SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
(Mark One)
_X_ Registration statement pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934 or
- ---- Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended or
- ---- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _________________
GEMSTAR RESOURCES LTD.
-------------------------------------
(Exact name of registrant as specified in this charter)
British Columbia, Canada
-------------------------------------
(Jurisdiction of incorporation or organization)
220 Decourcy Drive, Gabriola Island, British Columbia, Canada, V0R 1X0
----------------------------------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to section 12(b) of the Act:
None None
-------------------- ----------------------
(Title of each class) (Name of each exchange
on which registered)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value
--------------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
----------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.
5,652,000 Common Shares
------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No
---------- ----------
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 X Item 18.
-------- ---------
II
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Identity of Directors, Senior Management and Advisors........1
1.1 Directors and Senior Management.................1
1.2 Advisors........................................2
1.3 Auditors........................................2
ITEM 2. Offer Statistics and Expected Timetable...............................2
ITEM 3. Key Information 2
3.1 Selected Financial Data.........................2
3.2 Capitalization and Indebtedness.................4
3.3 Reasons for the Offer and Use of Proceeds.......5
3.4 Risk Factors....................................5
ITEM 4. Information on the Company............................................8
4.1 History and Development.........................8
4.2 Dotted Lake Property............................9
4.3 Competition....................................11
4.4 Management and Employees.......................12
4.5 Environmental Regulations......................12
ITEM 5. Operating and Financial Review and Prospects................13
5.1 Results of Operations..........................13
5.2 Liquidity......................................14
ITEM 6. Directors, Senior Management and Employees..................14
6.1 Directors and Senior Management................14
6.2 Compensation of Directors......................16
6.3 Board Practices................................17
6.4 Employees......................................17
6.5 Share Ownership of Directors and Officers......17
ITEM 7. Major Shareholders and Related Party Transactions...........17
7.1 Beneficial Ownership...........................17
7.2 Related Party Transactions.................... 18
7.3 Interests of Experts and Counsel...............18
ITEM 8. Financial Information.......................................19
8.1 Legal Proceedings..............................19
8.2 Significant Changes............................19
ITEM 9. The Offer and Listing.......................................19
9.1 Offering and Listing Details...................19
III
ITEM 10. Additional Information......................................20
10.1 Share Capital.................................20
10.2 Bylaws and Articles...........................20
10.3 Material Contracts............................21
10.4 Exchange Controls and other Limitations
Affecting Security Holders....................21
10.5 Certain Canadian Federal Income Tax C
onsequences to U.S. Investors.................22
10.6 Documents on Display..........................23
ITEM 11. Quantitative and Qualitative Disclosures About Market Risk...........23
ITEM 12. Descriptions of Securities Other than Equity Securities..............23
12.1 Warrants......................................23
12.2 Stock Options.................................23
PART II
ITEM 13. Defaults, Dividend Arrearages and Delinquencies......................23
ITEM 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds.............................................................23
PART III
ITEM 17. Financial Statements
ITEM 18. Financial Statements
ITEM 19. Exhibits
SIGNATURE
IV
FORWARD-LOOKING STATEMENTS
--------------------------
We caution you that certain important factors (including without limitation
those set forth in this Form 20-F) may affect our actual results and could cause
such results to differ materially from any forward-looking statements that may
be deemed to have been made in this Form 20-F registration statement, or that
are otherwise made by or on our behalf. For this purpose, any statements
contained in this registration statement that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "except," "believe,"
"anticipate," "intend," "could," estimate," or "continue," or the negative or
other variations of comparable terminology, are intended to identify
forward-looking statements.
PART I
------
Item 1. Identity of Directors, Senior Management and Advisors
1.1 Directors and Senior Management:
The following table sets forth the name, business address and position of each
of the directors and executive officers of the Company:
Name and Address............. Position
-------------- --------
Linda Smith President, Chief Executive Officer
RR #1, Site 10C............ and Director
Malaspina Drive ...........
Gabriola Island, B.C.
Canada
Shannon Krell Director
RR#1, Site 10C
Malaspina Drive
Gabriola Island, B.C.
Canada
Alexander Mancor Director
5715 Royal Oak Avenue
Burnaby, B.C.
Canada
Brent Peters Secretary
747 17th Street, Suite 301
West Vancouver, B.C.
Canada
1
1.2 Advisors:
The following table sets forth the name, business address and position of each
of the advisors to the Company:
Name and Address Position
Bank of Montreal Banker
Commercial Banking
Main Floor, First Bank Tower
P.O. Box 49500, 595 Burrard Street
Vancouver, B.C., Canada V7X 1L7
Gregory S. Yanke Law Corporation Legal Counsel
200 - 675 West Hastings Street
Vancouver, B.C., Canada V6B 1N2
1.3 Auditors
Name and Address Position
S.G. and Associates Auditor
Chartered Accountants
8211 Ackroyd Road, Suite 270
Vancouver, B.C., Canada V6X 3K8
Item 2. Offer Statistics and Expected Timetable
Not applicable
Item 3. Key Information
3.1 Selected Financial Data
The following tables set forth the data of the Company for the fiscal years
ended January 31, 2003, 2002, 2001, 2000 and 1999 and the three-month interim
periods ended April 30, 2003 and April 30, 2002. We derived all figures from our
financial statements, which were examined by our independent auditor. This
information should be read in conjunction with our financial statements included
in this registration statement.
Our financial statements included in this registration statement and the table
set forth below gave been prepared in accordance with accounting principles
generally accepted in Canada. A reconciliation to United States generally
accepted accounting principles is included in Note 9 to our audited financial
statements. All amounts are expressed in Canadian dollars. The first table
presents this financial data in accordance with United States generally accepted
accounting principles. The second table presents the data in accordance with
Canadian generally accepted accounting principles.
2
U.S. Generally Accepted Accounting Principles
===================================================================================================================================
Three-Month Three-Month Fiscal Year Fiscal Year Fiscal Year Fiscal year Fiscal Year
Period Ended Period Ended ended ended ended ended Jan. ended Jan.
