STORIMIN RESOURCES LIMITED
NOTICE OF ANNUAL AND SPECIAL MEETING
AND
MANAGEMENT INFORMATION CIRCULAR
TO BE HELD AT
THE BOARD OF TRADE
ROOM A
1 FIRST CANADIAN PLACE
4TH FLOOR
TORONTO, ONTARIO
ON
DECEMBER 14, 1999 AT 11:00 A.M.
(TORONTO TIME)
This Management Information Circular contains information relating to the
proposed acquisition by Storimin Resources Limited (the "Corporation") of Web
Dream Inc. Under the proposed acquisition, all of the issued and outstanding
shares of Web Dream Inc. will be exchanged for shares of the Corporation.
THESE DOCUMENTS REQUIRE YOUR IMMEDIATE ATTENTION. THEY REQUIRE SHAREHOLDERS TO
MAKE IMPORTANT DECISIONS.
NOVEMBER 12, 1999
TABLE OF CONTENTS
Notice of Annual and Special Meeting
of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
MANAGEMENT INFORMATION
CIRCULAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SOLICITATION OF PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . .1
APPOINTMENT OF PROXY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REVOCATION OF PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
VOTING OF SHARES AND PRINCIPAL
HOLDERS THEREOF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
STATEMENT OF EXECUTIVE
COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . . . .4
Long-Term Incentive Plan Awards . . . . . . . . . . . . . . . . . . . .4
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Termination of Employment, Changes in
Responsibility and Employment
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . 4
Directors' and Officers' Liability
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . 5
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INDEBTEDNESS OF DIRECTORS AND
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
INTEREST OF CERTAIN PERSONS IN MATTERS
TO BE ACTED UPON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
INTEREST OF INSIDERS IN MATERIAL
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
TRADING RANGE OF THE COMMON
SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
DESCRIPTION OF SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . .6
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PRIOR SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ESCROWED SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CURRENT OPERATIONS OF THE
CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
AUDITORS, TRANSFER AGENT AND
REGISTRAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
MANAGEMENT'S DISCUSSION OF VARIATIONS
IN OPERATING RESULTS AND FINANCIAL
CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
PARTICULARS OF MATTERS TO BE ACTED
UPON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
PROPOSED ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 11
Details of the Proposed Transaction . . . . . . . . . . . . . . . . .11
Description of Web Dream Inc . . . . . . . . . . . . . . . . . . . . 13
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Purpose and Effect of the Proposed
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Recommendation of the Board of Directors . . . . . . . . . . . . . .22
Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . .23
Management of the Corporation Following the
Proposed Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . .23
Pro Forma Consolidated Capitalization . . . . . . . . . . . . . . . . 24
Principal Shareholders Following the Proposed
Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
CHANGE OF NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
CONSOLIDATION OF COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . 25
AMENDMENT TO STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . . . . .26
Increase in Maximum Number of Common
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
APPOINTMENT OF AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 27
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CERTIFICATE OF THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . 28
CERTIFICATE OF WEB DREAM INC . . . . . . . . . . . . . . . . . . . . . . .29
SCHEDULES
Schedule A - Financial Statements of the
Corporation
Schedule B - Ordinary Resolution
re Proposed Acquisition
Schedule C - Description of Web Dream Inc.
Schedule D - Special Resolution
re Change of Corporate Name
Schedule E - Special Resolution
re Consolidation of Common Shares
Schedule F - Ordinary Resolution
re Amendment to Stock Option Plan
Schedule G - Notice of Change of Auditors
STORIMIN RESOURCES LIMITED
MANAGEMENT INFORMATION CIRCULAR
SOLICITATION OF PROXIES
- -------------------------
THIS MANAGEMENT INFORMATION CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY OR ON BEHALF OF THE MANAGEMENT OF STORIMIN RESOURCES
LIMITED (THE "CORPORATION") FOR USE AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON DECEMBER 14, 1999 AND AT ANY AND ALL ADJOURNMENTS
THEREOF (THE "MEETING"). It is expected that the solicitation will be primarily
by mail and possibly supplemented by telephone. The cost of soliciting these
proxies will be borne directly by the Corporation. The Corporation may also pay
brokers, investment dealers or nominees holding common shares in their names or
in the names of their principals for their reasonable expenses in sending
solicitation material to their principals.
No person is authorized to give any information or to make any
representations other than those contained in this circular and, if given or
made, such information must not be relied upon as having been authorized.
APPOINTMENT OF PROXY
- ----------------------
A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER OF THE CORPORATION) TO ATTEND, ACT AND VOTE FOR HIM AND ON HIS
BEHALF AT THE MEETING OR ANY ADJOURNMENT(S) THEREOF, OTHER THAN THE PERSONS
DESIGNATED IN THE ENCLOSED FORM OF PROXY, BY INSERTING SUCH PERSON'S NAME IN THE
SPACE PROVIDED IN THE FORM OF PROXY AND BY DELETING THE NAMES THEREIN.
All common shares (hereinafter referred to as "common shares" or "shares")
represented by properly executed proxies received by the Transfer Agent of the
Corporation in a timely fashion will be voted or withheld from voting in
accordance with the instructions of the Shareholders on any ballot that may be
called for at the Meeting; if a choice is specified in respect of any matter to
be acted upon, the shares will be voted accordingly. IN THE ABSENCE OF SUCH
DIRECTION, THE SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS; FOR THE
APPROVAL OF AN ORDINARY RESOLUTION AUTHORIZING THE ACQUISITION OF ALL THE ISSUED
AND OUTSTANDING SHARES OF WEB DREAM INC.; FOR THE APPROVAL OF A SPECIAL
RESOLUTION TO CHANGE THE NAME OF THE CORPORATION TO DIGITAL ROOSTER.COM INC.;
FOR THE APPROVAL OF A SPECIAL RESOLUTION TO CONSOLIDATE THE ISSUED AND
OUTSTANDING COMMON SHARES OF THE CORPORATION; FOR THE APPROVAL OF AN ORDINARY
RESOLUTION TO INCREASE THE MAXIMUM NUMBER OF SHARES ISSUABLE PURSUANT TO OPTIONS
GRANTED UNDER THE CORPORATION'S STOCK OPTION PLAN; AND FOR THE APPOINTMENT OF
AUDITORS AND THE AUTHORIZATION OF THE DIRECTORS OF THE CORPORATION TO FIX THE
AUDITORS' REMUNERATION; ALL AS MORE PARTICULARLY DESCRIBED UNDER THOSE HEADINGS
IN THIS MANAGEMENT INFORMATION CIRCULAR.
THE ENCLOSED FORM OF PROXY, WHEN PROPERLY EXECUTED, CONFERS DISCRETIONARY
AUTHORITY WITH RESPECT TO ALL AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN
THE NOTICE OF MEETING OR OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
The enclosed form of proxy must be dated and executed by the Shareholder or
his attorney authorized in writing, or if the Shareholder is a corporation,
under its corporate seal or by a duly authorized officer or attorney thereof. If
the form of proxy is executed by an attorney, the authority of the attorney to
act must accompany the form of proxy. The form of proxy must be received by the
Corporation's Registrar and Transfer Agent, Montreal Trust Company of Canada, 8
th Floor, 151 Front Street West, Toronto, Ontario, M5J 2N1 on or before 5:00
p.m. (Toronto time) on. December 13, 1999, or delivered to the Chairman of the
Meeting on the day of the Meeting or any adjournment thereof prior to the
commencement of the Meeting.
REVOCATION OF PROXIES
- -----------------------
Pursuant to Section 110(4) of the Business Corporations Act (Ontario), any
Shareholder giving a proxy may revoke a proxy by instrument in writing executed
by the Shareholder or by his attorney authorized in writing, or if the
Shareholder is a corporation, under the corporate seal or by a duly authorized
officer or attorney thereof and deposited with the Corporation's Registrar and
Transfer Agent, Montreal Trust Company of Canada, 8 th Floor, 151 Front Street
West, Toronto, Ontario, M5J 2N1 on or before 5:00 p.m. (Toronto time) on
December 13, 1999, or with the Chairman of the Meeting on the day, and prior to
the commencement, of the Meeting of Shareholders to be held on December 14,,
1999 or any adjournment thereof or in any other manner permitted by law.
VOTING OF SHARES AND PRINCIPAL HOLDERS THEREOF
The holders of the common shares of the Corporation will be entitled to
vote at the Meeting on all matters. Pursuant to Section 100(2) of the Business
Corporations Act (Ontario) and in accordance with National Policy Statement No.
41 adopted by the Ontario Securities Commission, each holder of a common share
of the Corporation at the close of business on October 15, 1999, (the "Record
Date") is entitled to one (1) vote for each such share held, except to the
extent that such shares may have been transferred after the Record Date and the
transferee produces properly endorsed share certificates or otherwise
establishes that he owns the shares and requests, not later than ten (10) days
before the Meeting, that his name be included in the list of Shareholders. As at
October 15, 1999, 24,815,191 common shares of the Corporation were issued and
outstanding.
To the knowledge of the Directors or Senior Officers of the Corporation, at
the date hereof, no person or corporation beneficially owns, directly or
indirectly, or exercises control or direction over securities of the Corporation
carrying more than ten (10) percent of the voting rights attached to any class
of voting securities of the Corporation.
The directors and officers of the Corporation beneficially own, directly
and indirectly, as a group, 2,459,756 common shares of the Corporation.
ELECTION OF DIRECTORS
The board of directors presently consists of four (4) members to be elected
annually. The persons named in the enclosed form of proxy intend to vote for the
election of those nominees whose names are set forth below. Management does not
contemplate that any nominee will be unable to serve as a director, but, if such
an event should occur for any reason prior to the Meeting, the persons named in
the enclosed form of proxy reserve the right to vote for another nominee in
their discretion, unless authority to vote the proxy in the election of
directors has been withheld. Each Director elected will hold office until the
next annual meeting of Shareholders or until his successor is duly elected,
unless the office is earlier vacated in accordance with the by-laws of the
Corporation.
The Corporation does not have an Executive Committee of its Board of
Directors. Pursuant to Section 158(1) of the Business Corporations Act
(Ontario), the Audit Committee of the Board of Directors is comprised of Messrs.
Knight, Manley and Mockler.
The following table and notes thereto state the names of all persons
proposed to be nominated for election as directors, all other major positions
and offices with the Corporation presently held by them, their principal
occupation. or employment, the year in which they became directors of the
Corporation, and the approximate number of securities of the Corporation
beneficially owned, directly or indirectly, or over which control or direction
is exercised by each of them as at November 12, 1999: (1)
-2-
Number of Common Shares
Beneficially Owned, Directly
Name and Major Positions and Present Principal or Indirectly or over which
Municipality of Offices with the Occupation or Director control or direction is
Residence Corporation Employment Since exercised
Hubert J. Mockler President and President, Canuc 1997 1,910,600
Toronto, Ontario Director Resources
Corporation
Frederick C. Knight Director Independent Mining 1998 Nil
Toronto, Ontario Consultant
Michael W. Manley Director Barrister and 1997 120,800
Toronto, Ontario Solicitor
Harry Hodge Director Geologist 1989 181,154
Toronto, Ontario
Notes:
(1) Information furnished by the respective nominees.
STATEMENT OF EXECUTIVE COMPENSATION
-----------------------------------
Ontario securities law requires that a "Statement of Executive
Compensation" in accordance with Form 40 to the Regulation to the Securities Act
(Ontario) be included in this Management Information Circular. Form 40
prescribes the disclosure requirements in respect of the compensation of the
executive officers and directors of reporting issuers. Form 40 provides that
compensation disclosure must be provided for the Chief Executive Officer of an
issuer and each of the issuer's four most highly compensated executive officers,
other than the Chief Executive Officer and other than an executive officer whose
total salary and bonus does not exceed $100,000. For the purposes of this
section of the Circular, executive officers of the Corporation for whom
compensation disclosure is required in accordance with these requirements shall
collectively be referred to as the "Named Executive Officers". The following
addresses the applicable items identified in Form 40.
-3-
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Name and Other Securities Shares or
Principal Annual Under Restricted LTIP All Other
Position Year Salary Bonus Compensation Option Share Units Payouts Compensation
Hubert J. Mockler 1999 $ Nil $ Nil $ Nil 550,000 Nil Nil Nil
President 1998 $ Nil $ Nil $ Nil 550,000 Nil Nil Nil
1997 $ Nil $ Nil $ Nil Nil Nil Nil Nil
LONG-TERM INCENTIVE PLAN AWARDS
The Corporation did not have a long-term incentive plan within the meaning
of Form 40 (the definition of "long-term incentive plan" contained in Form 40
expressly excludes a stock option plan) during the financial year ended March
31, 1999.
STOCK OPTIONS
The Corporation has a stock option plan. No stock options of the
Corporation were exercised by the Named Executive Officer during the financial
year ended March 31, 1999. The following table sets forth the value of the stock
options of the Corporation held by the Named Executive Officer as at March 31,
1999, all of which options were exercisable at such date.
Value of Unexercised
Unexercised Options in-the-Money
Name at March 31, 1999 Options at March 31, 1999
- ---- ----------------- -------------------------
Hubert J. Mockler 550,000 $Nil
TERMINATION OF EMPLOYMENT, CHANGES IN RESPONSIBILITY AND EMPLOYMENT CONTRACTS
There is no employment contract between the Corporation or any of its
subsidiaries and a Named Executive Officer. As well, there is no compensatory
plan or arrangement with respect to a Named Executive Officer, involving
payment(s) of more than $100,000, which results or will result from the
resignation, retirement or any other termination of employment of a Named
Executive Officer's employment with the Corporation and its subsidiaries or from
a change of control of the Corporation or any subsidiary of the Corporation or a
change in a Named Executive Officer's responsibilities following a change of
control.
COMPENSATION OF DIRECTORS
Other than through the granting of stock options as described below, no
directors of the Corporation were compensated by the Corporation during the
financial year ended March 31, 1999 for their services in their capacity as
directors or for services as consultants or experts.
The following table sets forth certain information with respect to stock
options granted by the Corporation to the directors of the Corporation during
the financial year ended March 31, 1999.
-4-
Market Value
% of Total of Shares
Options Underlying
Shares Under Granted in Options on
Options Financial the Date of Expiration
Name Date of Grant Granted Year Exercise Price Grant(1) Date
- ------------ ------------- ------------ ----------- --------------- -------------- ----------
Frederick C. August 11, August 10,
Knight 1998 60,000 100% $ 0.06 $ 0.015 2003
(1) The market value figures identified in this column of the table are the
closing sale prices of the common shares of the Corporation quoted by the
Canadian Dealing Network Inc. on the last day such shares traded prior to the
date the options in question were granted.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation does not maintain insurance for the benefit of its
Directors and Officers against certain
liabilities incurred by them in their capacity as directors or officers of the
Corporation.
COMPENSATION COMMITTEE
The Corporation does not have a compensation committee. The duties of such
a committee are carried out by the Board of Directors. The Board of Directors
meets on compensation matters as and when required with respect to executive
compensation.
PENSION PLAN
The Corporation does not maintain a pension plan for its employees,
officers or directors.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No director or senior officer or employee or any associate or affiliate of
any such director or senior officer is indebted to the Corporation. No director
or senior officer or employee or any associate or affiliate of any such director
or senior officer has been indebted to the Corporation at any time since the
beginning of the last completed financial year of the Corporation.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Other than as set forth in this Management Information Circular, management
of the Corporation is not aware of any material interest, direct or indirect, of
any director, officer or any associate or affiliate of any of the foregoing
persons, in any matter to be acted upon. See "Interest of Insiders in Material
Transactions".
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
Management of the Corporation is not aware of any material interest, direct
or indirect, of any director, officer or any associate or affiliate of any such
person in any transaction since March 31, 1999, or in any proposed transaction,
that has materially affected or would materially affect the Corporation. No
director or officer of the Corporation has had any material interest, direct or
indirect, in any transaction since the beginning of the last completed financial
year, or any proposed transaction which has materially affected or will
materially affect the Corporation.
-5-
TRADING RANGE OF THE COMMON SHARES
The Corporation's common shares are quoted for trading by The Canadian
Dealing Network Inc. ("CDN") under the symbol "SMRL". The following table sets
forth the reported high and low sale prices and volume of trading of the
Corporation's common shares as reported by CDN for the calendar periods
indicated:
HIGH LOW VOLUME
------ ------ ---------
1997
- ----
First Quarter - - -
Second Quarter $ 0.32 $ 0.11 835,328
Third Quarter $ 0.20 $ 0.08 1,671,573
Fourth Quarter $ 0.19 $ 0.09 1,537,489
1998
- ----
First Quarter $ 0.11 $ 0.05 218,032
Second Quarter $ 0.10 $ 0.04 411,670
Third Quarter $ 0.08 $ 0.01 419,000
Fourth Quarter $0.015 $0.015 287,723
1999
- ----
First Quarter $ 0.07 $ 0.01 1,282,167
April $ 0.04 $ 0.03 18,000
May $ 0.04 $ 0.04 20,500
June $ 0.02 $ 0.02 14,333
July $ 0.02 $ 0.01 58,333
August $ 0.09 $ 0.01 3,312,500
September (to September7) $ 0.08 $ 0.06 1,762,889
In accordance with the requirements of CDN, trading in the Corporation's
common shares was halted by CDN on September 7, 1999 pending completion of the
Proposed Acquisition.
DESCRIPTION OF SHARE CAPITAL
The authorized capital of the Corporation consists of an unlimited number
of common shares. The following is a summary of the principal attributes of the
common shares:
Common Shares
Each Common Share carries one vote at all meetings of shareholders, is
entitled to dividends as and when declared by the directors of the Corporation
and is entitled upon liquidation, dissolution or winding-up to a pro rata share
of the assets of the Corporation distributable to the holders of common shares.
The common shares carry no conversion or pre-emptive rights. There are
24,815,191 common shares issued and outstanding as fully paid and
non-assessable.
-6-
CAPITALIZATION
The following table and notes thereto set forth the audited consolidated
capitalization of the Corporation as at March 31, 1999 and the unaudited
consolidated capitalization of the Corporation as at September 30, 1999. This
table should be read in conjunction with the financial statements (and notes
thereto) attached to this Management Information Circular as Schedule "A".
OUTSTANDING AS OUTSTANDING AS
AT MARCH 31, AT SEPTEMBER 30,
CAPITAL AUTHORIZED 1999(2) 1999(2)
- -------------------------- ---------- -------------------- --------------------
(audited) (unaudited)
Common Unlimited $ 2,732,277 $ 2,732,277
Shares (24,815,191 shares) (24,815,191 shares)
Deficit ($2,292,146) ($2,335,526)
Total Shareholders' Equity $ 440,131 $ 396,951
Notes:
(1) Under the Corporation's stock option plan, 2,025,000 common shares have been
reserved for issuance upon exercise of stock options granted to directors and
officers of the Corporation. In the event these options are not exercised prior
to closing of the Proposed Acquisition, they will be cancelled.
(2) Upon the completion of the Proposed Acquisition of the Corporation, the
Corporation may grant stock options to purchase up to 3,000,000
post-consolidated Common Shares.
PRIOR SALES
On March 18, 1999, the Corporation issued 1,000,000 common shares to the
shareholders of 1345969 Ontario Limited in exchange for all it issued and
outstanding shares for aggregate consideration of $200,000.
DIVIDEND POLICY
No dividends have been paid on any shares of the Corporation since the date
of its incorporation and it is not contemplated that any dividends will be paid
in the immediate or foreseeable future.
ESCROWED SECURITIES
None of the common shares of the Corporation are subject to any escrow
requirement.
MATERIAL CONTRACTS
The Corporation is not currently a party to any material contracts other
than contracts in the ordinary course of business, except:
-7-
1. letter of intent dated September 2, 1999 between the Corporation and Web
Dream Inc.; and
2. the Acquisition Agreement. See "Proposed Acquisition - Acquisition
Agreement".
Copies of these agreements will be available for inspection at the
registered office of the Corporation, Suite 1800, 8 King Street East, Toronto,
Ontario, during ordinary business hours up to and including the date of the
Meeting.
CONFLICTS OF INTEREST
There may develop potential conflicts of interest to which the proposed
directors and officers of the Corporation may be subject in connection with the
operations of the Corporation. For example, situations may arise where some of
the directors and officers will be in direct competition with the Corporation.
Conflicts, if any will be subject to the procedures and remedies under the
Business Corporations Act (Ontario).
THE CORPORATION
The Corporation was incorporated under the Canada Business Corporations Act
on January 16, 1984 under the name Storimin Explorations Limited. By Articles of
Amendment dated April 1, 1997, the Corporation amended its Articles to change
the name of the Corporation to Storimin Resources Limited and to consolidate the
common shares of the Corporation on a one (1) for three (3) basis. By Articles
of Continuance dated October 30, 1998, the Corporation was continued under the
Business Corporations Act (Ontario). By Articles of Amalgamation dated April 1,
1999, the Corporation amalgamated with its wholly-owned subsidiaries, Old
Trafford Capital Corporation, Stamswiss Investments Inc. and 1345969 Ontario
Limited.
