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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2004
Commission file number: 0-21968
JAGUAR RESOURCES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
BRITISH COLUMBIA 76-0195574
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
800 Bering Drive, Suite 208
Houston, Texas 77057
(Address of Principal Executive Offices, including Zip Code)
(713) 785-1278
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
------------------- ------------------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
-------------------
COMMON STOCK
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
As of April 19, 2004, the aggregate market value of voting stock held by
non-affiliates of the Registrant, based on the closing price of the Common Stock
of the Registrant quoted on the TSX Venture Exchange was $40,584,600 (Canadian).
For purposes of calculating this amount, only directors, officers and beneficial
owners of 5% or more of the capital stock of the Registrant have been deemed
affiliates.
Number of shares of Registrant's Common Stock outstanding as of April 19, 2004:
36,073,871
Documents incorporated by reference: None.
JAGUAR RESOURCES CORPORATION.
FORM 10-K
TABLE OF CONTENTS
ITEM PAGE
NUMBER NUMBER
- ------ ------
PART I
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. . . . . . . . . . . . Market For Registrant's Common Stock and
Related Stockholder Matters 6
Item 6. Selected Financial Data 9
Item 7. . . . . . . . . . . . Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . 10
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. . . . . . . . . . . . Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . 13
Item 9A. Controls and Procedures 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners and Management 17
Item 13. Certain Relationships and Related Transactions 18
Item 14. Principal Accounting Services and Fees 19
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on 8-K 19
ITEM 1. BUSINESS
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GENERAL INFORMATION
Jaguar Resources Corporation, formerly Star Resources Corp., ("the
Company") is engaged in the business of exploring for and, if warranted,
developing mineral properties and is concentrating its current acquisition and
exploration efforts on those properties which the Company believes have large
scale gold potential. The Company leases interests in properties located in the
Tapajos Gold District of Brazil's northerly Para State (collectively the
"Properties").
The Company has two wholly-owned subsidiaries; Jaguar Resources do Brasil
Ltda., a Brazilian corporation, and Star U.S. Inc., a Delaware corporation
("Star"). Star in turn owns 100% of the stock of three corporations, Diamond
Exploration, Inc. and Continental Diamonds, Inc., both of which are Arkansas
corporations ("DEI" and "CDI", respectively), and Diamond Operations, Inc., a
Delaware corporation ("DOI"). All references to the Company herein include its
subsidiaries unless otherwise noted. The Company's Consolidated Financial
Statements referred to herein also include its subsidiaries. The Company's
fiscal year ends January 31.
The Company's principal office is located at 800 Bering Drive, Suite 208,
Houston, Texas 77057. The Company had three (3) full-time employees at January
31, 2004; however, the Company retains consultants, independent contractors and
part-time employees on an as-needed basis in connection with its exploration and
development activities.
The Company was incorporated under the Company Act (British Columbia) on
March 12, 1986. The authorized capital of the Company consists of 100,000,000
shares of common stock without par value (the "Common Stock"), of which
36,073,871 shares were issued and outstanding as of April 19, 2004. The Common
Stock of the Company ranks equally as to dividends, voting rights and
participation in assets and is traded under the symbol "JRS" on the TSX Venture
Exchange.
Unless otherwise stated herein, all monetary amounts are expressed in
Canadian dollars. At April 20, 2004, the exchange rate for conversion to United
States dollars was $1.00 (Canadian) = U.S. $ 0.7389. Historical exchange rates
for the last five years are set forth in Item 6 at page 10.
The Company is subject to substantial risks with respect to exploration
activities and will require additional capital during fiscal 2005 to conduct
additional property exploration activities and to fund general and
administrative expenses. See "Certain Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
OPERATING HISTORY AND DEVELOPMENT
The Company became a public company in January 1988 when it undertook an
initial public offering of its Common Stock in British Columbia, Canada and
became listed on the Vancouver Stock Exchange, the predecessor to the TSX
Venture Exchange. From inception and prior to 1988 the Company had limited
business activities and through 1993 explored and abandoned several mineral
properties. During fiscal 1993, the Company elected to pursue prospects with
the potential for commercial diamond production.
The Company completed three acquisitions in fiscal 1993 consistent with its
focus on diamond exploration prospects, including acquisitions of the "Arkansas
Properties" (defined below). During fiscal 1995 through 2003, the Company
completed additional acquisitions in Arkansas and directly managed and funded
exploration efforts on certain Arkansas Properties. In fiscal 2003 the Company
decided to cease exploration efforts in Arkansas due to disappointing
exploration results, and began to pursue mineral exploration prospects,
particularly gold prospects in South America. During fiscal 2004 the Company
acquired the mineral rights to two properties in Brazil, the Tocantinzinho and
Mamoal Properties, as described below. The Company will continue to pursue
mineral exploration prospects on a worldwide basis as opportunities arise,
subject to adequate acquisition and exploration funding.
1
Since its inception, the Company has no revenues from operations other than
rental income from the Company's Diamond Recovery Plant ("the Plant") totaling
$1,079,000, which was received during the three fiscal years ended January 31,
1999. In March 2003 the Company sold the Plant to a third party for $350,000
(U.S.).
CERTAIN RISK FACTORS
The Company's business plan to acquire additional exploration prospects
and, if warranted, undertake development and mining operations are subject to
numerous risks and uncertainties, including the following:
LACK OF PROVEN PROPERTIES AND INSUFFICIENT EXPLORATION AND DEVELOPMENT
FUNDS. At this point, all of the Company's exploration prospects and property
interests (collectively the "Properties") are gold prospects in Brazil. While
the Company has sufficient funds to complete the exploration phase currently
underway, additional funds will be necessary in order for the Company to pursue
further exploration on its existing properties and to acquire and develop
additional exploration prospects. Certain of the Company's planned expenditures
are discretionary and may be increased or decreased based upon funds available
to the Company.
As of January 31, 2004, the Company had sufficient cash to fund general and
administrative expenses anticipated during fiscal 2005. As discussed above, the
Company will be required to raise additional capital for additional exploration
activity on its existing properties and acquisition of new exploration prospects
during fiscal 2005. There can be no assurance that additional funds can be
raised. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" (hereinafter referred to as "MD & A").
ENVIRONMENTAL LAWS. The exploration programs conducted by the Company are
subject to national, state and/or local regulations regarding environmental
considerations in the jurisdiction where they are located. Most operations
involving exploration or production activities are subject to existing laws and
regulations relating to exploration and mining procedures, reclamation, safety
precautions, employee health and safety, air quality standards, pollution of
stream and fresh water sources, odor, noise, dust, and other environmental
protection controls adopted by federal, state and local governmental authorities
as well as the rights of adjoining property owners. The Company may be required
to prepare and present to federal, state or local authorities data pertaining to
the effect or impact that any proposed exploration or production of minerals may
have upon the environment. All requirements imposed by any such authorities may
be costly, time consuming, and may delay commencement or continuation of
exploration or production operations. However, at this time, the Company is in
the exploration stage with respect to all of its Properties and does not
anticipate preparing environmental impact statements or assessments until such
time as the Company believes one or more of its Properties will prove to be
commercially feasible.
LIMITED EXPLORATION PROSPECTS. The Company's existing properties are gold
prospects in Brazil. Accordingly, the Company does not have a diversified
portfolio of exploration prospects either geographically or by mineral targets.
TITLE TO PROPERTIES. The Company cannot guarantee title to all of its
Properties as the Properties may be subject to prior unregistered agreements or
transfers or native land claims, and title may be affected by undetected
defects. The Company does not maintain title insurance on its properties.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K under "Item 1. Business", "Item 2.
Properties", "Item 3. Legal Proceedings", and "Item 7. MD & A" and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions;
competition; success of operating initiatives; the success of the Company's
exploration and development operations on its Properties; the Company's ability
to raise capital and the terms thereof; the acquisition of additional
properties; the continuity, experience and quality of the Company's management;
changes in or failure to comply with government regulations or the lack of
government authorization to continue the Company's projects; and other factors
referenced in this Form 10-K. The use in this Form 10-K of such words as
2
"believes", "plans", "anticipates", "expects", "intends" and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. The success of the Company is dependent
on the efforts of the Company, its employees and many other factors including,
primarily, its ability to raise additional capital and establishing the economic
viability of its exploration Properties.
ITEM 2. PROPERTIES
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Currently, all of the Company's Properties are located in the Tapajos Gold
District of Brazil's northerly Para State. The general location of the
Company's Brazilian Properties is shown on the map provided below. The map is
followed by a description of the Company's rights and interests in each of the
Properties, including those Properties in the State of Arkansas where the
Company's rights and interests have expired.
[GRAPHIC OMITED]
3
BRAZILIAN PROPERTIES
Tocantinzinho Properties
In August 2003 the Company acquired the mineral rights to a total of 28,275
hectares in the Tapajos gold district in Para State, Brazil under an option
agreement with two individuals. The option agreement entitles the Company to
acquire a 100% interest in the Tocantinzinho Properties over a four-year period
in consideration for the staged payment of $465,000 (U.S.), the staged issuance
of 2,600,000 shares of the Company and the expenditure of $1,000,000 (U.S.).
The Company received approval for the acquisition from the TSX Venture Exchange
in August 2003 and made the initial payment required by the option agreement to
the optionors, consisting of 1,100,000 common shares of the Company and $75,000
(U.S.). The Company made the second option payment, consisting of 200,000
common shares of the Company and $30,000 (U.S.), in February 2004.
The additional total commitment under the option agreement is as follows (all
amounts are in U.S. dollars): $70,000 and 400,000 common shares of the Company,
$40,000 and 200,000 common shares of the Company, $130,000 and 200,000 common
shares of the Company, and $150,000 and 700,000 common shares of the Company for
the 2005, 2006, 2007 and 2008 fiscal years, respectively. A total of $300,000
(U.S.) must be expended by July 31, 2004.
Additionally, the option agreement requires the Company to assume all existing
mineral lease obligations of the optionors to the owners of the mineral rights
of the Tocantinzinho Properties (the "Underlying Agreements") totaling
$1,600,000 (U.S.) over a four-year period. The lease commitments under the
Underlying Agreements are as follows (all amounts are in U.S. dollars): $35,000,
$80,000, $120,000, $160,000 and $1,205,000 in fiscal years 2004, 2005, 2006,
2007 and 2008, respectively. The Company paid the lease payments totaling
$35,000 (U.S.) during fiscal 2004. One of the optionors entered into a
consulting agreement with the Company for an 18-month period at a rate of $7,000
(U.S.) per month. The payments under the option agreement, the Underlying
Agreements and the consulting agreement are considered expenditures for purposes
of meeting the required total and initial annual expenditures of $1,000,000
(U.S.) and $300,000 (U.S.) discussed above. The option agreement is cancelable
by the Company without obligation other than the initial payment of $75,000
(U.S.) and 1,100,000 shares of the Company and the expenditure of $300,000
(U.S.) by July 31, 2004.
The optionors are entitled to a sliding scale net smelter return royalty ranging
from 2.5% for gold prices below $400 (U.S.) per ounce and 3.5% for gold prices
in excess of $500 (U.S.) per ounce. Royalties will be reduced by the amount of
any royalties payable to underlying owners and the Government of Brazil.
The Company commenced a Phase I drilling program on the project in February,
2004. The Phase I program is targeting primary gold mineralization below the
strong eluvial and primary surface mineralization that has been mined since the
early 1960s. This phase, including eight inclined holes totaling approximately
1700 meters, will aim at intersecting steeply dipping mineralized zones at
anticipated depths of between 150 and 200 meters. The Company received assay
results from 438 samples from the first four diamond drill holes of the
eight-hole Phase I drilling program at the Tocantinzinho Properties in April,
2004.
All four drill holes intercepted mineralization, with the best intercepts
assaying 170.2 meters @1.84g/t gold in Hole # 4, and 91.9 meters @ 1.01 g/t Gold
in Hole # 1. Both holes bottomed in mineralization, and the target remains open
along strike. In addition, holes #2 and #3 penetrated tailings (that have been
processed and reprocessed by primitive artisanal methods), which reported
tailings values of 19.82 meters @ 2.15 g/t Gold, and 10.68 meters @ 1.36 g/t
gold. This indicates that the significant quantity of tailings on this property
is an additional resource, which will be pursued during fiscal 2005.
Mamoal Property
The Company acquired the mineral rights to the 10,000 hectare Mamoal Property,
located 30 kilometers southeast of the Company's Tocantinzinho Properties, in
December 2003. The Company has an option to acquire 100% of the Mamoal Property
by payment of a total of $300,000 (U.S.) over three and one half years. The
Company may terminate the option agreement at any time without further
obligation. The initial $10,000 (U.S.) payment was made by the Company in
4
December 2003, and the exploration research license has been transferred to
Jaguar Resources do Brasil Ltda. The remaining lease commitments are as follows
(all amounts are in U.S. dollars): $25,000, $45,000, $65,000, and $155,000 in
fiscal years ending January 31, 2005, 2006, 2007 and 2008, respectively. The
Company may acquire the Mamoal Property at any time by accelerating the lease
payments.
ARKANSAS PROPERTIES
Black Lick and Twin Knobs II Properties
In December 1999, the Company entered into an agreement with a third party
lessor to lease the undersurface rights below 480 acres in Pike County, Arkansas
located adjacent to the Company's American Mine Property. The consideration
paid for the lease was $50,000 (U.S.), 500,000 shares of the Company and the
transfer to the lessor of the surface rights to the 480 acres which the Company
purchased from a second third party for approximately US$313,000. The lease
grants the rights to explore, develop and extract diamond bearing material lying
below overburden and the upper 50 feet of diamond bearing material on those
areas for which the surface rights have been acquired and transferred to the
lessor. The primary term of the lease is five years plus two year extensions
and will continue so long as there is commercial production. Royalties include
2% of gross sales subject to a minimum of $48,000 (U.S.) per year after the
first seven years. The Company has the right to use the surface for plant and
other facilities for additional royalties.
During fiscal 2001 through fiscal 2003, the Company commenced an exploration
program, consisting of drilling and bulk sampling, to assess these prospects.
Core samples totaling 15,585 feet were taken from 45 drilling locations on these
properties. An analysis of a total of 238kg of lamproite from three different
core samples from the American Mine Property and the Black Lick Property was
performed and produced 14 microdiamonds and one macrodiamond. In July 2001 the
Company excavated a bulk sample of approximately 10,000 tons on the Black Lick
Property, and approximately 2,000 tons of the bulk sample was processed through
the Company's diamond sampling plant. Three diamonds with a total carat weight
of 0.38 were recovered, which was significantly less than the Company had
anticipated.
