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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F
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[ ] 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 March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transaction Period from ______________ to ___________________
Commission File Number 0-13248
LEVON RESOURCES LTD.
(Exact name of Registrant as specified in its charter)
A CORPORATION FORMED UNDER THE LAWS OF BRITISH COLUMBIA, CANADA
(Jurisdiction of Incorporation or Organization)
455 Granville Street, Suite 400, Vancouver, British Columbia V6C 1T1, Canada
(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:
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Common Shares, no par value
(Title of Class)
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Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act: None
The number of outstanding Common Shares as of March 31 2004 was 20,551,058.
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X]Yes [ ]No
Indicate by check mark which financial statement item the Company has elected to
follow. Item 17 [X] Item 18 [ ]
(Applicable only to issuers involved in bankruptcy proceedings during the past
five years)
Indicate by check mark whether the Company has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. NOT APPLICABLE
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1
TABLE OF CONTENTS
Introduction 3
Currency 3
Forward-looking Statements 3
Cautionary Note to U.S. Investors Concerning Estimate of Measured and
Indicated Mineral Resources 3
Glossary of Mining Terms 4
Part I 6
Item 1. Identity of Directors, Senior Management and Advisors 6
Item 2. Offer Statistics and Expected Timetable 6
Item 3. Key Information 6
Item 4. Information on the Company 12
Item 5. Operating and Financial Review and Prospects 19
Item 6. Directors, Senior Management and Employees 25
Item 7. Major Shareholders and Related Party Transactions 29
Item 8. Financial Information 30
Item 9. The Offer and Listing 30
Item 10. Additional Information 30
Item 11. Quantitative and Qualitative Disclosures About Market Risk 39
Item 12. Description of Securities Other than Equity Securities 39
Part II 39
Item 13. Defaults, Dividend Arrearages and Delinquencies 39
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 39
Item 15. Controls and Procedures 39
Item 16. [Reserved] 40
Item 16A. Audit Committee Financial Expert 40
Item 16B. Code of Ethics 40
Item 16C. Principal Accountant Fees and Services 40
Item 16D. Exemptions from the Listing Standards for Audit Committees 40
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 40
Part III 41
Item 17. Financial Statements 41
Item 18. Financial Statements 41
Item 19. Exhibits 41
2
Introduction
Levon Resources Ltd., which we refer to as the "Company", was incorporated
under the Company Act of the Province of British Columbia, Canada on April 9,
1965 under the name Alice Arm Mining Ltd. On January 13, 1975, the corporate
name was changed to New Congress Resources Ltd. The present name of Levon
Resources Ltd. was adopted on January 12, 1983. Our principal executive office
is located at Suite 400, 455 Granville Street, Vancouver, British Columbia V6C
1T1, Canada.
In this annual report on Form 20-F, which we refer to as the "Annual
Report", except as otherwise indicated or as the context otherwise requires, the
"Company", "we" or "us" refers to Levon Resources Ltd.
You should rely only on the information contained in this Annual Report. We
have not authorized anyone to provide you with information that is different.
The information in this Annual Report may only be accurate on the date of this
Annual Report or on or as at any other date provided with respect to specific
information.
Currency
Unless we otherwise indicate in this Annual Report, all references to
"Canadian Dollars", "CDN$" or "$" are to the lawful currency of Canada and all
references to "U.S. Dollars" or "US $" are to the lawful currency of the United
States
Forward-looking Statements
The following discussion contains forward-looking statements within the
meaning of the United States Private Securities Legislation Reform Act of 1995
concerning the Company's plans for its mineral properties which may affect the
future operating results and financial position. Such statements are subject to
risks and uncertainties that could cause our actual results and financial
position to differ materially from those anticipated in the forward-looking
statements. These factors include, but are not limited to, the factors set forth
in the sections entitled "Risk Factors" in Item 3.D., and "Operating and
Financial Review and Prospects" in Item 5. Statements concerning reserves and
resources may also be deemed to constitute forward-looking statements to the
extent that such statements reflect the conclusion that deposits may be
economically exploitable. Any statements that express or involve discussions
with respect to predictions, expectations, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using words
or phrases such as "expects", "does not expect", "is expected", "anticipates",
"does not anticipate", "plans", "estimates", or "intends", or stating that
certain actions, events or results "may", "could", "would", or "will" be taken,
occur or be achieved) are not statements of historical fact and may be
"forward-looking statements".
Cautionary Note to U.S. Investors Concerning Estimate of Measured and
Indicated Mineral Resources
We advise U.S. investors that although the terms "measured resources" and
"indicated resources" are recognized and required by Canadian regulations, the
U.S. Securities and Exchange Commission, referred to as the "SEC", does not
recognize them. U.S. investors are cautioned not to assume that all or any part
of our mineral resources in these categories will ever be converted into mineral
reserves.
3
GLOSSARY OF MINING TERMS
anomalous A value, or values, in which the amplitude is statistically
between that of a low contrast anomaly and a high contrast
anomaly in a given data set.
anomaly Any concentration of metal noticeably above or below the
average background concentration.
assay An analysis to determine the presence, absence or quantity
of one or more components.
Cretaceous The geologic period extending from 135 million to 65 million
years ago.
cubic meters or A metric measurement of volume, being a cube one meter in
m(3) length on each side.
fault A fracture in a rock where there has been displacement of
the two sides.
grade The concentration of each ore metal in a rock sample,
usually given as weight percent. Where extremely low
concentrations are involved, the concentration may be given
in grams per tonne (g/t or gpt) or ounces per ton (oz/t).
The grade of an ore deposit is calculated, often using
sophisticated statistical procedures, as an average of the
grades of a very large number of samples collected from
throughout the deposit.
hectare or ha An area totaling 10,000 square meters.
highly anomalous An anomaly which is 50 to 100 times average background, i.e.
it is statistically much greater in amplitude.
laterite A residual product of rock decay that is red in color and
has a high content in the oxides of iron and hydroxide of
aluminum.
mineral reserve The economically mineable part of a measured or indicated
mineral resource demonstrated by at least a preliminary
feasibility study. This study must include adequate
information on mining, processing, metallurgical, economic
and other relevant factors that demonstrate, at the time of
the reporting, that economic extraction can be justified. A
mineral reserve includes diluting materials and allowances
for losses that may occur when the material is mined.
Mineral resources are sub-divided in order of increasing
confidence into "probable" and "proven" mineral reserves. A
probable mineral reserve has a lower level of confidence
than a proven mineral reserve. The term "mineral reserve"
does not necessarily signify that extraction facilities are
in place or operative or that all governmental approvals
have been received. It does signify that there are
reasonable expectations of such approvals.
mineral resource The estimated quantity and grade of mineralization that is
of potential economic merit. A resource estimate does not
require specific mining, metallurgical, environmental, price
and cost data, but the nature and continuity or
mineralization must be understood. Mineral resources are
sub-divided in order of increasing geological confidence
into "inferred", "indicated", and "measured" categories. An
inferred mineral resource has a lower level of confidence
than that applied to an indicated mineral resource. An
indicated mineral resource has a higher level of confidence
than an inferred mineral resource, but has a lower level of
confidence than a measured mineral resource. A mineral
resource is a concentration or occurrence of natural, solid,
inorganic or fossilized organic material in or on the
earth's crust in such form and quantity and of such grade or
quality that it has reasonable prospects for economic
extraction.
mineralization Usually implies minerals of value occurring in rocks.
net smelter or Payment of a percentage of net mining profits after
NSR Royalty deducting applicable smelter charges.
4
e A natural aggregate of one or more minerals which may be
mined and sold at a profit, or from which some part may be
profitably separated.
outcrop An exposure of rock at the earth's surface.
possible or
inferred ore Term used to describe ore where the mineralization is
believed to exist on the basis of some geological
information, but the size, shape, grade, and tonnage are a
matter of speculation.
prefeasibility Each means a comprehensive study of the viability of a
study and mineral project that has advanced to a stage where mining
preliminary method, in the case of underground mining, or the pit
feasibility configuration, in the case of open pit mining, has been
study established, and which, if an effective method of mineral
processing has been determined, includes a financial
analysis based on reasonable assumptions of technical,
engineering, operating and economic factors, and the
evaluation of other relevant factors which are sufficient
for a qualified person, acting reasonably, to determine if
all or part of the mineral resource may be classified as a
mineral reserve.
probable mineral The economically mineable part of an indicated, and in some
reserve circumstances, a measured mineral resource demonstrated by
at least a prefeasibility study. This study must include
adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at
the time of reporting, that economic extraction can be
justified.
proven mineral reserve The economically mineable part of a measured
mineral resource demonstrated by at least a prefeasibility
study. This study must include adequate information on
mining, processing, metallurgical, economic, and other
relevant factors that demonstrate, at the time of reporting,
that economic extraction is justified. The term should be
restricted to that part of the deposit where production
planning is taking place and for which any variation in the
estimate would not significantly affect potential economic
viability.
quartz Silica or SiO2, a common constituent of veins, especially
those containing gold and silver mineralization.
ton Imperial measurement of weight equivalent to 2,000 pounds.
tonne Metric measurement of weight equivalent to 1,000 kilograms
(or 2,204.6 pounds).
veins The mineral deposits that are found filling openings in
rocks created by faults or replacing rocks on either side of
faults.
5
Part I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
A. Selected Financial Data
The selected historical financial information presented in the table below
for each of the years ended March 31, 2004, 2003, 2002, 2001 and 2000, is
derived from the audited financial statements of the Company. The audited
financial statements and notes for each year in the three years ended March 31,
2004, 2003 and 2002 are included in this Annual Report. The selected historical
financial information for each year ended March 31, 2001 and 2000, presented in
the table below are derived from financial statements of the Company that are
not included in this Annual Report. The selected financial information presented
below should be read in conjunction with the Company's financial statements and
the notes thereto (Item 17) and the Operating and Financial Review and Prospects
(Item 5) included elsewhere in this Annual Report.
The selected financial data has been prepared in accordance with Canadian
generally accepted accounting principles, which we refer to as "Canadian GAAP".
The financial statements included in Item 17 in this filing are also prepared
under Canadian GAAP. Included within these financial statements in Note 14 is a
reconciliation between Canadian GAAP and United States generally accepted
accounting principals, which is referred to as "U.S. GAAP", which differ, among
other things, in respect to the recording of the foreign exchange (gains) and
losses, deferred exploration expenditures and recognition of compensation
expense upon the issuance of stock options.
Canadian GAAP
Year Ended March 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------- ------------- ------------- -------------- --------------
Summary of Operations:
Interest and miscellaneous Income $104 $725 $811 $4,304 $3,352
Income tax recovery - - - - -
Expenses
General and administrative (173,325) (120,366) (113,163) (126,985) (127,362)
Property investigation expensed (8,000)
Write-down of mining properties (6,508) (10,363) (776,140) (69,641) (620)
Write-down property and equipment - - (10,000) (89,855) (23,957)
Write-down investments - (1,960) - (5,597) (756)
Recovery of mineral property costs - - - -
Net Income (loss) for year (179,729) (131,964) (898,492) (295,774) (149,343)
Income (loss) per share (0.01) (0.03) (0.06) (0.02) (0.01)
6
As at March 31,
--------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------- ------------- -------------- -------------- ---------
Balance Sheet Data:
Total assets 399,600 184,082 85,122 843,823 943,791
Cash and term deposits 264,064 109,342 3,388 1,022 0
Restricted cash - - - - -
Total liabilities 232,973 285,834 212,410 72,619 341,917
Shareholders' equity 160,119 (101,752) (127,288) 771,204 601,764
Number of Shares Issued 20,551,058 17,414,508 14,389,508 14,389,508 10,968,655
United States GAAP:
Year Ended March 31,
-------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------- ------------- -------------- -------------- -----------
Summary of Operations:
Net Income (loss) per
Canadian AP (173,221) (131,964) (898,492) (295,774) (149,343)
Adjustments (35,507) 353 734,174 30,186 18,075
Net Income (loss) per US
GAAP (215,236) (131,611) (164,318) (265,588) (131,268)
Income (loss) per share per US
GAAP (0.00) (0.01) (0.01) (0.01) (0.01)
Year Ended March 31,
-------------------------------------------------------------------------
2004 2003 2002 2001 2000
------------- ------------- -------------- -------------- -----------
Balance Sheet Data:
Total assets under Canadian GAAP 399,600 184,082 85,112 843,823 943,791
Adjustments (35,381) 120 120 (734,316) (741,287)
Total assets under US GAAP 357,705 184,202 85,242 109,507 202,504
Total equity under Canadian GAAP 20,326,919 20,027,819 19,727,819 19,727,819 19,262,605
Adjustments (1,696,550) (1,696,550) (1,696,550) (1,696,550) (1,696,550)
Total equity under US GAAP 18,630,369 18,331,269 18,031,269 18,031,269 17,566,055
Exchange Rates
The following table sets forth information as to the period end, average,
the high and the low exchange rate for Canadian Dollars and U.S. Dollars for the
periods indicated based on the noon buying rate in New York City for cable
transfers in Canadian Dollars as certified for customs purposes by the Federal
Reserve Bank of New York (Canadian dollar = US$1).
Year Ended
March 31, Average Period End High Low
--------- ------- ---------- ---- ---
2000 1.4517 1.4350 1.5286 1.4803
2001 1.5037 1.5767 1.5791 1.4470
2002 1.5655 1.5953 1.6190 1.5065
2003 1.5497 1.5652 1.6050 1.4584
2004 1.3531 1.3081 1.4940 1.2679
2005 1.2787 1.1866 1.4003 1.1714
7
The following table sets forth the high and low exchange rate for the past
six months. As of December 6, 2005, the exchange rate was CN$1.16260 for each
US$1.
Month High Low
----- ---- ---
March 2005 1.2492 1.1976
April 2005 1.2617 1.2061
May 2005 1.2732 1.2353
June 2005 1.2630 1.2230
July 2005 1.2477 1.2018
August 2005 1.2298 1.1857
September, 2005 1.1943 1.1620
October, 2005 1.1920 1.1582
B. Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
In addition to the other information presented in this Annual Report, the
following should be considered carefully in evaluating the Company and its
business. This Annual Report contains forward-looking statements that involve
risk and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed below
and elsewhere in this Annual Report.
We will be required to raise additional capital to mine our properties. Levon is
currently in the exploration stage of its properties. If we determine, based on
its most recent information, that it is feasible to begin operations on our
properties, Levon will be required to raise additional capital in order to
develop and bring the properties into production.
The commercial quantities of ore cannot be accurately predicted. Whether an ore
body will be commercially viable depends on a number of factors including the
particular attributes of the deposit, such as size, grade and proximity to
infrastructure, as well as mineral prices and government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may result in a mineral deposit being unprofitable.
The mining industry is highly speculative and involves substantial risks. The
mining industry, from exploration, development and production is a speculative
business, characterized by a number of significant risks including, among other
things, unprofitable efforts resulting not only from the failure to discover
mineral deposits but from finding mineral deposits, which, though present, are
insufficient in quantity and quality to return a profit from production. The
marketability of minerals acquired or discovered by the Company may be affected
by numerous factors which are beyond the control of the Company and which cannot
be accurately predicted, such as market fluctuations, the proximity and capacity
of milling facilities, mineral markets and processing equipment, and government
regulations, including regulations relating to royalties, allowable production,
importing and exporting of minerals, and environmental protection, the
combination of which factors may result in Levon not receiving an adequate
return on investment capital.
Levon's properties are all at the exploration stage and have no proven reserves.
All of our properties are in the exploration stage only and are without a known
body of ore. If we do not discover a body of ore on our properties, we will
continue to search for other properties where we can continue similar work.
8
The Company's mineral exploration efforts may be unsuccessful. Despite
exploration work on our mineral claims, no known bodies of commercial ore or
economic deposits have been established on any of the properties. In addition,
Levon is at the exploration stage on all of its properties and substantial
additional work will be required in order to determine if any economic deposits
occur on the properties. Even in the event commercial quantities of minerals are
discovered, the exploration properties might not be brought into a state of
commercial production. Finding mineral deposits is dependent on a number of
factors, including the technical skill of exploration personnel involved. The
commercial viability of a mineral deposit once discovered is also dependent on a
number of factors, some of which are particular attributes of the deposit, such
as size, grade and proximity to infrastructure, as well as metal prices. Most of
these factors are beyond the control of the entity conducting such mineral
exploration. The Company is an exploration stage company with no history of
pre-tax profit and no income from its operations.
Competition for mineral land. There is a limited supply of desirable mineral
lands available for acquisition, claim staking or leasing in the areas where the
Company contemplates expanding its operations and conducting exploration
activities. Many participants are engaged in the mining business, including
large, established mining companies. Accordingly, there can be no assurance that
Levon will be able to compete successfully for new mining properties.
