SHARE PURCHASE AGREEMENT
------------------------
This Agreement is made as of the 3rd day of September, 1999,
BETWEEN:
XXXXX XXXXXXX, Businessperson, of
0000 Xxxxxx Xxxxx, Xxxxx, Xxxxxxx Xxxxxxxx,
X0X 0X0
("Houston")
OF THE FIRST PART;
AND:
585735 B.C. LTD.,
a company incorporated under the laws of British Columbia
and having its registered office at 000 - 000 Xxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
("585735")
OF THE SECOND PART;
AND:
XXXXXX XXXXX, Investment Advisor, of
933 Bentall III, 000 Xxxxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx,
("Xxxxx")
OF THE THIRD PART;
AND:
FEDORA INDUSTRIES INC.
a company incorporated under the laws of British Columbia
and having its records and registered office at
1600 - 000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
X0X 0X0
("Purchaser")
OF THE FOURTH PART;
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WHEREAS:
A. As at the Closing Date, as hereinafter defined, Houston will be the
registered and beneficial owner of 42 Class A common shares, 585735 will be
the registered and beneficial owner of 40 Class A common shares, and Xxxxx
will be the registered and beneficial owner of 18 Class A common shares in
the capital of Sportslink Direct Marketing Ltd. (the "Company");
X. Xxxxxxx, 000000 and Xxxxx are hereinafter collectively referred to as
the "Vendors" and the 100 Class A common shares in the capital of the Company
to be owned by the Vendors as aforesaid are hereinafter collectively referred
to as the "Shares"; and
C. The Vendors have agreed to sell to the Purchaser, and the Purchaser
has agreed to buy from the Vendors, the Shares upon the terms and conditions
herein contained.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and of the mutual covenants and agreements herein contained and
other good and valuable consideration (the receipt and sufficiency of which
is hereby acknowledged by the Parties), the Parties hereby covenant,
represent and agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 The Vendors hereby agree to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Vendors, the Shares upon the terms and
conditions herein contained.
1.2 The purchase price (the "Purchase Price") for the Shares will be the
sum of $896,000, to be paid at Closing as follows:
(a) cash in the sum of $56,000;
(b) $644,000 represented by the issuance of 2,300,000 fully
paid and non-assessable common shares in the capital of the
Purchaser at a deemed price of $0.28 per share;
(c) $140,000 represented by the issuance of 500,000 share
purchase warrants of the Purchaser at a deemed price of $0.28
per warrant, exercisable for no additional consideration at
the Vendors' sole option for five years from the Closing
Date for 500,000 common shares in the capital of the
Purchaser, to be issued as fully
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paid and non-assessable, such warrants to be exercisable in
such numbers as the Vendors may elect from time to time;
(d) $56,000 represented by the issuance to the Vendors or their
nominees of stock options for the purchase of 400,000 shares
of the Purchaser exercisable for a period of five years at a
price of $0.28 per share, subject to the policy of the
Exchange and applicable law.
The Purchase Price shall be paid and issued to the Vendors and their nominees
in the proportions set forth in Schedule A.
1.3 The Vendors acknowledge that the shares of the Purchaser to be issued
pursuant to paragraph 1.2 will be subject to certain trading restrictions
under applicable law and the policy of the Vancouver Stock Exchange (the
"Exchange"), which have been communicated to and are satisfactory to the
Vendors.
ARTICLE 2
INCOME TAX ELECTION
2.1 Houston and 585735 and the Purchaser covenant and agree to make
elections pursuant to subsection 85(1) of the INCOME TAX ACT (Canada) with
respect to the purchase and sale of the Shares and in this regard the parties
covenant and agree to file Revenue Canada Taxation Forms T2057 in which the
agreed amount is as specified by each of Houston and 585735.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Each of the Vendors (hereinafter in this article individually
referred to as the "Vendor") hereby represent and warrant to the Purchaser as
follows, with the intent that the Purchaser shall rely thereon in entering
into this Agreement and concluding the purchase and sale of the Shares:
(a) on the Closing Date, the Vendor will be the beneficial
owner of, and will have the full right and authority to sell
to the Purchaser, the number of Shares of which he/it will
then be the registered and beneficial owner as set forth in
recital A hereto, free of all liens, charges and
encumbrances whatsoever;
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(b) on the Closing Date, no person, firm or corporation other than the
Purchaser shall have any agreement for the purchase of or any
other dealing whatsoever with the Shares;
(c) the Vendor is a resident of Canada within the meaning of section 116 of
the INCOME TAX ACT (Canada);
(d) the Company has been duly incorporated and is in good standing under the
laws of the Province of British Columbia and is duly registered to carry
on business in all jurisdictions in which it carries on business;
(e) the Company has an authorized capital of 30,000,000 common shares
without par value divided into 10,000,000 Class A voting common shares,
10,000,000 Class B non-voting common shares and 10,000,000 Class C
non-voting common shares, of which 100 shares Class A voting common
shares and no more will be issued as fully paid and non-assessable on
the Closing Date;
(f) no person has any agreement, option or right, present or future,
contingent, absolute or capable of becoming an agreement, option or
right:
(i) to require the Company to issue any further or other shares in its
capital, or to issue any other security, convertible or
exchangeable into shares in its capital, or to convert or exchange
any securities into or for shares in the capital of the Company; or
(ii) to require the Company to purchase, redeem or otherwise acquire any
of the issued and outstanding shares in the capital of the Company;
(g) no action will be taken whereby the capital of the Company will be in
any way changed between the time hereof and the Closing Date and in
particular no further shares of any class shall be created or issued;
(h) no dividends have been paid on any of the shares of the Company, nor
will be declared, paid or authorized after the date hereof and up to the
Closing Date, and no distribution of assets in any form or manner has
been made since the date of incorporation of the Company nor will be
made after the date hereof and up to the Closing Date;
(i) with the exception of an employment agreement between the Company and
Houston under which Houston will receive the sum of $5,000 per month
commencing August 1, 1999, no payments have been made, nor will be made
prior to the Closing Date, to any shareholder, director or officer of the
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Company and the Company is not now, nor will it be at the Closing Date,
a party to any written employment agreement with any employee;
(j) the Company is in the course of applying for trademark protection in
Canada for the brand name "Airbomb". This application will be filed as
soon as it has been completed but in any event will be filed by October
31, 1999. The Company currently anticipates filing for trademark
protection in the United States for the same brand name. The Company is
the owner of the website domain name "http.//xxx.xxxxxxx.xxx", and
maintenance fees for such domain name have been paid and are up to date;
(k) to the best of the Vendor's knowledge, information and belief, the
audited financial statements of the Company as at March 31, 1999,
attached hereto as Schedule B (the "Company Financial Statements") have
been prepared in accordance with generally accepted accounting
principles, applied on a consistent basis throughout the periods
indicated except as disclosed in any schedule thereto or as otherwise
stated therein, and the Company Financial Statements present fairly the
financial position of the Company as of the date indicated thereon and
present fairly the results of operations of the Company for the periods
then ended;
(l) with the exception of loans from Ubex Capital Inc. and Monaco Investment
Corp. in the aggregate sum of $40,000 and a loan from Xxxxx in the
principal amount of $25,000, and except to the extent reflected or
reserved against in the Company Financial Statements or incurred
subsequent to the date thereof in the ordinary and usual course of the
business of the Company, the Company has no outstanding indebtedness or
any liabilities or obligations (whether accrued, absolute, contingent or
otherwise) of a nature customarily reflected or reserved against in a
balance sheet (including the notes thereto) prepared in accordance with
generally accepted accounting principles;
(m) as at the date of the Company Financial Statements and except to the
extent reflected in or reserved against therein, the Company was not
liable for any Canadian federal, provincial, municipal or local taxes,
any United States federal, state or municipal taxes, assessments or
other imposts in respect of its income, business or property and no such
taxes, assessments, imposts or penalties were required to be reserved
against. The Company is not, except in respect of the current taxation
year, required to file or in default in filing any tax returns or
reports, including, without limitation, any returns or reports covering
any of the aforementioned taxes. The Vendors are not currently aware of
any circumstances whereby current taxation year filings will result in
any tax liabilities of the Company in excess of $10,000 in the aggregate;
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(n) since the date of the Company Financial Statements there has not been:
(i) any change in the condition or operations or the business, assets
or financial condition of the Company other than changes in the
ordinary and normal course of business which are not, individually
or in the aggregate, materially adverse; or
(ii) any damage, destruction or loss, labour trouble or other event,
development or condition of any character (whether or not covered
by insurance) materially and adversely affecting the business,
assets, properties or future prospects of the Company;
(o) except as disclosed elsewhere in this Article 3, since the date of the
Company Financial Statements, the Company has not:
(i) conducted its business other than in the usual and normal manner
thereof;
(ii) transferred, assigned, sold or otherwise disposed of any of the
assets shown in the statements, or cancelled any debts or claims;
(iii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and liabilities
incurred in the ordinary and normal course of business, and except
as set out in Schedule C hereto.