During fiscal 2003, the Company recovered several microdiamonds from drill core
from the Black Lick and American Mine Properties which were processed at the
Diamond Recovery Plant. In May 2002 the Company drilled a total of 11 auger
holes, each five feet in diameter, on the American Mine, Black Lick and
Kimberlite Properties. Most of drilling was not successful as the holes were
terminated short of their target depths by hard sandstone blocks, which could
not be penetrated by the auger. In the third quarter of fiscal 2003 the Company
completed eleven wide diameter holes on the American Mine and Black Lick
Properties and bulk sampled approximately 900 tons of material. Bulk sampling
revealed no macrodiamonds. In December 2002, based upon the cumulative
exploration results obtained on the Arkansas Properties, the Company made the
decision to cease exploration efforts in Arkansas. Accordingly, the capitalized
costs related to the Black Lick and Twin Knobs II properties totaling $2,512,500
were written off in the third quarter of fiscal 2003.
American Mine Property
Pursuant to an agreement dated November 4, 1992, DEI was granted a permit to
explore a mineral property located in Pike County, Arkansas. The Company's
Diamond Recovery Plant was located on this leased property. In November 1996,
the Company exercised its option to lease the property for 10 years upon the
payment of $125,000 (U.S.). Yearly payments of $25,000 (U.S.) were required for
each of the four years after the first year and $40,000 (U.S.) per year for the
following five years, plus an additional $7,500 (U.S.) per year for surface
rentals related to the Plant. Sampling was performed on the American Mine
property in the first quarter of fiscal 1998. The Company excavated a 100-ton
sample during fiscal 1998, and a total of 51 diamonds with a total carat weight
of 9.591 were recovered, including two stones greater than one carat. During
fiscal 2003 sampling was conducted on this property in conjunction with the
sampling performed on the Black Lick Property as discussed above. The lease
payment of $47,500(U.S.), due November 1, 2002, was not made by the Company.
Due to the lease expiration and the exploration results discussed above, the
capitalized costs related to the American Mine Property totaling $450,823 were
written off in the third quarter of fiscal 2003.
5
In March 2003 the Company sold the Plant to a third party for $350,000 (U.S.).
In conjunction with the sale, the third party paid the lessor of the American
Mine Property $47,500 (U.S.) on behalf of the Company in order to extend the
Company's lease on the property through October 31, 2003. The Company recorded
a reserve for leasehold reclamation costs of approximately $150,000,
representing the estimated costs of the Company's obligation to restore the
Arkansas properties to their original condition prior to lease expiration and to
perform reclamation activities as required by Arkansas regulatory authorities.
The Company allowed the lease to expire effective November 1, 2003.
Kimberlite Mine Property
In November 1998, the Company executed a lease on certain property in Pike
County, Arkansas with a two-year term ending November 14, 2000 by payment of
$15,000 (U.S.). The Company extended the lease to November 14, 2002 by payment
of an additional $15,000 (U.S.) in November 2000. The Company allowed this
lease to expire in November 2002, and the capitalized costs totaling $84,034
were written off in the third fiscal quarter of 2003.
Southwest Properties
In June 1994, the Company acquired from an unrelated company its rights under
fifteen mineral leases located in the southwestern region of Arkansas covering
approximately 2,000 acres. The original dates of the leases were from May 1992
to August 1992, with terms from 10 to 20 years. In fiscal 2002 and fiscal 2003
the Company elected not to renew selected leases, and, accordingly, write-downs
representing all prior acquisition costs totaling $86,067 and $59,020,
respectively, were recorded. The capitalized costs related to the remaining
active leases totaling $35,349 were written off in the third quarter of fiscal
2003 based upon the Company's decision to cease exploration efforts in Arkansas
as discussed above.
DIAMOND RECOVERY PLANT
In 1993, the Company contracted to obtain the Diamond Recovery Plant with
complete process design and specific modules supplied from E.L. Bateman
Engineering, a South African based company with worldwide experience in
designing and building diamond recovery plants. The Plant was located on the
American Mine Property. The Company utilized the Plant during its testing of
its Arkansas properties from 1994 through 2003. Additionally, the Plant was
used to process bulk samples for a third party in fiscal 1999. As discussed
above, the Plant was sold in March 2003 to a third party for $350,000 (U.S.).
ITEM 3. LEGAL PROCEEDINGS
------------------
Except as described in Note 10 of the Notes to the Company's Consolidated
Financial Statements incorporated by reference into Part II. Item 8 hereof,
there are no material pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of their property is subject. The
Company is involved from time to time in claims arising in the normal course of
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
----------------------------------------------------------
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
--------------------------------------------------------------
MATTERS
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The Company's Common Stock is listed on the TSX Venture Exchange ("the
TSX") in British Columbia, Canada under the symbol "JRS" ("SRS through September
17, 2003). The Company's Common Stock is not traded on an exchange or market in
the United States. The high and low sales prices (in Canadian dollars) as
quoted on the TSX for the below referenced quarterly periods were as follows:
6
Price Range of Common Stock
Fiscal Year Ended January 31
----------------------------
2004 2003
---- ----
Fiscal Quarter Ended High Low High Low
- -------------------- ---- ---- ---- ----
April 30 . . . . . . 0.25 0.07 0.85 0.16
July 31. . . . . . . 0.35 0.20 0.75 0.21
October 31 . . . . . 0.47 0.25 0.32 0.09
January 31 . . . . . 0.54 0.35 0.19 0.07
The closing price of the Company's Common Stock was $1.24 (Canadian) as of
April 19, 2004 on the TSX Venture Exchange.
At April 19, 2004, there were 135 holders of record of the Company's Common
Stock including 106 in the United States who collectively held 22,766,237 shares
representing 63% of the total number of issued and outstanding shares. The
Company believes it has in excess of 300 beneficial owners of its Common Stock
residing in the United States and Canada based on the number of record holders
and individual participants in security position listings.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company presently intends to retain cash for the operation and development
of its business and does not anticipate paying cash dividends in the foreseeable
future. A future determination as to the payment of dividends will depend on a
number of factors, including future earnings, capital requirements, the
financial condition and prospects of the Company and such other factors as the
Board of Directors of the Company deems relevant.
FOREIGN CONTROLS
The Company is not aware of governmental laws, decrees or regulations in
Canada restricting the import or export of capital or affecting the remittance
to the United States of interest, dividends or other payments to non-resident
holders of the Company's Common Stock. However, the payment or crediting of
interest or dividends to United States residents may be subject to applicable
withholding taxes at a rate prescribed by the Income Tax Act (Canada) as
modified by the provisions of the Canada-United States Income Tax Act (Canada)
and as further modified by the provisions of the Canada-United States Income Tax
Convention, 1980 (see "Taxation" below).
Except as provided in the Investment Canada Act (the "ICA"), there are no
limitations under the laws of Canada, the Province of British Columbia or in the
charter and organizational documents of the Company on the right of nonresident
or foreigner owners to hold and/or vote the shares of the Company.
The ICA applies when a "non-Canadian" individual or entity or controlled
group of entities as defined in the ICA proposes to make an investment to
acquire control of a Canadian business enterprise, either directly or
indirectly, and by way of purchase of voting shares of a corporation or of
substantially all of the assets used in the Canadian business enterprise. An
investment in voting shares of a corporation is deemed to be an acquisition of
control where more than 50% of the voting shares are acquired. An acquisition
of less than one-third of the voting shares of a corporation is deemed not to be
an acquisition of control and an acquisition of between one-third and one-half
of the voting shares of a corporation is presumed to be an acquisition of
control unless it can be established that the acquisition does not in fact
result in control of the corporation by the investor.
7
An investment to acquire control of a Canadian business enterprise, the
gross assets of which exceed certain thresholds, must be reviewed and approved
under the ICA before implementation. An investment to acquire control of a
Canadian business enterprise, the gross asset value of which falls below these
threshold amounts, is one in respect of which notification must be given under
the ICA although approval is not required prior to implementation of the
investment. NAFTA Investors, (i.e.) investors who are nationals, other than
Canadian, as defined in the North American Free Trade Agreement, are not
considered for the purposes of the ICA to be "non-Canadian".
TAXATION
Dividends. Generally, dividends paid by a Canadian corporation to
non-resident shareholders are, under the Income Tax Act (Canada) (the "ITA"),
subject to a withholding tax of 25%. However, paragraph 2 of Article X of the
Canada-United States Income Tax Convention (1980) (the "Treaty") provides for
the following maximum withholding tax rates:
a) 10% of the gross amount of the dividends if the beneficial owner of such
dividends is a U.S. resident company which owns at least 10% of the voting
stock of the corporation paying the dividends; and
b) 15% of the gross amount of the dividends in all other cases.
Subject to certain limitations and exceptions, U.S. resident shareholders
of a Canadian corporation may be entitled to a credit for all or a portion of
such withholding taxes in computing their U.S. federal and possibly their state
income tax liability.
Dividends paid by a Canadian corporation to shareholders resident in Canada
will not be subject to withholding tax. Any dividends received by a Canadian
resident on shares of the Company will be treated for tax purposes as dividends
from a taxable Canadian corporation. Accordingly, where a dividend is received
by an individual resident in Canada, the individual will be entitled to claim a
federal dividend tax credit, equal to 16 2/3% of the dividend. Where the
dividend is received by a corporation resident in Canada, the dividend will
normally be free of tax under Part I of the ITA but may be subject to refundable
tax under Part IV of the ITA.
Disposition of Capital Property. If shares of a Canadian public
----------------------------------
corporation held by a non-resident shareholder constitute capital property to
that shareholder, the disposition of such shares will not be subject to tax
under the ITA unless the shares constitute "taxable Canadian property" to the
vendor. Where a non-resident shareholder or persons with whom the non-resident
shareholder does not deal at arm's length have, at any time during the five year
period immediately preceding the disposition, owned not less than 25% of the
issued shares of any class of the capital stock of the public corporation, the
shares so disposed of will constitute "taxable Canadian property". Under the
ITA, a disposition of shares that constitute taxable Canadian property will give
rise to a capital gain (or a capital loss) equal to the amount by which the
proceeds of disposition of such shares, net of any cost of disposition, exceeds
(or is less than) the adjusted cost basis of such shares to that investor.
Generally, three-quarters of any capital gain realized by an investor on a
disposition or a deemed disposition of such a shares must be included in
computing his Canadian income for that year as a taxable capital gain.
Three-quarters of any capital loss realized by an investor on a disposition or
deemed disposition of such a share in a taxable year may generally be deducted
from his Canadian taxable capital gains for that year.
Any gains realized by a non-resident shareholder from the disposition of
shares which are taxable Canadian property may be exempt from tax under the ITA
by virtue of Article XIII of the Treaty if, at the time of the disposition of
the subject shares, the value thereof was derived principally from something
other than direct or indirect real property interests situated in Canada.
Under the ITA, the disposition of a share by an investor may occur or be
deemed to occur in a number of circumstances including on a sale or gift of such
share or upon the death of that investor.
The initial adjusted cost base of a share to an investor will be the cost
to him of that share. Under the ITA, certain addition or reduction adjustments
may be required to be made to the cost base of a share. The adjusted cost base
8
of each common share of a corporation owned by an investor at any particular
time will be the average adjusted cost base to him of all common shares of that
corporation owned at that time.
Subject to certain limitations and exceptions, U.S. resident shareholders
of a Canadian corporation may be entitled to a credit for all or a portion of
any capital gain taxation in computing their U.S. federal and possibly their
state income tax liability.
In general, the disposition by a shareholder resident in Canada of the
capital stock in a Canadian corporation will be subject to Canadian income
taxation in the same manner as rules described above relating to a disposition
of share which constitute taxable Canadian property. A shareholder resident in
Canada may, however, be entitled to a capital gains exemption. The ITA
provides, for residents of Canada, a cumulative lifetime exemption from income
tax or $100,000 of qualifying net capital gains.
Disposition of Non-Capital Property. If the shares of a Canadian public
---------------------------------------
corporation held by a non-resident do not constitute capital property to that
shareholder, any gains realized from the disposition thereof will be fully
taxable under the ITA if their disposition arises in the course of a business
carried on by the shareholder in Canada. Under the ITA, a shareholder will be
deemed to carry on business in Canada in respect of particular shares if he
offers them for sale in Canada through an agent, including the Vancouver Stock
Exchange. Under the Treaty, any business profits derived by a U.S. resident
shareholder of a Canadian public corporation from the disposition of the subject
corporation's shares will only be taxable in Canada to the extent that such
profits are attributable to a permanent establishment of the shareholder in
Canada.
The foregoing discussion is a summary of certain tax considerations which
may be relevant to stockholders of the Company, but it is not intended as a
substitute for personal tax planning and professional tax advice.
RECENT SALES OF UNREGISTERED SECURITIES
For a discussion of the recent sale of unregistered securities by the
Company, see" MD & A - Liquidity and Capital Resources".
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION
----------------------------------------------
The selected consolidated financial information set forth below for each of
the five years ended January 31, 2004 has been derived from the Consolidated
Financial Statements of the Company prepared in accordance with generally
accepted accounting principles in Canada. These principles are also in
conformity, in all material respects, with generally accepted accounting
principles in the United States except as described in Note 11 of the Notes to
Consolidated Financial Statements. The selected consolidated financial
information should be read in conjunction with the MD & A discussion below and
the Consolidated Financial Statements and related notes thereto included on
pages 21 to 38 herein. References in this Annual Report on Form 10-K to "Notes"
are intended to refer to the Notes to the Consolidated Financial Statements
included herein.
Since its formation, the Company has been in the exploration stage and its
activities have consisted primarily of acquiring interests in mineral
properties, exploration of those properties and acquiring financing for such
purposes. Consequently, the Selected Consolidated Financial Information may not
indicate the Company's future financial performance. The weighted average
number of common shares outstanding and the net loss per common share for the
fiscal years ending January 31, 2000 and 2001 have been restated to reflect the
consolidation of the Company's common shares outstanding on a seven for one
basis effective November 27, 2001.