Uncertainty of exploration and development programs. Levon's profitability is
significantly affected by the costs and results of its exploration and
development programs. As mines have limited lives based on proven and probable
mineral reserves, we actively seeks to expand our mineral reserves, primarily
through exploration, development and strategic acquisitions. Exploration for
minerals is highly speculative in nature, involves many risks and is frequently
unsuccessful. Among the many uncertainties inherent in any gold and silver
exploration and development program are the location of economic ore bodies, the
development of appropriate metallurgical processes, the receipt of necessary
governmental permits and the construction of mining and processing facilities.
Assuming the discovery of an economic deposit, depending on the type of mining
operation involved, several years may elapse from the initial phases of drilling
until commercial operations are commenced and, during such time, the economic
feasibility of production may change. Accordingly, Levon's exploration and
development programs may not result in any new economically viable mining
operations or yield new mineral reserves to expand current mineral reserves.
Licenses and permits. Our operations require licenses and permits from various
governmental authorities. We believe that we hold all necessary licenses and
permits under applicable laws and regulations and believe that we are presently
complying in all material respects with the terms of such licenses and permits.
However, such licenses and permits are subject to change in various
circumstances. There can be no guarantee that Levon will be able to obtain or
maintain all necessary licenses and permits as are required to explore and
develop our properties, commence construction or operate a mining facility and
properties under exploration or development or to maintain continued operations
that economically justify the cost.
Litigation. Although Levon is not currently subject to litigation, we may become
involved in disputes with other parties in the future, which may result in
litigation. Any litigation could be costly and time consuming and could divert
our management from our business operations. In addition, if the Company is
unable to resolve any litigation favorably, it may have a material adverse
impact on our financial performance, cash flow and results of operations.
Acquisitions. We undertake evaluations of opportunities to acquire additional
mining properties. Any resultant acquisitions may be significant in size, may
change the scale of our business, and may expose us to new geographic,
political, operating, financial and geological risks. The Company's success in
its acquisition activities depends on our ability to identify suitable
acquisition candidates, acquire them on acceptable terms, and integrate their
operations successfully. Any acquisitions would be accompanied by risks, such as
a significant decline in the price of gold or silver, the ore body proving to be
below expectations, the difficulty of assimilating the operations and personnel
of any acquired companies, the potential disruption of Levon's ongoing business,
the inability of management to maximize the financial and strategic position of
Levon through the successful integration of acquired assets and businesses, the
maintenance of uniform standards, controls, procedures and policies, the
9
impairment of relationships with customers and contractors as a result of any
integration of new management personnel and the potential unknown liabilities
associated with acquired mining properties. In addition, we need additional
capital to finance an acquisition. Historically, Levon has raised funds through
equity financing and the exercise of options and warrants. However, the market
prices for natural resources are highly speculative and volatile. Accordingly,
instability in prices may affect interest in resource properties and the
development of and production from such properties that may adversely affect our
ability to raise capital to acquire and explore resource properties. There can
be no assurance that Levon will be successful in overcoming these risks or any
other problems encountered in connection with such acquisitions.
Conflict of interest. Certain directors and officers of Levon are officers
and/or directors of, or are associated with, other natural resource companies
that acquire interests in mineral properties. Such associations may give rise to
conflicts of interest from time to time. The directors are required by law,
however, to act honestly and in good faith with a view to the best interests of
the Company and its shareholders and to disclose any personal interest which
they may have in any material transaction which is proposed to be entered into
with the Company and to abstain from voting as a director for the approval of
any such transaction.
Uncertainty of continuing as a going concern. The continuation of the Company
depends upon its ability to attain profitable operations and generate cash flow
from operations and/or to raise equity capital through the sale of its
securities. As a result, there is uncertainty about the Company's ability to
continue as a going concern. Levon's financial statements do not include the
adjustments that would be necessary if we were unable to continue as a going
concern.
Limited and volatile trading volume. Although the Company's common shares are
listed on the TSX Venture Exchange and quoted in the United States on the Over
the Counter Bulletin Board, the volume of trading has been limited and volatile
in the past and is likely to continue to be so in the future, reducing the
liquidity of an investment in the Company's common shares and making it
difficult for investors to readily sell their shares in the open market. Without
a liquid market for the Company's common shares, investors may be unable to sell
their shares at favorable times and prices and may be required to hold their
shares in declining markets or to sell them at unfavorable prices.
Volatility of share price. In recent years, securities markets in Canada have
experienced a high level of price volatility. The market price of many resource
companies, particularly those, like Levon, that are considered speculative
exploration companies, have experienced wide fluctuations in price, resulting in
substantial losses to investors who have sold their shares at a low price point.
These fluctuations are based only in part on the level of progress of
exploration, and can reflect general economic and market trends, world events or
investor sentiment, and may sometimes bear no apparent relation to any objective
factors or criteria. During the 2005 fiscal year, the Company's common share
price fluctuated on the TSX Venture Exchange between a low of $0.06 and a high
of $0.12. Subsequent to the 2005 fiscal year, the Company's common share price
has fluctuated between a low of $0.075 and a high of $0.095. Significant
fluctuations in the Company's common share price is likely to continue, and
could potentially increase in the future.
Difficulty for U.S. investors to effect services of process against the Company.
The Company is incorporated under the laws of the Province of British Columbia,
Canada. Consequently, it will be difficult for United States investors to affect
service of process in the United States upon the directors or officers of the
Company, or to realize in the United States upon judgments of United States
courts predicated upon civil liabilities under the United States Securities
Exchange Act of 1934, as amended. The majority of the Levon's directors and
officers are residents of Canada. A judgment of a U.S. court predicated solely
upon such civil liabilities would probably be enforceable in Canada by a
Canadian court if the U.S. court in which the judgment was obtained had
jurisdiction, as determined by the Canadian court, in the matter. There is
substantial doubt whether an original action could be brought successfully in
Canada against any of such persons or the Company predicated solely upon such
civil liabilities.
We have incurred net losses since our inception and expect losses to continue.
We have not been profitable since our inception. For the fiscal year ended March
31, 2005, we had a net loss of $62,155 and an accumulated deficit on March 31,
2005 of $20,228,955. As the Company is currently at the exploration stage and
10
has no reserves of precious metals, management expects the Company to continue
to suffer net losses for the foreseeable future.
There are no assurances that we will discover minerals on a commercially viable
basis. Levon's ability to generate revenues and profits is expected to occur
through exploration, development and production of our existing properties as
well as through acquisitions of interests in new properties. Substantial
expenditures will be incurred in an attempt to establish the economic
feasibility of mining operations by identifying mineral deposits and
establishing ore reserves through drilling and other techniques, developing
metallurgical processes to extract metals from ore, designing facilities and
planning mining operations. The economic feasibility of a project depends on
numerous factors, including the cost of mining and production facilities
required to extract the desired minerals, the total mineral deposits that can be
mined using a given facility, the proximity of the mineral deposits to a user of
the minerals, and the market price of the minerals at the time of sale. There is
no assurance that existing or future exploration programs or acquisitions will
result in the identification of deposits that can be mined profitably.
The Company's exploration activities are subject to various federal, state and
local laws and regulations. Laws and regulations govern the exploration,
development, mining, production, importing and exporting of minerals; taxes;
labor standards; occupational health; waste disposal; protection of the
environment; mine safety; toxic substances; and other matters. In many cases,
licenses and permits are required to conduct mining operations. Amendments to
current laws and regulations governing operations and activities of mining
companies or more stringent implementation thereof could have a substantial
adverse impact on the Company. Applicable laws and regulations will require
Levon to make certain capital and operating expenditures to initiate new
operations. Under certain circumstances, we may be required to stop our
exploration activities once it is started until a particular problem is remedied
or to undertake other remedial actions.
Market price is highly speculative. The market price of metals is highly
speculative and volatile. Instability in metal prices may affect the interest in
mining properties and the exploration, development and production of such
properties. If gold prices substantially decline, this may adversely affect our
ability to raise capital to explore for existing and new mineral properties.
The Company operates in a highly competitive industry. We compete with other
developmental resource companies, which have similar operations, and there are
many competitors that have operations, financial resources, and industry
experience greater than those of Levon's. We may encounter increasing
competition from other mining companies in our efforts to acquire mineral
properties and hire experienced resource industry professionals. Increased
competition in our business could adversely affect our ability to attract
necessary capital funding or acquire suitable producing properties or prospects
for mineral exploration in the future.
Penny stock rules may make it more difficult to trade the Company's common
shares. The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price of less than US$5.00 per share or an exercise price of less than US$5.00
per share, subject to certain exceptions. Our securities may be covered by the
penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors such as institutions with assets in excess of US$5,000,000
or an individual with net worth in excess of US$1,000,000 or annual income
exceeding US$200,000 or US$300,000 jointly with his or her spouse. For
transactions covered by this rule, the broker-dealers must make a special
suitability determination for the purchase and receive the purchaser's written
agreement of the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell our securities and also affect the
ability of our investors to sell their shares in the secondary market.
The Company is subject to foreign currency fluctuations. Levon may from time to
time operate in more than one country and our functional currency is the
Canadian Dollar. Our offices are located in Canada, the majority of our mining
exploration properties are located in Canada, and the Company's financial
results are reported in Canadian Dollars. The Company's currency fluctuation
exposure is primarily to the US Dollar and the Canadian Dollar. The Company has
reported a foreign exchange loss of $Nil in fiscal 2005. We do not use
11
derivative financial instruments for speculative trading purposes, nor does we
hedge our foreign currency exposure to manage our foreign currency fluctuation
risk. Fluctuations in and among the various currencies in which we operate could
have a material effect on our operations and our financial results.
- --------------------------------------------------------------------------------
Item 4. Information on the Company
Cautionary Note to U.S. Investors
We describe our properties utilizing mining terminology such as "measured
resources" and "indicated resources" that are required by Canadian regulations
but are not recognized by the SEC. U.S. investors are cautioned not to assume
that any part of the mineral deposits in these categories will ever be converted
into reserves.
A. History and Development of the Company
Levon was incorporated by Memorandum of Association under the laws of the
Province of British Columbia on April 9, 1965 under the name Alice Arm Mining
Ltd. On January 13, 1975 we changed the name from Alice Arm Mining Ltd. to New
Congress Resources, and on January 12, 1983 adopted the name Levon Resources
Ltd.
We are a natural resource company, primarily engaged in the acquisition and
exploration of natural resource properties. Our principal business activities
have been the exploration of certain mineral properties located in Canada,
specifically British Columbia. Since fiscal 2001 we made aggregate principal
capital expenditures of $104,931 on the properties in Canada. These capital
expenditures consist of $14,470, which was spent on the Congress property,
$72,699 on the Gold Bridge property, and $5,040 on the Wayside property. We also
have certain interests in mineral properties located in Nevada, USA. Since
fiscal 2001 we made aggregate principal capital expenditures of $12,723 all of
which were incurred on the Eagle property.
B. Business Overview
Operations and Principal Activities
Levon is a Canadian-based resource company focusing on gold exploration.
Our most recent activities have been focused on the Gold Bridge and Congress
Property, both located in the Lillooet Mining Division of British Columbia,
which has produced positive assays for gold through trenching, drilling and
sampling. We continue to focus on these projects and will remain our principal
focus for the foreseeable future.
Presently, Levon is an "exploration stage company", as all of our
properties are currently in the exploratory stage of development. In order to
determine if a commercially viable mineral deposit exists in any of our
properties, further geological work will need to be done and a final evaluation
based upon the results obtained to conclude economic and legal feasibility.
Significant Acquisitions and Significant Dispositions
We have no significant acquisitions or dispositions of property, other than
as otherwise disclosed in this Annual Report.
Competition
The mining industry in which we are engaged is highly competitive.
Competitors include well capitalized mining companies, independent mining
companies and other companies having financial and other resources far greater
than those of Levon's. The companies compete with other mining companies in
connection with the acquisition of gold and other precious metal properties. In
general, properties with a higher grade of recoverable mineral and/or which are
more readily minable afford the owners a competitive advantage in that the cost
12
of production of the final mineral product is lower. Thus, a degree of
competition exists between those engaged in the mining industries to acquire the
most valuable properties. As a result, Levon may eventually be unable to acquire
attractive gold mining properties.
Seasonality
Certain of our operations are conducted in British Columbia. The weather
during the colder seasons in these areas can be extreme and can cause
interruptions or delays in our operations. As a result, the preferable time for
activities in these regions is the spring and summer when costs are more
reasonable and access to the properties is easier. In the summer months,
however, if the weather has been unusually hot and dry, access to the Company's
properties may be limited as a result of access restrictions being imposed to
monitor the risks of forest fires.
Governmental Regulation
The current and anticipated future operations of the Company, including
development activities and commencement of production on its properties, require
permits from various federal, territorial and local governmental authorities and
such operations are and will be governed by laws and regulations governing
prospecting, development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, toxic substances, land use, environmental
protection, mine safety and other matters. Companies engaged in the development
and operation of mines and related facilities generally experience increased
costs and delays in production and other schedules as a result of the need to
comply with applicable laws, regulations and permits. Such operations and
exploration activities are also subject to substantial regulation under these
laws by governmental agencies and may require us to obtain permits from various
governmental agencies. We believe we are in substantial compliance with all
material laws and regulations which currently apply to our activities. There can
be no assurance, however, that all permits which we may require for construction
of mining facilities and conduct of mining operations will be obtainable on
reasonable terms or that such laws and regulations, or that new legislation or
modifications to existing legislation, would not have an adverse effect on any
exploration or mining project which we might undertake.
Failure to comply with applicable laws, regulations and permitting
requirements may result in enforcement actions, including orders issued by
regulatory or judicial authorities causing operations to cease or be curtailed,
and may include corrective measures requiring capital expenditures, installation
of additional equipment or remedial actions. Parties engaged in exploration and
mining operations may be required to compensate those suffering loss or damage
by reason of the mining activities and may have civil or criminal fines or
penalties imposed for violation of applicable laws or regulations.
The enactment of new laws or amendments to current laws, regulations and
permits governing operations and activities of mining companies, or more
stringent implementation thereof, could have a material adverse impact on Levon
and cause increases in capital expenditures or production costs or reduction in
levels of production at producing properties or require abandonment or delays in
the development of new mining properties.
C. Organizational Structure
The Company had a wholly-owned subsidiary, Levon Resources Inc., a Montana
corporation and was dissolved on October 30, 1990.
D. Property, Plants and Equipment
We have focused our exploration activities during the 2004 fiscal year on
the Gold Bridge Claims (also known as the "BRX Claims"),located in British
Columbia, Canada.
13
i) Congress Property
Ownership. The Company owns a 50% leasehold interest in 45 claims in the
Lillooet Mining Division, British Columbia, and a 5% net smelter royalty. The
property also covers two additional claims known as the Howard zone and the Lou
zone which are owned 100% by the Company.
Property Description and Location. The Congress property consists of 45
claims including 8 crown grants, 13 mineral leases and 24 mineral claims located
in the Lillooet Mining Division, British Columbia, Canada. The claims are
located in the Bridge River gold district of British Columbia. Access to the
property from Vancouver, British Columbia is via Highway 99 to Lillooet, a
distance of approximately 254 kilometers, and then an additional 70 kilometers
on gravel access road to the community of Gold Bridge. Access on the property is
possible on a number of cat trails built by the Company and previous operators,
A four-wheel drive vehicle is usually necessary to access all roads on the
property.
History. The mineral claims were purchased from a company with common
directors and are subject to a Joint Venture Agreement dated February 25, 1983
between Levon and Veronex Resources Ltd. ("Veronex"). Veronex has earned a 50%
net interest in the claims, net of a 5% net smelter royalty held by Levon, by
expending $1,000,000 in a prior year. Under the terms of the joint venture
agreement, the operator of the joint ventures is Congress Operating Ltd., a
British Columbia company equally owned by the Company and Veronex. The operator
reports to the management committee which consists of two representatives from
each the Company and Veronex. Each party is equally responsible for expenses of
the joint ventures. In the event that a party is unable to pay its portion of
expenses, such party's interest in the joint venture will be diluted.
Exploration under the Joint Venture ceased in early 1989. During this fiscal
year, due to a lack of funds, the Company did not conduct an exploration program
on this project.
The Congress property has had considerable past work, both underground and
surface over a number of years. During the 2005 fiscal year, we completed an
initial two-phase program of mineral exploration on the property. Phase one
consisted of approximately 120 metres of trenching in six trenches. Trenches 1
to 3 were to sample new showings but did not expose any mineralization of
economic interest. Trenches 4 and 5 exposed a massive stibnite vein grading up
to 5.9 g/t of gold over 1.6 metres. This Vein is the northern extension of the
Congress Vein which is exposed 250 metres to the south. Trench #6 extended the
1988 trench #18 to the west and exposed the Lou Zone 175 metres further to the
north. Phase Two consisted of 820.5 metres of NQ diamond drilling to test the
down plunge extension of gold mineralization outlined in the Upper Howard drift.