(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than current
liabilities shown on the Company Financial Statements, and current
liabilities incurred since the date thereof in the ordinary and
normal course of business;
(v) suffered an operating loss or any extraordinary loss, waived any
rights of substantial value, surrendered any license, or entered
into any material commitment or transaction not in the ordinary
and usual course of business;
(vi) amended or changed or taken any action to amend or change its
memorandum or articles;
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(vii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or
property, whether tangible or intangible; or
(viii) authorized or agreed or otherwise have become committed to do any
of the foregoing.
(p) with the exception of the security granted in connection with the loans
referred to in subparagraph (l), the Company has good and marketable
title to all its properties, rights and assets, including without
limitation valid title to all intellectual property necessary or
desirable to carry on its business, and including all assets reflected
in the Company Financial Statements or acquired since the date thereof,
free and clear of all mortgages, pledges, liens, title retention
agreements, encumbrances or charges of any nature or kind whatsoever;
(q) as at the date hereof the accounts payable of the Company are as
described in Schedule C hereto;
(r) except for the contracts, agreements or commitments disclosed in Schedule
D hereto, and the employment agreement disclosed in paragraph 3.1(i)
hereof, the Company is not party to or bound by any existing material
oral or written contract or commitment and all contracts, commitments or
agreements to which the Company is a party are in full force and effect,
unamended, and no material default exists with respect thereto on the
part of any of the parties thereto;
(s) the Company has not given or agreed to give, and is not a party to or
bound by, any guarantee of indebtedness or other obligation of any
person, firm or company;
(t) the Company is not a party to, bound by or subject to any indenture,
mortgage, lease, agreement, instrument, judgment or decree which would
be violated or breached by, or under which default would occur or which
would give any person any right to terminate, cancel or accelerate, in
whole or in part, as a result of, the execution and delivery of this
Agreement or the consummation of any of the transactions provided for
herein;
(u) the Company has, in all material respects, complied with all laws,
regulations and orders applicable to its present and proposed business
and has all material permits and licenses required thereby. There is no
term or provision of any material mortgage, indenture, contract, agreement
or instrument to which the Company is a party or by which it is bound or of
any provision of any
8
judgment, decree, order, statute, rule or regulation applicable to or
binding upon the Company which materially adversely affects or, so far
as the Company or the Vendor may now foresee, in the future is
reasonably likely to materially adversely affect, the business
prospects, condition, affairs or operations of the Company or any of
its properties or assets;
(v) neither the execution of this Agreement nor the performance by the
Vendors of any of the terms hereof will result in the violation,
contravention or breach of any statute, regulation, order, judgment,
decree or law to which the Vendors or the Company is subject;
(w) there is no suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and applications for review,
in progress, pending or, to the best of the knowledge, information and
belief (after due enquiry) of the Vendor, threatened against, or
relating to the Company or which might materially and adversely affect
the properties, business, future prospects or financial condition of the
Company, and there is not presently outstanding against the Company any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator;
(x) the execution, delivery and performance of this Agreement by the Vendors
will, at the Closing Date, have been duly authorized by the Board of
Directors of the Company and neither the execution and delivery of this
Agreement nor compliance with nor fulfillment of the terms and
provisions of this Agreement will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default under the
memorandum and articles of the Company or any instrument, agreement,
mortgage, judgment, order, award, decree or other restriction to which
the Vendors or the Company is a party or by which it is bound;
(y) all equipment owned or leased by the Company is now and will at Closing
be in good repair;
(z) except as disclosed in Schedule E hereto, the Company has no insurance
policies in force;
(aa) the Company has paid all assessments and is otherwise in good standing
under all applicable workers' compensation legislation;
(ab) the Company is not a party to any collective agreement with any labour
union or other association of employees nor has any union or association
of employees
9
been certified as a bargaining unit of the Company. Schedule F
accurately lists the positions, dates of hire and the individual rates
of salary, bonuses, commissions, reimbursements and other compensation
and terms thereof of each director, officer, employee and agent of the
Company. The Company Financial Statements accurately disclose all
liabilities of the Company for accrued and unpaid salary, vacation pay
and other benefits and remuneration due to all directors, officers,
employees and agents, except those accruing in the ordinary course of
their business since the date of such statements;
(ac) there are no pension plans, deferred profit sharing plans, deferred
compensation plans, individual or group life or disability insurance
policies or other similar plans or policies affecting the Company and
all such plans and policies are fully funded or require no contributions
or premiums by the Company in respect of any period prior to the Closing
except as shown as a liability on the Company Financial Statements and
all such plans and policies are terminable at any time by the Company at
no further cost or expense;
(ad) all material transactions of the Company have been promptly and properly
recorded or filed in or with its respective books and records and the
minute book of the Company contains complete records of all meetings and
proceedings of its shareholders and directors;
(ae) to the best of the Vendor's knowledge and belief none of the foregoing
representations and statements of fact contained any untrue statement of
material fact or omits to state any material fact necessary to make any
such statement or representation not misleading.
3.2 No investigation made by or on behalf of the Purchaser at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation, warranty or covenant made by the Vendors herein.
3.3 The completion of the Closing shall constitute a representation and
warranty by each of the Vendors that each of the representations and
warranties of such party set forth in this Article 3 are true and correct at
the time of Closing.
