Dependence on Recruiting and Retention of Sales and Customer Support Personnel
14
The future revenue growth of API will depend in large part on its ability
successfully to expand its sales force and its customer support capability. API
may not be able successfully to manage the expansion of such functions or to
recruit and train additional sales, consulting and client/customer support
personnel. If API is unable to hire and retain additional sales personnel, it
may not be able to increase its revenues to the extent necessary to ensure
profitability. If API is unable to hire trained consulting and client/customer
support personnel it may be unable to meet client or customer demands. API is
not likely to be able to increase its revenues in the event API fails to expand
its sales force or its consulting and client/customer support staff. Even if
API is successful in expanding its sales force and client/customer support
capability, the expansion may not result in revenue growth.
Fluctuations in Earnings
While API has been in business for approximately twenty years, it has
experienced losses in some of its recent financial years, including the fiscal
years ended May 31, 1999 and May 31, 2000. API expects to experience significant
fluctuations in future quarterly results that may be caused by many factors,
including (i) the pace of development of its business; (ii) changes in the level
of marketing and other operating expenses to support future growth; (iii)
competitive factors; and (iv) general economic conditions.
Dependence on Additional Financing
API may require additional financing in order to support expansion, develop new
or enhanced services or products, respond to competitive pressures, acquire
complementary businesses or technologies, or take advantage of unanticipated
opportunities. The ability of the Company and API to arrange such financing in
the future will depend in part upon the prevailing capital market conditions, as
well as the business performance of API. There can be no assurance that the
Company and API will be successful in their efforts to arrange additional
financing under satisfactory terms. If additional financing is raised by the
issuance of shares of the Company's Common Stock, the Company's shareholders may
suffer dilution. If adequate funds are not available, or are not available on
acceptable terms, the Company and API may not be able to take advantage of
opportunities, or otherwise respond to competitive pressures and remain in
business.
Risks Related to Fire, Natural Disaster, and Equipment Problems
If a fire, natural disaster or any other catastrophic event prevents API from
operating its factory for more than a few days, API's revenue and financial
condition could be severely impacted. There are a number of foundries which,
given appropriate lead times, could meet some of API's fabrication needs.
However, in the event API has to use such foundries, it cannot guarantee that it
will be able to meet its customers' required delivery schedules. Because of the
unique nature of API's manufacturing processes, it would be difficult for API to
arrange for independent suppliers to produce semiconductors and microelectronic
circuits in a short period of time. While API believes that it has sufficient
manufacturing capacity to meet its near term plans, prolonged problems with any
specific piece of equipment could cause API to miss its production goals.
Risks Related to the Company's Secondary Business, the Operation of the Internet
--------------------------------------------------------------------------------
Investment Site www.InvestorLinks.com through IL Data Canada, Inc. ("IL")
-------------------------------------------------------------------------
The Company Intends to Devote Only Minimal Resources to the Operation of its Web
Site www.InvestorLinks.com
15
On August 31, 2001, the Company's primary business became the manufacture and
supply of semiconductors and microelectronic circuits for military, aerospace
and commercial applications through its newly-acquired subsidiary API
Electronics, Inc. ("API"). The Company intends to devote the vast majority of
its resources to API, rather than to the operation of its web site
www.InvestorLinks.com. As a result, the number of users of, and advertising
revenues derived from IL and www.InvestorLinks.com will, in all likelihood,
decrease substantially in the future. As of the date of this Annual Report,
advertising revenues derived from IL and www.InvestorLinks.com have already
dropped significantly as compared to revenues through April 30, 2001, the
closing date of the Company's fiscal year to which this Annual Report pertains.
Since April 30, 2001, IL has discontinued its electronic newsletter, previously
a source of revenues from advertising sponsors, closed U.S. operations,
terminated its internal advertising sales force, discontinued the development of
content for its Web site, and for the most part, become inactive. Investors in
the Company should not, therefore, expect IL to contribute to the Company's
profitability. Because of this, the Company's management has in this Annual
Report abridged the risk factors pertaining to IL, many of which are immaterial
to the Company's overall business. The Company's 2000 Form 20-F Annual Report,
available online at the U.S. Securities and Exchange Commission's Web site
www.SEC.gov, contains a broader disclosure of risk factors relevant to IL's
business as previously conducted.
Intense Competition Will, in All Likelihood, Further Reduce the Market Share of
www.InvestorLinks.com and Further Deteriorate IL's Financial Performance
Because, as stated above, the Company has virtually eliminated resource
allocation to IL and the development of new content for www.InvestorLinks.com,
its ability to compete has been significantly reduced. An increasing number of
financial news and information sources compete for consumers' and advertisers'
attention and spending, as well as for outside contributors of content. The
Company and IL expect this competition to continue to increase. Given the
limited resources that the Company intends to allocate to IL and
www.InvestorLinks.com, IL will not, in all likelihood, be able to compete
successfully for advertisers, readers or outside contributors, which will
materially adversely affect IL's business, results of operations and financial
condition.
IL Has Been Unable to Maintain Strategic Relationships That Previously Benefited
Its Business
IL established a number of strategic relationships with online service providers
and information service providers during and prior to the fiscal year ending
April 30, 2001, and has been unable to maintain most of these strategic
relationships. These relationships were important to IL's business prospects,
and their loss has had, and will continue to have, a material adverse effect on
IL's business and financial performance.
The Elimination of IL's Internal Advertising Sales Force Will, in all
likelihood, Result in Lower Advertising Revenues
In addition to third party advertisement placement firms such as Engage Media
(which closed its operations in September 2001), IL previously depended on an
internal advertising sales department to maintain and increase its advertising
sales. As of the date of this Annual Report, IL had terminated all of the
employees in its internal advertising sales department. IL's Internet-related
business and results of operations will, in all likelihood, be materially
adversely affected by the elimination of its advertising sales department. IL
has experienced significant reductions in revenues from advertising since the
end of the Company's financial year ending April 30, 2001. As of the date of
this Annual Report, because of the elimination of IL's internal advertising
sales force and the loss of advertising sales through Engage Media, IL's
marketing and sales channels are inactive.
16
Domain Names
The regulation of domain names in the United States and in foreign countries may
change. Regulatory bodies could establish additional top-level domains, appoint
additional domain name registrars, or modify the requirements for holding domain
names, any or all of which may dilute the strength of its names. IL may not
acquire or maintain its domain names in all of the countries in which its
Internet site may be accessed, or for any or all of the top-level domain names
that may be introduced. The relationship between regulations governing domain
names and laws protecting proprietary rights is unclear. Therefore, IL may not
be able to prevent third parties from acquiring domain names that infringe or
otherwise decrease the value of its marks and other proprietary rights.
Changing Governmental Regulations
IL may face increased government regulation and legal uncertainties. There are
an increasing number of federal, state, local and foreign laws and regulations
pertaining to the Internet. In addition, a number of federal, state, local and
foreign legislative and regulatory proposals are under consideration. Laws or
regulations may be adopted with respect to the Internet relating to liability
for information retrieved from or transmitted over the Internet, online content,
user privacy and quality of products and services. Laws or regulations relating
to privacy, in particular, may decrease the value of IL's subscriber database of
approximately 30,000 online consumers. Moreover, the applicability to the
Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment and personal privacy is uncertain and developing. Any new
legislation or regulation, or the application or interpretation of existing laws
or regulations, may decrease the growth in the use of the Internet, may impose
additional burdens on electronic commerce or may alter how IL does business.
This could decrease the demand for its services, increase its cost of doing
business or otherwise have a material adverse effect on IL's business, results
of operations and financial condition.
Potential Liability for Information Displayed on IL's Web Site May Require the
Company to Defend Against Legal Claims, Which May Cause Significant Operational
Expenditures
IL may be subject to claims for defamation, libel, copyright or trademark
infringement or based on other theories relating to the information IL publishes
or has previously published on its Web site. These types of claims have been
brought, sometimes successfully, against online services as well as other print
publications in the past. IL could also be subject to claims based upon the
content that is accessible from IL's Web site through links to other Web sites.
ITEM 4. INFORMATION ON THE COMPANY
INTRODUCTION
API Electronics Group Inc. (formerly InvestorLinks.com Inc.), incorporated in
the Province of Ontario, Canada (the "Company"), completed an acquisition on
August 31, 2001, by which the primary business of the Company became the
manufacture and supply of semiconductors and microelectronic circuits for
military, aerospace and commercial applications through its newly acquired,
wholly-owned subsidiary API Electronics, Inc. Prior to August 31, 2001, the
Company had been primarily engaged in the business of a financial resource and
directory portal provider on the Internet, through the operation of the Internet
investment site www.InvestorLinks.com, since June 6, 2000. While the Company,
through its wholly-owned subsidiary IL Data Canada, Inc., still owns and
operates the Internet site www.InvestorLinks.com, the Company's primary
business, and the focus of substantially all of the Company's resources is,
since
17
August 31, 2001, the operation of its wholly-owned subsidiary API Electronics,
Inc. Prior to September 7, 2001, and during the fiscal year ending April 30,
2001, the Company's name was InvestorLinks.com Inc. Prior to June 6, 2000, and
during the fiscal year ended April 30, 2000, the Company's name was Opus
Minerals Inc., and the Company was in the business of locating, acquiring,
exploring, and, if warranted, developing and exploiting mineral properties. On
July 25, 2000, the Company filed Articles of Amendment in the Province of
Ontario changing its name from Opus Minerals Inc. to InvestorLinks.com Inc. As
of October 2001, other than holding a minority equity interest in Stroud
Resources Ltd. as a passive investment, the Company is no longer involved in the
business of exploiting mineral properties.
The Company is a publicly traded company whose Common Shares (the "Common Stock"
or the "Common Shares") trade in the United States on the National Association
of Securities Dealers OTC Bulletin Board under the symbol "APIEF." Previously,
the Company's Common Stock traded on the Canadian Venture Exchange under the
symbol "YIK," and on the NASD OTC Bulletin Board under the symbol "IVLKF." As
of the date of this Annual Report, the Company's Common Shares are not traded on
the Canadian Venture Exchange because the Company's Board of Directors, based on
business and timing factors, decided not to obtain pre-approval from the
Canadian Venture Exchange for its August 31, 2001 acquisition of API
Electronics, Inc., which constituted a reverse take-over transaction requiring
pre-approval. The Company's Board of Directors has determined that it will not
seek to re-establish trading of its Common Shares on the Canadian Venture
Exchange, and has requested to be delisted voluntarily from the Canadian Venture
Exchange.
A. HISTORY AND DEVELOPMENT OF THE COMPANY
The Company's legal name and commercial name is API Electronics Group Inc., and
the legal and commercial name of its primary business and wholly-owned
subsidiary is API Electronics, Inc. The Company was incorporated on May 14,
1985, in the Province of Ontario, Canada under the name Shediac Bay Resources
Inc. The Company is a corporation domiciled in the Province of Ontario, Canada,
and operates under the Ontario Business Corporations Act.
Both the registered office and principle place of business of the Company are
located at 505 University Avenue, Suite 1400, Toronto, Ontario, Canada M5G 1X3.
The telephone numbers of the Company's registered office and principle place of
business in Ontario, Canada are (416) 593-6543 and 1(800) 606-2326. The Company
is not required to have an agent in its home country, Canada, or in the host
country, the United States. The operating office of IL Data Corporation, Inc.,
a corporation incorporated under the laws of the State of Nevada in the United
States, which owns and operates the InvestorLinks.com Web site, is located at
505 University Avenue, Suite 1400, Toronto, Ontario, Canada M5G 1X3. The
registered agent of IL Data Corporation, Inc. is Walther, Key, Maupin, Oats, Cox
& LeGoy, A Professional Corporation, 3500 Lakeside Court, P. O. Box 30,000,
Reno, Nevada 89520. IL Data Corporation, Inc. is a wholly-owned subsidiary of
IL Data Canada, Inc., a corporation incorporated under the laws of the Province
of Ontario, Canada. IL Data Canada, Inc. is a wholly-owned subsidiary of the
Company. The corporate office of API Electronics, Inc., a corporation
incorporated under the laws of the state of Delaware in the United States and a
wholly-owned subsidiary of the Company, is located at 505 University Avenue,
Suite 1400, Toronto, Ontario, Canada M5G 1X3. API Electronics, Inc. operates a
plant and distribution facility at 375 Rabro Drive, Hauppauge, New York, 11788.
The registered agent of API Electronics, Inc. is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
Unless the context otherwise requires, all references herein to the Company
include the Company and its subsidiaries.
From the time of the Company's incorporation on May 14, 1985 until June 6, 2000,
the Company was in the business of locating, acquiring, exploring, and, if
warranted, developing and exploiting, mineral
18
properties. As noted above, the Company's name at the time it was incorporated
was Shediac Bay Resources Inc. Initially, the Company explored for beryllium and
gold in Canada. On June 25, 1985, the Company's Common Stock was listed for
trading on Canadian Dealing Network (the "CDN").
The Company filed Articles of Amendment effective September 13, 1991, changing
its name from Shediac Bay Resources Inc. to Dally Development Corp. The Company
was inactive from 1991 to April 1993, at which time a change in management,
stockholdings and control of the Company occurred. At this time the Company
raised working capital to allow it to become active by acquiring or entering
into new mineral ventures.
In April 1993, the Company acquired 1024680 Ontario Ltd., a corporation
organized under the laws of the Province of Ontario ("1024680"), through a
share-for-share exchange in which the Company acquired all of the issued and
outstanding shares and warrants of 1024680 in exchange for (i) 6,078,650 shares
of the Company's Common Stock with an aggregate negotiated value of $243,156,
and (ii) three-year warrants to purchase an additional 6,078,650 shares at $0.10
per share.
As a result of the share-for-share exchange, 1024680's sole stockholder, 867323
Ontario Ltd., a corporation organized under the laws of the Province of Ontario
("867323"), acquired approximately 58.9% of the Company's outstanding shares of
Common Stock (after taking into consideration the transaction with Sheppard
Ventures Inc. discussed below). Immediately following the share-for-share
exchange, Ms. Elizabeth J. Kirkwood, who, together with members of her immediate
family, owned and controlled 867323, became the President, a director and an
indirect principal stockholder of the Company.
Concurrent with the transaction described above with respect to 1024680, the
Company agreed to acquire all of the outstanding shares and warrants of Sheppard
Ventures Inc., a corporation organized under the laws of the Province of Ontario
("Sheppard"), through a share-for-share exchange in which the Company acquired
all of the issued and outstanding shares and warrants of Sheppard in exchange
for (i) 4,000,000 shares of the Company's Common Stock with an aggregate
negotiated value of $160,000, and (ii) three-year warrants to purchase an
additional 4,000,000 shares at $0.10 per share.
As a result of this transaction, Sheppard's stockholders acquired approximately
38.9% of the Company's outstanding shares of Common Stock (after taking into
consideration the transaction with 1024680 discussed above), and Mr. John R.
Gowdy, the sole officer and director of Sheppard and a principal indirect owner
of Sheppard, became a director and an indirect significant stockholder of the
Company.
The Company agreed in April 1993 to acquire all of the outstanding shares and
warrants of TNK Resources, Inc., a corporation organized under the laws of the
Province of Ontario ("Preceding TNK"), through a share-for-share exchange in
which the Company acquired all of the issued and outstanding shares and warrants
of Preceding TNK in exchange for (i) 2,500,000 shares of the Company's Common
Stock with an aggregate negotiated value of $250,000, and (ii) three-year
warrants to purchase an additional 2,500,000 shares at $0.20 per share.
Effective May 1, 1993, the Company amalgamated with its three newly-acquired,
wholly-owned subsidiaries (1024680, Sheppard and Preceding TNK), and thereupon
changed the name of the Company to TNK Resources Inc.
In September 1994, through a share-for-share exchange, the Company acquired
14,000,000 shares of common stock in Vertex (then known as Sommerset Industries
Inc., or "Sommerset"), a public company whose common stock is traded on the CDN.
As of September 24, 1999, the Company's shares in Vertex
19
had a value of $420,000 based on the closing trading price of such shares on the
CDN as of such date of $0.15 per share. At this point, the Company owned
14,000,000 shares of Sommerset common stock, which then represented
approximately 70% of the total issued and outstanding Sommerset shares,
including 327,000 shares held by prior Sommerset stockholders after the
acquisition. Following the acquisition, Sommerset changed its name to Midswana
Diamond Exploration Corp.
The Company filed Articles of Amendment on May 18, 1999, changing its name from
TNK Resources Inc. to Opus Minerals Inc. At that time, the trading symbol for
the Company's Common Shares on the CDN was changed to "OPUS", and the trading
symbol for the Company's Common Shares on the NASD OTC Bulletin Board was
changed to "OPMNF".
In February 2000, the Company sold all of its diamond exploration prospects to
its partially owned subsidiary, First Strike Diamonds Inc., then Vertex
Ventures, Inc. ("First Strike"), in exchange for 6,266,667 common shares of
First Strike. In April 2000, the Company issued a dividend-in-kind of the
6,266,667 common shares of First Strike to the Company's shareholders. In June
2000, the Company sold its remaining 2,800,000 common shares of First Strike.
As of June 7, 2000 and through the date of this Annual Report, other than
holding a minority equity interest in Stroud Resources Ltd. as a passive
investment, the Company is no longer involved in the business of exploiting
mineral properties.
On June 6, 2000, the Company acquired all of the shares of IL Data Canada, Inc.
in exchange for 6,800,000 Common Shares of the Company at an attributed value of
$1,700,000. IL Data Canada Inc. owns 100% of IL Data Corporation, Inc., which,
through a series of transactions, owns and operates the investment Web site
www.InvestorLinks.com. From June 6, 2001 through August 31, 2001, the Company's
primary business was that of a financial resource and directory portal provider
on the Internet. On July 25, 2000, the Company filed Articles of Amendment in
the Province of Ontario changing its name from Opus Minerals Inc. to
InvestorLinks.com Inc. In connection with these transactions, the Company's
Common Stock began trading on the National Association of Securities Dealers OTC
Bulletin Board under the symbol "IVLKF." Additional details regarding the
transactions summarized in this paragraph can be found below in Item 17 of this
Annual Report (see in particular Note 1 to the financial statements contained
therein).
On August 30, 2001, the Company's shareholders approved the acquisition of all
of the issued and outstanding shares of API Electronics, Inc., a Delaware
corporation ("API") by the issuance of 6,500,000 post-consolidation units at
U.S. $.40 per unit. Each unit consists of one common share, 1/2 of one Series
A common share purchase warrant exercisable at U.S. $.45 for a period of 18
months from the date of issuance, and 1/2 of one Series B common share purchase
warrant exercisable at U.S. $.75 for a period of two years from date of
issuance. This transaction constituted a reverse take-over of the Company by
API, the deemed acquiring company. Also on August 30, 2001, the Company's
shareholders approved a change of the Company's name from InvestorLinks.com Inc.
to API Electronics Group Inc., and the consolidation of the authorized common
shares on the basis that every three pre-consolidation Common Shares were
converted into one post-consolidation Common Share. The name change and share
consolidation became effective on September 10, 2001, when the Company filed
Articles of Amendment in Ontario. On September 10, 2001, shares of the
Company's Common Stock began trading on the National Association of Securities
Dealers OTC Bulletin Board under the symbol "APIEF." As of August 31, 2001, the
Company's primary business became the manufacture and distribution of
semiconductors and microelectronic circuits for military, aerospace, and
commercial applications through its newly acquired, wholly-owned subsidiary API.
The Company plans to devote substantially all of its resources to the business
of API. Additional details regarding the transactions summarized in this
paragraph can be found below in Item 17 of this Annual Report (see in particular
Note 11 to the financial statements contained therein).
20
Principal Capital Expenditures and Divestitures Since May 10, 2000
A description, including the amount invested, of the Company's principal capital
expenditures and divestitures (including interests in other companies), since
May 10, 2000, the date of incorporation of IL Data Canada, Inc., follows.
------------------------------------------------------------------------------------------------------------------------------
Date Parties Type Description of Capital Ex- Amount Invested or
penditure or Divestiture Divested
--------------------------------------------------------------------------------------------------------------------------
June 6, 2000 Company, IL Data Securities Company acquired all of the shares $1,700,000 invested
Canada, Inc. ("IL Exchange of IL Data which indirectly owns (attributed value of 6,800,000
Data") and the Agreement and operates the Internet Common Shares)
shareholders of IL investment site
Data Canada, Inc. www.InvestorLinks.com
-------------------------------------------------------------------------------------------------------------------------
August 30, 2001 Company, API Agreement and Company acquired all of the shares U.S. $2,600,000 invested
Acquisition Corp., Plan of Merger of API Electronics, Inc. (attributed value of
API Electronics, 6,500,000 post-consolidation
Inc. and the Common Shares and Warrants to
Shareholders of API Purchase Common Shares)
Electronics, Inc.
--------------------------------------------------------------------------------------------------------------------------
For a discussion of the reasons that descriptions of capital expenditures and
divestitures occurring prior to May 10, 2000 are excluded from this Item 4A, see
the footnotes accompanying the Selected Consolidated Financial Data in Item 3A
above. As of the date of this Annual Report, there are no material capital
expenditures or divestitures in progress.
Public Takeover Offers
There have been no public takeover offers by third parties in respect of the
Company's shares or by the Company in respect of other companies' shares since
May 1, 1999.
B. BUSINESS OVERVIEW
Business Overview - API Electronics, Inc.
-----------------------------------------
An Introduction to API Electronics, Inc. - Operations, Activities and Products
Effective on August 31, 2001, subsequent to the end of the Company's fiscal year
ending April 30, 2001, the Company completed its acquisition of API Electronics,
Inc., a Delaware corporation ("API"), which then became a wholly-owned
subsidiary of the Company. This transaction constituted a reverse take-over of
the Company by API, the deemed acquiring company. As a result of the reverse
take-over, the primary business of the Company became the manufacture and supply
of semiconductors and microelectronic circuits for military, aerospace, and
commercial applications through its newly-acquired, wholly-owned subsidiary API.