These holes were drilled to test an area approximately 100 metres north of the
face of the Lower Howard drift. The mineralization can be seen to extend to this
depth with wide zones, greater than 10 metres true width, intersected. A table
of significant results appears below:
Drill Hole Intersection (metres) Estimated True width Grade Gold g/t Zone
C-04-01 (-60(degree)) 135.2-137.2 1.85m 3.4 West Howard
153.2-154.2 0.93m 2.2 Howard
154.2-155.2 0.93m 3.7 Howard
224.0-225.5 1.39m 1.9 East Howard
255.4-256.0 0.56m 2.5 Far East Howard
C-04-02 (-60(degree)) 141.8-142.4 0.56m 1.2 West Howard
154.0-155.5 1.39m 1.2 Howard
155.5-157.0 1.39m 2.4 Howard
158.5-159.5 0.93m 2.4 Howard
160.7-162.1 1.30m 1.5 Howard
162.1-164.3 2.04m 1.5 Howard
C-04-03 (-80(degree)) 150.3-151.5 0.80m 1.13 West Howard
154.7-155.5 0.54m 1.33 West Howard
166.7-167.3 0.40m 1.13 West Howard
177.2-178.0 0.54m 12.14 Howard
C-05-04 (-80(degree)) 152.1-153.0 0.60m 7.93 West Howard
160.2-161.6 0.97m 1.37 West Howard
14
Further trenching was carried out in 2005 and directed at stripping an area of
the Lou Zone where surface enrichment has taken place in order to carry out a
bulk metallurgical test. Two areas 10 metres wide and, respectively, 22 and 10
metres long have been stripped. Samples have been taken at one metre intervals
along lines run every two metres across the mineralized zone. The mineralized
zone is approximately eight metres wide in this area, with the central four
metres averaging 10 g/t gold or better. A 40 kilogram sample of this material
has been sent to Process Research Associates for initial testing. The material
is highly oxidized and fractured and could be mined by excavator without
blasting. This oxidised material only extends for about three metres below
surface with drill holes below this returning values in the two to five g/t gold
range. If metallurgical testing indicates the oxidized material can be treated
at the nearby Bralorne mill, the plan is to mine and stockpile approximately
1,000 tonnes of this material at the mill and run it through as a batch to
better asses recoveries. There are 2,000 tonnes of the oxidized, enriched
material in sight with a conceptual resource of about 10,000 tonnes total. In
the process of road rehabilitation and reclamation a new zone has been
discovered, named "Golden Ledge". This zone is 1.4 kilometres due north of the
Howard workings on the south side of the Gun Creek canyon and might be the
northern extension of the Howard structure. The zone is 1.2 to 1.5 metres wide
and has returned assays to 14.0 g/t gold over 1.2 metres. Drilling was carried
out on the newly discovered Golden Ledge showing and intersected 3.9 metres
assaying 5.14 g/t gold on the first hole drilled. This program was followed by a
second phase of mechanized trenching and drilling. The drilling started on June
11th , 2005 and only the first hole, GL-05-1, has been completed and is reported
on here. Drill testing of the Golden Ledge target commenced June 11, 2005. The
first hole, GL-05-1, drilled at 90(degree) to the strike of the shear zone at an
inclination of -45(degree), intersected 3.9 metres assaying 5.14 g/t gold. The
shear zone is an altered quartz stockwork zone hosted in basic volcanics.
The Golden Ledge shear zone trends east-west and appears to be dipping
approximately 70(degree) to the south where intersected. The true width of the
zone is calculated to be 1.65 metres where intersected. These assays are viewed
by management as being very encouraging for the first hole on a new showing.
Proposed Work Program. Further drilling is currently planned to expand the
known extent of the mineralization. On completion of the drill program, all
mineral resources on the property will be recalculated in compliance with NI
43-101. Further development plans will be made based on a scoping study of those
resources. Metallurgical testing of Lou Zone material by Process Research
Analysis is ongoing. Initial leach tests of oxidized Lou Zone material show
greater than 90% of the gold can be recovered using a conventional leaching
systems.
ii) Gold Bridge Property (also known as the "BRX Claims")
Ownership. We own a 50% interest in 74 mineral claims in the Gold Bridge
area, in the Lillooet Mining Division, British Columbia.
Property Description and Location. The Gold Bridge Property consists of 74
mineral claims located in the Lillooet Mining Division of British Columbia. The
property is access from Vancouver, British Columbia via Highway 99 to Lillooet,
a distance of approximately 254 kilometers and then an additional 70 kilometers
on gravel access road to the community of Gold Bridge. A four-wheel vehicle is
usually necessary to access all roads on the property.
History. During the year ended March 31, 2002, the expenditures relating to
the claims were written down resulting in a charge of $118,179 to operations.
The claims remain in good standing until December 2008. On December 17, 2002, we
entered into an option agreement with Mill Bay Ventures Inc. ("Mill Bay") a
company related by common directors, whereby we granted Mill Bay an option to
acquire an undivided 50% interest in the Gold Bridge claims as follows:
(a) Incurring $100,000 of expenditures on the property, and issuance of
100,000 common shares of Mill Bay to Levon on or before December 17,
2003;
(b) Incurring an additional $100,000 of expenditures on the property, and
issuance of another 100,000 common shares of Mill Bay to Levon on or
before December 17, 2004; and
15
(c) Incurring an additional $100,000 of expenditures on the property, and
issuance of another 100,000 common shares of Mill Bay to Levon on or
before December 17, 2005.
On September 1, 2003, the option agreement was amended such that the
$100,000 in expenditures and the 100,000 common shares due on or before December
17, 2003 was deferred until December 17, 2004.
During the fiscal year a drill program was carried out on the property with
Mill Bay contributing 50% of the cost. The purpose of the program was to
investigate the California vein on strike for about 1,500 ft. All nine holes in
the program intersected the vein. The best result was in the DDH 03 - CAL-05
hole, 0.158 oz/t - Au over 18.51 ft. including 0.27 oz/t - Au over 6.2 ft..
Subsequent to the fiscal year, the Company drifted on the vein to evaluate the
ore grade and continued diamond drilling at a cost of $196,285.
Subsequent to the year, Mill Bay earned the 50% interest in the property by
incurring the required exploration on the property and issuing to us 300,000
common shares in the capital of Mill Bay.
16
Proposed Work Program. We have no current plans for exploration on this
property.
iii) Eagle Property
Ownership. The Eagle property is 50% by the and was acquired in 1996 when
Levon satisfied the terms of an Option Agreement dated May 19, 1993 between
Levon and Coral Resources Inc. ("Coral Resources") a wholly owned Nevada
subsidiary of Coral Gold Resources Ltd. formerly known as Coral Gold Corp.
("Coral Gold"). The cost of exercising the option was the payment of $10,000 and
the issuance of 100,000 Common Shares of the Company to Coral Resources. The
property is subject to a 3% net smelter royalty to Geomex Development Eight
Partnership ("Geomex 8) which royalty shall cease at such time as the sum of
US$1,250,000 has been paid to Geomex 8. Coral Gold is a public company which has
three directors in common with Levon.
Property Description and Location. This property consists of 46 lode claims
(approximately 646 acres), known as the Eagle 15 to 50 and Eagle 53 to 61 and
are located in Corral Canyon, in Lander County, Nevada. Access to the property
is through Elko, Nevada, a regional mining supply center, via Highways 80 and
306, a distance of approximately 90 kilometers and then an additional 13
kilometers on a gravel access road from the community of Crescent Valley. A
four-wheel drive vehicle is usually necessary to access all roads on the
property. There is no underground or surface plant or equipment on the property,
nor any known body of commercial ore.
History. We have not conducted exploration on the Eagle property since 1997
when a surface geophysical exploration program was conducted. In 2002, when it
was decided that Levon would not be planning further work on the property, the
property was written down to a nominal value of $1 by a charge to operations of
$232,170. Although we no plans to further explore the property we keep them in
good standing by paying our 50% of the cost (approximately $3,500 annually) in
holding fees and taxes with the intent of selling the property, if and, when the
opportunity presents itself. In fiscal 2002
Proposed Work Program. There are no plans to further explore this property.
iv) Ruff and Norma Sass Property
Ownership. Levon owns a 33.33% interest in the Ruff and Norma Sass
property. During the fiscal year Levon granted Agnco-Eagle Mines Ltd. ("AGE") an
option to purchase Levon's 33.33% interest in the property, subject to a royalty
as described below.
Property Description and Location. The property consists of 37 mining
claims and is located in the state of Nevada. To Access the property from Elko,
Nevada, is via Highways 80 and 306, a distance of approximately 102 kilometers
to the community of Crescent Valley and then 19 kilometers south on highway 306
to Ruf and approximately 25 kilometers south on highway 306 to Norma Sass. A
four-wheel drive vehicle is usually necessary to access all roads on the
property.
17
History. In September 1995, the Company entered into option agreements with
Coral Resources to acquire a 50% interest in 54 mineral claims located in Lander
County, Nevada known as the Ruf and Norma Sass properties (the "Agreement").
Under the terms of the Agreement, Levon paid $50,000 U.S. and issued 100,000
common shares. In order to exercise the option, Levon was required to incur
minimum expenditures of $400,000 U.S. in exploration expenditures on the
property on or before December 31, 2000, and issue a further 300,000 common
shares. The Agreement was subject to an Option Agreement between Coral Resources
and Amax Gold Inc., or their successors, dated May 16, 1995 whereby Amax could
purchase up to a 61% interest in the properties (the "Option"). In 1997, Amax
assigned the Option to Placer Dome U.S. Inc. ("Placer") and on July 11, 1997,
Placer exercised the Option and received a 61% interest in the property. As a
result, the Company and Coral Resources entered into a First Amending Agreement
to provide for cash payments in lieu of exploration expenditures. In February
2000, the Company and Coral Resources further amended the Agreement, whereby the
option was reduced from a 19.5% to a 15% interest in the property. On December
31, 2000, Coral Resources' Agreement with Placer was terminated, leading to the
automatic termination of all Amending Agreements with the Company. Effective
December 31, 2000, Levon and Coral Resources entered into a Fourth Amending
Agreement whereby Levon received an option to earn an undivided 19.5% interest
in the property by incurring $251,140 of expenditures on the property by
December 31, 2002 and issuing to Coral Resources 100,000 common shares. During
the year ended March 31, 2002, the Fourth Amending Agreement expired and, as
such, we failed to earn an undivided 19.5% interest in the property. The
property expenditures relating to the claims were written down resulting in a
charge to operations of $350,292. After negotiations with Coral Resources, we
received from Coral Resources an undivided one-third interest in the Ruf and
Norma Sass properties in recognition of the prior year payments by Levon to
Coral Resources of $350,292 and the prior year issuances of 300,000 common
shares in Levon.
During fiscal year, 2005, Coral Resources and Levon (collectively the
"Companies") entered into an Agreement with Agnico-Eagle Mines Ltd. ("AGE")
wherein the Companies granted AGE an option to purchase 100% interest in the
property, subject to a 2.5% royalty to the Companies, in consideration of the
following minimum advance royalty payments (in US dollars) and minimum work
commitments:
Execution of the Agreement
(October 12, 2004) $ 25,000 13,000 feet of drilling
First anniversary $ 30,000 15,000 feet of drilling
Second anniversary $ 50,000 17,000 feet of drilling
Third anniversary $ 75,000
Fourth anniversary $ 75,000
Fifth anniversary $150,000
Under the terms of the Agreement, AGE is committed to drilling a minimum of
13,000 feet on the property. Upon making the second and third years' anniversary
advance royalty payments, AGE will be obligated to complete the associated
minimum work commitment for that year. After the third anniversary, or at
anytime after the completion of at least 45,000 feet of drilling, AGE will have
earned a 51% interest in the property.
AGE can earn an additional 24% by providing the funds to acquire the leased
claims from the underlying owners and the remaining 25% by producing a positive
feasibility study and making a positive production decision.
At the fifth anniversary and every year thereafter until production occurs,
the advance royalty payment will be $150,000 per annum. All advance royalty
payments will be credited towards AGE's payment of a royalty of 2.5% net smelter
returns from production to the Companies. AGE has reserved the right to purchase
1% of this net smelter returns royalty (to reduce the royalty to Coral and Levon
to 1.5%) for a cash payment of U.S. $1million .
In light of our minority interest, we have not carried out an exploration
program on these claims.
Proposed Work Program. We have no plans to carry out exploration on these
claims.
18
v) Wayside Property
Ownership. In 1997 Levon acquired a 100% interest 27 mineral claims for
$5,000.
Property Description and Location. The Wayside claims are located in the
Lillooet Mining Division, British Columbia, Canada. Access to the claims from
Vancouver is via Highway 99 to Lillooet, a distance of approximately 254
kilometers and then an additional 70 kilometers on gravel access road to the
community of Gold Bridge. Access on the property is possible on a number of cat
trails built by us and previous operators, A four-wheel drive vehicle is usually
necessary to access all roads on the property.
History. We have not conducted exploration on these claims, nor do we have
future plans to, but we consider the property of merit and continue to maintain
the claims in good standing. The acquisition and maintenance costs incurred on
the property were written down on March 31, 2002 to nominal value of $1 by a
charge to operations of $42,119.
Proposed Work Program. We have no current plans to explore these claims.
Item 5. Operating and Financial Review and Prospects
This discussion and analysis of the operating results and the financial
position of the Company for the years ended March 31, 2004, 2003 and 2002 should
be read in conjunction with the consolidated financial statements and the
related notes attached hereto.
A. Operating Results
Our principal business activities are the exploration and development of
mineral properties. We are in the process of exploring and developing our
mineral properties and have not yet determined whether any of our mineral
properties contain ore reserves that are economically recoverable. The
recoverability of amounts shown for mineral properties is dependent upon the
discovery of economically recoverable ore reserves in the mineral properties,
our ability to obtain the necessary financing to complete development,
confirmation of our interest in the underlying mineral claims and leases and
future profitable production or sufficient proceeds from the disposition of its
mineral properties. We continue to investigate new exploration opportunities,
and we carry out mineral exploration on properties identified by management as
having favorable exploration potential. Interests in such properties are
acquired in various ways. In some cases, through our own efforts, by staking
mineral claims or acquiring exploration permits. In other cases we acquire
interests in mineral properties from third parties. An acquisition from a third
party is typically made by way of an option agreement, which requires Levon to
make specific option payments and to incur a specified amount of exploration
costs on the property. Once Levon has incurred the specified exploration
expenditures, the parties will enter into a joint venture requiring each party
to contribute towards future exploration and development costs, based on its
percentage interest in the property, or suffer dilution of its interest. We
advance our projects to varying degrees by prospecting, mapping, geophysics and
drilling. Once a property is determined to have limited exploration potential,
the property is abandoned or sold. In cases where exploration work on the
property reaches a stage where the expense and risk of further exploration and
development are too high, we may seek a third party to earn an interest by
furthering development. Optioning a property to a third party allows us to
retain an interest in further exploration and development while limiting its
obligation to commit a large amount of capital to any one project. The mineral
exploration business is high risk and most exploration projects will not become
mines.
Current Operations
Levon holds certain interest in mineral claims located in Nevada, USA and
in British Columbia, Canada.
19
In Nevada, USA, we hold interests in two separate mineral properties both
of which are located in Lander County. They are as follows: (a) Eagle Claims
consisting of a 50% interest in 26 lode mining claims; and (b) Ruf and Norma
Sass Property consisting of a 33.33% interest in 54 mineral claims. Both of
these properties were written down in prior years to nominal value of $1.00 and
no exploration was conducted in the year.
In British Columbia, we have interests in three separate mineral properties
all of which are located in the Lillooet Mining Division as follows: (i) the
Congress Claims consisting of a 50% leasehold interest in 46 claims; (ii) the
Gold Bridge Claims consisting of a 100% interest in 74 mineral claims; (iii)
Wayside Claims consisting of 100% interest in 24 mineral claims. Exploration has
been carried out in the year on both the Congress and Gold Bridge Claims.
Year in Review
From October 23, 2003 to February 15, 2005, in accordance with TSX Venture
Policy 2.5, the Company's listing was transferred to the NEX board (a trading
system designed for companies that did not meet the minimum listing requirements
for a TSX Venture Tier 2 listing. As a consequence of the down grade of our
listing, the Company was subject to restrictions on share issuances and certain
types of payments. Following a reactivation plan carried out in fiscal 2005,
which included a financing and a shares for debt settlement, the listing was
upgraded to the TSX Venture Exchange Tier 2.
During the year, a nine-hole diamond drilling program was carried out to explore
the California vein on the BRX property. All nine holes intersected the vein.
The purpose of the drill program was to investigate the California vein on
strike for about 1500 ft. Following this program, Mill Bay elected to continue
exploring the property without the Company's full participation in an effort to
incur the required exploration expenditures pursuant to the BRX Agreement.
Subsequent to the year, Levon completed an initial two-phase program of mineral
exploration on the Congress Property. Phase one consisted of approximately 120
metres of trenching in six trenches. Trenches 1 to 3 were to sample new showings
but did not expose any mineralization of economic interest. Trenches 4 and 5
exposed a massive stibnite vein grading up to 5.9 g/t of gold over 1.6 metres.