3.4 The representations and warranties contained in this Article 3 shall
survive the Closing and notwithstanding the Closing, shall continue and
remain in full force and effect for the benefit of the Purchaser for a period
of two years from the Closing Date.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 The Purchaser represents and warrants as follows and hereby acknowledges
and confirms that the Vendors are relying upon such representations and
warranties in connection with the purchase of the Shares, namely:
(a) the Purchaser has the full corporate power and authority to effect
the purchase from the Vendors of the Shares absolutely in
accordance with the terms hereof;
(b) the Purchaser has been duly incorporated and is in good standing
under the laws of the Province of British Columbia and is duly
registered to carry on business in all jurisdictions in which it
carries on business;
(c) the Purchaser is a reporting company duly listed and in good
standing on the Vancouver Stock Exchange;
(d) the Purchaser has the corporate power to own the properties owned
by it and to carry on the business carried on by it and is duly
registered and qualified to carry on business in all jurisdictions
in which it does so;
(e) the authorized capital of the Purchaser consists of 99,994,375
common shares without par value of which 3,660,462 common shares
are issued and outstanding;
(f) all issued shares of the Purchaser have been duly and validly
issued as fully paid and non-assessable shares;
(g) the common shares of the Purchaser to be issued to the Vendors
pursuant to subparagraph 1.2(b), the common shares of the
Purchaser to be issued to the Vendors pursuant to the exercise of
the share purchase warrants referred to in subparagraph 1.2(c)
and, subject to the due payment of the exercise price therefor,
the common shares of the Purchaser to be issued upon due exercise
of the stock options referred to in subparagraph 1.2(d) will be
issued as fully paid shares, and will be subject only to such
restrictions as may be imposed by the Vancouver Stock Exchange and
the laws of British Columbia having application;
(h) except as disclosed in Schedule G, no person has any agreement,
option or right, present or future, contingent, absolute or
capable of becoming an agreement, option or right:
11
(i) to require the Purchaser to issue any further or other shares
in its capital or to issue any other security, convertible or
exchangeable into shares in its capital, or to convert or
exchange any securities into or for shares in the capital of
the Purchaser; or
(ii) to require the Purchaser to purchase, redeem or otherwise
acquire any of the issued and outstanding shares in the
capital of the Purchaser;
(i) no action will be taken whereby the capital of the Purchaser will
be in any way changed between the time hereof and the Closing Date
and in particular no further shares of any class shall be created
or issued other than pursuant to the exercise of convertible
securities listed in Schedule G, or as agreed between the parties;
(j) no dividends have been paid on any of the shares of the Purchaser,
nor will be declared, paid or authorized after the date hereof
and up to the Closing Date, and no distribution of assets in any
form or manner has been made since the date of the Purchaser
Financial Statements nor will be made after the date hereof and up
to the Closing Date;
(k) the shareholdings of the directors, officers and greater than 10%
shareholders of the Purchaser are as set forth in Schedule H
hereto;
(l) to the best of the Purchaser's knowledge, information and belief,
the unaudited financial statements of the Purchaser as at June 30,
1999, attached hereto as Schedule I (the "Purchaser Financial
Statements") have been prepared in accordance with generally
accepted accounting principles, applied on a consistent basis
throughout the periods indicated except as disclosed in any
schedule thereto or as otherwise stated therein, and the Purchaser
Financial Statements present fairly the financial position of the
Purchaser as of the date indicated thereon and present fairly the
results of operations of the Purchaser for the periods then ended;
(m) with the exception of loans from Ubex Capital Inc. and Monaco
Investment Corp. in the aggregate sum of $50,000, and except to
the extent reflected or reserved against in the Purchaser
Financial Statements or incurred subsequent to the date thereof in
the ordinary and usual course of the business of the Purchaser,
the Purchaser has no outstanding indebtedness or any liabilities
or obligations (whether accrued, absolute, contingent or
otherwise) of a nature customarily reflected or reserved against
in a balance sheet (including the notes thereto) prepared in
accordance with generally accepted accounting principles;
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(n) as at the date of the Purchaser Financial Statements and except to
the extent reflected in or reserved against therein, the Purchaser
was not liable for any Canadian federal, provincial, municipal or
local taxes, any United States federal, state or municipal taxes,
assessments or other imposts in respect of its income, business or
property and no such taxes, assessments, imposts or penalties were
required to be reserved against. The Purchaser is not, except in
respect of the current taxation year, required to file or in
default in filing any tax returns or reports, including, without
limitation, any returns or reports covering any of the
aforementioned taxes. The Purchaser is not currently aware of any
circumstance whereby current taxation year filings will result in
any tax liabilities of the Purchaser in excess of $10,000 in the
aggregate;
(o) since the date of the Purchaser Financial Statements there has not
been:
(i) any change in the condition or operations of the business,
assets or financial condition of the Purchaser other than
changes in the ordinary and normal course of business which
are not, individually or in the aggregate, materially
adverse; or
(ii) any damage, destruction or loss, labour trouble or other
event, development or condition of any character (whether or
not covered by insurance) materially and adversely affecting
the business, assets, properties or future prospects of the
Purchaser;
(p) except as disclosed elsewhere in this Article 4, since the date of
the Purchaser Financial Statements, the Purchaser has not:
(i) conducted its business other than in the usual and normal
manner thereof;
(ii) transferred, assigned, sold or otherwise disposed of any of
the assets shown in the statements, or cancelled any debts
or claims;
(iii) incurred or assumed any obligation or liability (fixed or
contingent), except unsecured current obligations and
liabilities incurred in the ordinary and normal course of
business, and except as set out in Schedule J hereto;
(iv) discharged or satisfied any lien or encumbrance, or paid any
obligation or liability (fixed or contingent) other than
current liabilities shown on the Purchaser Financial
Statements, and current liabilities incurred since the date
thereof in the ordinary and normal course of business;
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(v) suffered an operating loss or any extraordinary loss, waived
any rights of substantial value, surrendered any license, or
entered into any material commitment or transaction not in the
ordinary and usual course of business;
(vi) amended or changed or taken any action to amend or change its
memorandum or articles;
(vii) mortgaged, pledged, subjected to lien, granted a security
interest in or otherwise encumbered any of its assets or
property, whether tangible or intangible; or
(viii) authorized or agreed or otherwise have become committed to do
any of the foregoing;
(q) the Purchaser has good and marketable title to all its properties,
interests in properties and assets, real and personal, as reflected
in the Purchaser Financial Statements or acquired since the date
thereof, free and clear of all mortgages, pledges, liens, title
retention agreements, encumbrances or charges of any nature or kind
whatsoever;
(r) as at the date hereof the accounts payable of the Purchaser are as
described in Schedule J hereto;
(s) except for the contracts, agreements or commitments disclosed in
Schedule K hereto, the Purchaser is not party to or bound by any
existing material oral or written contract or commitment and all
contracts, commitments or agreements to which the Purchaser is a
party are in full force and effect, unamended, and no material
default exists with respect thereto on the part of any of the
parties thereto;
(t) the Company has not given or agreed to give, and is not a party to
or bound by, any guarantee of indebtedness or other obligation of
any person, firm or company;
(u) the Purchaser is not a party to, bound by or subject to any
indenture, mortgage, lease, agreement, instrument, judgment or
decree which would be violated or breached by, or under which
default would occur or which would give any person any right to
terminate, cancel or accelerate, in whole or in part, as a result
of, the execution and delivery of this Agreement or the consummation
of any of the transactions provided for herein;
14
(v) the Purchaser has, in all material respects, complied with all laws,
regulations and orders applicable to its present and proposed
business and has all material permits and licenses required thereby.