The Company plans to devote substantially all of its resources to the business
of API.
API manufactures niche specialty products that major semiconductor manufacturers
no longer produce or do not plan on producing in the future. API has focused on
the discontinued parts niche of the electronic component industry since its
formation over 20 years ago. In support of API's goals and objectives, API has
focused on maximizing the potential of the various products for which it has
become the sole source supplier. Through the implementation of engineering
process controls and total quality management
21
principles, API has achieved manufacturing efficiencies and effectiveness via
specialization and concentration on these niche products. This strategy has
enabled API gradually to increase its prices, thereby enhancing margins in these
sole source offerings.
API's reputation is that of a preferred supplier of custom replacement parts for
critical, fixed-design systems. Such niche products include Varactor tuning
diodes, specialty suppressor diodes for the relay market, and custom
microelectronic hybrid circuits designed, built and tested to customer
specifications. API also manufactures power and small-signal transistors,
silicon rectifiers, zener diodes, high-voltage diodes, and resistor/capacitor
networks. All microelectronic products are manufactured using semiconductor,
hybrid, and surface-mount technologies or a combination. All methods and
processes are controlled and monitored by API's Quality Assurance programs.
Applications for API's semiconductor products include: Telecommunications,
Aerospace, Military Defense Systems, Automated Test Equipment, Computing
Equipment, Medical Equipment, Robotics, Instrumentation and Automotive Systems.
API currently serves a broad group of customers falling into four main
categories: Hybrid Circuit, Power and Small-Signal Transistor, Varactor Tuning
Diode and Value-Added Distribution.
API's principal markets consist of the government and military markets
(approximately 50% of revenues), laboratory and commercial equipment
(approximately 40% of revenues), and other replacement parts (approximately 10%
of revenues). The Company's customers include government agencies, Departments
of Defense, and large military contractors such as Honeywell/Allied Signal, BAE
Systems Controls, Deutch Relays, Litton Systems and Lockheed-Martin. Other
customers include Raytheon, Northrop Grumman Litton, Alcatel, Tektroniz, Racal,
Ball Aerospace and the Defense Electronic Supply Center.
The main thrust of API's strategy has been to increase its market penetration
via the acquisition of the following competitors' product lines:
1. Ampower - Power Transistors
2. Unitrode - Power and Darlington Transistors
3. Solid Power Corp. - Homotaxial Power Transistors
4. MSI Electronics - Varactor Tuning, Abrupt, and Hyperabrupt Diodes
5. ASI Microsystems - Custom Hybrid Circuits
6. REL Labs - Standard Hybrid Amplifiers, Oscillators, and Networks
API has obtained the original designs of these companies to manufacture brand
new spare parts for aircraft, military, medical and commercial systems that were
built over the past three decades and are still providing essential services.
Additionally, API plans to invest in engineering and research and development to
become more active in High Current/High Voltage devices and introduce a line of
specialty power rectifiers. Offering foundry capabilities to other organizations
needing manufacturing facilities will also serve to achieve API's goal of
increased market penetration. API will look to return to its previous Qualified
Product List (QPL) offerings and concentrate on achieving QPL status on other
products. Also, the purchase of standard materials in volume will capitalize on
discounted price points and support improved margins.
Seeking better to communicate its capabilities to the industry as a whole,
including customers, sales reps, and distributors, API has instituted a cost-
effective sales and marketing program. Updated catalogs, brochures, line cards,
and product lists are augmented by its Web site describing API and its
capabilities.
22
API seeks to improve its product sales in overseas markets through an increased
emphasis on the part of its domestic direct sales force and improved
communication with overseas sales representatives and distributors.
Principal Markets in which API Competes
API's customers are located primarily in the United States, Canada, Israel, and
certain countries that are members of the North Atlantic Treaty Organization.
These are the primary markets in which API competes. Because the Company did
not receive revenues from API during the fiscal year ending April 30, 2001 to
which this Annual Report primarily pertains, the Company can not at this time
provide a breakdown of total revenues by category of activity and geographic
market with regard to the Company's operation of API.
New Products
API has not introduced any significant new products or services in the year
prior to the date of this Annual Report.
Seasonality
API's revenues and business is not, in general, seasonal.
Raw Materials
Raw materials required by API's business consist primarily of silicon wafers. A
broad market for silicon wafers exists worldwide, and the prices of silicon
wafers has not historically been volatile.
Marketing Channels
API's marketing channels consist primarily of the use of an in-house sales
manager with a sales staff of two persons, and regional agents who act as
independent contractors to API. API does not use any special sales methods such
as installment sales.
Dependence on Patents, Licenses, Contracts and Processes
API is not dependent on patents, licenses, industrial contracts, commercial
contracts, financial contracts, or new manufacturing processes in such a manner
that such dependence would be material to API's business or profitability.
Material Effects of Government Regulations
Except as noted below, government regulations of the United States and the State
of New York related to environmental compliance, labor conditions, and
government contracting are typical in API's industry and do not have a material
effect on the company's business. API does, however, lack ISO-9002
certification and has not been able to maintain itself on all pre-qualification
lists necessary to contract with the United States Electronic Defense Supply
Center, including MIL-PRF-19500 (QML-19500) and MIL-PRF-38534 (QML-38534). The
United States Department of Defense regulates certification and qualification
requirements of the Defense Electronic Supply Center.
Business Overview - IL Data Canada, Inc. (www.InvestorLinks.com)
----------------------------------------------------------------
23
An Introduction to IL Data Canada, Inc. and InvestorLinks.com
On June 6, 2000, the Company completed its acquisition of IL Data Canada, Inc.,
which then became a wholly-owned subsidiary of the Company. IL Data Canada,
Inc., through a series of transactions, owns and operates the Internet
investment site www.InvestorLinks.com ("InvestorLinks"), with operations based
in Ontario, Canada.
InvestorLinks is a financial resource and directory portal that delivers
informational content to the online investing community through the
InvestorLinks Web site. InvestorLinks provides links to daily stock and market
analysis from numerous sources, comprehensive intra-day technical charting,
quotes, stock and market data, financial news, and financial directories. The
InvestorLinks Directory contains unique URLs in hundreds of categories,
organized in an easy-to-navigate format.
The Company's Internet properties, including www.InvestorLinks.com, primarily
target a focused demographic of high-income decision-making investors with the
goal of generating advertising revenue. In January 2000, more than 140,000
individual Internet users accessed InvestorLinks.com and related wholly-owned
Internet properties and generated over 5 million page views. Chosen as one of
the "Best Websites for Investors" by BARRON'S magazine, InvestorLinks has been
recognized in North America as a premier investor resource on the Internet, and
has been listed numerous times as a "financial megasite" in Online Investor
Magazine.
Closure of U.S. Operations and Decline in Revenues of IL Data Canada, Inc.
Despite the accolades that the InvestorLinks.com Web site received from Barron's
and Online Investor magazines, the Web site was not able to generate sufficient
revenues to warrant expenses incurred by the Company in maintaining the Web site
in the manner it was initially maintained. In general, many Web sites such as
InvestorLinks.com that are dependent on advertising revenues have not performed
well. During the three month period ending July 31, 2001, a quarter in which
the Company generated only $3,777 in advertising and sponsorship newsletter
revenues combined, the Company closed down its U.S. operations, terminated the
employment of all U.S. employees, and transferred the Company's U.S. assets to
Canada. While the Company explored options for entering another line of
business, it attempted to decrease expenses associated with the
InvestorLinks.com Web site so as to preserve the Company's assets. The Company
anticipates that revenues derived from the InvestorLinks.com Web site will
continue to decrease because of the reduction in resources devoted to its
operation and the allocation of substantially all of the Company's available
resources toward the operation of its newly-acquired subsidiary, API
Electronics, Inc. instead of its subsidiary IL Data Canada, Inc., which owns and
operates the InvestorLinks Web site. See also the Risk Factors related to IL
Data Canada, Inc. in Part III, Item 3D above.
Domain Names
The Company has registered the Domain name "InvestorLinks.com" with the
worldwide Internet registry called "Internic". InvestorLinks.com also owns, and
has registered the following additional Internet domain names:
"InvestorLinks.net" "InvestorLinks.org" "TheWebInvestor.com" "FuturesLinks.net"
"FundLinks.com" "InvestorSource.net" "myInvestorLinks.com" and "my-
InvestorLinks.com."
Ownership
The Website www.InvestorLinks.com, operated since 1997, is now owned 100% by IL
Data Corporation,
24
Inc., which is owned 100% by IL Data Canada, Inc. ("IL"), which is owned 100% by
the Company.
Competition
Because, as stated above, the Company has virtually eliminated resource
allocation to IL and the development of new content for www.InvestorLinks.com,
its ability to compete has been significantly reduced. An increasing number of
financial news and information sources compete for consumers' and advertisers'
attention and spending as well as for outside contributors of content. The
Company and IL expect this competition to continue to increase. Given the
limited resources that the Company intends to allocate to IL and
www.InvestorLinks.com, IL will not, in all likelihood, be able to compete
successfully for advertisers, readers or outside contributors, which will
materially adversely affect IL's business, results of operations and financial
condition.
Revenue Streams
IL has generated the majority of its revenues from advertising. Advertising
revenues have been derived principally from the sale of advertisements displayed
on IL's Websites and other online properties. Advertising revenues have
decreased substantially since April 30, 2001, the end of the Company's fiscal
year. Advertising revenues are obtained by delivering ad impressions over the
period in which the advertisement is displayed, provided that no significant IL
obligations remain at the end of a period and collection of the resulting
receivable is probable. IL obligations typically include guarantees of minimum
number of "impressions," or times that an advertisement appears in pages viewed
by users of IL's online properties. To the extent minimum guaranteed impressions
are not met, IL defers recognition of the corresponding revenues until the
remaining guaranteed impression levels are achieved.
In addition to revenues from advertising activities, IL has in the past, and
during the Company's fiscal year ending April 30, 2001, generated revenues
through a sponsorship newsletter. Sponsors have paid IL for advertising space
in IL's periodic electronic newsletter, which IL distributed to its base of
approximately 30,000 online users or consumers. While IL still maintains its
database of online users or consumers, its sponsorship newsletter program and
related revenue streams are, as of the date of this Annual Report, inactive.
Principal Markets in which the Company Competes
IL Data Canada, Inc. competes primarily in the financial Web site market in
North America.
Operations, Activities and Revenues by Category of Activity and Geographic
--------------------------------------------------------------------------
Market - May 10, 2000 to April 30, 2001
---------------------------------------
Beginning on May 10, 2000, and through April 30, 2001, the end of the Company's
last fiscal year, the Company's operations and principle activities consisted of
the operation of a financial resource and directory portal or the Internet
through the Internet investment site www.InvestorLinks.com. During this period,
the Company sold advertising and subscriptions to a sponsorship newsletter, and
did not introduce any significant new products or services. During this period,
the principal market in which the Company competed was the United States. The
following table shows a break-down of total revenues by category of activity and
geographic market the fiscal year ending April 30, 2001. For a discussion of
the reasons that revenue data for periods prior to May 10, 2000 are excluded
from this Item 4B, see the footnotes accompanying the Selected Consolidated
Financial Data Item 3A above.
Revenues by Category of Activity:
25
For the fiscal year ended April 30 2001
----------------------------------------------------------------------
Revenue
Advertising Revenue $ 98,220
Sponsorship Newsletter Subscriptions $ 35,059
Total Revenues $133,279
Revenues by Geographic Market:
For the fiscal year ended April 30 2001
----------------------------------------------------------------------
Revenue
United States (Advertising & Sponsorship $133,279
Newsletter)
Total Revenues $133,279
Seasonality
IL's financial Web site operations do not, as of the date of this Annual Report,
experience seasonality in operating results.
Raw Materials
IL's financial Web site operations do not depend on raw materials.
Marketing Channels
IL has employed the following marketing channels and special sales methods to
generate revenues from advertising, syndication and licensing related to its
financial Web site operations:
1. Engage Media ("Engage Media") was, until it closed operations in September
2001, the primary agent responsible for selling advertisement space on IL's
Web site. Engage Media served all advertisements through its Web servers,
and retained 40% of all advertising revenues generated for IL in exchange
for its services.
2. Prior to the termination of its internal sales force in May 2001, IL
generated some of its advertising revenues through direct sales.
As of the date of this Annual Report, IL's marketing channels were inactive.
Dependence on Patents, Licenses, Contracts, and Processes
While IL's financial Web site operations are not dependent on patents or
manufacturing processes, they are dependent in large part on the license of
content and Web site features designed to attract online visitors and thus, to
maintain advertising, syndication and licensing revenues. Numerous providers
have provided content and articles to the Company from time to time in the past,
although, as of the date of this Annual Report, IL is not actively engaged in
obtaining content from third party providers. The
26
market for such content is very fluid and is constantly changing.
Material Effects of Government Regulations on the Company's Business
See Item 3D ("Risk Factors - Changing Government Regulations"). In addition,
the Company must comply with securities regulations imposed by the United States
Securities and Exchange Commission, state securities law administrators in the
United States, securities law administrators in the Provinces of Canada, and
potentially with various securities laws of other countries.
C. ORGANIZATIONAL STRUCTURE
The Company, with its subsidiaries as described below, is a part of a group.
The corporate office of API Electronics, Inc., a corporation incorporated under
the laws of the State of Delaware in the United States and a wholly-owned
subsidiary of the Company, is located at 505 University Avenue, Suite 1400,
Ontario, Canada M5G 1X3. The Company holds 100% of the ownership interest and
voting power of API Electronics, Inc.
The operating office of IL Data Corporation, Inc., a corporation incorporated
under the laws of the State of Nevada in the United States, which owns and
operates the InvestorLinks.com Web site, is located at 505 University Avenue,
Suite 1400, Toronto, Ontario, Canada M5G 1X3. IL Data Corporation, Inc. is a
wholly-owned subsidiary of IL Data Canada, Inc., a corporation incorporated
under the laws of the Province of Ontario, Canada. IL Data Canada, Inc. is a
wholly-owned subsidiary of the Company. Thus the Company holds 100% of the
ownership interest and voting power of IL Data Canada, Inc., which in turn holds
100% of the ownership interest and voting power of IL Data Corporation, Inc.
D. PROPERTY, PLANTS, AND EQUIPMENT
The Company is not an extractive enterprise. Because the Company is no longer a
natural resource exploration company, none of its property, plants and equipment
is used in relation to the Company's previous natural resource exploration
operations.
The executive offices of the Company and its two subsidiaries, API Electronics,
Inc. and IL Data Canada, Inc., are located at 505 University Avenue, Suite 1400,
Toronto, Ontario, Canada M5G 1X3. The Company's wholly-owned subsidiary, API
Electronics, Inc., owns outright, without any major encumbrances, a 15,000
square foot manufacturing facility in Hauppauge, New York. The productive
capacity of this manufacturing facility is sufficient to meet present needs and
needs in the foreseeable future. All of API's products are produced at this
manufacturing facility, which is located at 375 Rabro Drive, Hauppauge, New York
11788. To the Company's knowledge, except as generally described in Item 3D of
this Annual Report above, there are no environmental issues that may affect the
Company's utilization of the assets located at this manufacturing facility. As
of the date of this Annual Report, the Company does not have any material plans
to construct, expand, or improve its facilities or the facilities of its
subsidiaries.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. OPERATING RESULTS
Absence of Comparative Figures
Note 1(b) to the consolidated financial statements included in Part III, Item 17
of this Annual Report
27
describes the Company's acquisition of IL Canada, Inc. and the accounting for
the business acquisition. Since IL Canada, Inc. is a newly incorporated company
and is deemed to be the acquirer for Cdn. GAAP purposes, no comparative figures
have been presented in the Company's financial statements. The standard of the
U.S. Securities and Exchange Commission for Item 3A requires selected historical
financial data "for the five most recent financial years (or such shorter period
that the [C]ompany has been in operation)...." Because of the reverse take-over
transaction described above, the Company has only been in operation since May
10, 2000.
For purposes of US GAAP, since IL Data Canada, Inc. had no operations,
Investorlinks.com LLC, the company that owned and operated the Investment Web
site www.InvestorLinks.com prior to the June 6, 2000 acquisition transactions,
would be considered the predecessor and audited information for the previous
three years would normally be disclosed. However, the operations of
Investorlinks.com LLC have been closed, and the previous years' information
would not be relevant or informative. Because of the foregoing, financial
statements for prior years are not included in this Annual Report.
Acquisition of API Electronics, Inc.
Effective on August 31, 2001, subsequent to the end of the Company's fiscal year
ending April 30, 2001, the Company completed its acquisition of API Electronics,
Inc., a Delaware corporation ("API"), which then became a wholly owned
subsidiary of the Company. This transaction constituted a reverse take-over of
the Company by API Electronics, Inc., the deemed acquiring company. As a result
of the reverse take-over, the primary business of the Company became the
manufacture and supply of semiconductors and microelectronic circuits for
military, aerospace and commercial applications through its newly acquired,
wholly owned subsidiary API Electronics, Inc. The Company plans to devote
substantially all of its resources to the business of API Electronics, Inc.
Because the financial statements of the Company included in Part III, Item 17 of
this Annual Report do not reflect the Company's new primary business, the
relevance of these financial statements to the Company's future performance is
negligible.
Closure of U.S. Operations of IL Data Canada, Inc. and Related Decrease in
Revenues
The Company, through its wholly owned subsidiary IL Data Canada, Inc., owns and
operates the InvestorLinks.com Web site. During the fiscal year ending April
30, 2001, the Web site was not able to generate sufficient revenues to warrant
expenses incurred by the Company in maintaining the Web site in the manner it
was initially maintained. In general, Web sites such as InvestorLinks.com that
are dependent on advertising revenues have fared poorly. During the three-month
period ending July 31, 2001, the Company closed down its U.S. operations,
terminated the employment of all U.S. employees, and transferred the Company's
U.S. assets to Canada. While the Company explored options for entering another
line of business, it attempted to decrease expenses associated with the
InvestorLinks.com Web site so as to preserve the Company's assets. The Company
anticipates that revenues derived from the InvestorLinks.com Web site will
continue to decrease because of the reduction in resources devoted to its
operation.
In fact, the Company's advertising revenues generated from the InvestorLinks.com
Web site for the three- month period ending July 31, 2001, dropped substantially
to a mere $3,777 for the entire three-month period. Investors in the Company's
Common Shares should not expect the operation of the InvestorLinks.com Web site
to generate any significant revenues in the future. During the fiscal year
ending April 30, 2001, as a comparison, the Company's InvestorLinks.com Web site
generated $98,220 in advertising revenue and $35,059 in sponsorship newsletter
revenues. In September 2001, the Company's primary source of advertising
revenues, an independent contractor sales agent trading as Engage Media, closed
its operations. While it is possible that the Company will be able to increase
revenues generated
28
from the InvestorLinks.com Web site, to accomplish this goal, the Company would
have to (i) re-establish independent contractor sales agents to generate
advertising revenues, and (ii) actively seek newsletter sponsors and re-
establish a program of sending electronic newsletters to the Company's online
user base of approximately 30,000 consumers.
Impact of Inflation
Inflation has not been material to the business of the Company. The Company's
financial statements are presented in Canadian currency. Canada has not
experienced hyperinflation during the last five years.
Impact of Foreign Currency Fluctuations on the Company
Foreign currency fluctuations had a material impact on the Company during the
fiscal year ending April 30, 2001. During the fiscal year ending April 30,
2001, the Company recorded a foreign exchange gain of $99,698, a number greater
than the Company's advertising revenues of $98,220 during the same year. The
Company does not employ hedging instruments to limit the impact of foreign
currency fluctuation.
Impact of Governmental Policies or Factors on the Company
No governmental economic, fiscal, monetary or political policies or factors have
materially affected, directly or indirectly, the Company's operations (with
regard to IL Data Canada, Inc.) or investments by United States shareholders in
the past. Except as noted in the following sentence, the Company does not
anticipate that such policies or factors will materially affect, directly or
indirectly, the Company's operations or investments by United States
shareholders in the future. Notwithstanding the foregoing, the Company's
operation of API Electronics, Inc. will be affected by governmental policies
related to defense spending (see also Item 4B - Material Effects of Government
Regulations above and Item 5D - TREND INFORMATION below).
B. LIQUIDITY AND CAPITAL RESOURCES
Liquidity
As of the date of this Annual Report, the Company's working capital is
sufficient for the Company's present requirements. However, should the Company
embark on expansion to develop new or enhanced services or products, respond to
competitive pressures, acquire complimentary businesses or technologies, or take
advantage of unanticipated opportunities, the Company may require additional
financing from external sources. While the Company does not have significant
internal sources of liquidity, it anticipates that cash flows from operations
will cover future expenses. While there are no legal or economic restrictions
on the ability of the Company's subsidiaries to transfer funds to the Company in
the form of cash dividends, loans or advances, the Company does not anticipate
such dividends, loans or advances in the foreseeable future.
During the fiscal year ending April 30, 2001, prior to the acquisition of IL
Data Canada, Inc., the Company issued 300,000 Common Shares upon the exercise of
Common Share purchase options for consideration of $75,000, and 300,000 Common
Shares upon the exercise of warrants for consideration of $105,000. After the
acquisition of IL Data Canada, Inc., the Company issued 3,000,000 Common Shares
upon the exercise of warrants for a consideration of $1,050,000 and 680,000
units pursuant to a private placement of the Company for consideration of
$2,266,481. Each unit consisted of one Common Share and one Common Share
purchase warrant exercisable at US $3.00 per share expiring on August 8, 2002.
The Company also purchased 4,890,000 Common Shares from certain shareholders for
consideration of US $0.05 per share or Cdn. $376,164.