The Corporation has two wholly-owned subsidiaries, Pizay Investments Inc.
and 1032142 Ontario Inc. The head office and registered office of the
Corporation is located at Suite 1800, 8 King Street East, Toronto, Ontario, M5C
1B5.
CURRENT OPERATIONS OF THE CORPORATION
The Corporation is a mineral exploration company.
AUDITORS, TRANSFER AGENT AND REGISTRAR
The auditors of the Corporation are Hilborn Ellis Grant, Chartered
Accountants, of Toronto, Ontario.
Montreal Trust Company of Canada, through its principal offices in Toronto,
Ontario, is the transfer agent and registrar for the common shares.
FINANCIAL STATEMENTS
The audited financial statements of the Corporation for the fiscal year
ended March 31, 1999 and the interim statements for the three months ended June
30, 1999 and the six months ended September 30, 1999, are attached to this
Information Circular as Schedule "A".
-8-
MANAGEMENT'S DISCUSSION OF VARIATIONS IN OPERATING RESULTS
AND FINANCIAL CONDITION
INTRODUCTION
This discussion should be read in conjunction with the financial statements
of the Corporation which have been prepared in accordance with generally
accepted accounting principles.
SIX MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH SIX MONTHS ENDED SEPTEMBER 30,
1998
For the six month period ended September 30, 1999, the Corporation carried
out no exploration activities. The net loss for this period was $43,180 compared
to a net loss of $61,378 for the six months ended September 30, 1998. This
reduction was mainly attributable to lower general and administration expenses
of $32,907 compared to $55,486 and reduced shareholders' information expenses of
$4,167 compared to $8,310 for the period ended September 30, 1998. For the
period ended September 30, 1999, the Corporation had cash of $75,077 compared to
$217,403 for the period ended September 30, 1998.
YEAR ENDED MARCH 31, 1999 COMPARED WITH YEAR ENDED MARCH 31, 1998
During the year ended March 31, 1999, the Corporation terminated its
agreement with ProAm Explorations Corporation in connection with the option to
acquire an undivided 10% interest in a mineral property located near Winnipeg,
Manitoba. As a result, all expenditures related to this property were charged to
loss on abandonment of mining properties during this period. The Corporation had
a net loss for the year ended March 31, 1999 of $631,660 compared to a loss of
$1,646,365 which was largely attributable to lower losses in connection with the
abandonment of mining properties. While the Corporation's legal and audit
expenses were higher during the period, $31,619 compared to $24,178, general and
administration expenses of $84,887 were lower compared to $114,011 during the
year ended March 31, 1998.
YEAR ENDED MARCH 31, 1998 COMPARED WITH YEAR ENDED MARCH 31, 1997
During the year ended March 31, 1998, the Corporation abandoned further
development of its properties located in the state of Nevada. As a result, these
resources properties reverted to Golden Nevada Resources Ltd. and all
expenditures in connection with these mining properties were charged as a loss
on the abandonment of mining properties. These charges were largely responsible
for the net loss for the year ended March 31, 1998 of $1,646,365 compared to a
net loss of $9,294 for the year ended March 31, 1997. In addition, the
Corporation experienced higher general and administration costs of
$114,011compared to $3,380 as at March 31, 1997. During the year ended March 31,
1998, the Corporation also took a significant write-down with respect to the
goodwill associated with its subsidiary companies, as the mining claims to which
the goodwill related were abandoned during the year. The Corporation had working
capital of $177,478 (1997 - $58,774).
YEAR ENDED MARCH 31, 1997 COMPARED WITH YEAR ENDED MARCH 31, 1996
During the year ended March 31, 1997, the Corporation continued the process
of exploring its mineral properties. In addition, the Corporation during the
year ended March 31, 1997 acquired all the issued and outstanding shares of Old
Trafford Capital Corporation which was considered a reverse takeover for
accounting purposes. Therefore, the comparative numbers for the years ended
March 31, 1997 and March 31, 1996 reflect the results of Old Trafford Capital
Corporation.
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The net loss for the year ended March 31, 1997 was $537,606 compared to a
net loss of $3,238,826 for the year ended March 31, 1996. This loss was largely
attributable to the write down of deferred exploration expenditures of $328,090
during the year as well as the write down of the Corporation's interest in
mining claims ($87,789). The Corporation had a working capital deficiency of
$81,786 compared to positive working capital of $27,567 for the year ended March
31, 1996.
YEAR ENDED MARCH 31, 1996 COMPARED WITH YEAR ENDED MARCH 31, 1995
During the year ended March 31, 1996, the Corporation carried out a
reorganization which included the disposal of its interest in the Moss Township
mining claims in return for treasury shares of Moss Lake Gold Mines. This
resulted in a loss on the disposal of the mining claims of $3,033,305.
LIQUIDITY AND CASH RESOURCES
As at September 30, 1999, the Corporation's cash position was $75,077. At
the beginning of the period the Corporation's cash position was $122,943. The
ability of the Corporation to discharge its liabilities is contingent upon
obtaining further financing and developing a viable business plan.
YEAR 2000 ISSUE
The Corporation has reviewed its business procedures with respect to the
Year 2000 Century change and the impact it could have on the Corporation's
business and information systems which rely on computer database information.
Following the review, the Corporation has determined that there are no material
Year 2000 implications.
LEGAL PROCEEDINGS
The Corporation has been named as a defendant in a lawsuit by ProAm
Explorations Corporation in the Supreme Court of British Columbia. This lawsuit
claims damages in the amount of $90,000 plus interest and costs for non-payment
of an outstanding demand note. The Corporation has filed a statement of defence
denying the allegations in the claim. The outcome of this action cannot be
determined at this time but management believes that the results will not have
an adverse effect on its business.
PARTICULARS OF MATTERS TO BE ACTED UPON
To the knowledge of the Corporation's directors, the only matters to be
placed before the meeting are those matters set forth in the accompanying notice
of meeting relating to the approval of the Proposed Acquisition of the
Corporation, the change of name of the Corporation, the consolidation of the
common shares of the Corporation on a 1 for 12 basis; the receipt of the
financial statements, the election of directors, the appointment of auditors,
and the increase in the maximum number of common shares issuable under the Stock
Option Plan.
I. PROPOSED ACQUISITION
1. SUMMARY
Pursuant to a share purchase agreement dated as of November 12, 1999 (the
"Acquisition Agreement") the Corporation has agreed to acquire all of the issued
and outstanding common shares (the "Web Dream Shares") of Web Dream Inc. ("Web
Dream"). A condition of closing the proposed acquisition (the "Proposed
Acquisition") is that.-11- shareholders of the Corporation approve the Proposed
Acquisition (see "Proposed Acquisition - Details of the Proposed Acquisition").
Pursuant to the Proposed Acquisition, the shareholders of Web Dream will receive
up to 28,000,000 post-consolidated common shares of the Corporation in exchange
for all of the issued and outstanding common shares of Web Dream.
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Management of the Corporation intends to place before the meeting, for
confirmation, approval and adoption, with or without modification, the ordinary
resolution as more particularly set forth in Schedule "B" attached hereto,
relating to the approval of the Proposed Acquisition. To be approved, the
resolution must be passed by a majority of the votes cast by shareholders at the
Meeting in respect of this resolution.
2. ACQUISITION AGREEMENT
On November 12, 1999, the Corporation and Web Dream entered into an
agreement (the "Acquisition Agreement") whereby the Corporation agreed to
acquire all the issued and outstanding common shares of Web Dream.
Pursuant to the Acquisition Agreement, the Corporation has agreed to
purchase all of the issued and outstanding common shares of Web Dream for an
aggregate consideration of not more than $7,000,000 to be satisfied by the
issuance of up to 28,000,000 post-consolidated common shares of the Corporation
(the "Proposed Acquisition"), based on the issuance of two post-consolidated
common shares of the Corporation for each one Web Dream Share outstanding. Web
Dream's principal business is an adult entertainment content and Internet
service provider as well as an adult membership site operator. A description of
the business of Web Dream, its financial statements for the relevant periods and
a discussion by management of Web Dream regarding its operations to date and
future plans are attached hereto as Schedule "C".
Pursuant to the Acquisition Agreement, the Corporation has agreed to
convene a shareholders' meeting to approve among other things, the Proposed
Acquisition, the consolidation of the issued and outstanding common shares of
the Corporation on the basis of one new share for every 12 issued and
outstanding common shares (See: "Consolidation") and to change the name of the
Corporation. (See: "Change of Name"). In addition, the Corporation has agreed to
use its best efforts to complete the Proposed Acquisition on or before December
15, 1999 or such later date as mutually acceptable by the parties.
Copies of the Acquisition Agreement will be available for inspection by the
shareholders of the Corporation during normal business hours at the offices of
the Corporation, Suite 1800, 8 King Street East, Toronto, Ontario and will be
available at the Meeting.
3. DETAILS OF THE PROPOSED ACQUISITION
The Corporation intends to acquire all of the issued and outstanding common
shares of Web Dream. The Acquisition Agreement provides that, as the
consideration for the purchase by the Corporation of the Web Dream Shares, the
Corporation shall issue to the shareholders of Web Dream (the "Web Dream
Shareholders") an aggregate of up to 28,000,000 post-consolidated common shares
of the Corporation based on the issuance of two post-consolidated common shares
of the Corporation for each one Web Dream Share outstanding. The Corporation
currently has issued and outstanding 24,815,191 common shares and subject to the
approval of the shareholders will have 2,067,933 post-consolidated common
shares. The obligation of the Corporation to purchase the Web Dream Shares is
subject to certain conditions, including the following:
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(a) the approval of the Proposed Acquisition involving the acquisition of all
the common shares of Web Dream, the consolidation of the common shares of
the Corporation and the change of name by the shareholders of the
Corporation;
(b) no adverse material change in the business, affairs, financial condition or
operations of either the Corporation or Web Dream shall occur between the
date of the latest available financial statements for each of the
Corporation and Web Dream and the date of closing;
(c) no act, action, suit or proceeding shall have been threatened or taken
against the Corporation or Web Dream except for actions disclosed in this
Circular before or by any domestic or foreign court or tribunal or
governmental agency or other regulatory authority or administrative agency
or commission by any elected or appointed public official or private person
(including, without limitation, any individual, corporation, firm, group or
other entity) in Canada or elsewhere, whether or not having the force of
law;
(d) Web Dream will not have issued or acquired or committed itself to acquire
any share in its capital;
(e) the Corporation shall have determined in its sole judgment that (since the
announcement by the Corporation of the Proposed Acquisition) Web Dream has
not taken or proposed to take any action, or publicly disclosed that it
intends to take any action, and the Corporation shall not have otherwise
learned of any previous action taken by Web Dream which had not been
publicly disclosed prior to the announcement by the Corporation of its
intention to make the Proposed Acquisition, which, in the sole judgment of
the Corporation, might make it inadvisable for the Corporation to proceed
with the Proposed Acquisition, or that would be materially adverse to the
business of Web Dream or to the Corporation; including, without limiting
the generality of the foregoing, any action with respect to any agreement,
proposal, offer or understanding relating to any material sale, disposition
or other dealing with any of the assets or contracts of Web Dream, any
issue of shares, options or other securities of Web Dream to any person
other than a wholly-owned subsidiary of Web Dream, any material acquisition
from a third party of assets or securities by Web Dream, or any
amalgamation, statutory arrangement, capital reorganization, merger,
business combination or similar transaction involving Web Dream, or any
material capital expenditure not in the ordinary course of business;
(f) the Corporation shall have determined in its sole judgment that:(i) no
material right, franchise or licence of Web Dream has been or may be
impaired (which impairment has not been cured or waived) or otherwise
adversely affected, whether as a result of the Proposed Acquisition or
otherwise which might make it inadvisable for the Corporation to proceed
with the Proposed Acquisition, and (ii) no covenant, term or condition of
any instruments or agreements of Web Dream exists which might make it
inadvisable for the Corporation to proceed with the Proposed Acquisition
(including without limitation, any default, acceleration or other adverse
event that may ensue as a result of the Proposed Acquisition);
(g) all of the outstanding Web Dream Shares shall have been properly tendered
to the Corporation;
(h) the Corporation shall have completed to its satisfaction its due diligence
investigation of Web Dream, and the Web Dream Shareholders shall have
completed to their satisfaction their due diligence investigation of the
Corporation;
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(i) transitional arrangements between the Corporation and its directors,
officers and employees shall have been resolved to the satisfaction of both
the Corporation and the Web Dream Shareholders, each acting reasonably; and
(j) there shall not have occurred, developed or come into effect or existence
any event, action, state, condition or major financial occurrence of
national or international consequence or any law, regulation, action,
government regulation, enquiry or other occurrence of any nature whatsoever
which, in the sole judgment of the Corporation, materially adversely
affects or involves, or may materially adversely affect or involve, the
financial markets in Canada or elsewhere generally, or the financial
condition, business, operations, assets, affairs or prospects of Web Dream
to the Corporation.
Upon the fulfillment or waiver of the conditions of the Proposed
Acquisition, the Corporation will take up and pay for all the issued and
outstanding common shares of Web Dream.
The common shares issuable pursuant to the Proposed Acquisition will not be
registered under the laws of any jurisdiction outside of Canada, and in
particular, will not be registered under the applicable securities laws of the
United States of America. Consequently, no common shares will be delivered to
any person who is, or appears to the Corporation to be, a resident or citizen of
the United States or any territory or possession thereof or to any person who is
a resident of any other country other than Canada, unless the Corporation is
satisfied that the common shares of the Corporation may be lawfully delivered in
such other jurisdiction without further action by the Corporation.
The Proposed Acquisition, if completed, will result in the Web Dream
Shareholders owning approximately 93.12% of the 30,067,933 common shares of the
Corporation to be issued and outstanding upon the completion of the Proposed
Acquisition (see "The Acquisition - Principal Shareholders Following the
Acquisition").
DESCRIPTION OF WEB DREAM INC.
BACKGROUND OF WEB DREAM INC.
Web Dream was incorporated by Articles of Incorporation under the Business
Corporations Act (Ontario) on February 17, 1998. There are no restrictions in
the Articles of Incorporation on the business Web Dream may carry on or powers
Web Dream may exercise. By Articles of Amendment dated April 16, 1999, Web Dream
amended its articles of incorporation to provide that the maximum number of
directors shall be ten (10); to increase the authorized capital of Web Dream to
include an unlimited number of Class A preference shares, an unlimited number of
Class B preference shares and an unlimited number of special shares; to provide
certain restrictions in connection with the transfer of shares of Web Dream; to
provide that Web Dream shall have a lien on its shares in connection with the
debt of a shareholder, to restrict the number of shareholders of Web Dream; to
prohibit any invitation to the public to subscribe for securities of Web Dream
and to provide that the holders of fractional shares shall be entitled to
exercise voting rights and to receive dividends. By Articles of Amendment dated
August 18, 1999, the common shares of Web Dream were subdivided on the basis of
10,000 common shares for each pre-split common share. Web Dream's registered
office and principal place of business is located at 366 Bay Street, 11 th
Floor, Toronto, Ontario and its telephone number is (416) 815-1771. Web Dream's
web site address is www.webdream.com.
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BUSINESS OVERVIEW OF WEB DREAM INC.
Web Dream Inc. is an Internet E-commerce adult entertainment destination
that provides online upscale adult content including nude and semi-nude models
as well as operating its own destination web sites. Web Dream's goals are to
brand its web sites as the premiere online adult entertainment destinations and
build a significant worldwide community of loyal clients who enjoy Web Dream's
unique adult entertainment.
Web Dream's content includes photographs, streaming video, audio on demand
and video conferencing.
A FULL DESCRIPTION OF THE BUSINESS, AFFAIRS, PRODUCTS, MANAGEMENT AND SHARE
STRUCTURE OF WEB DREAM IS CONTAINED IN SCHEDULE "C" ATTACHED HERETO.
4. RISK FACTORS
The following are the principal risk factors with respect to the
Corporation, Web Dream and the Proposed Acquisition of the Corporation:
DIVIDENDS. It is the current policy of the Corporation's board of directors to
retain any earnings to finance the operations and expansion of the Corporation's
business. Therefore the payment of any cash dividends on the common shares is
unlikely in the foreseeable future. See "Dividend Policy".
RAPID TECHNOLOGY CHANGE. The Internet is undergoing rapid changes, including
evolving industry standards, frequent new product introductions and changes in
consumer requirements and preferences. Web Dream's success is dependent upon,
among other things, its ability to achieve and maintain technological and
quality leadership by anticipating and developing new technologies in order to
ensure that it will remain competitive from the perspective of both product
performance and price.
LIMITED HISTORY OF OPERATIONS AND PROFITABILITY. Web Dream was organized in
February 1998 and began operations as a company in February, 1998. Accordingly,
Web Dream has a limited operating history upon which an evaluation of Web Dream
and its prospects can be based. Web Dream's prospects must be considered in
light of the risks, expenses, and difficulties frequently encountered by
companies in their early stages of development. Although Web Dream has
experienced increased quarterly revenue over the last five fiscal quarters in
the period ended August 31, 1999, such growth rates may not be sustainable and
are not indicative of future operating results. There can be no assurance that
any of Web Dream's business strategies will be successful or that Web Dream's
revenue growth or profitability will continue on an annual or quarterly basis.
POTENTIAL VOLATILITY OF STOCK PRICE. There can be no assurance that an active
trading market will develop or be sustained after the completion of the Proposed
Acquisition. The trading price of the common shares is likely to be highly
volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in Web Dream's operating results, announcements of
technological innovations, new products or new contracts by Web Dream or its
competitors, developments with respect to copyrights or proprietary rights,
conditions and trends in the adult entertainment and Internet industries,
adoption of new accounting standards affecting the Internet industry, changes in
financial estimates by securities analysts, general market conditions and other
factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the common stocks of Internet companies. These broad market
fluctuations may materially adversely affect the market price of the common
shares.
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CONTROL BY EXISTING SHAREHOLDERS; CERTAIN BYLAW PROVISIONS. After giving effect
to the acquisition of all the securities of Web Dream, Web Dream's officers,
directors, holders of 10% or more of Web Dream's common shares and their
affiliates will, in the aggregate, beneficially own approximately 58.5% of the
Corporation's outstanding common shares after the completion of the Proposed
Acquisition. As a result, these shareholders, acting together, would be able to
control most matters requiring approval by the shareholders of Web Dream,
including the election of directors. In addition, the Corporation's Bylaws
provide that the Corporation will indemnify officers and directors against
losses they may incur in legal proceedings resulting from their service to the
Corporation. After giving effect to the Proposed Acquisition the current
officers and directors of the Corporation will control beneficially, directly
and indirectly, as a group, less than 1% of the total number of common shares to
be issued and outstanding. Concentration of large amounts of the Corporation's
shares in the hands of the principal shareholders may also make more difficult
any takeover, buy-out or change of control of the Corporation not approved by
management.
NEED FOR ADDITIONAL FINANCING. Web Dream believes that its current working
capital together with funds expected to be generated from operations, will be
sufficient to meet its cash requirements for approximately 12 to 15 months
following consummation of the Proposed Acquisition; however, there can be no
assurance that Web Dream will not require additional financing prior to that
time or that, if required, additional financing will be available on acceptable
terms or at all. Web Dream may require substantial additional financing in the
future to fully implement its proposed business plan. Former sources of capital
are not obligated and are not expected to contribute, loan or provide any
additional financing to Web Dream. Web Dream has no binding commitments from any
third parties to provide funds to Web Dream and there can be no assurance that
additional financing will be available on terms favourable or acceptable to Web
Dream, if at all. Failure to obtain such additional financing would have a
material adverse effect on Web Dream's business and prospects and could require
Web Dream to severely limit or cease its operations.
DEPENDENCE UPON, AND NEED FOR, KEY PERSONNEL. Web Dream is dependent upon a
limited number of key personnel, particularly Lex van Arem and Anthony
Korculanic, its President and Executive Vice-President, respectively. The loss
of either of these individuals or a reduction in the time devoted by any of such
person to Web Dream's business could have a material adverse effect on Web
Dream's business. Web Dream's future success will depend in part upon its
ability to attract and retain highly qualified personnel. Web Dream faces
competition for such personnel from other companies, academic institutions and
other organizations, many of which have significantly greater resources than Web
Dream. There can be no assurance that Web Dream will be able to attract and
retain the necessary personnel on acceptable terms or at all. Web Dream has no
key-man life insurance policies on these individuals. (See "Schedule C - Officer
and Directors of Web Dream."
