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Canadian Northern Lites, Inc.
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CANADIAN NORTHERN LITES INC.
380 - 916 W. Broadway
Vancouver, British Columbia, Canada
V5Z 1K7
NOTICE OF THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD
May 2, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Canadian Northern Lites Inc. will be held at Suite U-13, 601 W. Broadway,
Vancouver, British Columbia, Canada at the hour of 6:00 o'clock p.m., Vancouver
time on Tuesday, May 2, 2000 for the following purposes:
1. To elect the directors for the ensuing year.
2. To appoint auditors for 1998,1999 and 2000.
3. To change the Company's state of incorporation to the state of Nevada.
4. To increase the authorized common stock from 100,000,000, $.001 par value
shares to 200,000,000 $.001 par value shares, and ratify a recapitalization of
the common stock of the Company.
5. To authorize the Officers and Board of Directors to settle a lawsuit
against the Company by Okanagan Opal Inc.
6. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
A Proxy Statement, a Proxy, and audited consolidated financial statements
for the year ended December 31, 1999 accompany this Notice. The enclosed Proxy
Statement should be consulted for further details on the matters to be acted
upon. Shareholders of record at the close of business of April 14, 2000 are
entitled to notice of and to vote at the meeting. Shareholders are requested to
complete, date, sign & return (in the pre-stamped envelope provided for that
purpose) the accompanying Proxy for use at the Annual Meeting.
DATED at Vancouver, British Columbia, Canada, this 18th day of March 2000.
BY ORDER OF THE BOARD
CANADIAN NORTHERN LITES INC.
/s/T.G. Cook
T.G. Cook , President and Director
IMPORTANT:
Whether or not you plan to attend the meeting, please execute and return
the enclosed proxy to 380 - 916 W. Broadway, Vancouver, British Columbia,
Canada, V5Z 1K7. A return envelope is enclosed for your convenience.
Prompt return of the proxy will assure a quorum and save the Company
unnecessary expense. At least ten (10) days before the meeting of the
shareholders, a complete record of the shareholders of the Company
entitled to vote at such meeting, or any adjournment thereof, will be on
file at Suite U-13, 601-W. Broadway, Vancouver, B.C., Canada, V5Z 4C2 and
shall be produced and kept open at the time and place of the meeting.
During all times referred to above, the records shall be subject to the
inspection of any shareholder for the purposes of the meeting.
CANADIAN NORTHERN LITES INC.
380 - 916 W. Broadway
Vancouver, British Columbia, Canada
V5Z 1K7
PROXY STATEMENT
Relating to
ANNUAL MEETING OF SHAREHOLDERS
To be held on May 2, 2000
INTRODUCTION
This Proxy Statement is being furnished by the Board of Directors of Canadian
Northern Lites Inc., a Texas corporation (the "Company"), to holders of shares
of the Company's Common Stock ("Common Stock") in connection with the
solicitation by the Board of Directors of proxies to be voted at the Annual
Meeting of Shareholders of the Company to be held on Tuesday, May 2, 2000 and
any adjournment or adjournments thereof (the "Annual Meeting") for the
purposes set forth in the accompanying Notice of the Annual Meeting. This
Proxy Statement is first being mailed to shareholders on or about April 14,
2000.
PURPOSES OF ANNUAL MEETING
Election of the Board of Directors
At the Annual Meeting, shareholders entitled to vote (see "Voting at Annual
Meeting") will be asked to consider and take action on the election of the
Board of Directors to serve for the ensuing year. See "Election of Directors".
Appointment of Auditors
At the Annual Meeting, shareholders entitled to vote will be asked to appoint
McLean Majdanski, Chartered Accountants as independent auditors for the fiscal
year ending December 31,1998, for the fiscal year ending December 31,1999 and ,
for the fiscal year ending December 31, 2000.
Re-Incorporation in Nevada
At the Annual Meeting, shareholders entitled to vote will be asked to
consider a proposal to change the Company's state of incorporation to the
state of Nevada. See "Re-incorporation in Nevada".
Increasing the Authorized Share Capital
At the Annual Meeting, shareholders entitled to vote will be asked to consider
a proposal to amend the Company's Articles of Incorporation to increase the
authorized common stock from 100,000,000 shares, $.001 par value, to
200,000,000 shares, $.001 par value, and ratify a recapitalization of the
common stock of the Company. See "Increasing the Authorized Share Capital".
Authorizing the Officers and Board of Directors to Settle the Okanagan Opal
Inc. Lawsuit
At the Annual Meeting, shareholders entitled to vote will be asked to consider
a proposal to authorize the Officers and Board of Directors to settle a lawsuit
filed against the Company by Okanagan Opal Inc., in the Supreme Court of
British Columbia on whatever terms the Officers and Board of Directors deem
appropriate, including the relinquishment by Canadian Northern Lites Inc. of
its interest in the Ewer-Klinker property. See "Authorizing Management to
Settle the Okanagan Opal Inc. Lawsuit".
Other Business
To transact other matters as may properly come before the annual meeting or any
adjournment or adjournments thereof.
VOTING AT ANNUAL MEETING
General
The close of business on the Date of April 14, 2000 has been fixed as the
record date for determination of the shareholders entitled to notice of, and to
vote at the Annual Meeting (the "Record Date"). As of March 15, 2000, there
were issued and outstanding 17,211,000 shares of Common Stock entitled to vote.
A majority of such shares will constitute a quorum for the transaction of
business at the Annual Meeting. The holders of record on the Record Date of
the shares entitled to be voted at the Annual Meeting are entitled to cast one
vote per share on each matter submitted to a vote at the Annual Meeting.
Proxies
Shares of Common Stock which are entitled to be voted at the Annual Meeting and
which are represented by properly executed proxies will be voted in accordance
with the instructions indicated in such proxies. If no instructions are
indicated, such shares will be voted in favor of all the matters set out herein
and at the discretion of the proxy holder, any other matters which may properly
come before the Annual Meeting. If no instructions are indicated, such shares
will be voted: (i) FOR the election of Directors nominated herein; (ii) FOR the
appointment of McLean Majdanski as auditors; (iii) FOR a change in the
Company's state of incorporation to Nevada; (iv) FOR a proposed amendment to
the Company's Articles of Incorporation to increase the authorized common stock
from 100,000,000 shares, $.001 par value, to 200,000,000 shares, $.001 par
value, and ratify a recapitalization of the common stock of the Company; (v)
FOR authorization of the Board of Directors to settle a lawsuit as they deem
appropriate; (vi) FOR such other business as properly may come before the
meeting. A shareholder who has executed and returned a proxy may revoke it any
time before it is voted at the Annual Meeting by executing and returning a
proxy bearing a later date, by giving written notice of revocation to the
Secretary of the Company, or by attending the Annual Meeting and voting in
person.
The indication of an abstention on a proxy or the failure to vote either by
proxy or in person will be treated as neither a
vote "for" nor "against" the election of any director. The proposal to change
the Company's state of incorporation to the state of Nevada; and the proposal
to amend the Articles of Incorporation; and the proposal to authorize the
Officers and Board of Directors to settle a lawsuit filed against the Company
by Okanagan Opal Inc., on whatever terms the Officers and Board of Directors
deem appropriate, including the relinquishment by Canadian Northern Lites Inc.
of its interest in the Ewer-Klinker property; must each be approved by the
affirmative vote of two-thirds of shares outstanding entitled to vote whether
present in person or represented by proxy. Each of the other matters must be
approved by the affirmative vote of a majority of shares outstanding entitled
to vote whether present in person or represented by proxy. Abstention from
voting will have the practical effect of voting against these matters since it
is one less vote for approval. Broker non-vote shares held by brokers or
nominees for the accounts of others as to which voting instructions have not
been given, will be treated as shares that are present for determining a
quorum, but will not be counted for purposes of determining the number of votes
cast with respect to a proposal. Brokers and nominees, under applicable law,
may vote shares for which no instructions have been given in their discretion
in the election of directors. The Company will bear all cost and expenses
relating to the solicitation of proxies, including the costs of preparing,
printing and mailing this Proxy Statement and accompanying material to
shareholders. In addition to the solicitation of proxies by use of the mails,
the directors, officers, and employees of the Company, without additional
compensation, may solicit proxies personally or by telephone or fax.
Please note that shareholders who receive their Meeting materials via ADP Proxy
Services ("ADP") or via Independent Investor Communications Corporation
("IICC") must return the proxy forms, once voted , to ADP or IICC,
respectively, for the proxy to be valid.
1. ELECTION OF DIRECTORS
It is intended that the proxies solicited hereby will be voted for election of
the nominees for director listed below, unless authority to do so has been
withheld. The Board of Directors knows of no reason why any of its nominees
will be unable to accept election. However, if a nominee becomes unable to
accept election, the Board will either reduce the number of directors to be
elected or select substitute nominees. If substitute nominees are selected,
proxies will be voted in favor of such nominees. The Board of Directors is
elected to serve until the Company's next Annual Meeting. During the course of
the 1997-1998 period, all four directors tendered their resignations..