29
On August 31, 2001, the Company acquired API Electronics Inc., for consideration
of 6,500,000 post-consolidation units of the Company, consisting of 6,500,000
Common Shares and warrants to purchase an additional 6,500,000 Common Shares.
Of the 6,500,000 warrants, 3,250,000 warrants are exercisable to acquire up to
3,250,000 Common Shares at US $0.45 expiring February 28, 2003, and 3,250,000
warrants are exercisable to acquire up to 3,250,000 Common Shares at US $0.75
expiring August 30, 2003. In connection with the acquisition of API Electronics,
Inc., the Company also issued 250,000 broker units. Each broker unit comprised
of one common share, plus 1/2 of one Series A common share purchase warrant
exercisable at US $0.45 per share until February 28, 2003 and 1/2 of one Series
B common share purchase warrant exercisable at US $0.75 per share until August
30, 2003. If these warrants and units are fully exercised, the cash
consideration to the Company could be up to US $4,150,000, which could enhance
the Company's future growth and ability to capitalize on opportunities as they
arise.
During the fiscal year ending April 30, 2001, the Company did not have a credit
facility in place, and had financed its working capital requirements through the
sale of its securities. Thus, the Company has not historically, through the end
of its fiscal year ending April 30, 2001, used debt or other financial
instruments. The Company's newly-acquired subsidiary, API Electronics, Inc.,
does, however, use debt instruments. As of August 31, 2001, based on unaudited
interim financial statements, API Electronics, Inc. had a bank loan in the
amount of US $304,350 (all of which represented current debt at a variable
interest rate of prime + 1.0), equipment loans of US $36,000, and a loan from a
shareholder in the amount of US $95,574. As of the date of this Annual Report,
the shareholder loan has been paid in full.
The Company holds cash and cash equivalents in Canadian currency. The Company's
primary subsidiary, API Electronics, Inc., holds cash and cash equivalents in
United States currency. Neither the Company nor any of its subsidiaries uses
financial instruments for hedging purposes.
The Company did not have material commitments for capital expenditures as of the
end of its fiscal year ending April 30, 2001.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
During the last three financial years, the Company did not spend any money on
Company-sponsored research and development activities, and the Company did not
have research and development policies. The Company's wholly-owned subsidiary,
API Electronics, Inc. has not spent material amounts of money on research and
development activities, and does not have formal research and development
policies.
D. TREND INFORMATION
Because of the Company's acquisition of API Electronics, Inc. and the resulting
change in the Company's business effective August 31, 2001 described above and
elsewhere in this Annual Report, any trends related to the Company's prior
business of exploiting mineral properties, or related to the Company's secondary
business of operating the Web site InvestorLinks.com, are not material to the
Company's current primary business, the operation of API Electronics, Inc. As
noted above and elsewhere in this Annual Report, revenues derived from the
Company's wholly owned subsidiary IL Data Canada, Inc., and the Web site
InvestorLinks.com, have decreased substantially since the end of the Company's
fiscal year ending April 30, 2001, and investors in the Company's Common Shares
should not expect the operation of the InvestorLinks.com Web site to generate
any significant revenues in the future. With regard to API Electronics, Inc.,
the Company believes that, given the increased emphasis on military preparedness
worldwide following the terrorist attacks in New York City and Washington, D.C.
on September 11, 2001, demand for API Electronics, Inc.'s products may increase
in the future.
30
ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT AS OF THE DATE OF THIS ANNUAL REPORT
Phillip DeZwirek
------- --------
On August 31, 2001, Phillip DeZwirek became a director, Chairman of the
Board, Chief Executive Officer and Treasurer of the Company. As of the
date of this Annual Report, Phillip DeZwirek also serves as the Chief
Financial Officer and Controller of the Company. Phillip DeZwirek has been
a director, Chairman of the Board and the Chief Executive Officer of CECO
Environmental Corp. since August 1979. Mr. DeZwirek also served as Chief
Financial Officer of CECO Environmental Corp. from August 1979 until
January 26, 2000. Mr. DeZwirek's principal occupations during the past five
years have been serving as Chairman of the Board and Vice President of CECO
Filters (since 1985); serving as Treasurer and Assistant Secretary of CECO
Group (since December 10, 1999); serving as a director of Kirk & Blum and
kbd/Technic (since 1999); serving as President of Can-Med Technology, Inc.
d/b/a Green Diamond Corp. (since 1990); and serving as Chairman and as a
director of Digital Fusion Multimedia Corp. (from January 1995 until June
1998). Mr. DeZwirek has also been involved in private investment
activities for the past five years.
Date of Birth: December 5, 1937
Current Outside Business Activities:
Chairman of the Board and Chief Executive Officer of CECO Environmental
Corp.
Chairman of the Board and Vice President of CECO Filters
Treasurer and Assistant Secretary of CECO Group
Director, Kirk & Blum
Director, kbd/Technic
President of Can-Med Technology, Inc. d/b/a Green Diamond Corp.
James C. Cassina
----- -- -------
James C. Cassina served as a director of the Company from December 1996
until April 2000, served as the President of the Company from April 2000
until August 31, 2001, and has served again as a director of the Company
since April 10, 2001. Since 1996, Mr. Cassina has also been a member of
the board of directors of Energy Power Systems Limited, and has served as
it President and Chief Executive Officer since July 1998. Mr. Cassina has
served as a director of Oil Springs Energy Corp. since August 1984, and
served as its President from August 1984 until October 1999. Mr. Cassina
served as the President and as a director of Eugenic Corp. from November
1996 until October 2000. Mr. Cassina has served as the President and as a
director of Bonanza Blue Corp. since October 2000, and currently serves as
the President of Core Financial Enterprises Inc. Mr. Cassina has extensive
experience managing public companies.
Date of Birth: September 26, 1956
Current Outside Business Activities:
President, Chief Executive Officer and Director of Energy Power Systems
Limited
31
Director, Oil Springs Energy Corp.
President and Director, Bonanza Blue Corp.
President, Core Financial Enterprises Inc.
Thomas W. Mills
------ -- -----
On August 31, 2001 Thomas W. Mills became a director and the President and
Chief Operating Officer of the Company. Thomas W. Mills is President and
Chief Operating Officer of the Company's wholly owned subsidiary, API
Electronics, Inc. He has worked within the electronics industry since 1967
and has specialized in semiconductors since 1969. His management career has
spanned Production Control, Production/Manufacturing, Quality
Control/Assurance, Program/Project Operation, and Vice President of
Operations. Mr. Mills, who has been with API Electronics, Inc. since 1981,
holds an Economics degree and has taken courses in Industrial Engineering.
Date of Birth: January 31, 1945
Current Outside Business Activities: None.
Sandra J. Hall
------ -- ----
Ms. Hall has been a director of the Company since June 2000, served as the
Comptroller of the Company from September 1996 until August 2001, and
served as the Secretary of the Company from June 2000 until August 31,
2001. Ms. Hall has extensive experience in corporate financial
administration and regulatory and investor communications for publicly
traded companies. Ms. Hall has been the President and a Director of
Eugenic Corp. since October 2000. Ms. Hall has been a director of Energy
Power Systems Limited since December 1997, Secretary since July 1998, and
VP Corporate Affairs since October 1999. Ms. Hall served as a Director of
Rally Energy Corp. from December 1997 until June 2001, and as President
from May 2000 until May 2001. Ms. Hall has provided financial,
administrative and executive services to several publicly traded companies
independently since September 1996. Prior to September 1996, Ms. Hall was
employed as an accountant at Duguay & Ringler Corporate Services, a company
which provides corporate secretarial and accounting services, including the
management of public, investor and regulatory filing requirements, to
several publicly traded companies.
Date of Birth: May 12, 1964
Current Outside Business Activities:
VP Corporate Affairs, Secretary and Director of Engineering Power Systems
Limited
President and Director of Eugenic Corp.
Jason DeZwirek
----- --------
On August 31, 2001 Jason DeZwirek became a director, Executive Vice
President, and Secretary of the Company. Jason DeZwirek has been Vice
President and a Director of CECO Environmental Corp. since February 1994
and the Secretary of CECO since February 20, 1998. He also serves as Vice
President of Can-Med Technology, Inc. d/b/a Green Diamond Corp. Mr.
32
DeZwirek's principal occupation since October 1999 has been as Founder and
President of kaboose.com Inc., a company engaged in the development of
interactive educational content. Mr. DeZwirek has also been involved in
private investment activities for the past five years.
Date of Birth: September 3, 1970
Current Outside Business Activities:
President of kaboose.com Inc.
Vice President, Secretary and Director of CECO Environmental Corp.
Vice President of Can-Med Technology, Inc. d/b/a Green Diamond Corp.
Joanne E. Mills
---------------
On August 31, 2001, Joanne E. Mills became the Assistant Secretary of the
Company. Joanne E. Mills is the Secretary of API Electronics, Inc., a
wholly owned subsidiary of the Company, and has worked for API Electronics,
Inc. since 1990. She currently serves as the Human Resources Director of
API Electronics, Inc., where she administers health and dental plans, the
401(k) retirement plan, payroll direction, insurance plans, and various
other administrative functions.
Date of Birth: August 11, 1946
Current Outside Business Activities: None.
Jason DeZwirek is Phillip DeZwirek's son. Joanne E. Mills and Thomas W. Mills
are married to each other. There are no other family relationships between any
two or more of the directors or senior management members named above. There
are no arrangements or understandings with major shareholders, customers,
suppliers or others, pursuant to which any person referred to above was selected
as a director or member of senior management.
The Company's directors and officers as of the date of this Annual Report are
summarized in the following table:
--------------------------------------------------------------------------------
Name Position(s)
--------------------------------------------------------------------------------
Phillip DeZwirek Director, Chairman of the Board, Chief
Executive Officer, Chief Financial Officer,
Treasurer, and Controller
--------------------------------------------------------------------------------
James C. Cassina Director
--------------------------------------------------------------------------------
Thomas W. Mills Director, President, and Chief Operating Officer
--------------------------------------------------------------------------------
Sandra J. Hall Director
--------------------------------------------------------------------------------
Jason DeZwirek Director, Executive Vice President, and Secretary
--------------------------------------------------------------------------------
Joanne E. Mills Assistant Secretary
--------------------------------------------------------------------------------
33
B. COMPENSATION
Compensation Required to be Disclosed Under the Ontario Securities Act
----------------------------------------------------------------------
The Ontario Securities Act requires that the Company disclose information about
the compensation paid to, or earned by the Company's Chief Executive Officer and
each of the other four most highly compensated executive officers of the Company
earning more than $100,000 in total salary and bonus for the fiscal year in
question. The only executive officers of the Company for whom disclosure is
required under the Ontario Securities Act for the fiscal year ended April 30,
2001 are Ms. Elizabeth J. Kirkwood, a former President and Chief Executive
Officer of the Company who resigned from her position as Chief Executive Officer
of the Company effective as of June 6, 2000, Romaine E. Gilliland, who was
appointed Chief Executive Officer of the Company on June 6, 2000 and served in
that capacity until his resignation on April 10, 2001, and James C. Cassina, who
was appointed Chief Executive Officer of the Company on April 10, 2001 and
remained the Company's Chief Executive Officer throughout the remainder of the
Company's fiscal year ending April 30, 2001.
The Company paid Elizabeth J. Kirkwood a salary at the rate of $85,000 per year
from May 10, 2000, the beginning of the Company's current fiscal year, until
June 30, 2000, following her resignation as Chief Executive Officer of the
Company on June 7, 2000. Thus, the Company paid Ms. Kirkwood approximately
$12,110 in salary during the fiscal year ending April 30, 2001. The Company
granted Elizabeth J. Kirkwood stock options to purchase 18,000 Common Shares of
the Company at an exercise price of US $2.55 during the fiscal year ending April
30, 2001. These stock options were subsequently cancelled. In addition to the
salary noted above, the Company made payments to entities affiliated with Ms.
Kirkwood in the amounts set forth in Note 7(a) to the financial statements
included in Part III, Item 17 of this Annual Report. Such payments include
$12,500 in office rent paid to 1014620 Ontario Ltd., a company in which Ms.
Kirkwood is the sole officer and director, and an owner of 75% of the company's
outstanding equity securities, during the fiscal year ending April 30, 2001.
Such payments also include $38,000 in fees related to accounting and
administrative support to 1014620 Ontario Ltd. during the fiscal year ending
April 30, 2001. Subsequent to the end of the Company's fiscal year ending April
30, 2001, the Company paid 1014620 Ontario Ltd. $2,000 per month through
September 30, 2001 for accounting and administrative support. Finally, such
payments include $1,600 in Web site hosting and maintenance fees paid to
Crossbeam Limited doing business as Crossbeam.com, a company in which Ms.
Kirkwood owns 90% of the company's outstanding equity securities and serves as a
director. Subsequent to the end of the Company's fiscal year ending April 30,
2001, the Company continued to pay Crossbeam.com $2,000 per month for Web site
hosting and maintenance fees through September 30, 2001. As reflected in Note
7(c) to the financial statements included in Part III, Item 17 of this Annual
Report, the Company carries an account payable of $25,000 owed to Ms. Kirkwood
for previous consulting services.
Romaine E. Gilliland, who served as Chief Executive Officer of the Company from
June 6, 2000 until April 10, 2001, entered into a two year employment agreement
with the Company's wholly owned subsidiary IL Data Corporation, Inc. on June 6,
2000 to act as its Secretary-Treasurer and Chief Financial Officer at an annual
salary of US $60,000, which salary was subsequently increased. This employment
agreement was terminated on April 10, 2001. The Company paid Mr. Gilliland US
$104,246 in salary and other compensation related to the severance of his
employment during the fiscal year ending April 30, 2001. In addition, the
Company paid Mr. Gilliland $8,370 in automobile benefits and $1,256 in
professional dues. As reflected in Note 7(d) to the financial statements
included in Part III, Item 17 of this Annual Report, the Company paid $8,795 in
accounting fees to the accounting firm of Romaine E. Gilliland, C.P.A. during
the fiscal year ending April 30, 2001.
34
The Company did not pay James C. Cassina cash compensation during the fiscal
year ending April 30, 2001. Information related to stock options granted to
persons for whom individual disclosure is required under Ontario law or for whom
the Company has elected to disclose publicly is set forth below.
Compensation Previously Disclosed Publicly
------------------------------------------
Although not required under the Ontario Securities Act, the Company disclosed,
in a July 27, 2001 Notice of Special Meeting of Shareholders to be Held August
30, 2001 and Management Information Circular Relating to its Acquisition of API
Electronics, Inc. (the "Circular"), which Circular was publicly disclosed in a
Form 6-K filing with the United States Securities and Exchange Commission,
compensation to certain of the Company's directors other than Elizabeth J.
Kirkwood, Romaine E. Gilliland, and James C. Cassina.
In the Circular, the Company disclosed that API Electronics, Inc., now the
Company's wholly owned subsidiary, pays Thomas W. Mills an annual salary of US
$91,000, and an annual car allowance of US $6,600. API Electronics, Inc. pays
Joanne Mills a yearly salary of US $28,600, and an annual car allowance of US
$7,300. API Electronics, Inc. does not pay any further compensation to Mr. or
Mrs. Mills, or to any of its directors. In the Circular, the Company also
disclosed that the Company paid Sandra J. Hall, formerly the Company's
Secretary, compensation of $2,000 per month for corporate secretarial services.
The Company paid this amount to Ms. Hall through September 30, 2001. The
Company paid Ms. Hall $23,500 for corporate secretarial services during the
fiscal year ending April 30, 2001.
Cash Compensation of Directors During the Financial Year Ended April 30, 2001
-----------------------------------------------------------------------------
No directors of the Company were compensated in cash by the Company or any of
its subsidiaries during the financial year ended April 30, 2000 for their
services in their capacity as directors, although directors are entitled to $200
per meeting.
Stock Option Plan
-----------------
In 1995, a stock option plan was authorized for directors, officers, and
employees. The terms of the plan restrict options granted at any point in time
to 10% of the outstanding shares of the Company. Also, no optionee can be
granted options of more than 5% of the outstanding Common Shares of the Company
at one point in time. The maximum term of any option granted is five years.
Stock Options Granted to Directors and Officers
-----------------------------------------------
In connection with the Company's acquisition of API Electronics, Inc., the
Company cancelled all of its stock options outstanding as of July 24, 2001,
except for those stock options that had been granted to Ms. Elizabeth J.
Kirkwood prior to the Company's fiscal year ending April 30, 2001 and which are
described in Item 6E below. As a result of these cancellations and as a result
of the expiration of certain other stock options, none of the stock options
granted by the Company during the fiscal year ending April 30, 2001 remain
exercisable. The Company did grant stock options to its directors after the end
of its fiscal year ending April 30, 2001, however, which stock options are set
forth in Item 6E below.
Long-Term Incentive Plan Awards
-------------------------------
The Company did not have a long-term incentive plan (the definition of "long-
term incentive plan"
35
contained in the Ontario Securities Act expressly excludes a stock option plan)
during the financial year ended April 30, 2001.
Pension and Retirement Benefits
-------------------------------
During the fiscal year ending April 30, 2001, the Company provided its employees
and employees of its subsidiaries with a simplified retirement benefit plan
whereby the Company matched employees' contributions up to the lesser of three
percent of each employees' annual income or US$6,000. Neither the Company nor
its subsidiaries have set aside or accrued any funds for the purpose of
providing pension, retirement, or similar benefits.
C. BOARD PRACTICES
During the fiscal year ended April 30, 2000, and until June 6, 2000, the
Company's board of directors consisted of four persons. Elizabeth J. Kirkwood,
Sandra J. Hall, William Jarvis, and Ian S. Davey served as directors until June
6, 2000, when Mr. Jarvis and Mr. Davey resigned from the board of directors, the
number of directors was increased from four to five, and Frank Kollar, Romaine
E. Gilliland, and George Stubos were appointed directors to fill the resulting
vacancies. From June 6, 2000 until December 15, 2000, the Company's board of
directors consisted of Elizabeth J. Kirkwood, Sandra J. Hall, Frank Kollar,
Romaine E. Gilliland, and George Stubos. On December 15, 2000, George Stubos
resigned from the Board of Directors, and the number of directors was decreased
from five to four. From December 15, 2000 until February 7, 2001, the Company's
board of directors consisted of Frank Kollar, Romaine E. Gilliland, Elizabeth J.
Kirkwood, and Sandra J. Hall. On February 7, 2001, the number of directors was
increased from four to five and Richard J. Lachick was appointed to the Board of
Directors. From February 7, 2001 until March 7, 2001, the Company's Board of
Directors consisted of Frank Kollar, Romaine E. Gilliland, Elizabeth J.
Kirkwood, Sandra J. Hall, and Richard J. Lachick. On March 7, 2001, Frank
Kollar resigned from the board of directors, and the number of directors was
decreased from five to four. On April 10, 2001, Mr. Gilliland resigned from the
board of directors and James C. Cassina was appointed to fill the resulting
vacancy. From April 10, 2001 until August 31, 2001, the Board of directors
consisted of James C. Cassina, Elizabeth J. Kirkwood, Sandra J. Hall, and
Richard J. Lachick.
On August 31, 2001, the number of directors was increased from four to five,
Elizabeth J. Kirkwood and Richard J. Lachick resigned from the board of
directors, and Phillip DeZwirek, Thomas W. Mills, and Jason DeZwirek were
appointed to the Board of Directors. The five directors named below continue to
serve as of the date of this Annual Report. The current terms of each of the
Company's directors began on October 30, 2001, the date of the Company's 2001
Annual Meeting of Shareholders, and will expire on the date of the Company's
2002 Annual Meeting of Shareholders. Each of the directors named below has
served as a Director of the Company since the date set forth beside his or her
name:
Sandra J. Hall: April 28, 2000
James C. Cassina: April 10, 2001
Phillip DeZwirek: August 31, 2001
Thomas W. Mills: August 31, 2001
Jason DeZwirek: August 31, 2001
None of the Company's directors are parties to service contracts with the
Company or any of its subsidiaries providing for benefits upon termination of
employment.
The Company does not have a Remuneration Committee. As of the date of this
Annual Report, the
36
Company's Audit Committee consists of three directors, Phillip DeZwirek, Sandra
J. Hall, and Jason DeZwirek. The members are appointed by the Company's
directors at the conclusion of the annual meeting to hold office until the next
annual meeting, or until their successors are elected or appointed. The Audit
Committee reviews the financial statements of the Company and reports thereon to
the Company's Board of Directors before the financial statements are approved by
the Board of Directors.
D. EMPLOYEES
The Company, including its subsidiaries, employed the following numbers of
employees as of the dates and at the locations set forth below:
-----------------------------------------------------------------
Location 5/10/00 10/31/00 4/30/01 10/1/01
-----------------------------------------------------------------
Ontario,
Canada 2 1 1 0
-----------------------------------------------------------------
Charlottesville,
Virginia 0 7 2 0
-----------------------------------------------------------------
Hauppauge,
New York 0 0 0 50
-----------------------------------------------------------------
-----------------------------------------------------------------
TOTAL 2 8 3 50
-----------------------------------------------------------------
-----------------------------------------------------------------
The Company, including its subsidiaries, employed the following numbers of
employees as of the dates and in the categories of activities set forth below:
-----------------------------------------------------------------
Activity 5/10/00 10/31/00 4/30/01 10/1/01
-----------------------------------------------------------------
Corporate
Offices 2 1 1 0
------------------------------------------------------------------
Web site
Management 0 7 2 0
------------------------------------------------------------------
API *
Management 0 0 0 3
------------------------------------------------------------------
API
Sales 0 0 0 2
------------------------------------------------------------------
API Design
Engineering 0 0 0 1
------------------------------------------------------------------
API Testing /
Environmental
Engineering 0 0 0 2
------------------------------------------------------------------
API Process
Engineering 0 0 0 4
------------------------------------------------------------------
API
QualityAssurance 0 0 0 2
------------------------------------------------------------------
API Production
Management 0 0 0 3
------------------------------------------------------------------
API
Assembly 0 0 0 31
------------------------------------------------------------------
API Accounting /
Human Resources 0 0 0 2
------------------------------------------------------------------
37
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL 2 8 3 50
------------------------------------------------------------------
* API = API Electronics, Inc., a wholly owned subsidiary of the Company
For a discussion of the reasons that employee data prior to May 10, 2000 is
excluded from this Item 6D, see the footnotes accompanying the Selected
Consolidated Financial Data in Item 3A above. None of the Company's employees
is a member of a labor union. The Company does not employ temporary employees.