MANAGEMENT OF EXPANDING OPERATIONS. Web Dream's ability to manage any future
expansion effectively will require it to attract, train, motivate and manage new
employees successfully, to integrate new management and employees into its
overall operations and to continue to improve its operational, financial and
management systems. Web Dream's failure to manage any expansion effectively,
including any failure to integrate management and employees or failure to
implement and improve financial, operational and management controls, systems
and procedures could have a material adverse effect on Web Dream's business,
operating results and financial condition. For Web Dream to expand its business
operations, it must continue to improve and expand the expertise of its
personnel and must attract, train and manage qualified managers and employees to
oversee and manage its contemplated expanded operations. It is the intention of
Web Dream to significantly expand its existing business operations and
management anticipates that significant expansion of its operations will
continue to be required in order to address potential market opportunities. Such
expansion will subject Web Dream to a variety of risks associated with rapidly
growing companies. In particular, Web Dream's growth may place a significant
strain on its accounting systems, internal controls and oversight of its day-to-
day operations. To manage its growth, Web Dream must implement, improve and
effectively utilize its operational, management, marketing and financial systems
and train and manage its future employees. These individuals will not have
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previously worked together and would be required to integrate as a management
team. There can be no assurance that Web Dream will be able to manage
effectively the expansion of its operations or that Web Dream's current
personnel, systems, procedures and controls will be adequate to support Web
Dream's operations. Any failure of management to manage effectively Web Dream's
growth could have a material adverse effect on Web Dream's business, results of
operations and financial conditions. (See "Dependence on and Need for Key
Personnel.") Although management intends to ensure that its internal controls
remain adequate to meet the demands of further growth, there can be no assurance
that its systems, controls or personnel will be sufficient to meet these
demands. Inadequacies in these areas could have a material adverse effect on Web
Dream's business, financial condition and results of operations.
FLUCTUATIONS IN OPERATING RESULTS. Web Dream may experience significant
fluctuations in operating results. These fluctuations may be caused by several
factors, many of which are beyond the control of Web Dream. These include: the
cost of acquiring and the availability of content; the overall level of demand
for content and e-commerce services; seasonal trends in Internet usage and
advertising placements; the amount and timing of the payment of fees from
webmasters and users; the amount and timing of increased expenditures for
expansion of operations, including the hiring of new employees, capital
expenditures and related costs; Web Dream's ability to continue to enhance,
maintain and support its technology; the introduction of new or enhanced
services by Web Dream; price competition or pricing changes in Internet
advertising and Internet services such as Web Dream's; technical difficulties,
system downtime, system failures or Internet brown-outs; political or economic
events and governmental actions affecting Internet operations or content; and
general economic conditions and economic conditions specific to the Internet. If
one or more of these factors or other factors occur, Web Dream's business could
suffer. In addition, because Web Dream only began operating as a corporation in
1998, and because the market for Internet services such as Web Dream provides is
new and evolving, it is very difficult to predict future financial results.
ACQUISITIONS. Web Dream intends from time to time to pursue the acquisition of
other companies, assets, technologies or product lines that would complement or
expand its existing business, although Web Dream has no present commitments or
agreements with respect to such acquisitions. Acquisitions involve a number of
risks that could adversely affect Web Dream's operating results, including
potentially dilutive issuances of equity securities, the incurrence of debt and
contingent liabilities, the diversion of management's attention, the
assimilation of the operations and personnel of the acquired companies, the
amortization of acquired intangible assets and the potential loss of key
employees of the acquired companies. Furthermore, acquisitions may involve
businesses in which Web Dream lacks experience. Because management has limited
experience in acquisitions and Web Dream has no experience in integrating
acquired companies or technologies into its operations, there can be no
assurance that Web Dream will be able to integrate the operations, products or
personnel gained through any such acquisitions without a material adverse effect
on Web Dream's business, financial condition and results of operations.
COMPETITION. The Internet adult entertainment industry involves rapid
technological change and is characterized by intense and substantial
competition. Many of the companies, both domestic and foreign, with which Web
Dream will compete are well established, substantially larger and have
substantially greater resources than Web Dream. It is also likely that other
competitors will emerge in the future. Additionally, Web Dream will compete with
other companies that have greater market recognition, greater resources and
broader distribution capabilities than Web Dream. Increased competition by
existing and future competitors could materially and adversely affect Web
Dream's ability to achieve profitability. The adult entertainment business is
highly competitive with respect to price, service, location and the
professionalism of entertainment. Web Dream will compete with a number of web
sites whose names initially may enjoy recognition that exceeds those of Web
Dream. Although Web Dream believes that it will compete successfully, there can
be no assurance that it will be able to maintain a high level of name
recognition and prestige within the marketplace. Moreover, Web Dream's success
depends on maintaining a high quality of models, entertainers and editorial
content. Competition for nude and/or semi-nude models and entertainers in the
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modeling and adult entertainment industries is intense. The lack of availability
of quality, personable, attractive models and/or entertainers or Web Dream's
inability to attract and retain other key employees could adversely affect the
business of Web Dream. Web Dream's inability to compete within the industry or
maintain a high quality of entertainment could adversely effect an investment in
the Shares.
RISK OF ADULT ENTERTAINMENT OPERATIONS. The adult entertainment industry is a
volatile industry. The industry tends to be sensitive to economic conditions.
When economic conditions are prosperous, entertainment industry revenues
increase; conversely, when economic conditions are unfavourable, entertainment
industry revenues decline. Customers who frequent adult web sites generally
follow trends in personal preferences. Web Dream will continuously monitor
trends in its clients' tastes and entertainment preferences so that, if
necessary, it can change its operations and services to accommodate the changes
in such trends. Any significant decline in general corporate conditions or the
economy that affect consumer spending could have a material adverse effect on
Web Dream's business.
RISK OF CAPACITY CONSTRAINTS, FILTERS AND SYSTEMS FAILUREs. The performance of
Web Dream's online services is critical to its reputation, to Web Dream's
services and achieving market acceptance of its online web sites destinations.
Any system failure, including network, software or hardware failure, that causes
interruption or an increase in response time of Web Dream's online services
could result in decreased usage of Web Dream's services and, if sustained or
repeated, could reduce the attractiveness of Web Dream's online services to its
clients. An increase in the volume of queries conducted through Web Dream's
online services could strain the capacity of the software or the hardware
employed by Web Dream, which could lead to slower response time or system
failures, thereby adversely affecting Web Dream's revenues. Web Dream also faces
technical challenges associated with higher levels of personalization and
localization of content delivered to users of its online services.
The process of managing traffic within large, high traffic Internet online
services such as Web Dream's is an increasingly important and complex task. Web
Dream will rely on both internal and licensed third party inventory management
and analysis systems. Web Dream's operations are dependent in part upon its
ability to protect its operating systems against physical damage from acts of
God, power loss, telecommunications failures, physical break-ins and similar
events. The occurrence of any of these events could result in interruptions,
delays or cessations in service to users of Web Dream's online services, which
could have a material adverse affect on Web Dream's business, results of
operations and financial condition.
A large portion of Web Dream's network infrastructure is located at a
single, leased facility in Toronto. Web Dream's systems and operations are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, Internet breakdowns, break-ins, tornadoes and
similar events. Web Dream does not presently have redundant facilities or
systems or a formal disaster recovery plan and does not carry sufficient
business interruption insurance to compensate it for losses that may occur.
Services based on sophisticated software and computer systems often encounter
development delays and the underlying software may contain undetected errors
that could cause system failures when introduced.
A sudden and significant increase in traffic on any of Web Dream's web
sites could strain the capacity of the software, hardware and telecommunications
systems deployed or utilized by Web Dream. Web Dream is also dependent upon
search engines, web browsers, Internet service providers ("ISPs") and online
service providers ("OSPs") to provide Internet users access to Web Dream's web
sites. Clients may experience difficulties accessing or using any of Web Dream's
web sites due to system failures or delays unrelated to Web Dream's systems.
These difficulties may negatively affect audio and video quality or result in
intermittent interruption in programming. Any sustained failure or delay could
reduce the attractiveness of Web Dream's web sites to its clients. The
occurrence of any of the foregoing events could have a material adverse effect
on Web Dream's business, results of operations and financial condition.
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Moreover, the prevalence and sophistication of various filtering
technologies which is designed to block access to adult sites may increase
throughout the Internet and the access to Web Dream's sites may not be available
to all who wish to have access.
DEPENDENCE ON CONTINUED GROWTH IN THE USE OF THE INTERNET; DEPENDENCE ON
INTERNET INFRASTRUCTURE. Web Dream's future success is substantially dependent
upon continued growth in the use of the Internet and, as it relates to Web
Dream, in the acceptance and volume of commercial transactions on the Internet.
There can be no assurance that the number of Internet users will continue to
grow or that commerce over the Internet will become more widespread. The
Internet may not prove to be a viable commercial marketplace for a number of
reasons, including lack of acceptable security technologies, lack of access and
ease of use, congestion of traffic, inconsistent quality of service and lack of
availability of cost-effective, high-speed service, potentially inadequate
development of the necessary infrastructure, excessive governmental regulation,
uncertainty regarding intellectual property ownership or timely development and
commercialization of performance improvements, including high speed modems.
Web Dream's success also depends upon, among other things, the continued
development and maintenance of a viable Internet infrastructure to support the
continued growth in the use of the Internet. The maintenance and improvement of
this infrastructure will require timely development of products, such as high
speed modems and communications equipment, to continue to provide reliable
Internet access and improved content. The current Internet infrastructure may
not be able to support an increased number of subscribers or the increased
bandwidth requirements of subscribers and, as such, the performance or
reliability of the Internet may be adversely affected. Furthermore, the Internet
has experienced certain outages and delays as a result of damage to portions of
its infrastructure. Similar outages and delays in the future, including those
resulting from Year 2000 problems, could adversely affect the level of traffic
on Web Dream's web site destinations. The effectiveness of the Internet may
decline due to delays in the development or adoption of new standards and
next-generation Internet protocols designed to support increased levels of
activity. There can be no assurance that the infrastructure or products or
services necessary to ensure the continued expansion of the Internet will be
developed, or that the Internet will become a viable commercial medium. If the
necessary infrastructure, standards, protocols, products, services or facilities
are not developed, or if the Internet does not become a viable commercial
medium, Web Dream's results of operations and financial condition could be
materially and adversely affected. Even if such infrastructure, standards or
protocols or complementary products, services or facilities are developed, there
can be no assurance that Web Dream will not be required to incur substantial
expenditures in order to adapt its services to changing or emerging
technologies, which could have a material adverse effect on Web Dream's
business, results of operations and financial condition.
Moreover, it is anticipated that additional domain levels may be created
(such as ".biz" or ".law"). To the extent additional domain levels are added,
their existence may greatly increase the level of competition for Web Dream's
site destinations.
ONLINE SECURITY RISKS. Despite the implementation of security measures, Web
Dream's network may be vulnerable to unauthorized access, computer viruses and
other disruptive problems. For example, given the content of Web Dream's web
sites, there is an incentive for users ("hackers") to penetrate Web Dream's
network security. A party who is able to circumvent security measures could
misappropriate proprietary information and, perhaps at least as critically,
cause interruptions in Web Dream's Internet operations. ISPs and OSPs have in
the past experienced, or may in the future experience, interruptions in service
as a result of the accidental or intentional actions of Internet users, current
and former employees or others. Web Dream may be required to expend significant
capital or other resources to protect against the threat of security breaches or
to alleviate problems caused by such breaches. Although Web Dream intends to
continue to implement industry-standard security measures, there can be no
assurance that measures implemented by Web Dream will not be circumvented in the
future. Eliminating computer viruses and alleviating other security problems may
require interruptions, delays or cessation of service to clients accessing Web
Dream's web sites which could have a material adverse effect on Web Dream's
business, results of operations and financial condition.
-18-
RISKS ASSOCIATED WITH BRAND DEVELOPMENT. Web Dream believes that establishing
and maintaining brand identity of its web site destinations is a critical aspect
for attracting and expanding its targeted Internet-based audience and that the
importance of brand recognition will increase due to the growing number of
Internet online services. Promotion and enhancement of Web Dream's brands will
depend largely on its success in continuing to provide high quality online
services, which cannot be assured. If users do not perceive Web Dream's existing
online services to be of high quality, or if Web Dream introduces online
services or enters into new business ventures that are not favorably received by
users, Web Dream will risk diluting its brand and decreasing the attractiveness
of its audiences to advertisers. Furthermore, in order to attract and retain
subscribers and to promote and maintain its brands in response to competitive
pressures, Web Dream may find it necessary to increase substantially its
financial commitment to creating and maintaining a distinct brand loyalty among
its clients. If Web Dream is unable to provide high quality online services, or
otherwise fails to promote and maintain its brands, incurs excessive expenses in
an attempt to improve, or promote and maintain its brands, Web Dream's business,
results of operations and financial condition could be materially and adversely
affected.
RISKS OF TECHNOLOGICAL CHANGE. The market for Internet services is characterized
by rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging character of these products and
services and their rapid evolution will require Web Dream to effectively use
leading technologies, continue to develop its technological expertise, enhance
its current services and continue to improve the performance, features and
reliability of its Internet destination. Changes in network infrastructure,
transmission and content delivery methods and underlying software platforms and
the emergence of new broadband technologies, such as DSL and cable modems, could
dramatically change the structure and competitive dynamic of the market. In
particular, technological developments or strategic partnerships that accelerate
the adoption of broadband access technologies may require Web Dream to expend
resources to address these developments. There can be no assurance that Web
Dream will be successful in responding quickly, cost effectively and
sufficiently to these or other such developments. In addition, the widespread
adoption of new Internet technologies or standards could require substantial
expenditures by Web Dream to modify or adapt its web site. A failure by Web
Dream to rapidly respond to technological developments could have a material
adverse effect on Web Dream's business, results of operations and financial
condition.
INTELLECTUAL PROPERTY RISKS. Web Dream regards its trade secrets and similar
intellectual property as critical to its success. In that context, Web Dream
will rely on a combination of copyright and trademark laws, trade secret
protection, confidentiality and non-disclosure agreements and contractual
provisions. There is no guarantee that these efforts will be adequate; that Web
Dream will be able to secure trademark registrations for all of its marks in
Canada, the United States or other countries; or that third parties will not
infringe upon or misappropriate Web Dream's copyrights, trademarks, service
marks and similar proprietary rights. In addition, effective copyright and
trademark protection may be unenforceable or limited in certain countries, and
the global nature of the Internet makes it impossible to control the ultimate
destination of Web Dream's web site destinations. Since trademark and copyright
protections are not "self-enforcing", future litigation may be necessary to
enforce and protect Web Dream's trade secrets, copyrights and other intellectual
property rights.
Web Dream may also be subject to litigation to defend against claims of
infringement of the rights of others or to determine the scope and validity of
the intellectual property rights of others. If competitors of Web Dream prepare
and file applications in the United States or Canada that claim trademarks used
or registered by Web Dream, Web Dream may oppose those applications and be
required to participate in the proceedings before the United States Patent and
Trademark Office or Canadian Intellectual Property Office to determine the
-19-
priority and scope of rights to the trademark, which could result in substantial
costs to Web Dream. An adverse outcome could require Web Dream to license
disputed rights from third parties or to cease using such trademark. Any
litigation regarding Web Dream's proprietary rights could be costly and divert
management's attention, result in the loss of certain of Web Dream's proprietary
rights, require Web Dream to seek licenses from third parties and prevent Web
Dream from selling its services, any one of which could have a material adverse
effect on Web Dream's business, results of operations and financial condition.
(See "Liability for Internet Content" and "Government Regulation and Legal
Uncertainty.")
Web Dream intends to pursue the registration of its trademarks based upon
anticipated use internationally. There can be no assurance that Web Dream will
be able to secure adequate protection for these trademarks in foreign countries.
Many countries have a "first-to-file" trademark registration system and thus Web
Dream may be prevented from registering its marks in certain countries if third
parties have previously filed applications to register or have registered the
same or similar marks. It is possible that competitors of Web Dream or others
will adopt service names similar to Web Dream's, thereby impeding Web Dream's
ability to build brand identity and possibly leading to customer confusion. In
addition, there could be potential trademark or trademark infringement claims
brought by owners of other registered trademarks or trademarks that incorporate
variations of "Web Dream" and other marks of Web Dream. The inability of Web
Dream to protect its marks adequately could have a material adverse effect on
Web Dream's business, results of operations and financial condition.
LIABILITY FOR INTERNET CONTENT. As a distributor of Internet content, Web Dream
faces potential liability for negligence, copyright, patent, trademark
infringement, defamation, indecency, disparagement and other claims based on the
nature and content of the materials that it transmits. Such claims have been
brought, and sometimes successfully pressed, against Internet content
distributors. In addition, Web Dream could be exposed to liability with respect
to the content or unauthorized duplication or transmission of content. Although
Web Dream will maintain general liability insurance, Web Dream's insurance may
not cover potential claims of this type or may not be adequate to indemnify Web
Dream for all liability that may be imposed. In addition, although Web Dream
generally requires its content providers to indemnify Web Dream for such
liability, such indemnification may be inadequate. Any imposition of liability
that is not covered by insurance, is in excess of insurance coverage or is not
covered by an indemnification by a content provider could have a material
adverse effect on Web Dream's business, results of operations and financial
condition.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES. Since few laws or regulations
currently are directly applicable to access or commerce on the Internet, Web
Dream is not subject to direct government regulation, other than regulations
applicable to business generally. However, a number of legislative and
regulatory proposals are under consideration by federal, provincial, local and
foreign governmental organizations and, as a result, a number of laws or
regulations may be adopted with respect to Internet user privacy, taxation,
infringement, pricing, quality of products and services and intellectual
property ownership. It is also uncertain as to how existing laws will be applied
to the Internet in areas such as property ownership, copyright, trademark, trade
secret, obscenity and defamation. The adoption of new laws or the adaptation of
existing laws to the Internet may decrease the growth in the use of the
Internet, which could in turn decrease the demand for Web Dream's online
services, increase the cost of Web Dream doing business or otherwise have a
material adverse effect on Web Dream's business, results of operations and
financial condition.
Web Dream intends to collect sales or other taxes with respect to the sale
of services or products in states and countries where Web Dream believes it is
required to do so. One or more states or countries have sought to impose sales
or other tax obligations on companies that engage in online commerce within
their jurisdictions. The United States Congress has passed a temporary
moratorium on taxing commerce on the Internet. A change in the current U.S.
federal exemption or successful assertion by one or more states, provinces or
countries that Web Dream should collect sales or other taxes on products and
services, or remit payment of sales or other taxes for prior periods, could have
a material adverse effect on Web Dream's business, results of operations and
financial condition.
-20-
The Communications Decency Act of 1996 (the "CDA") was enacted in 1996 in
the United States. Although those sections of the CDA that, among other things,
proposed to impose criminal penalties on anyone distributing "indecent" material
to minors over the Internet were held to be unconstitutional by the U.S. Supreme
Court, there can be no assurance that similar laws will not be proposed and
adopted at the state or federal level. Although Web Dream does not distribute
the types of materials that the CDA may have deemed illegal, the nature of such
similar legislation and the manner in which it may be interpreted and enforced
cannot be fully determined, and legislation similar to the CDA could subject Web
Dream to potential liability, which in turn could have an adverse effect on Web
Dream. Moreover, such laws could also damage the growth of the Internet
generally and decrease the demand for Web Dream's products and services, which
could adversely affect Web Dream's business, results of operations and financial
condition.
YEAR 2000 COMPLIANCE. The Year 2000 issue involves the potential for system and
processing failures of date-related data resulting from computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that contain time-sensitive software may recognize
"00" as the year 1900, rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations, including among
other things, a temporary inability to process transactions and invoices or
engage in similar ordinary business activities. Web Dream believes that its
Internet software and hardware systems will function properly with respect to
dates in the Year 2000 and thereafter. Nonetheless, there can be no assurance in
this regard until such systems are operational in the Year 2000. Web Dream is in
the process of contacting all of its significant suppliers to determine the
extent to which Web Dream's interface systems are vulnerable to those third
parties' failure to make their own systems Year 2000 compliant. Accordingly, to
the extent the systems of Web Dream's suppliers and clients are not fully Year
2000 compliant, there can be no assurance that potential system interruptions or
the cost necessary to update software will not have a material adverse affect on
Web Dream's business, results of operation or financial condition.
CYCLICALITY. Subscription revenues of Web Dream, as well as those of the media
generally, are often cyclical and dependent upon general economic conditions.
Management believes, however, that Web Dream's pricing strategies, distribution,
production cost structure, marketing strategy and management's experience
mitigate, to some degree, the effects of an economic downturn to the extent such
downturn is regional.
5. PURPOSE AND EFFECT OF THE PROPOSED ACQUISITION
The board of directors of the Corporation has concluded that the Proposed
Acquisition would be in the best interests of the Corporation and its
shareholders after considering a number of factors including but not limited to:
(a) as at September 30, 1999, the Corporation had a cash position of
$75,077; and
(b) the depressed state of capital markets for junior resource issuers.