This Vein is the northern extension of the Congress Vein which is exposed 250
metres to the south. Trench #6 extended the 1988 trench #18 to the west and
exposed the Lou Zone 175 metres further to the north. Phase Two consisted of
820.5 metres of NQ diamond drilling to test the down plunge extension of gold
mineralization outlined in the Upper Howard drift. These holes were drilled to
test an area approximately 100 metres north of the face of the Lower Howard
drift. The mineralization can be seen to extend to this depth with wide zones,
greater than 10 metres true width, intersected. Underground development in the
Lower Howard adit is being planned for this summer. In conjunction with this
work, diamond drilling will be carried out to better define the resources in the
Lou Zone.
20
Subsequent to the year, Coral Gold Corp. and Levon (collectively the
"Companies") entered into an Agreement with Agnico-Eagle Mines Ltd., ("AGE")
wherein the Companies granted AGE an option to purchase 100% interest in the Ruf
and Norma Sass Property in consideration of the following minimum advance
royalty payments (in US dollars) and minimum work commitments:
Execution of the Agreement
(October 12, 2004) $ 25,000 13,000 feet of drilling
First anniversary $ 30,000 15,000 feet of drilling
Second anniversary $ 50,000 17,000 feet of drilling
Third anniversary $ 75,000
Fourth anniversary $ 75,000
Fifth anniversary $150,000
Under the terms of the Agreement AGE is committed to drilling a minimum of
13,000 ft on the Property. Upon making the second and third year's anniversary
advance royalty payments, AGE will be obligated to complete the associated
minimum work commitment for that year. After the third anniversary, or at
anytime after the completion of at least 45,000 ft of drilling, AGE will have
earned a 51% interest in the Property. AGE can earn an additional 24% by
providing the funds to acquire the leased claims from the underlying owners and
the remaining 25% by producing a positive feasibility study and making a
positive production decision. At the fifth anniversary and every year thereafter
until production occurs, the advance royalty payment will be $150,000 per annum.
All advance royalty payments will be credited towards AGE's payment of a royalty
of 2.5% net smelter returns from production to the Companies. AGE has reserved
the right to purchase 1% of this net smelter returns royalty (to reduce the
royalty to Coral and Levon to 1.5%) for cash payment of USD$1.0 million.
Fiscal year ended March 31, 2004 compared to fiscal year ended March 31, 2003
The Company reported a loss for the year ended March 31, 2004 of $179,729.
During the year the Company capitalized $46,230 in expenditures on the BRX
mineral claims relating to the drilling program discussed above. Current
accounts payable declined by $161,253 during the year while long term debt
increased by the same amount. This change is a result of related parties
deferring payment of outstanding debts until July 1, 2005. The Company plans to
settle these amounts by the issuance of common shares.
The Company issued 3,136,000 units (shares and warrants) in the year for net
proceeds of $299,100 resulting in an increase in capital stock from $20,027,819
at March 31, 2003 to $20,326,919 at March 31, 2004 and increasing the number of
common shares issued from 17,414,508 at March 31, 2003 to 20,551,058 at March
31, 2004.
The net loss for the year ended March 31, 2004 of $179,729 was 36% higher than
the loss in the previous fiscal year. The Company had no operating revenues in
either years. The Company charged to operations a write-down of its investment
in resource properties of $6,508 relating to holding fees on the Congress and
Eagle claims compared to $10,363 the previous year. Although the Company carries
these properties at nominal $1, the carrying value is not a reflection of
Management's assessment of the value of these properties but is an accounting
procedure that is triggered when the Company does not intend, or have plans, to
future develop the property.
Administrative losses for the year were $173,221 compared to $119,641 the
previous year, 2003. The significant increase in expenses when comparing the two
years was due to an increase in consulting and professional fees, office
expenses, and travel expenses. Professional and consulting fees increased by 94%
when compared to the 2003 fiscal year. Profession fees includes legal, auditing
and accounting. Legal fees increased as a result of the costs associated with
the review and filing of the Company's Annual Information Form. Accounting fees
increased due to the increase in costs associated with meeting the financial
reporting requirements. Consulting fees increase by 75% from $30,000 to $52,500
as a result of retaining consultants to manage the day-to-day operations of the
Company. Office expenses increased by 57% as a result of an increase in support
staff and office leased equipment.
21
Fiscal year ended March 31, 2003 compared to fiscal year ended March 31, 2002
In the twelve months ended March 31, 2003 total assets increased from $85,122 at
March 31, 2002 to $184,082 at March 31, 2003 upon the completion of an equity
financing which netted the treasury $157,500. Levon issued 3,025,000 units at a
price of $0.10 per unit (common share and warrant) resulting in an increase in
share capital from $19,727,819 at March 31, 2002 to $19,727,819 at March 31,
2003 and the number of common shares issued from 14,389,508 to 17,414,508 at
March 31, 2003. Liabilities increased from $212,410 at March 31, 2002 to
$285,834 March 31, 2003. The increase in liabilities is a result of related
parties deferring payment of their fees and expenses until the company is
re-financed. The amount deferred in 2003 was $267,328 (2002: $187,359).
Investment in and Expenditures on Resource Properties remained at $6, unchanged
from the previous fiscal year.
The Company reported a net loss for the year ended March 31, 2003 of $131,964.
The Company had no operating revenues during the year. The Company charged to
operations a write-down of its investment in resource properties of $10,363
relating to land holding fees on the Congress and Eagle claims and wrote down
its investment in securities by $1,960 to reflect the current market value.
Administrative loss for the year ended March 31, 2003 was $120,366 which was
relatively consisant with the prior fiscal year where the expense was $113,163.
Government Regulation
We are subject to various federal and provincial laws and regulations
including environmental laws and regulations. Environmental regulations impose,
among other things, restrictions, liabilities and obligations in connection with
the generation, handling, use, storage, transportation, treatment and disposal
of hazardous substances and waste and in connection with spills, releases and
emissions of various substances to the environment. Environmental regulation
also requires that facility sites and other properties associated with our
operations be operated, maintained, abandoned and reclaimed to the satisfaction
of applicable regulatory authorities. In addition, certain types of operations,
including exploration and development projects and changes to certain existing
projects, may require the submission and approval of environmental impact
assessments or permit applications. Compliance with environmental regulation can
require significant expenditures, including expenditures for clean up costs and
damages arising out of contaminated properties and failure to comply with
environmental regulations may result in the imposition of fines and penalties.
We believe that we are in substantial compliance with such laws and regulations.
However, such laws and regulations may change in the future in a manner, which
will increase the burden and cost of compliance.
Certain laws and governmental regulations may impose liability on us for
personal injuries, clean-up costs, environmental damages and property damages,
as well as administrative, civil and criminal penalties. We maintain limited
insurance coverage for sudden and accidental environmental damages, but do not
maintain insurance coverage for the full potential liability that could be
caused by sudden and accidental environmental damage. Accordingly, we may be
subject to liability or may be required to cease production from properties in
the event of such damages.
B. Liquidity and Capital Resources
At this time, the Company has no operating revenues and does not anticipate
having any operating revenues until the Company is able to find, acquire, place
in production and operate a resource property. Historically, the Company has
raised funds through equity financing and the exercise of options and warrants
to fund its operations. The market price of natural resources is highly
speculative and volatile. Instability in prices may affect the interest in
resource properties and the development of and production from such properties.
This may adversely affect the Company's ability to raise capital to acquire and
explore resource properties. At March 31, 2004, we had working capital of
$208,861. We will need to re-finance to maintain current operations and explore
our properties.
22
Our financial statements are prepared in accordance with Canadian GAAP
which has several notable differences from US GAAP. Canadian GAAP permits the
deferral of acquisition and exploration costs, subject to periodic adjustments
for impairment, whereas US GAAP requires that such costs be expensed in the
period incurred. Canadian GAAP also requires that investments available for sale
be recorded at the lower of cost and market with long-term investments in
marketable securities being written down to market when impairment is considered
other than temporary, in which case the written down value becomes the new cost
base. US GAAP requires investments available for sale to be recorded at market
and unrealized holding gains or losses to be charged to comprehensive income or
loss. See. Note 13 to the financial statements which sets out a reconciliation
between Canadian and US GAAP.
C. Research and Development, Patents and Licenses, etc.
As we are a mineral exploration company with no research and development,
the information required by this section is inapplicable.
D. Trend Information
As we are a mineral exploration company with no currently producing
properties, the information required by this section is not applicable.
E. Off-balance sheet arrangements
There are no off-balance sheet arrangements.
F. Tabular disclosure of contractual obligations
As at March 31, 2004, Levon had the following contractual obligations:
Total < 1 year 1-3 years 3-5 years More than 5 years
----- -------- --------- --------- -----------------
Accounting and
Administrative - - - - -
Contract
Total - - - - -
23
G. Safe Harbor
Certain statements in this Annual Report, including those appearing under
this Item 5, constitute "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995, Section 21E of
the United States Securities Exchange Act of 1934, as amended, and Section 27A
of the United States Securities Act of 1933, as amended. Additionally,
forward-looking statements may be made orally or in press releases, conferences,
reports, on our website or otherwise, in the future, by us or on our behalf.
Such statements are generally identifiable by the terminology used such as
"plans", "expects", "estimates", "budgets", "intends", "anticipates",
"believes", "projects", "indicates", "targets", "objective", "could", "may", or
other similar words.
The forward-looking statements are subject to known and unknown risks and
uncertainties and other factors that may cause actual results, levels of
activity and achievements to differ materially from those expressed or implied
by such statements. Such factors include, among others: market prices for
metals; the results of exploration and development drilling and related
activities; economic conditions in the countries and provinces in which we carry
on business, especially economic slowdown; actions by governmental authorities
including increases in taxes, changes in environmental and other regulations,
and renegotiations of contracts; political uncertainty, including actions by
insurgent groups or other conflict; the negotiation and closing of material
contracts; and the other factors discussed in Item 3 Key Information - "Risk
Factors", and in other documents that we file with the SEC. The impact of any
one factor on a particular forward-looking statement is not determinable with
certainty as such factors are interdependent upon other factors; our course of
action would depend upon our assessment of the future considering all
information then available. In that regard, any statements as to future
production levels; capital expenditures; the allocation of capital expenditures
to exploration and development activities; sources of funding of our capital
program; drilling; expenditures and allowances relating to environmental
matters; dates by which certain areas will be developed or will come on-stream;
expected finding and development costs; future production rates; ultimate
recoverability of reserves; dates by which transactions are expected to close;
cash flows; uses of cash flows; collectability of receivables; availability of
trade credit; expected operating costs; expenditures and allowances relating to
environmental matters; debt levels; and changes in any of the foregoing are
forward-looking statements, and there can be no assurances that the expectations
conveyed by such forward-looking statements will, in fact, be realized.
Although we believe that the expectations conveyed by the forward-looking
statements are reasonable based on information available to us on the date such
forward-looking statements were made, no assurances can be given as to future
results, levels of activity, achievements or financial condition.
Readers should not place undue reliance on any forward-looking statement
and should recognize that the statements are predictions of future results,
which may not occur as anticipated. Actual results could differ materially from
those anticipated in the forward-looking statements and from historical results,
due to the risks and uncertainties described above, as well as others not now
anticipated. The foregoing statements are not exclusive and further information
concerning us, including factors that could materially affect our financial
results, may emerge from time to time. We do not intend to update
forward-looking statements to reflect actual results or changes in factors or
assumptions affecting such forward-looking statements.
24
Item 6. Directors, Senior Management and Employees
A. Directors and Senior Management
The following is a list of our directors and senior management as at March
31, 2004. The directors were re-elected by the Shareholders on August 3, 2005
and are elected for a term of one year, which term expires at the election of
the directors at the next annual meeting of shareholders.
Name and Present Position
with the Company Principal Occupation Director/Officer Since
- ---------------- -------------------- ----------------------
ERNEST CALVERT(1) Director of four other public companies; (Bralorne July 27, 1990
Director Gold Mines Ltd., formerly Bralorne-Pioneer Gold Mines
Ltd., Coral Gold Resources Ltd., formerly Coral Gold
Corp., Levon Resources Ltd, and Cresval Capital Corp)
WILLIAM C. GLASIER Director of four other public companies (Avino Silver May 22, 1990
Director & Gold Mines Ltd., Bralorne Gold Mines Ltd., formerly
Bralorne-Pioneer Gold Mines Ltd., Coral Gold
Resources Ltd., formerly Coral Gold Corp., and Mill
Bay Ventures Inc.)
ANDREA D. REGNIER President of Dawn Pacific Management Ltd.; Secretary August 16, 1995
Director, Secretary and Chief of Wellstar Energy Corp.
Financial Officer
FLORIAN RIEDL-RIEDENSTEIN Independent Financial Consultant; Director of Coral April 4, 1996
Director Gold Resources Ltd. (formerly Coral Gold Corp.)
LOUIS WOLFIN Director of five other public companies (Chief January 2, 1992
Director, Chairman of the Board Executive Officer of Bralorne Gold Mine Ltd.,
and Chief Executive Officer formerly Bralorne-Pioneer Gold Mines Ltd., Berkley
Resources Inc., Coral Gold Resources Ltd., formerly
Coral Gold Corp., Levon Resources Ltd, and Cresval
Capital Corp.)
(1) Mr. Calvert resigned effective July 15, 2005.
25
B. Compensation
Our Directors have not been paid fees or other cash compensation in their
capacity as directors nor are there any arrangements, presently or planned,
standard or otherwise, pursuant to which our current directors are or will be
compensated for their services in their capacity as directors, or for committee
participation, or involvement in special assignments. However we will reimburse
our Directors for actual expenses reasonably incurred in connection with the
performance of their duties as directors and certain directors may be
compensated for services as consultants or experts. Subsequent to this fiscal
year, on April 6, 2005, the Directors, Officers and Consultants of the Company
were granted option to purchase an aggregate 2,305,000 shares at a price of
$0.10 per share exercisable until April 6, 2010.
The following table sets forth details of the compensation paid during the
last three fiscal years ended March 31 to senior management:
========================== ========== ================================================= =================== =================
NAME AND PRINCIPAL LONG TERM ALL OTHER
POSITION YEAR(1) ANNUAL COMPENSATION COMPENSATION COMPENSATION
------------------------------------------------- ------------------- ($)
SALARY $(2) BONUS OTHER SHARES UNDER OPTION
========================== ========== =============== ================= =============== =================== =================
LOUIS WOLFIN 2004 Nil Nil Nil Nil Nil
Director, CEO and 2003 $30,000 Nil Nil 300,000 Nil
Chairman of the Board 2002 $30,000 Nil Nil 300,000 Nil
========================== ========== =============== ================= =============== ================== =================
Notes: (1) Year ended March 31.
(2) No member of the senior management team earned in excess of $100,000.
Termination of Employment, Changes in Responsibilities and Employment Contracts
We have no employment contracts with our executive officers and there are
no compensatory plan or arrangement with respect to our executive officers in
the event of the resignation, retirement or any other termination of the
executive officers' employment with us or in the event of a change of control of
the Company or in the event of a change in the executive officers'
responsibilities following a change in control, where in respect of the
executive officers the value of such compensation exceeds $100,000.
C. Board Practices
Our board of directors was at fiscal 2004 comprised of five directors. The
size and experience of the board is important for providing effective governance
in the mining industry. The board's mandate and responsibilities can be
effectively and efficiently administered at its current size. Given the size of
Levon, the Chairman of the Board is also the Chief Executive Officer and the
President of the Company, however we believe it has functioned and can continue
to function effectively and efficiently in administering Levon's affairs . At
the Annual General Meeting, held on September 29, 2004, the shareholders elected
Messrs. Wolfin, Calvert, Glasier, Riedl-Riededstein, and Ms. Regnier as
directors. Mr. Calvert subsequently resigned on July 15, 2005. The Board intends
to elect a new Chairman independent of management, in the near future.
We considered the relationship of each of our directors at March 31, 2004
and consider two directors (Riedl-Riededstein and Ms. Regnier) to be
"unrelated". "Unrelated director" means a director who is independent of
management and free from any interest and any business, or other relationship,
which could reasonably be perceived to materially interfere with the director's
ability to act with a view to the best interest of the Company, other than
interests and relationships arising solely from shareholdings.
26
We have procedures are in place to allow the board to function
independently. At the present time the board has experienced directors that have
made a significant contribution to our company's success, and are satisfied that
it is not constrained in its access to information, in its deliberations or in
its ability to satisfy the mandate established by law to supervise our business
and affairs. Committees meet independent of management and other directors.