E. SHARE OWNERSHIP
Share Ownership of Directors and Officers
-----------------------------------------
As of September 28, 2001, an aggregate of 10,892,972 Common Shares and no
Special Shares of the Company were issued and outstanding. The table below sets
forth the share ownership in the Company of the persons listed in subsection 6.B
of this Item 6 above as of September 28, 2001, based on numbers reported to the
Company by the persons set forth below. None of the persons set forth below
have different voting rights.
--------------------------------------------------------------------------------
Name Number of Common Percentage of Issued and
Shares Held Outstanding Common Shares(d)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Elizabeth J. Kirkwood 211,895 1.95%
--------------------------------------------------------------------------------
Romaine E. Gilliland 0 0.00%
--------------------------------------------------------------------------------
James C. Cassina 7,667 0.07%
--------------------------------------------------------------------------------
Sandra J. Hall 6,916/(a)/ 0.06%
--------------------------------------------------------------------------------
Phillip DeZwirek 1,567,380/(b)/ 14.39%
--------------------------------------------------------------------------------
Thomas W. Mills 329,916 3.03%
--------------------------------------------------------------------------------
Jason DeZwirek 1,402,422/(c)/ 12.87%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Notes:
------
(a) Ms. Sandra J. Hall holds 6,916 Common Shares of the Company directly. Ms.
Hall also has an indirect interest in an additional 5,000 Common Shares of
the Company (not reflected in the table above) held by Eugenic Corp., a
company in which Ms. Hall is a minority shareholder and of which she is the
President and a director.
(b) Mr. Phillip DeZwirek holds 50% of Icarus Investments Corp., which in turn
holds 50.01% of Can-Med Technology, Inc. Can-Med Technology, Inc. (doing
business as Green Diamond Corp.) held 2,804,283 Common Shares of the
Company as of September 28, 2001. Mr. Phillip DeZwirek thus holds,
indirectly through Can-Med Technology Inc., a 50% interest in approximately
1,402,422 Common Shares of the Company, representing approximately 12.87%
of the outstanding Common Shares of the Company. Mr. Phillip DeZwirek also
controls Technapower Industries Corporation, a company that held 164,958
Common Shares of the Company, representing an additional 1.51 % of the
Company's Common Shares, as of September 28, 2001.
(c) Mr. Jason DeZwirek holds 50% of Icarus Investments Corp., which in turn
holds 50.01% of Can-
38
Med Technology, Inc. Can-Med Technology Inc. (doing business as Green
Diamond Corp.) held 2,804,283 Common Shares of the Company as of September
28, 2001. Mr. Jason DeZwirek thus holds, indirectly through Can-Med
Technology Inc., a 50% interest in approximately 1,402,422 Common Shares of
the Company, representing approximately 12.87% of the outstanding Common
Shares of the Company.
(d) Percentages are computed by dividing the number of Common Shares held
(excluding options and warrants to purchase Common Shares, which are
disclosed separately below) by the 10,892,972 Common Shares of the Company
issued and outstanding as of September 28, 2001. Note that percentages
held by the Company's major shareholders, as disclosed in Item 7A below,
which reflect shares beneficially owned (including options and warrants),
may be higher.
Stock Option Plan
-----------------
In 1995, a stock option plan was authorized for directors, officers and
employees. The terms of the plan restrict options granted at any point in time
to 10% of the outstanding shares of the Company. Also, no optionee can be
granted options of more than 5% of the outstanding Common Shares of the Company
at one point in time. The maximum term of any option granted is five years.
Stock Options Held by Directors and Officers
--------------------------------------------
The following table sets forth all outstanding stock options granted to
directors and officers of the Company for whom individual disclosure is required
under Ontario law or for whom the Company has elected to disclose publicly as of
the date of this Annual Report:
Common Share Purchase Options
--------------------------------------------------------------------------------
Optionee Number of Shares Exercise Price Expiration Date
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Elizabeth J. Kirkwood 10,000 $.90 August 3, 2002
--------------------------------------------------------------------------------
James C. Cassina 50,000 $.45 July 31, 2006
--------------------------------------------------------------------------------
James C. Cassina 50,000 $.75 July 31, 2006
--------------------------------------------------------------------------------
Sandra J. Hall 50,000 $.45 July 31, 2006
--------------------------------------------------------------------------------
Sandra J. Hall 50,000 $.75 July 31, 2006
--------------------------------------------------------------------------------
Phillip DeZwirek 50,000 $.45 August 31, 2006
--------------------------------------------------------------------------------
Phillip DeZwirek 50,000 $.75 August 31, 2006
--------------------------------------------------------------------------------
Thomas W. Mills 50,000 $.45 August 31, 2006
--------------------------------------------------------------------------------
Thomas W. Mills 50,000 $.75 August 31, 2006
--------------------------------------------------------------------------------
Jason DeZwirek 50,000 $.45 August 31, 2006
--------------------------------------------------------------------------------
Jason DeZwirek 50,000 $.75 August 31, 2006
--------------------------------------------------------------------------------
No purchase price was associated with any of the stock options set forth above.
The number of shares and exercise prices associated with the stock options set
forth above reflect post-consolidation numbers and prices--see Note 11(b) to the
financial statements contained in Part III, Item 17 of this Annual Report.
Warrants Held by Directors and Officers
---------------------------------------
The following table sets forth all outstanding warrants to purchase Common
Shares granted to persons for whom individual disclosure is required under
Ontario law or for whom the Company has elected to disclose
39
publicly as of the date of this Annual Report:
Warrants to Purchase Common Shares
--------------------------------------------------------------------------------
Warrant Holder Number of Shares Exercise Price Expiration Date
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Phillip DeZwirek/(a)/ 783,690 US$.45 February 28, 2003
--------------------------------------------------------------------------------
Phillip DeZwirek/(a)/ 783,690 US$.75 August 30, 2003
--------------------------------------------------------------------------------
Thomas W. Mills 164,958 US$.45 February 28, 2003
--------------------------------------------------------------------------------
Thomas W. Mills 164,958 US$.75 August 30, 2003
--------------------------------------------------------------------------------
Jason DeZwirek/(b)/ 701,211 US$.45 February 28, 2003
--------------------------------------------------------------------------------
Jason DeZwirek/(b)/ 701,211 US$.75 August 30, 2003
--------------------------------------------------------------------------------
_____________
Notes:
------
(a) Mr. Phillip DeZwirek holds 50% of Icarus Investments Corp., which in turn
holds 50.01% of Can-Med Technology, Inc. Can-Med Technology, Inc. (doing
business as Green Diamond Corp.) held Class A Warrants to purchase
1,402,142 Common Shares of the Company at an exercise price of US$.45 and
Class B Warrants to purchase 1,402,142 Common Shares of the Company at an
exercise price of US$.75 as of September 28, 2001. Mr. Phillip DeZwirek
thus holds, indirectly through Can-Med Technology Inc., a 50% interest in
warrants to purchase approximately 1,402,422 Common Shares of the Company.
Mr. Phillip DeZwirek also controls Technapower Industries Corporation, a
company that held Class A Warrants to purchase 82,479 Common Shares of the
Company at an exercise price of US$.45 and Class B Warrants to purchase
82,479 Common Shares of the Company at an exercise price of US$.75 as of
September 28, 2001.
(b) Mr. Jason DeZwirek holds 50% of Icarus Investments Corp., which in turn
holds 50.01% of Can-Med Technology, Inc. Can-Med Technology, Inc. (doing
business as Green Diamond Corp.) held Class A Warrants to purchase
1,402,142 Common Shares of the Company at an exercise price of US$.45 and
Class B Warrants to purchase 1,402,142 Common Shares of the Company at an
exercise price of US$.75 as of September 28, 2001. Mr. Phillip DeZwirek
thus holds, indirectly through Can-Med Technology Inc., a 50% interest in
warrants to purchase approximately 1,402,422 Common Shares of the Company.
The warrants described in the table above were issued in connection with the
transaction described in Note 11(a) to the financial statements contained in
Part III, Item 17 of this Annual Report, and for the consideration described
therein. The number of shares and exercise prices associated with the stock
options set forth above reflect post-consolidation numbers and prices--see Note
11(b) to the financial statements contained in Part III, Item 17 of this Annual
Report.
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
The following table discloses all known major shareholders beneficially owning
5% or more of the Company's issued and outstanding shares of Common Stock as of
September 28, 2001. As of September 28, 2001 (and as of the date of this Annual
Report), an aggregate of 10,892,972 Common Shares and no Special Shares of the
Company were issued and outstanding. None of the major shareholders have
different voting rights.
40
-----------------------------------------------------------------------------------------
Name Number of Common Shares Percentage of Issued and
Beneficially Owned Outstanding Common Shares /(a)/
-----------------------------------------------------------------------------------------
Can-Med Technology, Inc. doing 5,608,567/(b)/ 33.99%
business as Green Diamond Corp.
-----------------------------------------------------------------------------------------
Phillip DeZwirek 6,038,483/(c)/ 43.25%
-----------------------------------------------------------------------------------------
Jason DeZwirek 5,708,567/(d)/ 40.89%
-----------------------------------------------------------------------------------------
Seloz Gestion & Finance SA 1,094,165/(e)/ 9.13%
-----------------------------------------------------------------------------------------
Hapi Handels-Und- 1,094,165/(e)/ 9.13%
Beteiligungsqeselischaft MBH
-----------------------------------------------------------------------------------------
Private Investment Company Ltd. 1,094,165/(e)/ 9.13%
-----------------------------------------------------------------------------------------
CCD Consulting Commerce 1,094,165/(e)/ 9.13%
Distruibution AG
-----------------------------------------------------------------------------------------
Partner Marketing AG 1,094,165/(e)/ 9.13%
-----------------------------------------------------------------------------------------
Thomas W. Mills 759,832 /(f)/ 6.52%
-----------------------------------------------------------------------------------------
Shangri-La Investments Inc 669,565/(g)/ 5.79%
-----------------------------------------------------------------------------------------
Notes:
------
(a) Computed by dividing the number of shares beneficially held by each
shareholder, including Common Shares and Common Shares underlying options
and warrants exersisable within 60 days, by the total number of issued and
outstanding Common Shares of the Company plus each shareholder's Common
Shares underlying options and warrants exersisable within 60 days.
(b) Includes 2,804,283 Common Shares and 2,804,284 Common Shares underlying
warrants exercisable within 60 days.
(c) Includes 2,804,283 Common Shares and 2,804,284 Common Shares underlying
warrants exercisable within 60 days held of record by Can-Med Technology,
Inc. d/b/a Green Diamond Corp. ("Green Diamond Corp."). Mr. Phillip
DeZwirek is the President of Green Diamond Corp., and holds a 50% equity
interest in Icarus Investments Corp., which in turn holds a 50.01% equity
interest in Green Diamond Corp. Also includes 164,958 Common Shares and
164,958 Common Shares underlying warrants exercisable within 60 days held
of record by Technapower Industries Corporation, a corporation controlled
by Mr. Phillip DeZwirek. Also includes 100,000 Common Shares underlying
options exercisable within 60 days held of record by Mr. Phillip DeZwirek.
(d) Includes 2,804,283 Common Shares and 2,804,284 Common Shares underlying
warrants exercisable within 60 days held of record by Can-Med Technology,
Inc. d/b/a Green Diamond Corp. ("Green Diamond Corp."). Mr. Phillip
DeZwirek, Mr. Jason DeZwirek's father, is the President of Green Diamond
Corp., and Mr. Jason DeZwirek holds a 50% equity interest in Icarus
Investments Corp., which in turn holds a 50.01% equity interest in Green
Diamond Corp. Also includes 100,000 Common Shares underlying options
exercisable within 60 days held of record by Mr. Jason DeZwirek.
(e) Includes 547,083 Common Shares and 547,082 Common Shares underlying
warrants exercisable within 60 days.
(f) Includes 329,916 Common Shares and 329,916 Common Shares underlying
warrants exercisable within 60 days. Also includes 100,000 Common Shares
underlying options exercisable within 60 days.
(g) Includes 334,781 Common Shares and 334,784 Common Shares underlying
warrants exercisable within 60 days.
41
Each of the major shareholders listed above obtained his or its Common Shares
effective August 31, 2001. There have been no other significant changes in the
percentage ownership held by any of the above major shareholders during the past
three years.
The following table discloses the geographic distribution of the holders of
record of the Company's Common Stock as of September 28, 2001:
-------------------------------------------------------------------------------------------------
Number of Number of Shares Percentage of Percentage of Shares
Country Shareholders Shareholders
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Canada 1,040 6,141,793 89.19% 56.38%
-------------------------------------------------------------------------------------------------
USA (host country) 107 699,084 9.18% 6.42%
-------------------------------------------------------------------------------------------------
Switzerland 3 1,641,249 0.26% 15.07%
-------------------------------------------------------------------------------------------------
Australia 4 1,166 0.34% 0.01%
-------------------------------------------------------------------------------------------------
Bahamas 5 783,845 0.43% 7.20%
-------------------------------------------------------------------------------------------------
Turks & Caicos 1 547,083 0.09% 5.02%
-------------------------------------------------------------------------------------------------
Austria 1 547,083 0.09% 5.02%
-------------------------------------------------------------------------------------------------
Denmark 1 2 0.09% 0.00%
-------------------------------------------------------------------------------------------------
British Virgin 1 200,000 0.09% 1.84%
Islands
-------------------------------------------------------------------------------------------------
Botswana 1 13,333 0.09% 0.12%
-------------------------------------------------------------------------------------------------
Belize 1 159,167 0.09% 1.46%
-------------------------------------------------------------------------------------------------
BWI 1 159,167 0.09% 1.46%
-------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------
Total 1,166 10,892,972 100.03%/(a)/ 100%
-------------------------------------------------------------------------------------------------
/(a)/ Rounding Error.
The Company may be indirectly controlled by Can-Med Technology Inc., which, as
of September 28, 2001, held 2,804,283 shares of Common Stock of the Company
(excluding warrants), representing approximately 25.74% of the Company's issued
and outstanding shares of Common Stock as of September 28, 2001. The Company
may be indirectly controlled by Phillip DeZwirek, who indirectly, through his
ownership of a portion of Can-Med Technology Inc. and Technapower Industries
Corporation, held approximately 14.39% of the Company's issued and outstanding
shares of Common Stock (excluding options and warrants) as of September 28,
2001. The Company may be indirectly controlled by Jason DeZwirek, who
indirectly, through his ownership of a portion of Can-Med
42
Technology Inc., held approximately 12.87% of the Company's issued and
outstanding shares of Common Stock (excluding options and warrants) as of
September 28, 2001. The Company is not aware of any other corporations, foreign
governments, natural persons, or legal persons that may directly or indirectly
own or control the Company.
There are no arrangements known to the Company, the operation of which may at a
subsequent date result in a change in control of the Company.
B. RELATED PARTY TRANSACTIONS SINCE MAY 10, 2000
Ms. Elizabeth J. Kirkwood, formerly the Chief Executive Officer of the Company,
serves on the Board of Directors of Stroud Resources Ltd., a company in which
the Company holds a minority interest as a passive investment. See Item 6B
above for additional related party transactions with Elizabeth J. Kirkwood and
her affiliates, and for related party transactions with Romaine E. Gilliland,
Sandra J. Hall, and their affiliates.
Frank Kollar, who served as Chairman of the Company's board of directors from
June 6, 2000 until March 7, 2001, entered into a two year employment agreement
with the Company's wholly owned subsidiary IL Data Corporation, Inc. on June 6,
2000 to act as its President at an annual salary of US $60,000. This employment
agreement was terminated on March 7, 2001. As reflected in Note 7(d) to the
financial statements included in Part III, Item 17 of this Annual Report, the
Company paid Frank Kollar, formerly Chairman of the Company's board of
directors, $30,227 in consulting fees during the fiscal year ending April 30,
2001. The Company also paid Mr. Kollar US $10,000 per month in consulting fees
from May 1, 2001 through August 31, 2001.
On March 7, 2001, the Company purchased 4,890,000 Common Shares of the Company
from Sierra Holdings Limited, a company beneficially owned 88.84% by Frank
Kollar and 11.16% by Romaine E. Gilliland (3,890,000 Common Shares), George
Stubos, a former member of the Company's board of directors (500,000 Common
Shares), and Christos Lividas, a former member of the Company's advisory board
(500,000 Common Shares) for consideration of US $.05 per share (US $244,500 or
Cdn. $376,164).
C. INTERESTS OF EXPERTS AND COUNSEL
Not Applicable.
ITEM 8. FINANCIAL INFORMATION
Consolidated Financial Statements
See the Consolidated Financial Statements set forth in Part III, Item 17 hereof
and filed as a part of this Annual Report.
Export Sales
Export sales did not constitute a significant portion of the Company's total
sales volume as of April 30, 2001, the end of the Company's most recent fiscal
year.
Legal or Arbitration Proceedings
As of the date of this Annual Report, there are no legal or arbitration
proceedings that may have, or have
43
had in the recent past, significant effects on the Company's financial position
or profitability.
Company Policy on Dividend Distributions
The Company's board of directors declared the Company's most recent dividend on
April 11, 2000, when the Company issued a dividend-in-kind of 6,266,667 common
shares of First Strike Diamonds Inc. to shareholders of record of the Company on
March 1, 2000. This dividend was an extraordinary event and the Company does not
intend to pay further dividends in cash or in kind in the future. The Company
expects to retain its earnings to finance the further growth of the Company.
The directors of the Company will determine if and when dividends should be
declared and paid in the future based upon the earnings and financial conditions
of the Company at the relevant time and such other factors as the directors may
deem relevant. All of the Common Shares of the Company are entitled to an equal
share in any dividends declared and paid.
Significant Changes
Significant changes have occurred since April 30, 2001, the date of the
Consolidated Financial Statements set forth in Part III, Item 17 hereof and
filed as a part of this Annual Report. In particular, see Note 11 ("Subsequent
Events") to the Consolidated Financial Statements for a description of these
significant changes.
ITEM 9. THE OFFER AND LISTING
Not applicable except for Item 9A(4) and Item 9C.
A(4). PRICE HISTORY
Price History in the Canadian Market
The following table sets forth the reported high and low sale prices and, as
applicable, the volume of trading of the Company's Common Shares, as adjusted to
reflect a 1:3 consolidation of the Company's Common Shares effective September
10, 2001 and a 1:10 consolidation of the Company's Common Shares effective May
18, 1999, and as reported by the Canadian Dealing Network Inc. ("CDN") (prior to
December 22, 2000) or the Canadian Venture Exchange ("CDNX") (after December 22,
2000), as applicable, for the periods indicated:
Period High Low Volume
------- ---- --- ------
Past 6 Calendar Months
----------------------
2001: September/(a)/......................... N/A N/A N/A
August (through August 8, 2001)/(a)/... $1.50 $1.29 10,150
July................................... 0.45 0.39 2,652
June................................... 0.60 0.27 16,754
May.................................... 0.75 0.45 347,033
April.................................. 0.39 0.39 69
Quarterly Data Since Q1 2000
----------------------------
2002: Second Quarter (10/31/01)/(a)/......... 1.50 1.29 10,050
First Quarter (7/31/01)................ 0.75 0.27 366,443
44
2001: Fourth Quarter (4/30/01)............ 1.38 0.75 4,572
Third Quarter (1/31/01)/(b)/........ 2.28 1.38 39,327
Second Quarter (10/31/00)/(c)/...... N/A N/A N/A
First Quarter (7/31/00)/(c)/........ N/A N/A N/A
2000: Fourth Quarter (4/30/00)/(c)/....... 12.00 5.25 508,159
Third Quarter (1/31/00)............. 12.00 2.70 567,014
Second Quarter (10/31/99)........... 2.70 0.81 202,022
First Quarter (7/31/99)............. 1.20 0.75 31,236
2001: FYE 4/30/01/(b)/.................... 2.28 0.75 43,899
2000: FYE 4/30/00/(c)/.................... 12.15 0.75 1,003,930
1999: FYE 4/30/99:........................ 16.50 2.10 591,876
1998: FYE 4/30/98:........................ 72.00 6.00 15,852,442
1997: FYE 4/30/97:........................ 142.50 22.50 2,577,307
/(a)/ The Company's trading was halted on the CDNX as of August 8, 2001. The
Company's Board of Directors has determined that it will not seek to re-
establish trading of its Common Shares on the CDNX and has requested to be
delisted voluntarily from the CDNX.
/(b)/ Beginning December 22, 2000, the date on which trading commenced on
the CDNX.
/(c)/ The Company's Common Shares were not traded in Canada from March 3,
2000 until December 22, 2000.
Prior to December 22, 2000, the Company's Common Shares were traded on the CDN,
and were traded under the symbol OPUS from May 1999 until March 3, 2000. On
March 3, 2000, when the Company announced a transaction with IL Data
Corporation, the Company's Common Shares were removed from the visible quotation
provided by the CDN because the transaction represented a change in control, a
change in business and a change of name for the Company. The IL Data
Corporation transaction was completed on June 6, 2000, the name change occurred
on July 25, 2000, and the Company filed an application for quotation with CDN on
August 11, 2000.