9
SELECTED CONSOLIDATED FINANCIAL INFORMATION
----------------------------------------------
Fiscal Year Ended January 31
----------------------------
2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
(In Canadian dollars)
(000's except for net loss per common share data)
Writedown and abandonment of properties, plant
and equipment . . . . . . . . . . . . . . . . . - 3,142 86 - 22
Net loss. . . . . . . . . . . . . . . . . . . . . (792) (4,310) (1,961) (1,695) (1,085)
Basic and diluted net loss per common share . . . (0.04) (0.26) (0.21) (0.20) (0.20)
Weighted average common shares outstanding. . . . 21,350 16,439 9,142 8,388 5,441
Working capital (deficit) . . . . . . . . . . . . 1,722 (63) 376 379 (1,205)
Total assets. . . . . . . . . . . . . . . . . . . 2,819 96 3,516 3,132 1,770
Long-term debentures payable. . . . . . . . . . . - 1,279 1,279 - -
Deficit accumulated during the exploration stage. (33,227) (32,436) (28,125) (26,165) (24,469)
Total shareholders' equity (deficit). . . . . . . 2,450 (1,557) 1,983 2,492 71
EXCHANGE RATES
On April 20, 2004, the noon buying rate in New York City for cable
transfers in Canadian dollars, as certified for customs purposes by the Federal
Reserve Bank of New York, was $1.00 (Canadian) = U.S. $0.7389. The following
table sets forth, for each of the years indicated, additional information with
respect to the noon buying rate for $1.00 (Canadian). Such rates are set forth
as U.S. dollars per Canadian. $1.00 and are based upon the rates quoted by the
Federal Reserve Bank of New York.
Rate. . . . 2003 2002 2001 2000 1999
------ ------ ------ ------ ------
Last Day. . 0.7539 0.6542 0.6279 0.6669 0.6925
Average (1) 0.7289 0.6386 0.6446 0.6727 0.6744
High. . . . 0.7880 0.6619 0.6697 0.6936 0.6969
Low . . . . 0.6530 0.6200 0.6241 0.6410 0.6535
(1) The average rate means the average of the exchange rates on the last day of
each month during the year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-------------------------------------------------------------------
RESULTS OF OPERATIONS
-------------------
Results of Operations.
- For the Years Ended January 31, 2004, 2003 and 2002
The Company is in the exploration stage and has no revenues from operations
other than rental income related to the Diamond Recovery Plant, totaling
approximately $1,079,000 from inception through March 2003, when the Plant was
sold. None of its Properties have proven to be commercially developable to date
and as a result the Company has not generated any revenue from these activities.
The Company's existing Properties are gold prospects in Brazil, as discussed in
Note 3, which were acquired during fiscal 2004. The Company capitalizes
expenditures associated with the direct acquisition, evaluation and exploration
of mineral properties. When an area is disproved or abandoned, the acquisition
costs and related deferred expenditures are written-off. The net capitalized
cost of each mineral property is periodically compared to management's
estimation of the net realizable value and a write-down is recorded if the net
realizable value is less than the cumulative net capitalized costs. As
discussed in Note 3, during fiscal 2003 the Company decided to cease exploration
activities in Arkansas due to disappointing exploration results, and the total
10
of $3,141,726 of accumulated capitalized costs related to the Arkansas leases
were written off. The Company has recorded cumulative write-offs of mineral
properties of $15,306,613 during its exploration stage, a period of
approximately fifteen years, and cumulative writedowns of property, plant and
equipment of $3,614,952.
During fiscal 2004, the Company's mineral properties and deferred
expenditures increased to $714,283 as a result of acquisition costs totaling
$540,495 and exploration costs totaling $173,788 related to the activities on
the Company's Brazilian Properties as further described in Note 3. As of
January 31, 2003 mineral properties and deferred expenditures decreased to a
zero balance from $2,942,086 at January 31, 2002 as a result of the writedown
related to the Arkansas Properties discussed above
The Company's revenues during fiscal 2004 were primarily comprised of the
gain from the sale of the Diamond Recovery Plant ("the Plant"). The Plant was
sold to a third party for $350,000 (U.S.) and was fully depreciated at disposal.
As discussed in Note 3, the Plant was located on the American Mine Property.
The Company recorded a reserve for leasehold reclamation of approximately
$150,000, which represents the estimated costs to return the leased property to
its original condition and to complete environmental reclamation as required by
the Arkansas regulatory authorities. During the years ended January 31, 2003
and 2002 the Company's revenues were comprised entirely of interest income on
proceeds received from prior financings and gains on sales of equipment. The
Company has not received any revenues from mining operations since inception.
General and administrative expenses totaled approximately $997,000 during
fiscal 2004 as compared to approximately $1,021,000 during fiscal 2003,
representing a decrease of approximately $24,000 or 2%. Salaries, professional
and consulting fees totaling approximately $674,000 were incurred during 2004 as
the Company commenced the evaluation of several mineral prospects, principally
gold prospects in Brazil. In particular, the Company hired a new president and
retained the services of an exploration project manager and an administrator for
the Brazilian Properties during fiscal 2004. During fiscal 2003, the general
and administrative expenses incurred by the Company primarily represented costs
associated with the exploration activities on the Arkansas Properties, including
salaries of approximately $424,000 and repairs and maintenance of approximately
$127,000. The Company anticipates that general and administrative expenses
during fiscal 2005 will increase from the level experienced in fiscal 2004 as
the Company incurs additional consulting and exploration expenditures related to
the Brazilian Properties.
General and administrative expenses decreased by approximately $673,000, or
40%, from fiscal 2002 to fiscal 2003. The exploration program in fiscal 2002
involved extensive excavation activities, and the Company incurred significant
salary costs associated with the supervision of the excavation and the
preparation of the Plant for the bulk sample test conducted in July 2001. The
sampling work performed in fiscal 2003 consisted of drilling, microdiamond
analysis and limited bulk sampling, which required less of a staffing commitment
LIQUIDITY AND CAPITAL RESOURCES.
As of January 31, 2004, the Company had working capital of $1,722,290 as
compared to a working capital deficit of $62,984 at January 31, 2003. At
January 31, 2004, the Company had current assets of $2,092,004, including
$1,982,536 in cash and $109,468 in accounts receivable compared to total current
liabilities of $369,714.
In the first quarter of fiscal 2002, the Company completed the issuance of
$1,278,595 principal amount of 10% secured convertible debentures ("the
Debentures"). The Debentures were convertible into units at the rate of one
unit for each $2.87 principal amount of the Debentures until February 16, 2003.
Each unit was to consist of one common share of the Company and one share
purchase warrant with an exercise price of $3.15, exercisable through August 16,
2003. The conversion and share purchase warrant prices above were adjusted to
reflect the Company's seven for one share consolidation on November 27, 2001.
On February 11, 2003, the holders of the Debentures approved the amendment
of the conversion price of the units to $0.30 and the extension of the maturity
date of the Debentures to February 16, 2004. As amended, each of the 4,261,983
units would consist of one common share of the Company and one share purchase
warrant with an exercise price of $0.30, exercisable through February 16, 2004.
Upon conversion, $97,000 principal amount of the Debentures held by a director
11
will be convertible only into common shares of the Company on the basis on one
share for each $0.30 principal amount. Additionally, the terms of the Debenture
were amended to include a mandatory conversion provision which will require
conversion of all Debentures and exercise of all related warrants within 30 days
after the closing price of the Company's common shares has exceeded $0.375 for
ten consecutive trading days.
Interest at the rate of 10% was payable on conversion or maturity in cash,
or at the election of the Company, in common shares valued at the weighted
average trading price of the common shares of the Company for the ten trading
days preceding the interest payment date. The Debentures were secured by a
general security interest in the Company's current and future assets and by the
stock of Star U.S., Inc. ("Star"), a wholly owned subsidiary of the Company, and
a wholly-owned subsidiary of Star.
During fiscal 2004, several holders of the Debentures elected to convert a
total of $197,000 principal amount and received 656,666 common shares and
656,666 common share purchase warrants with exercise prices of $0.30.
Additionally, during the third quarter of fiscal 2004, a director of the Company
elected to convert $97,000 principal amount and received 323,333 common shares.
Effective October 31, 2003 a total of $984,595 principal amount of
Debentures were automatically converted into 3,281,977 units of the Company in
accordance with the February 11, 2003 amendments discussed in the third
preceding paragraph. Each unit consisted of one common share and one common
share purchase warrant with an exercise price of $0.30. Additionally, under the
terms of the mandatory conversion provision, the expiration date of all warrants
issued upon conversion of the Debentures was established as December 1, 2003.
During the fourth quarter of fiscal 2004, the Company received a total of
$937,593, representing the exercise price of 3,125,311 warrants, and issued
3,125,311 common shares. A total of 813,332 common share warrants expired
unused on December 1, 2003.
During fiscal 2004, a total of $335,075 of interest accrued on the
principal amounts converted in fiscal 2004 was paid via the issuance of a total
of 1,122,522 shares, representing the conversion of the interest amounts at
weighted average prices from $0.17 to $0.33 per share.
The Company received $563,955 during fiscal 2003, representing
subscriptions for a private placement of the Company's common shares. A total
of 2,819,774 units were issued in the private placement at a price of $0.20 per
unit, each unit to consist of one common share and one share purchase warrant
with an exercise price of $0.25. The share purchase warrants have an expiration
date of September 17, 2004. As of January 31, 2004, 2,819,774 warrants were
outstanding. In February 2004, 125,000 common share warrants were exercised,
and the Company received total exercise proceeds of $31,250.
The Company received approximately $1,138,000 during fiscal 2002
representing subscriptions for a private placement of the Company's common
shares. A total of 5,691,376 units were issued at a price of $0.20 per unit,
each unit to consist of one common share and one share purchase warrant with an
exercise price of $0.25. The share purchase warrants originally had an
expiration date of January 29, 2003, and that date was extended during fiscal
2003 to January 29, 2004. A total of 5,669,101 warrants were exercised in
January 2004, and the Company received total exercise proceeds of $1,417,275. A
total of 22,275 warrants expired unused on January 29, 2004.
During fiscal 2004, 2003 and 2002 the Company received $424,919, $153,457
and $313,660 representing the exercise price of 1,884,376, 570,000 and 1,229,000
stock options, respectively, by officers, directors, employees and consultants
at exercise prices from $0.10 to $0.32.
All financings described herein were private placements and were made
pursuant to the private placement laws of Canada and pursuant to the exemptions
provided by Section 4(2) and Regulation S under the United States Securities Act
of 1933. The Debentures were offered to a limited number of accredited
investors in the United States and Canada pursuant to Rule 506 of Regulation D
and Regulation S.
The Company has no properties that have proven to be commercially
developable and has no revenues from mining operations other than the rentals
12
received from the Plant and the proceeds from the sales of the Plant and related
equipment. The rights and interests in the Tocantinzinho and Mamoal Properties
in Brazil constitute the Company's current mineral holdings. At this point in
time, the Company estimates that the completion of the initial exploration Phase
I program on the Tocantinzinho Property will require the expenditure of at least
$375,000 (U.S.) which will be funded by the current assets of the Company. The
Company cannot estimate with any degree of certainty either the time or the
amount of funds that will be required to acquire and conduct additional
exploration activities on new prospects. The Company intends to seek additional
equity financing during fiscal 2005, including the potential exercise of
outstanding warrants and options. The inability of the Company to raise further
equity financing will adversely affect the Company's business plan, including
its ability to acquire additional properties and perform exploration activities
on such acquired properties. If additional equity is not available, the Company
may seek additional debt financing or seek exploration partners to assist in
funding acquisition or exploration efforts. Historically, the Company has been
able to successfully raise capital as required for its business needs; however,
no assurances are made by the Company that it can continue to raise debt or
equity capital for a number of reasons including its history of losses and
property writedowns, the decline in the price of its common stock, the number of
shares outstanding and the Company's limited and speculative asset base of
exploration properties and prospects.
IMPACT OF INFLATION.
As the Company is in the exploration stage and has not recorded sales and
revenues from operations, a discussion of the effect of inflation and changing
prices on its operations is not relevant.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
At the present stage of the Company's business development, there are no
significant differences between Canadian and United States generally accepted
accounting principles that impact the Consolidated Balance Sheet and
Consolidated Statement of Operations and Deficit except for foreign currency
translation and the capitalization of mineral properties and deferred
expenditures. For a discussion of certain differences between Canadian and
United States generally accepted accounting principles impacting the
Consolidated Statement of Cash Flows, see Note 12 to Notes to Consolidated
Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------------
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------
The Consolidated Financial Statements of the Company included as part of
this Annual Report on Form 10-K (pages 21 through 38) are incorporated by
reference in response to this Item 8. An index to the Consolidated Financial
Statements is included in Item 14.
The Company is not required to provide the selected quarterly financial
data specified in Item 302 of Regulation S-K because it does not satisfy the
tests outlined therein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------------------------------------------------------------------
FINANCIAL DISCLOSURE.
------------------
None.
ITEM 9A. CONTROLS AND PROCEDURES.
--------------------------
Results of Operations.
- For the Years Ended January 31, 2004, 2003 and 2002
The Company is in the exploration stage and has no revenues from operations
other than rental income related to the Diamond Recovery Plant, totaling
approximately $1,079,000 from inception through March 2003, when the Plant was
sold. None of its Properties have proven to be commercially developable to date
and as a result the Company has not generated any revenue from these activities.
The Company's existing Properties are gold prospects in Brazil, as discussed in
Note 3, which were acquired during fiscal 2004. The Company capitalizes
expenditures associated with the direct acquisition, evaluation and exploration
of mineral properties. When an area is disproved or abandoned, the acquisition
costs and related deferred expenditures are written-off. The net capitalized
cost of each mineral property is periodically compared to management's
estimation of the net realizable value and a write-down is recorded if the net
realizable value is less than the cumulative net capitalized costs. As
discussed in Note 3, during fiscal 2003 the Company decided to cease exploration
activities in Arkansas due to disappointing exploration results, and the total
of $3,141,726 of accumulated capitalized costs related to the Arkansas leases
were written off. The Company has recorded cumulative write-offs of mineral
properties of $15,306,613 during its exploration stage, a period of
approximately fifteen years, and cumulative writedowns of property, plant and
equipment of $3,614,952.
During fiscal 2004, the Company's mineral properties and deferred
expenditures increased to $714,283 as a result of acquisition costs totaling
$540,495 and exploration costs totaling $173,788 related to the activities on
the Company's Brazilian Properties as further described in Note 3. As of
January 31, 2003 mineral properties and deferred expenditures decreased to a
zero balance from $2,942,086 at January 31, 2002 as a result of the writedown
related to the Arkansas Properties discussed above
The Company's revenues during fiscal 2004 were primarily comprised of the
gain from the sale of the Diamond Recovery Plant ("the Plant"). The Plant was
sold to a third party for $350,000 (U.S.) and was fully depreciated at disposal.