There is no term or provision of any material mortgage, indenture,
contract, agreement or instrument to which the Purchaser is a party
or by which it is bound or of any provision of any judgment, decree,
order, statute, rule or regulation applicable to or binding upon the
Purchaser which materially adversely affects or, so far as the
Purchaser may now foresee, in the future is reasonably likely to
materially adversely affect, the business prospects, condition,
affairs or operations of the Purchaser or any of its properties or
assets;
(w) neither the execution of this Agreement nor the performance by the
Purchaser of any of the terms hereof will result in the violation,
contravention or breach of any statute, regulation, order, judgment,
decree or law to which the Purchaser is subject;
(x) there is not suit, action, litigation, arbitration proceeding or
governmental proceeding, including appeals and applications for
review, in progress, pending or, to the best of the knowledge,
information and belief (after due enquiry) of the Purchaser,
threatened against, or relating to the Purchaser or which might
materially and adversely affect the properties, business, future
prospects or financial condition of the Purchaser, and there is not
presently outstanding against the Purchaser any judgment, decree,
injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator;
(y) the execution, delivery and performance of this Agreement by the
Purchaser will, at the Closing Date, have been duly authorized by
its Board of Directors and neither the execution and delivery of
this Agreement nor compliance with nor fulfillment of the terms and
provisions of this Agreement will conflict with or result in a
breach of the terms, conditions or provisions of or constitute a
default under the memorandum and articles of the Purchaser or any
instrument, agreement, mortgage, judgment, order, award, decree or
other restriction to which the Purchaser is a party or by which it
is bound;
(z) all equipment owned or leased by the Purchaser is now and will at
Closing be in good repair;
(aa) the Purchaser has no insurance policies in force;
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(ab) the Purchaser has paid all assessments and is otherwise in good
standing under all applicable workers' compensation legislation;
(ac) the Purchaser is not a party to any collective agreement with any
labour union or other association of employees nor has any union or
association of employees been certified as a bargaining unit of the
Purchaser. Schedule L accurately lists the positions, dates of hire
and the individual rates of salary, bonuses, commissions,
reimbursements and other compensation and terms thereof of each
director, officer, employee and agent of the Purchaser. The
Purchaser Financial Statements accurately disclose all liabilities
of the Purchaser for accrued and unpaid salary, vacation pay and
other benefits and remuneration due to all directors, officers,
employees and agents, except those accruing in the ordinary course
of their business since the date of such statements;
(ad) there are no pension plans, deferred profit sharing plans, deferred
compensation plans, individual or group life or disability insurance
policies or other similar plans or policies affecting the Purchaser
and all such plans and policies are fully funded or require no
contributions or premiums by the Purchaser in respect of any period
prior to the Closing except as shown as a liability on the Purchaser
Financial Statements and all such plans and policies are terminable
at any time by the Purchaser at no further cost or expense;
(ae) all material transactions of the Purchaser have been promptly and
properly recorded or filed in or with its respective books and
records and the minute book of the Purchaser contains complete
records of all meetings and proceedings of its shareholders and
directors;
(af) with the exception of Canaccord Capital Corp. which will receive a
finder's fee of 120,000 special warrants of the Purchaser in
connection with the sale and purchase of the Shares, the Purchaser
has not retained, employed or introduced any broker or finder or any
other person who would be entitled to a brokerage commission or
finder's fee arising out of the transaction contemplated hereby
other than as agreed between the parties;
(ag) to the best of the Purchaser's knowledge and belief none of the
foregoing representations and statements of fact contain any untrue
statement of material fact or omits to state any material fact
necessary to make any such statement or representation not
misleading.
4.2 No investigation made by or on behalf of the Vendors at any time shall
have the effect of waiving, diminishing the scope of or otherwise affecting
any representation, warranty or covenant made by the Purchaser herein.
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4.3 The completion of the Closing shall constitute a representation and
warranty by the Purchaser that each of the representations and warranties of
the Purchaser set forth in this Article 4 are true and correct at the time of
Closing.
4.4 The representations and warranties contained in this Article 4 shall
survive the Closing and, notwithstanding the Closing, shall continue and
remain in full force and effect for the benefit of the Vendors for a period
of two years from the Closing Date.
ARTICLE 5
CONDITIONS
5.1 The sale and purchase of the Shares herein provided for is subject to
the following terms and conditions to be performed on or prior to the Closing
Date:
(a) upon the request of the Purchaser, the Vendors shall make
available to the representatives of the Purchaser all books,
accounts, records and other financial and accounting data and all
charter documents, minute books, and other corporate records, and
all documents of title and related records and other data of the
Company in their possession in order to enable such representative
to make an examination of the same;
(b) upon the request of either Vendor, the Purchaser shall make
available to the representatives of such Vendor all books,
accounts, records and other financial and accounting data and all
charter documents, minute books and other corporate records, and
all documents of title and related records and other data of the
Purchaser in its possession in order to enable such
representatives to make an examination of same;
(c) no substantial damage resulting from fire or other hazard to the
physical assets of the Company which materially and adversely
affects the value of the Company shall have occurred prior to the
Closing Date;
(d) each of the Vendors' warranties and representations set out in
Article 3 shall be true as at and on the Closing Date;
(e) each of the Purchaser's warranties and representations set out in
Article 4 shall be true as at and on the Closing Date;
17
(f) all necessary corporate action and proceedings shall be taken to
permit the due and valid transfer, at the Closing Date, of the
Shares from the Vendors to the Purchaser;
(g) all necessary corporate action and proceedings shall be taken to
permit the due and valid payment and issuance to the Vendors, at
the Closing Date, of the cash, shares, warrants and options of the
Purchaser referred to in paragraph 1.2;
(h) the Vendors shall be satisfied as to the status of the Purchaser's
negotiations to obtain the financing referred to in paragraph 8.1,
such satisfaction to be indicated in writing, signed by Houston on
behalf of the Vendors;
(i) prior to the Closing Date, the Purchaser shall have received all
necessary regulatory approvals of this Agreement and the issuance
of its securities hereunder;
(j) prior to the Closing Date, the Purchaser shall have received any
required approval of its shareholders to the transactions hereby
contemplated.
5.2 Each of the foregoing conditions may be waived in writing by the party
for whose benefit such condition was included.
ARTICLE 6
CLOSING
6.1 The sale and purchase of the Shares shall be closed at 10:00 a.m. at the
offices of Forth & Company, solicitors for the Purchaser, on the date which
is five (5) business days after the receipt by the Purchaser of the approval
of the Exchange to the transaction herein, or such other date as may be
agreed between the parties but in any event no later than February 29, 2000,
the ("Closing Date").