In the meantime, some companies that were quoted on CDN were invited to apply
for listing on the CDNX. The Company made the application for listing on the
CDNX and filed the necessary documentation, and began listing the shares of the
Company on Tier 3 of CDNX as of December 22, 2000.
For the period from December 22, 2000 through August 8, 2001, the Common Stock
of the Company was listed on the CDNX under the symbol "YIK" and CUSIP
#461459109. The Company's trading was halted on the CDNX as of August 8, 2001,
and remains halted as of the date of this Annual Report. This is a result of
the fact that the Company's Board of Directors, based on business and timing
factors, decided not to obtain pre-approval from the CDNX for its August 31,
2001 acquisition of API Electronics, Inc., which constituted a reverse take-over
transaction requiring pre-approval. The Company's Board of Directors has
determined that it will not seek to reestablish trading of its Common Shares on
the CDNX, and has requested to be delisted voluntarily from the CDNX.
Price History in the United States Market
During the fiscal year ending April 30, 2001 and through September 7, 2001,
while the Company's name was InvestorLinks.com Inc., the Common Stock of the
Company was traded over-the-counter on the NASD
45
OTC Bulletin Board under the symbol "IVLKF." On August 30, 2001, the Company's
shareholders approved a change of the Company's name from InvestorLinks.com Inc.
to API Electronics Group Inc., and the consolidation of the authorized common
shares on the basis that every three pre-consolidation Common Shares were
converted into one post-consolidation Common Share. The name change and share
consolidation became effective on September 10, 2001, when the Company filed
Articles of Amendment in Ontario. On September 10, 2001, shares of the Company's
Common Stock began trading on the National Association of Securities Dealers OTC
Bulletin Board under the symbol "APIEF."
The following table sets forth the reported high and low bid prices and volume
of trading of the Common Shares, as adjusted to reflect a 1:3 consolidation of
the Company's Common Shares effective September 10, 2001 and a 1:10
consolidation of the Company's Common Shares effective May 18, 1999, and as
reported by the NASD for the fiscal periods indicated (the Common Stock
commenced trading on the NASD Electronic Bulletin Board in February 1997). Such
over-the-counter market quotations reflect interdealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
Period High Low Volume
------ ---- --- ------
Past 6 Calendar Months
----------------------
2001: September................... US$1.39 US $0.75 2,133
August...................... 1.05 0.51 62,200
July........................ 0.57 0.33 12,000
June........................ 0.57 0.33 5,867
May......................... 0.75 0.39 100,533
April....................... 0.60 0.375 8,400
Quarterly Data Since Q1 2000
----------------------------
Fiscal 2002: First Quarter (7/31/01)..... 0.75 0.33 118,400
Fiscal 2001: Fourth Quarter (4/30/01).... 0.600 0.375 56,833
Third Quarter (1/31/01)..... 3.844 0.750 295,933
Second Quarter (10/31/00)... 10.125 3.750 781,800
First Quarter (7/31/00)..... 8.718 3.375 1,418,400
Fiscal 2000: Fourth Quarter (4/30/00).... 9.186 3.750 250,600
Third Quarter (1/31/00)..... 8.115 1.710 152,467
Second Quarter (10/31/99)... 1.875 0.450 465,467
First Quarter (7/31/99)..... 2.400 0.450 29,067
2001: FYE 4/30/01:................ 13.500 0.375 2,593,460
2000: FYE 4/30/00:................ 9.186 0.450 897,600
1999: FYE 4/30/99:................ 13.11 1.500 141,900
1998: FYE 4/30/98:................ 56.25 6.000 235,533
1997: FYE 4/30/97:................ N/A*
* The Company's Common Stock did not trade on the NASD Bulletin Board
prior to February, 1997.
46
The Company's Common Stock is not registered to trade in the United States in
the form of American Depository Receipts (ADR's) or similar certificates.
The Company's Common Stock is issued in registered form and the following
information is taken from the records of Equity Transfer Services, Inc. (located
in Toronto, Ontario, Canada), the registrar and transfer agent for the Common
Stock.
As of September 28, 2001, the stockholders' list for the Company's Common Shares
showed 1,166 registered stockholders and 10,892,972 Common Shares outstanding.
Since a portion of the Company's Common Shares is held by agents in street name,
and the Company (pursuant to applicable Canadian and corporate law) only sends
information concerning the Company, including with respect to its Annual General
Meeting, to shareholders who request this information, the Company cannot
estimate the total number of beneficial holders of its Common Shares. For the
same reason the Company is unaware of how many of its outstanding Common Shares
are held by United States residents. In accordance with Rule 12g5-1 of the
Securities Exchange Act of 1934, the Company's share register indicated, as of
September 28, 2001, 107 stockholders having addresses in the United States
(including voting trustees, depositories, share transfer agents, or any person
acting on behalf of the Company within the United States), which persons held
699,084 of the Company's issued and outstanding Common Shares, representing
approximately 6.42% of the total issued and outstanding Common Shares as of such
date.
C. MARKETS
See Item 9A(4) above.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
The Company's corporation number as assigned by the Ontario Ministry of Consumer
and Commercial Relations is 1028514. The Company's Articles of Amalgamation do
not contain the Company's purpose or its objectives, as neither is required
under the laws of Ontario.
No director of the Company is permitted to vote on any resolution to approve a
material contract or transaction in which such director has a material interest.
(Bylaws, Paragraph 17). Neither the Articles of Amalgamation nor the Bylaws of
the Company limit the directors' power, in the absence of an independent quorum,
to vote compensation to themselves or any members of their body. The Bylaws
provide that directors shall receive remuneration, as the board of directors
shall determine from time to time. (Bylaws, Paragraph 15). The board of
directors may, without the authorization of the shareholders, (i) borrow money
upon the credit of the Company; (ii) issue, reissue, sell or pledge debt
obligations of the Company; whether secured or unsecured (iii) give a guarantee
on behalf of the Company to secure performance of obligations; and (iv) charge,
mortgage, hypothecate, pledge or otherwise create a security interest in all
currently owned or subsequently acquired real or personal, movable or immovable,
tangible or intangible, property of the Company to secure obligations of the
Company. (Bylaws, Paragraph 38). Neither the Articles of Amalgamation nor the
Bylaws of the Company discuss the retirement or non-retirement of directors
under an age limit requirement, and there is no number of shares required for
director qualification.
47
A description of the rights, preferences and restrictions attached to each class
of the Company's shares as set forth in the Company's Articles of Amalgamation
follows:
The Company's Articles of Amalgamation provide that the Company is authorized to
issue an unlimited number of Common Shares ("Common Shares") and an unlimited
number of Special Shares ("Special Shares"). Of the Special Shares, the Company
has designated a class of up to 500,000 Preference Shares ("Preference Shares").
While the Company has issued Common Shares, it has not issued any Preference
Shares or other Special Shares.
Dividend Rights. The Company's Articles of Amalgamation provide that no
dividends shall be declared, set aside, or paid on the Preference Shares. Thus,
only holders of Common Shares are entitled to be paid dividends under the
Company's current Articles of Amalgamation.
Voting Rights. Neither the Company's Articles of Amalgamation nor its Bylaws
provide for the election or reelection of directors at staggered intervals. The
holders of Common Shares and Preference Shares have equal voting rights at
meetings of the Company's shareholders.
Rights to Share in the Company's Profits. See "Dividend Rights" above.
Rights to Share in Any Surplus in the Event of Liquidation. Under the Company's
Articles of Amalgamation, upon the dissolution, winding up or liquidation of the
Company, holders of Preference Shares are entitled to receive a sum equivalent
to the amount paid for the Preference Shares prior to any distribution to the
holders of Common Shares or shares ranking junior to the Preference Shares.
Holders of Preference Shares are not entitled to share in any further
distribution of the assets or property of the Company. Holders of the Common
Shares are entitled to receive the remaining property of the Company upon
dissolution.
Redemption Provisions. Under the Company's Articles of Amalgamation, the
Company, when redeeming shares:
. Shall not redeem Preference Shares prior to the expiration of five
years from the issuance date without the prior consent of the holder
of the Preference Shares to be redeemed;
. Shall, at least thirty days prior to the redemption date, mail a
notice to all registered holders of Preference Shares stating its
intention to redeem such shares. The notice shall set forth the
redemption price, the date on which redemption is to occur, and the
number of the holder's shares that are to be redeemed. If only a
portion of the holder's shares is to be redeemed, the Company shall
issue such holder a new certificate for the balance of such shares.
After the redemption date, the holders shall not be entitled to
exercise any rights of shareholders unless the Company failed to pay
the redemption price;
. May at any time, with the consent of the holder, purchase for
cancellation all or part of the Preference Shares; and
. May purchase any of its issued Common Shares subject to the provisions
of the Ontario Business Corporations Act.
Sinking Fund Provisions. Neither the Company's Articles of Amalgamation nor its
Bylaws contain sinking fund provisions.
Liability to Further Capital Calls by the Company. Neither the Company's
Articles of Amalgamation nor its Bylaws contain provisions allowing the Company
to make further capital calls with respect to any
48
shareholder of the Company.
Discriminatory Provisions Based on Substantial Ownership. Neither the Company's
Articles of Amalgamation nor its Bylaws contain provisions which discriminate
against any existing or prospective holders of securities as a result of such
shareholder owning a substantial number of shares.
Miscellaneous Provisions. Under the Company's Articles of Amalgamation, holders
of Preference Shares shall not be entitled to sell, assign, transfer or dispose
of Preference Shares without the previous, express consent of the directors and
the prior written consent of the Ontario Securities Commission. In the event
the Company were to pay dividends on the issued and outstanding shares, the
dividend must be claimed within six years of the payment date and payment shall
be forfeited and shall revert to the Company if not so claimed.
Neither the Articles of Amalgamation nor the Bylaws of the Company address the
process by which the rights of holders of stock may be changed. The general
provisions of the Ontario Business Corporations Act apply to this process, and
require shareholder meetings and independent voting for such changes.
Annual general meetings of the Company's shareholders are held on such day as is
determined by resolution of the directors. (Bylaws, Paragraph 45). Special
meetings of the Company's shareholders may be convened by order of the Chairman
or Vice-Chairman of the Board, the Managing Director, the President if a
director, a Vice-President who is a director, or the board of directors.
(Bylaws, Paragraph 46). Shareholders of record must be given notice of such
special meeting not less than 33 days nor more than 50 days before the date of
the meeting. Notices of special meetings of shareholders must state the nature
of the business to be transacted in detail and must include the text of any
special resolution or bylaw to be submitted to the meeting. (Bylaws, Paragraph
47). The Company's board of directors is permitted to fix a record date for any
meeting of the shareholders that is between 21 and 50 days prior to such
meeting. (Bylaws, Paragraph 51). However, as a result of Ontario securities
laws applicable to the Company, the record date must be at least 35 days prior
to the meeting date. The only persons entitled to admission at a meeting of the
shareholders are shareholders entitled to vote, the Company's directors, the
Company's auditors, and others entitled by law, by invitation of the chairman of
the meeting, or by consent of the meeting. (Bylaws, Paragraph 50).
Neither the Articles of Amalgamation nor the Bylaws of the Company discuss
limitations on the rights to own securities or exercise voting rights thereon.
There is no provision of the Company's Articles of Amalgamation or Bylaws that
would delay, defer or prevent a change in control of the Company, and that would
operate only with respect to a merger, acquisition, or corporate restructuring
involving the Company (or any of its subsidiaries). The Company's Bylaws do not
contain a provision indicating the ownership threshold above which shareholder
ownership must be disclosed. With respect to the matters discussed in this Item
10B, the law applicable to the Company is not significantly different from
United States law. Neither the Articles of Amalgamation nor Bylaws contain
provisions governing changes in capital that are more stringent than the
conditions required by law.
C. MATERIAL CONTRACTS
The following table summarizes each material contract, other than contracts
entered into in the ordinary course of business, to which the Company or any
member of the Company's group is a party, for the two years immediately
preceding the publication of this Annual Report:
49
-------------------------------------------------------------------------------------------------------------------
Date Parties Type Terms and Conditions Consideration
-------------------------------------------------------------------------------------------------------------------
Oct. 12, 1999 Company and Taurus Agency Taurus agrees to coordinate the Commission of 7%, or
Capital Markets Agreement offering of 3,000,000 units of $52,500 and 300,000
Ltd. ("Taurus") the Company for sale by private compensation warrants,
placement, each unit consisting each warrant exercisable
of one Common Share and one to purchase one Unit for
Common Share purchase warrant $0.25 per Unit. Taurus
for $0.25 per unit ("Unit). has exercised all of its
Each common share purchase compensation warrants.
warrant is exercisable at the
price of $0.35 per share on or
before October 23, 2001.
-------------------------------------------------------------------------------------------------------------------
Nov. 15, 1999 Company and Consulting IRG agrees to provide $15,000 per month
Investor Relations Agreement consulting services to the
Group (Ontario) Company for a period of one
Inc. ("IRG") year ending November 15, 2000
with a one-year renewal option.
Agreement was mutually
terminated effective February
28, 2001, and the related
options lapsed effective March
30, 2001.
-------------------------------------------------------------------------------------------------------------------
Nov. 15, 1999 Company and IRG Stock Option Company granted IRG options to At the date of the
Agreement purchase up to 300,000 Common agreement the options
Shares at $0.90 per share on or had no value.
before November 30, 2001.
Agreement was mutually
terminated effective February
28, 2001, and the related
options lapsed effective March
30, 2001.
-------------------------------------------------------------------------------------------------------------------
January 17, Company and Vertex Acquisition Company transferred and $940,000
2000 Ventures Inc. Agreement assigned all of its interest in
("Vertex") the Baffin Island Project, the
Gope Project and converted
$265,000 of indebtedness to
Vertex for common shares of
Vertex valued at $0.15 per
share.
-------------------------------------------------------------------------------------------------------------------
June 6, 2000 Company, IL Data Securities Company acquired all of the $1,700,000 in Common
Canada, Inc. ("IL Exchange shares of IL Data, which Shares of the Company
Data") and the Agreement indirectly owns and operates
shareholders of IL the Internet investment site
Data Canada, Inc. www.InvestorLinks.com.
-------------------------------------------------------------------------------------------------------------------
50
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and IRG Amendment to Parties agreed to increase $5,000 per month
Consulting monthly fee to US$20,000 and to
Agreement extend term of agreement to
dated Nov. 15, July 1, 2001, with a one-year
1999 renewal option. Agreement was
mutually terminated effective
February 28, 2001, and the
related options lapsed
effective March 30, 2001.
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and IRG Stock Option Company granted IRG options to At the date of the
Agreement purchase up to 150,000 Common agreement the options
Shares at US$2.55 per share on had no material value
or before June 30, 2002. because the market value
Agreement was mutually of the Common Shares was
terminated effective February US$2.53.
28, 2001, and the related
options lapsed effective March
30, 2001.
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Messrs. Consulting and The consultants agreed to sit At the date of the
Carusone, Livadas, Advisory Board on Company's Advisory Board and agreement the options
Johnson and Ms. Wood Agreements Company agreed to grant stock had no material value
options to purchase up to because the market value
225,000 Common Shares in the of the Common Shares was
aggregate at US$2.55 per share US$2.53.
on or before June 26, 2005.
(Mr. Livadas' agreement and
stock option grant were
cancelled and forfeited by
Release, dated March 1, 2001,
between the parties. See
summary below. All agreements
expired as of June 26, 2001,
and the related options have
lapsed.)
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Kathy Stock Option Company granted Hobbs-Parent At the date of the
Hobbs-Parent Agreement options to purchase up to 9,000 agreement the options
Common Shares at $2.55 per had no material value
share, vesting at a rate of 1/3 because the market value
per year for three years. Ms. of the Common Shares was
Hobbs-Parent's employment was US$2.53.
terminated effective May 31,
2001. The options expired
August 29, 2001.
-------------------------------------------------------------------------------------------------------------------
51
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Stock Option Company granted Ms. Kirkwood At the date of the
Elizabeth J. Agreement options to purchase up to agreement the options
Kirkwood 18,000 Common Shares at $2.55 had no material value
per share on or before June 30, because the market value
2005. (Released by letter, of the Common Shares was
dated July 24, 2001, signed by US$2.53.
Ms. Kirkwood - See below)
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Sandra Stock Option Company granted Ms. Hall At the date of the
J. Hall Agreement options to purchase up to agreement the options
45,000 Common Shares at $2.55 had no material value
per share on or before June 30, because the market value
2005. (Released by letter, of the Common Shares was
dated July 24, 2001, signed by US$2.53.
Ms. Hall)
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and George Stock Option Company granted Mr. Stubos At the date of the
Stubos Agreement options to purchase up to agreement the options
90,000 Common Shares at $2.55 had no material value
per share on or before June 30, because the market value
2005. (Cancelled by Release, of the Common Shares was
dated March 1, 2001, between US$2.53.
the parties. See summary below)
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Romaine Stock Option Company granted Mr. Gilliland At the date of the
Gilliland Agreement options to purchase up to agreement the options
110,000 Common Shares at $2.55 had no material value
per share on or before June 30, because the market value
2005. Mr. Gilliland resigned of the Common Shares was
effective April 10, 2001. The US$2.53.
options lapsed July 10, 2001.
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Frank Stock Option Company granted Mr. Kollar At the date of the
Kollar Agreement options to purchase up to agreement the options
290,000 Common Shares at $2.55 had no material value
per share on or before June 30, because the market value
2005 (Cancelled by Release, of the Common Shares was
dated March 1, 2001, between US$2.53.
the parties. See summary below)
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Denise Stock Option Company granted Ms. Gervin At the date of the
Gervin Agreement options to purchase up to agreement the options
15,000 Common Shares at $2.55 had no material value
per share, vesting at a rate of because the market value
1/3 per year for three years. of the Common Shares was
Ms. Gervin's employment was US$2.53.
terminated effective February
9, 2001. The options expired
May 9, 2001.
-------------------------------------------------------------------------------------------------------------------
52
-------------------------------------------------------------------------------------------------------------------
June 26, 2000 Company and Chris Consulting and Mr. Papaioannou agrees to . $2,166.67 per month
Papaioannou Stock Option provide consulting services to . Reimbursement for
Agreement the Company for a three-year expenses
period commencing June 26, . Company granted Mr.
2000. Mr. Papaioannou Papaioannou options to
terminated the Consulting purchase up to 9,000
Agreement effective December Common Shares at $2.55
2000, and the related options per share for a period
have lapsed. of five years, vesting
at a rate of 1/3 per
year for three years. At
the date of the
agreement the options
had no material value
because the market value
of the Common Shares was
US$2.53.
--------------------------------------------------------------------------------------------------------------------
August 2, 2000 Company and Subscription Stockhouse subscribed for US$3,375,000
Stockhouse Media Agreement 1,500,000 Common Shares of the
Corp. ("Stockhouse") Company at US$2.25 to be
satisfied by providing services
to the Company over a two-year
period. See Note 4(b)(ii) of
the Financial Statements
included in Item 17 of this
Annual Report for further
detail regarding the
termination of agreements with
Stockhouse.
--------------------------------------------------------------------------------------------------------------------
August 2, 2000 Company and Services Stockhouse sets out the See description of
Stockhouse Agreement services and functions to be Subscription Agreement
performed by Stockhouse to earn between Company and
the 1,500,000 Common Shares of Stockhouse Media Corp.
the Company referred to above. above.
See Note 4(b)(ii) of this
Financial Statements included
in Item 17 of this Annual
Report for further detail
regarding the termination of
agreements with Stockhouse.
--------------------------------------------------------------------------------------------------------------------
August 8, 2000 Company and Ming Subscription Ming subscribed for 680,000 US$1,530,000
Capital Enterprises Agreement units of the Company for
Ltd. ("Ming") US$2.25 per unit. Each unit
consists of one Common Share
and one Common Share purchase
warrant exercisable at the
price of US$3.00.
--------------------------------------------------------------------------------------------------------------------
53
--------------------------------------------------------------------------------------------------------------------
August 8, 2000 Company and Ming Warrant Certificate evidencing right of Nil
Certificate Ming to purchase 680,000 Common
Shares at the price of US$3.00
on or before August 8, 2002.
--------------------------------------------------------------------------------------------------------------------
March 1, 2001 Company and George Release Mr. Stubos agrees to (i) fully US$35,000
Stubos and completely release and
discharge any and all actions,
causes of actions, claims and
demands arising out of any and
all relationships with the
Company and (ii) allow the
Company to purchase for
cancellation 500,000 Common
Shares and cancel his option to
buy 90,000 Common Shares.
--------------------------------------------------------------------------------------------------------------------
March 1, 2001 Company and Release Mr. Livadas agrees to (i) fully US$25,000
Christos Livadas and completely release and
discharge any and all actions,
causes of actions, claims and
demands arising out of any and
all relationships with the
Company and (ii) allow the
Company to purchase for
cancellation 500,000 Common
Shares and cancel his option to
buy 90,000 Common Shares.
--------------------------------------------------------------------------------------------------------------------
March 1, 2001 Company, Frank Release and Kollar and Sierra Holdings US$209,000 to be paid
Kollar and Sierra Consulting Limited agree to (i) fully and immediately at the time
Holdings Limited Agreement completely release and of the Release and
discharge any and all actions, US$60,000 to be paid as
causes of actions, claims and set forth in the
demands arising out of any and Consulting Agreement.
all relationships with the
Company and (ii) allow the
Company to purchase for
cancellation 3,890,000 Common
Shares and cancel Mr. Kollar's
option to buy 290,000 Common
Shares.
--------------------------------------------------------------------------------------------------------------------
54
--------------------------------------------------------------------------------------------------------------------
May 11, 2001 Company, Elizabeth Letter of Kirkwood and Crossbeam Limited . $4,000 for the
J. Kirkwood and Agreement for doing business as Crossbeam.com initial set-up
Crossbeam Limited Website agree to provide Web site . $2,000 pre month for
doing business as Services set-up and maintenance services maintenance
Crossbeam.com to the Company for a six-month
period from May 11, 2001
through November 30, 2001. The
Agreement is automatically
renewed for additional
six-month terms absent notice
of cancellation. Either party
may cancel on thirty days
notice.