As discussed in Note 3, the Plant was located on the American Mine Property.
The Company recorded a reserve for leasehold reclamation of approximately
$150,000, which represents the estimated costs to return the leased property to
its original condition and to complete environmental reclamation as required by
the Arkansas regulatory authorities. During the years ended January 31, 2003
and 2002 the Company's revenues were comprised entirely of interest income on
proceeds received from prior financings and gains on sales of equipment. The
Company has not received any revenues from mining operations since inception.
General and administrative expenses totaled approximately $997,000 during
fiscal 2004 as compared to approximately $1,021,000 during fiscal 2003,
representing a decrease of approximately $24,000 or 2%. Salaries, professional
and consulting fees totaling approximately $674,000 were incurred during 2004 as
the Company commenced the evaluation of several mineral prospects, principally
gold prospects in Brazil. In particular, the Company hired a new president and
retained the services of an exploration project manager and an administrator for
the Brazilian Properties during fiscal 2004. During fiscal 2003, the general
and administrative expenses incurred by the Company primarily represented costs
associated with the exploration activities on the Arkansas Properties, including
salaries of approximately $424,000 and repairs and maintenance of approximately
$127,000. The Company anticipates that general and administrative expenses
during fiscal 2005 will increase from the level experienced in fiscal 2004 as
the Company incurs additional consulting and exploration expenditures related to
the Brazilian Properties.
General and administrative expenses decreased by approximately $673,000, or
40%, from fiscal 2002 to fiscal 2003. The exploration program in fiscal 2002
involved extensive excavation activities, and the Company incurred significant
salary costs associated with the supervision of the excavation and the
preparation of the Plant for the bulk sample test conducted in July 2001. The
sampling work performed in fiscal 2003 consisted of drilling, microdiamond
analysis and limited bulk sampling, which required less of a staffing commitment
LIQUIDITY AND CAPITAL RESOURCES.
As of January 31, 2004, the Company had working capital of $1,722,290 as
compared to a working capital deficit of $62,984 at January 31, 2003. At
January 31, 2004, the Company had current assets of $2,092,004, including
$1,982,536 in cash and $109,468 in accounts receivable compared to total current
liabilities of $369,714.
In the first quarter of fiscal 2002, the Company completed the issuance of
$1,278,595 principal amount of 10% secured convertible debentures ("the
Debentures"). The Debentures were convertible into units at the rate of one
unit for each $2.87 principal amount of the Debentures until February 16, 2003.
Each unit was to consist of one common share of the Company and one share
purchase warrant with an exercise price of $3.15, exercisable through August 16,
2003. The conversion and share purchase warrant prices above were adjusted to
reflect the Company's seven for one share consolidation on November 27, 2001.
On February 11, 2003, the holders of the Debentures approved the amendment
of the conversion price of the units to $0.30 and the extension of the maturity
date of the Debentures to February 16, 2004. As amended, each of the 4,261,983
units would consist of one common share of the Company and one share purchase
warrant with an exercise price of $0.30, exercisable through February 16, 2004.
Upon conversion, $97,000 principal amount of the Debentures held by a director
will be convertible only into common shares of the Company on the basis on one
share for each $0.30 principal amount. Additionally, the terms of the Debenture
were amended to include a mandatory conversion provision which will require
conversion of all Debentures and exercise of all related warrants within 30 days
after the closing price of the Company's common shares has exceeded $0.375 for
ten consecutive trading days.
Interest at the rate of 10% was payable on conversion or maturity in cash,
or at the election of the Company, in common shares valued at the weighted
average trading price of the common shares of the Company for the ten trading
days preceding the interest payment date. The Debentures were secured by a
general security interest in the Company's current and future assets and by the
stock of Star U.S., Inc. ("Star"), a wholly owned subsidiary of the Company, and
a wholly-owned subsidiary of Star.
During fiscal 2004, several holders of the Debentures elected to convert a
total of $197,000 principal amount and received 656,666 common shares and
656,666 common share purchase warrants with exercise prices of $0.30.
Additionally, during the third quarter of fiscal 2004, a director of the Company
elected to convert $97,000 principal amount and received 323,333 common shares.
Effective October 31, 2003 a total of $984,595 principal amount of
Debentures were automatically converted into 3,281,977 units of the Company in
accordance with the February 11, 2003 amendments discussed in the third
preceding paragraph. Each unit consisted of one common share and one common
share purchase warrant with an exercise price of $0.30. Additionally, under the
terms of the mandatory conversion provision, the expiration date of all warrants
issued upon conversion of the Debentures was established as December 1, 2003.
During the fourth quarter of fiscal 2004, the Company received a total of
$937,593, representing the exercise price of 3,125,311 warrants, and issued
3,125,311 common shares. A total of 813,332 common share warrants expired
unused on December 1, 2003.
During fiscal 2004, a total of $335,075 of interest accrued on the
principal amounts converted in fiscal 2004 was paid via the issuance of a total
of 1,122,522 shares, representing the conversion of the interest amounts at
weighted average prices from $0.17 to $0.33 per share.
The Company received $563,955 during fiscal 2003, representing
subscriptions for a private placement of the Company's common shares. A total
of 2,819,774 units were issued in the private placement at a price of $0.20 per
unit, each unit to consist of one common share and one share purchase warrant
with an exercise price of $0.25. The share purchase warrants have an expiration
date of September 17, 2004. As of January 31, 2004, 2,819,774 warrants were
outstanding. In February 2004, 125,000 common share warrants were exercised,
and the Company received total exercise proceeds of $31,250.
The Company received approximately $1,138,000 during fiscal 2002
representing subscriptions for a private placement of the Company's common
shares. A total of 5,691,376 units were issued at a price of $0.20 per unit,
each unit to consist of one common share and one share purchase warrant with an
exercise price of $0.25. The share purchase warrants originally had an
expiration date of January 29, 2003, and that date was extended during fiscal
2003 to January 29, 2004. A total of 5,669,101 warrants were exercised in
January 2004, and the Company received total exercise proceeds of $1,417,275. A
total of 22,275 warrants expired unused on January 29, 2004.
During fiscal 2004, 2003 and 2002 the Company received $424,919, $153,457
and $313,660 representing the exercise price of 1,884,376, 570,000 and 1,229,000
stock options, respectively, by officers, directors, employees and consultants
at exercise prices from $0.10 to $0.32.
All financings described herein were private placements and were made
pursuant to the private placement laws of Canada and pursuant to the exemptions
provided by Section 4(2) and Regulation S under the United States Securities Act
of 1933. The Debentures were offered to a limited number of accredited
investors in the United States and Canada pursuant to Rule 506 of Regulation D
and Regulation S.
The Company has no properties that have proven to be commercially
developable and has no revenues from mining operations other than the rentals
received from the Plant and the proceeds from the sales of the Plant and related
equipment. The rights and interests in the Tocantinzinho and Mamoal Properties
in Brazil constitute the Company's current mineral holdings. At this point in
time, the Company estimates that the completion of the initial exploration Phase
I program on the Tocantinzinho Property will require the expenditure of at least
$375,000 (U.S.) which will be funded by the current assets of the Company. The
Company cannot estimate with any degree of certainty either the time or the
amount of funds that will be required to acquire and conduct additional
exploration activities on new prospects. The Company intends to seek additional
equity financing during fiscal 2005, including the potential exercise of
outstanding warrants and options. The inability of the Company to raise further
equity financing will adversely affect the Company's business plan, including
its ability to acquire additional properties and perform exploration activities
on such acquired properties. If additional equity is not available, the Company
may seek additional debt financing or seek exploration partners to assist in
funding acquisition or exploration efforts. Historically, the Company has been
able to successfully raise capital as required for its business needs; however,
no assurances are made by the Company that it can continue to raise debt or
equity capital for a number of reasons including its history of losses and
property writedowns, the decline in the price of its common stock, the number of
shares outstanding and the Company's limited and speculative asset base of
exploration properties and prospects.
IMPACT OF INFLATION.
As the Company is in the exploration stage and has not recorded sales and
revenues from operations, a discussion of the effect of inflation and changing
prices on its operations is not relevant.
DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
At the present stage of the Company's business development, there are no
significant differences between Canadian and United States generally accepted
accounting principles that impact the Consolidated Balance Sheet and
Consolidated Statement of Operations and Deficit except for foreign currency
translation and the capitalization of mineral properties and deferred
expenditures. For a discussion of certain differences between Canadian and
United States generally accepted accounting principles impacting the
Consolidated Statement of Cash Flows, see Note 12 to Notes to Consolidated
Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------------
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-----------------------------------------------
The Consolidated Financial Statements of the Company included as part of
this Annual Report on Form 10-K (pages 21 through 38) are incorporated by
reference in response to this Item 8. An index to the Consolidated Financial
Statements is included in Item 14.
The Company is not required to provide the selected quarterly financial
data specified in Item 302 of Regulation S-K because it does not satisfy the
tests outlined therein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------------------------------------------------------------------
FINANCIAL DISCLOSURE.
------------------
None.
ITEM 9A. CONTROLS AND PROCEDURES.
--------------------------
(a) Evaluation of disclosure controls and procedures.
The term "disclosure controls and procedures" (defined in SEC
rule 13a-14(c)) refers to the controls and other procedures of a
company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the
Securities Exchange Act of 1934 (the "Exchange Act") is recorded,
processed, summarized and reported within required time periods.
13
The Company's Chairman, who also serves as the Company's
principal financial officer, has evaluated the effectiveness of
the Company's disclosure controls and procedures as of a date
within 90 days before the filing of this annual report, and he
concluded that, as of such date, the Company's controls and
procedures were effective.
(b) Changes in internal controls.
The Company maintains a system of internal accounting controls
that are designed to provide reasonable assurance that its books
and records accurately reflect its transactions and that
established policies and procedures are followed. There were no
significant changes to the Company's internal controls or in
other factors that could significantly affect its internal
controls subsequent to such evaluation.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------------
The directors and executive officers of the Company, their ages and term of
continuous service are as follows:
POSITION WITH SERVED AS A DIRECTOR
NAME. . . . . . . . . . . AGE REGISTRANT AND/ OR OFFICER SINCE
Patrick L. Glazier. . . . 46 Director July 8, 1998
Brian C. Irwin. . . . . . 64 Director October 3, 1995
Mark E. Jones, III. . . . 63 Director, Chairman & CEO March 12, 1986
Leendert G. Krol. . . . . 64 Director, President March 6, 2003
Daniel B. Leonard . . . . 67 Director October 20, 1999
Dr. Roger Howard Mitchell 62 Director June 14, 1993
Dr. Roger David Morton. . 68 Director June 14, 1993
PATRICK L. GLAZIER. Mr. Glazier has served as the President of East Fraser
Fiber Co. Ltd. based in Prince George, British Columbia for the past five years.
BRIAN C. IRWIN. For the past five years, Mr. Irwin's principal occupation
has been the practice of law as a partner of DuMoulin Black in Vancouver,
British Columbia.
MARK E. JONES, III. Mr. Jones has served as a Director of the Board of
Crown Resources Corporation since January 1987. Crown Resources Corporation,
based in Denver, Colorado, is publicly traded on the OTC Bulletin Board and is
engaged in the exploration and development of mineral properties, primarily
gold. Mr. Jones served as the President of the Company from 1986 to June 1990
and from July 2001 to the March 2003. Mr. Jones is also a director of Solitario
Resources Corporation. In his capacity as Chairman of the Board of Directors,
Mr. Jones is the chief executive officer of the Company.
LEENDERT G. KROL. Until his retirement in April 2001, Mr. Krol had spent
15 years with Newmont Mining Corporation including the last 10 years,
successively, as Director of Foreign Operation, Vice President Exploration and
Vice President International Exploration.
DAN LEONARD. Mr. Leonard served as Senior Vice President of INVESCO for
twenty-four years until his retirement in January 1999. Mr. Leonard also serves
as a Director of Solitario Resources Corporation.
DR. ROGER HOWARD MITCHELL. For the past six years, Dr. Mitchell has served
as a Professor of Geology at Lakehead University, Thunder Bay, Ontario. Dr.
Mitchell received his B.Sc. from the University of Manchester, 1964; M.Sc. from
14
Manchester, 1966; Ph.D from McMaster University, 1969; and a D.Sc in 1978 from
the University of Manchester. He was elected a Fellow of the Royal Society of
Canada in 1994.
DR. ROGER DAVID MORTON. For the past five years, Dr. Morton has been
Professor Emeritus in Geology with the Department of Earth and Atmospheric
Sciences at the University of Alberta. He also serves as Chairman of the Board
for Mindoro Resources Inc., and is President of Muskox Minerals Corp. He is a
member of the Board of Directors of Uruguay Mineral Resources and Black Swan
Resources. Dr. Morton obtained his B.Sc. (Hons. 1st class) in Geology and his
Ph.D. in Geology from the University of Nottingham, England.
All of the directors are residents of Canada except for Messrs. Jones, Krol
and Leonard, who reside in the United States. All directors are elected
annually by the shareholders and hold office until the next Annual Meeting of
Shareholders. Each officer of the Company holds office at the pleasure of the
Board of Directors. No director or officer of the Company has any family
relationship with any other officer or director of the Company. Messrs. Jones,
Irwin and Mitchell are members of the Company's audit committee. Messrs. Morton
and Mitchell are members of the Company's Environmental Committee and Messrs.
Morton and Jones serve as members of the Company's Compensation Committee.
Operating within the guidance provided by the Company's Board of Directors, the
Compensation Committee's role is to assure that the Company's executive
compensation strategy is aligned with the interests of the shareholders, and the
Company's compensation structure will allow for fair and reasonable base salary
levels and the opportunity for executives to earn compensation that reflects
both Company and individual performance.
CERTAIN SIGNIFICANT EMPLOYEES OR CONSULTANTS
The Company has consulting relationships with other geologists and persons
that are included in its projects and properties from time to time, none of
which are currently material to the Company.
ITEM 11. EXECUTIVE COMPENSATION
-----------------------
OFFICERS
The Company has no long-term incentive plans. However stock options are
awarded from time-to-time in the discretion of the Board of Directors and the
Compensation Committee. The following tables set forth all annual and long-term
compensation for services in all capacities to the Company and its subsidiaries
for the three most recently completed financial years, including information
regarding stock option awards made under the Company's Stock Option Plan. All
information regarding the number and price of securities under options granted
prior to November 27, 2001 have been adjusted to reflect the seven for one
consolidation of the Company's common shares effective on that date.