Mandate of the Board of Directors, its Committees and Management
The role of our board is to oversee the conduct of Levon's business,
including the supervision of management, and determining strategy. Management is
responsible for the day-to-day operations, including proposing its strategic
direction and presenting budgets and business plans to the board of directors
for consideration and approval. The strategic plan takes into account, among
other things, the opportunities and risks of Levon's business. Management
provides the board with periodic assessments as to those risks and the
implementation of systems to manage those risks. The board reviews the personnel
needs from time to time, having particular regard to succession issues relating
to senior management. Management is responsible for the training and development
of personnel. The board assesses how effectively we communicate with our
shareholders, but has not adopted a formal communications policy. Through the
audit committee, and in conjunction with our auditors, the board assesses the
adequacy of our internal control and management information systems. The board
looks to management to keep it informed of all significant developments relating
to or effecting operations. Major financings, acquisitions, dispositions and
investments are subject to board approval. A formal mandate for the board of
directors and the chief executive officer has not been considered necessary
since the relative allocation of responsibility is well understood by both
management and the board. The board meets as required. The board and committees
may take action at these meetings or at a meeting by conference call or by
written consent.
Committees
Audit Committee
The audit committee assists the board in its oversight of our financial
statements and other related public disclosures, our compliance with legal and
regulatory requirements relating to financial reporting, the external auditors,
qualifications and independence and the performance of the internal audit
function and the external auditors. The committee has direct communications
channels with the auditors. The committee reviews the financial statements and
related management's discussion and analysis of financial and operating results.
The committee can retain legal, accounting or other advisors.
The audit committee currently consists of three directors (Messrs. Florian
Riedl-Riededstein, Louis Wolfin and William Glasier) of which two are unrelated
and all are financially literate, and have accounting or related financial
expertise. "Financially literate" means the ability to read and understand a
balance sheet, an income statement, and a cash flow statement. "Accounting or
related financial expertise" means the ability to analyze and interpret a full
set of financial statements, including the notes attached thereto, in accordance
with Canadian GAAP. In fiscal 2005 the committee was changed such that all
members are independent.
We intend to maintain this committee comprised solely of unrelated
directors.
The board has adopted a charter for the audit committee which is reviewed
annually and sets out the role and oversight responsibilities of the audit
committee with respect to:
- its relationship with and expectation of the external auditors,
including the establishment of the independence of the external
auditor and the approval of any non-audit mandates of the external
auditor;
- determination of which non-audit services the external auditor is
prohibited from providing;
27
- the engagement, evaluation, remuneration, and termination of the
external auditors;
- appropriate funding for the payment of the auditor's compensation and
for any advisors retained by the audit committee;
- its relationship with and expectation of the internal auditor;
- its oversight of internal control;
- disclosure of financial and related information; and
- any other matter that the audit committee feels is important to its
mandate or that which the board chooses to delegate to it.
D. Employees
We have no employees at this time.
E. Share Ownership
The following table sets forth the share ownership of our directors and
officers as of March 31, 2004. No person owned more than 10% of the outstanding
common shares.
Name of Beneficial Owner Number of Shares Percent
------------------------ ---------------- -------
Ernest Calvert - -
William Glasier 752,900 3.7
Andrea Regnier - -
Riedl-Riededstein 6,000 0.3
Louis Wolfin 2,050,802 9.9
Options to Purchase Securities of the Company
- --------------------------------------------------------------------------------------------------------------------
Name of Optionee No. of Shares Exercise Price Date of Grant Expiry Date
Per Share
- ------------------------------- ------------------ ------------------- -------------------- ------------------------
Executive
Officers/Directors
- ------------------
Nil
Other Insiders
- --------------
Nil
There were no options granted during the last three fiscal years.
Item 7. Major Shareholders and Related Party Transactions
A. Major Shareholders
As far as it is known to the Company, it is not directly or indirectly
owned or controlled by any other corporation or by the Canadian Government, or
any foreign government, or by any other natural or legal person.
28
As of March 31, 2004, the following table sets forth the persons to the
knowledge of management who hold (5%) percent of the outstanding shares of each
class of voting securities and the total shares owned by the officers and
directors as a group as of March 31, 2004:
Number of Shares of Percent of
Name Common Stock Owned Class
---- ------------------- -----
Louis Wolfin 2,050,802 9.9%
All Officers and Directors as a Group
(5 persons) 2,809,702 13.67%
B. Related Party Transactions
In 2004, the Company was charged administrative fees of $10,500 by a
private company owned by a director for providing accounting and general
corporate services to the Company.
Levon entered into a cost sharing agreement dated October 1, 1997 to
reimburse a private company, under common control, Oniva International Services
Corp., ("Oniva"), for 20% of its overhead expenses, to reimburse 100% of its out
of pocket expenses incurred on Levon's behalf and to pay a 10% fee based on the
total overhead and corporate expenses referred to above. The agreement may be
terminated by either party giving to the other party one months notice. During
the year, a total of $78,655 was charged to operations in relation to the cost
sharing agreement referred to above. In 2003, the amount was $29,027. Included
in accounts payable at March 31, 2004 is $217,470 due to Oniva and a private
company owned by Louis Wolfin, the President of the Company, for expenses paid
on behalf of Levon. In 2003 the amount was $267,327. In fiscal 2006 we settled
this debt by the issuance of common shares.
Levon has an investment in Mill Bay Ventures Inc. consisting of 48,978
common shares and a value of $4,897 and in Avino Silver & Gold Mines Ltd.
consisting of 4,200 common shares and a value of $1,554. These companies are
related by way of common directors and common management.
All related party transactions are recorded at the value agreed upon by
Levon and the related party. The amounts due to related parties are non-interest
bearing, non-secured and due on demand.
Levon entered into an agreement, dated August 23, 2003, to receive
accounting and general corporate services at a rate of $1,500 per month with
Dawn Pacific Management Ltd., a private company owned by the Secretary and a
Director. The agreement was for an initial term of one year and can be renewed
at the end of its term or renewal term for further successive annual terms until
such time that either party has given notice of termination in writing at least
30 days prior to the end of a term. During the year, Levon paid $10,500 (2003:
$22,500).
None of our directors, executive or senior officers, proposed nominees for
election as directors, or associates or affiliates of any of them, is or has
been indebted to Levon at any time since our last completed financial year.
C. Interests of Experts and Counsel
Not Applicable.
29
Item 8. Financial Information
A. Statements and Other Financial Information
The following financial statements of the Company are attached to this
Annual Report:
Auditors Report.
Balance Sheet for years ended March 31, 2004 and 2003.
Statement of Operations and Deficit for the years ended March 31, 2004,
2003, and 2002.
Statement of Cash flows for the years ended March 31,
2004, 2003, and 2002.
Notes to Financial Statements for the years ended March 31, 2004 and
2003.
Dividend Policy
Levon has never paid any dividends and does not intend to in the near
future.
B. Significant Changes
None.
Item 9. The Offer and Listing
A. Offer and Listing Details
The common shares of Levon are listed on the TSX Venture Exchange under the
symbol "LVN" and quoted in the United States on the pink sheets, under the
symbol "LVNVF".
As of September 26, 2005, there were 470 holders of record in the United
States holding 2,229,127 of Levon's common shares representing 53% of the total
number of shareholders, and approximately 8.6 % of the total number of common
shares issued. The common shares are issued in registered form and the
percentage of shares reported to be held by record holders in the United States
is taken from the records of the Computershare Trust Company in the City of
Vancouver, the registrar and transfer agent for our common shares.
Between October 23, 2003 and February 15, 2005, in accordance with TSX
Venture Policy 2.5, the Company's listing was transferred to the NEX board (a
trading system designed for companies that did not meet the minimum listing
requirements for a TSX Venture Tier 2 listing. The following table sets forth
the high and low prices expressed in Canadian dollars on the TSX Venture
Exchange or the NEX, as the case maybe, for Levon's common shares for the past
five years, for each quarter for the last two fiscal years, and for the last six
months.
30
TSX Venture Exchange/NEX
(Canadian Dollars)
Last Five Fiscal Years High Low
- ---------------------- ---- ---
2005 0.12 0.06
2004 0.19 0.07
2003 0.205 0.05
2002 0.16 0.02
2001 0.06 0.01
2003-2004 High Low
- --------- ---- ---
Fourth Quarter ended March 31, 2004 0.22 0.13
Third Quarter ended December 31, 2003 0.19 0.055
Second Quarter ended September 30, 2003 0.13 0.07
First Quarter ended June 30, 2003 0.105 0.05
2004-2005 High Low
- --------- ---- ---
Fourth Quarter ended March 31, 2005 0.14 0.08
Third Quarter ended December 31, 2004 0.125 0.07
Second Quarter ended September 30, 2004 0.155 0.08
First Quarter ended June 30, 2004 0.19 0.12
Last Six Months High Low
- --------------- ---- ---
October 2005 0.095 0.075
September 2005 0.09 0.08
August 2005 0.095 0.065
July 2005 0.08 0.06
June 2005 0.09 0.08
May 2005 0.12 0.09
B. Plan of Distribution
Not Applicable.
C. Markets
Levon's common stock is listed on the TSX Venture Exchange under the symbol
"LVN" and in the United States on the pink sheets under the symbol "LVNVF".
D. Selling Shareholders
Not Applicable.
E. Dilution
Not Applicable.
F. Expenses of the Issue
Not Applicable.
31
Item 10. Additional Information
A. Share Capital
Not Applicable.
B. Memorandum and Articles of Association
Common Shares
All issued and outstanding common shares are fully paid and non-assessable.
Each holder of record of common shares is entitled to one vote for each common
share so held on all matters requiring a vote of shareholders, including the
election of directors. The holders of common shares will be entitled to
dividends on a pro-rata basis, if and when as declared by the board of
directors. There are no preferences, conversion rights, preemptive rights,
subscription rights, or restrictions or transfers attached to the common shares.
In the event of liquidation, dissolution, or winding up of the Company, the
holders of common shares are entitled to participate in the assets of the
Company available for distribution after satisfaction of the claims of
creditors.
Powers and Duties of Directors
The directors shall manage or supervise the management of the affairs and
business of the Company and shall have authority to exercise all such powers of
the Company as are not, by the Company Act or by the Memorandum or the Articles,
required to be exercised by the Company in a general meeting.
Directors will serve as such until the next annual meeting. In general, a
director who is, in any way, directly or indirectly interested in an existing or
proposed contract or transaction with the Company whereby a duty or interest
might be created to conflict with his duty or interest as a director, shall
declare the nature and extent of his interest in such contract or transaction or
the conflict or potential conflict with his duty and interest as a director.
Such director shall not vote in respect of any such contract or transaction with
the Company in which he is interested and if he shall do so, his vote shall note
be counted, but he shall be counted in the quorum present at the meeting at
which such vote is taken. However, notwithstanding the foregoing, directors
shall have the right to vote on determining the remuneration of the directors.
The directors may from time to time on behalf of the Company: (a) borrow
money in such manner and amount from such sources and upon such terms and
conditions as they think fit; (b) issue bonds, debentures and other debt
obligations; and (c) mortgage, charge or give other security on the whole or any
part of the property and assets of the Company.
The directors of the Company must be persons of the full age of 18 years.
There is no minimum share ownership to be a Director. No person shall be a
Director of the Company who is not capable of managing their own affairs; is an
undischarged bankrupt; convicted of an offense in connection with the promotion,
formation or management of a corporation or involved in fraud within the last
five years; or a person that has had a registration in any capacity under the
"BC Securities Act" or the "BC Mortgage Brokers Act" canceled within the last
five years.
32
Shareholders
An annual general meeting is held once a year at such time and place as may
be determined by the directors. A quorum at an annual general meeting and
special meeting shall be two shareholders or one or more proxy holders
representing two shareholders, or one shareholder and a proxy holder
representing another shareholder. There is no limitation imposed by the laws of
Canada or by the charter or other constituent documents of the Company on the
right of a non-resident to hold or vote the common shares, other than as
provided in the Investment Canada Act (the "Investment Act") discussed below
under "Item 10. Additional Information, D. Exchange Controls."
In accordance with British Columbia law, directors shall be elected by an
"ordinary resolution" which means: (a) a resolution passed by the shareholders
of the Company at a general meeting by a simple majority of the votes cast in
person or by proxy; or (b) a resolution that has been submitted to the
shareholders of the Company who would have been entitled to vote on it in person
or by proxy at a general meeting of the Company and that has been consented to
in writing by such shareholders of the Company holding shares carrying not less
than the requisite majority of the votes entitled to be cast on it.
Under British Columbia law certain items such as an amendment to the
Company's articles or entering into a merger requires approval by a special
resolution which means: (a) a resolution passed by a majority of not less than
the requisite majority of the votes cast by the shareholders of the Company who,
being entitled to do so, vote in person or by proxy at a general meeting of the
company; or (b) a resolution consented to in writing by every shareholder of the
Company who would have been entitled to vote in person or by proxy at a general
meeting of the Company, and a resolution so consented to is deemed to be a
special resolution passed at a general meeting of the Company.
Recent Developments
On March 29, 2004, the British Columbia legislature enacted the British
Columbia Business Corporations Act ("BCBCA") and repealed the British Columbia
Company Act (the "Company Act"). The BCBCA removes many of the restrictions
contained in the Company Act, including restrictions on the residency of
directors, the location of annual general meetings and limits on authorized
share capital. As well, the BCBCA uses new forms and terminology and has
replaced the Memorandum with a Notice of Articles. At the Company's annual and
special general meeting held on August 3, 2005, shareholders were asked to
approve:
1. a special resolution to remove the application of the Pre-existing
Company Provisions, as defined in the Business Corporations Act
(British Columbia);
2. a special resolution to alter the Company's share structure to an
unlimited number of common shares without par value; and
3. a special resolution to approve new articles for the Company.
The regulations under the BCBCA effectively added certain provisions,
called the "Pre-Existing Company Provisions" or "PCPs", to every company's
Notice of Articles. The PCPs provide that the number of votes required to pass a
special resolution (formerly also referred to as a special resolution under the
Company Act) or a special separate resolution is at least three-quarters of the
votes cast by shareholders present in person or by proxy at the meeting. This is
the majority that was required under the Company Act. The BCBCA allows a special
resolution to be passed by at least two-thirds of the votes cast by shareholders
present in person or by proxy at the meeting. The Company proposes to amend its
Notice of Articles to delete the PCPs so that the provisions of the BCBCA
permitting a two-thirds majority will apply to the Company.
33
The shareholders have approved the above resolutions and therefore special
resolutions will require a two-thirds majority vote, instead of a three-quarters
majority vote. The authorized share capital of the Company will also be an
unlimited number of common shares without par value. Management believes that
this provides the Company with greater flexibility for future corporate
activities and is consistent with special resolution requirements for companies
in other jurisdictions.
C. Material Contracts
Nil
D. Exchange Controls
There is no law, governmental decree or regulation in Canada that restricts
the export or import of capital or affects the remittance of dividends, interest
or other payments to a non-resident holder of common shares other than
withholding tax requirements. Any such remittances to United States residents
are subject to withholding tax. See "Taxation".
There is no limitation imposed by the laws of Canada or by the charter or
other constituent documents of the Company on the right of a non-resident to
hold or vote the common shares, other than as provided in the Investment Act.
The following discussion summarizes the principal features of the Investment Act
for a non-resident who proposes to acquire the common shares.
The Investment Act generally prohibits implementation of a reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture (each an "entity") that is not a "Canadian"
as defined in the Investment Act (a "non-Canadian"), unless after review, the
Director of Investments appointed by the minister responsible for the Investment
Act is satisfied that the investment is likely to be of net benefit to Canada.
An investment in the common shares by a non-Canadian other than a "WTO Investor"
(as that term is defined by the Investment Act, and which term includes entities
which are nationals of or are controlled by nationals of member states of the
World Trade Organization) when the Company was not controlled by a WTO Investor,
would be reviewable under the Investment Act if it was an investment to acquire
control of the Company and the value of the assets of the Company, as determined
in accordance with the regulations promulgated under the Investment Act, equals
or exceeds $5 million for direct acquisitions and over $50 million for indirect
acquisitions, or if an order for review was made by the federal cabinet on the
grounds that the investment related to Canada's cultural heritage or national
identity, regardless of the value of the assets of the Company. An investment in
the common shares by a WTO Investor, or by a non-Canadian when the Company was
controlled by a WTO Investor, would be reviewable under the Investment Act if it
was an investment to acquire control of the Company and the value of the assets
of the Company, as determined in accordance with the regulations promulgated
under the Investment Act, was not less than a specified amount, which for 2004
is any amount in excess of $137 million. A non-Canadian would acquire control of
the Company for the purposes of the Investment Act if the non-Canadian acquired
a majority of the common shares. The acquisition of one third or more, but less
than a majority of the common shares, would be presumed to be an acquisition of
control of the Company unless it could be established that, on the acquisition,
the Company was not controlled in fact by the acquirer through the ownership of
the common shares.
Certain transactions relating to the common shares would be exempt from the
Investment Act, including: (i) an acquisition of the common shares by a person
in the ordinary course of that person's business as a trader or dealer in
securities; (ii) an acquisition of control of the Company in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provisions of the Investment Act; and (iii) an
acquisition of control of the Company by reason of an amalgamation, merger,
consolidation or corporate reorganization following which the ultimate direct or
indirect control in fact of the Company, through the ownership of the common
shares, remained unchanged.