--------------------------------------------------------------------------------------------------------------------
June 11, 2001 Company and Engage, Website Company grants Engage the right Company to pay Engage a
Inc. ("Engage") Publisher to sell advertising space on royalty of 50% on all
Agreement the Company's website. Engage Net Advertising Revenue.
agrees that it will solicit,
serve, report and track
advertisers on the Company's
website for an initial term of
90-days after which the parties
have the option of one-year
renewals. Engage ceased all
operations in September 2001.
--------------------------------------------------------------------------------------------------------------------
June 19, 2001 Company and API Non-binding Letter agreement confirming None agreed upon at the
Electronics, Inc. Letter of mutual understanding regarding time of the Letter.
("API") Intent the parties' intention to
Regarding complete negotiations and enter
Potential into a formal agreement for the
Business Company's purchase of API.
Combination of
the Company
and API
--------------------------------------------------------------------------------------------------------------------
June 26, 2001 Company and Taurus Letter Taurus agrees to act as the . A work fee of $15,000
Agreement for Company's exclusive financial . Reimbursement of
financial advisor with respect to the certain out-of-pocket
advisor potential acquisition of API costs
services for a period of four months . In the event of and
commencing on the date of the upon completion of the
letter. purchase of API, 250,000
broker warrants for
Units on the same terms
as Units being issued to
purchase API
--------------------------------------------------------------------------------------------------------------------
55
--------------------------------------------------------------------------------------------------------------------
June 26, 2001 Company and Gilray, Letter Gilray, LLC agrees to execute a . $18,000
LLC Agreement for Certificate of Satisfaction . Ownership of any and
settlement of fully releasing IL Data all furniture abandoned
lease, dated Corporation Inc. and/or the by tenant on the premises
July 3, 2000, Company from any further
between responsibility under the lease.
Gilray, LLC
and IL Data
Corporation
Inc., to
commence
August 1, 2000
and terminate
July 31, 2003
--------------------------------------------------------------------------------------------------------------------
July 24, 2001 Company and Release Kirkwood agrees to release Nil
Elizabeth J. 45,000 stock options previously
Kirkwood granted by the Company.
--------------------------------------------------------------------------------------------------------------------
July 24, 2001 Company and Sandra Release Hall agrees to release 45,000 Nil
J. Hall stock options previously
granted by the Company.
--------------------------------------------------------------------------------------------------------------------
August 2, 2001 Company and James Stock Option Company granted Cassina options At the date of the
C. Cassina Agreement to purchase up to 50,000 Common agreement, market value
Shares at US$0.45 per share, of the Common Shares was
and up to 50,000 Common Shares US$0.30.
at US$0.75 per share on or
before July 31, 2006. The
number of shares and exercise
prices associated with the
stock options set forth reflect
post-consolidation numbers and
prices--see Note 11(b) to the
financial statements contained
in Part III, Item 17 of this
Annual Report.
--------------------------------------------------------------------------------------------------------------------
56
--------------------------------------------------------------------------------------------------------------------
August 2, 2001 Company and Sandra Stock Option Company granted Hall options to At the date of the
J. Hall Agreement purchase up to 50,000 Common agreement, market value
Shares at US$0.45 per share, of the Common Shares was
and up to 50,000 Common Shares US$0.30.
at US$0.75 per share on or
before July 31, 2006. The
number of shares and exercise
prices associated with the
stock options set forth reflect
post-consolidation numbers and
prices--see Note 11(b) to the
financial statements contained
in Part III, Item 17 of this
Annual Report.
--------------------------------------------------------------------------------------------------------------------
July 27, 2001 InvestorLinks.com Agreement and The Company acquired all of the 6,500,000
Inc. and API Plan of Merger issued and outstanding shares post-consolidation Units
Electronics, Inc., of API Electronics, Inc. a at US $.40 per Unit.
et al. Delaware corporation. Each Unit consists of
one Common Share, 1/2
of one Series A Common
Share purchase warrant
exercisable at US $.45
for a period of 18
months from the date of
issuance and 1/2 of one
Series B Common Share
purchase warrant
exercisable at US $.75
for a period of two
years from date of
issuance.
--------------------------------------------------------------------------------------------------------------------
57
--------------------------------------------------------------------------------------------------------------------
August 31, 2001 API Electronics, Agreement of API Electronics, Inc. merges Each share of common
Inc. and API Merger into API Acquisition Corp. with stock of API Acquisition
Acquisition Corp. API Electronics, Inc. as the Corp. outstanding on the
surviving corporation. effective date of the
Agreement was cancelled
and no consideration was
paid with respect to any
such shares. Each share
of common stock of API
Electronics, Inc., the
surviving corporation,
outstanding on the
effective date of the
Agreement, was (i)
exchanged with
InvestorLinks.com Inc.,
an Ontario Corporation
and the parent of API
Acquisition Corp.
("IC"), for 33,163.27
shares of IC common
stock and A and B
warrants to purchase an
aggregate of 33,163.28
shares of IC common
stock and (ii) cancelled
immediately thereafter.
The surviving
corporation issued a new
certificate for 100
shares of common stock
to IC, which represented
all of the issued and
outstanding shares of
the surviving
corporation.
--------------------------------------------------------------------------------------------------------------------
58
--------------------------------------------------------------------------------------------------------------------
August 31, 2001 Company and Phillip Stock Option Company granted options to At the date of the
DeZwirek Agreement purchase up to 50,000 Common Agreement, market value
Shares at US$0.45 per share, of the Common Shares was
and up to 50,000 Common Shares US$0.78 per share.
at US$0.75 per share on or
before August 31, 2006. The
number of shares and exercise
prices associated with the
stock options set forth reflect
post-consolidation numbers and
prices--see Note 11(b) to the
financial statements contained
in Part III, Item 17 of this
Annual Report.
--------------------------------------------------------------------------------------------------------------------
August 31, 2001 Company and Thomas Stock Option Company granted options to At the date of the
W. Mills Agreement purchase up to 50,000 Common Agreement, market value
Shares at US$0.45 per share, of the Common Shares was
and up to 50,000 Common Shares US$0.78 per share.
at US$0.75 per share on or
before August 31, 2006. The
number of shares and exercise
prices associated with the
stock options set forth reflect
post-consolidation numbers and
prices--see Note 11(b) to the
financial statements contained
in Part III, Item 17 of this
Annual Report.
--------------------------------------------------------------------------------------------------------------------
August 31, 2001 Company and Jason Stock Option Company granted options to At the date of the
DeZwirek Agreement purchase up to 50,000 Common Agreement, market value
Shares at US$0.45 per share, of the Common Shares was
and up to 50,000 Common Shares US$0.78 per share.
at US$0.75 per share on or
before August 31, 2006. The
number of shares and exercise
prices associated with the
stock options set forth reflect
post-consolidation numbers and
prices--see Note 11(b) to the
financial statements contained
in Part III, Item 17 of this
Annual Report.
--------------------------------------------------------------------------------------------------------------------
D. EXCHANGE CONTROLS
59
There are no governmental laws, decrees or regulations in Canada that restrict
the export or import of capital, or affect the remittance of dividends, interest
or other payments to a non-resident holder of Common Stock of the Company, other
than withholding tax requirements (see "Item 7 -- Taxation").
Except as provided in the Investment Canada Act discussed below, there are no
limitations imposed under the laws of Canada, the Province of Ontario, or by the
constituent documents of the Company on the right of a non-resident to hold or
vote the Common Stock of the Company.
The Investment Canada Act (the "ICA"), which became effective on June 30, 1985,
regulates the acquisition by non-Canadians of control of a Canadian business
enterprise. In effect, the ICA requires review by Investment Canada, the agency
which administers the ICA, and approval by the Canadian government, in the case
of an acquisition of control of a Canadian business by a non-Canadian where:
(i) in the case of a direct acquisition (for example, through a share purchase
or asset purchase), the assets of the business are $5 million or more in value;
or (ii) in the case of an indirect acquisition (for example, the acquisition of
the foreign parent of the Canadian business) where the Canadian business has
assets of $5 million or more in value or if the Canadian business represents
more than 50% of the assets of the original group and the Canadian business has
assets of $5 million or more in value. Review and approval are also required
for the acquisition or establishment of a new business in areas concerning
"Canada's cultural heritage or national identity" such as book publishing, film
production and distribution, television and radio production and distribution of
music, and the oil and natural gas industry, regardless of the size of the
investment.
As applied to an investment in the Company, three methods of acquiring control
of a Canadian business would be regulated by the ICA: (i) the acquisition of
all or substantially all of the assets used in carrying on the Canadian
business; (ii) the acquisition, directly or indirectly, of voting shares of a
Canadian corporation carrying on the Canadian business; or (iii) the acquisition
of voting shares of an entity which controls, directly or indirectly, another
entity carrying on a Canadian business. An acquisition of a majority of the
voting interests of an entity, including a corporation, is deemed to be an
acquisition of control under the ICA. An acquisition of less than one-third of
the voting shares of a corporation is deemed not to be an acquisition of
control. An acquisition of less than a majority, but one-third or more, of the
voting shares of a corporation is presumed to be an acquisition of control
unless it can be established that the acquisition the corporation is not, in
fact, controlled by the acquirer through the ownership of voting shares. For
partnerships, trusts, joint ventures or other unincorporated entities, an
acquisition of less than a majority of the voting interests is deemed not to be
an acquisition of control.
In 1988, the ICA was amended, pursuant to the Free Trade Agreement dated January
2, 1988 between Canada and the United States, to relax the restrictions of the
ICA. As a result of these amendments, except where the Canadian business is in
the cultural, oil and gas, uranium, financial services or transportation
sectors, the threshold for direct acquisition of control by U.S. investors and
other foreign investors acquiring control of a Canadian business from U.S.
investors has been raised from $5 million to $150 million of gross assets, and
indirect acquisitions are not reviewable.
In addition to the foregoing, the ICA requires that all other acquisitions of
control of Canadian businesses by non-Canadians are subject to formal
notification to the Canadian government. These provisions require a foreign
investor to give notice in the required form, which notices are for information,
as opposed to review, purposes.
E. TAXATION
60
Certain Canadian Federal Income Tax Consequences
Management of the Company has been advised by its Canadian legal counsel that
the following general summary fairly describes the principal Canadian federal
income tax consequences applicable to a holder of Common Shares of the Company
who is a resident of the United States and who is not a resident of Canada and
who does not use or hold, and is not deemed to use or hold, his or her Common
Shares of the Company in connection with carrying on a business in Canada (a
"non-resident shareholder").
This summary is based upon the current provisions of the Income Tax Act (Canada)
(the "ITA"), the regulations thereunder (the "Regulations"), the current
publicly announced administration and assessing policies of Revenue Canada,
Taxation, and all specific proposals (the "Tax Proposals") to amend the ITA and
Regulations announced by the Minister of Finance (Canada) prior to the date
hereof. This description is not exhaustive of all possible Canadian federal
income tax consequences and, except for the Tax Proposals, does not take into
account or anticipate any changes in law, whether by legislative, governmental
or judicial action, nor does it take into account provincial or foreign tax
considerations which may differ significantly from those discussed herein. The
following discussion is for general information only and is not intended to be,
nor should it be construed to be, legal or tax advice to any holder of Common
Shares of the Company, and no opinion or representation with respect to the
Canadian Federal Income Tax consequences to any such holder or prospective
holder is made. Accordingly, holders and prospective holders of Common Shares of
the Company should consult with their own tax advisors about the federal,
provincial and foreign tax consequences of purchasing, owning and disposing of
Common Shares of the Company.
Dividends
Dividends paid on the Common Shares of the Company to a non-resident holder will
be subject to withholding tax under the ITA. The Canada-US. Income Tax
Convention (1980) (the "Treaty") provides that the normal 25% withholding tax
rate is reduced to 15% on dividends paid on shares of a corporation resident in
Canada (such as the Company) to residents of the United States, and also
provides for a further reduction of this rate to 5% where the beneficial owner
of the dividends is a corporation which is a resident of the United States which
owns at least 10% of the voting shares of the corporation paying the dividend.
Capital Gains
A non-resident shareholder of Canada is not subject to tax under the ITA in
respect of a capital gain realized upon the disposition of Common Shares of the
Company unless the Common Shares represent "taxable Canadian property" to the
holder thereof. The Company is a public corporation for purposes of the ITA. A
Common Share of the Company will be taxable Canadian property to a non-resident
shareholder if, at any time during the period of five years immediately
preceding the disposition, the non-resident shareholder and/or persons with whom
he or she did not deal at arm's length owned not less than 25% of the issued
shares of any class or series of the Company. There are other circumstances in
which the Common Shares of the Company will be taxable Canadian property to a
non-resident holder.
Non-resident shareholders should consult their Canadian tax advisors about
whether the Common Shares are taxable Canadian property to them. In the case of
a non-resident shareholder to whom Common Shares of the Company represent
taxable Canadian property, relief from Canadian income tax under the Treaty may
be available.
61
Certain United States Federal Income Tax Consequences
The following is a general discussion of certain possible United States federal
income tax consequences, under current law, generally applicable to a U.S.
Holder (as defined below) of Common Shares of the Company. This discussion does
not address all potentially relevant federal income tax matters and does not
address consequences peculiar to persons subject to special provisions of
federal income tax law, such as those described below as excluded from the
definition of a U.S. Holder. In addition, this discussion does not cover any
state, local or foreign tax consequences (See "Certain Canadian Federal Income
Tax Consequences" above).
The following discussion is based upon the sections of the Internal Revenue Code
of 1986, as amended (the "Code"), Treasury Regulations, published Internal
Revenue Service ("IRS") rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of recently proposed legislation, which, if enacted,
could be applied, possibly on a retroactive basis, at any time. The following
discussion is for general information only and it is not intended to be, nor
should it be construed to be, legal or tax advice to any holder or prospective
holder of Common Shares of the Company, and no opinion or representation with
respect to the United States federal income tax consequences to any such holder
or prospective holder is made. Accordingly, holders and prospective holders of
Common Shares of the Company should consult their own tax advisors about the
federal, state, local, and foreign tax consequences of purchasing, owning and
disposing of Common Shares of the Company.
U.S. Holders
As used herein, a "U.S. Holder" includes a holder of Common Shares of the
Company who is a citizen or legal resident of the United States, a corporation
created or organized in or under the laws of the United States or of any
political subdivision thereof and any other person or entity whose ownership of
Common Shares of the Company is effectively connected with the conduct of a
trade or business in the United States. A U.S. Holder does not include persons
subject to special provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
broker-dealers, non-resident alien individuals or foreign corporations whose
ownership of Common Shares of the Company is not effectively connected with the
conduct of a trade or business in the United States and shareholders who
acquired their stock through the exercise of employee stock options or otherwise
as compensation.
Distributions on Common Shares of Company
U.S. Holders receiving dividend distributions (including constructive dividends)
with respect to Common Shares of the Company are required to include in gross
income for United States federal income tax purposes the gross amount of such
distributions to the extent that the Company has current or accumulated earnings
and profits, without reduction for any Canadian income tax withheld from such
distributions. Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holder's United States federal income tax
liability or, alternatively, may be deducted in computing the U.S. Holder's
United States federal taxable income by those who itemize deductions. (See more
detailed discussions at "Foreign Tax Credit" below). To the extent that
distributions exceed current or accumulated earnings and profits of the Company,
they will be treated first as a return of capital up to the U.S. Holder's
adjusted basis in the Common Shares and thereafter as gain from the sale or
exchange of the Common Shares.
62
Preferential tax rates for long-term capital gains are applicable to a U.S.
holder that is an individual, estate or trust. There are currently no
preferential tax rates for long-term capital gains for a U.S. holder that is a
corporation.
Dividends paid on the Common Shares of the Company will not generally be
eligible for the dividends received-deduction provided to corporations receiving
dividends from certain United States corporations. A US holder which is a
corporation may, under certain circumstances, be entitled to a 70% deduction of
the United States source portion of dividends received from the Company (unless
the Company qualified as a "foreign personal holding company" or a "passive
foreign investment company," as defined below) if such U.S. Holder owns shares
representing at least 10% of the voting power and value of the Company. The
availability of this deduction is subject to several complex limitations, which
are beyond the scope of this discussion.
Foreign Tax Credit
A U.S. Holder who pays (or has withheld from distributions) Canadian income tax
with respect to the ownership of Common Shares of the Company may be entitled,
at the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld. Generally, it will be more advantageous to claim
a credit because a credit reduces United States federal income taxes on a dollar
for dollar basis, while a deduction merely reduces the taxpayer's income subject
to tax. This election is made on a year by year basis and applies to all
foreign taxes paid by (or withheld from) the U.S. Holder during that year.
There are significant and complex limitations, which apply to the credit, among
which is the general limitation that the credit cannot exceed the proportionate
shares of the U.S. Holder's United States income tax liability that the U.S.
Holder's foreign source income bears to his or her or its worldwide taxable
income. In the determination of the application of this limitation, the various
items of income deduction must be classified into foreign and domestic sources.
Complex rules govern this classification process. There are further limitations
on the foreign tax credit for certain types of income such as "passive income,"
"high withholding tax interest," "financial services income," "shipping income,"
and certain other classifications of income. The availability of the foreign
tax credit and the application of the limitations on the credit are fact
specific and holders and prospective holders of Common Shares of the Company
should consult their own tax advisors regarding their individual circumstances.
Disposition of Common Shares of Company
A U.S. Holder will recognize gain or loss upon the sale of Common Shares of the
Company equal to the difference, if any, between the amount of cash plus the
fair market value of any property received, and the shareholder's tax basis in
the Common Shares of the Company. This gain or loss will be capital gain or
loss if the Common Shares are a capital asset in the hands of the U.S. Holder.
In such event the gain or loss will be short-term or long-term capital gain or
loss depending upon the holding period of the U.S. Holder. Gains and losses are
netted and combined according to special rules in arriving at the overall
capital gain or loss for a particular tax year. Deductions for net capital
losses are subject to significant limitations. For U.S. Holders who are
individuals, any unused portion of such net capital loss may be carried over to
be used in later tax years until such net capital loss is thereby exhausted.
For U.S. holders that are corporations (other than corporations subject to
Subchapter S of the Code), an unused net capital loss may be carried back three
years from the loss year and carried forward five years from the loss year to be
offset against capital gains until such net capital loss is thereby exhausted.
Other Considerations
In the following circumstances, the above sections of this discussion may not
describe the United States
63
federal income tax consequences resulting from the holding and disposition of
Common Shares of the Company:
Foreign Personal Holding Company. If at any time during a taxable year more
than 50% of the total combined voting power or the total value of the Company's
outstanding shares is owned, actually or constructively, by five or fewer
individuals who are citizens or residents of the United States and 60% or more
of the Company's gross income for such year was derived from certain passive
sources (e.g. from dividends received from its subsidiaries), the Company would
be treated as a "foreign personal holding company." In that event, U.S. Holders
that hold Common Shares of the Company would be required to include in gross
income for such year their allowable portions of such passive income to the
extent the Company does not actually distribute such income.
Foreign Investment Company. If 50% or more of the combined voting power or
total value of the Company's outstanding shares are held, actually or
constructively, by citizens or residents of the United States, United States
domestic partnerships or corporations, or estates or trusts other than foreign
estates or trusts (as defined by the Code Section 7701(a)(31)), and the Company
is found to be engaged primarily in the business of investing, reinvesting, or
trading in securities, commodities, or any interest therein, it is possible that
the Company might be treated as a "foreign investment company" as defined in
Section 1246 of the Code, causing all or part of any gain realized by the U.S.
Holder selling or exchanging Common Shares of the Company to be treated as
ordinary income rather than capital gain.
Passive Foreign Investment Company. As a foreign corporation with U.S. Holders,
the Company could potentially be treated as a passive foreign investment company
("PFIC"), as defined in Section 1297 of the Code, depending upon the percentage
of the Company's income which is passive, or the percentage of the Company's
assets which is held for the purpose of producing passive income.
Certain United States income tax legislation contains rules governing PFIC which
can have significant tax effects on U.S. shareholders of foreign corporations.
These rules do not apply to non-US. shareholders. Section 1297 of the Code
defines a PFIC as a corporation that is not formed in the United States and, for
any taxable year, either (i) 75% or more of its gross income is "passive
income," which includes interest, dividends and certain rents and royalties or
(ii) the average percentage, by fair market value (or, if the company is a
controlled foreign corporation or makes an election, by adjusted tax basis) of
its assets that produce or are held for the production of "passive income" is
50% or more.
A U.S. shareholder who holds stock in a foreign corporation during any year in
which such corporation qualifies as a PFIC is subject to U.S. federal income
taxation under one of two alternative tax regimes at the election of each such
U.S. shareholder (the deferred tax charge regime and the Qualified Election Fund
"QEF" regime). The following is a discussion of these two alternative tax
regimes as applied to U.S. shareholders of the Company. Both regimes, however,
may apply if the shareholder makes the QEF election after the first year in
which it owned stock in the PFIC.
A U.S. shareholder who elects in a timely manner (an "Electing U.S.
Shareholder") to treat the Company as a QEF, as defined in the Code, will be
subject, under Section 1293 of the Code, to current federal income tax for any
taxable year in which the Company qualifies as a PFIC on his or her pro-rata
share of the Company's: (i) "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), which will be taxed as long-term
capital gain to the Electing U.S. Shareholder and (ii) "ordinary earnings" (the
excess of earnings and profits over net capital gain), which will be taxed as
ordinary income to the Electing U.S. Shareholder, in each case, for the
shareholder's taxable year in which (or with which) the Company's taxable year
ends, regardless of whether such amounts are actually distributed.