After comprehensive negotiations with the representatives of the
shareholders for shares of Web Dream, all of whom are at arm's length to the
Corporation, the Corporation offered to acquire the Web Dream Shares on the
basis of two post-consolidated common shares of the Corporation for each Web
Dream Share. Management of the Corporation determined to issue securities of the
Corporation, namely post-consolidated common shares with respect to the
acquisition of the Web Dream Shares based on a deemed issue price of $0.25 per
post-consolidated common share. The deemed issue price was arrived at by the
management of the Corporation, after calculation of the negative net book value
per share of the Corporation based upon the March 31, 1999 audited balance sheet
which shows a deficit of $2,292,146, and after consideration of the trading
history of the shares of the Corporation as recorded on The Canadian Dealing
Network Inc. (see Trading Range of the Common Shares.)
-21-
In determining to issue post-consolidated common shares at an issue price
of $0.25 per post-consolidated share, the directors of the Corporation
considered that the lack of volume and frequency of trading in the shares of the
Corporation did not reliably indicate the fair value of the Corporation's
shares. The directors of the Corporation considered that the value of the
Corporation was represented primarily by its status as a reporting issuer in the
Provinces of Alberta and Ontario. Informal comparative analysis of the prices
paid for so-called "shell" reporting issuers indicated a fair value ranging from
$300,000 to $600,000. Accordingly, the directors considered that the Corporation
had a fair value of approximately $500,000, resulting in a value per share of
$0.02.
Discussions with the representatives of the shareholders of Web Dream,
conducted at arm's length, confirmed the analysis of the directors of the
Corporation, resulting in the entering into of the Acquisition Agreement whereby
the Corporation agreed to acquire all of the Web Dream Shares, issued and to be
issued, in consideration of the issuance by the Corporation of post-consolidated
common shares at a price of $0.25 per post-consolidated common share.
For the last several years, the Corporation has experienced continuing
operational losses and has written down the value of its mining properties. The
junior mining sector in Canada and the world has experienced a significant
downturn in activity due to low commodity prices and low gold prices. In
addition, the Corporation has been unsuccessful in raising additional equity
capital or securing alternative financing sources.
As a result of the Corporation's inactivity, it was determined, therefore,
that it would be in the best interests of the Corporation and its shareholders
to seek out new business opportunities. The Board was presented with the
opportunity to consider combining the operations of the Corporation and Web
Dream through the Proposed Acquisition. Management of the Corporation entered
into negotiations with Web Dream and its shareholders relating to the takeover
by the Corporation of Web Dream, which may also be characterized as a reverse
takeover of the Corporation by the shareholders of Web Dream. The Corporation
and Web Dream agreed to conclude a transaction conditional upon, among other
things, Web Dream having raised equity of not less than $450,000 and
shareholders of the Corporation approving the transaction. As at the date of
this Management Information Circular, Web Dream has raised $453,418.
Management of the Corporation's analysis concludes that, considering the
risks and the other factors described elsewhere herein, the Proposed Acquisition
is in the best interests of the Corporation and fair to its shareholders
generally.
If the Proposed Acquisition is approved, the nature of the Corporation's
activities will change to a holding company whose wholly-owned subsidiary
carries on the business of an adult entertainment content and Internet service
provider as well as an adult membership site operator.
Recommendation of the Board of Directors
- ------------------------------------------
In assessing the Proposed Acquisition and making the determination to
recommend the approval thereof to the shareholders of the Corporation, the board
of directors of the Corporation, among other things, has considered:
(a) the prospects and opportunities currently available to the
Corporation;
(b) the audited financial statements of the Corporation as at March 31,
1999 and the unaudited financial statements for the six months ended
September 30, 1999, attached hereto;
(c) the audited financial statements of Web Dream as at August 31, 1999
and August 31, 1998, attached hereto as Exhibit I to Schedule "C";
-22-
(d) the Pro Forma Consolidated Balance Sheet and compilation report
prepared by Silver Gold Glatt & Grosman, Chartered Accountants,
attached hereto as Exhibit II to Schedule "C"; and
(e) the description of Web Dream in Schedule "C".
Shareholder Approval
- ---------------------
A copy of the proposed resolution is attached to this information circular
as Schedule "B". The board of directors recommends that shareholders vote FOR
approval of the Proposed Acquisition. In the event that the shareholder approval
is not obtained, the acquisition of Web Dream will not occur. PROXIES RECEIVED
IN FAVOUR OF MANAGEMENT WILL BE VOTED FOR THE APPROVAL OF THE PROPOSED
ACQUISITION UNLESS A SHAREHOLDER HAS SPECIFIED IN THE PROXY THAT HIS SHARES ARE
TO BE VOTED AGAINST SUCH RESOLUTION. To be approved at the Meeting, the
resolution must be approved by the affirmative vote of at least a majority of
the votes cast by holders of common shares present in person or by proxy, at the
Meeting.
MANAGEMENT OF THE CORPORATION FOLLOWING THE PROPOSED ACQUISITION
If the Proposed Acquisition is completed, it is anticipated that the number of
the directors of the Corporation will be increased to five members. The current
members of the Board of Directors of the Corporation will resign, seriatim, in
favour of the following individuals who will be the directors and officers of
the Corporation:
NAME AND MUNICIPALITY
OF RESIDENCE POSITION(S) TO BE HELD
- ------------- ----------------------
John A. van Arem President and a director
Toronto, Ontario
Anthony Korculanic Vice-President and a director
Toronto, Ontario
Hubert J. Mockler Director
Toronto, Ontario
Brian Usher-Jones Director
Toronto, Ontario
Sean Husvar Director
Buffalo, New York
The following is a brief description of the above individuals:
Mr. van Arem has been the President and a director of Web Dream since
February 1998. He grew up in Holland where he studied at the nautical college.
He came to Canada in 1986 where he started his own construction company. The
years 1990 and 1991 were difficult for many companies in the construction
industry and there were not sufficient projects to sustain 30 employees. After
meeting Mr. Korculanic, they founded Blurb (see below). Then in 1996 they formed
a partnership to start Web Dream.
-23-
Mr. Korculanic is the Secretary, Executive Vice President and a director of
Web Dream. He has been Web Dream's Executive Vice President since February,
1998. He received an architectural degree in 1988 and worked on such projects as
Sky Dome (Toronto), Metro Hall (Toronto) and the World Exchange Towers (Ottawa).
Employed at Brisbin Brook Beynon Architects for four years he eventually became
CAD Manager where he obtained both computer and managerial experience. He was a
co-founder of Blurb Magazine which was a highly innovative Teen tabloid in the
Toronto area. In 1996 he formed a partnership with Mr. van Arem to start Web
Dream. He is employed by the Company on a full-time basis.
Mr. Mockler is the president of Storimin Resources Limited. He is also
President and a director of Canuc Resources Corporation, a mineral exploration
company and a director of Equisure Financial Network Inc.
Mr. Usher-Jones is a director of Xplore Technologies Inc. Prior thereto he
was a merchant banker from 1995 to the present. From September to December 1994
he was the president of MB Capital Corporation and from June 1993 to September
1994 he was president of Thomson Kernaghan & Co. Ltd.
Mr. Husvar is the Chairman and CEO of EdgeNet, Inc. an Internet design
firm. He is also the co-founder and Chairman of Chek, Inc., a leading provider
of business and consumer e-mail outsourcing solutions for over 150 major brand
and media companies including Budweiser, The PGA, K-Mart and Corel Corporation.
PRO FORMA CONSOLIDATED CAPITALIZATION
For accounting purposes, the business combination resulting from the
Proposed Acquisition will be treated as a reverse take-over of the Corporation
by Web Dream Shareholders. The following table sets forth the unaudited pro
forma consolidated capitalization of the Corporation as at October 1, 1999 as if
the completion of the Proposed Acquisition had occurred on October 1, 1999. This
table should be read in conjunction with the unaudited pro forma financial
statements of the Corporation (and related notes) attached to this Circular as
exhibit II to Schedule "C".
Outstanding as at
October 1, 1999
-----------------
Shareholder's Equity
Common Shares $967,951
(authorized-unlimited) (30,067,933 shares)
Deficit $130,745
--------
Total Shareholder's Equity $837,206
--------
PRINCIPAL SHAREHOLDERS FOLLOWING THE PROPOSED ACQUISITION
If the Proposed Acquisition is completed, no person or company will, to the
knowledge of management of the Corporation, beneficially own, directly or
indirectly, or exercise control or direction over more than 10% of the issued
and outstanding common shares of the Corporation other than as set forth below:
-24-
NAME OF SHAREHOLDER NUMBER OF SHARES % OF ISSUED SHARES
- ------------------- ---------------- ------------------
John A. van Arem 9,600,000 31.9%
Anthony Korculanic 8,000,000 26.6%
II. CHANGE OF NAME
If the Proposed Acquisition is completed, it is proposed that the name of
the Corporation be changed to "Digital Rooster.com Inc.". If "Digital
Rooster.com Inc." is unacceptable to the regulatory authorities, management of
the Corporation will attempt to find a name which is acceptable to the
regulatory authorities and which the directors of the Corporation determine in
their sole discretion best identifies the Corporation's activities.
A copy of the proposed special resolution is attached to this information
circular as Schedule "D". In order to pass the special resolution amending the
articles of the Corporation, at least two-thirds of the votes cast by holders of
common shares, present in person or by proxy, must be voted in favour of the
special resolution. If this special resolution is duly passed at the Meeting,
the directors intend to file Articles of Amendment giving effect to the change
of name with the Ontario Ministry of Consumer and Commercial Relations. The
resolution permits the directors to revoke the resolution in whole or in part
without further approval by the shareholders at any time prior to effecting the
name change by filing Articles of Amendment, if in their discretion it is deemed
desirable to do so.
If the special resolution amending the Articles does not receive the
requisite approval, the Articles will remain unchanged. PROXIES RECEIVED IN
FAVOUR OF MANAGEMENT WILL BE VOTED FOR THE APPROVAL OF THE ABOVE AMENDMENT TO
THE ARTICLES OF INCORPORATION UNLESS A SHAREHOLDER HAS SPECIFIED IN THE PROXY
THAT HIS SHARES ARE TO BE VOTED AGAINST SUCH RESOLUTION.
III. CONSOLIDATION OF COMMON SHARES
In connection with the Proposed Acquisition, shareholders will be asked to
consider and if deemed advisable, approve and confirm with or without variance,
a Special Resolution, the text of which is set forth in Schedule "E" annexed
hereto, to authorize the Corporation to amend its Articles of Incorporation by
consolidating the issued and outstanding common shares of the Corporation on the
basis of one (1) new common share for twelve (12) existing common shares, such
that the existing 24,815,191 common shares of the Corporation will be
consolidated into approximately 2,067,933 issued and outstanding common shares
without par value, subject to the elimination of fractions. Fractional shares
will not be issued and where a fraction results from the consolidation of the
issued and outstanding common shares, the higher number of shares will be
issued.
The consolidation of the common shares will not affect the aggregate
adjusted cost base to a holder of all his common shares for purposes of Canadian
federal income tax. However, the adjusted cost base per share will be increased
by a factor of twelve. There will not be any other tax consequences to Canadian
resident holders of common shares for purposes of the Income Tax Act (Canada).
-25-
ISSUE OF NEW SHARE CERTIFICATES
Upon filing of Articles of Amendment of the Corporation, the currently
outstanding common shares of the Corporation will be consolidated into new
common shares and the name of the Corporation will be changed as set out above.
To obtain a new share certificate evidencing common shares after the amendment
is effective, holders of common shares must tender their certificates evidencing
shares held by them. For this purpose, following the approval and filing of
Articles of Amendment, shareholders will receive a letter of transmittal which
they will be required to complete and return to the Corporation in order to
obtain a new share certificate.
If the special resolution amending the Articles of Incorporation does not
receive the requisite approval, the Articles of Incorporation will remain
unchanged and the Corporation will be unable to complete the acquisition of all
of the issued and outstanding shares of Web Dream as described herein. PROXIES
RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED FOR THE APPROVAL OF THE ABOVE
AMENDMENTS TO THE ARTICLES OF INCORPORATION UNLESS A SHAREHOLDER HAS SPECIFIED
IN THE PROXY THAT HIS SHARES ARE TO BE VOTED AGAINST SUCH RESOLUTION.
IV. AMENDMENT TO STOCK OPTION PLAN
INCREASE IN MAXIMUM NUMBER OF COMMON SHARES
Shareholders of the Corporation, at the special meeting of shareholders
held on March 31, 1997, approved the adoption of a stock option plan for the
Corporation (the "Plan"). The Plan provides for the grant of stock options by
the Board to directors, officers, and employees of, and consultants to, the
Corporation and its subsidiaries, and any employee of any management company
providing services to the Corporation. The Plan provides that the maximum
aggregate number of common shares of the Corporation that may be issued pursuant
to the exercise of options granted under the Plan (the "Maximum Number") is
2,500,000. The Corporation has issued and outstanding 24,815,191 Common Shares
(see "Voting Securities and Principal Holders Thereof").
In accordance with the requirements of the terms of the Proposed
Acquisition, the Board, by resolution passed, subject to and conditional upon
receipt of shareholder approval and the completion of the Proposed Acquisition,
an amendment to the Plan to increase the Maximum Number from 2,500,000 to
3,000,000 post-consolidated common shares. The Proposed Acquisition contemplates
the issuance by the Corporation to the Web Dream Shareholders of up to
28,000,000 post-consolidated common shares (see "The Proposed Acquisition -
Details of the Acquisition"). As a result, if the Acquisition is completed, the
Corporation will have issued and outstanding 30,067,933 post-consolidated Common
Shares. The proposed new Maximum Number will therefore represent approximately
9.98% of the Common Shares which will be outstanding following the Acquisition.
As the said amendment to the Plan was made subject to shareholder approval
(shareholder approval also being required pursuant to Ontario securities
regulation), shareholders of the Corporation will be asked at the Meeting to
consider and, if thought advisable, to approve, confirm and ratify by means of
an ordinary resolution, the said amendment to the Plan. The resolution
shareholders will be asked to approve is attached to this Circular as Schedule
"F". To be approved, the resolution must be passed by a majority of the votes
cast by shareholders at the Meeting in respect of this resolution. UNLESS
OTHERWISE SPECIFIED, THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY WILL VOTE
FOR THE RESOLUTION.
-26-
V. APPOINTMENT OF AUDITORS
Proxies received in favour of management will be voted in favour of the
appointment of Hilborn Ellis Grant LLP, Chartered Accountants, as auditors of
the Corporation to hold office until the next annual meeting of shareholders and
the authorization of the directors to fix their remuneration, unless the
shareholder has specified in the proxy that the shares are to be withheld from
voting in respect thereof.
In the event shareholders approve of the Proposed Acquisition and the
acquisition is completed, Hilborn Ellis Grant will resign as auditors of the
Corporation and Silver Gold Glatt & Grosman LLP, Chartered Accountants, will be
appointed as auditors of the Corporation in their place. In accordance with the
provisions of National Policy #31, annexed to this information circular as
Schedule "G" is confirmation (the "Confirmation") that the notice of the
Corporation (the "Notice") to Hilborn Ellis Grant and Silver Gold Glatt &
Grosman (the "Letters") to the applicable securities regulators stating their
agreement with the Notice have been reviewed by the audit committee and board of
directors of the Corporation. Each of the Notice and the Letters is an exhibit
to the Confirmation. The Confirmation will only be filed with the applicable
securities regulatory authorities upon completion of the Proposed Acquisition,
the resignation of Hilborn Ellis Grant, and the appointment of Silver Gold Glatt
& Grosman.
GENERAL
All matters referred to herein for approval by the shareholders require a
simple majority of the shareholders voting, in person or by proxy, at the
Meeting of the shareholders, except for the special resolutions to change the
name of the Corporation and to consolidate all the issued and outstanding common
shares of the Corporation on the basis of one (1) share for every twelve (12)
shares which require approval by at least two-thirds (2/3rds) of the votes cast
at the Meeting.
MISCELLANEOUS
The management of the Corporation knows of no amendments, variations or
other matters which are likely to be brought before the Meeting. HOWEVER, IF ANY
AMENDMENTS, VARIATIONS, OR OTHER MATTERS OF WHICH THE MANAGEMENT IS NOT NOW
AWARE ARE PROPERLY PRESENTED TO THE MEETING FOR ACTION, IT IS THE INTENTION OF
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY TO VOTE SAID PROXIES IN
ACCORDANCE WITH THEIR JUDGEMENT ON SUCH MATTERS.
-27-
CERTIFICATE
Dated: November 12, 1999
The undersigned hereby certify that the contents and the sending of this
Management Information Circular have been approved by the directors of the
Corporation. The foregoing and the Schedules which are attached to and form part
of this Management Information Circular, to the extent the foregoing and the
Schedules relate to the Corporation, contain no untrue statement of a material
fact and do not omit to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in the light of the
circumstances in which it was made. The foregoing, to the extent that it relates
to the Corporation, constitutes full, true and plain disclosure of all material
facts relating to the particular matters to be acted upon by the security
holders concerning the Corporation.
This information is given as at November 12, 1999.
(Signed) Hubert J. Mockler (Signed) France Crawford
President and Secretary
Chief Executive Officer
ON BEHALF OF THE BOARD
(Signed) Frederick C. Knight (Signed) Harry Hodge
Director Director
-28-
CERTIFICATE
Dated: November 12, 1999
The foregoing and the Schedules which are attached to and form part of this
Management Information Circular, to the extent the foregoing and the Schedules
relate to Web Dream Inc., contain no untrue statement of a material fact and do
not omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of the circumstances
in which it was made. The foregoing, to the extent that it relates to Web Dream
Inc., constitutes full, true and plain disclosure of all material facts relating
to the particular matters to be acted upon by the security holders concerning
Web Dream Inc.
(Signed) John A. van Arem (Signed) Anthony Korculanic
President Vice-President
ON BEHALF OF THE BOARD
(Signed)Nick Laroche (Signed) Johannes van Arem
Director Director
-29-
THIS IS SCHEDULE "A" ATTACHED TO AND MADE A PART OF THE INFORMATION CIRCULAR IN
CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF STORIMIN
RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY ADJOURNMENT THEREOF
FINANCIAL STATEMENTS OF THE CORPORATION
STORIMIN RESOURCES LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
HILBORN ELLIS GRANT LLP
Chartered Accountants
Toronto, Ontario
STORIMIN RESOURCES LIMITED
================================================================================
AUDITORS' REPORT
================================================================================
To the Shareholders of
STORIMIN RESOURCES LIMITED
We have audited the consolidated balance sheets of STORIMIN RESOURCES LIMITED as
at March 31, 1999 and 1998 and the consolidated statements of operations,
deficit and changes in financial position for the years then ended. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 31, 1999
and 1998 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles.
Toronto, Ontario (signed) Hilborn Ellis Grant LLP
August 6, 1999 Chartered Accountants
1
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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CONSOLIDATED BALANCE SHEETS
================================================================================
March 31, 1999 1999 1998
$ $
ASSETS
Current Assets
Cash and short-term investments 122,943 282,329
Mining properties and deferred exploration (note 3) 429,218 694,313
------------ ------------
552,161 976,642
============ ============
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 21,930 14,851
Demand note payable (note 3(b)) 90,000 90,000
------------ ------------
111,930 104,851
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock (note 4) 2,732,277 2,532,277
Deficit (2,292,146) (1,660,486)
------------ ------------
440,131 871,791
------------ ------------
552,061 976,642
============ ============
Approved on behalf of the Board:
(signed) Michael W. Manley Director
- --------------------------
(signed) Hubert Mockler Director
- --------------------------
2
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
Year ended March 31, 1999 1999 1998
$ $
-------- ---------
Income
Interest - 5,020
-------- ---------
Expenses
General and administration 84,887 114,011
Shareholders' information 14,305 22,156
Legal and audit 31,619 24,178
Interest and bank charges 849 929
Write-down of goodwill (note 5) - 483,776
Loss on abandonment of mining properties (note 3) 500,000 1,006,335
-------- ---------
631,660 1,651,385
======== =========
Net loss for year 631,660 1,646,365
======== =========
Net loss per share 0.025 0.069
======== =========
Net loss per share, fully diluted 0.023 0.047
======== =========
================================================================================
CONSOLIDATED STATEMENTS OF DEFICIT
================================================================================
Year ended March 31, 1999 1999 1998
$ $
--------- ---------
Balance, beginning of year 1,660,486 14,121
Net loss for year 631,660 1,646,365
--------- ---------
Balance, end of year 2,292,146 1,660,486
========= =========
3
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
============================================================================================
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
============================================================================================
Year ended March 31, 1999 1999 1998
$ $
---------- ------------
CASH PROVIDED BY (USED IN)
Operating activities
Net loss for year (631,660) (1,646,365)
Items not requiring a current cash payment
Write-down of goodwill (note 5) - 483,776
Loss on abandonment of mining properties (note 3) 500,000 1,006,335
---------- ------------
(131,660) (156,254)
Net change in non-cash working capital balances 7,079 9,851
---------- ------------
(124,581) (146,403)
---------- ------------
Investment activities
Net investment in mining properties and deferred exploration (234,905) (1,480,542)
Goodwill purchased on acquisition of subsidiaries - (483,776)
---------- ------------
(234,905) (1,964,318)
---------- ------------
Financing activities
Issuance of common shares 200,000 2,239,276
Increase in demand note payable - 90,000
---------- ------------
200,000 2,329,276
---------- ------------
Net increase (decrease) in cash during year (159,386) 218,555
Cash and short-term investments, beginning of year 282,329 63,774
---------- ------------
Cash and short-term investments, end of year 122,943 282,329
========== ============
4
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
March 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
a) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Old Trafford Capital
Corporation, Pizay Investments Inc., Stamswiss Investments Inc.,
1032142 Ontario Inc. and 1345969 Ontario Limited. All material
inter-company balances, transactions and profits have been eliminated.