6.2 At the Closing Date:
(a) the Vendors shall present to the Secretary of the Company the duly
endorsed share certificates for the Shares with a request to the
Company that the Purchaser be entered on the books of the Company
as the registered owner of the Shares, and the Secretary of the
Company shall cause the certificates so surrendered to be
cancelled and a new certificate representing the Shares to be
issued in the name of and delivered to the Purchaser;
18
(b) the Vendors shall deliver to the Purchaser the corporate seal of
the Company and all corporate records and books of account of the
Company;
(c) the Purchaser shall deliver the resignation of Xxxxxxx Xxxxx as a
director of the Purchaser and shall receive consents of Houston
and Xxxxxxx Xxxxxxx and shall cause to be passed a directors'
resolution of the Purchaser necessary to appoint Houston and
Xxxxxxx Xxxxxxx to the Board of the Purchaser;
(d) the Purchaser shall deliver to the Vendors certified cheques and
share and warrant certificates representing the consideration set
forth in subparagraphs 1.2(a), (b) and (c) in accordance with
Schedule A;
(e) the Purchaser and the Vendors and their nominees shall execute and
deliver stock option agreements as contemplated by subparagraph
1.2(d).
ARTICLE 7
REQUISITE APPROVALS
7.1 The parties hereto hereby acknowledge that the transactions contemplated
by this Agreement must be approved by the Exchange before they can be
effected. Notwithstanding any other provision of this Agreement, in the event
that such approval has not been received by the Purchaser by 4:00 p.m. on
February 15, 2000, this Agreement shall be rendered null and void AB INITIO.
ARTICLE 8
MISCELLANEOUS
8.1 The parties acknowledge that one of the purposes of the Vendors in
entering into this agreement is to gain access to additional capital to be
raised by the Purchaser for the express purpose of providing capital
necessary for the maintenance and expansion of the operations of the Company
and the Purchaser. In this regard, the Purchaser agrees to use its best
efforts to raise at least $350,000 in equity or debt financing after the date
of this agreement and prior to the expiry of 30 days after this agreement is
approved by the Exchange.
8.2 The parties agree that all expenditures by the Company during the
twelve month period immediately following the Closing Date will be made in
accordance with a budget prepared by the Company's management and approved by
the Board of Directors of the Purchaser as constituted pursuant to
subparagraph 6.2(c).
19
8.3 The parties agree that all individual expenditures by the Company in
excess of $7,500 during the period of twelve months immediately following the
Closing Date will only be made with the prior approval of Houston and Xxxxxx
Xxxxx, or in either case his duly appointed alternate, provided however that
such approval shall not be required for any expenditure provided for in the
budget referred to in paragraph 8.2 or any expenditure necessary to purchase
inventory required to fill previously received orders from customers.
8.4 The parties hereto shall execute such further and other documents and do
such further and other things as may be necessary to carry out and give
effect to the intent of this Agreement.
8.5 This Agreement may only be amended in writing duly executed by the
parties hereto.
8.6 This Agreement shall constitute the entire agreement between the parties
hereto with respect to the matters covered hereby and shall supersede all
previous written, oral, or implied understandings between them with respect
to such matters.
8.7 Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision shall be prohibited by or be invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
8.8 Titles and headings to sections herein are inserted for convenience of
reference only and are not intended to be a part of or to affect the meaning
or interpretation of this Agreement.
8.9 This Agreement may be executed in counterparts, each of which shall be
deemed an original but which together shall constitute one and the same
instrument.
8.10 The use of the masculine gender herein includes the feminine and neuter
wherever appropriate and the plural includes the singular.
8.11 The Schedules to this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein.
8.12 Time shall be of the essence of this Agreement.
8.13 This Agreement shall be deemed to be made in the Province of British
Columbia and shall be construed in accordance with and governed by the laws of
such Province.
20
8.14 Any notice or other communication or instrument required or permitted to
be given or delivered hereunder shall be in writing and shall be well and
sufficiently given or delivered if enclosed in a sealed envelope and
addressed to the party to receive same at his address as set forth on the
first page of this Agreement, and in each case delivered personally or mailed
by registered mail. Any notice so given or delivered shall be conclusively
deemed to have been given when delivered, if delivered personally, or 72
hours following the mailing of the same, if mailed by registered mail.
8.15 This Agreement shall enure to the benefit of and be binding upon the
parties to this Agreement and their respect heirs, executors, administrators,
successors, and assigns.
IN WITNESS WHEREOF the parties hereto have caused these presents to be
duly executed as of the day and year first above written.
The CORPORATE SEAL of FEDORA )
INDUSTRIES INC. was hereunto )
affixed in the presence of: )
) C/S
/s/ [ILLEGIBLE] )
--------------------------- )
)
--------------------------- )
)
SIGNED, SEALED AND DELIVERED )
BY XXXXX XXXXXXX in the presence )
of: )
) /s/ Xxxxx Xxxxxxx
/s/ [ILLEGIBLE] ) ------------------
--------------------------- ) XXXXX XXXXXXX
)
--------------------------- )
)
THE CORPORATE SEAL of )
585735 B.C. Ltd. was hereunto affixed )
in the presence of: ) C/S
)
/s/ [ILLEGIBLE] )
--------------------------- )
)
--------------------------- )
)
21
SIGNED, SEALED AND DELIVERED )
BY XXXXXX XXXXX in the presence )
of: )
) /s/ Xxxxxx Xxxxx
/s/ [ILLEGIBLE] ) ------------------
--------------------------- ) XXXXXX XXXXX
)
--------------------------- )
)
SCHEDULE "A"
XXXXX XXXXXXX Cash $16,000.00
Fedora shares - 1,202,858
585735 B.C. LTD. Cash $40,000.00
Fedora shares - 557,142
Fedora warrants - 500,000
XXXXXX XXXXX Cash $0.0
Fedora shares - 540,000
OPTIONS
XXXX XXX 20,000
XXXX CONGO 25,000
XXXX XXXXXXXX 20,000
XXXXX XXXXX 20,000
XXXXXX XXXX 10,000
XXXX XXXX 35,000
XXXXX XXXXXXX 30,000
XXXX XXXXXXX 30,000
XXX XXXX 50,000
XXXXXX XXXXX 80,000
XXXXX XXXXXXX 80,000
TOTAL 400,000
[LETTERHEAD]
AUDITORS' REPORT
To the Directors
Sports Link Direct Marketing Ltd.
We have audited the balance sheet of Sports Link Direct Marketing Ltd. as at
March 31, 1999 and 1998 and the statements of operations and deficit and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at March 31, 1999 and 1998
and the results of its operations and cash flows for the period then ended in
accordance with 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. /s/ Xxxxxx & Company
July 6, 1999 Chartered Accountants
SPORTS LINK DIRECT MARKETING LTD.
BALANCE SHEET
---------------------------------------------------------------------
MARCH 31
1999 1998
---------------------------------------------------------------------
ASSETS
Current
Cash $ 6,020 $ -
GST recoverable 9,910 -
Inventory 82,246 16,748
-------------------------
98,176 16,748
Capital Assets (Note 2) 8,705 8,509
-------------------------
$106,881 $ 25,257
=======================================================================
LIABILITIES
Current
Bank indebtedness $ - $ 3,232
Accounts payable and accrued liabilities 97,903 45,115
Shareholders' advances 49,153 15,628
-------------------------
147,056 63,975
-------------------------
SHAREHOLDERS' DEFICIENCY
Share Capital (Note 3) 100 100
Deficit (40,275) (38,818)
-------------------------
(40,175) (38,718)
-------------------------
$106,881 $ 25,257
=======================================================================
Approved by the Directors:
/s/ [ILLEGIBLE]
----------------------------
SPORTS LINK DIRECT MARKETING LTD.