Resigning as directors were Michael Cox, David Rambaran, David Radbourne, and
Santbir Minhas. Prior to resigning these directors appointed three new
directors as interim directors until the next Annual Meeting. Appointed on May
1, 1998 as interim directors (with one directorship left vacant) were Larry
Low, Cam Dalgliesh, and T.G. Cook.
Nominees
The following information relating to the nominees as Directors is based on
information received by the Company from said nominees.
Proposed Nominee Voting Common
And Position in the Director Shares Owned % of
Company Background of the Nominee Since Beneficially Class
Larry Low (1) A graduate of the University of British May1, 1998 0 0
Vancouver, Columbia and of Capilano College.
Canada Currently a Director of the Company.
Employed since 1997 as an information
Director technology consultant with The CGI
Group Inc., an international information
technology firm based in Vancouver.
Cam Dalgliesh (1) A graduate of the University of May 1, 1998 0 0
North Vancouver, Alberta (B.A.).
Canada Currently a Director of the Company.
An independent businessman with
Secretary and experience in several small and medium-
Director sized businesses, including Factory
Direct Sports Ltd. (1995 - 1997)
(sporting goods distributor); and Solid Gold
(1993 - 1995) (retail discount programs).
T.G. Cook (1) An MBA graduate of Harvard Business May 1, 1998 1,686,000 (2) 9.8%
Vancouver, School.
Canada Currently a Director of the Company.
President and Director since 1978 of Westridge
President and Capital Ltd. a management and investment
Direct company, with over 20 years experience in
creating and building small and medium-
sized businesses and real estate ventures.
(1) None of the director nominees serves as a director for any company
registered under the Securities Exchange Act of 1934.
(2) These shares are held by Hudson Capital Corporation, a company
controlled by T.G.Cook.
Board and Committee Meetings
The Board held two meetings during fiscal year 1998 and two meetings
during fiscal year 1999. Each Director whose reelection is proposed and
who served as a member of the Board during fiscal year 1998 and 1999
attended 100% of the aggregate number of meetings of the Board and of the
committees of which he is a member.
The Company's Board of Directors has formally designated one Committee: an
Audit Committee. The company does not have a nominating committee.
The Audit Committee consisting of Mr. Dalgliesh and Mr. Cook for fiscal
year 1998 and fiscal year 1999, generally engages in oversight of the
structure of the Company's internal controls, reviews the selections of
the independent auditors, reviews the annual audit plan, and oversees the
Company's financial reporting. However, the responsibility to review and
approve internal accounting and controls; quarterly financials;
registration statements; reports to the SEC; financial press releases;
cost of conduct; and any other legal/ethics audit (except as these matters
have a direct bearing on the duties stated above) remain the
responsibility of the full Board of Directors. Mr Dalgliesh and Mr. Cook
will serve on the Audit Committee for fiscal year 2000.
MANAGEMENT RECOMMENDS THAT THE SHARHOLDERS VOTE "FOR" THE NOMINEES TO THE
BOARD OF DIRECTORS OF THE COMPANY.
2. RATIFICATION OF AUDITORS FOR FISCAL YEARS 1998, 1999, & 2000.
McLean Majdanski, independent public accountants, have again been
selected by the Board of Directors as the independent auditors for the
Company for the fiscal year ending December 31, 1998, fiscal year ending
December 31, 1999, and the fiscal year ending December 31, 2000 subject to
approval by the shareholders. McLean Majdanski has served as an
independent auditor for the Company since the fiscal year ended December
31, 1997. This firm is experienced in the field of accounting and is well
qualified to act in the capacity of auditors.
A representative of McLean Majdanski is expected to attend the Annual
Meeting to make a statement, if he or she so desires, and to be available
to respond to questions from the shareholders.
MANAGEMENT RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE RATIFICATION OF
AUDITORS.
3. RE-INCORPORATION IN NEVADA
Over the past few months your Company's new Board of Directors has
conducted an intensive review of the Company's prospects for the future,
with a view to finding the most effective way to enable the Company to
survive and be resurrected in some form as a viable, actively-traded
public company. It is essential to reposition the Company , after being
preoccupied for almost two years with trying to make a success of its
minority interest in the Ewer-Klinker mineral property in southwestern
British Columbia. This will involve restructuring the Company's balance
sheet, corporate and legal affairs, and share capital in order to be able
to offer Canadian Northern Lites as an attractive publicly-traded vehicle,
suitable for the vend-in of an expanding operating company; or a promising
new venture capable of capturing the fascination of small-cap investors.
The climate of rapid and constant change in the marketplace and in
industry dynamics poses a serious threat to companies with rigid
structures, whose ability to adapt quickly and effectively is constrained
by rigidity in the Company's articles and bylaws; in the Texas Business
Corporation Act; or in the Company's corporate structure.
As many of you are aware, the past couple of years has seen significant
developments that present serious challenges to the rejuvenation of
Canadian Northern Lites Inc. The mining industry has been rendered
virtually uneconomic for all but the industry's most senior companies as a
result of a deadly combination of steep declines in commodity prices and
the virtual disappearance of investment capital to finance junior
exploration companies, as a direct result of Bre-X and other debacles. In
addition, the regulatory environment for NASDAQ Bulletin Board companies
has come under intensive scrutiny with stiffer requirements to obtain and
maintain a quotation on the Bulletin Board, as well as higher standards
for a company to "graduate" to a more prestigious Nasdaq Small-Cap or
Nasdaq National Market listing. This "graduation" is usually critical to
a company being able to attract serious amounts of equity capital.. In
August 1999 the Company filed a Form 10KSB at the Securities and Exchange
Commission. resulting in the Company becoming a fully-reporting
company.While the Company responds to SEC comments on its Form 10KSB, the
Company's shares will trade on the National Quotation Bureau's Electronic
Pink Sheets, under the symbol CANL. At such point as the SEC has no
further comments on the Company's initial Form 10KSB the Company's shares
will become eligible for quotation on the Over-the-Counter Bulletin Board.
In view of the demanding environment described above, your Board of
Directors has conducted an intensive review of the Company's status as a
Texas Corporation, and more specifically, has conducted a thorough
examination of the Texas Business Corporation Act and comparing it with
the Corporation Act of other states. The Board is particularly concerned
with and desirous:
a) of locating a State Law that is progressive and provides a company with
the flexibility essential to allow the Company to compete in an intensely
competitive business environment and
b) that ongoing costs of legal advice be kept reasonable, particularly
in view of the Company's modest size.
Your Board concluded that:
a) It would be expensive to require expertise in the Texas Business
Corporation Act, in order to manage a company operating in the Pacific
Northwest. The Company's status as a publicly-traded company, with
limited capital, make it particularly critical to be domiciled in a state
whose laws have the clarity and flexibility to keep legal costs under
control . Unfortunately without close attention to the efficiency of its
legal work, the legal costs of a small public company can become a major
cost of operating the firm. In addition to the added expense, the need for
Texas legal expertise could prove to be a cumbersome impediment to
responding quickly to evolving opportunities.
b) The State of Nevada offers a Business Corporation Act that contains
statutes that are clear and concise, and provide the ongoing flexibility
the Company needs in order for Canadian Northern Lites Inc. to become an
exceptionally attractive publicly-traded vehicle.
In addition, as a Nevada company, the Company would be very capable of
obtaining cost-effective legal advice as it is quite common for a company
to be incorporated in Nevada.
c) From direct and recent experience by the President in investigating the
merits of incorporation in Nevada, the representatives of the Secretary of
State of Nevada demonstrate an impressive attitude of cooperation and
assistance in aiding business and a recognition that the relative cost of
doing business in a particular state is very important to the Company.
There is no corporate income tax, no personal income tax, and no franchise
tax in the state of Nevada.
d) The Nevada Secretary of State sent materials addressed "Dear Customer"
that were extremely easy to read and understand by a layman, and left the
unmistakable impression that Nevada is committed to attracting and
retaining business, and ensuring a minimum of rigid legal and
administrative constraints.
General
The Company's Board of Directors (the "Board of Directors" or the "Board")
unanimously believes it to be in the best interests of the Company and its
shareholders for the Company to change its state of incorporation from Texas to
Nevada.
The principal effect of this proposal is to quickly and cost-effectively
enhance the attractiveness of Canadian Northern Lites Inc. as a publicly-traded
vehicle for a merger partner; as the Nevada Act will enable the Company to
adapt and respond opportunistically to a business environment of constant
change.
In the re-incorporation, all outstanding shares of common stock of the Company,
a Texas corporation, will be automatically converted, on a share-for-share
basis, into comparable shares of a new Nevada corporation to be formed. The
proposed re-incorporation will result in several important changes in the
rights of shareholders.
Reasons for Re-incorporation
The Board of Directors unanimously believes that the benefits far outweigh the
very modest costs of re-incorporating the Company in Nevada.
The benefits are immediate and substantial. The benefit of a Corporation Act
that provides the Company with flexibility (as discussed above, see "principal
effect") together with a state tax system in which there is no corporate state
income tax nor any state personal income tax, should provide the Company with a
real competitive advantage in attracting an established , profitable business
as a merger partner. See "Possible Disadvantages" below.
Possible Disadvantages
Possible disadvantages of re-incorporating in Nevada could include the
following:
Loans to Officers do not require the approval of a majority of shareholders as
they do under Texas Law; furthermore, removal of directors by shareholders is
more difficult in Nevada (see "Removal of Directors" and "Loans to Officers"
below).