The basis of accounting for the acquisitions is disclosed in Note 2.
b) MINING PROPERTIES AND DEFERRED EXPLORATION
The acquisition cost of mining properties and the related exploration
costs are deferred on a specific project basis until the commercial
viability of a project is determined. Amortization is provided over
the estimated productive life of the project once commercial
production begins. If a project is abandoned, the accumulated project
costs are written off.
c) SITE RESTORATION COSTS
The operations of the Company may be subject to certain requirements
for future site removal and restoration costs for mining properties.
Such costs cannot be reasonably determined. Any costs that may be
required for any project undertaken will be charged to earnings as
incurred. No current provision has been made in the financial
statements.
d) FOREIGN CURRENCY TRANSLATION
Monetary items have been translated at the year end rate, non-monetary
items have been translated at the historical rate and revenue and
expense items have been translated at the rate in effect on the dates
the transactions occurred. This methodology applied to the Company's
integrated foreign subsidiary, as well as to foreign transactions
entered into by the Canadian based companies.
5
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL (continued)
e) MEASUREMENT UNCERTAINTY AND FINANCIAL INSTRUMENTS
The recoverability of the carrying values for mining properties and
deferred exploration expenditures is dependent on the discovery of
economically viable reserves and the ability to obtain the necessary
financing to complete the development and profitable production of the
reserves.
The fair value of the Company's financial instruments approximates
their carrying values unless otherwise stated.
f) UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. The effects of the year
2000 issue may be experienced before, on, or after January 1, 2000,
and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure
which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the
year 2000 issue affecting the Company, including those related to the
efforts of customers, suppliers, or third parties, will be fully
resolved. Management believes the year 2000 issue will not have any
effect on the Company.
6
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
2. BUSINESS COMBINATIONS
a) OLD TRAFFORD CAPITAL CORPORATION
The consolidated financial statements have been prepared on the basis
of accounting for the April 1, 1997 business combination of Old
Trafford Capital Corporation ("Trafford") and Storimin Resources
Limited ("Storimin") as an acquisition by Trafford of Storimin. The
acquisition is accounted for as a reverse takeover in accordance with
generally accepted accounting principles. In a reverse takeover, the
legal parent company, Storimin, is deemed to be a continuation of the
legal subsidiary, Trafford. Details of the acquisition accounted for
using the purchase method are as follows:
Storimin common shares prior to acquisition (note 4(b)) 9,885,567
Consolidation ratio 1:3
---------
Common shares issued as purchase consideration by
Trafford 3,295,189
=========
Purchase consideration as follows:
Issuance of common shares by Trafford (note 4(b)) $284,987
Less: fair value of net assets of Storimin (113,527)
---------
Excess purchase consideration as goodwill (note 5) $171,460
---------
The purchase required that certain other share capital transactions
occur as a condition to completing the acquisition, which resulted in
the following issued and outstanding capital stock:
Number of Amount
Shares $
---------- -----------
Trafford capital stock at March 31, 1997 2,980,001 293,001
Private placement for cash 5,000,000 1,200,000
Purchase of Peru Ventures, S.A. (note 3(f)) 275,000 6,000
Issue costs - (113,711)
---------- -----------
8,255,001 1,445,290
Share exchange ratio 2:1 -
---------- -----------
Capital stock at March 31, 1997 (note 4(b)) 16,510,002 1,445,290
========== ===========
7
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
March 31, 1999
2. BUSINESS COMBINATIONS (continued)
b) PIZAY INVESTMENTS INC. ("Pizay")
On November 18, 1997, the Company issued 4,010,000 common shares to
the shareholders of Pizay in exchange for all its issued and
outstanding shares. The acquisition has been accounted for using the
purchase method as follows:
Issuance of 4,010,000 common shares (note 4(b)) $ 802,000
Less: fair value of net assets of Pizay (494,606)
----------
Excess purchase consideration as goodwill (note 5) $ 307,394
----------
c) STAMSWISS INVESTMENTS INC. ("Stamswiss")
During the 1998 fiscal year, the Company acquired 100% of the issued
and outstanding shares of Stamswiss for cash consideration, resulting
in goodwill of $4,922 (note 5).
d) 1345969 ONTARIO LIMITED ("1345969")
On March 18, 1999, the Company issued 1,000,000 common shares to the
shareholders of 1345969 in exchange for all its issued and outstanding
shares. The acquisition has been accounted for using the purchase
method, whereby the purchase price approximates the fair value of the
net assets acquired as follows:
Issuance of 1,000,000 common shares (note 4(b)) $ 200,000
Cash consideration 34,905
----------
$ 234,905
----------
3. MINING PROPERTIES AND DEFERRED EXPLORATION
Opening Closing
Balance Additions Disposals Balance
$ $ $ $
-------- ---------- ----------- --------
Northwest Territories 194,313 - - 194,313
Golden Boy, Manitoba 500,000 - (500,000) -
Lac Rocher, Quebec - 234,905 - 234,905
-------- ---------- ----------- --------
694,313 234,905 (500,000) 429,218
======== ========== =========== ========
8
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
3. MINING PROPERTIES AND DEFERRED EXPLORATION (continued)
a) NORTHWEST TERRITORIES
The Company owns 100% of 52 claims in the Northwest Territories.
In January 1997, the Company entered into an agreement with Gerle Gold
Ltd. whereby the latter could earn a 51% right, title and interest in
the property by making exploration expenditures of not less than
$390,000 on or before December 31, 1998. This agreement was terminated
on December 31, 1998 at no cost or diminution of interest to the
Company.
b) GOLDEN BOY, MANITOBA
In October 1997, the Company's wholly-owned subsidiary, Pizay
Investments Inc. ("Pizay"), entered into an agreement with ProAm
Explorations Corporation whereby the latter granted Pizay an exclusive
option to acquire an undivided 10% interest in the property. The
consideration to earn this 10% interest was $100,000 cash, 500,000
shares of Pizay valued at $100,000 and a commitment to incur $600,000
in exploration expenditures over a two year period, subsequent to
which a joint venture will be formed. Flow through financing for
$210,000 was obtained in 1997 and the balance of the $300,000 first
year's commitment was secured by a non-interest bearing demand note
payable of $90,000. This agreement was terminated in 1999. All
expenditures have been charged to loss on abandonment of mining
properties in the 1999 fiscal year.
The Company and Pizay are disputing legal action initiated by ProAm
Explorations Corporation with respect to Pizay's demand note payable,
Court Order interest and costs.
c) LAC ROCHER, QUEBEC
In March 1999, the Company's wholly-owned subsidiary, 1345969 Ontario
Limited, acquired an undivided 50% interest in 166 mining claims (note
2(d)).
d) NEVADA
In January 1997, the Company entered into an agreement to acquire an
80% interest in the Nevada properties for total cash consideration of
$376,323.
In 1998, the Company abandoned further development and the properties
reverted back to Golden Nevada Properties Ltd. All expenditures have
been charged to loss on abandonment of mining properties in the 1998
fiscal year.
9
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
3. MINING PROPERTIES AND DEFERRED EXPLORATION (continued)
e) ECUADOR
In May 1997, the Company entered into an agreement to purchase mining
properties from Mingold Export S.A. for U.S. $1,300,000. At March 31,
1998, the Company had made expenditures of $83,854 pursuant to the
purchase agreement. Due to issues regarding title to the properties,
the Company has abandoned its claim and charged the expenditures to
loss on abandonment of mining properties in the 1998 fiscal year.
f) PERU
The Company acquired control of Peru Ventures, S.A. as follows:
Issuance of capital stock (note 2(a)) $ 66,000
Cash consideration 70,753
--------
$136,753
--------
In 1998, advances of $423,505 were made for exploration expenditures.
The Company sold its investment for cash consideration of $14,100,
resulting in a net loss on abandonment of mining properties of
$546,158 expensed in the 1998 fiscal year.
10
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Hilborn Ellis Grant LLP
STORIMIN RESOURCES LIMITED
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
4. CAPITAL STOCK
a) AUTHORIZED
Unlimited number of common shares.
b) ISSUED AND OUTSTANDING
------ 1999 ------ ------ 1998 ------
Number of Amount Number of Amount
Shares $ Shares $
---------- ----------- ----------- ----------
Balance, beginning of year (note 2(a)) 23,815,191 2,532,277 9,885,567 293,001
Pre-acquisition transactions (note 2(a))
Private placement for cash - 1,200,000
Purchase of Peru Ventures, S.A.
(note 3(f)) - 66,000
Issue costs - (113,711)
Consolidation of share capital - (6,590,378)
Issued to shareholders of Trafford on
reverse takeover (note 2(a)) - - 16,510,002 284,987
Issued for acquisition of Pizay
Investments Inc. (note 2(b)) - - 4,010,000 802,000
Issued for acquisition of 1345969
Ontario Limited (note 2(d)) 1,000,000 200,000 - -
---------- ----------- ----------- ----------
Balance, end of year 24,815,191 2,732,277 23,815,191 2,532,277
========== =========== =========== ==========
c) WARRANTS
Pursuant to the acquisition of Old Trafford Capital Corporation, the
Company issued 8,655,000 share purchase warrants, expiring on March
31, 1998, entitling the holders to purchase 8,655,000 common shares at
a price of $0.25 per share. On February 26, 1998, the directors of the
Company approved the re-pricing of the warrants at $0.15 per share and
extended the expiry date to October 31, 1998. The warrants expired and
were not exercised.
11
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STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
4. CAPITAL STOCK (continued)
d) STOCK OPTIONS
On March 31, 1997, the shareholders approved a stock option plan
whereby the number of shares which may be issued under the plan shall
not exceed 2,500,000 shares. The number of shares which may be
reserved for issuance to any one individual shall not exceed 5% of the
Company's outstanding shares. Each option entitles the holder to
purchase one common share of the Company and has a term not exceeding
ten years.
Number of
Options, Options Options Number of Exercise
Beginning Granted Expired Options, Price
of Year During Year During Year End of Year $ Expiry Date
--------- ----------- ----------- ------------ --------- ----------------
2,230,000 - (515,000) 1,715,000 0.20 April 1, 2002
20,000 - (20,000) - 0.20 May 15, 2002
250,000 - - 250,000 0.20 October 1, 2002
- 60,000 - 60,000 0.06 August 10, 2003
--------- ----------- ----------- ------------
2,500,000 60,000 (535,000) 2,025,000
========= =========== =========== ============
No options were exercised during the year. On August 11, 1998, the
directors approved a reduction of the exercise price of all options
granted at $0.20 to $0.06.
12
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STORIMIN RESOURCES LIMITED
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
March 31, 1999
5. WRITE-DOWN OF GOODWILL
1999 1998
$ $
--------- --------
Storimin Resources Limited (note 2(a)) - 171,460
Pizay Investments Inc. (note 2(b)) - 307,394
Stamswiss Investments Inc. (note 2(c)) - 4,922
--------- --------
- $483,776
========= ========
The excess purchase consideration arising on the acquisition of subsidiary
companies pertained to the investments in mining properties and related
development costs. As the mining claims to which goodwill relates were
abandoned, the amount has been expensed to operations in the 1998 fiscal
year.
6. INCOME TAXES
The Company and its subsidiaries have non-capital losses totalling
approximately $608,000 (1998 - $484,000), which can be carried forward to
be applied against future taxable income. These losses expire as follows:
Year of Total
Expiry $
------ -------
2001 22,000
2002 139,000
2004 129,000
2005 194,000
2006 124,000
-------
608,000
=======
7. SUBSEQUENT EVENT
On April 1, 1999, the Company amalgamated with its wholly-owned
subsidiaries, Old Trafford Capital Corporation, Stamswiss Investments Inc.
and 1345969 Ontario Limited. The Company will continue as Storimin
Resources Limited.
STORIMIN RESOURCES LIMITED
CONSOLIDATED BALANCE SHEET
AT JUNE 30, 1999
(UNAUDITED)
1999 1998
ASSETS
Current
Cash and short-term investments $ 99,772 $ 252,095
Mining properties and deferred
exploration 429,118 694,313
------------ ------------
$ 528,890 $ 946,408
============ ============
LIABILITIES
Current
Accounts payable $ 21,410 $ 10,116
Demand note payable 90,000 90,000
------------ ------------
111,410 100,116
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock 2,732,277 2,532,277
Deficit (2,314,797) (1,685,985)
------------ ------------
417,480 846,292
------------ ------------
$ 528,890 $ 946,408
============ ============
STORIMIN RESOURCES LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
1999 1998
Revenue $ - $ -
------------ ------------
Expenses
Shareholders' information 1,911 2,086
Legal and audit 2,845 59
General and administration 17,895 23,354
------------ ------------
Loss for the period $ 22,651 $ 25,499
============ ============
Loss per share $ 0.001 $ 0.001
============ ============
CONSOLIDATED STATEMENT OF DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Balance, beginning of period $ 2,292,146 $ 1,660,486
Loss for the period 22,651 25,499
------------ ------------
Balance, end of period $ 2,314,797 $ 1,685,985
============ ============
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE THREE MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
Cash provided by (used in):
Operating activities
Loss for the period $ (22,651) $ (25,499)
Net change in non-cash working
capital balances (520) (4,735)
------------ ------------
(23,171) (30,234)
STORIMIN RESOURCES LIMITED
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1999
(UNAUDITED)
1999 1998
ASSETS
Current
Cash and short-term investments $ 75,077 $ 217,403
Mining properties and deferred
exploration 429,118 694,313
------------ ------------
$ 504,195 $ 911,716
============ ============
LIABILITIES
Current
Accounts payable $ 17,244 $ 11,303
Demand note payable 90,000 90,000
------------ ------------
107,244 101,303
------------ ------------
SHAREHOLDERS' EQUITY
Capital stock 2,732,277 2,532,277
Deficit (2,335,326) (1,721,864)
------------ ------------
396,951 810,413
------------ ------------
$ 504,195 $ 911,716
============ ============
STORIMIN RESOURCES LIMITED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
1999 1998
Revenue
Gain on foreign exchange $ - $ 2,808
------------ ------------
Expenses
Shareholders' information 4,167 8,310
Legal and audit 6,106 390
General and administration 32,907 55,486
------------ ------------
43,180 64,186
------------ ------------
Loss for the period $ 43,180 $ 61,378
============ ============
Loss per share $ 0.001 $ 0.001
============ ============
CONSOLIDATED STATEMENT OF DEFICIT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
Balance, beginning of period $ 2,292,146 $ 1,660,486
Loss for the period 43,180 61,378
------------ ------------
Balance, end of period $ 2,335,326 $ 1,721,864
============ ============
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)
Cash provided by (used in):
Operating activities
Loss for the period $ (43,180) $ (61,378)
Net change in non-cash working
capital balances (4,686) (3,548)
------------ ------------
THIS IS SCHEDULE "B" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
PROPOSED ACQUISITION
BE AND IT IS HEREBY RESOLVED THAT:
1. the proposed acquisition by the Corporation hereby of all of the issued and
outstanding shares of Web Dream Inc. on the terms and subject to the
Acquisition Agreement dated November 12, 1999 (the "Acquisition Agreement),
be and is hereby authorized and approved;
2. any officer alone or any director alone be and is hereby authorized and
empowered to execute, swear to, acknowledge, deliver, file and record the
Acquisition Agreement and all other contracts, instruments, agreements,
transfers, assignments and any other document on behalf of the Corporation
in such form as may be required in order to carry out the purpose thereof;
and
3. the Board of Directors be and it is hereby authorized to revoke this
resolution and any or all of the actions herein described, notwithstanding
the approval by the shareholders of same, at any time prior to the
completion thereof, if in the Board's sole discretion, it is in the best
interest of the Corporation to do so.
THIS IS SCHEDULE "C" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
DESCRIPTION OF WEB DREAM INC.
GLOSSARY
BANDWIDTH = Term used to describe the quantity of internet access
CONTENT = Those services available to paying members of a site, i.e. movies,
liveshows
EMBLAZE = A means of streaming video without the need for a plugin
MEMBERSHIP SITE = A website to which the end user gets access after giving a
credit card or paying by 1 900, 011 or check by web
PLUGIN = A program which is needed to view or listen to certain content, i.e.
Vivo movies
SURFER = Someone using the Internet to visit different websites.
VIVO = A Plugin to watch streaming video encoded with Vivo
WEBMASTER = Someone who operates or is responsible for a website
WHOLESALE CUSTOMER = A website (owner) who buys content for their website.
WEB DREAM INC.
Web Dream Inc. was incorporated by Articles of Incorporation under the
Business Corporations Act (Ontario) on February 17, 1998. Prior to its
incorporation, the principals of the company, John A. van Arem and Anthony
Korculanic operated the business as a partnership. There are no restrictions in
the Articles of Incorporation on the business Web Dream may carry on or powers
Web Dream may exercise. By Articles of Amendment dated April 16, 1999, Web Dream
amended its articles of incorporation to provide that the maximum number of
directors shall be ten (10); to increase the authorized capital of Web Dream to
include an unlimited number of Class A preference shares, an unlimited number of
Class B preference shares and an unlimited number of Special shares; to provide
certain restrictions in connection with the transfer of shares of Web Dream; to
provide that Web Dream shall have a lien on its shares in connection with the
debt of a shareholder, to restrict the number of shareholders of Web Dream; to
prohibit any invitation to the public to subscribe for securities of Web Dream
and to provide that the holders of fractional shares shall be entitled to
exercise voting rights and to receive dividends. By Articles of Amendment dated
August 18, 1999, the Common Shares of Web Dream were subdivided on the basis of
10,000 Common Shares for each pre-split Common Share. Web Dream's registered and
principal office is located at 366 Bay Street, 11 th Floor, Toronto, Ontario and
its telephone number is (416) 815-1771. Web Dream's Web site address is
www.webdream.com.
The offices comprise approximately 4,900 square feet of which approximately
400 square feet are used for sales and marketing activities, 800 square feet for
office administration, and 3,700 square feet for production and site operations.
The space is leased pursuant to a lease agreement dated July 1, 1998 for a
period of three years ending on June 30, 2001.
BUSINESS OF WEB DREAM
GENERAL
Web Dream is an Internet E-commerce adult entertainment destination that
provides online upscale adult content including nude and semi-nude models as
well as operating its own destination web sites. Web Dream's goals are to brand
its web sites as the premiere online adult entertainment destinations and build
a significant worldwide community of loyal clients who enjoy Web Dream's unique
adult entertainment.
Web Dream's original content includes photographs, streaming video, audio
on demand and video conferencing.
According to an article entitled "The Sex Industry, Giving the Customer
What He Wants" in the February 14, 1998 issue of The Economist magazine, the
international adult entertainment industry is characterized as a $US20 billion
business. According to Forrester Research, a leading technology research firm
listed on NASDAQ, in a report dated October 30, 1998, adult entertainment in the
United States is a $US10 billion industry and the Internet-based adult
entertainment market generated between $US750 million and $US1 billion in
revenues in 1998 with rapid growth expected in the years that follow.
As the Internet becomes the ubiquitous communications tool, Web Dream
believes the Internet adult entertainment market will expand and flourish. For
example, after interviewing site operators, banner exchanges and traffic
measurement firms, Forrester Research (see above) concluded that (i) the biggest
sites have gross incomes of $US100 to $US150 million annually, mostly from
subscriptions and a significant annual growth rate; (ii) major credit card
processing services confirm that the largest adult entertainment web sites
processed $US150 million in 1997 for their adult site clients; and (iii) even
medium sized as well as small and mom-and-pop players flourished. Moreover, the
report concluded that: (1) "adult entertainment generates $US10 billion a year
in the United States. Yet the online marketplace falls under most people's
radar; and (2) even with an anticipated shake-out in adult online content,
revenue will not likely be affected and, in fact, in its opinion, "big site
networks will triple in size"
Web Dream believes it is among the 10 largest membership sites in the
world. Web Dream foresees this market ultimately ending up with little more than
a handful of significant players.