STATEMENT OF OPERATIONS AND DEFICIT
-------------------------------------------------------------------------------
TEN MONTHS
YEAR ENDED ENDED
MARCH 31
1999 1998
-------------------------------------------------------------------------------
Sales $519,970 $112,979
-------------------------
Cost Of Sales
Opening inventory 16,748 -
Purchases 498,390 127,419
Less ending inventory (82,246) (16,748)
-------------------------
Cost of sales 432,892 110,671
-------------------------
Gross Profit 87,078 2,308
-------------------------
Expenses
Accounting and legal 2,962 4,315
Advertising and promotion 4,871 3,493
Amortization 4,132 1,667
Automotive 2,983 1,800
Bank charges, Interest and foreign exchange 5,803 1,107
Consulting 19,350 6,075
Management fees 6,750 1,000
Office and sundry 4,269 11,673
Rent 6,964 1,850
Telephone and Internet 16,679 8,146
Travel 638 -
Wages 13,133 -
-------------------------
88,534 41,126
-------------------------
Loss For The Year (1,456) (38,818)
Deficit, Beginning Of The Year (38,818) -
-------------------------
Deficit, End Of The Year $(40,274) $(38,818)
===============================================================================
SPORTS LINK DIRECT MARKETING LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. SIGNIFICANT ACCOUNTING POLICIES
a) Amortization of Capital Assets
Capital assets are stated at cost, amortization is provided using the
declining balance method at the following rates:
Computer equipment 30%
Computer software 100%
Furniture and equipment 20%
b) Inventory
Inventory is stated at the lower of cost and net realizable value.
c) Foreign Currency Translation
Transactions in foreign currencies are translated at the exchange
rates in effect on the transaction dates. Monetary assets and
liabilities resulting from such transactions are adjusted to reflect
the exchange rates in effect at the balance sheet date and the
resulting gain or loss is recognized in the statement of earnings.
2. CAPITAL ASSETS
Capital assets and related accumulated amortization consist of the
following:
1999 1998
---------------------------------- ----------
Accumulated Net Book Net Book
Cost Amortization Value Value
---------------------------------- ----------
Computer equipment $ 8,610 $ 2,478 $ 6,132 $ 4,508
Computer software 2,965 2,552 412 1,302
Furniture and
equipment 2,928 768 2,160 2,699
---------------------------------- ----------
$ 14,503 $ 5,798 $ 8,705 $ 8,509
================================== ==========
SPORTS LINK DIRECT MARKETING LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
3. SHARE CAPITAL
Authorized
10,000,000 Class A voting shares - no par value
10,000,000 Class B non-voting shares - no par value
10,000,000 Class C non-voting shares - no par value
Issued
1999 1998
-----------------
100 Class A voting shares $ 100 $ 100
=================
4. FINANCIAL INSTRUMENTS
The carrying amounts for cash, GST recoverable, accounts payable and
accrued liabilities, and shareholders' advances approximate their
respective fair values due to their short term maturity or capacity of
prompt liquidation.
5. INCOME TAXES
The Company has tax losses of $34,475 which expire in the year 2005. The
potential tax reduction arising from the application of these losses
against future taxable income has not been recorded in the financial
statements.
6. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
7. COMPARATIVE FIGURES
The Company was Incorporated and commenced operations on June 19, 1997. The
comparative figures are for the period of operations from June 19, 1997 to
March 31, 1998
SCHEDULE "C"
PAYEE BALANCE ($CDN)
Georgia Straight (advertising) 700.10
Pt. Xxxxxxx Freight 841.88
Xxxxx & Co. (chartered accountants) 236.47
Telecomm Leasing (phone system) 229.95
Baglot & Associates (consultant) 1,508.70
Ikon (office equipment) 986.10
Asama Enterprises Corp. (product) 41,950.43
Dick Hope & Associates (MYOB) 687.00
Norco Products Ltd. (product) 4,017.61
Salaries unpaid (Xxxx) 10,000.00
Shareholders advances 49,153.00
Insurance (building) 41.67
Race Face (product) 15,526.30
Imperial (product) 223.05
Designs (advertising) 142.50
B.C. Tel 663.75
Xxxxx Security (monitoring) 28.95
Letter Carrier (shipping and rent) 6,749.67
Clearlines (phone install) 376.20
Future Shop (computer hardware) 2,000.00
Cannect (phone service) 1,793.57
TOTAL PAYABLES 137,856.90
SCHEDULE "D"
CONTRACTS
1) Century Holdings - Lease of building see attached five pages, complete
lease on file at Sportslink Direct Marketing Ltd. office.
[Century Group Letterhead]
August 6, 1999
SPORTSLINK DIRECT MARKETING LTD.
#00-0000 00xx Xxxxxx
Xxxxx, X.X.
X0X 0X0
Attention: Xxx Xxxx and Xxxxx Xxxxxxx
Dear Don and Xxxxx;
RE: LEASE XXXXXXXXX-#00-0000 00xx Xxxxxx, Xxxxx X.X.
-----------------------------------------------------
Please find enclosed the executed copy of the above mentioned Lease Agreement
for your records.
Should you have any questions, please do not hesitate to contact the
undersigned.
Yours truly,
CENTURY HOLDINGS LTD.
/s/ Xxxx Xxxxxxxx
XXXX XXXXXXXX
Property Manager
TCT/jw
encls.
1
APPENDIX 1
KEY DATA
The following is key data which is part of and may be referred to in this
lease:
LEASE
CLAUSE
------
======================================================================================================
PROJECT: CENTURY SQUARE Schedule 4
------------------------------------------------------------------------------------------------------
STORE XX. #00-0000-00XX XXXXXX, XXXXX, X.X. X0X 0X0
------------------------------------------------------------------------------------------------------
STORE AREA: (Approximate Square Footage) 3.10
1,237 SQ.FT.
------------------------------------------------------------------------------------------------------
TRADE NAME: SPORTSLINK DIRECT MARKETING LIMITED 2.2.3
------------------------------------------------------------------------------------------------------
USE: OFFICE FOR THE PURPOSE OF INTERNET SALES, AND SUCH OTHER 2.2.2
PURPOSES AS THE LANDLORD MAY APPROVE IN WRITING
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
TERM: Years ONE (1) Months Days Schedule 1
---------------------------------------------------------------------------------------- Definition
TERM START DATE: SEPTEMBER 1, 1999 of "Term"
---------------------------------------------------------------------------------------- "Commence-
TERM EXPIRY DATE: AUGUST 31, 2000 ment
Date"
------------------------------------------------------------------------------------------------------
RENEWAL OPTION: THREE (3) YEARS Schedule 6
------------------------------------------------------------------------------------------------------
BASIC RENT: 3.1
Lease Years
1 through 1 : $ 12.00
-----------------------------------------------------------------------------------
Through : $
-----------------------------------------------------------------------------------
Through : $
-----------------------------------------------------------------------------------
Through : $
-----------------------------------------------------------------------------------
Through : $
-----------------------------------------------------------------------------------
per square foot per annum of the GROSS LEASEABLE AREA of the STORE.