Apr. 30, 2003 Apr. 30, 2002 Jan. 31, 2003 Jan. 31, 2002 Jan. 31, 2001 31, 2000 31, 1999
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Operating Nil Nil Nil Nil Nil Nil Nil
Revenue
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from ($18,072) ($12,718) ($62,432) ($269,158) ($73,946) ($104,426) ($144,437)
operations
- -----------------------------------------------------------------------------------------------------------------------------------
Loss per $0.00 $0.00 ($0.01) ($0.05) ($0.01) ($0.02) ($0.04)
common share
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $162,642 $162,544 $162,544 $160,781 $13,536 $3,246 $5,724
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ($678,713) ($660,641) ($660,641) ($598,209) ($329,051) ($255,105) ($492,788)
- -----------------------------------------------------------------------------------------------------------------------------------
Long term debt $622,998 $617,302 $617,302 $608,250 $239,994 Nil Nil
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends Nil Nil Nil Nil Nil Nil Nil
per share
- -----------------------------------------------------------------------------------------------------------------------------------
Deficit ($1,798,599) ($1,780,487) ($1,780,487) $ (1,718,055) ($1,448,897) ($1,374,951) ($1,270,525)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital stock $1,119,846 $1,119,846 $ 1,119,846 $ 1,119,846 $1,119,846 $1,119,846 $777,737
- -----------------------------------------------------------------------------------------------------------------------------------
Weighted 5,652,000 5,652,000 5,652,000 5,652,000 5,970,000 5,845,566 4,008,490
average number
of common
shares
===================================================================================================================================
3
Canadian Generally Accepted Accounting Principles
==================================================================================================================================
Three-Month Three-Month Fiscal Year Fiscal Year Fiscal Year Fiscal year Fiscal Year
Period Ended Period Ended ended ended ended ended ended
Apr. 30, 2003 Apr. 30, 2002 Jan. 31, Jan. 31, 2002 Jan. 31, 2001 Jan. 31, 2000 Jan. 31,
(unaudited) (unaudited) 2003 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Net Operating Nil Nil Nil Nil Nil Nil Nil
Revenue
- ----------------------------------------------------------------------------------------------------------------------------------
Loss from ($13,866) ($12,718) ($262,432) $ (69,158) $ (73,946) $ (104,426) $ (144,437)
operations
- ----------------------------------------------------------------------------------------------------------------------------------
Loss per $0.00 $0.00 ($0.05) ($0.01) ($0.01) ($0.02) ($0.04)
common share
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $166,848 $162,544 $162,544 $360,781 $13,536 $3,246 $5,724
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets ($674,507) ($660,641) ($660,641) ($398,209) ($329,051) ($255,105) ($492,788)
- ----------------------------------------------------------------------------------------------------------------------------------
Long term debt $622,998 $617,302 $617,302 $608,250 $239,994 Nil Nil
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends Nil Nil Nil Nil Nil Nil Nil
per share
- ----------------------------------------------------------------------------------------------------------------------------------
Deficit ($1,794,353) ($1,530,773) ($1,780,487) ($1,518,055) ($1,448,897) ($1,374,951) ($1,270,525)
- ----------------------------------------------------------------------------------------------------------------------------------
Capital stock $1,119,846 $1,119,846 $1,119,846 $1,119,846 $1,119,846 $1,119,846 $777,737
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted 5,652,000 5,652,000 5,652,000 5,652,000 5,970,000 5,845,566 4,008,490
average number
of common
shares
==================================================================================================================================
Since June 1, 1970, the government of Canada has permitted a floating exchange
rate to determine the value of the Canadian dollar as compared to the United
States dollar. On August 29, 2003, the exchange rate in effect for Canadian
dollars exchanged for United States dollars, expressed in terms of Canadian
dollars was $1.3850. This exchange rate is based on the noon buying rates in New
York City, for cable transfers in Canadian dollars, as certified for customs
purposes by the Federal Reserve Bank of New York. For the past fiscal years
ended January 31 and for the six-month period between March 1, 2003 and August
31, 2003, the following exchange rates were in effect for Canadian dollars
exchanged for United States dollars, calculated in the same manner as above:
Time Period Average Exchange Rate for Period
----------- --------------------------------
Year ended Jan 31, 2003 $1.5650
Year ended Jan 31, 2002 $1.5596
Year ended Jan 31, 2001 $1.4910
Year ended Jan 31, 2000 $1.4779
Year ended Jan 31, 1999 $1.4948
Time Period Low - High
----------- ----------
Month ended August 2003 $1.3840 - $1.4100
Month ended July 2003 $1.3368 - $1.4114
Month ended June 2003 $1.3348 - $1.3768
Month ended May 2003 $1.3446 - $1.4221
Month ended April 2003 $1.4336 - $1.4843
Month ended March 2003 $1.4659 - $1.4905
4
3.2 Capitalization and Indebtedness
The following table sets forth our capitalization and indebtedness as
at July 31, 2003.
=====================================================================================================
As at July 31, 2003
-----------------------------------------------------------------------------------------------------
Short term debt (unsecured and not guaranteed) $230,357
-----------------------------------------------------------------------------------------------------
Long term debt $622,998
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Total debt $841,355
--------------------------------------------------------------------- -------------------------------
-----------------------------------------------------------------------------------------------------
Shareholder's Equity
-----------------------------------------------------------------------------------------------------
Common shares $1,119,846
-----------------------------------------------------------------------------------------------------
Retained earnings ($1,806,653)
-----------------------------------------------------------------------------------------------------
Total shareholders' equity ($686,807)
=====================================================================================================
3.3 Reasons for the Offer and Use of Proceeds
Not Applicable
3.4 Risk Factors
Any investment in our common shares involves a high degree of risk. You should
consider carefully the following information before you decide to buy our common
shares. If any of the events discussed in the following risk factors actually
occurs, our business, financial condition or results of operations would likely
suffer. In this case, the market price of our common shares could decline, and
you could lose all or part of your investment in our shares. In particular, you
should consider carefully the following risk factors:
We have a history of losses.
We have incurred losses in our business operations since inception, and we
expect that we will continue to lose money for the foreseeable future. Since our
incorporation on March 31, 1998 to April 30, 2003, we have incurred losses
totalling $1,794,353. Very few junior resource companies ever become profitable.
Failure to achieve and maintain profitability may adversely affect the market
price of our common stock.
We have limited financial resources and no source of cash flow.
We have limited financial resources, no source of operating cash flow and no
assurance that additional funding will be available to us for further
exploration of the Dotted Lake property. Failure to obtain such additional
financing could result in delay or indefinite postponement of further
exploration.
5
Very few mineral properties are ultimately developed into producing mines.
The business of exploration for minerals and mining involves a high degree of
risk. Few properties that are explored are ultimately developed into producing
mines. At present, our mineral properties have no known body of commercial ore.
Most exploration projects do not result in the discovery of commercially
mineable deposits of ore.