34
E. Taxation
Canadian Federal Income Tax Consequences
The following summarizes the principal Canadian federal income tax
consequences applicable to the holding and disposition of common shares in the
capital of the Company by a United States resident, and who holds common shares
solely as capital property, referred to as a "U.S. Holder". This summary is
based on the current provisions of the Income Tax Act (Canada), referred to as
the "Tax Act", the regulations thereunder, all amendments thereto publicly
proposed by the government of Canada, the published administrative practices of
Revenue Canada, Customs, Excise and Taxation, and the current provisions of the
Canada-United States Income Tax Convention, 1980, as amended, referred to as the
"Treaty". Except as otherwise expressly provided, this summary does not take
into account any provincial, territorial or foreign (including without
limitation, any U.S.) tax law or treaty. It has been assumed that all currently
proposed amendments will be enacted substantially as proposed and that there is
no other relevant change in any governing law or practice, although no assurance
can be given in these respects.
Each U.S. Holder is advised to obtain tax and legal advice applicable to such
U.S. Holder's particular circumstances.
Every U.S. Holder is liable to pay a Canadian withholding tax on every
dividend that is or is deemed to be paid or credited to the U.S. Holder on the
U.S. Holder's common shares. The statutory rate of withholding tax is 25% of the
gross amount of the dividend paid. The Treaty reduces the statutory rate with
respect to dividends paid to a U.S. Holder for the purposes of the Treaty. Where
applicable, the general rate of withholding tax under the Treaty is 15% of the
gross amount of the dividend, but if the U.S. Holder is a company that owns at
least 10% of the voting stock of the Company and beneficially owns the dividend,
the rate of withholding tax is 5% for dividends paid or credited after 1996 to
such corporate U.S. Holder. The Company is required to withhold the applicable
tax from the dividend payable to the U.S. Holder, and to remit the tax to the
Receiver General of Canada for the account of the U. S. Holder.
Pursuant to the Tax Act, a U.S. Holder will not be subject to Canadian
capital gains tax on any capital gain realized on an actual or deemed
disposition of a common share, including a deemed disposition on death, provided
that the U.S. Holder did not hold the common share as capital property used in
carrying on a business in Canada, and that neither the U.S. Holder nor persons
with whom the U.S. Holder did not deal at arms length (alone or together) owned
or had the right or an option to acquire 25% or more of the issued shares of any
class of the Company at any time in the five years immediately preceding the
disposition.
United States Federal Income Tax Consequences
Passive Foreign Investment Company
The Company believes that it is a passive foreign investment company,
referred to as a "PFIC" for United States federal income tax purposes with
respect to a United States Investor. The Company will be a PFIC with respect to
a United States Investor if, for any taxable year in which such United States
Investor held the Company's shares, either (i) at least 75 % of the gross income
of the Company for the taxable year is passive income, or (ii) at least 50% of
the Company's assets are attributable to assets that produce or are held for the
production of passive income. In each case, the Company must take into account a
pro-rata share of the income and the assets of any company in which the Company
owns, directly or indirectly, 25% or more of the stock by value (the
"look-through" rules). Passive income generally includes dividends, interest,
royalties, rents (other than rents and royalties derived from the active conduct
of a trade or business and not derived from a related person), annuities and
gains from assets that produce passive income. As a publicly traded corporation,
the Company would apply the 50% asset test based on the value of the Company's
assets.
Because the Company believes it qualifies as a PFIC, unless a United States
Investor who owns shares in the Company (i) elects (a section 1295 election) to
have the Company treated as a "qualified electing fund" (a "QEF") (described
below), or (ii) marks the stock to market (described below), the following rules
apply:
35
1. Distributions made by the Company during a taxable year to a United
States Investor who owns shares in the Company that are an "excess
distribution" (defined generally as the excess of the amount received
with respect to the shares in any taxable year over 125% of the
average received in the shorter of either the three previous years or
such United States Investor's holding period before the taxable year)
must be allocated ratably to each day of such shareholder's holding
period. The amount allocated to the current taxable year and to years
when the corporation was not a PFIC must be included as ordinary
income in the shareholder's gross income for the year of distribution.
The remainder is not included in gross income but the shareholder must
pay a deferred tax on that portion. The deferred tax amount, in
general, is the amount of tax that would have been owed if the
allocated amount had been included in income in the earlier year, plus
interest. The interest charge is at the rate applicable to
deficiencies in income taxes.
2. The entire amount of any gain realized upon the sale or other
disposition of the shares will be treated as an excess distribution
made in the year of sale or other disposition and as a consequence
will be treated as ordinary income and, to the extent allocated to
years prior to the year of sale or disposition, will be subject to the
interest charge described above.
A shareholder that makes a section 1295 election will be currently taxable
on his or her pro-rata share of the Company's ordinary earnings and net capital
gain (at ordinary income and capital gain rates, respectively) for each taxable
year of the Company, regardless of whether or not distributions were received.
The shareholder's basis in his or her shares will be increased to reflect taxed
but undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the shares and will not be
taxed again as a distribution to the shareholder.
A shareholder may make a section 1295 election with respect to a PFIC for
any taxable year of the shareholder (shareholder's election year). A section
1295 election is effective for the shareholder's election year and all
subsequent taxable years of the shareholder. Procedures exist for both
retroactive elections and filing of protective statements. Once a section 1295
election is made it remains in effect, although not applicable, during those
years that the Company is not a PFIC. Therefore, if the Company re-qualifies as
a PFIC, the section 1295 election previously made is still valid and the
shareholder is required to satisfy the requirements of that election. Once a
shareholder makes a section 1295 election, the shareholder may revoke the
election only with the consent of the Commissioner.
If the shareholder makes the section 1295 election for the first tax year
of the Company as a PFIC that is included in the shareholder's holding period,
the PFIC qualifies as a pedigreed QEF with respect to the shareholder. If a QEF
is an unpedigreed QEF with respect to the shareholder, the shareholder is
subject to both the non-QEF and QEF regimes. Certain elections are available
which enable shareholders to convert an unpedigreed QEF into a pedigreed QEF
thereby avoiding such dual application.
A shareholder making the section 1295 election must make the election on or
before the due date, as extended, for filing the shareholder's income tax return
for the first taxable year to which the election will apply. A shareholder must
make a section 1295 election by completing Form 8621, attaching said Form to its
federal income tax return, and reflecting in the Form the information provided
in the PFIC Annual Information Statement, or if the shareholder calculated the
financial information, a statement to that effect. The PFIC Annual Information
Statement must include the shareholder's pro-rata shares of the ordinary
earnings and net capital gain of the PFIC for the PFIC's taxable year or
information that will enable the shareholder to calculate its pro-rata shares.
In addition, the PFIC Annual Information Statement must contain information
about distributions to shareholders and a statement that the PFIC will permit
the shareholder to inspect and copy its permanent books of account, records, and
other documents of the PFIC necessary to determine that the ordinary earnings
and net capital gain of the PFIC have been calculated according to federal
income tax accounting principles. A shareholder may also obtain the books,
records and other documents of the foreign corporation necessary for the
shareholder to determine the correct earnings and profits and net capital gain
of the PFIC according to federal income tax principles and calculate the
shareholder's pro-rata shares of the PFIC's ordinary earnings and net capital
gain. In that case, the PFIC must include a statement in its PFIC Annual
Information Statement that it has permitted the shareholder to examine the
PFIC's books of account, records, and other documents necessary for the
36
shareholder to calculate the amounts of ordinary earnings and net capital gain.
A shareholder that makes a Section 1295 election with respect to a PFIC held
directly or indirectly for each taxable year to which the Section 1295 election
applies must comply with the foregoing submissions.
Because the Company's stock is "marketable" under section 1296(e), a U.S.
Investor may elect to mark the stock to market each year. In general, a PFIC
shareholder who elects under section 1296 to mark the marketable stock of a PFIC
includes in income each year an amount equal to the excess, if any, of the fair
market value of the PFIC stock as of the close of the taxable year over the
shareholder's adjusted basis in such stock. A shareholder is also generally
allowed a deduction for the excess, if any, of the adjusted basis of the PFIC
stock over the fair market value as of the close of the taxable year. Deductions
under this rule, however, are allowable only to the extent of any net mark to
market gains with respect to the stock included by the shareholder for prior
taxable years. While the interest charge regime under the PFIC rules generally
does not apply to distributions from and dispositions of stock of a PFIC where
the U.S. Investor has marked to market, coordination rules for limited
application will apply in the case of a U.S. Investor that marks to market PFIC
stock later than the beginning of the shareholder's holding period for the PFIC
stock.
Special rules apply with respect to the calculation of the amount of the
foreign tax credit with respect to excess distributions by a PFIC or inclusions
under a QEF.
Controlled Foreign Corporations
Sections 951 through 964 and Section 1248 of the Internal Revenue Code,
referred to as the "Code", relate to controlled foreign corporations, referred
to as "CFCs". A foreign corporation that qualifies as a CFC will not be treated
as a PFIC with respect to a shareholder during the portion of the shareholder's
holding period after December 31, 1997, during which the shareholder is a 10%
United States shareholder and the corporation is a CFC. The PFIC provisions
continue to apply in the case of a PFIC that is also a CFC with respect to
shareholders that are less than 10% United States shareholders.
The 10% United States shareholders of a CFC are subject to current U.S. tax
on their pro-rata shares of certain income of the CFC and their pro-rata shares
of the CFC's earnings invested in certain U.S. property. The effect is that the
CFC provisions may impute some portion of such a corporation's undistributed
income to certain shareholders on a current basis and convert into dividend
income some portion of gains on dispositions of stock, which would otherwise
qualify for capital gains treatment.
We do not believe the Company will be a CFC. It is possible that the
Company could become a CFC in the future. Even if the Company were classified as
a CFC in a future year, however, the CFC rules referred to above would apply
only with respect to 10% shareholders.
37
Personal Holding Company/Foreign Personal Holding Company/Foreign Investment
Company
A corporation will be classified as a personal holding company, or a "PHC",
if at any time during the last half of a tax year (i) five or fewer individuals
(without regard to their citizenship or residence) directly or indirectly or by
attribution own more than 50% in value of the corporation's stock and (ii) at
least 60% of its ordinary gross income, as specially adjusted, consists of
personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). A PHC is
subject to a United States federal income tax of 39.6% on its undistributed
personal holding company income (generally limited, in the case of a foreign
corporation, to United States source income).
A corporation will be classified as a foreign personal holding company, or
an "FPHC", and not a PHC if at any time during a tax year (i) five or fewer
individual United States citizens or residents directly or indirectly or by
attribution own more than 50% of the total combined voting power or value of the
corporation's stock and (ii) at least 60% of its gross income consists of
foreign personal holding company income (defined generally to include dividends,
interest, royalties, rents and certain other types of passive income). Each
United States shareholder in a FPHC is required to include in gross income, as a
dividend, an allocable share of the FPHC's undistributed foreign personal
holding company income (generally the taxable income of the FPHC, as specially
adjusted).
A corporation will be classified as a foreign investment company, or an
"FIC", if for any taxable year it: (i) is registered under the Investment
Company Act of 1940, as amended, as a management company or share investment
trust or is engaged primarily in the business of investing or trading in
securities or commodities (or any interest therein); and (ii) 50% or more of the
value or the total combined voting power of all the corporation's stock is owned
directly or indirectly (including stock owned through the application of
attribution rules) by United States persons. In general, unless an FIC elects to
distribute 90% or more of its taxable income (determined under United States tax
principles as specially adjusted) to its shareholders, gain on the sale or
exchange of FIC stock is treated as ordinary income (rather than capital gain)
to the extent of such shareholder's ratable share of the corporation's earnings
and profits for the period during which such stock was held.
The Company believes that it is not and will not be a PHC, FPHC or FIC.
However, no assurance can be given as to the Company's future status.
U.S. Information Reporting and Backup Withholding
Dividends are generally subject to the information reporting requirements
of the Code. Dividends may be subject to backup withholding at the rate of 31%
unless the holder provides a taxpayer identification number on a properly
completed Form W-9 or otherwise establishes an exemption.
The amount of any backup withholding will not constitute additional tax and
will be allowed as a credit against the United States Investor's federal income
tax liability.
Filing of Information Returns
Under a number of circumstances, a United States Investor acquiring shares
of the Company may be required to file an information return. In particular, any
United States Investor who becomes the owner, directly or indirectly, of 10% or
more of the shares of the Company will be required to file such a return. Other
filing requirements may apply and United States Investors should consult their
own tax advisors concerning these requirements.
38
F. Dividends and Paying Agents
Not Applicable.
G. Statement by Experts
Not Applicable.
H. Documents on Display
The Company files annual reports and furnishes other information with the
SEC. You may read and copy any document that we file at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or
by accessing the Commission's website (http://www.sec.gov). The Company also
files its annual reports and other information with the Canadian Securities
Administrators via SEDAR (www.sedar.com).
Copies of the Company's material contracts are kept in the Company's
administrative headquarters.
I. Subsidiary Information
None.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
As the Company is a small business issuer, this section is inapplicable.
Item 12. Description of Securities Other than Equity Securities
Not Applicable.
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
None.
Item 15. Controls and Procedures
The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's chief
executive officer along with the Company's principal financial officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
the Company's chief executive officer along with the Company's principal
financial officer concluded that the Company's disclosure controls and
procedures as of the end of the fiscal year covered by this Form 20-F are
effective in timely alerting them to material information relating to the
Company required to be included in this Form 20-F.
39
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
The board of directors determined that Andrea Regnier is qualified as an
Audit Committee Financial Expert. Ms. Regnier is independent as determined by
the NASD listing standards.
Item 16B. Code of Ethics
The Company has not currently adopted a code of ethics but is evaluating
its internal procedures to determine the necessity of it.
Item 16C. Principal Accountant Fees and Services
The independent auditor for the last two fiscal years was Smythe Ratcliffe,
Chartered Accountants.
Audit Fees
The aggregate fees billed by Smythe Ratcliffe for professional services
rendered for the audit of our annual financial statements for the fiscal year
ended March 31, 2004 was $8,500 and March 31, 2003 was $8,500.
Audit-Related Fees
There were no aggregate fees billed for assurance and related services by
the principal accountant that were reasonably related to the performance of the
audit or review of the financial statements for the years ended March 31, 2004
and 2005.
Tax Fees
The aggregate fees billed for tax compliance, tax advice and tax planning
rendered by our independent auditors for the fiscal year ended March 31, 2004
was $1,000 and March 31, 2003 was $1,000. The services comprising these fees
include the preparation of corporate tax returns.
All Other Fees
Other than referred to above, there were no aggregate fees billed for any
other professional services rendered by our independent auditors for the fiscal
year ended March 31, 2004 or 2003.
The audit committee approved 100% of the fees paid to the principal
accountant for audit-related, tax and other fees in the fiscal year 2004. The
audit committee pre-approves all non-audit services to be performed by the
auditor in accordance with the audit committee Charter. There were no hours
expended on the principal accountant's engagement to audit the Company's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
40
Part III
Item 17. Financial Statements
The following Financial Statements pertaining to the Company are filed as
part of this annual report:
Auditors Report..............................................43
Balance Sheets...............................................44
Statements of Operations and Deficit.........................45
Statements of Cash Flows.....................................46
Notes to Financial Statements................................47 thru 62
Item 18. Financial Statements
See Item 17.
Item 19. Exhibits
Exhibit Number Name
------------- ----
1.2. Articles of Levon Resources Ltd*
12.1 Certification of the Principal Executive Officer under the
Sarbanes-Oxley Act.
12.2 Certification of the Principal Financial Officer under the
Sarbanes-Oxley Act.
13.1 Certificate under section 906 Principal Executive Officer
13.2 Certificate under section 906 Principal Financial Officer
41
SmytheRatcliffe
Chartered Accountants
LEVON RESOURCES LTD.
Consolidated Financial Statements
March 31, 2004
(Canadian Dollars)
INDEX Page
- ----- ----
Auditors' Report to the Shareholders 43
Consolidated Financial Statements
Consolidated Balance Sheets 44
Consolidated Statements of Income and Deficit 45
Consolidated Statements of Cash Flows 46
Notes to Consolidated Financial Statements 46-62
A member of PKF International
42
SmthyeRatcliffe.com
7th Floor, Marine Building
355 Burard Street
Vancouver, B.C. V6C 2G8
SmthyeRatclifee
Chartered Accountants
facsimile: 604.688.4675
telephone: 604.687.1231
AUDITORS' REPORT
TO THE SHAREHOLDERS OF LEVON RESOURCES LTD.
We have audited the consolidated balance sheets of Levon Resources Ltd. as at
March 31, 2004 and 2003 and the consolidated statements of income and deficit
and cash flows for each of the years in the three year period ended March 31,
2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at March 31, 2004
and 2003 and the results of its operations and the cash flows for each of the
years in the three year period ended March 31, 2004 in accordance with Canadian
generally accepted accounting principles.