15
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
---------------------------------------------- --------------------------------------------
Awards Payouts
---------------------- --------------------
Name. . . . . . . . Securities
and . . . . . . . . Under All other
Other Annual Options Restricted LTIP Compensa-
Principal . . . . . Fiscal Salary Bonus Compensation Granted Shares Payouts tion (3)
Position. . . . . . Year ($) ($) ($) (#) ($) ($) ($)
- ------------------- --------- ----------- -------- ------------ ---------- ---------- --------- ---------
Mark E. Jones, III 2004 US$65,000 - - 775,000 - - US$7,800
Chairman 2003 US$60,000 - - 130,888 - - US$7,800
.. 2002 US$60,000 - - 184,072 - - US$7,800
Leendert G. Krol
President (1) . . . 2004 US$64,000 - - 1,387,501 - - -
J. David Edwards. . 2002 US$62,500 - - 21,429 - - US$3,900
President (2)
(1) Mr. Krol began serving as the Company's President in March 2003.
(2) Mr. Edwards served as the Company's President from 1994 through July 2001.
All options held by Mr. Edwards expired unused in August 2001.
(3) Car allowance.
OPTION GRANTS DURING THE MOST RECENTLY COMPLETED FISCAL YEAR
(1) Market Value
Securities % of Total of Securities
Under Options Options Exercise or Underlying
Granted Granted to Base Price Options on
Employees in Date of Grant
Name (#) Fiscal Year ($/Security) ($/Security) Expiration Date
--------- ----------- ------------ ------------ ------------- ---------------
Mark E. Jones, III 500,000 13.0% $0.30 $0.30 August 14, 2008
Mark E. Jones, III 275,000 7.2% $0.40 $0.40 October 21, 2008
Leendert G. Krol . 1,000,000 26.1% $0.10 $0.10 March 6, 2008
Leendert G. Krol . 100,000 2.6% $0.40 $0.40 October 21, 2008
Leendert G. Krol . 287,501 7.5% $0.49 $0.49 November 26, 2008
1) The options are subject to vesting requirements (25% on the date of grant
and 12.5% on each quarter end thereafter).
16
OPTION EXERCISES IN LAST FISCAL YEAR
Unexercised Value of Unexercised
Options In-the-Money
at Fiscal Options
Securities Aggregate Year-End at Fiscal Year-End
Acquired Value (#) ($)
on Exercise Realized
Exercisable/ Exercisable/
Name. . . . . . . . . (#) ($) Unexercisable Unexercisable
- --------------------------- ------------ --------- ----------------------- ------------------------
Mark E. Jones, III. . . . . 496,875 US$19,358 284,375 - Exercisable $20,625 - Exercisable
518,750 - Unexercisable $25,000 - Unexercisable
Leendert G. Krol. . . . . . 287,501 US$55,620 434,374 - Exercisable $94,500 - Exercisable
665,626 - Unexercisable $105,000 - Unexercisable
Following the consolidation of the Company's Common Stock effective
November 27, 2001, the exercise price for the outstanding options ranged from
$2.24 to $6.71, which exceeded the market price after consolidation by a
significant margin. The directors and officers have in the past provided a
significant source of financing to the Company without fees and on a timely
basis. At the Extraordinary General Meeting of the Company held on October 15,
2001, the shareholders of the Company approved the repricing of existing stock
options to a price of $0.24, which was equivalent to the weighted average
trading price for a five day, post-consolidation period.
DIRECTORS
The Directors of the Company did not receive cash or other compensation by
the Company for their service as directors during the most recently completed
fiscal year, except for option awards under the Company's stock option plan. In
fiscal 2004, in addition to the option awards to Mr. Jones and Mr. Krol
discussed above, Mr. Glazier, Mr. Irwin, Mr. Leonard, Mr. Mitchell and Mr.
Morton received 430,000, 260,000, 280,000, 230,000 and 215,000 options to
purchase common stock, respectively, for their services on the Board of
Directors. The common share options granted during fiscal 2004 are subject to
vesting requirements (25% on the date of grant and 12.5% on each quarter end
thereafter). Information regarding individual awards to directors is included
in the footnotes to Item 12. Security Ownership of Certain Beneficial Owners and
Management below. The Company maintains no pension, profit sharing, retirement
or other plan providing benefits to its officers and directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------
The following table sets forth, as of April 19, 2004, the number of Common
Stock and the corresponding percentage ownership of (i) each person who held of
record, or was known by the Company to own beneficially, more than five percent
of the Company's Common Stock, (ii) each director and executive officer of the
Company, and (iii) all directors and executive officers of the Company as a
group. Unless otherwise indicated, the Company believes the following persons
have sole voting and investment power with respect to the number of shares set
forth opposite their names.
17
NAME AND ADDRESS OF BENEFICIAL OWNER . . . . . . NUMBER OF SHARES PERCENT OF CLASS
Cede & Co.
P.O. Box 20, Bowling Green Station
New York, New York 10274 . . . . . . . . . . . . 17,061,154 (1) 47.3%
CDS & Co.
P. O. Box 1038, Station A, 25 The Esplanade
Toronto, Ontario M5W 1G5 . . . . . . . . . . . . 11,917,405 (1) 33.0 %
Patrick L. Glazier (3) . . . . . . . . . . . . . 1,630,381 (2) 4.5 %
Brian C. Irwin . . . . . . . . . . . . . . . . . 278,750 (2) * %
Mark E. Jones, III . . . . . . . . . . . . . . . 2,411,377 (2) 6.5 %
Leendert G. Krol . . . . . . . . . . . . . . . . 1,100,000 (2) 3.0 %
Daniel B. Leonard. . . . . . . . . . . . . . . . 1,287,249 (2) 3.5 %
Dr. Roger Howard Mitchell. . . . . . . . . . . . 263,619 (2) * %
Dr. Roger David Morton . . . . . . . . . . . . . 239,178 (2) * %
Officer and Directors of the Company as a group
(7 persons). . . . . . . . . . . . . . . . . . 7,210,554 (2) 18.3 %
* Less than 1%.
(1) It is the understanding of the Company that all of these shares are
held by the record shareholder in a nominal, fiduciary, trustee or similar
capacity. The Company is unaware of the identities of the beneficial owners of
these shares, with the exception of shares held by the Company's officers or
directors included in such share positions.
(2) A director of the Company. Address is 800 Bering, Suite 208, Houston,
TX 77057. Mr. Jones and Mr. Krol are also executive officers of the Company.
Include options to purchase common shares at $0.18 through September 26, 2007
(28,125 options for Mr. Glazier, Mr. Jones, Mr. Leonard and Mr. Mitchell, and
18,750 options for Mr. Irwin and Mr. Morton). Include options to purchase
712,499 common shares at $0.10 through March 6, 2008 for Mr. Krol. Include
options to purchase common shares at $0.30 through August 14, 2008 (350,000 for
Mr. Glazier, 135,000 for Mr. Irwin and Mr. Morton, 500,000 for Mr. Jones,
200,000 for Mr. Leonard and 150,000 for Mr. Mitchell). Include options to
purchase common shares at $0.40 through October 21, 2008 (80,000 for Mr.
Glazier, Mr. Leonard, Mr. Mitchell and Mr. Morton, 125,000 for Mr. Irwin,
275,000 for Mr. Jones, and 100,000 for Mr. Krol). Include options to purchase
common shares at $0.49 through November 26, 2008 for Mr. Krol. Include 100,000,
286,200, and 40,000 warrants to purchase common shares at an exercise price of
$0.25 for Messrs. Glazier, Jones, and Leonard, respectively.
(3) The beneficial owner has sole ownership, with the exception of a total
of 124,285 shares, where ownership is shared.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------
Accounts receivable at January 31, 2004 and 2003 include $105,758 and
$31,600 receivable from Mr. Jones, respectively. Debentures payable at January
31, 2003 include $97,000 payable to Mr. Leonard. During fiscal 2004 Mr. Leonard
converted his debenture into common stock and received 323,333 common shares.
Amounts totaling $121,957 and $24,681 were paid by the Company during fiscal
2004 and 2003, respectively, to a law firm in which Mr. Irwin is a partner. In
January 2002, Mr. Jones, Mr. Glazier and Mr. Leonard purchased subscriptions in
a private placement by payment of $95,550, $56,250 and $59,719 and received
477,750, 225,000 and 238,875 common shares and warrants to purchase common
shares with an exercise price of $0.25 through January 29, 2004, respectively.
During January 2004, all the warrants described in the preceding sentence were
18
exercised. In September, 2002, Mr. Jones, Mr. Glazier and Mr. Leonard purchased
subscriptions in a private placement by payment of $57,240, $20,000 and $8,000
and received 286,200, 100,000, and 40,000 common shares and warrants to purchase
common shares with an exercise price of $0.25 through September 18, 2004,
respectively. See Notes 6 and 9 to the Consolidated Financial Statements for
additional information regarding related party transactions.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
------------------------------------------
Audit and Tax Fees. The fees billed for professional services rendered by
Morgan & Company in connection with the audit of the Company's annual financial
statements for the years ended January 31, 2003 and 2002 included in the
Company's annual report on Form 10-K totaled approximately $6,400 and $6,600,
respectively. The above fees included the professional services rendered by
Morgan & Company in connection with tax compliance for the two years ending
January 31, 2003.
Audit Committee. The Audit Committee makes recommendations concerning the
engagement of public accountants, reviews the scope and results of the audit
engagement, considers the range of audit and non-audit fees and reviews the
adequacy of internal controls.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
------------------------------------------------------------------
(a) Financial Statements and Schedules.
(1) The following is a list of and index to the Consolidated Financial
Statements filed as part of this Registration Statement:
JAGUAR RESOURCES CORPORATION
Index to Consolidated Financial Statements
Page
Report of Independent Auditors - Morgan & Company 21
Consolidated Financial Statements:
Consolidated Balance Sheets - January 31, 2004 and 2003 22
Consolidated Statements of Operations and Deficit
for each of the years ended January 31, 2004, 2003 and 2002 23
Consolidated Statements of Cash Flows for each of the years
ended January 31, 2004, 2003 and 2002 24
Notes to Consolidated Financial Statements 25
(2) All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are either not
required under the related instructions, are not applicable, or the information
required thereby is set forth in the Company's Consolidated Financial Statements
or the Notes thereto.
(3) Exhibits Filed as Part of this Registration Statement.
See Index to Exhibits.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
April 30, 2004 JAGUAR RESOURCES CORPORATION
(Registrant)
By: /s/ Mark E. Jones, III
--------------------------
MARK E. JONES, III
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE . . . . . . . . . TITLE DATE
- --------------------------- ----------------------------------- --------------
/s/ Mark E. Jones, III
- ---------------------------
Mark E. Jones, III* . . . . Chief Executive Office and Director April 30, 2004
_____________________
Patrick L. Glazier* . . . . Director April 30, 2004
_____________________
Brian C. Irwin* . . . . . . Director April 30, 2004
_____________________
Leendert G. Krol* . . . . . President and Director April 30, 2004
_____________________
Daniel B. Leonard*. . . . . Director April 30, 2004
_____________________
Dr. Roger Howard Mitchell*. Director April 30, 2004
______________________
Dr. Roger David Morton* . . Director April 30, 2004
By: /s/ Mark E. Jones, III
- ---------------------------
Mark E. Jones, III
Attorney-in-fact
For persons indicated *
20
[GRAPHIC OMITED]
[GRAPHIC OMITED]
AUDITORS' REPORT
To the Shareholders of
Jaguar Resources Corporation
(Formerly Star Resources Corporation)
(An exploration stage enterprise)
We have audited the consolidated balance sheets of Jaguar Resources Corporation
(formerly Star Resources Corporation) (an exploration stage enterprise) as at
January 31, 2004 and 2003, and the consolidated statements of operations and
deficit, and cash flows for the years ended January 31, 2004, 2003, and 2002.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at January 31, 2004
and 2003, and the results of its operations and cash flows for the years ended
January 31, 2004, 2003, and 2002, in accordance with Canadian generally accepted
accounting principles. As required by the British Columbia Company Act, we
report that, in our opinion, these principles have been applied on a consistent
basis.
Vancouver, B.C. "Morgan & Company"
April 15, 2004 Chartered Accountants
COMMENTS BY INDEPENDENT AUDITORS FOR U.S. READERS ON
CANADA-U.S. REPORTING CONFLICT
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by significant uncertainties such as those described in
Note 1 of the consolidated financial statements. Our report to the shareholders,
dated April 15, 2004, is expressed in accordance with Canadian reporting
standards which do not permit a reference to such an uncertainty in the
Auditors' Report when the uncertainty is adequately disclosed in the financial
statements.
Vancouver, B.C. "Morgan & Company"
April 15, 2004 Chartered Accountants
21
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
January 31, 2004 January 31, 2003
------------------ ------------------
(In Canadian Dollars)
ASSETS
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . $ 1,982,536 $ 22,734
Accounts receivable . . . . . . . . . . . . . . . 109,468 38,962
------------------ ------------------
Total current assets . . . . . . . . . . . . . . . . 2,092,004 61,696
------------------ ------------------
Property, plant and equipment, at cost:
Mineral properties and deferred
expenditures (Note 3) . . . . . . . . . . . . . 714,283 -
Diamond recovery plant . . . . . . . . . . . . . . - 1,905,873
Buildings, equipment and other . . . . . . . . . . 68,788 101,853
Accumulated depreciation . . . . . . . . . . . . . (63,472) (1,982,185)
------------------ ------------------
Total property, plant and equipment, at cost . . . . 719,599 25,541
------------------ ------------------
Other assets . . . . . . . . . . . . . . . . . . . . 7,826 9,018
------------------ ------------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 2,819,429 $ 96,255
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities. . . . . $ 369,714 $ 124,680
------------------ ------------------
Total current liabilities. . . . . . . . . . . . . . 369,714 124,680
------------------ ------------------
Debentures (Note 4). . . . . . . . . . . . . . . . . - 1,278,595
Interest payable (Note 4). . . . . . . . . . . . . . - 250,114
Commitments and contingencies (Note 10)
Shareholders' equity (deficit)
Common share capital, no par value:
Authorized shares - 100,000,000
Issued and outstanding shares - 35,748,871
(18,471,459 at January 31, 2003) (Note 5) . . 35,622,793 30,878,419
Contributed surplus (Note 7) . . . . . . . . . . . 54,403 -
Deficit accumulated during the exploration stage . (33,227,481) (32,435,553)
------------------ ------------------
Total shareholders' equity (deficit) . . . . . . . . 2,449,715 (1,557,134)
------------------ ------------------
Total liabilities and shareholders' equity (deficit) $ 2,819,429 $ 96,255
================== ==================
Approved by the Board of Directors.. . . . . . . . . Director: "Mark E. Jones, III"
Director: "Brian C. Irwin"
See accompanying notes.