Substantial expenditures are required for us to establish ore reserves through
drilling, to develop metallurgical processes, to extract the metal from the ore
and, in the case of new properties, to develop the mining and processing
facilities and infrastructure at any site chosen for mining.
Although substantial benefits may be derived from the discovery of a major
mineral deposit, no assurance can be given that we will discover minerals in
sufficient quantities to justify commercial operations or that we can obtain the
funds required for development on a timely basis. The economics of developing
precious and base metal mineral properties is affected by many factors including
the cost of operations, variations in the grade of ore mined, fluctuations in
metal markets, costs of processing equipment and other factors such as
government regulations, including regulations relating to royalties, allowable
production, importing and exporting of minerals and environmental protection. We
have no producing mines at this time.
If we do not obtain additional financing, our business will fail.
As at April 30, 2003, we had cash in the amount of $1,952. Our ability to
continue as a going concern is dependent upon the ability of management to
obtain sufficient financing. Management is actively seeking additional
financing, and while they have been successful in the past, there is no
assurance they will be able to do so in the future. These matters raise doubt
about the company's ability to continue as a going concern. These financial
statements do not include adjustments that would be necessary should the company
be unable to continue as a going concern.
Because management has only limited experience in resource exploration, the
business has a higher risk of failure.
Our management, while experienced in business operations, has only limited
experience in resource exploration. None of our directors or officers have any
significant technical training or experience in resource exploration or mining.
We rely on the opinions of consulting geologists that we retain from time to
time for specific exploration projects or property reviews. As a result of our
management's inexperience, there is a higher risk of our being unable to
complete our business plan.
Mineral exploration involves a high degree of risk against which we are not
currently insured.
Unusual or unexpected rock formations, formation pressures, fires, power
outages, labour disruptions, flooding, cave-ins, landslides and the inability to
obtain suitable or adequate machinery, equipment or labour are risks involved in
the operation of mines and the conduct of exploration programs. We have relied
on and will continue to rely upon consultants and others for exploration
expertise.
It is not always possible to fully insure against such risks and we may decide
not to take out insurance against such risks as a result of high premiums or
other reasons. Should such liabilities arise, they could reduce or eliminate any
future profitability and result in increasing costs and a decline in the value
of our common stock. We do not currently maintain insurance against
environmental risks relating to the Dotted Lake property.
6
There is no assurance of the title to the Dotted Lake property.
The Dotted Lake property may be subject to prior unregistered agreements or
transfers or native land claims and title may be affected by undetected defects,
though we have no knowledge of any such claims. There is a risk that the
property boundaries could be challenged.
We may require permits and licenses that we may not be able to obtain.
Our operations may require licenses and permits from various governmental
authorities. Although we have had no problems obtaining required permits to
date, there can be no assurance that we will be able to obtain all necessary
licenses and permits that may be required to conduct exploration, development
and mining operations at our project in the future.
Metal prices fluctuate widely.
Factors beyond our control may affect the marketability of any minerals we
discover. Metal prices have fluctuated widely, particularly in recent years. The
effect of these factors cannot accurately be predicted.
The resource industry is very competitive.
The resource industry is intensely competitive in all its phases. We compete
with many companies possessing greater financial resources and technical
facilities than us for the acquisition of mineral concessions, claims, leases
and other mineral interests as well as for the recruitment and retention of
qualified employees.
Our operations may be adversely affected by environmental regulations.
Our operations may be subject to environmental regulations promulgated by
government agencies from time to time. Environmental legislation provides for
restrictions and prohibitions on spills, release or emissions of various
substances produced in association with certain mining industry operations, such
as seepage from tailings disposal areas, which would result in environmental
pollution. A breach of such legislation may result in the imposition of fines
and penalties. In addition, certain types of operations require the submission
and approval of environmental impact assessments. Environmental legislation is
evolving in a manner which means that standards, enforcement, fines and
penalties for non-compliance are more stringent. Environmental assessments of
proposed projects carry a heightened degree of responsibility for us and our
directors, officers and consultants. The cost of compliance with changes in
governmental regulations has a potential to reduce the profitability of our
operations. We do not maintain environmental liability insurance.
7
There is currently no trading market for our common shares.
Our common shares do not trade on any recognized stock exchange or quotation
system and there is no assurance that a market will develop. In such
circumstances, it will be difficult for shareholders to sell their stock. As a
result, shareholders may find that they are unable to achieve benefits from
their investment.
Our securities may be subject to penny stock regulation.
If a market for our securities develops and the price of our common stock falls
below $5.00 per share, then we will be subject to "penny stock" regulation.
"Penny stock" rules impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with a
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a
disclosure schedule prescribed by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Consequently, the "penny
stock" rules may restrict the ability of broker-dealers to sell our shares of
common stock. The market price of our shares would likely suffer as a result.
Enforcement of legal process may be difficult.
All members of our Board of Directors and management reside in Canada. As well,
our address for service is a Canadian address. Accordingly, service of process
upon us, or upon individuals related to us, may be difficult or impossible to
obtain within the United States.
All of our assets are located outside of the United States. Any judgment
obtained in the United States against us may not be collectible within the
United States.
As we are incorporated pursuant to the laws of British Columbia, duties of our
directors and officers, and the ability of shareholders to initiate a lawsuit on
our behalf, are governed by the British Columbia Company Act.
8
Item 4 Information on the Company
4.1 History and Development
We were incorporated under the name "Gemstar Resources Ltd." pursuant to the
Company Act in the Province of British Columbia, Canada by registration of our
Memorandum and Articles of Association and the issuance by the Registrar of
Companies of a Certificate of Incorporation on March 31, 1988. Our head office
is located at 220 Decourcy Drive, Gabriola Island, British Columbia, Canada, V0R
1X0. Our telephone number is (604) 837-2739.
We have not been involved in any bankruptcy, receivership or similar
proceedings, nor have we been a party to any material reclassification, merger,
consolidation or purchase or sale of a significant amount of assets.
We are engaged in the business of acquiring and exploring resource properties.
We currently own a 100% interest in five contiguous mineral claims known
collectively as the Dotted Lake property which are situated in the Blake River
area, Thunder Bay Mining Division of Ontario, Canada. There is no assurance that
a commercially viable mineral deposit exists on the Dotted Lake property.
Further exploration will be required before a final evaluation as to the
economic feasibility of the property is determined.