As far as the size of the market is concerned the Internet is still in its
infancy and will continue to experience tremendous growth, not only in number of
users but especially in dollars spent per user.
Web Dream believes it can penetrate this marketplace to become a force in
this industry.
PRODUCTS AND SERVICES
Premium Adult Web Site Content
Web Dream's content is one facet of Web Dream's activities. While the more
profitable segment of Web Dream's business is from the membership sites it
provides, the content segment provides a steady and growing income stream. The
following is the current content provided by Web Dream:
- - Hot Girls Live - Two live strip rooms including chat where the end user can
interact with the girls and ask them to perform certain tasks. This service
is sold to other webmasters for use on their members section with the
ability for them to personalize it and give it their logo. The first room
runs from 10.00 AM to 2.00 AM and the second room runs from 6.00 PM to 6.00
AM. This means that currently the show is live 20 hours a day with 8 hours
a day with both rooms live. Many content providers charge members extra for
the content. Web Dream was the first of its kind to include it.
- - Laura's Condo - A live voyeur feed, which operates 24/6 and follows a woman
in her condo, cleaning, working out showering and "playing". The show
features "Nude Mondays" where she cleans, cooks and does other chores while
naked. The show has a loyal following and continues to appeal to many due
to the nature of the feed. The fact that a user can "spy" on someone 24 hrs
a day and that you even get to see someone do everyday tasks makes this
person really seem like the girl next door. Web Dream has a significant
number of people tuning in to watch her sleep.
- - Teen Dreams - 2 Young girls live in a house and are filmed 24/7 including
taking baths together, playing and having slumber parties with other girl
friends.
- - XXX Theater - 1,800 XXX movie clips. These are divided in various
categories as well as different transfer rates. Through its collaboration
with Adults Only Video ("AOV"), the largest chain of adult video stores in
North America, Web Dream has access to a library of hundreds of movies with
broadcast rights. Web Dream
- - adds new content regularly. The movies are presented in Vivo format which
requires a plugin download of about 700 Kb.
- - Full Length Movies - It is all in the name. Instead of clips people get the
whole movie, from beginning to end. Both the XXX Theaters and the Full
Length Movies are provided by AOV with which we have a contract to supply
the movies in exchange for 1/3 of the revenue generated from this minus the
expenses. This deal also includes Hot Girls Live. These movies are streamed
in a newer format called Emblaze which does not require a plugin.
- - Thumbnail Indexed Pictures - This gallery has over 12,000 pictures in
different categories. Web Dream provides these pictures from CV
productions. They shoot all their own pictures and Web Dream purchases them
on a fixed amount per picture per month with the right to resell this
online as a service. This means webmasters pay Web Dream a certain amount
per month for which Web Dream gives their customers access to its picture
database.
- - Japanese hardcore - 200 Full length Japanese hardcore movies which number
is growing rapidly.
In all these scenarios Web Dream provides the complete setup, servers
(computers), bandwidth (internet access), customer support, updates and related
services. Wholesale customers merely have to provide a link to Web Dream's
content from a members protected area.
Management believes that Web Dream membership sites will be the source of
growth in the future. They consist of:
- - Sinteens.com - This site will be the main entry point in the 5 for 1 deal.
- - Sinusa.com - One of the 5 for 1 sites featuring mainstream content.
- - Voyeurhouse.com - This sites features live voyeur feeds.
- - Adulttheater.com - The fourth of the 5 for 1 sites with more mainstream
content.
- - Teeneagles.com - One more teen site as the 5 th and final 5 for 1 site.
- - Studtheater.com - This is a gay site which allows access to this market as
well.
Unlike most companies which either provide content to web sites or have a
web site where they buy content, Web Dream not only specializes in both fields
but also management believes it has become a trusted name within the industry.
(2) Eliminate Online Inconveniences: Web Dream seeks to eliminate the online
inconveniences associated with enjoying adult content on the Internet. First,
Web Dream will not place any click through advertising on its web site. (These
ads often tempt consumers to "free pics" but they actually lead to absolutely
nothing free - not only a hassle, but also a rude "bait and switch" deception).
Second, Web Dream will not manipulate the "back" key in the web browser. This
annoying manipulation re-opens the last site when the viewer tries to exit
through the "back" key. For example, if a person is viewing an adult content web
site and someone walks in by surprise, he can not exit the site by pressing the
"back" key because it reloads the last web site he was visiting. Instead, the
person must close and exit the browser program altogether, an annoying
inconvenience. Third, Web Dream will not place any data files on its members' or
visitors' hard drives ("cookies") in order to obtain information for Web Dream's
benefit.
CORPORATE STRATEGY
Web Dream believes very strongly in technical, financial, business and
moral excellence. To secure a stable future for all those connected with Web
Dream management has set the following long term goals:
Management believes that the present worldwide market is estimated at $US6
billion. Web Dream's goal for market share is 3%.
Like any other industry there are many companies in this industry sector
for the short term. Web Dream wants, and is developing the "trustworthy" name in
the industry. With prompt and honest promises management is committed to
developing a long lasting bond with its clients and to establish a recurring
membership base of 750,000 web site members.
Web Dream plans to achieve these levels by increasing productivity by
investing in promotions and advertising and pursuing the following steps:
1. Budget for complete advertising campaign.
2. Implement promotional plans for Dream Bucks (Partnership Program)
which is the most lucrative program available to webmasters today.
3. Automation of "End User" promotions.
4. Introduction of new web site content.
5. Increase customer service.
6. Implement Web Site promotion plans including "Live and Interactive"
sign up pages.
HUMAN RESOURCES
Web Dream has 50 employees made up of the following:
- Lex van Arem (President) & Anthony Korculanic (Executive vice
president)
- 2 full time graphic designers
- 3 full time programmers / technical support
- 2 full time sales people
- 1 full time administrative person
- 2 full time bookkeepers
- 1 full time HTML programmer / webmaster
- 1 full time general manager for the live shows
- 3 full time assistant managers for the live shows
- 2 part time assistant managers for the live shows
- 19 female live performers
- 12 male live performers
There are no collective bargaining agreements in effect. Web
Dream enjoys good relations with its employees. Employees receive an industry
competitive package of benefits.
COMPETITION
The company's three main competitors Interactive Gallery, Internet
Entertainment Group and Python Video, are based in the United States. All three
have been in business for at least three years and have favourable reputations.
These companies also provide content and operate membership sites.
In total there are about 10 companies which provide content on a large
scale that may be considered competitors and operate membership sites, placing
Web Dream in a very select group.
COMPETITIVE ADVANTAGES
Web Dream believes it will differentiate and distance itself from the
competition by offering a variety of unique products and services including,
subscription-based membership for access to the web sites' contents (including
an online library of original adult content) and developing new web sites and
content to keep abreast of market demands.
Web Site Membership
Through Web Dream innovation and teamwork Web Dream has been able to
implement many new ideas that help market its web sites on line.
- - End user promotion where clients assist in Web Site marketing by offering
many incentives. This is a first in this industry.
- - Offering its "5 for 1" site access to improve client retention.
- - Offering a 3 day trial period to reduce charge backs.
- - Developed a live and interactive sign up page. A live video and chat feed
on the sign up page where a girl would make commission based on how many
sign ups she has produced.
- - Unparalleled customer service, which by contrast, is innovative.
- - Increase selection by offering multiple niche market sites.
- - Offering multiple methods of payment, like; Credit Card, 1-900, Checks by
Web, Long Distance Phone Billing.
- - Efficient utilization of traffic flow with multiple sites helps increase
sign-up ratio.
- - Reduced overhead by trading content with other content providers for
membership sites.
Management believes that the distinctive competitive advantages which Web
Dream brings to this market are:
- - Experience in this market. Web Dream has 4 years of hands-on experience in
this industry during which time Web Dream has learned refined and reworked
its operating strategy.
- - Philosophy of Web Dream. Web Dream's philosophy is not only to provide a
superior product but also to provide superior customer service.
- - To provide access to a variety of sites for the price of one. Through
research Web Dream has determined that just a slight increase of usage when
a client has access to five sites as opposed to one site provides access to
400% more for about 2 - 3% additional cost to Web Dream. This also allows
us to offer 5 different "faces" to Company promotions, offering membership
to one site and if that does not get excite patrons, Web Dream offers a
different look.
- - By offering a high pay out and honest and prompt payments to Web Dream's
partners, Web Dream has created a strong webmaster program. The average
webmaster knows what is available as far as partnership programs and can
therefore be very selective. Management believes that its product is the
best in the industry.
Web Site Content
Web Dream has also developed innovative content ideas and continues to
do so. These initiatives have included the following:
- - The inclusion of chat with live feeds instead of having members pay extra
for it. Management recognized that members were less and less inclined to
pay extra for services over and above their membership fees.
- - "Big Screen" video on line.
- - Thumbnailed pictures as a service to webmasters
- - A "budget package" which used a bandwidth limiter and allowed small sites
to buy content consisting of 2 live feeds, more than 12,000 pictures, full
length movies and a library of over 1,800 movie clips for $US495 per month.
The distinctive competitive advantages which Web Dream brings to this
market are:
Experience in this market. The principals of Web Dream have 4 years of
hands on experience in this industry. As explained above that means Web Dream
has gone through a lot of trial and error in order to attain its current
position.
Strategic alliances provide superior top line content with full
electronic broadcast rights which normally can cost tens of thousands of dollars
per movie. Web Dream's alliances with AOV & CV productions have allowed Web
Dream to compete with the large production houses as far as movie and picture
content.
- - Superior customer service.
- - Innovative options for end user specification such as 3 different broadcast
speeds, 3 different movies screen sizes, dozens of different categories and
a Java indexed photo gallery for easy navigation.
- - Unprecedented "up time" of 99.98%. Many people in this industry have
frequent technical difficulties. Web Dream has taken the initiative to have
a quality infrastructure and is recognized by its customers as one of the
most reliable sources.
- - Supplying a variety of content for all needs. Web Dream regularly adds new
content and new features to stay on the cutting edge.
- - Offering different options for pricing to accommodate all sizes of web
sites. Web Dream was the first company of its kind to introduce a "budget"
package whereby customers were offered content which was served up through
special "choking" software to ensure only limited availability of bandwidth
which in turn allowed us to bring this at a competitive price to smaller
sites.
Pricing
Web Dream's content including its live feeds, voyeur feeds, digitized
videos and picture database, have been priced competitively. Management believes
that the range of content gives Web Dream an advantage over most companies
providing content. There are approximately 10 large content providers, of which
Web Dream is one.
Content is priced based on package choice and bandwidth (consumption).
Prices range from $US295 to $US7,500 per month
Membership sites
Trial memberships are offered for $US2.95 for three days. Web Dream's
membership sites range in pricing from $US27.95 to $US29.95 per month which is
charged recurring unless the end user cancels.
Service
The above pricing structure was established based on market research.
Web Dream's efforts are focused on providing top quality service. While pricing
points are important, management has determined that quality products and
service are more important than low pricing. Web Dream's objective is to provide
quality to both our wholesale (content) customers and our retail (membership)
customers.
Markets
Wholesale service
Although the Internet is the buzzword and many mainstream companies
are jumping onboard, the adult industry is still for the largest part the only
industry generating profits online. Hundreds of adult web sites are starting up
daily. Although most are small enterprises, there is an increasing number of
companies that are well funded. More and more seasoned business people are
getting in to the industry to capitalize on the profitability of it. Web Dream's
customer base is spread over 6 continents, although most of them are located in
North America. Wholesale customers pay anywhere from $US295 to $US7,500 per
month.
Membership services
Retail customers also come from all corners of the world. Web Dream's web
sites are presented as a special deal, where if you join one you get access to
all. Besides Web Dream's own content for its members, Web Dream also offers
content from many other content providers. By exchanging content, Web Dream has
an inexpensive way to offer additional content.
Web Dream is also adding a live show using its own models to offer just to
its members adding another reason for membership loyalty. These will be hosts
and hostesses for specific sites.
Retail customers pay either $US27.95 or $US29.95 per month. There is a
three-day trial for $US2.95. All memberships are billed recurring.
GROWTH STRATEGY
Wholesale service
Web Dream is forming strategic alliances to further increase growth.
These alliances include sharing customer information with a select few other
content providers as well as paying out referral bonuses to webmasters for
sending third parties to Web Dream. Working together with companies like 3 rd
party Credit Card processors to provide them with leads for people who call us
requesting 3 rd party billing, Web Dream has these groups send information about
those people who are interested in content. This represents an additional way to
increase exposure and revenue and is a source that has great potential for Web
Dream. Web Dream also uses other marketing tools such as; trade shows, mailings,
cold calling, exchanging content for traffic and magazine advertising.
Membership services
- - Web Dream's membership sites are being marketed in "conventional" ways like
buying traffic, search engine manipulation and free sites. Management
believes that significant growth will come with the start of Web Dream's
new programs, such as end user promotions
Dreambucks
Dreambucks is a new partnership program developed by Web Dream. It pays out
51% of the gross as well as 5% of the pay out to webmasters that have referred
the webmaster on the second level. This second level pay out increases the
programs appeal significantly. This gives an incentive to webmasters to actively
refer friends and business associates. It is common in the adult industry to
have other webmasters promote your site(s) in return for a percentage of the
revenue. However Web Dream's payout is among the highest in the industry, the
second level payout is not that common yet but the big advantages are the live
signup page, the end user promotion and the silver membership site.
End user promotions
Web Dream has constructed a way to get the end user actively involved in
the promotion of the membership sites. This will be one of the most powerful
tools developed yet and is unique to Web Dream.
Live signup page
A true live interactive signup page with girls 24/7 telling people what to
expect inside and teasing visitors into signing up. The main issue is always
that with all that surfers are exposed to they tend to be reluctant. Web Dream
has received interest from third parties to offer this feature on their behalf.
Service
Bringing on new members is only part of the equation. Once a member is
registered the next challenge is to keep him/her as long as possible. Normal
retention is around 2 to 3 months. Web Dream implementing a few things to
increase this retention period.
- - Live host/hostess for all 6 sites. This will give each site unique content
which will not be resold to third party web-sites.
- - Adding content weekly or more frequently where possible.
- - Maintain excellent service.
RESEARCH AND DEVELOPMENT
Web Dream is constantly striving to stay ahead of the competition.
Examples to date of Web Dream innovations are:
- - End user promotion
- - Host & hostess
- - Including live chat with the membership (not up selling)
- - Interactive sign up pages
Web Dream's current developments include;
- - Throttling software - Web Dream is writing a program in house to restrict
the amount of bandwidth a user can get, regardless of the connection
(28.8Kb/ps, ISDN, Cable modem). This will save on bandwidth cost and, once
tested properly will be a program many other companies will be interested
in purchasing.
- - New proprietary video streaming software for our live feeds.
YEAR 2000
The "Year 2000 Issue" involves the potential for system and processing
failures of date-related data resulting from computer-controlled systems using
two digits rather than four to define the applicable year. For example, computer
programs that contain time-sensitive software may recognize a date using two
digits of "00" as the year 1900 rather than the Year 2000. This could result in
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar ordinary business activities.
Web Dream believes that its internal software and hardware systems
will function properly with respect to dates in the Year 2000 and thereafter,
especially since its web site and related activities have been developed in 1999
sensitive to the Year 2000 Issue. Nonetheless, there can be no assurance in this
regard until such systems are operational in the Year 2000. Web Dream is in the
process of contacting all of its significant suppliers to determine the extent
to which Web Dream's interface systems are vulnerable to those third parties'
failure to make their own systems Year 2000 compliant. Additionally, any Year
2000 problems experienced by Web Dream's customers could affect the payment for
its online services. Accordingly, to the extent the systems of Web Dream's
suppliers and customers are not fully Year 2000 compliant, there can be no
assurance that potential system interruptions or the cost necessary to update
software will not have a material adverse affect on Web Dream's business,
results of operation or financial condition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF VARIATIONS IN OPERATING RESULTS AND
FINANCIAL CONDITION
DISCUSSION OF OPERATIONS
This discussion should be read in conjunction with the financial statements
of Web Dream which have been prepared in accordance with generally accepted
accounting principles and which are attached as Exhibit I to this Schedule C.
YEAR ENDED AUGUST 31, 1999 COMPARED WITH PERIOD ENDED AUGUST 31, 1998
For the year ended August 31, 1999, Web Dream had sales of $1,821,413
compared to sales of $226,263 for the period ended August 31, 1998. This was an
increase of 705%. Cost of sales for the year of $264,950 increased by $224,464
or 550% compared to $40,846. Expenses of $1,706,693 increased by 792% ($191,237)
largely because the year ended August 31, 1999 represented the first full year
of operation for Web Dream. During this year Web Dream experienced rapid growth
which led to increased wages because of the need to hire additional employees,
increased selling expenses which included advertising and higher computer
expenses because of the need to acquire additional bandwidth, computer equipment
and other ancillary services.
During this year Web Dream experienced a net loss of $156,050 compared to a
net loss of $5,820 for the period ended August 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At the beginning of the year on September 1, 1998, Web Dream had cash of
$3,515. At the end of the period, Web Dream had cash of $2,618. Expenditures on
capital assets cost of $90,299 were financed primarily through advances from a
company of which Messrs. van Arem and Korculanic are the principal shareholders.
Web Dream has no operating lines of credit. Web Dream has financed its
growth and cash needs through shareholder loans, advances from related parties
and corporate financing activities.
Web Dream believes that inflation has not had a major effect on operating
results during the last fiscal year.
FINANCIAL CONDITION
Current assets increased to $70,508 at August 31, 1999 from $23,219 as at
August 31, 1998, primarily due to the increase in accounts receivable
facilitated by Web Dream's increase in sales. Accounts receivable increased to
$63,069 at August 31, 1999, from $9,898 at August 31, 1998. Capital assets
increased to $108,253 at August 31, 1999, as a result of the acquisition of
additional computer hardware and software. Current liabilities increased to
$333,811 at August 31, 1999 from $72,015 at August 31, 1998. The increase in
current liabilities is mainly in amounts due to shareholders and related
parties. Capital deficiency increased to $155,050 at August 31, 1999 compared to
($4,820) in 1998. The decline is due to the net loss of Web Dream. Web Dream's
working capital balance has decreased by $214,507 since August 31, 1998. The
current ratio at August 31, 1999 was 0.2 to 1.
OFFICERS AND DIRECTORS OF WEB DREAM
The board of directors of Web Dream consists of five directors. The names,
municipalities of residence, positions with Web Dream and principal occupations
of the directors and officers over the past five years are as follows:
NAME AND MUNICIPALITY
OF RESIDENCE OFFICE PRINCIPAL OCCUPATION
- --------------------- --------- ---------------------------
John A. van Arem President President of Web Dream
Toronto, Ontario
Anthony Korculanic Secretary Executive Vice-President of
Toronto, Ontario Web Dream
FlorisVersteeg Director Business Consultant
Utrecht, Holland
Johannes van Arem Director Business Consultant
Amersfoort, Holland
Nick Laroche Director Self-employed businessman
Vancouver, BC
Mr. van Arem has been the President and a director of Web Dream since
February 1998. He grew up in Holland where he studied at the nautical college.
He came to Canada in 1986 where he started his own construction company. The
years 1990 and 1991 were difficult for many companies in the construction
industry and there were not sufficient projects to sustain 30 employees. After
meeting Mr. Korculanic, they founded Blurb (see below). Then in 1996 they formed
a partnership to start Web Dream.
Mr. Korculanic is the Secretary, Executive Vice President and a director of
Web Dream. He has been Web Dream's Executive Vice President since February,
1998. He received an architectural degree in 1988 and worked on such projects as
Sky Dome (Toronto), Metro Hall (Toronto) and the World Exchange Towers (Ottawa).
Employed at Brisbin Brook Beynon Architects for four years he eventually became
CAD Manager where he obtained both computer and managerial experience. He was a
co-founder of Blurb Magazine which was a highly innovative Teen tabloid in the
Toronto area. In 1996 he formed a partnership with Mr. Van Arem to start Web
Dream. He is employed by the company on a full-time basis.
Floris Versteeg has a masters in computer science from the University of
Utrecht in the Netherlands. He is a senior consultant for Oracle and has been
for the past 9 years.
Johannes van Arem has a degree in chemistry and physics from the University
of Utrecht. He held a senior position with Randstad, the third largest temporary
employment agency in the world. Here he has been bringing (multi million dollar)
solutions to corporations like Phillips, ABN-AMRO and other multinationals.