64
The effective QEF election also allows the Electing U.S. Shareholder to (i)
generally treat any gain realized on the disposition of his or her Common Shares
(or deemed to be realized on the pledge of his or her Common Shares) as capital
gain; (ii) treat his or her share of the Company's net capital gain, if any, as
long-term capital gain instead of ordinary income, and (iii) either avoid
interest charges resulting from PFIC status altogether, or make an annual
election, subject to certain limitations, to defer payment of current taxes on
his or her share of the Company's annual realized net capital gain and ordinary
earnings subject, however, to an interest charge. If the Electing U.S.
Shareholder is not a corporation, such an interest charge would be treated as
"personal interest" that can be deducted only when it is paid or accrued and is
only 10% deductible in taxable years beginning in 1990 and not deductible at all
in taxable years beginning after 1990.
The procedure with which a U.S. shareholder must comply in making an effective
QEF election will depend on whether the year of the election is the first year
in the U.S. shareholder's holding period in which the Company is a PFIC. If the
U.S. shareholder makes a QEF election in such first year, i.e. a timely QEF
election, then the U.S. shareholder may make the QEF election by simply filing
the appropriate documents at the time the U.S. shareholder files its tax return
for such first year. If, however, the Company qualified as a PFIC in a prior
year, then in addition to filing documents, the U.S. shareholder must elect to
recognize (i) (under the rules of (S)1291 (discussed below), any gain that he
would otherwise recognize if the U.S. shareholder sold his or her stock on the
application date or (ii) if the Company is a controlled foreign corporation, the
U.S. shareholder will be deemed to have made a timely QEF election.
When a timely QEF election is made, if the Company no longer qualifies as a PFIC
in a subsequent year, normal Code rules will apply. It is unclear whether a new
QEF election is necessary if the Company thereafter re-qualifies as a PFIC.
U.S. shareholders should seriously consider making a new QEF election under
those circumstances.
If a U.S. shareholder does not make a timely QEF election during a year in which
it holds (or is deemed to have held) the Common Shares in question and the
Company is a PFIC (a "Non-electing U.S. Shareholder"), then special taxation
rules under Section 1291 of the Code will apply to (i) gains realized on the
disposition (or deemed to be realized by reason of a pledge) of his or her
Common Shares and (ii) certain "excess distributions," as specially defined, by
the Company.
A Non-electing U.S. Shareholder generally would be required to pro-rate all
gains realized on the disposition of his or her Common Shares and all excess
distributions over the entire holding period for the Common Shares. All gains
or excess distributions allocated to prior years of the U.S. shareholder (other
than years prior to the first taxable year of the Company during such U.S.
shareholder's holding period and beginning after January 1, 1987 for which it
was a PFIC) would be taxed at the highest tax rate for each such prior year
applicable to ordinary income. The Non-electing U.S. Shareholder also would be
liable for interest on the foregoing tax liability for each such prior year
calculated as if such liability had been due with respect to each such prior
year. A Non-electing Shareholder that is not a corporation must treat this
interest charge as "personal interest" which, as discussed above, is partially
or wholly non-deductible. The balance of the gain or the excess distribution
will be treated as ordinary income in the year of the disposition or
distribution, and no interest charge will be incurred with respect to such
balance.
If the Company is a PFIC for any taxable year during which a Non-electing U.S.
Shareholder holds Common Shares, then the Company will continue to be treated as
a PFIC with respect to such Common Shares, even if it is no longer
definitionally a PFIC. A Non-electing U.S. Shareholder may terminate this
deemed PFIC status by electing to recognize a gain (which will be taxed under
the rules discussed above for Non-Electing U.S. Shareholders) as if such common
shares had been sold on the last day of the last taxable year for which it was a
PFIC.
65
Under Section 1291(f) of the Code, the Department of the Treasury has issued
proposed regulations that would treat as taxable certain transfers of PFIC stock
by Non-electing U.S. Shareholders that are generally not otherwise taxed, such
as gifts, exchanges pursuant to corporate reorganizations, and transfers at
death.
Certain special, generally adverse, rules will apply with respect to the Common
Shares while the Company is a PFIC whether or not it is treated as a QEF. For
example under Section 1298(b)(6) of the Code, a U.S. shareholder who uses PFIC
stock as security for a loan (including a margin loan) will, except as may be
provided in the regulations, be treated as having made a taxable disposition of
such stock.
The foregoing discussion is based on existing provisions of the Code, existing
and proposed regulations thereunder, and current administrative rulings and
court decisions, all of which are subject to change. Any such change could
affect the validity of this discussion. In addition, the implementation of
certain aspects of the PFIC rules require the issuance of regulations which in
many instances have not been promulgated and which may have retroactive effect.
There can be no assurance that any of the proposals will be enacted or
promulgated, and if so, the form they will take or the effect that they may have
on this discussion. Accordingly, and due to the complexity of the PFIC rules,
U.S. persons who are shareholders of the Company are strongly urged to consult
their own tax advisors concerning the impact of these rules on their investment
in the Company.
Controlled Foreign Corporation. If more than 50% of the voting power of all
classes of stock or the total value of the stock of the Company is owned,
directly or indirectly, by citizens or residents of the United States, United
States domestic partnerships and corporations or estates or trusts other than
foreign estates or trusts, each of whom own 10% or more of the total combined
voting power of all classes of stock of the Company or the total value of the
stock of the Company ("United States shareholder"), the Company could be treated
as a "controlled foreign corporation" under Subpart F of the Code. This
classification would result in many complex consequences including the required
inclusion into income by such United States shareholders of their pro rata
shares of "Subpart F income" (as specially defined by the Code) of the Company
and the Company's earnings invested in U.S. property and previously excluded
Subpart F withdrawn from certain types of investments (as specifically defined
by the Code). In addition, under Section 1248 of the Code, gain from the sale
or exchange of Common Shares of the Company by a U.S. person who is or was a
United States shareholder (as defined in the Code, a holder of Common Shares of
the Company who is or was a United States shareholder at any time during the
five year period ending with the sale or exchange) is treated as ordinary
dividend income to the extent of earnings and profits of the Company
attributable to the stock sold or exchanged. Because of the complexity of
Subpart F, and because it is not clear that Subpart F would apply to the holders
of Common Shares of the Company, a more detailed review of these rules is
outside the scope of this discussion.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
The documents concerning the Company which are referred to in this Annual Report
may be inspected at
66
the Company's executive offices located at 505 University Avenue, Suite 1400,
Toronto, Ontario M5G 1X3.
I. SUBSIDIARY INFORMATION
InvestorLinks.com, formed in 1997, is owned 100% by IL Data Corporation, Inc.,
which is owned 100% by IL Data Canada, Inc., which is owned 100% by the Company.
Effective August 31, 2001, the Company acquired API Electronics, Inc., of
Hauppauge, New York as a wholly-owned subsidiary.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable. The Company is a small business issuer.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
As disclosed in Note 4(b)(ii) to the Consolidated Financial Statements of the
Company included in Part III, Item 17 of this Annual Report, the Company entered
into a strategic alliance services agreement effective August 2, 2000 with a
global financial content firm (the "Firm") to provide business development
services. As consideration for the services to be provided over twenty-nine
months following the effective date, the Company was to release Common Shares on
the basis of one Common Share for each US $2.25 of services provided for a total
of up to 1,500,000 Common Shares for total consideration of US $3,375,000.
Subsequent to the end of the Company's fiscal year ending April 30, 2001, the
Firm claimed a breach of the agreement and requested payment of 144,000 Common
Shares and cash expenses of US $26,562 (total cost $525,843). The Firm has
given notice of its termination of the agreement. It is the position of the
Company that it is the Firm that is in breach of the agreement and has so
responded to the Firm. The Company has issued 44,444 Common Shares to the Firm
with a value of $150,000 and has accrued for services based on invoices to date
totaling $405,842.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
Not applicable.
ITEM 15. [RESERVED]
ITEM 16. [RESERVED]
PART III
--------
ITEM 17. FINANCIAL STATEMENTS
As noted in Note 1 to the consolidated financial statements of the Company
included with this Part III, Item 17 of the Annual Report, no comparative
figures have been presented because IL Data Canada, Inc., the deemed acquiring
company in a reverse take-over of the Company by IL Data Canada, Inc. effective
67
June 6, 2000, was a newly incorporated company, having been incorporated on May
10, 2000. Because of the reverse take-over transaction described above, the
Company has only been in operation since May 10, 2000, during and after the
financial year ending April 30, 2001.
In addition, as noted in Note 10(a) to the financial statements of the Company
included with this Part III, Item 17 of the Annual Report, for purposes of
accounting principles generally accepted in the United States ("US GAAP"), since
IL Data Canada, Inc. had no operations, Investorlinks.com LLC, the company that
owned and operated the Investment Web site www.InvestorLinks.com prior to the
June 6, 2000 acquisition transactions, "would be considered the predecessor and
audited information for the previous three years would normally be disclosed
however, the operations of Investorlinks.com LLC have been closed and the
previous information would not be relevant or informative."
Because of the foregoing, financial statements for prior years is not included
in this Annual Report. Selected financial data for prior years is, however,
disclosed in the Company's 2000 Form 20-F Annual Report, available through the
U.S. Securities and Exchange Commission's EDGAR database system.
These financial statements which follow were prepared in accordance with
Canadian Generally Accepted Accounting Principles ("Cdn GAAP") and are expressed
in Canadian dollars. A reconciliation from Cdn GAAP to US GAAP is disclosed in
Note 10 to the financial statements. The financial statements include the
following:
(i) Auditors' Report
(ii) Consolidated Balance Sheet at April 30, 2001
(iii) Consolidated Statements of Operations and Deficit for the year ended
April 30, 2001
(iv) Consolidated Statements of Changes in Cash Flow for the year ended
April 30, 2001
(v) Summary of Significant Accounting Policies
(vi) Notes to Consolidated Financial Statements
[PRINTER TO INSERT FINANCIAL STATEMENTS HERE]
ITEM 18. FINANCIAL STATEMENTS
Not applicable.
ITEM 19. EXHIBITS
1. Articles of incorporation and bylaws as currently in effect:
1.1 Articles of Amalgamation, effective May 1, 1993, amalgamating
1024680 Ontario Ltd., Shepherd Ventures Inc., Dally Development
Corp. and TNK Resources Inc. into an amalgamated corporation
under the name TNK Resources Inc. under the articles of
incorporation of Dally Development Corp./(1)/
1.2 By-law Number A of Shediac Bay Resources, Inc. (the Company's
predecessor) dated May 14, 1985/(1)/
68
1.3 Special By-law Number 1 of A of Shediac Bay Resources, Inc. (the
Company's predecessor) dated May 14, 1985/(1)/
1.4 Articles of Amendment filed May 18, 1999 reflecting Name Change
from TNK Resources Inc. to Opus Minerals Inc. /(3)/
1.5 Articles of Amendment filed July 25, 2000 reflecting Name Change
from Opus Minerals Inc. to InvestorLinks.com Inc. /(4)/
1.6 Articles of Amendment filed September 6, 2001, effective
September 10, 2001, reflecting Name Change from
InvestorLinks.com Inc. to API Electronics Group Inc./(5)/
2. Instruments defining rights of holders of equity or debt securities
being registered:
2.1 See Articles of Amalgamation described above in item 1.1. /(1)/
2.2 Specimen Common Share certificate/(1)/
2.3 1995 Stock Option Plan and Board resolution defining rights of
holders of Management Stock Options granted thereunder/(1)/
2.4 Form of Share Purchase Warrant/(1)/
2.5 Form of Agent's Compensation Warrant/(1)/
2.6 See Consulting Agreement described below in item 3.21 for
description of Consultant's Options/(1)/
3. Certain contracts:
3.1 Republic of Botswana Prospecting License No. 142/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.2 Republic of Botswana Renewal Prospecting License No. 142/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.3 Republic of Botswana Prospecting License No. 143/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.4 Republic of Botswana Renewal Prospecting License No. 143/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.5 Republic of Botswana Prospecting License No. 144/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.6 Republic of Botswana Renewal Prospecting License No. 144/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
69
3.7 Republic of Botswana Prospecting License No. 145/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.8 Republic of Botswana Renewal Prospecting License No. 145/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.9 Republic of Botswana Prospecting License No. 146/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.10 Republic of Botswana Renewal Prospecting License No. 146/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.11 Republic of Botswana Prospecting License No. 147/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.12 Republic of Botswana Renewal Prospecting License No. 147/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.13 Republic of Botswana Prospecting License No. 148/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.14 Republic of Botswana Renewal Prospecting License No. 148/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.15 Republic of Botswana Prospecting License No. 149/93, dated
September 8, 1993, in favor of TNK Resources Incorporated/(1)/
3.16 Republic of Botswana Renewal Prospecting License No. 149/93,
dated October 22, 1996, in favor of TNK Resources
Incorporated/(1)/
3.17 Republic of Botswana Prospecting License No. 156/93, dated
October 25, 1993, in favor of TNK Resources Incorporated/(1)/
3.18 Republic of Botswana Prospecting License No. 157/93, dated
October 25, 1993, in favor of TNK Resources Incorporated/(1)/
3.19 Republic of Botswana Renewal Prospecting License No. 157/93,
dated October 22, 1996, in favor of Midswana Diamond
Exploration Corporation/(1)/
3.20 Republic of Botswana Prospecting License No. 158/93, dated
October 25, 1993, in favor of TNK Resources Incorporated/(1)/
3.21 Republic of Botswana Renewal Prospecting License No. 158/93,
dated October 22, 1996, in favor of Midswana Diamond
Exploration Corporation/(1)/
3.22 Contract of Work dated December 21, 1987 between the Government
of the Republic of Indonesia and P.T. Marunda Wahau Mining/(1)/
3.23 Contract of Work dated December 2, 1986 between the Government
of the Republic of Indonesia and P.T. Alahan Panjang
Minerals/(1)/
70
3.24 Contract of Work dated December 2, 1986 between the Government
of the Republic of Indonesia and P.T. Sungai Tembese
Minerals/(1)/
3.25 Contract of Work dated December 21, 1987 between the Government
of the Republic of Indonesia and P.T. Buntok Maju Minerals/(1)/
3.26 Contract of Work dated October 24, 1987 between the Government
of the Republic of Indonesia and P.T. Tumbang Kuling
Minerals/(1)/
3.27 Assignment Agreement, dated September 16, 1994, between TNK
Resources Inc. and 1096883 Ontario Limited/(1)/
3.28 Agreement, dated September 26, 1994, between the persons shown
as the 1096883 Ontario Limited Shareholders and Sommerset
Industries Inc. and 1096883 Ontario Limited/(1)/
3.29 Memorandum of Agreement, dated February 14, 1996, between P.T.
Hutan Nauli and TNK Resources Inc./(1)/
3.30 Memorandum of Agreement, dated March 26, 1996, between TNK
Resources Inc. and 867323 Ontario Limited/(1)/
3.31 Agreement, dated April 8, 1996, between P.T. Hutan Nauli and
TNK Resources Inc. /(1)/
3.32 Letter agreement, dated April 15, 1996, between TNK Resources
Inc. and Oil Springs Energy Corp. /(1)/
3.33 Employment Agreement, dated May 1, 1996, between TNK Resources
Inc. and Elizabeth J. Kirkwood/(1)/
3.34 Employment Agreement, dated May 1, 1996, between Midswana
Diamond Exploration Corp. and Elizabeth J. Kirkwood/(1)/
3.35 Letter agreement dated May 24, 1996, between TNK Resources Inc.
and P.T. Hutan Nauli/(1)/
3.36 Consulting Agreement, dated August 1, 1996, between TNK
Resources Inc. and 1165953 Ontario Inc. /(1)/
3.37 Memorandum of Agreement, dated November 15, 1996, between P.T.
Hutan Nauli and TNK Resources Inc. /(1)/
3.38 Prospecting Agreement (Area Agreement #1), dated February 20,
1998 between DeBeers Prospecting Botswana (Proprietary) Limited
and TNK Resources Inc. /(2)/
3.39 Prospecting Agreement (Area Agreement #2), dated February 20,
1998 between DeBeers Prospecting Botswana (Proprietary) Limited
and TNK Resources Inc. /(2)/
71
3.40 Prospecting Agreement (Area Agreement #3), dated February 20,
1998 between DeBeers Prospecting Botswana (Proprietary) Limited
and TNK Resources Inc. /(2)/
3.41 Subscription Agreement, dated March 12, 1998 between TNK
Resources Inc. and Monopros Limited/(2)/
3.42 Memorandum and Articles of Association of TNK Area 1
(Proprietary) Limited, dated February 11, 1998/(2)/
3.43 Memorandum and Articles of Association of TNK Area 2
(Proprietary) Limited, dated February 11, 1998/(2)/
3.44 Memorandum and Articles of Association of TNK Area 3
(Proprietary) Limited, dated February 11, 1998/(2)/
3.45 Assignment Agreement, dated March 31, 1998 between TNK
Resources Inc. and TNK Resources Area 1 (Proprietary)
Limited/(2)/
3.46 Assignment Agreement, dated March 31, 1998 between TNK
Resources Inc. and TNK Resources Area 2 (Proprietary)
Limited/(2)/
3.47 Assignment Agreement, dated March 31, 1998 between TNK
Resources Inc. and TNK Resources Area 3 (Proprietary)
Limited/(2)/
3.48 Republic of Botswana Prospecting License No. 67/97, dated May
28, 1997, in favor of TNK Resources Incorporated, in favor of
TNK Resources Incorporated/(2)/
3.49 TNK Resources Inc. Application for the Renewal of Prospecting
Licence Nos. 142-149/93, Ghanzi District, dated August 12,
1998/(2)/
3.50 Republic of Botswana Prospecting License No. 93/98, dated
September 29, 1998, in favor of TNK Resources Inc./(2)/
3.51 Agency Agreement, dated October 12, 1999, between Taurus
Capital Markets Ltd. and Opus Minerals Inc. /(3)/
3.53 Letter Agreement, dated July 13, 1998, between Mountain
Province Mining Inc. and Opus Minerals Inc. /(3)/
3.54 Asset Sale Agreement, dated October 1998, between International
Capri Resources Ltd. And TNK Resources Inc. /(3)/
3.55 Letter Agreement, dated November 27, 1998, regarding Baffin
Island Permit Applications. /(3)/
3.56 Letter Agreement, dated December 1, 1998, regarding Services
for Baffin Island Exploration and Development. /(3)/
72
3.57 Letter Agreement, dated August 3, 1999, regarding Borden
Peninsula, Baffin Island. /(3)/
3.58 Letter Agreement, dated August 26, 1999, between Mountain
Province Mining Inc. and Opus Minerals Inc. /(3)/
3.59 Agency Agreement, dated January 26, 1999, between Taurus
Capital Markets Ltd. and Opus Minerals Inc. and Termination.
/(3)/
3.60 Warrant to Purchase Common Shares of Stroud Resources Inc.
/(3)/
3.61 Wolf Lake Property Option Agreement, dated April 14, 1999
between International Capri Resources Ltd. and Opus Minerals
Inc. /(3)/
3.62 Letter Agreement, dated February 13, 1999 between International
Capri Resources Ltd. And Opus Minerals Inc. /(3)/
3.63 Consulting agreement dated November 15, 1999 as amended by
agreement dated June 26, 2000 between the Company and Investor
Relations Group (Ontario) Inc. ("IRG") pursuant to which IRG
will provide ongoing investor relations activities to the
Company. Agreement was mutually terminated effective February
28, 2001, and the related options lapsed effective March 30,
2001. /(4)/
3.64 Stock option agreement dated November 15, 1999 whereunder the
Company granted IRG options to acquire up to 300,000 common
shares of the Company at the price of $0.90 per share expiring
November 15, 2001. Agreement was mutually terminated effective
February 28, 2001, and the related options lapsed effective
March 30, 2001. /(4)/
3.65 Acquisition Agreement dated January 17, 2000 between the
Company and Vertex Ventures Inc. (now First Strike Diamonds
Inc.) whereby the Company transferred and assigned all of its
interest in the mining properties located in Botswana, Africa
and Baffin Island, Nunavut, to First Strike in consideration
for the allotment and issuance of 6,266,667 common shares of
First Strike. /(4)/
3.66 Securities Exchange Agreement made as of the 6th day of June,
2000 among the Company, IL Data Canada, Inc., all of the
shareholders of IL Data Canada, Inc., as vendors and Frank J.