We originally acquired the Dotted Lake property from LCM Equities Ltd., a
private British Columbia company owned by Mr. John Donaldson, pursuant to a
mineral property purchase agreement dated October 27, 2000. Pursuant to that
agreement, we paid $200,000 to acquire a 100% interest in the Dotted Lake
property. In our most recently completed fiscal year, our interest in the Dotted
Lake property lapsed due to our failure to complete the minimum required
assessment exploration work on the claims. However, we re-acquired the property
by staking the property in accordance with Ontario laws.
4.2 Dotted Lake Property
Location and Access
- -------------------
The Dotted Lake property is situated in north central Ontario, approximately 50
kilometers northeast of Lake Superior and 260 kilometers east-northeast from the
city of Thunder Bay. Manitouwadge (45 kilometers to the north), Marathon (45
kilometers southwest) and White River (50 kilometers southeast) are the closest
towns. The latter two communities are situated along Highway 17, part of the
Trans-Canada Highway network, while the property itself lies some 20 kilometers
north of Highway 17.
Currently, there is no road access directly on to the Dotted Lake property. From
Highway 614, located 13 kilometres north of Highway 17, a bush road leads seven
kilometers north-eastward to the southwest shore of Dead Otter Lake. From there,
the property may be conveniently reached by boat in summer or by snowmobile in
winter. Alternatively, another bush road that connects with Highway 614, some
19.2 kilometers north of Hwy 17, terminates approximately 0.7 kilometers north
of the north claim boundary.
9
Title and Claim Status
- ----------------------
The Dotted Lake property consists of five contiguous mineral claims registered
in the name of 1179406 Ontario Ltd., a private Ontario company that holds the
claims in trust for us. In order to keep the claims in good standing, we must
spend at least $31,200 on exploration of the Dotted Lake property by March 14,
2005.
Previous Exploration
- --------------------
Several companies and individuals have conducted exploration activities on
various parts of the Dotted Lake property. To date, no mineral deposit has been
delineated on the property, and consequently there has been no production from
the property nor any reserve or resource estimated.
In 1965, Irish Copper Mines Limited flew a 160 kilometer combined
electromagnetic and magnetic survey over the property area. Such surveys involve
measuring the strength of the earth's magnetic field. Variations in the magnetic
readings on a property may indicate the increased likelihood of precious or base
minerals in the area. This particular survey resulted in the discovery of three
areas on the property where magnetic readings were high. It was recommended that
a follow-up appraisal be conducted over these areas, but there are no records to
indicate that they were.
In 1983, Clear Mines Ltd. held claims that covered the Dotted Lake property.
During March to June 1983, Clear Mines Ltd. commissioned VLF-EM, magnetic and
HEM surveys over the area. A VLF-EM survey consists of two separate surveys: a
very low frequency survey and an electromagnetic survey. Very low frequency
surveys use radio waves to determine whether rocks on a mineral property conduct
electricity. Almost all of the precious and base metals that we seek are above
average conductors of electricity and will affect VLF readings. Electromagnetic
surveys involve measuring whether or not rocks on the surface and subsurface of
the property conduct electricity. Copper and gold are excellent conductors of
electricity. Areas of high conductivity are targets for follow-up exploration.
Magnetic surveys involve searching for changes in the magnetic field over
property areas. Magnetic anomalies may be a result of accumulations of certain
magnetic rocks such as phrrhotite, hematite and magnetite. These rock types are
often found alongside base metals such as copper, zinc and nickel, or precious
metals such as gold and silver.
A HEM, or horizontal loop electromagnetic survey, is a type of electromagnetic
survey that detects how rocks respond to specific electrical frequencies. Three
weak HEM conductors were detected on the present claims beneath Dotted Lake. Two
west to west southwest VLF anomalies were also delineated.
In 1983, Rodeo Resources Ltd. conducted an exploration program over the
southwest corner of the Dotted Lake property. The highest value for 15 rock
samples collected from the property included 103 parts per billion ("ppb") gold,
two ppb molybdenum, 129 parts per million ("ppm") copper, 90 ppm zinc and one
ppm silver.
10
In 1991, Noranda Exploration Company Limited drilled two holes on the Dotted
Lake property. The first hole intercepted a one meter section that contained 2%
pyrite and pyrrhotite. The second hole included a 10.7 meter section that
contained magnetite, pyrrhotite and a minor amount of chalcopyrite. Pyrite,
pyrrhotite, magnetite and chalcopyrite are minerals often found with the
precious and base metals we are seeking.
We have not yet conducted any exploration on the Dotted Lake property.
Proposed Exploration
- ---------------------
Our consulting geologist, Mr. James G. Burns, P.Eng., believes that the Dotted
Lake property is under explored due to the fact that it is located between
Manitouwadge, a major base metal camp 45 kilometers to the north and Hemlo, a
major gold camp 25 kilometers to the southwest. As well, the Dotted Lake
property's geology is similar to both the Manitouwadge and Hemlo occurrences.
Mr. Burns recommends a two phase exploration program for the Dotted Lake
property. The first phase should consist of line cutting, a induced polarization
survey, a magnetic survey and a VLF survey.
Based upon positive results from phase one, Mr. Burns recommends a phase two
exploration program consisting of the drilling of targets identified from the
results of the phase one work. He suggests the following budgets:
Phase I
- -------
Line cutting: $36,800
Induced polarization survey: $66,000
Detailing IP survey: $6,000
Magnetic and VLF surveys: $17,250
Supervision: $5,000
Geophysical interpretation and reporting: $7,000
Contingency: $13,950
Total: $152,000
Phase II
- --------
Diamond drilling: $150,000
Assays: $4,000
Geologist: $25,000
Core shack/office rental: $5,000
Reporting: $1,750
Drafting: $2,000
Contingency: $2,000
Total: $206,000
11
4.3 Competition
The mineral property exploration business, in general, is intensively
competitive and there is not any assurance that even if commercial quantities of
ore are discovered, a ready market will exist for sale of same. Numerous factors
beyond our control may affect the marketability of any substances discovered.
These factors include market fluctuations, the proximity and capacity of natural
resource markets and processing equipment, government regulations, including
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of mineral and environmental protection. The exact
effect of these factors cannot be accurately predicted, but the combination of
these factors may make it difficult for us to receive an adequate return on
investment.
We compete with many companies possessing greater financial resources and
technical facilities for the acquisition of mineral concessions, claims, leases
and other mineral interests as well as for the recruitment and retention of
qualified employees.
4.4 Management and Employees
We do not have any employees other than our directors and officers.