Nick Laroche is a self-employed businessman who has been involved in taking
companies public, including those where he was involved from the outset.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
--------------------------------- -------------------------------
Securities Restricted
Under Shares or
Fiscal Options Restricted LTIP All Other
Name and Period Annual Other Granted Share Payout Compensation
Principal Ended Salary Bonus (#) Units($) s ($) ($)
Position Compensation
- --------------- ------------ ----------- ---------- -------- ---------- ------- ---------- --------------
Lex Van Arem 1999 $ 20,000 Nil Nil Nil Nil Nil Nil
President 1998 $ 20,000 Nil Nil Nil Nil Nil Nil
- --------------- ------------ ----------- ---------- -------- ---------- ------- ---------- --------------
Anthony 1999 $ 20,000 Nil Nil Nil Nil Nil Nil
Korculanic 1998 $ 20,000 Nil Nil Nil Nil Nil Nil
Executive Vice-
President
LONG-TERM INCENTIVE PLAN AWARDS
Web Dream did not have a long-term incentive plan within the meaning of
Form 40 during the financial year ended August 31, 199
STOCK OPTIONS
Web Dream does not have a stock option plan.
TERMINATION OF EMPLOYMENT, CHANGES IN RESPONSIBILITY AND EMPLOYMENT CONTRACTS
There is no employment contract between Web Dream and a Named Executive
Officer. As well, there is no compensatory plan or arr
COMPENSATION OF DIRECTORS
No directors of Web Dream were compensated by Web Dream during the
financial year ended August 31, 1999 for their services in
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Web Dream does not maintain insurance for the benefit of its Directors and
Officers against certain liabilities incurred by th
COMPENSATION COMMITTEE
Web Dream does not have a compensation committee. The duties of such a
committee are carried out by the Board of Directors. Th
DIRECTORS' AND OFFICERS' INSURANCE
At this time, Web Dream does not maintain insurance for the benefit of its
directors and officers against certain liabilities
PENSION PLANS
Web Dream has instituted no pension or retirement plans and none are
proposed at this time.
INTEREST OF MANAGEMENT AND
OTHERS IN MATERIAL TRANSACTIONS
None of the present directors or officers of Web Dream or associates or
affiliates thereof has any material interest, direct o
PRIOR SALES
Web Dream has issued the following securities since its incorporation:
1. On February 17, 1998, Web Dream issued 1,000 common shares at a price of
$1.00 per share for an aggregate purchase price of $1,0
2. On August 18, 1999, Web Dream issued 2,000,000 post-split Common Shares at
a price of $0.075 per share for an aggregate purchase
3. On September 22, 1999, Web Dream issued 566,436 common shares in connection
with a seed capital financing. (See: "Seed Capital O
4. On November 3, 1999, Web Dream issued 340,000 common shares in connection
with a seed capital financing. (See: "Seed Capital Off
5. On November 12, 1999, Web Dream issued 800,000 common shares as a finder's
fee in consideration of certain services relating to
On August 18, 1999, the shareholders of Web Dream voted by way of special
resolution to divide the 1,000 issued and outstandin
SEED CAPITAL FINANCING
On September 22, 1999, Web Dream completed a sale by way of private
placement of 566,436 common shares of Web Dream at a price
On November 3, 1999, Web Dream completed a subsequent sale of the Seed
Capital Offering of 340,000 common shares of Web Dream
There were no selling commissions in connection with the Seed Capital
Financing.
FINDER'S FEE
Pursuant to a consulting agreement with Tory, Ryan & Co. Inc. ("TR") dated
July, 19, 1999, as amended, Web Dream agreed to pay
DIVIDEND POLICY
To date, Web Dream has not paid any dividends on its outstanding Common
Shares and has no current intention to declare any div
CAPITALIZATION
The following table sets forth the capitalization of Web Dream as at the
date indicated:
OUTSTANDING AS AT OUTSTANDING AS AT
AUGUST 31, 1999 NOVEMBER 12, 1999
(AUDITED) (UNAUDITED)
-------------------- -------------------
Shareholders' equity:
Common Shares (authorized - unlimited) $ 151,000 $ 664,218
(12,000,000 shares) (13,706,436 shares)
Class A Preference shares (authorized - unlimited) --- ---
Class B Preference shares (authorized - unlimited) --- ---
Special Shares (authorized - unlimited) --- ---
-------------------- -------------------
Total capitalization $ 151,000 $ 664,218
==================== ===================
<FN>
(1) As at August 31, 1999, Web Dream had a deficit of $130,745.
DESCRIPTION OF SHARE CAPITAL
COMMON SHARES
The common shares are without par value, entitle the holders thereof to
receive notice of all meetings of shareholders and to one vote for each common
share held. The holders of common shares are entitled to dividends as and when
declared by the board of directors and are entitled upon liquidation,
dissolution or winding-up of Web Dream to receive a pro-rata share of the assets
of Web Dream distributable to the holders of the common shares, subject to the
rights, privileges, restrictions and conditions attaching to any other class of
shares of Web Dream. The common shares carry no special liquidation right,
pre-emptive right or conversion rights. All issued and outstanding common shares
are fully paid and non-assessable.
CLASS A PREFERENCE SHARES
Each Class A Preference Share entitles its holder to a preferential
non-cumulative dividend at the rate of 120% of the lending rate quoted by Web
Dream's bankers for its commercial customers, per annum of the amount paid up
thereon. The Class A Preference Shares rank prior to the Class B Preference
Shares, the Special Shares and the common shares with respect to dividends and
return of capital in the event of the liquidation, dissolution or winding-up of
Web Dream. The holders of Preference Shares are entitled to receive notice of
and to attend any meeting of the shareholders of Web Dream and each Class A
Preference Share carries one vote. Web Dream may at any time upon delivery of
proper notice in respect thereof redeem at any time any or all of the then
outstanding Class A Preference Shares. The Class A Preference Shares are
retractable by the holder at any time upon the delivery of notice to Web Dream.
CLASS B PREFERENCE SHARES
Each Class B Preference Share entitles its holder to a preferential
non-cumulative dividend at the rate of 120% of the lending rate quoted by Web
Dream's bankers for its commercial customers, per annum of the amount paid up
thereon. The Class B Preference Shares rank subordinate to the Class A
Preference Shares and prior to the Special Shares and the common shares with
respect to dividends and return of capital in the event of the liquidation,
dissolution or winding-up of Web Dream. Except with respect to matters as to
which the holders of Class B Preference Shares are entitled to vote as a class,
the holders of Class B Preference Shares shall not be entitled to receive notice
of, to attend or to vote at any meeting of the shareholders of Web Dream. Web
Dream may at any time upon delivery of proper notice in respect thereof redeem
at any time any or all of the then outstanding Class B Preference Shares. The
Class B Preference Shares are retractable by the holder at any time upon the
delivery of notice to Web Dream.
SPECIAL SHARES
The holders of the Special Shares shall not be entitled to receive notice
of, to attend or to vote at any meeting of the shareholders of Web Dream. The
Special Shares rank subordinate to the Class A Preference Shares and the Class B
Preference shares and prior to the Common Shares with respect to the payment of
dividends and return of capital in the event of the liquidation, dissolution or
winding-up of Web Dream.
OPTIONS TO PURCHASE SECURITIES
There are no outstanding warrants or options to purchase securities of Web
Dream.
PRINCIPAL SHAREHOLDERS
The following table sets forth the name of every person or company who, to
the knowledge of Web Dream, owned of record or beneficially, directly or
indirectly, more than 10% of the voting securities of Web Dream as at the date
hereof.
NUMBER OF COMMON
SHARES OWNED OF PERCENTAGE OF
NAME AND ADDRESS RECORD AND BENEFICIALLY COMMON SHARES OWNED
- ------------------ ----------------------- --------------------
John A. van Arem 4,800,000 35.02%
Toronto, Ontario
Anthony Korculanic 4,000,000 29.18%
Toronto, Ontario
AUDITORS, REGISTRAR AND TRANSFER AGENT
Silver Gold Glatt & Grosman, Toronto, Ontario are the auditors of Web
Dream.
There is currently no registrar and transfer agent for Web Dream. The
register and the transfer ledgers are kept at the principal office of Web Dream.
The register will be available for inspection by shareholders subject to
applicable law.
MATERIAL CONTRACTS
Except for contracts entered into in the ordinary course of business, the
only material contracts which have been entered into by Web Dream within the
last 12 months and which can be reasonably be considered as being presently
material are the following:
1. consulting agreement with Tory, Ryan & Co. Inc., dated July 19, 1999,
as amended.
2. letter of intent dated September 2, 1999 with Storimin Resources
Limited.
3. subscription agreements dated September 22, 1999 entered into with
each of the subscribers to the Seed Capital Financing and subscription
agreements dated November 3, 1999 entered into with each of the
subscribers to the Seed Capital Financing. See this Schedule C - "Seed
Capital Financing".
4. "Acquisition Agreement with Storimin Resources Limited dated November
12, 1999.
These agreements may be reviewed at Web Dream's registered and principal
office.
PROMOTERS
John A. van Arem and Anthony Korculanic, the President and Vice-President,
respectively, of Web Dream are considered to be the promoters of Web Dream
within the meaning of the Securities Act (Ontario).
LEGAL PROCEEDINGS
In 1998 a claim was filed in the Superior Court of Justice against Web Dream
seeking damages of $2,000,000 resulting from the breach of a contract for the
supply of adult entertainment services. Web Dream has defended the claim on the
basis that the contract was properly terminated. To date, there have been no
conclusive developments in this litigation, which it is anticipated, will
continue for some time. This action is not expected to have a material adverse
effect on the financial position of Web Dream. Management believes that this
lawsuit is without substance or merit and will be defended vigorously.
WEB DREAM INC
FINANCIAL STATEMENTS
AUGUST 31, 1999
AUDITORS' REPORT
To the Shareholders of
WEB DREAM INC.
We have audited the balance sheet of WEB DREAM INC. as at August 31, 1999 and
August 31, 1998 and the statements of operations and deficit and cash flows for
the periods then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
IN OUR OPINION, THESE FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL POSITION OF THE COMPANY AS AT AUGUST 31, 1999 AND AUGUST
31, 1998 AND THE RESULTS OF ITS OPERATIONS AND ITS CASH FLOWS FOR THE PERIODS
THEN ENDED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
"SILVER GOLD GLATT & GROSMAN"
Toronto, Ontario Chartered Accountants
October 15, 1999
Except Note 7 dated November 12, 1999.
WEB DREAM INC.
(Incorporated under the laws of the Province of Ontario)
BALANCE SHEET AS AT AUGUST 31, 1999
================================================================================
1999 1998
ASSETS
CURRENT
Cash $ 1,335 $ 3,515
Accounts receivable 63,069 9,898
Prepaid expenses and sundry receivables 4,820 3,902
---------- --------
69,224 17,315
CAPITAL ASSETS (Note 2) 108,253 43,976
---------- --------
$ 177,477 $ 61,291
========== ========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 95,992 $ 38,818
Loans payable (Note 3) 17,404 16,500
Due to shareholders (Note 4) 38,638 -
Due to Jazz Monkey Media Inc. (Note 5) 5,188 -
---------- --------
157,222 55,318
---------- --------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 6) 151,000 1,000
DEFICIT (130,745) 4,973
---------- --------
20,255 5,973
---------- --------
$ 177,477 $ 61,291
========== ========
APPROVED ON BEHALF OF THE BOARD "John A. van Arem" Director "Anthony Korculanic"
------------------ --------------------
Director
WEB DREAM INC.
STATEMENT OF OPERATIONS AND DEFICIT
FOR THE YEAR ENDED AUGUST 31, 1999
========================================
================================================================================
- --------------------------------------------------------------------------------
FEB. 17,
1998 TO
1999 AUG. 31, 1998
SALES $1,821,413 $ 226,263
COST OF SALES 765,944 40,846
----------- --------------
GROSS PROFIT 1,055,469 185,417
----------- --------------
EXPENSES
Administrative 781,134 101,412
Selling 213,734 28,565
Computer 196,319 50,467
----------- --------------
1,191,187 180,444
----------- --------------
NET INCOME (LOSS) (135,718) 4,973
RETAINED EARNINGS, Beginning of year 4,973 -
----------- --------------
RETAINED EARNINGS (DEFICIT), End of year $ (130,745) $ 4,973
=========== ==============
WEB DREAM INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 1999
================================================================================
- --------------------------------------------------------------------------------
1999 1998
OPERATING ACTIVITIES
Net income (loss) $(135,718) $ 4,973
Adjustment for non-cash item:
Amortization 26,652 7,447
---------- ---------
(109,066) 12,420
Changes in non-cash operating assets and liabilities 3,989 41,519
---------- ---------
CASH PROVIDED BY (EXPENDED IN) OPERATING ACTIVITIES (105,077) 53,939
---------- ---------
INVESTING ACTIVITY
Purchase of capital assets (90,929) (51,424)
---------- ---------
CASH EXPENDED IN INVESTING ACTIVITY (90,929) (51,424)
---------- ---------
FINANCING ACTIVITIES
Advances from shareholders 38,638 -
Advances from Jazz Monkey Media Inc. 5,188 -
Issuance of capital stock 150,000 1,000
---------- ---------
CASH PROVIDED BY FINANCING ACTIVITIES 193,826 1,000
---------- ---------
NET CHANGE IN CASH (2,180) 3,515
CASH, Beginning of year 3,515 -
---------- ---------
CASH, End of year $ 1,335 $ 3,515
========== =========
WEB DREAM INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999
================================================================================
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at historical cost. Amortization is charged to
earnings over the estimated useful life of the assets on the following
basis:
Furniture and equipment - 20% declining balance
Leasehold improvements - 20% straight line
Computer hardware - 30% declining balance
Computer software - 100% declining balance
Capital assets purchased during the year are amortized at one-half the
above stated rates.
FOREIGN CURRENCY TRANSLATION
The Company has translated monetary assets and liabilities, denominated in
foreign currencies into Canadian dollars using the year-end rate of
exchange. The Company translates revenue and expense items, other than
amortization on a monthly basis, at the average rate of exchange for that
month.
2. CAPITAL ASSETS
1999 1998
---------------------------------- ---------
ACCUMULATED NET BOOK NET BOOK
COST AMORTIZATION VALUE VALUE
Furniture and equipment $ 10,545 $ 1,360 $ 9,185 $ 1,534
Leasehold improvements 5,512 1,323 4,189 3,421
Computer hardware 124,110 30,323 93,787 39,021
Computer software 2,185 1,093 1,092 -
-------- ------------- --------- ---------
$142,352 $ 34,099 $ 108,253 $ 43,976
======== ============= ========= =========
3. LOANS PAYABLE
These loans are unsecured, bear no interest and are due on demand.
4. DUE TO SHAREHOLDERS
Shareholders' advances are unsecured, bear no interest and have no fixed
terms of repayment.
WEB DREAM INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31 1999
================================================================================
- --------------------------------------------------------------------------------
5. DUE TO JAZZ MONKEY MEDIA INC
The amount is unsecured, bears no interest and is due on demand.
6. CAPITAL STOCK
AUTHORIZED
Unlimited number of Common shares
Unlimited number of Class A voting preference shares, having a
non-cumulative dividend as determined by the Board of Directors and are
redeemable and retractable
Unlimited number of Class B voting preference shares, having a
non-cumulative dividend as determined by the Board of Directors and are
redeemable and retractable
Unlimited number of non-voting special shares
1999 1998
ISSUED - Common shares NUMBER AMOUNT NUMBER AMOUNT
BALANCE, Beginning of year 1,000 $ 1,000 1,000 $ 1,000
August 18, 1999
Subdivision of existing 1,000
common shares on basis of 10,000
shares for each share 9,999,000 - - -
August 18, 1999
Issuance of 2,000,000 shares
for cash 2,000,000 150,000 - -
---------- -------- ------ -------
BALANCE, End of year 12,000,000 $151,000 1,000 $ 1,000
========== ======== ====== =======
By Articles of Amendment dated April 16, 1999, the Company amended its
Articles of Incorporation to include an unlimited number of Class A
preference shares, an unlimited number of Class B preference shares and an
unlimited number of special shares, to provide the maximum number of
directors to ten (10) and to prohibit any invitation to the public to
subscribe for securities of the Company.
By Articles of Amendment dated August 18, 1999, the common shares of the
Company were subdivided on a basis of 10,000 common shares for each
pre-split common share.
WEB DREAM INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999
================================================================================
- --------------------------------------------------------------------------------
7. SUBSEQUENT EVENTS
The Company issued 566,436 common shares in connection with a seed capital
offering resulting in proceeds after expenses of $250,000. The Company
issued an additional 340,000 common shares in connection with a seed
capital offering resulting in proceeds after expenses of $170,000.
The Company issued 800,000 common shares for the provision of investment
banking services having a value of $60,000.
Pursuant to an agreement dated November 12, 1999, the existing shareholders
of Web Dream Inc. agreed to sell and transfer all of their shares to
Storimin Resources Limited ("Storimin") in consideration of 28,000,000
shares of Storimin. Web Dream Inc. shareholders will receive as
consideration, 2 post-consolidation common shares of Storimin for each
common share of Web Dream Inc. sold. This transaction is still subject to
the approval of Storimin's shareholders. Subsequent to the share exchange,
the former shareholders of Web Dreams Inc. will own a majority of all the
issued and outstanding common shares of Storimin. The combination will be
accounted for as a "reverse takeover" using the purchase method of
accounting with Web Dream Inc. being the acquiring Company.
8. CONTINGENT LIABILITY
In 1998, a claim was filed against the Company seeking damages of
$2,000,000 resulting from a breach of contract. The Company has defended
the claim on the basis that the contract was properly terminated.
Management believes this action will not have a material adverse effect on
the financial position of the Company and no provision has been reported in
these financial statements.
9. LEASE COMMITMENTS
The Company is obligated under an operating lease for its premises. The
monthly rental payment is $4,686. The lease expires on June 30, 2001.
Future minimum payments for its premises as at August 31, 1999 are as
follows:
2000 $ 56,767
2001 49,537
10. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue relates to the potential problems that may arise due to
possible date limitations in computerized systems. The effects of the Year
2000 Issue may be experienced before, on or after January 1, 2000 and if
not addressed, the impact on operations and financial reporting may range
from minor errors to significant system failure, which could affect an
entity's ability to conduct normal business operations. Management is
confident that it will have programs in place to identify, test and
minimize the Company's exposure to the Year 2000 Issue. They feel that the
costs related to the Year 2000 Issue are not material. However, it is not
possible to be certain that all aspects of the Year 2000 Issue affecting
the Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
WEB DREAM INC.
SCHEDULE OF EXPENSES
AUGUST 31, 1999
=================
================================================================================
- --------------------------------------------------------------------------------
FEB. 17, 1998
YEAR ENDED TO AUG. 31,
AUG. 31, 1999 1998
ADMINISTRATIVE
Wages $ 507,600 $ 49,313
Office and general 66,271 14,009
Occupancy 49,994 13,570
Professional fees 43,313 5,305
Telephone 35,040 7,027
Travel 27,635 1,478
Interest and bank charges 16,752 2,046
Vehicle 7,877 1,154
Amortization 26,652 7,510
-------------- --------------
$ 781,134 $ 101,412
============== ==============
SELLING
Advertising $ 169,317 $ 20,061
Entertainment 36,485 7,571
Printing 5,544 133
Promotion gifts 2,388 800
-------------- --------------
$ 213,734 $ 28,565
============== ==============
COMPUTER
Bandwidth $ 125,895 $ 35,377
Internet services 38,592 9,710
Domain names 22,606 3,075
Computer auxiliary equipment 8,296 4,798
Computer supporting 930 8,300
-------------- --------------
$ 196,319 $ 61,260
============== ==============
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 1999
COMPILATION REPORT
We have reviewed, as to compilation only, the accompanying pro-forma
consolidated balance sheet of DIGITAL ROOSTER.COM INC. (Currently Storimin
Resources Limited) as at October 1, 1999 prepared for inclusion in the Storimin
Resources Limited Management Information Circular dated November 12, 1999
relating to the offer by Storimin Resources Limited to acquire all of the common
shares of Web Dream Inc.
In our opinion, the pro-forma consolidated balance sheet has been properly
compiled to give effect to the proposed transactions and the assumptions
described in note 1 thereto.