------------------------------------------------------------------------------------------------------
PERCENTAGE RENT: 0.00% of Gross Revenue, less Allowable Gross Minimum 3.2
------------------------------------------------------------------------------------------------------
11A ALLOWABLE GROSS MINIMUM: $0.00 3.2
------------------------------------------------------------------------------------------------------
PREPAID RENT: FIRST MONTHS RENT PAID IN ADVANCE 3.13
------------------------------------------------------------------------------------------------------
SECURITY DEPOSIT: LAST MONTHS RENT PAID IN ADVANCE 3.13
------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE CONTRIBUTION: $ 0.00 Per square foot of the 4.3
Gross Leaseable Area of the Store.
------------------------------------------------------------------------------------------------------
3.6
------------------------------------------------------------------------------------------------------
FIXTURING PERIOD: See 2.1. Schedule 1 - Definition and Schedule 3
N/A
------------------------------------------------------------------------------------------------------
PLAN REVIEW CHARGE: 0.00 Schedule 3
2.4
------------------------------------------------------------------------------------------------------
TENANT NAME: SPORTSLINK DIRECT MARKETING LIMITED Preamble
------------------------------------------------------------------------------------------------------
TENANT ADDRESS: #28-1835-56th Street, Delta, B.C. Preamble
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
1ST INDEMNIFIER'S NAME: XXXXX XXXXXXX Preamble
------------------------------------------------------------------------------------------------------
1ST INDEMNIFIER'S ADDRESS: 0000 Xxxxxx Xxxxx, Xxxxx, X.X. Preamble
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
2ND INDEMNIFIER'S NAME: N/A Preamble
------------------------------------------------------------------------------------------------------
2ND INDEMNIFIER'S ADDRESS: N/A Preamble
-----------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
LANDLORD ADDRESS: Century Holdings Ltd., 0000-00 Xxxxxx, Xxxxx, X.X. X0X 0X0
------------------------------------------------------------------------------------------------------
MANAGER: Century Holdings Ltd.
======================================================================================================
[ILLEGIBLE] LEASING CONTRACT made the 27th day of July , 1999 between
CENTURY HOLDINGS LTD., a Company
incorporated pursuant to the Laws
of the Province of British Columbia
and having a Registered and Records
Office at 0000 - 00 Xxxxxx, Xxxxx,
X.X. X0X 0X0
as Landlord
-and-
SPORTSLINK DIRECT MARKETING LIMITED, a Company
incorporated pursuant to the Laws of the Province of British Columbia
And having a Registered and Records office at #28-1835-56th Street,
Delta, B.C.
as Tenant
-and-
XXXXX XXXXXXX, businessman of
0000 Xxxxxx Xxxxx, Xxxxx, X.X.
as 1st Indemnifier
In consideration of the rents to be paid and the covenants contained in
this leasing contract, Landlord leases the Store to Tenant and Tenant leases
the Store from Landlord, to have and to hold the Store during the Term, at
the rent, subject to the conditions and limitations and in accordance with
the convenants contained in this leasing contract.
(g) the release of discharge of Tenant in any receivership, bankruptcy,
winding-up or other creditors' proceedings or the rejection,
disaffirmance or disclaimer of the Lease in any proceeding or
otherwise, however, and this Indemnity shall constitute with respect to
the periods prior thereto and thereafter, for and with respect to the
Term as if the Lease from not been disaffirmed or disclaimed or as if
such release or discharge had not occurred; and in furtherance hereof,
Indemnifier agrees, upon any such disaffirmance or disclaimer, release
or discharge that Indemnifier shall, at the option of Landlord,
become Tenant of Landlord upon the same terms and conditions as are
contained in the Lease; applied mutatis mutandis; or
(h) any repossession of the Leased Premises by Landlord.
WAIVER OF NOTICE
13.4 Indemnifier hereby expressly waives notice of the acceptance of this
Indemnity and all notice of non-performance, non-payment or
non-observance on the part of Tenant of the terms, covenants and
conditions in the Lease.
NOTICE
13.5 Any notice to indemnifier under or with respect to this Lease shall be
given in writing and shall be sufficiently given if delivered or if
sent by telecopy or similar form of immediate transmission either
delivered to indemnifier personally (or to a partner or officer of
indemnifier if indemnifier is a firm or corporation) at the address
specified in the Term Sheet or left at the Leased Premises (whether or
not Tenant has departed from, vacated or abandoned the same). Indemnifier
may from time to time by notice in writing to the other designate
another address or addresses in Canada as the address to which notices
are to be sent in lieu of the address specified in item 10 of the Term
Sheet. If two or more Persons are named as Indemnifier, such notice given
hereunder or under the Lease shall be sufficiently given if delivered
or emailed in the foregoing manner to any one of such persons.
DEFAULT
13.6 Should an Event of Default occur under the Lease or should a default
occur under this Indemnity, Indemnifier waives any right to require
Landlord:
(a) to proceed against Tenant or pursue any rights or remedies
against Tenant with respect to the Lease;
(b) to proceed against or exhaust any security given by Tenant and
held by Landlord; or
(c) to pursue any other remedy whatsoever in Landlord's power.
NO ESTOPPEL
13.7 No action or proceedings brought or instituted under this Indemnity
and no recovery in pursuance thereof shall be a bar or defence to any
further action or proceeding which may be brought by reason of any
further default hereunder or by reason of any further Event of Default
under the Lease.
ASSIGNMENT BY LANDLORD
13.8 Any assignment by Landlord of any of its interests in the Lease, the
Project or any interest therein operates automatically as an
assignment of the benefit of this Indemnity to the same extent and to
the same assignee.
IN WITNESS WHEREOF the parties hereto have executed this lease.
EXECUTION BY THE LANDLORD, CENTURY HOLDINGS LTD. )
was hereto made in the presence of its )
duly authorized signatories )
)
)
/s/ [illegible] )
-------------------------------------------------- )
Authorized Signatory )
)
-------------------------------------------------- )
Authorized Signatory
SCHEDULE "E"
Insurance - See next four pages
[LETTERHEAD]
28JUL1998 440720.1
Sportslink Direct Ltd.
#00 - 0000 00 Xxxxxx
Xxxxx XX X0X 0X0
POLICY NO.: 7866962
COMPANY: Federation Insurance Company
INSURANCE: COMMERCIAL LIABILITY
EFFECTIVE DATE: 17MAY1998 EXPIRY DATE: 17MAY2000
Dear Xxxxx:
In accordance with your instructions, we are now pleased to enclose the
attached endorsement amending your coverage.
If you require any further changes, or should you have any questions, please
do not hesitate to contact the office.
Thank you for the opportunity to be of continued service.
The enclosed endorsement reflects the change to your business location as
well as increasing your limit of liability to $2,000,000. No additional
premium has been charged to you for this endorsement.