"Smythe Ratcliffe"
Chartered Accountants
Vancouver, British Columbia
August 5, 2004
A Member of PKF International
43
LEVON RESOURCES LTD.
Consolidated Balance Sheets
March 31
(Canadian Dollars)
- --------------------------------------------------------------------------------------------------------------------
2004 2003
- --------------------------------------------------------------------------------------------------------------------
Assets
Current
Cash $264,064 $109,342
Accounts Receivable 10,065 2,269
Investments (note 4) 6,452 6,452
- --------------------------------------------------------------------------------------------------------------------
280,581 118,063
Security Deposits (note 6) 53,469 54,251
Investment in and Expenditures on Resource
Properties (notes 5 and 7) 46,236 6
Property and Equipment (note 8) 12,806 11,762
- --------------------------------------------------------------------------------------------------------------------
$393,092 $184,082
- --------------------------------------------------------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities $71,720 $285,834
Long-Term Debt (note 9) 161,253 0
- --------------------------------------------------------------------------------------------------------------------
232,973 285,834
- --------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
Capital Stock (note 10) 20,326,919 20,027,819
Subscription Receivable (note 10(c)) 0 (142,500)
Deficit (20,166,800) (19,987,071)
- --------------------------------------------------------------------------------------------------------------------
160,119 (101,752)
- --------------------------------------------------------------------------------------------------------------------
$393,092 $184,082
- --------------------------------------------------------------------------------------------------------------------
Commitment (note 14)
Approved on behalf of the Board:
"Louis Wolfin"
..................................Director
Louis Wolfin
"Andrea Regnier"
..................................Director
Andrea Regnier
See notes to consolidated financial statements.
44
LEVON RESOURCES LTD.
Consolidated Statements of Income and Deficit
Years Ended March 31, 2004, 2003 and 2002
(Canadian Dollars)
- --------------------------------------------------------------------------------------------------------------------
2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Interest Income $104 $725 $811
- --------------------------------------------------------------------------------------------------------------------
Expenses
Professional and consulting
fees 84,268 43,259 51,002
Administrative services 33,070 34,838 13,949
Shareholder relations,
promotion and compliance 36,262 30,891 14,176
Office, occupancy and
miscellaneous 14,787 9,403 28,502
Travel and automotive 4,938 1,975 2,628
Bad debt 0 0 2,906
- --------------------------------------------------------------------------------------------------------------------
173,325 120,366 113,163
- --------------------------------------------------------------------------------------------------------------------
Loss Before Other Items (173,221) (119,641) (112,352)
- --------------------------------------------------------------------------------------------------------------------
Other Items
Write-down of investment
in and expenditures on
resource properties (6,508) (10,363) (776,140)
Write-down of investments 0 (1,960) 0
Write-down of mill equipment 0 0 (10,000)
- --------------------------------------------------------------------------------------------------------------------
(6,508) (12,323) (786,140)
- --------------------------------------------------------------------------------------------------------------------
Net Loss for Year (179,729) (131,964) (898,492)
Deficit, Beginning of Year (19,987,071) (19,855,107) (18,956,615)
- --------------------------------------------------------------------------------------------------------------------
Deficit, End of Year $(20,166,800) $(19,987,071) $(19,855,107)
- --------------------------------------------------------------------------------------------------------------------
Loss Per Share $ (0.01) $ (0.01) $ (0.06)
- --------------------------------------------------------------------------------------------------------------------
Weighted Average Number
of Shares Outstanding 18,084,784 14,551,108 14,389,508
- --------------------------------------------------------------------------------------------------------------------
45
LEVON RESOURCES LTD.
Consolidated Statements of Cash Flows
Years Ended March 31, 2004, 2003 and 2002
(Canadian Dollars)
- --------------------------------------------------------------------------------------------------------------------
2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------
Operating Activities
Net loss $(179,729) $(131,964) $(898,492)
Items not involving cash
Write-down of investment in and expenditures on
resource properties 6,508 10,363 776,140
Write-down of investments 0 1,960 0
Write-down of mill equipment 0 0 10,000
Amortization 1,463 1,040 959
- --------------------------------------------------------------------------------------------------------------------
Operating Cash Outflow (171,758) (118,601) (111,393)
- --------------------------------------------------------------------------------------------------------------------
Changes in Non-Cash Working Capital
Accounts receivable (7,796) 4,753 15,889
Accounts payable and accrued
liabilities (214,114) 73,424 139,791
- --------------------------------------------------------------------------------------------------------------------
(221,910) 78,177 155,680
- --------------------------------------------------------------------------------------------------------------------
Cash Provided by (Used in) Operating Activities (393,668) (40,424) 44,287
- --------------------------------------------------------------------------------------------------------------------
Investing Activities
Investment in and expenditures on resource
properties, net of proceeds (52,738) (10,363) (41,831)
Acquisition of property and equipment (2,507) (1,391) 0
Security deposits refunded (advanced) 782 632 (90)
- --------------------------------------------------------------------------------------------------------------------
Cash Used in Investing Activities (54,463) (11,122) (41,921)
- --------------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from long-term debt 161,253 0 0
Issuance of shares - for cash, net of costs 441,600 157,500 0
- --------------------------------------------------------------------------------------------------------------------
Cash Provided by Financing Activities 602,853 157,500 0
- --------------------------------------------------------------------------------------------------------------------
Inflow of Cash 154,722 105,954 2,366
Cash, Beginning of Year 109,342 3,388 1,022
- --------------------------------------------------------------------------------------------------------------------
Cash, End of Year $264,064 $109,342 $3,388
- --------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Shares issued as finders' fee $14,555 $2,500 $0
Acquisition of mineral properties for
common shares $0 $0 $0
Shares issued for settlement of debt $0 $0 $0
Income tax paid $0 $0 $0
Interest paid $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
46
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Levon Resources Ltd. (the "Company") was incorporated under the laws of
British Columbia on April 9, 1965. It is an exploration stage public
company whose principal business activity is the exploration for and
development of natural resource properties. There has been no significant
revenues generated from these activities to date.
These consolidated financial statements include the accounts of Levon
Resources Ltd. and its wholly-owned subsidiary, Levon Resources Inc. (a
United States Corporation). All significant intercompany balances and
transactions have been eliminated.
These consolidated financial statements are prepared in accordance with
Canadian generally accepted accounting principles and all figures are in
Canadian dollars unless otherwise stated. Canadian generally accepted
accounting principles differ in certain respects from accounting principles
generally accepted in the United States of America. The significant
differences and the approximate related effects on these consolidated
financial statements are set forth in note 13.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Investments
Investments are recorded at the lower of their written down value and
market value.
(b) Investment in and expenditures on resource properties
Acquisition costs of resource properties, rights and options together
with direct exploration and development expenditures thereon are
deferred in the accounts on a property-by-property basis. The
expenditures related to a property from which there is production will
be amortized using the unit-of-production method based upon the
estimated proven reserves. When there is little prospect of further
work on a property being carried out by the Company, the costs of that
property are charged to operations.
(c) Amortization
Amorization is calculated on the declining balance basis at the
following annual rates:
Buildings - 5%
Furniture and equipment - 20%
Automobiles - 30%
47
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Foreign currency translation
Amounts recorded in foreign currency are translated into Canadian
dollars as follows:
(i) Monetary assets and liabilities, at the rate of exchange in
effect as at the balance sheet date;
(ii) Non-monetary assets and liabilities at the exchange rates
prevailing at the time of the acquisition of the assets or
assumption of the liabilities; and,
(iii) Revenues and expenses (excluding amortization which is
translated at the same rate as the related asset), at the average
rate of exchange for the year.
Gains and losses arising from this translation of foreign currency are
included in net loss for the year.
(e) Income taxes
Income taxes are calculated using the liability method of tax
accounting. Temporary differences arising from the difference between
the tax basis of an asset or liability and its carrying amount on the
balance sheet are used to calculate future income tax assets or
liabilities. Future income tax assets or liabilities are calculated
using tax rates anticipated to apply in the periods that the temporary
differences are expected to reverse. A valuation allowance is provided
to reduce the asset to the net amount management estimates to be
reasonable to carry as a future income tax asset.
(f) Loss per share
Loss per share computations are based on the weighted average number
of common shares outstanding during the year. Diluted loss per share
has not been presented separately as the outstanding stock options and
warrants are anti-dilutive.
(g) Use of estimates
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets
and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates and would impact future results of
operations and cash flows.
48
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) Stock-based compensation
As permitted by the CICA Handbook Section 3870, "Stock-based
Compensation and Other Stock-based Payments", the Company opted to
apply the settlement method of accounting for employee stock options.
Under the settlement method, no compensation expense is recorded on
the grant of stock options to employees. Options granted to
non-employees are to be accounted for using the fair value method.
In December 2003, the CICA amended Section 3870 to require entities to
account for employee and non-employee stock options using the fair
value-based method, beginning January 1, 2004. Under the fair
value-based method, compensation cost of a stock option is measured at
fair value at the date of grant and is expensed over the stock
option's vesting period, with a corresponding increase to contributed
surplus. When these stock options are exercised, the proceeds,
together with the amount recorded in contributed surplus, are recorded
in capital stock.
In accordance with one of the transitional alternatives permitted
under amended Section 3870, the Company has prospectively adopted the
fair value-based method of all employee stock options granted on or
after April 1, 2003.
3. FINANCIAL INSTRUMENTS
(i) Fair value
The carrying value of cash, accounts receivable, security deposits and
accounts payable and accrued liabilities approximate their fair value
because of the short maturity of these financial instruments. The
Company estimates that the fair value of the long-term debt
approximates the carrying value at March 31, 2004.
The fair value of investments as determined by approximate quoted
market values, are disclosed in note 5.
(ii) Interest rate risk
The Company is not exposed to significant interest rate risk due to
the short-term maturity of its monetary current assets and current
liabilities.
(iii) Credit risk
The Company's financial assets that are exposed to credit risk consist
primarily of cash, security deposits and accounts receivable. Cash and
security deposits are placed with well capitalized, high quality
financial institutions.
(iv) Translation risk
The Company is exposed to foreign currency fluctuations to the extent
expenditures incurred by the Company are not denominated in Canadian
dollars.
49
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
4. INVESTMENTS
-----------------------------------------------------------------------------------------------------------
2004 2003
-----------------------------------------------------------------------------------------------------------
Number Number
of Shares Amount of Shares Amount
-----------------------------------------------------------------------------------------------------------
Mill Bay Ventures Inc.
(market $8,816 (2003 - $4,897)) 48,978 $4,897 48,978 $4,897
Avino Silver & Gold Mines Ltd.
(market $8,484 (2003 - $1,680) 4,200 1,554 4,200 1,554
Omega Equities Corp.,
at nominal value 57,000 1 57,000 1
-----------------------------------------------------------------------------------------------------------
110,178 $6,452 110,178 $6,452
-----------------------------------------------------------------------------------------------------------
The Company, Avino Silver & Gold Mines Ltd. and Mill Bay Ventures Inc. have
common directors.
5. REALIZATION OF ASSETS
The investment in and expenditures on resource properties comprise a
significant portion of the Company's assets. Realization of the Company's
investment in these assets is dependent upon the establishment of legal
ownership, the attainment of successful production from the properties or
from the proceeds of their disposal.
6. SECURITY DEPOSITS
The security deposits are held by the Company's banks as a condition of
various reclamation permits.
50
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
7. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES
-------------------------------------------------------------------------------------------------------------------------------
Gold Norma
Congress Bridge Eagle Ruf Sass Wayside Total
-------------------------------------------------------------------------------------------------------------------------------
(note 7(a)) (note 7(b)) (note 7(c)) (note 7(d)) (note 7(d)) (note 7(e))
Opening balance, March 31, 2001 $23,060 $91,711 $232,171 $134,433 $215,861 $37,080 $734,316
Deferred exploration costs
Assessments and property tax 6,500 26,469 3,821 0 0 5,040 41,830
-------------------------------------------------------------------------------------------------------------------------------
29,560 118,180 235,992 134,433 215,861 42,120 776,146
Write-down to nominal value (29,559) (118,179) (235,991) (134,432) (215,860) (42,119) (776,140)
-------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2002 1 1 1 1 1 1 6
Deferred exploration costs
Assessments and property tax 5,678 0 4,685 0 0 0 10,363
-------------------------------------------------------------------------------------------------------------------------------
5,679 1 4,686 1 1 1 10,369
Write-down to nominal value (5,678) 0 (4,685) 0 0 0 (10,363)
-------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003 1 1 1 1 1 1 6
Deferred exploration costs
Assessments and property tax 2,292 0 4,216 0 0 0 6,508
Drilling program 0 46,230 0 0 0 0 46,230
--------------------------------------------------------------------------------------------------------------------------------
2,293 46,231 4,217 1 1 1 52,744
Write-down to nominal value (2,292) 0 (4,216) 0 0 0 (6,508)
--------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2004 $1 $46,231 $1 $1 $1 $1 $46,236
--------------------------------------------------------------------------------------------------------------------------------
51
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
7. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES
(a) Congress Claims
The Company owns a 50% leasehold interest in 45 claims in the Lillooet
Mining Division, British Columbia. The mineral claims were purchased
from a company with common directors.
The Congress Claims are subject to a Joint Venture Agreement dated
February 25, 1983 between the Company and Veronex Resources Ltd.
("Veronex"). Veronex has earned a 50% net interest in the claims, net
of a 5% net smelter royalty held by the Company, by expending
$1,000,000 in a prior year. All subsequent expenditures are to be
contributed equally by the Company and Veronex. During the year ended
March 31, 2002, the Company wrote-down the expenditures related to the
claims resulting in a charge of $29,559 to operations. During the year
ended March 31, 2004, the Company wrote-off expenditures of $2,293
(2003 - $5,678) related to these claims, which were paid to maintain
the property in good standing. The claims remain in good standing to
December 2004. The Company is in the process of beginning an
exploration program on this property.
(b) Gold Bridge Claims
The Company owns 74 mineral claims in the Gold Bridge area, Lillooet
Mining Division, British Columbia. During the year ended March
31,2002, the Company wrote-down the expenditures related to the claims
resulting in a charge of $118,179 to operations. The claims remain in
good standing until December 2004.
During the year ended March 31, 2003, the Company entered into an
option agreement whereby Mill Bay Ventures Inc. ("Mill Bay"), a
company related by common directors, could acquire an undivided 50%
interest in the Gold Bridge claims upon completion of the following:
(i) Incurring $100,000 of expenditures on the property, and issuance
of 100,000 common shares of Mill Bay to the Company on or before
December 17, 2003;
(ii) Incurring an additional $100,000 of expenditures on the property,
and issuance of another 100,000 common shares of Mill Bay to the
Company on or before December 17, 2004; and
(iii) Incurring an additional $100,000 of expenditures on the
property, and issuance of another 100,000 common shares of Mill
Bay to the Company on or before December 17, 2005.
During the year ended March 31, 2004, the option agreement was amended
such that the $100,000 and the 100,000 common shares due on or before
December 17, 2003 be deferred until December 17, 2004. Subsequent to
March 31, 2004, Mill Bay incurred all required exploration
expenditures to earn the 50% interest in the Gold Bridge claims as
required under the agreement. The Company has not yet received any
common shares of Mill Bay.
52
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
7. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(c) Eagle Claims
The Company holds a 50% interest in 26 lode mining claims located in
Lander County, Nevada. The claims are subject to a 3% net smelter
return royalty. During the year ended March 31, 2002, the Company
wrote-down the expenditures related to the claims, resulting in a
charge to operations of $235,991. During the year ended March 31,
2004, the Company wrote-off expenditures of $4,216 (2003 - $4,685)
related to these claims, which was paid to maintain the property in
good standing. The Company has no current plan to further explore or
incur additional expenditures on this property.
(d) Ruf and Norma Sass Properties
In September 1995, the Company entered into option agreements with
Coral Gold Corp. ("Coral"), a company with common directors, to
acquire a 50% interest in 54 mineral claims located in Lander County,
Nevada known as the Ruf and Norma Sass properties (the "Agreement").
Under the terms of the Agreement, the Company paid $50,000 U.S. and
issued 100,000 common shares. In order to exercise the option, the
Company was required to incur minimum expenditures of $400,000 U.S. in
exploration expenditures on the property on or before December 31,
2000, and issue a further 300,000 common shares.
The Agreement was subject to an Option Agreement between Coral and
Amax Gold Inc., or their successors, dated May 16, 1995 whereby Amax
could purchase up to a 61% interest in the properties (the "Option").
In 1997, Amax assigned the Option to Placer Dome U.S. Inc. ("Placer")
and on July 11, 1997, Placer exercised the Option and received a 61%
interest in the property. As a result, the Company and Coral entered
into a First Amending Agreement to provide for cash payments in lieu
of exploration expenditures.
In February 2000, the Company and Coral further amended the Agreement,
whereby the option was reduced from a 19.5% to a 15% interest in the
property.