The Company is a party to an agreement with Darcy Krell, spouse of Linda Smith,
President and a Director of the Company, whereby Mr. Krell is engaged to perform
certain management relations services on our behalf at a fee of $2,500 per
month.
4.5 Environmental Regulations
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in Canada generally, and in the Province of Ontario, specifically. Under these
laws, prior to production, we have the right to explore the property, subject
only to a notice of work which may entail posting a bond. To date, we have not
been required to post a bond with respect to exploration on the Dotted Lake
property.
In addition, production of minerals in Ontario will require prior approval of
applicable governmental regulatory agencies. We can provide no assurance to
investors that such approvals will be obtained. The cost and delay involved in
attempting to obtain such approvals cannot be known at this time.
We have budgeted for regulatory compliance costs as part of our operations. We
will have to sustain the cost of reclamation and environmental mediation for all
exploration work undertaken. The amount of these costs is not known at this time
as we do not know the extent of future exploration. Because there is presently
no information on the size, tenor, or quality of any resource or reserve at this
time, it is impossible to assess the impact of any capital expenditures on
earnings in the event a potentially economic deposit is discovered.
12
Permits and regulations will control all aspects of any production program if
the project continues to that stage because of the potential impact on the
environment. Examples of regulatory requirements include:
- Water discharge will have to meet water standards;
- Dust generation will have to be minimal or otherwise re-mediated;
- Dumping of material on the surface will have to be re-contoured and
re-vegetated;
- An assessment of all material to be left on the surface will need to
be environmentally benign;
- Ground water will have to be monitored for any potential contaminants;
- The socio-economic impact of the project will have to be
evaluated and if deemed negative, will have to be re-mediated; and
- There will have to be an impact report of the work on the local fauna
and flora.
Item 5. Operating and Financial Review and Prospects
5.1 Results of Operations
In 1997, we entered into an agreement to acquire 95% all of the property, assets
and undertaking associated with the Dalian Maple Leaf International School
located in the City of Dalian, China. In consideration for the school assets, we
agreed to issue to the owners of the school 45,780,000 common shares and
5,500,000 performance escrow shares having a total deemed value of $11,500,000.
Due to difficulties meeting Vancouver Stock Exchange requirements, in our fiscal
year ended January 31, 1999, we agreed with the Dalian Maple Leaf International
School to terminate our agreement.
During that fiscal year, we incurred a loss of $144,437 consisting of management
fees $60,000, interest and bank charges of $34,942, legal fees $24,725,
brokerage sponsorship fees of $15,000 payable in connection with the acquisition
of the Dalian school, listing and transfer fees of $6,233, accounting and audit
fees of $1,865 and conference costs of $1,672.
We were essentially inactive during the fiscal year ended January 31, 2000.
Management investigated several business acquisition opportunities in China, but
did not reach any agreements to acquire assets. During the fiscal year, we
incurred a loss of $104,426 consisting entirely of the following administrative
fees: accounting and legal fees of $42,882, management fees of $30,000, interest
and bank charges of $24,426, listing and transfer fees of $6,498 and office
costs of $620.
13
In our fiscal year ended January 31, 2001, we underwent a complete change in
management. Mr. Sherman Jen, Wei Shao and Wang Qing Li resigned as directors in
place of Linda Smith, Alexander Mancor, Frank McGill and Shannon Krell. Ms.
Smith replaced Mr. Jen as our president. Upon the change of management, we
entered into an agreement whereby we acquired a 100% interest in the Dotted Lake
property consisting of 76 mineral claim units. The property is located in the
Thunder Bay Mining Division approximately 16 miles south-southeast of
Manitouwadge, Ontario.
During the fiscal year, we spent $73,946 on administrative expenses consisting
of management fees of $35,000, bank charges and interest of $16,397, accounting
and legal fees of $9,086, office costs of $7,248, listing and filing fees of
$5,063 and transfer agent fees of $1,152.
In the following fiscal year ended January 31, 2002, we completed our
acquisition of the Dotted Lake property by paying $200,000 in cash to the
vendor, LCM Equities Ltd., a private arm's length British Columbia company. We
also advanced $152,000 to LCM Equities Ltd. as an advance for exploration of the
Dotted Lake property. We acquired the funds for the property payment and
exploration advance from director and shareholder loans.
We incurred a net loss of $269,158 in the fiscal year ended January 31, 2002
consisting of the $200,000 payment we made in connection with the Dotted Lake
property acquisition, $20,791 in office costs, $20,000 in management fees,
$10,481 in accounting and legal costs, $5,970 in listing and filing fees, $4,684
in consulting fees, $2,785 in transfer agent fees, $2,286 in bank charges and
interest, $1,436 in travel costs and $725 in advertising and promotion expenses.
In comparison with fiscal 2001, our net loss increased substantially due to the
payment made in connection with our property acquisition. Administrative
expenses decreased slightly in fiscal 2002 due to a reduction in fees charged by
new management.
In the fiscal year ended January 31, 2003, we incurred a net loss of $62,432
consisting of management fees of $30,000, office costs of $20,871, legal and
accounting fees of $8,390, listing and filing fees of $2,050, transfer agent
costs of $647, bank charges and interest of $292, travel costs of $158 and
advertising and promotion costs of $24. Our net loss decreased in comparison
with fiscal 2002 primarily due to a reduction in consulting fees and a reduction
in filing fees.
During the three-month period ended April 30, 2003, we incurred a net loss of
$18,072. This amount consisted of management fees ($7,500), office costs
($4,718), restaking costs related to the Dotted Lake property ($4,206),
consulting fees ($1,035), accounting and legal fees ($400) and bank charges and
interest ($213). At April 30, 2003, we had cash on hand of $1,952, prepaid
exploration work of $152,000 and taxes receivable of $1,790. We also had
accounts payable and accrued liabilities of $218,357 and loans payable of
$622,998.
14
5.2 Liquidity and Capital Resources
Since our incorporation, we have financed our operations almost exclusively
through the sale of our common shares to investors. We expect to finance
operations through the sale of equity in the foreseeable future or through
director and shareholder loans, as we have no source of revenue from our
business operations. There is no guarantee that we will be successful in
arranging financing on acceptable terms.
To a significant extent, our ability to raise capital is affected by trends and
uncertainties beyond our control. These include the market prices for base and
precious metals and results from our exploration programs. Our ability to attain
our business objectives may be significantly impaired if prices for metals such
as gold, copper and platinum fall or if results from our intended exploration
programs on our properties are unsuccessful.