22
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
Year Ended January 31,
2004 2003 2002
------------- ------------- -------------
(In Canadian Dollars)
Revenues:
Interest income. . . . . . . . . . . . . . . . . . $ 1,259 $ 1,618 $ 6,514
Gains on sales of plant and equipment (Note 3) . . 351,272 10,740 -
------------- ------------- -------------
352,531 12,358 6,514
------------- ------------- -------------
Expenses:
General and administrative (Note 11) . . . . . . . 997,171 1,020,729 1,693,363
Finance charges. . . . . . . . . . . . . . . . . . 80,579 22,396 91,116
Write-down of mineral properties (Note 3). . . . . - 3,141,726 86,067
Interest expense . . . . . . . . . . . . . . . . . 84,961 127,510 122,932
Translation (gains) losses . . . . . . . . . . . . (18,252) 10,132 (26,300)
------------- ------------- -------------
1,144,459 4,322,493 1,967,178
------------- ------------- -------------
Loss before provision for income taxes . . . . . . . (791,928) (4,310,135) (1,960,664)
Provision for income taxes (Note 8). . . . . . . . . - - -
------------- ------------- -------------
Net loss . . . . . . . . . . . . . . . . . . . . . . (791,928) (4,310,135) (1,960,664)
------------- ------------- -------------
Deficit accumulated during the exploration stage at
beginning of the year. . . . . . . . . . . . . . . (32,435,553) (28,125,418) (26,164,754)
------------- ------------- -------------
Deficit accumulated during the exploration stage at
end of the year. . . . . . . . . . . . . . . . . . $(33,227,481) $(32,435,553) $(28,125,418)
============= ============= =============
Basic and diluted net loss per common share. . . . . $ (0.04) $ (0.26) $ (0.21)
============= ============= =============
Weighted-average common shares outstanding . . . . . 21,349,766 16,439,454 9,141,534
See accompanying notes.
23
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended January 31,
2004 2003 2002
------------ ------------ ------------
(In Canadian Dollars)
Operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . $ (791,928) $(4,310,135) $(1,960,664)
Items not affecting cash:
Depreciation. . . . . . . . . . . . . . . . . . . . . 18,277 28,924 88,358
Gains on sales of plant and equipment (Note 3). . . . (351,272) - -
Stock based compensation (Note 7) . . . . . . . . . . 54,403 - -
Write-down of mineral properties. . . . . . . . . . . - 3,141,726 86,067
Interest expense. . . . . . . . . . . . . . . . . . . 84,961 127,510 122,604
Other . . . . . . . . . . . . . . . . . . . . . . . . (15,015) 4,275 534
------------ ------------ ------------
(1,000,574) (1,007,700) (1,663,101)
------------ ------------ ------------
Changes in noncash working capital:
Accounts receivable . . . . . . . . . . . . . . . . . (70,506) (24,124) 93,672
Accounts payable and accrued liabilities. . . . . . . 113,403 45,094 (63,507)
------------ ------------ ------------
42,897 20,970 30,165
------------ ------------ ------------
Net cash used in operating activities . . . . . . . . . . (957,677) (986,730) (1,632,936)
Investing activities:
Property acquisition and exploration. . . . . . . . . . (384,283) (199,640) (577,463)
Buildings, equipment and other. . . . . . . . . . . . . - (1,613) (48,403)
------------ ------------ ------------
Net cash used in investing activities . . . . . . . . . . (384,283) (201,253) (625,866)
------------ ------------ ------------
Financing activities:
Proceeds from issuances of common shares. . . . . . . . 2,779,784 717,412 1,451,935
Proceeds from sales of plant and equipment (Note 3) . . 521,978 - -
Issuances of advances and notes payable (net) . . . . . - - (445,000)
Proceeds from issuance of convertible debentures. . . . - - 1,278,595
------------ ------------ ------------
Net cash provided by financing activities . . . . . . . . 3,301,762 717,412 2,285,530
------------ ------------ ------------
Increase (decrease) in cash and temporary cash
investments . . . . . . . . . . . . . . . . . . . . . . 1,959,802 (470,571) 26,728
Cash and temporary cash investments, beginning of period. 22,734 493,305 466,577
------------ ------------ ------------
Cash and temporary cash investments, end of period. . . . $ 1,982,536 $ 22,734 $ 493,305
============ ============ ============
See accompanying notes.
24
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2004
1. OPERATIONS
Jaguar Resources Corporation, formerly known as Star Resources Corp., ("the
Company") was incorporated in 1986 in British Columbia, Canada, and has been
engaged in the acquisition and exploration of mineral properties with the
potential for economically recoverable reserves. During fiscal 2004 the Company
pursued gold exploration opportunities that have large scale potential, with
prospects in South America as the primary focus. Prior to the current fiscal
year, the Company had concentrated its efforts primarily on the acquisition and
exploration of mineral properties with the potential for economically
recoverable diamonds. See Note 3 for further discussion of the Company's
mineral property interests.
The nature of the Company's operations results in significant expenditures for
the acquisition and exploration of properties. None of the Company's properties
have economically recoverable reserves or proven reserves at the current stage
of exploration. The recoverability of the carrying value of mineral properties
and deferred expenditures is dependent upon a number of factors including the
existence of recoverable reserves, the ability of the Company to obtain
financing to renew leases and continue exploration and development and the
discovery of economically recoverable reserves.
All amounts are in Canadian dollars unless noted otherwise.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in Canada and comply in all material respects with
United States generally accepted accounting principles except as discussed in
Note 12.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary Jaguar Resources do Brasil Ltda., a Brazilian
corporation, and its wholly owned United States subsidiary, Star U.S. Inc.
("Star"), and the three wholly-owned subsidiaries of Star, Diamond Operations,
Inc. ("DOI"), Diamond Exploration, Inc. ("DEI") and Continental Diamonds, Inc.
("CDI") from their respective dates of acquisition. Significant intercompany
balances and transactions have been eliminated.
FOREIGN CURRENCY TRANSLATION
Transactions denominated in United States dollars or other foreign currencies
during a year are translated at exchange rates prevailing at the date of the
transaction. Exchange gains or losses resulting from such translations are
included in the determination of net loss. Translation adjustments resulting
from the process of translating monetary assets and liabilities of United States
wholly owned subsidiaries into Canadian dollars are included in the
determination of net loss. Property, plant and equipment of the United States
wholly owned subsidiaries are translated into Canadian dollars at exchange rates
prevailing at the date of the expenditure.
CASH AND TEMPORARY CASH INVESTMENTS
All instruments with a maturity of three months or less are considered to be
temporary cash investments. Cash and temporary cash investments are carried at
cost which approximates market.
25
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of January 31, 2004 and 2003, the fair value of cash, accounts receivable and
accounts payable including amounts due to and from related parties approximates
carrying values because of the short term of these instruments.
MINERAL PROPERTIES AND DEFERRED EXPENDITURES
Direct acquisitions, evaluation and exploration expenditures are capitalized,
reduced by sundry income, to be amortized over the recoverable mineral reserves
if a property becomes commercially developed. When an area is disproved or
abandoned, the acquisition costs and related deferred expenditures are written
off. Interest is capitalized on properties upon the commencement of active
evaluation and preproduction activities, if significant. During the three-year
period ended January 31, 2004, no interest was capitalized.
The net capitalized cost of each mineral property is periodically compared to
management's estimation of the net realizable value and a write-down is recorded
if the net realizable value is less than the cumulative net capitalized costs.
Write-downs totaling $3,141,726 and $86,067 were recorded in fiscal 2003 and
2002, respectively.
OTHER PROPERTY, PLANT AND EQUIPMENT
Buildings, equipment and other are depreciated on a straight-line basis over
useful lives ranging from 3 to 25 years. The diamond recovery plant (the
"Plant"), sold during fiscal 2004, became fully operational in April 1994 and
was depreciated on a straight-line basis over its estimated useful life of seven
years.
INCOME TAXES
The Company files a separate Canadian income tax return. The Company's United
States subsidiaries file a consolidated United States income tax return. The
Company provides future income taxes, when applicable, on items of income and
expense reported in different periods for financial and income tax reporting
purposes. At January 31, 2004, the Company has net operating loss carryforwards
in excess of timing differences between financial and income tax reporting
amounts which are not probable of realization. Accordingly, the future benefit
of these net operating loss carryforwards are not reflected in the accompanying
consolidated financial statements.
LOSS PER COMMON SHARE
The Company has adopted the new accounting standard for the calculation of loss
per share, which follows the treasury stock method in the calculation of diluted
loss per share and requires the presentation of both basic and diluted loss per
share on the face of the consolidated statements of operations and deficit.
STOCK BASED COMPENSATION
Effective February 1, 2002, the Company adopted the new Canadian Institute of
Chartered Accountants ("CICA") Handbook Section 3870 "Stock-Based Compensation
and Other Stock-Based Payments", which recommends a fair value based method of
accounting for compensation costs. The new section also permits the use of the
intrinsic value-based method, which recognizes compensation cost for awards to
employees only when the market price exceeds the exercise price at date of
grant, but requires pro-forma disclosure of earnings and earning per share as if
26
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the fair value method had been adopted. The Company has elected to adopt the
intrinsic value-based method for employee awards. Any consideration paid by the
option holders to purchase shares is credited to share capital.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company's management to make estimates and
assumptions that affect the amounts reported in the consolidated financial
statements and related notes to the consolidated financial statements. Actual
results may differ from those estimates.
3. MINERAL PROPERTIES AND DEFERRED EXPENDITURES
BRAZILIAN PROPERTIES
Tocantinzinho Properties
In August 2003 the Company acquired a total of 28,275 hectares in the Tapajos
gold district in Para State, Brazil under an option agreement with two
individuals. The option agreement entitles the Company to acquire a 100%
interest in the Tocantinzinho Properties over a four-year period in
consideration for the staged payment of US$465,000, the staged issuance of
2,600,000 shares of the Company and the expenditure of $1,000,000 (U.S.). The
Company received approval for the acquisition from the TSX Venture Exchange in
August 2003 and made the initial payment required by the option agreement to the
optionors, consisting of 1,100,000 common shares of the Company and $75,000
(U.S.). The Company made the second option payment, consisting of 200,000
common shares of the Company and $30,000 (U.S.), in February 2004.
The total commitment under the option agreement is as follows (all amounts are
in U.S. dollars): $70,000 and 400,000 common shares of the Company, $40,000 and
200,000 common shares of the Company, $130,000 and 200,000 common shares of the
Company, and $150,000 and 700,000 common shares of the Company for the 2005,
2006, 2007 and 2008 fiscal years, respectively. A total of $300,000 (U.S.) must
be expended by July 31, 2004.
Additionally, the option agreement requires the Company to assume all existing
obligations of the optionors to the owners of the mineral rights of the
Tocantinzinho Properties (the "Underlying Agreements") totaling $1,600,000
(U.S.) over a four-year period. The lease commitments under the Underlying
Agreements are as follows (all amounts are in U.S. dollars): $35,000, $80,000,
$120,000, $160,000 and $1,205,000 in fiscal years 2004, 2005, 2006, 2007 and
2008, respectively. The Company paid the lease payments totaling $35,000 (U.S.)
during fiscal 2004. One of the optionors entered into a consulting agreement
with the Company for an 18-month period at a rate of $7,000(U.S.) per month.
The payments under the option agreement, the Underlying Agreements and the
consulting agreement are considered expenditures for purposes of meeting the
required total and initial annual expenditures of $1,000,000 (U.S.) and $300,000
(U.S.) discussed above. The option agreement is cancelable by the Company
without obligation other than the initial payment of $75,000 (U.S.) and
1,100,000 shares of the Company and the expenditure of $300,000 (U.S.) by July
31, 2004.
The optionors are entitled to a sliding scale net smelter return royalty ranging
from 2.5% for gold prices below $400 (U.S.) per ounce and 3.5% for gold prices
in excess of $500 (U.S.) per ounce. Royalties will be reduced by the amount of
any royalties payable to underlying owners and the Government of Brazil.
27
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
3. MINERAL PROPERTIES AND DEFERRED EXPENDITURES (CONTINUED)
Mamoal Property
The Company acquired the 10,000 hectare Mamoal Property, located 30 kilometers
southeast of the Company's Tocantinzinho Properties, in December 2003. The
Company has an option to earn 100% of the Mamoal Property by payment of a total
of US$300,000 over three and one half years. The Company may terminate the
option agreement at any time without further obligation. The initial US$10,000
payment was made by the Company in December 2003, and the exploration research
license has been transferred to Jaguar Resources do Brasil Ltda. The remaining
lease commitments are as follows: US$25,000, US$45,000, US$65,000, and
US$155,000 in fiscal years ending January 31, 2005, 2006, 2007 and 2008,
respectively. The Company may acquire the Mamoal Property at any time by
accelerating the lease payments.
ARKANSAS PROPERTIES
Black Lick and Twin Knobs II Properties
In December 1999, the Company entered into an agreement with a third party
lessor to lease the undersurface rights below 480 acres in Pike County, Arkansas
located adjacent to the Company's American Mine Property. The consideration
paid for the lease was $50,000 (U.S.), 500,000 shares of the Company and the
transfer to the lessor of the surface rights to the 480 acres which the Company
purchased from a second third party for approximately $313,000 (U.S.). The
lease grants the rights to explore, develop and extract diamond bearing material
lying below overburden and the upper 50 feet of diamond bearing material on
those areas for which the surface rights have been acquired and transferred to
the lessor. The primary term of the lease is five years plus two year
extensions and will continue so long as there is commercial production.
Royalties include 2% of gross sales subject to a minimum of $48,000 (U.S.) per
year after the first seven years. The Company has the right to use the surface
for plant and other facilities for additional royalties.
In December 2002, based upon the cumulative exploration results obtained on the
Arkansas Properties, the Company made the decision to cease exploration efforts
in Arkansas. Accordingly, the capitalized costs related to the Black Lick and
Twin Knobs II properties totaling $2,512,500 were written off in the third
quarter of fiscal 2003.
American Mine Property
Pursuant to an agreement dated November 4, 1992, DEI was granted a permit to
explore a mineral property located in Pike County, Arkansas. The Company's
Plant was located on this leased property. In November 1996, the Company
exercised its option to lease the property for 10 years upon the payment of
$125,000 (U.S.). Yearly payments of $25,000 (U.S.) were required for each of
the four years after the first year and $40,000 (U.S.) per year for the
following five years, plus an additional $7,500 (U.S.) per year for surface
rentals related to the Plant.