Mergers require the approval of holders of 2/3 of the Company's outstanding
shares under Texas Law; whereas a majority is sufficient under Nevada Law (see
"Shareholder Vote for Mergers", below)
Appraisal rights are granted to shareholders in more situations under Texas Law
than under Nevada Law - eg. Mergers. (see "Appraisal Rights" below).
Significant Differences Between the Corporation Laws of Texas and Nevada
It is not practical to describe all the differences between Texas law and
Nevada law. The following is a summary of certain differences which may affect
the rights of shareholders of the Company. This summary is qualified in its
entirety by reference to the full text of such documents. For information as
to how such documents may be obtained, see "Available Information". Canadian
Northern Lites is incorporated under the laws of Texas. The rights of
shareholders of Common Stock are governed by Texas Law and assuming that there
are no other agreements in existence, those rights are governed by the Texas
Corporate Law and Canadian Northern Lites Certificate of Incorporation and By-
laws.
The corporation laws of Texas and Nevada differ in many respects and it is not
practical to summarize all of such differences here. Certain significant
differences which affect the interests of shareholders, are as follows:
(1) Number of Directors. Under Texas law, the authorized number of directors
may be changed by an amendment to the bylaws which the directors may be
authorized to adopt, whereas under Nevada law only the shareholders can
change the authorized number of directors unless the shareholders have
adopted a provision in the articles of the Company or bylaws permitting
the directors to fix their number within the bounds of a stated minimum
and maximum number. The Company's Texas Articles permit the directors to
fix the number of directors within a minimum of 3 and a maximum of 7.
(2) Shareholder Vote for Mergers. In the area of mergers or by other
corporate reorganizations, Texas law differs from Nevada law in a number
of respects. Generally, Nevada law requires a shareholder vote in more
situations than does Texas law. Texas provides for shareholder votes
(except as indicated below) by both the acquiring and the acquired company
to approve mergers and by Shareholders of the acquired company for the
sale by a company of substantially all of its assets. In addition to the
foregoing, Texas provides for votes by the shareholders of an acquiring
company in either share-for-share exchanges or sale of assets
reorganizations.
(3) Appraisal Rights. Generally, Texas law gives appraisal rights in more
situations than does Nevada law. Both Nevada and Texas provide such
rights to shareholders entitled to vote in certain merger transactions.
(4) Removal of Directors. Under Nevada law, a director may be removed with or
without cause by a two-thirds shareholder vote, provided that (if the
company had cumulative voting) the shares voted against such removal
would not have been sufficient to prevent the election of the director.
Under Texas law, a director of a company can be removed without or with
cause unless the Certificate of Incorporation or the company otherwise
provides.
(5) Loans to Officers. Under Nevada law, a company may make loans to or
guarantee the obligations of or otherwise assist its officers or other
employees when such action, in the judgement of the directors, is fair to
the company (and the interested director discloses the terms of the
transaction; and the interested director does not vote) and a majority
vote of shareholders approves the transaction. Under Texas law, any such
loan or guaranty to or for the benefit of a director or officer of the
company or any of its subsidiaries requires a majority vote of
shareholders (excluding the vote of any benefited director or officer).
(6) Indemnification. The Texas and Nevada Corporation laws have similar
provisions and limitations regarding indemnification by a company of its
officers, directors and employees. Texas has adopted legislation
authorizing the inclusion of a provision in the certificate of
incorporation of Texas companies eliminating or limiting the personal
liability of directors of Texas companies to the company or its
shareholders for monetary damages for conduct as a director. The statute
provides, however, that no such provision can eliminate or limit a director's
liability (i) for breach of the director's duty or loyalty, (ii) for acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of law, (iii) for willful or negligent conduct in paying dividends or
repurchasing stock out of other than lawfully available funds, or (iv) for any
transaction from which the director derives an improper personal benefit.
(7) Inspection of Shareholders' List. Texas law provides for an absolute
right of inspection of the shareholders' list for shareholders who have
held of record, shares of the company for 6 months or shareholders holding
5% or more of the company's shares. Nevada law allows any shareholders
who have held of record, shares of the company for 6 months or
shareholders holding 5% or more of the company's shares to inspect the
shareholders' list for a purpose reasonably related to such person's
interest as a shareholder.
(8) Voting Rights And Quorum Requirements. Under Nevada Law each holder of
record of Common Stock is entitled to one vote per share. The presence,
in person or by proxy, of the holders record of shares of Common Stock
entitling the holders thereof to cast a majority of the votes entitled to
be cast, shall constitute a quorum. Under Nevada law action by
shareholders can be taken to a meeting if a majority of shareholders
consent in writing. Under Texas Law and the company's By-laws, each
shareholder entitled to vote at a meeting of shareholders may authorize
another person or persons to act for him by proxy. Unless the proxy
provides for a longer period, no proxy may be voted or acted upon after
three years from its date. The company's By-laws provide that in all
elections of directors, the voting may (but need not) be by ballot.
(9) Required Vote For Authorization Of Certain Corporate Actions. Under Texas
law, most fundamental corporate changes, including the amendment of the
company's certificate of incorporation, a merger or consolidation or the
dissolution of the company, must be approved by the affirmative vote of
two-thirds of the outstanding shares of capital stock entitled to vote
thereon. Texas law provides appraisal rights for certain mergers and
consolidations. Appraisal rights are not available to holder of (i)
shares listed on a national securities exchange or held of record by more
than 2,000 Shareholders or (ii) shares of the surviving company of the
merger, if the merger did not require the approval of the shareholders of
such company, unless, in either case, the holders of such stock are
required pursuant to the merger to accept anything other than (A) shares
of stock of the surviving company; (B) shares of stock of another company
which are also listed on a national securities exchange or held of record
by more than 2,000 shareholders; and/or (C) cash in lieu of fractional
shares of such stock.
(10) Under Nevada law, most fundamental corporate changes, including amendment
of the certificate of incorporation, a merger or consolidation or the
dissolution, must be approved by the affirmative vote of a majority of the
outstanding shares of capital stock entitled to vote thereon. Nevada law
provides appraisal rights for certain mergers and consolidations. No
appraisal rights exist if a company's shares are listed on a national
securities exchange or held of record by more than 2,000 shareholders.
Under Nevada Law, each holder of record of Common Stock is entitled to one
vote per share. The presence, in person or by proxy, of the holders of
record of shares of capital stock entitling the holders thereof to cast a
majority of the votes entitled to be cast by the holders of shares of
capital stock shall constitute a quorum. Under Nevada Law, each
shareholder entitled to vote at a meeting of shareholders may authorize
another person or persons to act for him by proxy.
Available Information:
Shareholders may wish to consult the relevant internet sites of Texas and
Nevada which are listed below:
Nevada internet address: http://www.leg.state.nv.us/index.htm
Texas internet address: http://www.capitol.state.tx.us/statutes/butoc.html
Shareholders are cautioned that the content of the foregoing internet
"web" sites may not reflect current legislation in the States of Texas or
Nevada. Shareholders may also wish to consult legal counsel in Texas and
Nevada.
Mechanics of Re-incorporation
The proposed re-incorporation will be effected by organizing and forming,
Canadian Northern Lites Nevada Inc., a Nevada Corporation. Upon the
effective date of the re-incorporation each outstanding share of Canadian
Northern Lites Inc. common stock will automatically be converted into one
share of Canadian Northern Lites Nevada Inc. common stock. Each
outstanding certificate representing shares of Canadian Northern Lites
Inc. common stock will continue to represent the same number of shares of
common stock of Canadian Northern Lites Nevada Inc.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE THEIR
EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF CANADIAN NORTHERN
LITES NEVADA INC..
In accordance with Texas law, the affirmative vote of at least two-thirds
(2/3's) of the common stock of Canadian Northern Lites Inc. is required
for approval of the re-incorporation and the other terms of the proposed
re-incorporation. The Texas Business Corporation Act contains no
provisions for dissenters' or appraisal rights on the part of the
shareholders of Canadian Northern Lites Inc. in connection with the
proposed re-incorporation.
No Change will be Made in the Name, Business or Physical Location of the
Company
The proposed re-incorporation from Texas to Nevada will effect a change in
the legal domicile of the Company and other changes of a legal nature,
some of which are described in this Proxy Statement. However, the re-
incorporation will not result in any significant change in the name,
business, management, location of the principal executive offices, assets,
liabilities or net worth of the Company. The Board of Directors
recommends adoption of all of the proposed amendments. Adoption of the
amendments requires the affirmative vote of the holders of two-thirds
(2/3's) of the outstanding voting stock of the Company, voting as a single
class.
MANAGEMENT RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THIS PROPOSAL TO
RE-INCORPORATE IN THE STATE OF NEVADA.
4. INCREASING THE AUTHORIZED SHARE CAPITAL
On February 3, 2000, the Board of Directors of the Company adopted a plan to
increase the authorized capital of the Company whereby the Company's
authorized capital would be changed from 100,000,000 shares of stock,
$.001 par value per share, to 200,000,000 shares of stock, $.001 par value
per share.