"SILVER GOLD GLATT & GROSMAN"
Toronto, Ontario Chartered Accountants
November 12, 1999
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
(Incorporated under the laws of the Province of Ontario)
PRO-FORMA CONSOLIDATED BALANCE SHEET AS AT OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
ASSETS
CURRENT
Cash and short term investments $ 496,412
Accounts receivable 63,069
Prepaid expenses and sundry 4,820
-----------
564,301
MINING PROPERTIES AND DEFERRED EXPLORATION (Note 4) 429,118
CAPITAL ASSETS (Note 5) 108,253
-----------
$1,101,672
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 113,236
Note payable 90,000
Loans payable (Note 6) 17,404
Due to shareholders (Note 7) 38,638
Due to Jazz Monkey Media Inc. (Note 8) 5,188
-----------
264,466
-----------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 9) 967,951
DEFICIT (130,745)
-----------
837,206
-----------
$1,101,672
===========
APPROVED ON BEHALF OF THE BOARD "John A. van Arem" Director "Anthony Korculanic"
------------------ --------------------
Director
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The pro-forma consolidated balance sheet should be read in conjunction with
the unaudited financial statements of Storimin Resources Limited
("Storimin") as at September 30, 1999 and the audited financial statements
of Web Dream Inc. as at August 31, 1999 included elsewhere in the
Management Information Circular.
The pro-forma consolidated balance sheet of Digital Rooster.com Inc., the
proposed new name for Storimin, gives effect to the reverse takeover
whereby Storimin, the legal parent, is acquired by Web Dream Inc., the
legal subsidiary.
The pro-forma consolidated financial statements include the accounts of Web
Dream Inc. and Storimin and its wholly-owned subsidiaries, Pizay
Investments Inc. ("Pizay") and 1032142 Ontario Inc. All material
inter-company balances, transactions and profits have been eliminated.
The pro-forma consolidated balance sheet gives effect to the proposed
acquisition as if it occurred on October 1, 1999 after giving effect to the
following transactions as if they had occurred by October 1, 1999.
a) Storimin consolidated its issued and outstanding common shares on a
1:12 basis;
b) The issue of 28,000,000 common shares of Storimin in exchange for all
of the issued and outstanding securities of Web Dream Inc.;
c) Pursuant to a private placement, Web Dream Inc. issued 906,436 common
shares for aggregate consideration of $453,218, which netted $360,000
to the Company after costs of issuance; and
d) The issue of 800,000 shares of Web Dream Inc. to Tony, Ryan & Co. Inc.
for the provision of investment banking services.
2. BUSINESS COMBINATION
a) The business combination is accounted for by the purchase method, with
Web Dream Inc. being deemed the acquirer, because this exchange of
shares leaves the former shareholders of Web Dream Inc. with the
majority of the issued shares of Storimin. As a result, the balance
sheet of Web Dream Inc. is recorded at book value and the balance
sheet of Storimin is recorded at fair market value (see below).
b) Current assets $ 75,077
Mining properties and deferred exploration 429,118
Liabilities assumed (107,244)
-----------
Cost of purchase $ 396,951
===========
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS AND AMORTIZATION
Capital assets are recorded at historical cost. Amortization is charged to
earnings over the estimated useful life of the assets on the following
basis:
Furniture and equipment - 20% declining balance
Leasehold improvements - 20% straight line
Computer hardware - 30% declining balance
Computer software - 100% declining balance
Capital assets purchased during the year are amortized at one-half the
above stated rates.
MINING PROPERTIES AND DEFERRED EXPLORATION
The acquisition cost of mining properties and the related exploration costs
are deferred on a specific project basis until the commercial viability of
a project is determined. Amortization is provided over the estimated
productive life of the project once commercial production begins. If a
project is abandoned, the accumulated project costs are written off.
FOREIGN CURRENCY TRANSLATION
The Company has translated monetary assets and liabilities, denominated in
foreign currencies into Canadian dollars using the year-end rate of
exchange. The Company translates revenue and expense items, other than
amortization on a monthly basis, at the average rate of exchange for that
month.
MEASUREMENT UNCERTAINTY AND FINANCIAL INSTRUMENTS
The recoverability of the carrying values for mining properties and
deferred exploration expenditures is dependent on the discovery of
economically viable reserves and the ability to obtain the necessary
financing to complete the development and profitable production of the
reserves.
The fair value for the Company's financial instruments approximates their
carrying values unless otherwise stated.
4. MINING PROPERTIES AND DEFERRED EXPLORATION
OPENING CLOSING
BALANCE ADDITIONS BALANCE
Northwest Territories $194,313 $ - $194,313
Lac Rocher, Quebec - 234,805 $234,805
-------- --------- ---------
$194,313 $ 234,805 $429,118
======== ========== ========
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
4. MINING PROPERTIES AND DEFERRED EXPLORATION (Cont'd)
NORTHWEST TERRITORIES
The Company owns 100% of 52 claims in the Northwest Territories.
GOLDEN BOY, MANITOBA
In October 1997, the Company's wholly-owned subsidiary, Pizay, entered into
an agreement with ProAm Explorations Corporation whereby the latter granted
Pizay an exclusive option to acquire an undivided 10% interest in the
property. The consideration to earn this 10% interest was $100,000 cash,
500,000 shares of Pizay valued at $100,000 and a commitment to incur
$600,000 in exploration expenditures over a two year period, subsequent to
which a joint venture will be formed. Flow through financing for $210,000
was obtained in 1997 and the balance of the $300,000 first year's
commitment was secured by a non-interest bearing demand note payable of
$90,000. This agreement was terminated in 1999. All expenditures have been
charged to loss on abandonment of mining properties in the 1999 fiscal
year.
LAC ROCHER, QUEBEC
In March 1999, the Company's wholly-owned subsidiary, 1345969 Ontario
Limited, acquired an undivided 50% interest in 166 mining claims.
5. CAPITAL ASSETS
1999
--------------------------------------
ACCUMULATED NET BOOK
COST AMORTIZATION VALUE
Furniture and equipment $ 10,545 $ 1,360 $ 9,185
Leasehold improvements 5,512 1,323 4,189
Computer hardware 124,110 30,323 93,787
Computer software 2,185 1,093 1,092
------------ ------------- ---------
$ 142,352 $ 34,099 $ 108,253
============ ============= =========
6. LOANS PAYABLE
These loans are unsecured, bear no interest and are due on demand.
7. DUE TO SHAREHOLDERS
Shareholders' advances are unsecured, bear no interest and have no fixed
terms of repayment.
8. DUE TO JAZZ MONKEY MEDIA INC.
This amount, due to a company related to directors of Web Dream Inc., is
unsecured, bears no interest and is due on demand.
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
9. CAPITAL STOCK
AUTHORIZED
Unlimited number of Common shares
Unlimited number of Class A voting preference shares, having a
non-cumulative dividend as determined by the Board of Directors and are
redeemable and retractable
Unlimited number of Class B voting preference shares, having a
non-cumulative dividend as determined by the Board of Directors and are
redeemable and retractable
Unlimited number of non-voting special shares
ISSUED # $
WEB DREAM INC.
Balance as at August 31, 1998 1,000 $ 1,000
Upon private placement of shares on August 18, 1999 2,000,000 150,000
Upon subdivision of common shares on August 18, 1999 9,999,000 -
------------ ------------
Balance as at August 31, 1999 12,000,000 151,000
Upon private placement of shares [see Note 1(c)] 906,436 360,000
Upon issue of shares for services [see Note 1(d)] 800,000 60,000
------------ ------------
Pro-forma balance as at October 1, 1999 13,706,436 571,000
------------ ------------
STORIMIN RESOURCES LIMITED
Balance as at March 31, 1999 24,815,191 2,732,277
Share consolidation on 1:12 basis [see Note 1(a)] (22,747,258) -
Upon issue of shares on reverse takeover [see Note 1(b)] 28,000,000 (2,335,326)
------------ ------------
Pro-forma balance as at October 1, 1999 30,067,933 396,951
------------ ------------
Web Dream Inc. and Storimin Resources Limited combined 43,774,369 967,951
Eliminate consolidation of subsidiary (13,706,436) -
------------ ------------
Pro-forma consolidated balance sheet
as at October 1, 1999 30,067,933 $ 967,951
============ ============
DIGITAL ROOSTER.COM INC.
(CURRENTLY STORIMIN RESOURCES LIMITED)
NOTES TO PRO-FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 1, 1999
(Unaudited - See Compilation Report)
================================================================================
- --------------------------------------------------------------------------------
10. INCOME TAXES
At October 1, 1999, the Company had non-capital losses for income tax
purposes of approximately $130,000 available to offset future taxable
income. The potential tax benefits have not been reflected in these
financial statements. These losses will expire as follows:
2005 $ 4,000
2006 126,000
----------
$ 130,000
==========
11. CONTINGENT LIABILITY
In 1998, a claim was filed against the Company seeking damages of
$2,000,000 resulting from a breach of contract. The Company has defended
the claim on the basis that the contract was properly terminated.
Management believes this action will not have a material adverse effect on
the financial position of the Company and no provision has been reported in
these financial statements.
12. LEASE COMMITMENTS
The Company is obligated under an operating lease for its premises. The
monthly rental payment is $4,686. The lease expires on June 30, 2001.
Future minimum payments for its premises as at October 1, 1999 are as
follows:
2000 $ 56,767
2001 49,537
13. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue relates to the potential problems that may arise due to
possible date limitations in computerized systems. The effects of the Year
2000 Issue may be experienced before, on or after January 1, 2000 and if
not addressed, the impact on operations and financial reporting may range
from minor errors to significant system failure, which could affect an
entity's ability to conduct normal business operations. Management is
confident that it will have programs in place to identify, test and
minimize the Company's exposure to the Year 2000 Issue. They feel that the
costs related to the Year 2000 Issue are not material. However, it is not
possible to be certain that all aspects of the Year 2000 Issue affecting
the Company, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved.
THIS IS SCHEDULE "D" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
SPECIAL RESOLUTION - CHANGE OF CORPORATE NAME
BE AND IT IS HEREBY RESOLVED AS A SPECIAL RESOLUTION THAT:
1. the Articles of the Corporation, shall, pursuant to Section 168(1)(a) of
the Business Corporations Act (Ontario) be amended by changing the name of
the Corporation from Storimin Resources Limited to "Digital Rooster.com
Inc.", or such other name as the Board of Directors of the Corporation
determine in their sole discretion best identifies the Corporation's
activities and as may be allowed by regulatory authorities;
2. in the event that the Director appointed under the Business Corporations
Act (Ontario) or any regulatory authority in Canada, requires that the
name, "Digital Rooster.com Inc.", be amended or further modified for the
purpose of reducing any confusion in the minds of the public or
shareholders of the Corporation, the directors of the Corporation are
hereby authorized to vary the provisions of paragraph 1 above to refer to
such amended or modified name prior to delivery of Articles of Amendment to
the Director for endorsement by articles contemplated herein;
3. the Board of Directors of the Corporation, may pursuant to Section 168(3)
of the Business Corporations Act (Ontario) revoke this special resolution
before it is acted on without further approval of the shareholders; and
4. any officer or director of the Corporation alone be and he is hereby
authorized and directed to execute or cause to be executed, under the seal
of the Corporation or otherwise, and to deliver or cause to be delivered
any and all such documents and instruments and to do or cause to be done
all such other acts and things as, in the opinion of such director or
officer, may be necessary or desirable to fulfil the intent of the
foregoing paragraphs of this resolution including, without limitation, the
delivery of Articles of Amendment, in duplicate, to the Director under the
Business Corporations Act (Ontario).
THIS IS SCHEDULE "E" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
SPECIAL RESOLUTION - CONSOLIDATION OF COMMON SHARES
BE AND IT IS HEREBY RESOLVED AS A SPECIAL RESOLUTION THAT:
I. the articles of the Company be amended as follows:
1. to consolidate all of the issued and outstanding common shares of the
Company into one common share for each presently existing twelve
common shares
II. any one officer or director of the Company is hereby authorized and
directed on behalf of the Company to deliver Articles of Amendment in
duplicate to the Director under the Business Corporations Act (Ontario) and
to sign and execute all documents and to do all things necessary or
advisable in connection with the foregoing; and
III. the board of directors of the Company is hereby authorized to revoke this
special resolution without further approval of the shareholders of the
Company at any time prior to the endorsement by the Director under the
Business Corporations Act (Ontario), of a certificate of amendment of
articles in respect of the amendment referred to above.
THIS IS SCHEDULE "F" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
AMENDMENT TO STOCK OPTION PLAN
WHEREAS shareholders of the Corporation, at the special meeting of
shareholders of the Corporation held on March 31, 1997, approved the adoption of
a stock option plan for the Corporation (the "Plan");
AND WHEREAS the Plan provides for the grant of options to purchase
common shares of the Corporation ("Shares") to employees, officers and directors
of, and consultants to, the Corporation and its subsidiaries, and any employee
of any management company providing services to the Corporation;
AND WHEREAS the maximum aggregate number of Shares that may be issued
pursuant to the exercise of options granted under the Plan is 2,500,000;
AND WHEREAS the Corporation is proposing to acquire all of the issued
and outstanding shares of Web Dream Inc. (the "Proposed Acquisition");
AND WHEREAS the board of directors of the Corporation, by resolution
passed effective November 12, 1999, approved, subject to and conditional upon
receipt of shareholder approval and the completion of the Proposed Acquisition,
an amendment to the Plan to increase the said maximum number from 2,500,000 to
3,000,000;
AND WHEREAS shareholders of the Corporation wish to approve, confirm
and ratify pursuant hereto the said amendment to the Plan;
NOW THEREFORE BE IT RESOLVED THAT:
1. the amendment to the Plan to increase from 2,500,000 to 3,000,000 the maximum
number of Shares which may be issued pursuant to the exercise of options granted
under the Plan be and is hereby approved, confirmed and ratified; and
2. any one director or officer of the Corporation be and is hereby authorized
and directed to execute and deliver on behalf of the Corporation all such
documents and instruments and to do all such other acts and things as in his or
her opinion may be necessary or desirable in connection with the foregoing.
THIS IS SCHEDULE "G" ATTACHED TO AND MADE A PART OF THE INFORMATION
CIRCULAR IN CONNECTION WITH THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
OF STORIMIN RESOURCES LIMITED TO BE HELD ON DECEMBER 14, 1999 AND ANY
ADJOURNMENT THEREOF
NOTICE OF CHANGE OF AUDITORS
NOTICE OF CHANGE OF AUDITOR
REPORTING PACKAGE
The Reporting Package consists of:
1. Notice of Change of Auditor
2. Letter to the Ontario Securities Commission from the Former Auditor.
3. Letter to the Alberta Securities Commission from the Former Auditor.
4. Letter to the Ontario Securities Commission from the Successor
Auditor.
5. Letter to the Alberta Securities Commission from the Successor
Auditor.
6. Officer's Certificate
NOTICE OF CHANGE OF
AUDITORS OF STORIMIN RESOURCES LIMITED
Hilborn Ellis Grant is hereby notified that Storimin Resources Limited
("Storimin") does not intend to reappoint Hilborn Ellis Grant (the "Former
Auditor") as auditors of Storimin at the annual and special meeting of
shareholders to be held on December 3, 1999 (the "1999 Meeting").
Pursuant to a letter of intent (the "Agreement") dated September 2,
1999 between Storimin and Web Dream Inc. ("Web Dream"), Storimin has agreed upon
the principal terms and conditions of a Proposed Acquisition. The Agreement
contemplates the acquisition by Storimin of all of the issued and outstanding
shares of Web Dream. Pursuant to the share purchase agreement providing for this
acquisition, the shareholders of Web Dream will sell all of their shares in the
capital of Web Dream to Storimin in consideration of the issuance from treasury
of 28,000,000 common shares of Storimin for all of the Web Dream shares. This
issuance will result in the former shareholders of Web Dream assuming effective
voting control of Storimin.
Silver Gold Glatt & Grosman, Chartered Accountants, audited the
financial statements of Web Dream for the year ended August 31, 1999. Due to Web
Dream's historical relationship with this firm and the advantages inherent in
continuity, and after discussions between the board of directors of Storimin and
Web Dream and certain shareholders of Web Dream, it has been determined that it
would be in the best interest of the company and its shareholders for Silver
Gold Glatt & Grosman to be its auditors. Under the circumstances, the board of
directors and management of Storimin intend to recommend the appointment of
Silver Gold Glatt & Grosman (the "Successor Auditor") as auditors of Storimin at
the 1999 Meeting.
Pursuant to National Policy Statement No. 31 (the "Policy") of the
Canadian securities administrators, each of Storimin, the Former Auditor and the
Successor Auditor are required to comply with certain reporting obligations to
the shareholders and the applicable securities administrators. The Policy
requires disclosure by Storimin of any "reportable events" which have occurred
in connection with the audits of the two most recently completed fiscal years or
during the period from the most recently completed fiscal year to the date of
the change of auditor (collectively, the "Reporting Periods"). Reportable events
represent occurrences in the relationship between Storimin and the Former
Auditor or the Successor Auditor which may be a contributing factor to the
change of auditor. In the opinion of Storimin, there were no reportable events
in the Reporting Periods.
The Policy also requires a statement as to whether there were any
reservations in the auditors' reports during the Reporting Periods and, if so, a
description of such reservations. In the opinion of management of Storimin,
there have not been any such reservations.
In accordance with the Policy, we hereby request from each of the
Former Auditor and the Successor Auditor, a letter addressed to each of the
Ontario and Alberta Securities Commission stating their agreement or
disagreement with the information contained herein and, in the event of a
disagreement with such information, the reasons for such disagreement.
The information contained herein has been reviewed and approved by the
directors of Storimin.
Storimin Resources Limited
November 3, 1999
HILBORN ELLIS GRANT LLP
8 KING STREET EAST, SUITE 1400
TORONTO, ON M5C 1B5
FAX: (416) 364-9503 TELEPHONE: (416) 364-1359
PRIVATE & CONFIDENTIAL November 4, 1999
Ontario Securities Commission
Suite 800
20 Queen Street West
Toronto, Ontario
M5H 3S8
re: Storimin Resources Limited
--------------------------
Dear Sirs:
We have read the Notice of Change of Auditor of Storimin Resources Limited
dated November 3, 1999 and, based on our knowledge at the date hereof, confirm
that we are in agreement with the statements contained therein.
Yours very truly,
L.J.Saunders/dc (Signed) Hilborn Ellis Grant LLP
cc: Alberta Securities Commission
HILBORN ELLIS GRANT LLP
8 KING STREET EAST, SUITE 1400
TORONTO, ON M5C 1B5
FAX: (416) 364-9503 TELEPHONE: (416) 364-1359
PRIVATE & CONFIDENTIAL November 4, 1999
Alberta Securities Commission
20th Floor
10025 Jasper Avenue
Edmonton, Alberta
T5J 3Z5
re: Storimin Resources Limited
--------------------------
Dear Sirs:
We have read the Notice of Change of Auditor of Storimin Resources Limited
dated November 3, 1999 and, based on our knowledge at the date hereof, confirm
that we are in agreement with the statements contained therein.
Yours very truly,
L.J. Saunders/dc (Signed) Hilborn Ellis Grant LLP
cc: Ontario Securities Commission
SILVER GOLD GLATT & GROSMAN LLP
CHARTERED ACCOUNTANTS
45 ST. CLAIR AVENUE WEST, SUITE 200
TORONTO, ONTARIO, M4V 1K6
TEL.: (416) 967-3444 FAX: (416) 967-3945 EMAIL: SGGG@SGGG.COM
November 4, 1999
Ontario Securities Commission
20 Queen Street West
Suite 800
Toronto ON M5H 3S8
RE: STORIMIN RESOURCES LIMITED
Dear Sirs:
We have read the Notice of Change of Auditor of Storimin Resources Limited dated
November 3, 1999 and are in agreement with the statements contained therein with
respect to our firm.
Yours very truly,
SILVER GOLD GLATT & GROSMAN LLP
(Signed) Randy L. Gold
RLG/sc
SILVER GOLD GLATT & GROSMAN LLP
CHARTERED ACCOUNTANTS
45 ST. CLAIR AVENUE WEST, SUITE 200
TORONTO, ONTARIO, M4V 1K6
TEL.: (416) 967-3444 FAX: (416) 967-3945 EMAIL: SGGG@SGGG.COM
November 4, 1999
Alberta Securities Commission
10025 Jasper Avenue
20th Floor
Edmonton, Alberta T5J 3Z5
RE: STORIMIN RESOURCES LIMITED
Dear Sirs:
We have read the Notice of Change of Auditor of Storimin Resources Limited dated
November 3, 1999 and are in agreement with the statements contained therein with
respect to our firm.
Yours very truly,
SILVER GOLD GLATT & GROSMAN LLP
(Signed) Randy L. Gold
RLG/sc
OFFICER'S CERTIFICATE
The undersigned, France Crawford, Secretary of Storimin Resources
Limited ("Storimin") hereby certifies that the Audit Committee and the Board of
Directors of Storimin have reviewed and approved the Notice of Change of Auditor
dated November 3, 1999 (copy attached) and the accompanying letters relating
thereto from Hilborn Ellis Grant LLP as the Former Auditor, and Silver Gold
Glatt & Grosman LLP as the Successor Auditor.
DATED this 12th day of November 1999.
STORIMIN RESOURCES LIMITED
(Signed) France Crawford
Secretary