The lease payment of $47,500(U.S.), due November 1, 2002, was not made by the
Company. Due to the lease expiration and the exploration results discussed
above, the capitalized costs related to the American Mine Property totaling
$450,823 were written off in the third quarter of fiscal 2003.
In March 2003 the Company sold the Plant to a third party for $350,000 (U.S.).
In conjunction with the sale, the third party paid the lessor of the American
Mine Property $47,500 (U.S.) on behalf of the Company in order to extend the
Company's lease on the property through October 31, 2003. The Company recorded
a reserve for leasehold reclamation costs of approximately $150,000,
representing the estimated costs of the Company's obligation to restore the
Arkansas properties to their original condition prior to lease expiration and to
28
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
3. MINERAL PROPERTIES AND DEFERRED EXPENDITURES (CONTINUED)
perform reclamation activities as required by Arkansas regulatory authorities.
The Company allowed the lease to expire effective November 1, 2003.
Kimberlite Mine Property
In November 1998, the Company executed a lease on certain property in Pike
County, Arkansas with a two-year term ending November 14, 2000 by payment of
$15,000 (U.S.). The Company extended the lease to November 14, 2002 by payment
of an additional $15,000 (U.S.) in November 2000. The Company allowed this
lease to expire in November 2002, and the capitalized costs totaling $84,034
were written off in the third fiscal quarter of 2003.
Southwest Properties
In June 1994, the Company acquired from an unrelated company its rights under
fifteen mineral leases located in the southwestern region of Arkansas covering
approximately 2,000 acres. The original dates of the leases were from May 1992
to August 1992, with terms from 10 to 20 years. In fiscal 2002 and fiscal 2003
the Company elected not to renew selected leases, and, accordingly, write-downs
representing all prior acquisition costs totaling $86,067 and $59,020,
respectively, were recorded. The capitalized costs related to the remaining
active leases totaling $35,349 were written off in the third quarter of fiscal
2003 based upon the Company's decision to cease exploration efforts in Arkansas
as discussed above.
Mineral properties and deferred expenditures were as follows:
BALANCE AT BALANCE AT
JANUARY 31 IMPAIRED JANUARY 31
2001 ADDITIONS WRITE-OFFS 2002
Arkansas Properties:
Southwest Properties:
Acquisition costs. . . . . . . . . $ 170,760 $ 7,410 $ (86,067) $ 92,103
---------- ---------- ------------ ----------
170,760 7,410 (86,067) 92,103
---------- ---------- ------------ ----------
American Mine Property:
Acquisition costs. . . . . . . . . 226,064 75,585 - 301,649
Exploration costs. . . . . . . . . 134,467 - - 134,467
---------- ---------- ------------ ----------
360,531 75,585 - 436,116
Blacklick and Twin Knobs II Properties:
Acquisition costs. . . . . . . . . 783,845 - - 783,845
Exploration costs. . . . . . . . . 1,068,229 494,468 - 1,562,697
---------- ---------- ------------ ----------
1,852,074 494,468 - 2,346,542
Kimberlite Mine Property:
Acquisition costs. . . . . . . . . 67,325 - - 67,325
---------- ---------- ------------ ----------
67,325 - - 67,325
---------- ---------- ------------ ----------
Total acquisition costs. . . . . . . . . . 1,247,994 82,995 (86,067) 1,244,922
Total exploration costs. . . . . . . . . . 1,202,696 494,468 - 1,697,164
---------- ---------- ------------ ----------
Total costs. . . . . . . . . . . . . . . . $2,450,690 $ 577,463 $ (86,067) $2,942,086
========== ========== ============ ==========
29
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
3. MINERAL PROPERTIES AND DEFERRED EXPENDITURES (CONTINUED)
BALANCE AT BALANCE AT
JANUARY 31 IMPAIRED JANUARY 31
2002 ADDITIONS WRITE-OFFS 2003
Arkansas Properties:
Southwest Properties:
Acquisition costs. . . . . . . . . $ 92,103 $ 2,266 $ (94,369) $ -
---------- ---------- ------------ ----------
92,103 2,266 (94,369) -
American Mine Property:
Acquisition costs. . . . . . . . . 301,649 - (301,649) -
Exploration costs. . . . . . . . . 134,467 14,707 (149,174) -
---------- ---------- ------------ ----------
436,116 14,707 (450,823) -
Blacklick and Twin Knobs II Properties:
Acquisition costs. . . . . . . . . 783,845 - (783,845) -
Exploration costs. . . . . . . . . 1,562,697 165,958 (1,728,655) -
---------- ---------- ------------ ----------
2,346,542 165,958 (2,512,500) -
Kimberlite Mine Property:
Acquisition costs. . . . . . . . . 67,325 - (67,325) -
Exploration costs. . . . . . . . . - 16,709 (16,709) -
---------- ---------- ------------ ----------
67,325 16,709 (84,034) -
---------- ---------- ------------ ----------
Total acquisition costs. . . . . . . . . . 1,244,922 2,266 (1,247,188) -
Total exploration costs. . . . . . . . . . 1,697,164 197,374 (1,894,538) -
---------- ---------- ------------ ----------
Total costs. . . . . . . . . . . . . . . . $2,942,086 $ 199,640 $(3,141,726) $ -
========== ========== ============ ==========
BALANCE AT BALANCE AT
JANUARY 31 IMPAIRED JANUARY 31
2003 ADDITIONS WRITE-OFFS 2004
Brazilian Properties. . . .
Tocantinzinho Properties
Acquisition costs . $ - $ 527,345 $ - $ 527,345
Exploration costs . - 173,788 - 173,788
---------- ---------- ---------- ----------
- 701,133 - 701,133
Mamoal Property:
Acquisition costs . - 13,150 - 13,150
Exploration costs . - - - -
---------- ---------- ---------- ----------
- 13,150 - 13,150
---------- ---------- ---------- ----------
Total acquisition costs . . - 540,495 - 540,495
Total exploration costs . . - 173,788 - 173,788
---------- ---------- ---------- ----------
Total costs . . . . . . . . $ - $ 714,283 $ - $714,283
========== ========== ========== ==========
4. DEBENTURES
In fiscal 2002, the Company completed the issuance of $1,278,595 principal
amount of 10% secured convertible debentures ("the Debentures"). The Debentures
were convertible into units at the rate of one unit for each $2.87 principal
amount of the Debentures until February 16, 2003. Each unit was to consist of
one common share of the Company and one share purchase warrant with an exercise
price of $3.15, exercisable through August 16, 2003. The conversion and share
purchase warrant prices above were adjusted to reflect the Company's seven for
one share consolidation on November 27, 2001.
30
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
4. DEBENTURES (CONTINUED)
On February 11, 2003, the holders of the Debentures approved the amendment of
the conversion price of the units to $0.30 and the extension of the maturity
date of the Debentures to February 16, 2004. As amended, each of the 4,261,976
units consisted of one common share of the Company and one share purchase
warrant with an exercise price of $0.30, exercisable through February 16, 2004.
Additionally, the terms of the Debenture were amended to include a mandatory
conversion provision of all Debentures and exercise of all related warrants
within 30 days after the closing price of the Company's common shares has
exceeded $0.375 for ten consecutive trading days.
Interest at the rate of 10% was payable on conversion or maturity in cash, or at
the election of the Company, in common shares valued at the weighted average
trading price of the common shares of the Company for the ten trading days
preceding the interest payment date. The Debentures were secured by a general
security interest in the Company's current and future assets and by the stock of
Star U.S., Inc. ("Star"), a wholly owned subsidiary of the Company, and a
wholly-owned subsidiary of Star.
During fiscal 2004, several holders of the Debentures elected to convert a total
of $197,000 principal amount and received 656,666 common shares and 656,666
common share purchase warrants with exercise prices of $0.30. Additionally,
during the third quarter of fiscal 2004, a director of the Company elected to
convert $97,000 principal amount and received 323,333 common shares.
Effective October 31, 2003 a total of $984,595 principal amount of Debentures
were automatically converted into 3,281,977 units of the Company in accordance
with the February 11, 2003 amendments discussed in the third preceding
paragraph. Each unit consisted of one common share and one common share
purchase warrant with exercise prices of $0.30. Additionally, under terms of
the mandatory conversion provision, the expiration date of all warrants issued
upon conversion of the Debentures was established as December 1, 2003. During
the fourth quarter of fiscal 2004, the Company received a total of $937,593,
representing the exercise price of 3,125,311 warrants, and issued 3,125,311
common shares. A total of 813,332 common share warrants expired unused on
December 1, 2003.
During fiscal 2004, a total of $335,075 of interest accrued on the principal
amounts converted during fiscal 2004 was paid via the issuance of a total of
1,129,522 shares, representing the conversion of the interest amounts at
weighted average prices from $0.17 to $0.33 per share.
31
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
5. SHARE CAPITAL
Common share issuances during the three years ended January 31, 2004 are as
follows:
STAR RESOURCES CORP.
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
PRICE
NUMBER OF PER
DATE SHARES SHARE AMOUNT
Balance at January 31, 2001 . . . . .. . . 62,971,916 $ 28,656,572
Common share options exercised. . . .. . . March 21 through May 11, 2001 1,229,000 (1) 313,660
Common shares consolidated on a
ratio of 7 to 1 November 27, 2001 (55,029,357) -
Issued for cash . . . . . . . . . . . . . . January 29, 2002 5,691,376 0.20 1,138,275
------------ ------------
Balance at January 31, 2002 . . . . . . . . . . 14,862,935 30,108,507
Issued for services . . . . . . . . . . . . March 25, 2002 218,750 0.24 52,500
Common share options exercised. . . . . . . June 18, 2002 570,000 (2) 153,457
Issued for cash . . . . . . . . . . . . . . September 18, 2002 2,819,774 0.20 563,955
------------ ------------
Balance at January 31, 2003 . . . . . . . . . . 18,471,459 30,878,419
Issued for conversion of
convertible debentures. . . . . . . . . . May 27 through October 31, 2003 4,261,976 0.25 1,278,595
Issued for interest on
convertible debentures. . . . . . . . . May 27 through November 14, 2003 1,129,522 (3) 335,075
Issued for debt payment . . . . . . . . . July 24, 2003 107,126 0.20 20,917
Common share options exercised. . . . . . August 7 through December 1, 2003 1,884,376 (4) 424,919
Issued for property acquisition . . . . . August 18, 2003 1,100,000 0.33 330,000
Common share warrants exercised . . . . . November 30 through December 1, 2003 3,125,311 0.30 937,593
Common share warrants exercised . . . . . January 29, 2004 5,669,101 0.25 1,417,275
------------ ------- ------------
Balance at January 31, 2004 . . . . . . . . . 35,748,871 $ 35,622,793
============ ============
(1) Price ranged from $0.20 to $0.32
(2) Price ranged from $0.24 to $0.28
(3) Price ranged from $0.17 to $0.33
(4) Price ranged from $0.10 to $0.28
On January 29, 2002 the Company completed a private placement of 5,691,376 units
at a price of $0.20 per unit, each unit to consist of one common share and one
share purchase warrant with an exercise price of $0.25 per unit. The share
purchase warrants had an expiration date of January 29, 2003, which was extended
during fiscal 2003 to January 29, 2004. A total of 5,669,101 warrants were
exercised in January 2004, and the Company received total exercise proceeds of
$1,417,275. A total of 22,275 warrants expired unused on January 29, 2004.
On September 18, 2002, the Company completed a private placement of 2,819,774
units at a price of $0.20 per unit, each unit consisting of one common share and
one share purchase warrant with an exercise price of $0.25 per unit. The share
purchase warrants have an expiration date of September 18, 2004. The Company
received a total of $563,955 during fiscal 2003 representing subscriptions for
the private placement. Included in that amount was a total of $85,240
representing subscriptions for 426,200 units by three of the Company's
directors. As of January 31, 2004, 2,819,774 warrants were outstanding. In
February 2004, 125,000 common share warrants were exercised, and the Company
received total exercise proceeds of $31,250.
32
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
6. STOCK OPTION PLAN
The Company maintains a stock option plan for its directors, officers and
employees and may issue up to 3,000,000 options. At the Company's annual
meeting held July 23, 2002, shareholders approved an amendment of the 2001 Stock
Option Plan (the "Plan") to increase the number of shares reserved for issuance
under the Plan from 1,142,857 to 3,000,000. Under the terms of the plan, the
exercise price of each option equals the closing market price of the Company's
stock on the date of grant. No compensation expense is recognized when stock
options are issued. Any consideration paid by the optionee on the exercise of
options is credited to share capital. Through July 2002 all options were
immediately vested and generally have a term of five years. The common share
options granted subsequent to July 2002 are subject to vesting requirements (25%
on the date of grant and 12.5% on each quarter end thereafter).
The activity in common stock option grants outstanding for the prior three
fiscal years is as follows (the number and prices of options for prior years
have been adjusted to reflect the seven for one share consolidation effective on
November 27, 2001):
2004 2003 2002
-------------------- ------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Amount Price Amount Price Amount Price
--------- --------- --------- --------- --------- ---------
Outstanding, beginning
of year. . . . . . . . . . 1,946,429 $ 0.24 1,475,000 $ 0.26 897,857 $ 4.48
Granted . .. . . . . . . . . 4,387,001 0.30 1,145,000 0.22 1,044,143 0.44
Exercised . . . . . . . . . 1,884,376 0.23 570,000 0.27 175,571 0.26
Forfeited . . - - 103,571 0.24 291,429 0.71
--------- --------- --------- --------- --------- ---------
Outstanding, end of
year (1) . . . . . . .. . .4,449,054 $ 0.31 1,946,429 $ 0.24 1,475,000 $ 0.26
========= ========= ========= ========= ========= =========
(1) A total of 49,286 options outstanding at January 31, 2004 (438,572 at January 31, 2003) were repriced to $0.24 effective
January 17, 2002. A total of 4,352,625 options are subject to vesting requirements. A total of 450,000 options were issued in
December 2003 subject to shareholder approval.