Item 6. Directors, Senior Management and Employees
6.1 Directors and Senior Management
Directors:
Name of Director Age
- ---------------------- ----
Linda Smith 54
Shannon Krell 26
Frank McGill 63
Executive Officers:
Name of Officer Age Office
- -------------------- ----- -------
Linda Smith 54 President and Chief
Executive Officer
Brent Peters 49 Secretary
The following describes the business experience of our directors and executive
officers, including other directorships held in reporting companies:
Linda Smith
Linda Smith has acted as our president and as a director since October 27, 2000.
Ms. Smith has also acted as Blue Lightning Ventures Inc.'s president and as a
director from October 1999 to present. She also acted in the same capacities for
Big Bar Gold Corporation from August 1999 to June 2003 and for Candorado
Operating Company Ltd. from June 2000 to November 2001. All of these companies
are British Columbia and Alberta reporting corporations involved in mineral
property exploration. Mr. Smith was also employed part-time as a dental
assistant from 1995 to 2002.
15
Shannon Krell
Shannon Krell has acted as our director since October 27, 2000. She has been a
psychology student for the past five years and is currently attending Douglas
College and the University of British Columbia.
Alexander Mancor
Mr. Mancor has acted as our director since October 27, 2000. For the past five
years, Mr. Mancor has owned and managed a series of residential rental
properties in Burnaby, British Columbia. From 1973 to 1995, he acted as a
contract distributor for Pacific Press Ltd. where he was in charge of wholesale
and retail distribution of the Vancouver Province and Vancouver Sun newspapers
in the Burnaby region.
Brent Peters
Mr. Peters has acted as our secretary since August 21, 2003. Since 1980, he has
acted as President and owner of Colwood Enterprises Ltd., a private British
Columbia company that provides management and consulting services to reporting
companies in British Columbia and Alberta. He has acted as a director of
Consolidated Jaba Inc. (from November 1997 to present), as chief financial
officer and a director of Strikezone Minerals (Canada) Ltd. (from August 2002 to
present) and as president, chief executive officer and a director of B2B
Solutions Inc. (from March 2000 to present), all of which are British Columbia
and Alberta reporting companies involved in mineral property exploration.
There are no arrangements or understandings between any of our directors or
executive officers, pursuant to which they were selected to be a director or
executive officer, nor are there any family relationships among any of our
directors and officers.
6.2 Compensation of Directors
We are required, under applicable securities legislation in Canada, to disclose
to our shareholders details of compensation paid to our directors. The following
fairly reflects all material information regarding compensation paid to our
directors in our fiscal year ended January 31, 2003.
16
Summary Compensation Table
=======================================================================================================================
Name and Year Annual Compensation Long-term Compensation
Principal
Position
- -----------------------------------------------------------------------------------------------------------------------
Other Awards
Salary Bonus Annual --------------------------- LTIP All Other
Compensation Securities payouts Compensatio
Underlying
Restricted Options/
Stock Awards SAR's
- -----------------------------------------------------------------------------------------------------------------------
Linda Smith 2003 Nil Nil Nil Nil Nil Nil Nil
President,
Chief Executive
Officer and
Director
- -----------------------------------------------------------------------------------------------------------------------
Shannon Krell 2003 Nil Nil Nil Nil Nil Nil Nil
Director
- -----------------------------------------------------------------------------------------------------------------------
Alexander Mancor 2003 Nil Nil Nil Nil Nil Nil Nil
Director
- -----------------------------------------------------------------------------------------------------------------------
Frank McGill 2003 Nil Nil Nil Nil Nil Nil Nil
Former
Director
- -----------------------------------------------------------------------------------------------------------------------
Brent Peters 2003 Nil Nil Nil Nil Nil Nil Nil
Secretary
=======================================================================================================================
>
6.3 Board Practices
Linda Smith has acted as our President and a director since October 27, 2000.
Alexander Mancor and Shannon Krell directors on the same date. The directors
hold office until the next annual general meeting of the shareholders at which
time they may stand for re-election. We are required to hold an annual general
meeting once in every calendar year and not longer than thirteen months from the
last annual general meeting.
We are a party to an agreement with Darcy Krell, spouse of Linda Smith, our
president and a director, whereby Mr. Krell is engaged to perform certain
management relations services on our behalf at a fee of $2,500 per month.
Our audit committee is comprised of Linda Smith, Alexander Mancor and Shannon
Krell. We have not appointed a remuneration committee.
6.4 Employees
We have not had any employees other than our directors and officers. When
required, we have retained geological and other consultants.
17
6.5 Share Ownership of Directors and Officers
Our directors and officers own beneficially the following shares as of the date
of this registration statement:
Percentage of Outstanding
Number of Shares Owned Common Shares
--------------------- -------------
Linda Smith: 567,825 10.05%
Shannon Krell: 0 0.00%
Alexander Mancor: 0 0.00%
Brent Peters: 0 0.00%
The above percentages are based on the number of common shares issued and
outstanding in our capital stock as of the date of this registration statement
which is 5,651,714.
No incentive stock options are outstanding to our directors and officers.
Item 7. Major Shareholders and Related Party Transactions
7.1 Beneficial Ownership
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise has
or shares voting power (which includes the power to vote, or to direct the
voting of such security) or investment power (which includes the power to
dispose, or to direct the disposition of, such security); and (2) any person
who, directly or indirectly, creates or uses a trust, proxy, power of attorney,
pooling arrangement or any other contract, arrangement or device with the
purpose or effect of divesting such person of beneficial ownership of a security
or preventing the vesting of such beneficial ownership.
As of the date of this registration statement, 5,651,714 common shares are
issued and outstanding. The Company is authorized to issue up to 100,000,000
common shares without par value.
As of the date of this registration statement, the following persons known to us
were the beneficial owner of more than five percent of our outstanding common
shares.
Name of Shareholder Number of Shares Percentage of Issued Shares
- ------------------ ---------------- ---------------------------
Darcy Krell 900,000 15.92%
Sherman Jen 637,500 11.28%
Linda Smith 567,825 10.05%
Ryan Krell 500,000 8.85%
Frank McGill 409,119 7.24%
Each of our issued shares entitles the holder to one vote in general meeting.
There are no disproportionate or weighted voting privileges.
We are not controlled directly or indirectly by any other corporation or any
other foreign government or by any other natural or legal person, severally or
jointly.
There are no arrangements the operation of which at a subsequent date may result
in a change in our control.