The Company is considering future issuances of debt and/or equity
securities (which may include shares of common stock or securities
convertible into or exercisable for shares of common stock) in order to
make a public or private offering of stock, increase the Company's
available cash, to retire debt and to improve the Company's financial
condition. Such securities would be sold or issued by the Company upon
such terms and conditions as the Board of Directors may subsequently
determine. The Company has no present commitments, agreements, or intent
to issue additional shares of Voting Common Stock, other than with respect
to currently reserved shares, in connection with transactions in the
ordinary course of the Company's business.
In the considered unanimous opinion of the Board of Directors, the
proposed plan will place the Company in a more favourable position to
attract and properly structure the terms of additional financing, if
needed. The Board of Directors may, from time to time in the future,
enter into negotiations with private and institutional investors, or
others with stock. If approved by the shareholders, such additional
authorized shares would be available for issuance (subject to applicable
federal and state securities laws and state corporate law) to take
advantage of future opportunities for equity financing to improve the
Company's capital structure, and for other corporate purposes.
The Board of Directors has adopted resolutions proposing that the Articles
of Incorporation be amended to increase the number of shares of common
stock which the Company is authorized to issue from 100,000,000, $.001 par
value, to 200,000,000 $.001 par value.
If approved by the shareholders, such additional authorized shares would
be available for issuance at the discretion of the Board of Directors
without further shareholder approval (subject to applicable Federal and
State Securities Laws and by law) to provide the Company with adequate
flexibility in the future, to take advantage of future opportunities for
equity financing to improve the Company's capital structure, and for other
corporate purposes, without the delay and expense incident to the holding
of a special meeting of shareholders to consider the specific issuances.
The holders of Common Stock of the Company are not entitled to preemptive
rights or cumulative voting. Accordingly, the issuance of additional
shares of Common Stock might dilute, under certain circumstances, the
ownership and voting rights of Shareholders.
Proposed Text of Amendment to Articles of Incorporation
It is proposed that an amended and restated Article Two Section 3A and 3B
replace the existing Article 2 Section 3 to the Articles of Incorporation
regarding capitalization as follows:
ARTICLE TWO
CAPITALIZATION
Section 3A: Aggregate Number of Shares. The total number of shares which
the Company shall have authority to issue is 200,000,000 shares of Common
Stock of the par value of $.001 per share.
Section 3B: Rights of Common Stock. The Common Stock may be issued from
time to time in one or more series and with such designation for each such
series as shall be stated and expressed in the resolution or resolutions
providing for the issue of each such series adopted by the board of
directors. The board of directors in any such resolution or resolutions
is expressly authorized to state and express for each such series:
(i) The voting powers, if any, of the holders of stock of such series;
(ii) The rate per annum and the times at and conditions upon which the
holders of stock of such series shall be entitled to receive
dividends, and whether such dividends shall be cumulative or
noncumulative and if cumulative the terms upon which such dividends
shall be cumulative;
(iii) The price or prices and the time or times at and the manner in
which the stock of such series shall be redeemable and the terms and
amount of any sinking fund provided for the purchase or redemption of
shares;
(iv) The rights to which the holders of the shares of stock of such series
shall be entitled upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company;
(v) The terms, if any, upon which shares of stock of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or classes or of any other series of the same or any other
class or classes, including the price or prices or the rate or rates
of conversion or exchange and the terms of adjustment, if any; and
(vi) Any other designations, preferences, and relative participating,
optimal or other special rights, and qualifications, voting rights,
limitations or restrictions thereof so far as they are not
inconsistent with the provisions of the Articles of Incorporation, as
amended, and to the full extent now or hereafter permitted by the
laws of Texas.
The Amendment to the Articles of Incorporation requires the affirmative vote of
the holders of two-thirds (2/3's) of the outstanding voting stock of the
Company, voting as a single class.
MANAGEMENT RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THIS PROPOSAL TO
INCREASE THE AUTHORIZED SHARE CAPITAL
5. AUTHORIZING MANAGEMENT TO SETTLE THE OKANAGAN OPAL INC. LAWSUIT
On April 2, 1997, the Company was named as a Defendant in certain
litigation initiated by Okanagan Opal Inc., namely Okanagan Opal Inc. vs
Canadian Northern Lites Inc., Case No. 1618 Revelstoke Registry (Supreme
Court British Columbia, Canada). The Complaint alleges damages of $30,000
plus interest at 24%/annum since mid-1996 resulting from alleged non-
payment by Canadian Northern Lites of invoices from Okanagan Opal Inc.
pertaining to services allegedly rendered and products allegedly provided
by Okanagan Opal in 1996.
Your Management strenuously denies any and all allegations made in the
Plaintiff's Statement of Claim, No.1618 Revelstoke B.C. Registry, between
Okanagan Opal Inc. (Plaintiff) and Canadian Northern Lites
Inc.(Defendant), and is prepared, if necessary, to defend itself
vigorously in a Court of Law. However, your Management believes that the
long-running lawsuit by Okanagan Opal Inc. is a significant distraction
for Management; is generating costly legal expenses that Canadian Northern
Lites can ill afford; and is a serious impediment to your Company
rebuilding itself by means of an attractive acquisition or merger.
Proceeding through the court system is a long expensive process that
exposes the Company to the risk of an adverse court judgement. Further, as
a result of the extremely unfavorable terms contained in the Option
Agreement with Okanagan Opal, the value to Canadian Northern Lites
shareholders of a courtroom victory is highly questionable.
In view of the above it is proposed to authorize the Officers and Board of
Directors of Canadian Northern Lites Inc. to settle the lawsuit with
Okanagan Opal Inc. on whatever terms the Officers and Directors deem
appropriate, including relinquishing Canadian Northern Lites Inc.'s
interest in the Ewer-Klinker property.
In accordance with Texas law, the affirmative vote of at least two-thirds
(2/3's) of the common stock of Canadian Northern Lites Inc. is required
for approval to settle the Okanagan Opal Inc. lawsuit..
The effect of the affirmative vote of at least two-thirds (2/3's) of the
common stock of Canadian Northern Lites Inc. will be to authorize
Management to settle this lawsuit on terms Management deems appropriate.
MANAGEMENT RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THIS PROPOSAL TO
AUTHORIZE THE OFFICERS AND BOARD OF DIRECTORS TO SETTLE THE LAWSUIT WITH
OKANAGAN OPAL INC. ON WHATEVER TERMS MANAGEMENT DEEMS APPROPRIATE.
6. TO TRANSACT SUCH BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING
OR ANY ADJOURNMENT THEREOF.
At the date of this proxy statement, the Board of Directors knows of no
other matters which will be presented for consideration at the Annual
Meeting. However, if any such other matters are properly presented for
action at the Annual Meeting, it is the intention of the persons named in
the accompanying form of proxy to vote the shares represented by the proxy
in accordance with their judgement on such matters, and discretionary
authority to do so is granted in this Proxy.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 15, 2000 the amount and percentage
of the Voting Common Stock of the Company, which according to information
supplied by the Company, is beneficially owned by Management, including
officers and directors of the Company.
Title of Name of Amount & Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
Common T.G. Cook (2)
(Officer & Director) 1,686,000 (1) 9.8%
Common Cam Dalgliesh (2)
(Officer & Director) 0 0
Common Larry Low (2) 0 0
(Director)
(1) shares are held by Hudson Capital Corporation, a company controlled by
T.G. Cook.
(2) Officers and Directors as a Group (3 Persons) are the beneficial
owners of 1,686,000 shares, or 9.8% of the outstanding common shares.
SECURITY OWNERSHIP OF SIGNIFICANT SHAREHOLDERS
The Table below lists as of March 15, 2000 all persons or companies the
Company is aware of as being the beneficial owner of more than five percent
(5%) of the common stock of the Company.
Table of Significant Shareholders
5% Shareholders
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class (2)
Common Terry G. Cook (1) 1,686,000 9.8%
Common William E.Gould 1,480,000 8.6%
Common Myron Kinach 1,475,000 8.6%
Common William Lumley 1,440,000 8.4%
TOTAL 6,081,000 35.4%
(1) shares are held by Hudson Capital Corporation, a company controlled by
T.G.Cook. 1,500,000 of these shares are restricted pursuant to Rule 144.
(2) Based on 17,211,000 shares outstanding.
RELATED PARTY TRANSACTIONS
The Company acquired on May 5, 1998, a 100% interest in certain strategic
mineral claims known as Way I, Banjo I, and Banjo II in the immediate vicinity
of the Company's Ewer-Klinker Property in southwestern British Columbia, from
456786 B.C. Ltd., a company indirectly controlled by T.G. Cook, President and
Director of Canadian Northern Lites Inc., in exchange for a Promissory Note Due
on Demand for $50,000 USD with interest at 8%, calculated and compounded semi-
annually.The mineral claims were recorded in the Company's books at the $24,841
cost to the significant shareholder and the principal of the note payable was
reduced by the significant shareholder from $50,000 to $24,841. No independent
evaluation by an investment banking firm was obtained on the transaction.
In a separate transaction 1,500,000 common voting shares were issued to a
company controlled by T.G. Cook, President and Director of Canadian Northern
Lites Inc. in exchange for cancellation of debt outstanding.