33
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
6. STOCK OPTION PLAN (CONTINUED)
The following table summarizes information about stock options outstanding at
January 31, 2004:
NUMBER OUTSTANDING
AT JANUARY 31,2004 ISSUE DATE EXPIRATION DATE EXERCISE PRICE
14,286 . . . . . .December 14, 1999 December 14, 2004 $ 0.24
3,571. . . . . . .April 6, 2000 April 6, 2005 0.24
2,857. . . . . . .May 4, 2000 May 4, 2005 0.24
14,286 . . . . . September 27, 2000 September 27, 2005 0.24
14,286 . . . . . . May 11, 2001 May 11, 2006 0.24
47,143 . . . . . . January 31, 2002 January 31, 2007 0.28
253,125. . . . . . September 26, 2002 September 26, 2007 0.18
712,499. . . . . . March 6, 2003 March 6, 2008 0.10
1,622,500. . . . . August 14, 2003 August 14, 2008 0.30
1,027,000. . . . . October 21, 2003 October 21, 2008 0.40
287,501. . . . . . November 26, 2003 November 26, 2008 0.49
450,000. . . . . . December 17, 2003 December 17, 2008 0.42
7. STOCK BASED COMPENSATION
Stock-based compensation required by CICA Handbook Section 3870 related to
options granted to consultants increased the following expenses in the financial
statements of the Company in 2004, 2003 and 2002:
2004 2003 2002
Consulting $54,403 $ - $ -
------- ------- -------
$54,403 $ - $ -
======= ======= =======
These amounts have also been recorded as contributed surplus on the balance
sheet.
The Company has elected to adopt the intrinsic value-based method for employee
awards according to the CICA Handbook Section 3870. Based on the computed
option values and the number of options issued to employees and directors, had
the Company recognized compensation expense, the following would have been its
effect on the Company's loss for the year and loss per share:
2004 2003 2002
$. . . . . . $ $
Loss for the year (as reported). (791,928) (4,310,135) (1,960,664)
Pro-forma net loss for the year. (1,199,406) (4,468,492) (2,230,157)
Basic loss per common share
(as reported). . . . . . . . . (0.04) (0.26) (0.21)
Pro-forma basic net loss per
common share . . . . . . . . . (0.06) (0.27) (0.24)
34
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
6. STOCK BASED COMPENSATION (CONTINUED)
The fair value of each option granted to employees and directors has been
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
2004 2003 2002
Expected dividend yield 0% 0% 0%
Expected volatility . . 161% 141% 125%
Risk-free interest rate 3.00% 5.25% 5.25%
Expected life . . . . . 3.5 years 3.5 years 3.5 years
The weighted average fair value of options granted as of January 31, 2004 is
$0.26 and as of January 31, 2003 is $0.19.
8. INCOME TAXES
The Company has not incurred or paid any Canadian or United States income taxes
since its inception. At January 31, 2004 the Company has Canadian noncapital
loss carryforwards of approximately $2,348,000 which begin to expire in fiscal
year 2005 and United States federal net operating loss carryforwards of
approximately $18,565,000 (U.S.) which begin to expire in 2005.
United States net operating losses may be limited if more than a 50% ownership
change has occurred with respect to any Company included in the consolidated
group. If an ownership change has occurred, such losses are limited on an
annual basis to the value of the respective Company on the date of change
multiplied by the U.S. federal long-term, tax-exempt rate in effect for the
period. In addition, some U.S. net operating losses may be subject to other
limitations based on taxable income from wholly owned subsidiaries on a
stand-alone basis.
At January 31, 2004, the Company has incurred approximately $512,000 of
exploration and development costs which may be deducted against future Canadian
taxable income subject to certain limitations.
As a result of the losses incurred in each year since inception of the Company,
temporary differences between financial and tax basis of assets and liabilities
are offset by operating loss carryforwards. The Company does not anticipate
completion of the analysis of the temporary differences and the impact of
ownership changes, if any, on net operating losses until such time as the
Company becomes profitable. The Company does not anticipate any effect on the
consolidated financial statements related to the ownership changes for Canadian
or United States generally accepted accounting principles purposes.
9. RELATED PARTY TRANSACTIONS
The chairman has significant share ownership of the Company. Accounts
receivable at January 31, 2004 and 2003 includes $105,758 and $31,600,
respectively, receivable from the chairman of the Company. Included in accounts
payable and accrued liabilities at January 31, 2004 and 2003 is approximately
$5,800 and $37,700, respectively, payable to a law firm in which one of the
Company's directors is a partner. Debentures payable at January 31, 2003
includes $97,000 payable to a director.
10. COMMITMENTS AND CONTINGENCIES
Except as described below, there are no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which any of their
property is subject.
On May 15, 1998, a legal action styled James Cairns and Stewart Jackson vs.
Texas Star Resources Corporation d/b/a Diamond Star, Inc. was filed in the 215th
Judicial District Court of Harris County, Texas, Cause No. 9822760 wherein the
35
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Plaintiffs allege, among other things, that the Company breached contractual
agreements and committed fraud by not timely releasing or causing to be released
from an escrow account required by Canadian law certain shares of the Company to
which Plaintiffs allege that they were entitled to receive in calendar 1995 and,
as a result of the Company's alleged actions with respect to the release of such
shares, the Plaintiffs sought monetary damages for losses in share value,
attorney's fees, court costs, expenses, interest and exemplary damages. In
1999, the litigation against the Company in Houston, Harris County, Texas, was
dismissed by the court with prejudice, leaving only the claims of James M.
Cairns, Jr. pending in British Columbia which is generally described below.
The legal action in Texas is similar to one filed against the Company in the
Supreme Court of British Columbia, Canada, in August 1996 styled Cause No.
C96493; James M. Cairns, Jr. vs. Texas Star Resources Corporation. In January
1993, the Plaintiffs were issued common stock of the Company in escrow which
shares were to be released based on exploration expenditures by the Company on
certain of its properties in Arkansas. The escrow requirements were imposed by
the Vancouver Stock Exchange. Plaintiffs requested that all of the shares be
released in 1995. At that time the Company believed that the release of said
shares when requested by the Plaintiffs was inappropriate due to legal
requirements and regulatory concerns. The shares were subsequently released to
the Plaintiffs. The Company intends to vigorously defend the allegations of the
Plaintiffs in the pending litigation for damages in British Columbia and in
Texas (if the case is appealed or refiled) and believes it has meritorious
defenses to such claims. No proceedings in the action in British Columbia have
been taken by the Plaintiff since March 30, 2000. However, the Company cannot
provide any assurances that it will be successful, in whole or in part, with
respect to its defense of the claims of the Plaintiffs. If the Company is not
successful, any judgment obtained by Plaintiffs could have a material and
adverse effect on its financial condition.
11. GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses consist of the following:
2004 2003 2002
---------- ---------- ----------
Consulting fees . . . . $ 234,253 $ 134,605 $ 197,473
Depreciation expense. . 18,277 28,924 88,359
Entertainment . . . . . 29,716 31,884 40,823
Insurance . . . . . . . 484 7,385 22,075
Office expenses . . . . 70,587 61,639 94,796
Professional fees . . . 110,674 68,767 109,420
Rent. . . . . . . . . . 33,999 32,724 32,047
Repairs and maintenance 21,400 126,856 172,205
Salary. . . . . . . . . 328,656 423,802 700,014
Shareholder relations . 51,192 30,126 91,826
Travel. . . . . . . . . 92,783 41,393 106,201
Utilities . . . . . . . 5,150 32,624 38,124
---------- ---------- ----------
Total . . . . . . . . $997,171 $1,020,729 $1,693,363
========== ========== ==========
36
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ("GAAP")
The consolidated financial statements have been prepared in accordance with
Canadian GAAP which differs in some respects from United States GAAP. The
material differences in respect to these financial statements between Canadian
and United States GAAP, and their effect on the Company's financial statements,
are summarized below.
Mineral Properties and Deferred Expenditures
Under Canadian GAAP, companies have the option to defer mineral exploration
expenditures on prospective properties until such time as it is determined that
further work is not warranted, at which point property costs would be written
off. Under United States GAAP, all exploration expenditures are expensed until
an independent feasibility study has determined that the property is capable of
commercial production. At this stage, the Company has not yet identified
economically recoverable reserves on any of its properties. Accordingly, under
United States GAAP, all exploration costs incurred are expensed.
2004 2003 2002
------------ ------------ ------------
Loss in accordance with Canadian GAAP . . . . . . . . $ (791,928) $(4,310,135) $(1,960,664)
Deduct:
Deferred exploration expenditures capitalized
during the period. . . . . . . . . . . . . . . . . . (173,788) - (494,468)
Add:
Deferred exploration expenditures written off in the
period that would have been expensed in a prior
period. . . . . . . . . . . . . . . . . . . . . . . . - 1,697,164 -
------------ ------------ ------------
Loss in accordance with United States GAAP. . . . . . $ (965,716) $(2,612,971) $(2,455,132)
============ ============ ============
Loss per share (United States GAAP) . . . . . . . . . $ (0.05) $ (0.16) $ (0.27)
============ ============ ============
Weighted average shares outstanding (United States
GAAP) . . . . . . . . . . . . . . . . . . . . . . . . 21,349,766 16,439,454 9,141,534
============ ============ ============
2004 2003 2002
----------- ------------ ------------
Shareholders' equity (deficiency) - Canadian GAAP. . . . $2,449,715 $(1,557,134) $ 1,983,089
Mineral properties and deferred exploration expenditures (173,788) - (1,697,164)
----------- ------------ ------------
Shareholders' equity (deficiency) - United States GAAP . $2,275,927 $(1,557,134) $ 285,925
=========== ============ ============
37
JAGUAR RESOURCES CORPORATION
(AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2004
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ("GAAP") (CONTINUED)
2004 2003 2002
---------- ---------- ------------
Mineral properties and deferred exploration expenditures
- Canadian GAAP . . . . . . . . . . . . . . . . . . . . $ 714,283 $ - $ 2,942,086
Mineral properties and deferred exploration expenditures
expensed per United States GAAP . . . . . . . . . . . . (173,788) - (1,697,164)
---------- ---------- ------------
Mineral properties and deferred exploration expenditures
- - United States GAAP . . . . . . . . . . . . . . . . . . $ 540,495 $ - $ 1,244,922
========== ========== ============
Foreign Currency Translation
Under United States GAAP for 2004 and 2003, shareholders' equity would reflect a
foreign currency translation gain of $15,254 and $144,289, respectively.
(This portion of the page is intentionally left blank.)
38
INDEX TO EXHIBITS
3.1 Certificate of Incorporation, Memorandum and Articles of Texas Star
Resources Corporation (the "Company") dated March 12, 1986. (a)
3.1.1 Amendment to Certificate of Incorporation and Memorandum. (b)
3.1.2 Certificate of Change of Name dated October 30, 1996.
3.1.3 Amendment to the Company's Memorandum, effective November 27,
2001. (h)
10.6 Agreement dated July 28, 1992, between the Company and certain royalty
holders (as set forth therein). (a)
10.7 Stock Purchase Agreement dated July 29, 1992, by and among the Company,
DEI, James M. Cairns, Jr., Gandy Baugh and Stewart Jackson (such
Individuals being collectively referred to as the "DEI Shareholders")
and the Amendment thereto dated January 13, 1993. (a)
10.11 Prospecting Permit and Option to Lease dated November 4, 1992, between
DEI and various interest holders. (a)
10.12 Agreement dated December 22, 1992, between the Company and certain
royalty interest holders. (a)
10.16 Royalty Interest Agreement dated January 13, 1993, by and between the
Company and the DEI Shareholders relating to the properties of the
Company and DEI in Arkansas. (a)
10.40 Mining Lease between the Company and certain royalty interest holders
dated November 4, 1996. (c)
10.42 Amendment No. 1 to Mining Lease between the Company and certain
royalty interest holders dated November 1997. (d)
10.43 Mining Lease between the Company and ABJ Hammett Estate/ Trust dated
September 11, 1997. (d)
10.47 Mining Lease Agreement and Lease Modification and Escrow
Agreement dated December 16, 1999. (e)
10.48 Letter Agreement dated October 26, 2000 between the Company and
McGeorge Contracting Co. (f)
10.49 Stripping Agreement dated October 31, 2000 between the Company
and McGeorge Contracting Co. (f)
10.50 Lease Confirmation Agreement dated effective March 16, 2000. (g)
10.51 Mining Lease between the Company and ABJ Hammett Estate/ Trust
dated November 15, 2000. (g)
10.52 Trust Deed for Debentures dated February 16, 2001 between the
Company and Montreal Trust Company of Canada. (g)
10.53 Pledge Agreement for Shares of Star U.S., Inc. between the
Company and Montreal Trust Company of Canada dated February
16, 2001. (g)
10.54 Pledge Agreement for Shares of Diamond Operations, Inc. between
the Company and Montreal Trust Company of Canada dated February
16, 2001. (g)
10.55 Second Supplemental Indenture between the Company and
Computershare Trust Company of Canada dated February 11,
2003. (i)
10.56 Option Agreement, Tocantinzinho Project - Brazil dated July 31,
2003. (j)
22 Subsidiaries of the Registrant. (k)
23 Consent of Independent Auditors, Morgan & Company, dated April 30,
2004. (k)
24 Powers of Attorney dated April 23, 2004. (k)
31.1 Certification of Chairman pursuant to Exchange Act Rules 13a-14. (k)
32 Certification of Chairman pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (k)
_________________
(a) Filed as an exhibit to Registration Statement on Form 10 as filed on
June 23, 1993.
(b) Filed as an exhibit to Form 8 Amendment No. 1 to Form 10 as filed
on October 4, 1993.
(c) Filed as an exhibit to Form 10-K for the fiscal year ended January
31, 1997 as filed on May 13, 1997.
(d) Filed as an exhibit to Form 10-K for the fiscal year ended January 31,
1998 as filed on April 29, 1998.
(e) Filed as an exhibit to Form 10-K for the fiscal year ended January 31,
2000 as filed on April 28, 2000.
(f) Filed as an exhibit to Form 10-Q for the fiscal quarter ended
October 31, 2000 as filed on December 13, 2000.
(g) Filed as an exhibit to Form 10-K for the fiscal year ended January
31, 2001 as filed on April 27, 2001.
(h) Filed as an exhibit to Form 10-Q for the fiscal quarter ended
October 31, 2001 as filed on December 13, 2001.
(i) Filed as an exhibit to Form 10-Q for the fiscal quarter ended April
30, 2003 as filed on June 16, 2003.
(j) Filed as an exhibit to Form 10-Q for the fiscal quarter ended July
31, 2003 as filed on September 15, 2003.
(k) Filed herewith.
All Exhibits referred to in (a) through (j) above were filed with previous
Securities and Exchange Commission filings of the Company (File No. 0-21968) and
are incorporated herein by reference.
39