18
7.2 Related Party Transactions
Since January 31, 2000, there are no transactions which have materially affected
or will materially affect us in which any director, executive officer or
beneficial holder of more than 10% of our outstanding common stock, or any of
their respective relatives, spouses, associates or affiliates, has had or will
have any direct or material indirect interest except as follows:
a) since November 2000, we have paid $2,500 per month for management
fees to Darcy Krell doing business as DK Financial
Consultants. Mr.Krell is the spouse of our president, Ms.Linda Smith;
b) since November 2000, we have paid $1,500 per month for rent and
office expenses to Darcy Krell doing business as DK Financial
Consultants;
c) on February 15, 2002, Shannon Krell, one of our directors, advanced
$75,000 to us as a non-interest bearing loan with no fixed terms of
repayment;
d) between November 2000 and July 2001, Ryan Krell, brother of Shannon
Krell, advanced a total of $106,574 to us as a non-interest bearing
loan with no fixed terms of repayment;
e) between November 2000 and December 2001, Linda Smith, our president
and a director, advanced a total of $413,061 to us as a non-interest
bearing loan with no fixed terms of repayment. We have repaid $10,796
of this amount; and
f) between August 2000 and February 2003, Darcy Krell, spouse of Ms.
Linda Smith, advance a total of $330,930 to us as a non-interest
bearing loan with no fixed terms of repayment. We have repaid
$302,747 of this amount.
7.3 Interests of Experts and Counsel
Our experts and legal counsel have no interest in our shareholdings.
Item 8. Financial Information
8.1 Legal Proceedings
To the best of our knowledge there are no legal or arbitration proceedings
threatened, pending or in progress against us, except for a British Columbia
Supreme Court action by Ellis Foster, Chartered Accountants, our form auditor,
for $51,680.54 as at June 30, 2001, plus interest accruing thereafter at a rate
of 1% per month.
Ellis Foster commenced legal action against us, Dalian Maple Leaf International
School, Sherman Investment Ltd. and Shu Liang Sherman Jen and Lan Ying Li on
October 19, 2001. The claim alleges that Ellis Foster provided accounting and
audit services to the defendants in connection with the preparation of financial
statements relating to our proposed acquisition of Dalian Maple Leaf
International School.
We have filed a Statement of Defence in the action denying that we retained
Ellis Foster to provide accounting and audit services in connection with the
preparation of financial statements for Dalian Maple Leaf International School.
We further state that the other defendants are responsible for any fees
incurred. Ellis Foster has not taken any steps to proceed with its legal claim
since November 23, 2001.
19
8.2 Significant Changes
There have been no significant changes since the date of the audited financial
statements included herein.
Item 9. The Offer and Listing
9.1 Offer and Listing Details
Our common shares previously traded on the Canadian Venture Exchange and
Vancouver Stock Exchange under the symbol "GMS". On July 12, 2001, our shares
were suspended from trading on the TSX Venture Exchange due to our failure to
meet the exchange's minimum working capital requirements. Accordingly, there is
no current market for our common shares.
The following table sets forth the high and low closing prices in Canadian funds
of our common shares during the time they traded through the facilities of the
Canadian Venture Exchange, and its predecessor, the Vancouver Stock Exchange:
Period High Low
- ------- ---- -----
February 1, 1999 to January 31, 2000 $0.15 $0.03
February 1, 2000 to January 31, 2001 $0.25 $0.06
We intend to apply to have our common shares quoted on the National Association
of Securities Dealers' over-the-counter electronic bulletin board. However,
there is no certainty that such listing or any other stock exchange listing will
occur.
Item 10. Additional Information
20
10.1 Share Capital
Our authorized share capital consists of 100,000,000 common shares without par
value. Our issued share capital as of the date of this registration statement is
5,651,714 fully paid common shares without par value. We did not issue any
common shares in our capital in our fiscal year ended January 31, 2003, and we
have not issued any common shares since that date.
All shares issued and to be issued in the future must be and have been approved
by authorizing resolution consisting of a simple majority of our board of
directors.
We do not hold any of our own shares.
We do not have any potential obligations to increase our issued capital.
Since February 1, 2000, we have not issued any common shares in our capital.
10.2 Memorandum and Articles of Association
We were incorporated under the Company Act of British Columbia by registration
of our articles of incorporation and memorandum. Pursuant to the provisions of
the Company Act, a company may conduct any business that it is not restricted by
the terms of its articles from conducting. Our articles contain no such
restrictions.
Our directors are required to disclose to the board of directors the nature and
extent of their interest in any proposed transaction or contract and must
thereafter refrain from voting in respect thereof. An interested director may be
counted in the quorum when a determination as to such director's remuneration is
being considered but may not vote in respect thereof. The directors have an
unlimited power to borrow money, issue debt obligations and mortgage or charge
our assets provided such actions are conducted bona fide and in our best
interests. There are no mandatory retirement ages for directors or any required
shareholdings.
All holders of common shares are entitled to receive dividends out of assets
legally available therefor at such times and in such amounts as the board of
directors may from time to time determine. All holders of common shares will
share equally on a per share basis in any dividend declared by the board of
directors. The dividend entitlement time limit will be fixed by the board of
directors at the time any such dividend is declared. Each outstanding common
share is entitled to one vote on all matters submitted to a vote of our
shareholders in general meeting. There are no cumulative voting rights attached
to any of our shares and, accordingly, the holders of more than half of the
shares represented at a general meeting can elect all of the directors to be
elected in a general meeting. All directors stand for re-election annually. Upon
any liquidation, dissolution or winding up, all common shareholders are entitled
to share ratably in all net assets available for distribution after payment to
creditors. The common shares are not convertible or redeemable and have no
preemptive, subscription or conversion rights. In the event of a merger or
consolidation, all common shareholders will be entitled to receive the same per
share consideration.
The rights of shareholders may only be altered by the shareholders passing a
special resolution at a general meeting. A special resolution may only be passed
when it has been circulated to all shareholders by way of an information
circular and then must be passed by seventy-five percent of the votes cast at
the general meeting.
The board of directors may call annual and extraordinary general meetings when
required. One or more shareholders holding in aggregate five percent or more of
our issued shares may requisition an extraordinary meeting and the directors are
required to hold such meeting within four months of such requisition. Only
registered shareholders or persons duly appointed by proxy may be admitted to
meetings unless otherwise permitted by the chairman of the meeting.
21
There are no national limitations or restrictions on the right to own our common
shares.