REMUNERATION OF DIRECTORS AND OFFICERS
Compensation of Directors and Executive Officers
The Company had one Executive Officer during the fiscal year ended December 31,
1997. Total remuneration of $37,000 was billed by the former executive, to the
Company or its wholly-owned subsidiary during fiscal year 1997. The Company
had one Executive Officer during the period beginning January 1,1998 and ending
April 30, 1998. No remuneration was billed to the Company or its wholly-owned
subsidiary for this period. The Company had one Executive Officer during the
period beginning May 1,1998 and ending December 31, 1998. Total remuneration of
$18,000 was billed by the executive to the Company or its wholly-owned
subsidiary during this period. The Company had one Executive Officer during the
fiscal year ended December 31, 1999. Total remuneration of $ 24,000 was billed
by the executive to the Company or its wholly-owned subsidiary during this
period. The Company had a maximum of four (4) Directors during the fiscal year
ended December 31, 1997 and four (4) directors for the subsequent period ending
April 30,1998. The Company had three (3) directors for the subsequent period
ending December 31,1998; and for the subsequent year ending December 31, 1999.
No remuneration has been paid by the Company to the Directors . No pension or
retirement benefits are payable to the Executive Officer or Directors. The
Company has no Stock Option Plan.
SHAREHOLDERS' PROPOSALS FOR 2000 MEETING
Any appropriate proposal submitted by a shareholder of the Company intended to
be presented at the next Annual Meeting in May 2000 must be received by the
Company by February 2, 2000 to be included in the Company's proxy statement and
related proxy for the May 2000 Meeting.
ANNUAL REPORT & FORM 10-KSB
A copy of the Company's Audited Financial Statements for the fiscal year ended
Dec. 31, 1999 accompanies this Proxy Statement. No portion of the Financial
Statements are incorporated herein and no portion is to be considered proxy
soliciting material. A copy of the Company's Annual Report to the Securities
and Exchange Commission on Form 10-KSB, including the financial statements and
the schedules thereto, for the Fiscal Year ended December 31, 1999 will be sent
to those shareholders who request a copy by sending a letter addressed to
Canadian Northern Lites, 380 - 916 W. Broadway, Vancouver, British Columbia,
Canada, V5Z 1K7.
By Order of the Board of Directors
/s/T.G. Cook
T.G. Cook
March 15, 2000 President and Director
CANADIAN NORTHERN LITES INC.
Vancouver, British Columbia, Canada
Fax: (604) 879-9004
PROXY
THIS PROXY IS SOLICITED BY MANAGEMENT OF THE COMPANY AND WILL BE USED AT THE
ANNUAL MEETING OF SHAREHOLDERS ON May 2, 2000, at 6:00 P.M., Vancouver, B.C.
The undersigned nominates, constitutes and appoints T.G. Cook and
Cam Dalgliesh, and each of them proxies of the undersigned, with the full power
of substitution to attend, act and vote in respect of all shares held by the
undersigned at the annual meeting of shareholders of the Company to be held on
May 2, 2000, or any adjournment or adjournments thereof, with all powers the
undersigned would have if personally present.
THE SHARES WILL BE VOTED AS DIRECTED WITH RESPECT TO OTHER MATTERS OF BUSINESS
PROPERLY BEFORE THE MEETING AS THE PROXIES SHALL DECIDE. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4, 5 and 6.
1. TO ELECT DIRECTORS:
( ) FOR all nominees listed below, (except as marked to the contrary)
LARRY LOW, CAM DALGLIESH, T.G. COOK
To withhold authority for any individual nominee, write that nominee's name on
the space provided below:
( ) WITHHOLD AUTHORITY to vote for all nominees listed above
2. TO APPROVE THE SELECTION OF McLEAN MAJDANSKI AS INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEARS ENDED DECEMBER 31, 1998, DECEMBER 31, 1999 &
DECEMBER 31, 2000.
FOR ( ) AGAINST ( ) ABSTAIN ( )
3. TO APPROVE A CHANGE IN THE STATE OF INCORPORATION FROM TEXAS TO NEVADA.
FOR ( ) AGAINST ( ) ABSTAIN ( )
4. TO CONSIDER AND VOTE UPON A PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES
OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK FROM 100,000,000
SHARES, $.001 PAR VALUE TO 200,000,000 SHARES, $.001 PAR VALUE;
FOR ( ) AGAINST ( ) ABSTAIN ( )
5. TO AUTHORIZE THE OFFICERS AND BOARD OF DIRECTORS OF CANADIAN NORTHERN LITES
INC. TO SETTLE THE LAWSUIT WITH OKANAGAN OPAL INC. ON WHATEVER TERMS THE
OFFICERS AND DIRECTORS DEEM APPROPRIATE, INCLUDING RELINQUISHING CANADIAN
NORTHERN LITES INC.'S INTEREST IN THE EWER-KLINKER PROPERTY.
FOR ( ) AGAINST ( ) ABSTAIN ( )
6. In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the meeting.
Sign exactly as your name appears hereon. When signing in a representative or
fiduciary capacity, indicate title. If shares are held jointly, each holder
should sign. For a Company, the full Company name should be signed by a duly
authorized officer who should state his/her title. For a partnership, an
authorized person should sign in the partnership name.
YOU MAY FAX YOUR PROXY TO: 1-604-879-9004
__________________________________ ____________________________________
Signature of Shareholder Name of Shareholder - (PLEASE PRINT)
Number of Common Shares represented by this proxy: _________
PART F/S
ITEM 1. AUDITED FINANCIAL STATEMENTS - DECEMBER 31, 1999
The financial statements and notes thereto are attached hereto and found
immediately following the text of this Registration Statement. The audit report
of McLean Majdanski, Chartered Accountants, for the audited financial statements
for Fiscal 1999, 1998 and notes thereto are included herein immediately
preceding the audited financial statements.
(A-1) Audited Financial Statements: December 31, 1999 and December 31, 1998
Auditor's Report, dated March 27, 2000
Consolidated Balance Sheets at December 31, 1999 and December 31, 1998
Consolidated Statements of Operations for the Years Ended December 31, 1999 and
1998
Consolidated Statements of Shareholders' Deficit From Inception on June 18, 1990
Through December 31, 1999
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999 and
1998
Notes to Consolidated Financial Statements
CANADIAN NORTHERN LITES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Auditors' Report To The Shareholders F-1
Consolidated Balance Sheets As Of December 31, 1999 And 1998 F-2
Consolidated Statements Of Operations For The Years Ended
December 31, 1999 And 1998 And From Inception Through
December 31, 1999 F-3
Consolidated Statement Of Shareholders' Deficit From
Inception Through December 31, 1999 F-4, F-5
Consolidated Statements Of Cash Flows For The Years Ended
December 31, 1999 And 1998 And From Inception Through
December 31, 1999 F-6, F-7
Notes To Consolidated Financial Statements F-8 to F-18
F-1
AUDITORS' REPORT
RE: DECEMBER 31, 1999 AND 1998
CONSOLIDATED FINANCIAL STATEMENTS
To the Shareholders of
Canadian Northern Lites, Inc.
We have audited the accompanying consolidated balance sheets of Canadian Northern Lites,
Inc. (A Development Stage Company) as of December 31, 1999 and December 31, 1998,
the related consolidated statements of operations, shareholders' deficit and cash flows for the
years then ended and from inception to December 31, 1999. These financial statements are
the responsibility of the company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards in the
United States. 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. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of Canadian Northern Lites, Inc. (A Development Stage Company)
as of December 31, 1999 and 1998 and the results of operations, changes in shareholders'
deficit and changes in cash flows for the years then ended and from inception to December 31,
1999 in accordance with generally accepted accounting principles in the United States.
The accompanying consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company's net capital deficiency, with no mining operations to generate cash, raise
substantial doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also discussed in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
/s/McLean Majdanski
Chartered Accountants
Vancouver, B.C.