On December 31, 2000, Coral's Agreement with Placer was terminated,
leading to the automatic termination of all Amending Agreements with
the Company.
Effective December 31, 2000, the Company and Coral entered into a
Fourth Amending Agreement whereby the Company received an option to
earn an undivided 19.5% interest in the property pursuant to the
following terms:
(i) incur $251,140 of expenditures on the property on or before
December 31, 2002; and
(ii) issue 100,000 common shares upon the acceptance by the exchange
of an independent technical report on the exploration work
carried out on the property.
During the year ended March 31, 2002, the Fourth Amending Agreement
expired and, as such, the Company failed to earn an undivided 19.5%
interest in the property. The Company wrote-down the expenditures
related to the claims resulting in a charge to operations of $350,292.
53
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
7. INVESTMENT IN AND EXPENDITURES ON RESOURCE PROPERTIES (Continued)
(d) Ruf and Norma Sass Properties (Continued)
During the year-ended March 31, 2003, the Company received from Coral
an undivided one-third interest in the Ruf and Norma Sass properties
in recognition of the prior year payments by the Company to Coral of
$350,292 and the prior year issuances of 300,000 shares of the
Company. The Company has no current plan to further explore or incur
additional expenditures on this property.
(e) Wayside Claims
The Company owns 24 mineral claims in the Lillooet Mining Division,
British Columbia. During the year ended March 31, 2002, the Company
wrote-down the expenditures related to the claims resulting in a
charge to operations of $42,119. The claims remain in good standing
until December 2004. The Company has no current plan to further
explore or incur additional expenditures on this property.
8. PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------------------------------------------
2004 2003
-----------------------------------------------------------------------------------------------------------
Accumulated Accumulated
Cost Amortization Net Cost Amortization Net
-----------------------------------------------------------------------------------------------------------
Buildings $21,484 $12,479 $9,005 $21,484 $11,991 $9,493
Furniture and
equipment 27,804 24,153 3,651 25,297 23,247 2,050
Automobiles 51,615 51,465 150 51,615 51,396 219
-----------------------------------------------------------------------------------------------------------
$100,903 $88,097 $12,806 $98,396 $86,634 $11,762
-----------------------------------------------------------------------------------------------------------
54
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
9. LONG-TERM DEBT
Long-term debt represents amounts due to companies with common directors
without interest and deferred repayment until July 1, 2005.
10. CAPITAL STOCK AND DEFICIT
(a) Authorized 100,000,000 common shares without par value
(b) Issued
--------------------------------------------------------------------------------------------------
Shares Amount (Deficit)
--------------------------------------------------------------------------------------------------
Balance, March 31, 2002 14,389,508 $19,727,819 $(19,855,107)
Share issuance
For cash at $0.10 (note 10(c)) 3,000,000 302,500 0
Share issue costs (note 10(c)) 25,000 (2,500) 0
2003 net loss 0 0 (131,964)
--------------------------------------------------------------------------------------------------
Balance, March 31, 2003 17,414,508 20,027,819 (19,987,071)
Share issuance
For cash at $0.10 (note 10(c)) 3,000,000 313,655 0
Share issue costs (note 10(c)) 136,550 (14,555) 0
2004 net loss 0 0 (173,221)
--------------------------------------------------------------------------------------------------
Balance, March 31, 2004 20,551,058 $20,326,919 $(20,160,292)
--------------------------------------------------------------------------------------------------
(c) Private placements
During the year ended March 31, 2003, the Company completed two
separate non-brokered private placements. The issues consisted of a
total of 3,000,000 units at a price of $0.10 per unit for gross
proceeds of $302,500. A finder's fee of 25,000 units was included as
part of the private placement. Each unit consists of one common share
and one non-transferable share purchase warrant entitling the holder
to purchase one additional common share of the Company at $0.12 for a
two year period. Of the above warrants, 1,005,000 expire on March 14,
2005, and the remaining 2,020,000 expire on March 10, 2005. In
connection with these private placements, $142,500 was receivable at
March 31, 2003. The shares related to the funds receivable were issued
and held by the trust Company until the funds were received by the
Company during the year ended March 31, 2004
During the year ended March 31, 2004, the Company completed one
non-brokered private placement. The issue consisted of a total of
3,000,000 units at a price of $0.10 per unit for gross proceeds of
$300,000. A finder's fee of 136,550 units was included as part of the
private placement. Each unit consists of one common share and one
non-transferable share purchase warrant entitling the holder to
purchase one additional common share of the Company at $0.12 for a one
year period, expiring January 13, 2005. 50% of the placement was
designated flow through shares for income tax purposes.
Subsequent to March 31, 2004, another private placement of 5,000,000
units was announced for which $429,250 had been collected at the
auditor's report date.
55
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
10. CAPITAL STOCK AND DEFICIT (Continued)
(d) Stock options
The Company presently does not have a formal plan for the granting of
stock options. Pursuant to the policies of the TSX Venture Exchange
("TSX"), the Company may grant incentive stock options to officers,
directors employees and to persons in consideration for services.
Stock options must be non-transferable and the aggregate number of
shares that may be reserved for issuance may not exceed 10% of the
issued shares at the time of grant and to each individual may not
exceed 5% of the issued shares. The exercise price of stock options is
determined by the Board of Directors of the Company at the time of
grant and may not be less than the average closing price of the
Company's shares for the ten trading days immediately preceding the
day on which the option is granted and publicly announced, and may not
be less than $0.10 per share. Options have a maximum term of ten years
and terminate 30 days following the termination of the optionee's
employment, except in the case of retirement, death or disability, in
which case they terminate one year after the event. Vesting of the
options is determined at the time of granting of the options at the
discretion of the Board of Directors. Once approved and vested,
options are exercisable at any time.
The Company is in the process of drafting a formal stock option plan
which is pending shareholder and regulatory approval.
Details of the status of the Company's stock options as at March 31,
2004 and 2003 and changes during the years then ended are as follows:
--------------------------------------------------------------------------------------------------
2004 2003
--------------------------------------------------------------------------------------------------
Exercise Exercise
Shares Price Shares Price
--------------------------------------------------------------------------------------------------
Options
outstanding ,and
exercisable,
beginning of year 760,000 $ 0.22 810,000 $ 0.10 - $ 0.22
Cancelled (760,000) $ 0.22 (50,000) 0.10
--------------------------------------------------------------------------------------------------
Options outstanding and
exercisable,
end of year 0 $ 0.00 760,000 $ 0.22
--------------------------------------------------------------------------------------------------
Share purchase options outstanding and exercisable at March 31 are as
follows:
--------------------------------------------------------------------------------------------------
Number of Shares
Expiry Date Exercise Price 2004 2003
--------------------------------------------------------------------------------------------------
April 21, 2003 $ 0.22 0 760,000
--------------------------------------------------------------------------------------------------
56
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
10. CAPITAL STOCK AND DEFICIT (Continued)
(e) Share purchase warrants
The following share purchase warrants were outstanding at March 31:
----------------------------------------------------------------------
Exercise Number of Shares
Expiry Date Price 2004 2003
----------------------------------------------------------------------
January 13, 2005 $ 0.12 3,136,550 0
March 10, 2005 $ 0.12 2,020,000 2,020,000
March 14, 2005 $ 0.12 1,005,000 1,005,000
----------------------------------------------------------------------
11. RELATED PARTY TRANSACTIONS
(a) Accounts payable and long-term debt includes $56,216 (2003 - $65,389)
due to a company with common directors, $115,119 (2003 - $103,333) due
to a company with common management and $46,135 (2003 - $98,605) due
to a company controlled by a director.
(b) Accounts receivable includes $1,047 (2003 - $1,047) due from a company
with common management.
(c) During the year $78,655 (2002 - $29,027) was charged by Oniva
International Services Corporation, a company with common management,
for office, occupancy and miscellaneous costs and salaries and
administrative services paid on behalf of the Company.
(d) During the year, the Company was charged $2,635 (2003 - $5,678) by
Oniva International Services Corporation, a company with common
management, and $3,067 (2003 - $3,857) by Coral Gold Corporation, a
company with common directors, for exploration expenditures incurred
on behalf of the Company.
(e) During the year, the Company was charged consulting fees of $0 (2003 -
$22,500) and miscellaneous and administration fees of $10,500 (2003 -
$21,375) by companies controlled by directors.
57
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
12. INCOME TAXES
The components of income taxes are as follows:
---------------------------------------------------------------- -------------------- ---------------------
2004 2003
---------------------------------------------------------------- -------------------- ---------------------
Future income taxes
Non-capital loss carry-forwards for Canadian purposes $1,022,000 $958,000
Excess of undepreciated capital cost over net book value
of fixed assets 353,600 472,000
Exploration expenditures for Canadian purposes
Unused earned depletion base 675,000 675,000
Unused cumulative Canadian exploration expenses 2,768,000 2,918,000
Unused cumulative Canadian development expenses 2,179,000 2,172,000
Unused cumulative foreign exploration and development
expenses 707,000 707,000
---------------------------------------------------------------- -------------------- ---------------------
7,704,600 7,902,000
Approximate Canadian tax rate 38% 38%
---------------------------------------------------------------- -------------------- ---------------------
2,927,748 3,003,000
Non-capital loss carry-forwards for United States purposes
at a rate of 35% 1,427,500 1,597,900
---------------------------------------------------------------- -------------------- ---------------------
4,355,248 4,600,900
Less: Valuation allowance (4,355,248) (4,600,900)
---------------------------------------------------------------- -------------------- ---------------------
$0 $0
---------------------------------------------------------------- -------------------- ---------------------
The valuation allowance reflects the Company's estimate that the tax
assets, more likely than not, will not be realized.
During the year, the Company renounced a total of $150,000 of qualifying
Canadian expenditures pursuant to the issuance of flow-through share
subscription agreements. To date, the Company has announced expenditures of
a total of $150,000.
58
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
12. INCOME TAXES (Continued)
The non-capital losses which may be carried forward to apply against future
years' income for Canadian income tax purposes will expire as follows:
-------------------------------------------------- ------------------------
Available to Amount
-------------------------------------------------- ------------------------
2005 $184,000
2006 185,000
2007 121,000
2008 129,000
2009 111,000
2010 118,000
2011 174,000
-------------------------------------------------- ------------------------
$1,022,000
-------------------------------------------------- ------------------------
The net operating losses which may be carried forward to apply against
future years' income for United States income tax purposes will expire as
follows:
-------------------------------------------------- ------------------------
Available to Canadian Dollars
-------------------------------------------------- ------------------------
2004 $587,000
2005 1,053,000
2006 194,700
2007 187,000
2008 1,150,000
2009 116,700
2010 26,900
2011 35,800
2017 227,200
2018 272,200
2019 86,500
2020 30,000
2021 98,700
2022 11,900
2023 800
2024 15
-------------------------------------------------- ------------------------
$4,078,415
-------------------------------------------------- ------------------------
59
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP)
(a) U.S. accounting pronouncements
In December 2002, FASB issued SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment to SFAS 123".
SFAS 148 provides two additional transition methods for entities that
adopt the preferable method of accounting for stock-based
compensation. Further, the statement requires disclosure of comparable
information for all companies regardless of whether, when, or how an
entity adopts the preferable, fair value method of accounting. These
disclosures are now required for interim periods in addition to the
traditional annual disclosure. The amendment to SFAS 123, which
provides for additional methods, are effective for periods beginning
after December 15, 2002, although earlier application is permitted.
The amendments to the disclosure requirements are required for
financial reports containing condensed financial statements for
interim periods beginning after December 15, 2002.
In April 2003, the FASB issued SFAS 149, "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities". SFAS 149 amends
certain portions of SFAS 133 and is effective for all contracts
entered into or modified after June 30, 2003 on a prospective basis.
SFAS 149 is not expected to have a material effect on the results of
operations or financial position of the Company as the Company
presently has no derivatives or hedging contracts.
In June, 2003, the FASB approved SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS 150 establishes new standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS 150 is effective
for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. SFAS 150 did not have an effect
on the Company's financial position.
(b) Resource properties
The acquisition in prior years of certain mining claims located in the
Lillooet Mining Division, British Columbia acquired from a director
and the acquisition of the Congress 5% net smelter return from
companies with common directors are accounted for at cost being the
market value of the shares issued as consideration. Under U.S. GAAP,
these acquisitions would have been recorded at the Directors' and
related companies' original cost. If these financial statements were
prepared in accordance with U.S. GAAP, capital stock would be stated
at $1,696,550 less than what it is recorded at for Canadian GAAP.
Under Canadian GAAP, exploration and development expenditures are
capitalized (note 3(b)). Under U.S. GAAP all exploration and
development expenditures are charged to expenses when incurred.
(c) Marketable securities
Under Canadian GAAP, marketable securities are state at the lower of
cost written down value and market value. If these statements were
prepared in accordance with U.S. GAAP, these would have been stated at
market value.
60
LEVON RESOURCES LTD.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP) (Continued)
(d) Reconciliation of total assets, liabilities and shareholders' equity
at March 31:
--------------------------------------------------------------------------------------------------
2004 2003 2002
--------------------------------------------------------------------------------------------------
Total assets for Canadian GAAP $399,600 $184,082 $85,122
Adjustments to U.S. GAAP
Marketable securities 10,849 126 126
Capitalized mineral expenditures (52,744) (6) (6)
--------------------------------------------------------------------------------------------------
Total assets for U.S GAAP $357,705 $184,202 $85,242
--------------------------------------------------------------------------------------------------
Total liabilities for Canadian GAAP $232,973 $285,834 $212,410
Adjustments to U.S. GAAP 0 0 0
--------------------------------------------------------------------------------------------------
Total liabilities for U.S. GAAP $232,973 $285,834 $212,410
--------------------------------------------------------------------------------------------------
Total capital stock for Canadian
GAAP $20,326,919 $20,027,819 $19,727,819
Adjustment to U.S. GAAP
Congress adjustment (note 13(b)) (1,696,550) (1,696,550) (1,696,550)
--------------------------------------------------------------------------------------------------
Total capital stock for U.S. GAAP $18,630,369 $18,331,269 $18,031,269
--------------------------------------------------------------------------------------------------
Total deficit for Canadian GAAP $(20,160,292) $(19,987,071) $(19,855,107)
Adjustments to U.S. GAAP
Exploration adjustments (52,744) (6) (6)
Marketable securities adjustments 10,849 126 126
Congress adjustment (note 13(b)) 1,696,550 1,696,550 1,696,550
--------------------------------------------------------------------------------------------------
Total shareholders' deficit for U.S.
GAAP $(18,505,637) $(18,290,401) $(18,158,437)
--------------------------------------------------------------------------------------------------
Subscriptions receivable for
Canadian and U.S. GAAP $0 $(142,500) $0
--------------------------------------------------------------------------------------------------
Total liabilities, capital stock and
Shareholders' deficit for U.S. GAAP $357,705 $184,202 $85,242
--------------------------------------------------------------------------------------------------
61
LEVON RESOURCES CORP.
Notes to Consolidated Financial Statements
Year Ended March 31, 2004
(Canadian Dollars)
- --------------------------------------------------------------------------------
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (CANADIAN GAAP AND U.S. GAAP) (Continued)
(e) Reconciliation of loss reported in accordance with Canadian GAAP and
U.S. GAAP for the years ended March 31:
---------------------------------------------------- -------------- -------------- ---------------
2004 2003 2002
---------------------------------------------------- -------------- -------------- ---------------
Net loss - Canadian GAAP $(173,221) $(131,964) $(898,492)
Adjustments decreasing (increasing) net
loss
Differences in fair value of marketable
securities 10,723 0 0
Exploration and development
expenditures for year (52,738) (10,363) (41,831)
Write-off of resource properties 0 10,363 776,140
---------------------------------------------------- -------------- -------------- ---------------
Net loss U.S. GAAP (215,236) (131,964) (164,183)
Comprehensive income (loss)
adjustments 0 0 0
---------------------------------------------------- -------------- -------------- ---------------
Net loss, U.S GAAP $(215,236) $(131,964) $(164,183)
---------------------------------------------------- -------------- -------------- ---------------
Net loss per common share
Canadian GAAP - Basic $ (0.00) $ (0.01) $ (0.06)
---------------------------------------------------- -------------- -------------- ---------------
Net loss per common share for
U.S. GAAP $ (0.00) $ (0.01) $ (0.01)
---------------------------------------------------- -------------- -------------- ---------------
Weighted average number of shares outstanding (Canadian and
U.S.
GAAP) 18,084,784 14,551,108 14,389,508
---------------------------------------------------- -------------- -------------- ---------------
14. COMMITMENT
The Company entered into an Accounting and Administrative Services
Consulting Agreement with Dawn Pacific Management Ltd., for a monthly fee
of $1,605 for an initial term of one year ending August, 2004.
62
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.
Dated: January 24, 2006 Levon Resources Ltd
By: /s/ Louis Wolfin
----------------------------------------
Louis Wolfin, President
(Chief Executive Officer)
63