Kollar and Romaine Gilliland as Principals whereunder the
Company acquired all of the issued and outstanding common
shares of IL Data Canada, Inc. which owns the business known as
InvestorLinks.com in consideration for the allotment of
issuance of 6,800,000 Common Shares of the Company. /(4)/
3.67 Stock option agreement dated June 26, 2000 whereunder the
company granted IRG options to acquire up to 150,000 common
shares of the Company at the price of $2.55 US per share
expiring June 30, 2002. /(4)/
3.68 Stock option agreements dated June 26, 2000 with officers,
directors, and employees of the Company. /(4)/
73
3.69 Consulting and Advisory Board Agreements dated June 26, 2000
with Messrs. Joseph Carusone, Christos Livadas, Ben Johnson and
Ms. Suzanne Wood. Mr. Livadas' agreement and stock option and
grant were cancelled and forfeited by Release, dated March 1,
2001, between the parties. See Item 3.83 below. All agreements
expired as of June 26, 2001, and the related options have
lapsed. /(4)/
3.70 Subscription Agreement dated August 2, 2000 with Stockhouse
Media Corp. ("Stockhouse") whereby Stockhouse subscribed for
1,500,000 Common Shares of the Company at the price of US$2.25
per share in consideration for Stockhouse providing to the
Company Services (as therein described) over a period of two
years. See Note 4(b)(ii) of the Financial Statements included
in Item 17 of this Annual Report for further detail regarding
the termination of agreements with Stockhouse. /(4)/
3.71 Services Agreement dated August 2, 2000 with Stockhouse which
sets out the services and functions to be performed by
Stockhouse to earn the 1,500,000 Common Shares of the Company
referred to above. See Note 4(b)(ii) of the Financial
Statements included in Item 17 of this Annual Report for
further detail regarding the termination of agreements with
Stockhouse. /(4)/
3.72 Subscription Agreement effective August 8, 2000 between the
Company and Ming Capital Enterprises Ltd. /(4)/
3.73 Warrant certificate issued to Ming Capital Enterprises Ltd. to
purchase up to 680,000 common shares at the price of US$3.00 on
or before August 8, 2002. /(4)/
3.74 Stock Option Agreement dated June 26, 2000 granting Kathy
Hobbs-Parent options to purchase up to 9,000 Common Shares at
$2.55 per share, vesting at a rate of 1/3 per year for three
years. Ms. Hobbs-Parent's employment was terminated effective
May 31, 2001. The options expired August 29, 2001. /(5)/
3.75 Stock Option Agreement dated June 26, 2000 granting Elizabeth
J. Kirkwood options to purchase up to 18,000 Common Shares at
$2.55 per share on or before June 30, 2005 (Released by letter,
dated July 24, 2001, signed by Ms. Kirkwood - See Exhibit 3.92
below). /(5)/
3.76 Stock Option Agreement dated June 26, 2000 granting Sandra J.
Hall options to purchase up to 45,000 Common Shares at $2.55
per share on or before June 30, 2005 (Released by letter, dated
July 24, 2001, signed by Ms. Hall - See Exhibit 3.93 below).
/(5)/
3.77 Stock Option Agreement dated June 26, 2000 granting George
Stubos options to purchase up to 90,000 Common Shares at $2.55
per share on or before June 30, 2005 (Cancelled by Release,
dated March 1, 2001, between the parties. See Exhibit 3.83
below). /(5)/
3.78 Stock Option Agreement dated June 26, 2000 granting Romaine
Gilliland options to purchase up to 110,000 Common Shares at
$2.55 per share on or before June 30, 2005. Mr. Gilliland
resigned effective April 10, 2001. The options lapsed July 10,
2001. /(5)/
74
3.79 Stock Option Agreement dated June 26, 2000 granting Frank
Kollar options to purchase up to 290,000 Common Shares at $2.55
per share on or before June 30, 2005 (Cancelled by Release,
dated March 1, 2001, between the parties. See Exhibit 3.85
below). /(5)/
3.80 Stock Option Agreement dated June 26, 2000 granting Denise
Gervin options to purchase up to 15,000 Common Shares at $2.55
per share, vesting at a rate of 1/3 per year for three years.
Ms. Gervin's employment was terminated effective February 9,
2001. The options expired May 9, 2001. /(5)/
3.81 Consulting and Stock Option Agreement dated June 26, 2000 with
Chris Papaioannou pursuant to which Mr. Papaioannou agrees to
provide consulting services to the Company for a three-year
period commencing June 26, 2000, and in consideration, the
Company agrees to provide Mr. Papaioannou (i) US$2,166.67 per
month, (ii) reimbursement for expenses and (iii) options to
purchase up to 9,000 Common Shares at $2.55 per share for a
period of five years, vesting at a rate of 1/3 per year for
three years. Mr. Papaioannou terminated the Consulting
Agreement effective December 2000, and the related stock
options have lapsed. /(5)/
3.82 Release dated March 1, 2001 by George Mr. Stubos whereby Stubos
agrees to (i) fully and completely release and discharge any
and all actions, causes of actions, claims and demands arising
out of any and all relationships with the Company, (ii) allow
the Company to purchase for cancellation 500,000 Common Shares
and (iii) cancel his option to buy 90,000 Common Shares, in
exchange for a lump-sum payment by the Company of US$35,000.
/(5)/
3.83 Release dated March 1, 2001 by Christos Livadas whereby Mr.
Livadas agrees to (i) fully and completely release and
discharge any and all actions, causes of actions, claims and
demands arising out of any and all relationships with the
Company, (ii) allow the Company to purchase for cancellation
500,000 Common Shares and (iii) cancel his option to buy 90,000
Common Shares, in exchange for a lump-sum payment by the
Company of US$25,000. /(5)/
3.84 Release and Consulting Agreement dated March 1, 2001 with Frank
Kollar and Sierra Holdings Limited whereby Mr. Kollar and
Sierra Holdings Limited agree to (i) fully and completely
release and discharge any and all actions, causes of actions,
claims and demands arising out of any and all relationships
with the Company, (ii) allow the Company to purchase for
cancellation 3,890,000 Common Shares and (iii) cancel his
option to buy 290,000 Common Shares, in exchange for US$209,000
to be paid by the Company immediately at the time of the
Release and US$60,000 to be paid as set forth in the Consulting
Agreement. /(5)/
3.85 Letter of Agreement for Website Services dated May 11, 2001
with Elizabeth J. Kirkwood and Crossbeam Limited doing business
as Crossbeam.com whereby Ms. Kirkwood and Crossbeam.com agree
to provide website set-up and maintenance services to the
Company for a six-month period from May 11, 2001 through
November 30, 2001 in exchange for payment by the Company of
75
a one-time payment of $4,000 for the initial set-up and $2,000
per month for maintenance thereafter. The Agreement is
automatically renewed for additional six-month terms absent
notice of cancellation. Either party may cancel on thirty days
notice. /(5)/
3.86 Website Publisher Agreement dated June 11, 2001 with Engage,
Inc. ("Engage") granting Engage the right to sell advertising
space on the Company's website in exchange for Engage's
agreement to pay the Company a royalty of 50% on all Net
Advertising Revenue. /(5)/
3.87 Non-binding Letter of Intent regarding potential business
combination of the Company and API Electronics, Inc. ("API")
dated June 19, 2001. /(5)/
3.88 Letter Agreement dated June 26, 2001 with Taurus Capital
Markets Ltd. as the Company's exclusive financial advisor with
respect to the potential acquisition of API in exchange for (i)
a work fee of $15,000, (ii) reimbursement of certain out-of-
pocket costs and (iii) in the event of and upon completion of
the purchase of API, 250,000 broker warrants for Units on the
same terms as Units being issued to purchase API. /(5)/
3.89 Letter Agreement dated June 26, 2001 for settlement of lease,
dated July 3, 2000, between Gilray, LLC and IL Data Corporation
Inc., to commence August 1, 2000 and terminate July 31, 2003
whereby Gilray, LLC agrees to execute a Certificate of
Satisfaction fully releasing IL Data and/or the Company from
any further responsibility under the lease in exchange for
US$18,000 and ownership of any and all furniture abandoned by
tenant on the premises. /(5)/
3.90 Release dated July 24, 2001 by Elizabeth J. Kirkwood agreeing
to release 45,000 stock options previously granted by the
Company. /(5)/
3.91 Release dated July 24, 2001 by Sandra J. Hall agreeing to
release 45,000 stock options previously granted by the Company.
/(5)/
3.92 Stock Option Agreement dated August 2, 2001 granting James C.
Cassina options to purchase up to 50,000 Common Shares at $0.45
per share, and up to 50,000 Common Shares at $0.75 per share on
or before July 31, 2006. The number of shares and exercise
prices associated with the stock options set forth reflect
post-consolidation numbers and prices--see Note 11(b) to the
financial statements contained in Part III, Item 17 of this
Annual Report. /(5)/
3.93 Stock Option Agreement dated August 2, 2001 granting Sandra J.
Hall options to purchase up to 50,000 Common Shares at $0.45
per share, and up to 50,000 Common Shares at $0.75 per share on
or before July 31, 2006. The number of shares and exercise
prices associated with the stock options set forth reflect
post-consolidation numbers and prices--see Note 11(b) to the
financial statements contained in Part III, Item 17 of this
Annual Report. /(5)/
3.94 Agreement and Plan of Merger, dated July 27, 2001, between
InvestorLinks.com Inc. and API Electronics, Inc. et al.,
whereby the Company acquired all of the issued and outstanding
shares of API Electronics, Inc., a
76
Delaware corporation for consideration of 6,500,000 post-
consolidation units at U.S. $.40 per unit. Each unit
consists of one Common Share, 1/2 of one Series A Common
Share purchase warrant exercisable at U.S. $.45 for a
period of 18 months from the date of issuance, and 1/2 of
one Series B Common Share purchase warrant exercisable at
U.S. $.75 for a period of two years from date of
issuance./(5)/
3.95 Agreement of Merger, dated August 31, 2001, between API
Electronics, Inc. and API Acquisition Corp., whereby API
Electronics, Inc. merged with and into API Acquisition
Corp. with API Electronics, Inc. as the surviving
corporation. Each share of common stock of API Acquisition
Corp. outstanding on the effective date of the Agreement
was cancelled and no consideration was paid with respect to
any such shares. Each share of common stock of API
Electronics, Inc., the surviving corporation, outstanding
on the effective date of the Agreement, was (i) exchanged
with InvestorLinks.com Inc., an Ontario Corporation and the
parent of API Acquisition Corp. ("IC"), for 33,163.27
shares of IC Common Stock and A and B warrants to purchase
an aggregate of 33,163.28 shares of IC Common Stock and
(ii) cancelled immediately thereafter. The surviving
corporation issued a new certificate for 100 shares of
common stock to IC, which represented all of the issued and
outstanding shares of the surviving corporation. /(5)/
3.96 Stock Option Agreement dated August 31, 2001 granting
Phillip DeZwirek options to purchase up to 50,000 Common
Shares at $0.45 per share, and up to 50,000 Common Shares
at $0.75 per share on or before August 31, 2006. The number
of shares and exercise price associated with the stock
options set forth reflect post-consolidation numbers and
prices - See Note 11(b) to the financial statements
contained in Part III, Item 17 of this Annual Report. /(5)/
3.97 Stock Option Agreement dated August 31, 2001 granting
Thomas W. Mills options to purchase up to 50,000 Common
Shares at $0.45 per share, and up to 50,000 Common Shares
at $0.75 per share on or before August 31, 2006. The number
of shares and exercise price associated with the stock
options set forth reflect post-consolidation numbers and
prices - See Note 11(b) to the financial statements
contained in Part III, Item 17 of this Annual Report. /(5)/
3.98 Stock Option Agreement dated August 31, 2001 granting Jason
DeZwirek options to purchase up to 50,000 Common Shares at
$0.45 per share, and up to 50,000 Common Shares at $0.75
per share on or before August 31, 2006. The number of
shares and exercise price associated with the stock options
set forth reflect post-consolidation numbers and prices -
See Note 11(b) to the financial statements contained in
Part III, Item 17 of this Annual Report. /(5)/
4. Miscellaneous:
4.1 List of Subsidiaries /(5)/
Footnotes to List of Exhibits:
-----------------------------
77
(1) Incorporated by reference from the Company's Registration Statement on Form
20-F, File No. 0-29142, filed on February 3, 1997
(2) Incorporated by reference from the Company's Annual Report on Form 20-F,
File No. 0-29142, filed on October 31, 1998
(3) Incorporated by reference from the Company's Annual Report on Form 20-F,
File No. 0-29142, filed on November 1, 1999
(4) Incorporated by reference from the Company's Annual Report on Form 20-F,
File No. 0-29142, filed on November 14, 2000
(5) Filed herewith.
Pursuant to the requirements of Section 12 of the Securities Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
20-F and has duly caused this Annual Report on Form 20 F to be signed on its
behalf by the undersigned, thereunto authorized.
Dated at Hauppauge, New York, United States of America, this 31st day of October
2001.
API ELECTRONICS GROUP INC.
By: /s/ Thomas W. Mills
--------------------
Thomas W. Mills, President
78
As filed with the Securities and Exchange Commission on October 31, 2001
Commission File No.: 0-29142
--------------------------------------------------------------------------------
INVESTORLINKS.COM INC.
ANNUAL REPORT
On
FORM 20-F
______________________
EXHIBIT INDEX
__________
INVESTORLINKS.COM INC.
ANNUAL REPORT ON FORM 20-F
FILED EXHIBIT INDEX
-------------------
Exhibit
Number Description
--------------------------------------------------------------------------------
1.6 Articles of Amendment filed September 6, 2001, effective September
10, 2001, reflecting Name Change from InvestorLinks.com Inc. to API
Electronics Group Inc.
3.74 Stock Option Agreement dated June 26, 2000 granting Kathy Hobbs-
Parent options to purchase up to 9,000 Common Shares at $2.55 per
share, vesting at a rate of 1/3 per year for three years. Ms. Hobbs-
Parent was terminated effective May 31, 2001. The options expired
August 29, 2001.
3.75 Stock Option Agreement dated June 26, 2000 granting Elizabeth J.
Kirkwood options to purchase up to 18,000 Common Shares at $2.55 per
share on or before June 30, 2005 (Released by letter, dated July 24,
2001, signed by Ms. Kirkwood - See Exhibit 3.92 below).
3.76 Stock Option Agreement dated June 26, 2000 granting Sandra J. Hall
options to purchase up to 45,000 Common Shares at $2.55 per share on
or before June 30, 2005 (Released by letter, dated July 24, 2001,
signed by Ms. Hall - See Exhibit 3.93 below).
3.77 Stock Option Agreement dated June 26, 2000 granting George Stubos
options to purchase up to 90,000 Common Shares at $2.55 per share on
or before June 30, 2005 (Cancelled by Release, dated March 1, 2001,
between the parties. See Exhibit 3.83 below).
3.78 Stock Option Agreement dated June 26, 2000 granting Romaine Gilliland
options to purchase up to 110,000 Common Shares at $2.55 per share on
or before June 30, 2005. Mr. Gilliland resigned effective April 10,
2001. The options lapsed July 10, 2001.
3.79 Stock Option Agreement dated June 26, 2000 granting Frank Kollar
options to purchase up to 290,000 Common Shares at $2.55 per share on
or before June 30, 2005 (Cancelled by Release, dated March 1, 2001,
between the parties. See Exhibit 3.85 below).
3.80 Stock Option Agreement dated June 26, 2000 granting Denise Gervin
options to purchase up to 15,000 Common Shares at $2.55 per share,
vesting at a rate of 1/3 per year for three years. Ms. Gervin's
employment was terminated effective February 9, 2001. The options
expired May 9, 2001.
3.81 Consulting and Stock Option Agreement dated June 26, 2000 with Chris
Papaioannou
pursuant to which Mr. Papaioannou agrees to provide consulting
services to the Company for a three-year period commencing June 26,
2000, and in consideration, the Company agrees to provide Mr.
Papaioannou (i) US$2,166.67 per month, (ii) reimbursement for
expenses and (iii) options to purchase up to 9,000 Common Shares at
$2.55 per share for a period of five years, vesting at a rate of 1/3
per year for three years. Mr. Papaioannou terminated the Consulting
Agreement effective December 2001, and the related options have
lapsed.
3.82 Release dated March 1, 2001 by George Stubos whereby Mr. Stubos
agrees to (i) fully and completely release and discharge any and all
actions, causes of actions, claims and demands arising out of any and
all relationships with the Company, (ii) allow the Company to
purchase for cancellation 500,000 Common Shares and (iii) cancel his
option to buy 90,000 Common Shares, in exchange for a lump-sum
payment by the Company of US$35,000.
3.83 Release dated March 1, 2001 by Christos Livadas whereby Mr. Livadas
agrees to (i) fully and completely release and discharge any and all
actions, causes of actions, claims and demands arising out of any and
all relationships with the Company, (ii) allow the Company to
purchase for cancellation 500,000 Common Shares and (iii) cancel his
option to buy 90,000 Common Shares, in exchange for a lump-sum
payment by the Company of US$25,000.
3.84 Release and Consulting Agreement dated March 1, 2001 with Frank
Kollar and Sierra Holdings Limited whereby Mr. Kollar and Sierra
Holdings Limited agree to (i) fully and completely release and
discharge any and all actions, causes of actions, claims and demands
arising out of any and all relationships with the Company, (ii) allow
the Company to purchase for cancellation 500,000 Common Shares and
(iii) cancel his option to buy 290,000 Common Shares, in exchange for
US $209,000 to be paid by the Company immediately at the time of the
Release and US $60,000 to be paid as set forth in the Consulting
Agreement.
3.85 Letter of Agreement for Website Services dated May 11, 2001 with
Elizabeth J. Kirkwood and Crossbeam Limited doing business as
Crossbeam.com whereby Ms. Kirkwood and Crossbeam.com agree to provide
website set-up and maintenance services to the Company for a six-
month period from May 11, 2001 through November 30, 2001 in exchange
for payment by the Company of a one-time payment of $4,000 for the
initial set-up and $2,000 per- month for maintenance thereafter. The
Agreement is automatically renewed for additional six-month terms
absent notice of cancellation. Either party may cancel on thirty days
notice.
3.86 Website Publisher Agreement dated June 11, 2001 with Engage, Inc.
("Engage") granting Engage the right to sell advertising space on the
Company's website in exchange for Engage's agreement to pay the
Company a royalty of 50% on all Net Advertising Revenue.
3.87 Non-binding Letter of Intent regarding potential business combination
of the Company and API Electronics, Inc. ("API") dated June 19, 2001.
3.88 Letter Agreement dated June 26, 2001 with Taurus Capital Markets Ltd.
as the Company's exclusive financial advisor with respect to the
potential acquisition of API
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in exchange for (i) a work fee of $15,000, (ii) reimbursement of
certain out-of-pocket costs and (iii) in the event of and upon
completion of the purchase of API, 250,000 broker warrants for Units
on the same terms as Units being issued to purchase API.
3.89 Letter Agreement dated June 26, 2001 for settlement of lease, dated
July 3, 2000, between Gilray, LLC and IL Data Corporation Inc., to
commence August 1, 2000 and terminate July 31, 2003 whereby Gilray,
LLC agrees to execute a Certificate of Satisfaction fully releasing
IL Data and/or the Company from any further responsibility under the
lease in exchange for US$18,000 and ownership of any and all
furniture abandoned by tenant on the premises.
3.90 Release dated July 24, 2001 by Elizabeth J. Kirkwood agreeing to
release 45,000 stock options previously granted by the company.
3.91 Release dated July 24, 2001 by Sandra J. Hall agreeing to release
45,000 stock options previously granted by the company.
3.92 Stock Option Agreement dated August 2, 2001 granting James C. Cassina
options to purchase up to 50,000 Common Shares at $0.45 per share,
and up to 50,000 Common Shares at $0.75 per share on or before July
31, 2006. The number of shares and exercise prices associated with
the stock options set forth reflect post-consolidation numbers and
prices--see Note 11(b) to the financial statements contained in Part
III, Item 17 of this Annual Report.
3.93 Stock Option Agreement dated August 2, 2001 granting Sandra J. Hall
options to purchase up to 50,000 Common Shares at $0.45 per share,
and up to 50,000 Common Shares at $0725 per share on or before July
31, 2006. The number of shares and exercise prices associated with
the stock options set forth reflect post-consolidation numbers and
prices--see Note 11(b) to the financial statements contained in Part
III, Item 17 of this Annual Report.
3.94 Agreement and Plan of Merger, dated July 27, 2001, between
InvestorLinks.com Inc. and API Electronics, Inc. et al., whereby the
Company acquired all of the issued and outstanding shares of API
Electronics, Inc., a Delaware corporation for consideration of
6,500,000 post-consolidation units at U.S. $.40 per unit. Each unit
consists of one Common Share, 1/2 of one Series A Common Share
purchase warrant exercisable at U.S. $.45 for a period of 18 months
from the date of issuance, and 1/2 of one Series B Common Share
purchase warrant exercisable at U.S. $.75 for a period of two years
from date of issuance.
3.95 Agreement of Merger dated August 31, 2001, between API Electronics,
Inc. and API Acquisition Corp., whereby API Electronics, Inc. merged
with and into API Acquisition Corp. with API Electronics, Inc. as the
surviving corporation. Each share of common stock of API Acquisition
Corp. outstanding on the effective date of the Agreement was
cancelled and no consideration was paid with respect to any such
shares. Each share of Common Stock of API Electronics, Inc., the
surviving corporation, outstanding on the effective date of the
Agreement, was (i) exchanged with InvestorLinks.com Inc., an Ontario
Corporation and the parent of API Acquisition Corp. ("IC"), for
33,163.27 shares of IC Common Stock and A and B warrants to purchase
an aggregate of 33,163.28 shares of IC Common Stock and (ii)
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cancelled immediately thereafter. The surviving corporation issued a
new certificate for 100 shares of common stock to IC, which
represented all of the issued and outstanding shares of the surviving
corporation.
3.96 Stock Option Agreement dated August 31, 2001 granting Phillip
DeZwirek options to purchase up to 50,000 Common Shares at $0.45 per
share, and up to 50,000 Common Shares at $0.75 per share on or before
August 31, 2006. The number of shares and exercise price associated
with the stock options set forth reflect post-consolidation numbers
and prices - see Note 11(b) to the financial statements contained in
Part III, Item 17 of this Annual Report.
3.97 Stock Option Agreement dated August 31, 2001 granting Thomas W. Mills
options to purchase up to 50,000 Common Shares at $0.45 per share,
and up to 50,000 Common Shares at $0.75 per share on or before August
31, 2006. The number of shares and exercise price associated with the
stock options set forth reflect post-consolidation numbers and
prices_ see Note 11(b) to the financial statements contained in Part
III, Item 17 of this Annual Report.
3.98 Stock Option Agreement dated August 31, 2001 granting Jason DeZwirek
options to purchase up to 50,000 Common Shares at $0.45 per share,
and up to 50,000 Common Shares at $0.75 per share on or before August
31, 2006. The number of shares and exercise price associated with the
stock options set forth reflect post-consolidation numbers and
prices -see Note 11(b) to the financial statements contained in Part
III, Item 17 of this Annual Report.
4.1 List of Subsidiaries.
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