March 27, 2000
(McLean Majdanski is a joint venture of incorporated professionals)
F- 2
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
ASSETS
CURRENT
Cash (Note 8) $2,083 $21,029
Canadian goods and services tax receivable 1,500 1,369
Total current assets 3,583 22,398
INVESTMENT IN JOINT VENTURE (Note 3) 1 1
MINERAL PROPERTIES (Note 3) 1 1
Total assets $3,585 $22,400
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
CURRENT
Accounts payable (Notes 4 and 8) $57,552 $20,892
Loan from shareholder (Notes 4 and 8) 14,016 14,016
Total current liabilities 71,568 34,908
PROMISSORY NOTE PAYABLE (Notes 4, 7, 8) 24,841 24,841
ADVANCES FROM SHAREHOLDERS (Notes 4 and 8) 151,718 144,579
Total liabilities 248,127 204,328
SHAREHOLDERS' DEFICIT
Share capital (Note 6)
Authorized
100,000,000 shares with a par value of $.001
Issued and outstanding
17,211,000 shares (1998 - 17,211,000 shares)
Par value 17,211 17,211
Additional paid up capital 978,231 978,231
Deferred foreign currency translation gain (loss) (3,915) 483
Deficit accumulated during the development stage (1,236,069) (1,177,853)
Total shareholders' deficit (244,542) (181,928)
Total liabilities and shareholders' deficit $3,585 $22,400
(See accompanying notes)
F- 3
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FROM INCEPTION ON JUNE 18, 1990 THROUGH DECEMBER 31, 1999
Cumulative
Total Since
Inception 1999 1998
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
Exploration and development $19,885 $0 $0
Write off of investment in joint venture (Note 3) 60,463 0
Write off of development and property costs (Note 3) 442,529 0
Total exploration and development expenses 522,877 0 85,303
MARKETING EXPENSES (Note 4)
Advertising 2,637 0 0
Courier and postage 7,383 0 0
Meetings 1,357 0 0
Printing 19,056 0 0
Promotion and entertainment 16,454 0 0
Services 58,525 0 0
Telephone and fax 22,438 0 0
Travel 41,305 0 0
Total marketing expenses 169,155 0 0
ADMINISTRATIVE EXPENSES (Note 4)
Accounting and audit fees 28,006 13,469 5,730
Automobile 2,689 0 0
Bank charges and interest (recovery) 2,126 268 (449)
Computer servicing 9,830 0 0
Incorporation expenses written off 6,794 0 0
Insurance 836 0 0
Interest on long term debt (Note 7) 9,829 3,609 4,630
Legal 140,172 4,149 3,625
Management and consulting fees 148,906 24,326 18,200
Meals and entertainment 28 28 0
Office supplies and service 64,801 998 1,742
Rent 9,021 0 0
SEC filing fees 10,981 10,981 0
Telephone and fax 7,036 216 0
Transfer agent fees 1,339 330 550
Travel 33,990 132 594
U.S. financial services 28,339 0 0
Wages and benefits 25,930 0 1,113
Total administrative expenses 530,653 58,506 35,735
LOSS BEFORE OTHER INCOME (LOSS) (1,222,685) (58,506) (121,038)
OTHER INCOME (LOSS)
Interest income 798 290 508
Gain (loss) on disposal of capital assets (11,923) 0 26
Gain (loss) on cash settlements of accounts payable (2,259) 0 1,980
INCOME (LOSS) BEFORE INCOME TAX PROVISION (1,236,069) (58,216) (118,524)
INCOME TAX PROVISION 0 0 0
NET INCOME (LOSS) ($1,236,069) ($58,216) ($118,524)
(See accompanying notes)
F- 4
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FROM INCEPTION ON JUNE 18, 1990 THROUGH DECEMBER 31, 1999
Deficit
Accumulated
Common Stock Additional During The
Per Paid-up Development
Share Shares Par Value Capital Stage
Issuance of stock to officers, directors and
other individuals, for an amount equal to
part of the organization costs,
on April 10, 1991 $0.10 30,000 $300 $2,700
Reorganization of capital reducing the par
value from $.01 / share to $.001 / share (270) 270
Net loss, year ended December 31, 1994
Balance, December 31, 1992, 1993 & 1994 30,000 30 2,970
Issuance of stock to investment banker,
controlled by a director for services
rendered and valued at the billed amount
for the services 0.50 12,000 12 5,988
Issuance of common stock to public for cash 0.50 8,000 8 3,992
Net loss, year ended December 31, 1995
Balance, December 31, 1995 50,000 50 12,950
Issuance of common stock pursuant to stock
options of which 1,220 shares were issued
to an affiliate of the issuer for cash 0.01 50,000 50 450
Balance prior to stock split 100,000 100 13,400
Stock split effective April, 1996 300,000 300 (300)
Balance after stock split 400,000 400 13,100
Stock issued for acquisition of Dakota
Mining & Exploration, Ltd. ("Dakota")
valued at the net book value of Dakota
at the date of acquisition 0.01 10,000,000 10,000 59,488
Recognition of deficit accumulated during
the development stage by Dakota up to
the date of acquisition 78,064 ($78,064)
Issue of shares to H J S Financial Services,
Inc. for services rendered valued at the
market value of the shares when issued 1.28 24,000 24 30,732
Issuance of common stock to repay
advances to Canadian Northern Lites, Inc.
made by former directors and valued at the
net book value of those advances which
was less than the market value of the
shares 0.15 4,000,000 4,000 596,822
Net loss, year ended December 31, 1996 (460,106)
Balance at December 31, 1996 14,424,000 $14,424 $778,206 ($538,170)
(See accompanying notes)
F- 5
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FROM INCEPTION ON JUNE 18, 1990 THROUGH DECEMBER 31, 1999
Deficit
Accumulated
Common Stock Additional During The
Per Paid-up Development
Share Shares Par Value Capital Stage
Balance at December 31, 1996 14,424,000 $14,424 $778,206 ($538,170)
Issuance of common stock for services to
former legal counsel valued at the billed
value for the services rendered $0.17 570,000 570 98,911
Fair value of donated accounting services
provided by a former director 2,000
Net loss, year ended December 31, 1997 (521,159)
Balance at December 31, 1997 14,994,000 14,994 879,117 (1,059,329)
Issuance of common stock to former directors
to repay amounts advanced by them to the
Company and the shares are valued at the
value of the amount owing to them 0.12 667,000 667 82,672
Issuance of common stock to an arm's
length supplier to repay the amount owing
and shares valued at the fair value of
the shares issued 0.06 50,000 50 2,942
Issuance of common stock to a company
controlled by a current director to repay an
amount owing and valued at the market
value of the shares issued 0.01 1,500,000 1,500 13,500
Net loss, year ended December 31, 1998 (118,524)
Balance at December 31, 1998 17,211,000 17,211 978,231 (1,177,853)
Net loss, year ended December 31, 1999 (58,216)
Balance at December 31, 1999 17,211,000 17,211 978,231 (1,236,069)
Subsequent Event
Cancellation of shares in consideration for
the release by the Company of its 20%
joint venture interest subsequent to
December 31, 1999 (Notes 3 and 6) 0.01 (2,080,000) (2,080) 2,079
Balance, March 30, 2000 15,131,000 $15,131 $980,310 ($1,236,069)
(See accompanying notes)
F- 6
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FROM INCEPTION ON JUNE 18, 1990 THROUGH DECEMBER 31, 1999
Cumulative
Total Since
Inception 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($1,236,069) ($58,216) ($118,524)
Items not involving an outlay of cash
Non-cash accounting services of a former director 2,000
Loss (gain) on disposal of capital assets 11,923 0 (26)
Write off of incorporation costs 794 0 0
Write down of investment in joint venture 60,463 0 60,463
Write down of development and property costs 442,529 0 24,840
Loss (gain) on cash settlements of accounts payable 2,260 0 (1,980)
Change in working capital items
Canadian goods and services tax receivable (1,500) (131) 21,879
Accounts payable increase before part of the
balance was settled by issuing shares 181,993 36,660 27,309
Net cash (used in) received from operating activities (535,607) (21,687) 13,961
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 151,502 0 0
Stock issued on exercise of stock options 500 0 0
Loan from shareholder 14,016 0 0
Advances from shareholders before part of the
balance was settled by issuing shares 866,457 7,139 6,611
Net cash from financing activities 1,032,475 7,139 6,611
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of capital assets (11,949) 0 0
Proceeds from disposal of capital assets 26 0 26
Incorporation costs (794) 0 0
Mineral property payments (478,153) 0 0
Net cash (used in) received from investing activities (490,870) 0 26
NET INCREASE (DECREASE) IN CASH
(BANK INDEBTEDNESS) 5,998 (14,548) 20,598
CASH (BANK INDEBTEDNESS) AT
BEGINNING OF YEAR 0 21,029 (52)
FOREIGN CURRENCY TRANSLATION GAIN (LOSS) (3,915) (4,398) 483
CASH (BANK INDEBTEDNESS) AT
END OF YEAR $2,083 $2,083 $21,029
(See accompanying notes)
F- 7
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FROM INCEPTION ON JUNE 18, 1990 THROUGH DECEMBER 31, 1999
Cumulative
Total Since
Inception 1999 1998
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Reverse Take-Over
The Company had a reverse takeover in which the following
net assets were acquired in exchange for assumption
of the shareholders' equity of the acquiring company
Net assets acquired $87,408
Liabilities assumed $17,920
Shareholders' equity assumed
Share capital, par value 10,000
Share capital, additional paid up capital 137,552
Accumulated deficit during the development stage (78,064)
Total shareholders' equity 69,488
Total liabilities and shareholders' equity $87,408
Shares Issued to Repay Current and Long Term Debt
Par value $6,853 $0 $2,217
Additional paid up capital 834,537 0 99,114
Total $841,390 $0 $101,331
Debt repaid
Accounts payable $124,391 $0 $17,992
Advances from shareholders 714,739 0 85,319
Gain on settlement of debt 2,260 0 (1,980)
Total debt repaid $841,390 $0 $101,331
Purchase of Property with Promissory Note
Promissory note payable issued for property $24,841 $0 $24,841
(See accompanying notes)
F- 8
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. BASIS OF PRESENTATION FOR A COMPANY IN THE DEVELOPMENT STAGE
The Company was first incorporated in the State of Nevada on June 18, 1990 as
QQQ-Huntor Associates, Inc. On July 21, 1995, the Company changed its domicile to the State
of Texas and merged into a Texas Corporation, Unimex Transnational Consultants, Inc. On
April 26, 1996, the Company reorganized and acquired all the issued and outstanding stock
of Dakota Mining & Exploration Ltd. ("Dakota") for 10,000,000 shares of the Company's
common stock, and changed the name of the Company to Canadian Northern Lites, Inc.