There are no provisions in our articles of association that would have the
effect of delaying, deferring or preventing a change in control.
There are no provisions in our articles of association that establish any
threshold for disclosure of ownership. However, the British Columbia and Alberta
Securities Commissions require that persons that are the registered owners of,
and/or have voting control over 10% or more of our common shares must file
insider reports disclosing securities holdings.
10.3 Material Contracts
We have not entered into any material contracts within the past two years.
10.4 Exchange Controls and other Limitations Affecting Security Holders
There is no law or governmental decree or regulation in Canada that
restricts the export or import of capital, or affects the remittance of
dividends, interest or other payments to a non-resident holder of common
shares, other than withholding tax requirements. See "Item 10.5. Taxation"
--------
There is no limitation imposed by Canadian law or by our constituent documents
on the right of a non-resident to hold or vote common shares, other than are
provided in the Investment Canada Act (Canada). The following summarizes the
principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian" individuals,
governments, corporation or other entities who wish to acquire a "Canadian
business" (as defined in the Investment Canada Act), or establish a "new
Canadian business" (as defined in the Investment Canada Act) to file either a
notification or an application for review with a governmental agency known as
"Investment Canada". The Investment Canada Act requires that certain acquisition
of control of Canadian business by a "non-Canadian" must be reviewed and
approved by the Minister responsible for the Investment Canada Act on the basis
that the Minister is satisfied that the acquisition is "likely to be of net
benefit to Canada", having regard to criteria set forth in the Investment Canada
Act. Only acquisitions of control are reviewable under the Investment Canada
Act; however, the Investment Canada Act provides detailed rules for the
determination of whether control has been acquired and, pursuant to those rules,
the acquisition of one-third or more of the voting shares of a corporation may,
in some circumstances, be considered to constitute an acquisition of control.
Certain reviewable acquisitions of control may not be implemented before being
approved by the Minister; if the Minister does not ultimately approve a
reviewable acquisition, which has been completed, the acquired Canadian business
must be divested. Failure to comply with the review provisions of the Investment
Canada Act could result in, amongst other things, an injunction or a court order
directing disposition of assets of shares.
22
10.5 Canadian Federal Income Tax Consequences to United States
Investors
A brief description of certain provisions of the tax treaty between Canada and
the United States is included below, together with a brief outline of certain
taxes, including withholding provisions to which United States security holders
are subject under existing laws and regulations of Canada and United States; the
consequences, if any, of state and local taxes are not considered. The following
information is general and security holders are urged to seek the advice of
their own tax advisors, tax counsel or accountants with respect to the
applicability or effect on their own individual circumstances of not only the
matters referred to herein, but also any state or local taxes.
Canadian federal tax legislation generally requires a 25% withholding from
dividends paid or deemed to be paid to the Company's nonresident shareholders.
However, shareholders resident in the United States will generally have this
rate reduced to 15% through the tax treaty between Canada and the United States.
The amount of stock dividends paid to non-residents of Canada will be subject to
withholding tax at the same rate as cash dividends. The amount of stock dividend
(for tax purposes) would generally be equal to the amount by which our stated
capital has increased by reason of the payment of such dividend. We will furnish
additional tax information to shareholders in the event of such a dividend.
Interest paid or deemed to be paid on our debt securities held by non-Canadian
residents may also be subject to Canadian withholding tax, depending upon the
terms and provisions of such securities and any applicable tax treaty. Under
present legislation in the United States, we are generally not subject to United
States back up withholding rules, which would require withholding at a rate of
20% on dividends and interest paid to certain United States persons who have not
provided us with a taxpayer identification number.
Gains derived from a disposition of shares of the company by a non-resident
shareholder will be subject to tax in Canada only if not less than 25% of any
class of our shares was owned by the nonresident shareholder and/or persons with
whom the nonresident did not deal at arm's length at any time during the
five-year period immediately preceding the disposition. In such cases gains
derived by a U.S. shareholder from a disposition of our shares would likely be
exempt from tax in Canada by virtue of the Canada-U.S. tax treaty.
ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.
23
10.6 Documents on Display
You may review a copy of our filings with the SEC, including exhibits and
schedules filed with it, at the SEC's public reference facilities in Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
The SEC maintains a Web site (HTTP://WWW.SEC.GOV) that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC . Although we may make our filings with the SEC
electronically as a foreign private issuer, we are not obligated to do so until
after the effective date of this registration statement.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 12. Descriptions of Securities Other than Equity Securities
12.1 Warrants
We have no warrants issued and outstanding.
12.2 Stock Options
We have no incentive stock options issued and outstanding.
PART II
-------
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable
Item 14. Material Modifications to the Rights of Security Holders and Use of
Proceeds
Not applicable
Item 15.
Not applicable
Item 16.
Not applicable
24
PART III
--------
Item 17. Financial Statements
Our audited financial statements include:
- - our balance sheets as at January 31, 2003 and January 31, 2002;
- - the following statements for the fiscal years ended January 31, 2003, 2002
and 2001:
- statements of operations and deficit; and
- statements of cash flows; and
- - notes to the financial statements.
All of these were prepared by our auditor, S.G. and Associates,
Chartered Accountants.
The financial statements are prepared in accordance with generally accepted
accounting principles in Canada and are reconciled to United States generally
accepted accounting principles in Note 9. All figures are expressed in Canadian
dollars.
Our unaudited financial statements include:
- - our balance sheets at April 30, 2003 and January 31, 2003;
- - our statements of loss and deficit for the three-month periods ended
April 30, 2003 and April 30, 2002;
- - our statements of cash flows for the three-month periods ended April 30
2003 and April 30, 2002; and
- - notes to the financial statements.
All of these were prepared in accordance with interim reporting requirements
under United States generally accepted accounting principles. All figures are
expressed in Canadian dollars.
Item 18. Financial Statements
See "Item 17 Financial Statement"
-------------------
25
Item 19. Exhibits
Exhibit 1: Financial Statements
Exhibit 2: Certificate of Incorporation
Exhibit 3: Memorandum and Articles of Association
Exhibit 4: Management Agreement dated November 1, 2000 between
Gemstar Resources Ltd. and Darcy Krell doing business as DK
Financial Consultants.
Exhibit 5: Consent of S.G. and Associates, Chartered Accountants
26
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly cause and authorized the undersigned to sign
this statement on its behalf.
GEMSTAR RESOURCES LTD.
Dated: September 16, 2003
By: /s/ Linda Smith
----------------------
Linda Smith, President