As a result of that transaction, Dakota became a legal subsidiary of the Company. However,
as stated below, Dakota is the acquirer in the consolidated financial statements.
As a result of the transaction in which the Company acquired all the outstanding shares of
Dakota, the group of shareholders that owned Dakota held 10,000,000 shares of the
Company which was more than 50% of the voting shares at that time. This resulted in
the transaction being accounted for as a "reverse take-over" in the consolidated financial
statements which means that Dakota is the acquirer. Accordingly, the consolidated
financial statements are a continuation of the Dakota financial statements, translated into
U.S. Dollars. The transaction was recorded at the historical cost of the net assets of
Canadian Northern Lites because it represented a recapitalization of Dakota. The $3,050
deficit of the legal parent as at the date of the reverse take-over is eliminated on
consolidation such that the consolidated deficit reflects the deficit of Dakota at the date
of acquisition, $78,064, plus the results of operations of Dakota and Canadian Northern
Lites, Inc., since the acquisition.
The cumulative statements of operations, cash flows and deficit accumulated during the
development state reflect the translated balances of Dakota from inception. The cumulative
balance for office supplies and service is net of $20,340 of consulting revenue, received
by Dakota in 1994, because the revenue was incidental to the development stage.
Dakota was incorporated on January 12, 1994 under the Company Act of British
Columbia and changed its name to Dakota Mining & Exploration Ltd. from Eagle Ridge
Manufacturing Ltd. on July 27, 1995. The Company's purpose is to explore and develop
mining properties in Canada. Dakota is in the development stage because its
activities have consisted of the purchase of interests in mining properties and some
exploration and development. Dakota has not yet developed any mining properties into a
producing mine nor has it earned revenue from any of its properties.
As at December 31, 1999, both the Company and Dakota do not have sufficient cash
to cover current liabilities. Future activities require cash being provided to the Company
by investors or lenders. As stated in Note 5, companies controlled by the president of
F- 9
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. BASIS OF PRESENTATION FOR A COMPANY IN THE DEVELOPMENT STAGE
(Continued)
the Company are currently funding, and plan to continue to fund, the administrative
expenses incurred by the Company. In addition, these related parties do not currently
intend to receive cash for the management fees of $2,000 per month that they charge
the Company. These efforts are part of a long range strategy to restructure the Company's
affairs, arrange for new long term financing and continue to locate and develop income
producing properties.
The financial statements are prepared on the assumption that the entity is a going concern,
meaning it will continue in operation for the foreseeable future and will be able to realize its
assets and discharge its liabilities through the normal course of operations. Because the
Company has no cash and has not yet developed any producing mines, its ability to realize
assets and discharge its liabilities through the normal course of its operations is dependent
on continued funding from companies controlled by the president, the receipt of additional
funds from investors and the establishment of successful operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)Basis Of Consolidation
As stated in Note 1, the consolidated financial statements include the accounts of
Dakota Mining & Exploration Ltd., the designated acquirer in the reverse take over
transaction, and Canadian Northern Lites, Inc. The investment in the Ewer/Klinker
mineral properties joint venture was accounted for on the cost basis because the
joint venture had not commenced operating and had not provided any financial
information due to a dispute between the joint venture partners.
(b)Fiscal Year
The parent company, Canadian Northern Lites Inc., has a fiscal year end of
December 31. The subsidiary company, Dakota, has a fiscal year end of January 31.
These consolidated financial statements have been prepared using the December 31
financial statements of the legal parent, and the January 31 financial statements of the
subsidiary. There were no intervening events that materially affect the consolidated
financial position or the consolidated results of operations and cash flows for the
fiscal periods presented.
F- 10
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c)Use Of Estimates
Preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions. These estimates
or assumptions affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and reported
amounts of expenses and gains during the reporting periods. Actual results could
differ from estimates.
(d)Foreign Currency Translation Gain
The foreign currency translation gain relates to translating the Canadian dollar financial
statements of the wholly owned legal subsidiary into US dollars. This amount is not
included in the statement of operations because the gains relate to translating from the
functional currency of the subsidiary into the reporting currency of the legal parent.
Instead, the exchange adjustment is recorded as a component of shareholders' deficit.
(e)Canadian Goods And Services Tax Receivable
The Canadian Goods And Services Tax is a seven percent tax charged on most goods
and services rendered in Canada. Commercial enterprises are required to charge the
tax on the goods and services it sells. This tax is then reduced for any taxes that are
paid on goods and services purchased. Because the Company is a development
stage enterprise, it has not yet provided goods and services that would be subject to
the tax and therefore it is entitled to a refund of taxes paid.
The Canadian Goods And Services Tax receivable is recorded when the expenditures,
which give rise to the refundable tax, are recorded in the financial statements.
(f)Mineral Properties
Mineral properties are recorded at cost. In the event that one of the properties
commences production, it will be depleted on a unit-of-production basis over the
proven, developed reserves of the property. To date, no properties have commenced
commercial production.
F- 11
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f)Mineral Properties (Continued)
The carrying values of the properties are reviewed for possible impairment whenever
events or changes in circumstances indicate. Change in management is one
circumstance in which the carrying values of all properties are reviewed to determine
if there has been any impairment in the carrying value.
The cost of properties that are abandoned are written off in the year the decision to
make no further expenditures on the property is made. When impairment is
indicated, the carrying amounts of assets are written down to fair value, usually
determined on the basis of a consulting geologist report. In the absence of such a
report, the properties are written down to a nominal value of $1.00.
(g)Nonmonetary Transactions
Nonmonetary transactions in which shares were issued to pay for services rendered
or to repay an amount owing are valued at the billed amount for the services or the
principal amount of the debt owing if bills are rendered or cash is advanced. If specific
billings are not presented, then the transactions are valued at the trading price of
publicly traded shares on the date the new shares were issued.
(h)Donated Services
The fair value of services donated to the Company are expensed or capitalized and
treated as a contribution of capital. If the fair value of the services is considered
immaterial, then no amount is recorded.
(i)Related Party Transactions
Related parties include current and former directors and officers and those entities that
hold more than 5% of the shares. The Company discloses all transactions, other than
those in the ordinary course of business, with these related parties.
Assets acquired from significant shareholders are recorded at the net book value to
the shareholder and the difference between the purchase price and cost is treated as a
reduction or increase in paid up capital. In the case of the 1998 property acquisition, the
significant shareholder reduced the price and amount of the promissory note to the
net book value of the property.
F- 12
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j)Income Taxes
The Company utilizes the liability method of accounting for income taxes. Deferred
income taxes are determined based on the estimated future tax effects of
differences between the financial and tax bases of assets and liabilities given the
provision of the enacted tax laws. The Company is a development state enterprise
and accordingly has not commenced operations that would generate taxable income.
For that reason, the Company has a valuation reserve equal to the amount of the
deferred income tax assets and has no net provision for income tax recovery in its
consolidated statements of operations.
(k)Development Stage Enterprise
The Company is a development stage enterprise that presents its financial statements
in conformity with the generally accepted accounting principles that apply to established
operating enterprises. As such, the Company charges all exploration, marketing and
administrative expenses to operations in the year they occur. The Company capitalizes
only those costs that it expects to recover through future operations and those costs
are subject to a regular review for possible impairment.
As a development state enterprise, the Company discloses the deficit accumulated
during the development stage and the cumulative statement of operations and cash
flows from inception of the designated acquirer, Dakota Mining & Exploration, Ltd.
and from the date of acquisition of Canadian Northern Lites, Inc., the designated
subsidiary.
3. MINERAL PROPERTIES AND INVESTMENT IN JOINT VENTURE
1999 1998
Investment in joint venture (Ewer/Klinker properties) $1 $1
Investment in mineral properties (Way I, Banjo I & II) $1 $1
(a)Ewer/Klinker Mineral Properties
On April 10, 1996, the Company entered into an agreement which was an Option To
Purchase certain mineral claims, located near Vernon, British Columbia, from a Vernon
mining company. This agreement was pursuant to a Letter Of Intent between the
Vernon mining company and the Company that was signed in January, 1996.
The payments made to the Vernon company pursuant to the Letter Of Intent in January,
1996 are reflected as an asset in the 1996 financial statements. The Company paid
$64,000 prior to the agreement and $411,000 pursuant to the agreement.
These funds were advanced to the Company by individuals, who were directors and
shareholders at the time. These advances were eventually repaid by issuing
F- 13
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
3. MINERAL PROPERTIES AND INVESTMENT IN JOINT VENTURE (Continued)
(a)Ewer/Klinker Mineral Properties (Continued)
4,000,000 shares having a total par value of $4,000 and additional share capital
of $596,822 as noted in the consolidated statement of shareholders' deficit.
This option agreement originally gave the Company an option to acquire a 100%
interest in the property but that option expired unexercised on January 15, 1998 and a
joint venture was then created. The Company received a 20% joint venture interest in
the mineral claims and the Vernon mining company had the remaining 80% interest.
In 1997, the mineral property was written down to its estimated net realizable value
of $60,464 based on the "worst case" estimate determined by a consultant geologist.
This write down was initiated by the new management after the review of the geologist's
report and after protracted negotiations with the joint venture partner to attempt to
settle the unresolved legal matters.
In 1997, the Joint Venture Partner filed a statement of claim in the Supreme Court of
British Columbia alleging that an amount of $29,847 (Cdn$46,860) was due for work done,
goods supplied and accounts incurred and that claim was disputed by the Company.
In 1998, the mineral property became an investment in a joint venture and was written
down to a value of $1.00 because of continued protracted negotiations with the joint
venture partner meant the Company had no access to information to make an updated
valuation of the property based on discounted cash flows and had no information to
assess the 80% joint venture partner's ability to fund the mining operations.
Subsequent to December 31, 1999, the Company reached a formal agreement with
the former Joint Venture Party to return its 20% interest in the joint venture in exchange
for the Joint Venture Party returning 2,080,000 shares of the Company back to the
Company and releasing the Company from any claim arising from the Option agreement
or the British Columbia Supreme Court Action. The Consent Dismissal Order has now
been filed and the shares have now been returned.
(b)Way1, Banjo I & II Mineral Properties
The Company purchased mineral properties from a company controlled by a
significant shareholder, who is also a director, for a price of $50,000 ($78,500 Cdn)
and the purchase was paid with a promissory note as disclosed in Notes 4(f) and 7.
There is no independent appraisal supporting the value of the property, nor was any
other detailed analysis done to determine the value. Instead, the directors arbitrarily
set the value after considering the consulting geologist's report on neighbouring
properties referred to in Note 3(a) and the possible strategic role of this assembly
of properties in a larger development.
Because this asset was purchased from a significant shareholder, the asset was
recorded at the shareholder's net book value of $24,841 and the difference of
F- 14
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
3. MINERAL PROPERTIES (Continued)
(b)Way1, Banjo I & II Mineral Properties (Continued)
$25,159 has been treated as a reduction of the note payable with the approval of
the significant shareholder.
In 1998 the property was written down to $1.00 to recognize the company's inability
to prepare an updated valuation on the property owned in the joint venture which is
adjacent to this property. This property was purchased as a possible strategic role as
part of a larger development incorporating the joint venture property.
4. RELATED PARTIES
(a)Loan From Shareholder
This amount due to a shareholder bears interest at 18% per annum and was due July 1,
1998. In the event the loan is paid in full on or before July 1, 1998, the interest rate
is reduced to 10% per annum from the date of advancement of the funds to the date
of payment. Because this loan was still outstanding at December 31, 1999, interest has
been accrued at 18% per annum.
(b)Advances From Shareholders
The amount due to the shareholders is unsecured, non-interest bearing and has no
specific terms of repayment. Some of these amounts are reflected as a long term
liability because the shareholders, who advanced the balances, have agreed that
they will not request a cash payment of any of the balances outstanding nor settle
any advances in exchange for the issuance of shares for at least one year from the
balance sheet date.
(c)Management Fees
Management fees of $39,723 in fiscal 1997 and $36,670 in fiscal 1996 were charged
to the Company by a former director. Commencing in fiscal 1998, management fees
of $2,000 per month, for a total of $24,000 (1998 - $18,200), are charged
by companies controlled by the president of the Company. Since that time, these
companies have been funding the administrative expenses of the Company and its
parent. Accounts payable as at December 31, 1999 includes $30,651
(1998 $14,065) payable to these related parties.
(d)Accounting Services
Accounting services were provided by a former director and shareholder of the
Company. No fees were paid for these services. There is a $2,000 charge to
F- 15
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
4. RELATED PARTIES (Continued)
(d)Accounting Services (Continued)
operations for the fair market value of these services offset by a contribution to
capital of the same amount.
(e)Other Expenses
Most other marketing and administrative expenses were reimbursements to former
directors and officers for expenses incurred in their efforts to develop the Company's
business.
(f)Purchase Of Mineral Properties From A Shareholder Who Is Also A Director
The Company committed to purchase mineral properties from a company controlled by
a significant shareholder, who is also a director, for a price of $50,000 and the
purchase was paid for by issuing a $50,000 promissory note. See Notes 3(b) and 7.
The property was recorded at the $24,841 cost to the significant shareholder and the
principal of the note payable was reduced by the significant shareholder from $50,000
to $24,841.
5. INCOME TAX
(a)Income Tax Provision
The Company is in the development stage and has not yet earned any revenue or income.
No provision for additional income tax recovery is recorded by the Company due to its
history of losses indicating that, more likely than not, none of the deferred income tax
assets will be realized.
(b)Effective Income Tax Rate
Because the Company has not yet earned any revenue or income, it has an effective tax
rate of zero per cent. The rate used to estimate the deferred income tax assets in Note 5(d)
below is 45.6%, the combined Canadian federal and British Columbia provincial tax rate.
(c)Losses Available For Deduction Against Future Taxable Incomes
In addition to the Canadian development expense referred to in Note 5(d) below, the
Company has losses available for deduction against future Canadian taxable
incomes until the years indicated as follows:
F- 16
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
5. INCOME TAX (Continued)
(c)Losses Available For Deduction Against Future Taxable Incomes (Continued)
Expiry years: 2003 $93,412
2004 387,749
2005 97,217
2006 28,591
2007 54,464
$661,433
(d)Deferred Income Tax Assets
1999 1998
Canadian development expense, the cost of any rights
to prospect, explore, drill or mine for mineral available for
deduction against future income, in excess of the
carrying value of the mineral properties $211,100 $211,100
Net operating loss carryforwards 296,100 276,800
Net deferred income tax assets 507,200 487,900
Valuation allowances to recognize the Company's history of
losses and absence of any profits to date (507,200) (487,900)
Net deferred income tax assets $0 $0
6. SHARE CAPITAL
(a)Net Earnings (Loss) Per Share
1999 1998
Net earnings (loss) ($58,216) ($118,524)
Common shares issued
Average outstanding shares 17,211,000 17,211,000
Net earnings (loss) per share $0.00 ($0.01)
There are no outstanding options so fully diluted net earnings (loss) per share are not
provided.
F- 17
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
6. SHARE CAPITAL (Continued)
(b)Cancellation Of Shares - Subsequent Event
Subsequent to the year end, the Company received 2,080,000 previously issued shares from the
former joint venture partner as part of a settlement of a dispute referred to in Note 3(a). The Company
cancelled the shares and wrote off the reduction in par value against the remaining $1 net
book value of the investment in joint venture and the balance against additional paid up capital.
The impact of the transaction on the financial statements is as follows:
Balance
Balance After
December Subsequent Subsequent
31, 1999 Event Event
Impact On Balance Sheet
Investment in joint venture $1 ($1) $0
Share Capital
Par value $17,211 ($2,080) $15,131
Additional paid up capital 978,231 2,079 980,310
$995,442 ($1) $995,441
7. PROMISSORY NOTE
To purchase the mineral properties discussed in Note 3(b), the Company issued a $50,000
promissory note, due on demand, to a company that is a major shareholder of Canadian
Northern Lites, Inc. and whose controlling shareholder is the president and a director
of Canadian Northern Lites, Inc. This note requires interest at 8% per annum. The holder
of the note reduced the principal to $24,841, as explained in Note 3(b), and has committed
to not request a payment of principal for at least one year from the balance sheet date.
8. FINANCIAL INSTRUMENTS
(a)Fair Value
The Company's financial instruments consist of cash, accounts payable, loan from
shareholder, promissory note payable and advances from shareholders. Unless
otherwise stated, the fair values of these financial instruments, except for the
advances from shareholders, approximate their carrying values. No interest is
charged or paid on the advances from shareholders and they are not expected
to be paid soon, so the fair values are less than their carrying values.
No estimate was made of the fair value of the advances from shareholders because
the expected maturity of the instruments is unknown. While the shareholders who
made the advances have committed not to request payment for at least a year, the
Company is a development stage enterprise without any current means of repaying
the amounts owing. As indicated in Note 1, there is a great deal of uncertainty as
to when, or if, the Company will have the means to pay the amounts owing. A further
F- 18
CANADIAN NORTHERN LITES, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
8. FINANCIAL INSTRUMENTS (Continued)
(a)Fair Value (Continued)
degree of uncertainty is created if the Company and the shareholders agree to
settle the debt by issuing more shares because the future market value of those
shares is unknown.
(b)Foreign Currency Risk
The Company has cash, goods and services tax receivable and accounts payable from
purchases in Canada. As a result, the Company is exposed to foreign exchange rate
fluctuations. The exposure to foreign currency is mitigated by the fact that the cash and
goods and services tax receivable partially offset the accounts payable balance.
The following are the balances at December 31, 1999:
Canadian$ Translation US$
Cash $3,011 ($928) $2,083
Goods and services tax receivable 2,169 (669) 1,500
Accounts payable 83,199 (25,647) 57,552
(c)Interest Rate Risk
As the interest rates are fixed on the loan from shareholder and the promissory note
payable, the Company is not exposed to interest rate risk.