Yours truly,
/s/ [ILLEGIBLE]
We are your Commercial Service Team,
Xxxxx Xxxxx Xxxxxxx Xxxxxxx
Broker Manager
We look forward to hearing from you.
CHANGE ENDORSEMENT
================================================================================
Westland Insurance Group Ltd. Federation Insurance Company of Canada
#2026, 0000 - 000xx Xxxxxx
Xxxxxx, X.X. X0X 0X0
================================================================================
Sportslink Direct Ltd. 7866962 Commercial
#36 - 0000 - 00xx Xxxxxx
Xxxxx, X.X. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
X0X 0X0
17 May, 1999 17 May, 2000
--------------------------------------------------------------------------------
EFFECTIVE DATE OF CHANGE: 26 JULY, 1999
It is hereby understood and agreed that the location and mailing address is
amended to read as shown above and not as previously stated. All underwriting
information remains unchanged.
It is further understood and agreed that the limit of liability is increased
by $1,000,000 to now read as $2,000,000.
Additional Insured: It is hereby understood and agreed that Century Holdings
Ltd. (Landlord) is an Additional Insured but only insofar as their legal
liability arise vicariously out of the negligent operations of the Named
Insured.
No change in premium has resulted from this endorsement.
All other terms and conditions remain the same
/s/ [ILLEGIBLE]
Date: 26 July, 1999 Authorized Representative:
================================================================================
[LETTERHEAD]
===================================================================================================
Sportslink Direct Ltd. FROM: BRANCH:
#36 0000 - 00xx Xxxxxx 17 May, 0000 XXXXXX
Xxxxx, X.X. X0X 0X0 TO: TRANSACTION:
17 May, 2000 1 -NEW POLICY
(12:01 AM LOCAL TIME AT THE INSURED ADDRESS SHOWN.)
===================================================================================================
LOCATION OF INSURED PREMISES OCCUPANCY/OPERATIONS BY INSURED: SALES OF SPORTING
EQUIPMENT VIA INTERNET
As Shown Above
CONSTRUCTION: 9 - Not Applicable
FIRE PROTECTION: 9 - Non Sprinklered/Not Applicable
CRIME: 99 - Not Applicable
===================================================================================================
PROPERTY OF EVERY DESCRIPTION Not Included
Earthquake Coverage-Subject to a 10% Deductible Not Included
Flood Coverage-Subject to a $10,000 Deductible Not Included
Sewer Backup Coverage-Subject to a $2,500 Deductible Not Included
Additional Endorsements:
Comprehensive Boiler & Machinery Coverage Not Included
Deletion of Boiler & Machinery - Form 112
===================================================================================================
Business Income Not Included
===================================================================================================
COMPREHENSIVE GENERAL LIABILITY $1,000,000
Tenants Legal Liability $250,000
Liability Restricted to Premises
===================================================================================================
NON OWNED AUTOMOBILE Included
===================================================================================================
UMBRELLA LIABILITY Not Included
===================================================================================================
CRIME Not Included
Additional Endorsements
$500.00
===================================================================--------------------------------
THIS DOCUMENT CONTAINS A CLAUSE(S) THAT MAY LIMIT THE AMOUNT PAYABLE.
THIS POLICY IS SUBJECT TO THE MISINTERPRETATION OF DATE EXLUSION.
/s/ [ILLEGIBLE]
-----------------------------
Authorized Representative.
================================================================================
COMMERCIAL GENERAL LIABILITY
LIMITS OF LIABILITY:
Each Occurrence Limit: $1,000,000
Aggregate Limit: $1,000,000
Personal Injury & Advertising Limit: $1,000,000
Tenants Legal Liability Limit: $250,000 (any one premises)
Medical Expense Limits: $10,000 (any one person)
Property Damage Deductible: $500
Tenants Legal Liability Deductible: $500
Endorsements:
Products & Completed Operations Excluded
Liability Restricted to Premises Only
Professional Liability Excluded
Limit for Non Owned Automobile Liability: $1,000,000
PREMIUM ADJUSTMENT:
Deposit Premium:
SCHEDULE "F"
SALARIES AND DATES OF HIRE
NAME SALARY DATE OF HIRE POSITION
----------------------------------------------------------------------------------------
Xxxx Congo $10/hr August 1, 1997 Sales
Xxxx Xxxxxxxx $26,000 August 14, 1999 Sales
Xxxx Xxx $36,000 August 14, 1999 Sales
Xxx Xxxx $47,000 June 1, 1999 Vice President, Operations
Xxxxx Xxxxxxx $60,000 August 1, 1999 President
Xxxx Xxxx $100 month credit August 1, 1997 Webmaster
Xxx Baglot $15/hr May 1, 1998 Bookkeeping
Xxxxx Xxxxxxx $43,000 September 1, 1999 Sales
Xxxxx Xxxxx $12,000 September 1, 1999 Administration
Xxxxxx Xxxx $10/hr May 1, 1999 Assembler
CONTRACTORS
------------
Xxxx Xxxxxxx $1,000/month September 1, 1999 Consultant
Xxxxxx Xxxxx $1,000/month September 1, 1999 Consultant
FEDORA INDUSTRIES INC. - OUTSTANDING WARRANTS
SCHEDULE "G"
1,755,000 Warrants outstanding at a price of $0.18 to March 25, 2000;
700,000 Warrants outstanding at a price of $0.15 to October 30, 1999 or $0.17
to October 30, 2000
-------------------------------------------------------------------------------------------------
Name Number of Exercise Date Amount Balance
Warrants Price Exercised Exercised Remaining
-------------------------------------------------------------------------------------------------
Ubex Capital 550,000 $0.18 May 6, 1999 10,000 540,000
-------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 365,000 $0.18 May 6, 1999 10,000 355,000
-------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxx 2,500 $0.18 2,500
-------------------------------------------------------------------------------------------------
Xx Xxxxx 80,000 $0.18 80,000
-------------------------------------------------------------------------------------------------
Xxxxxxx Securities 40,000 $0.18 40,000
Xxxxx Forward RRSP
#60-12090
-------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx 125,000 $0.18 125,000
-------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx 152,500 $0.18 152,500
-------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxxxx 200,000 $0.18 200,000
-------------------------------------------------------------------------------------------------
Xxxxxx XxXxxxxx 60,000 $0.18 60,000
-------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 25,000 $0.18 25,000
-------------------------------------------------------------------------------------------------
Canaccord Capital 75,000 $0.18 75,000
Corporation I/T/F Xxxxx
Xxxxxx RRSP #235-
522S-8
-------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxx & Co. 100,000 $0.18 100,000
Inc. F/B/O Xxxxx
Xxxxxxxxxxx A/C #7503-
0936
-------------------------------------------------------------------------------------------------
Chesa Management Co. 700,000 $0.17 700,000
Ltd.
-------------------------------------------------------------------------------------------------
FEDORA INDUSTRIES INC.
LIST OF OUTSTANDING STOCK OPTIONS
--------------------------------------------------------------------------------------------
Name Position No. of Shares Granted Exercise Price Expiry Date
--------------------------------------------------------------------------------------------
Xxxxxx Xxxxx Director 34,000 $0.16 October 2/03
66,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
Xxxx XxXxxxxxxx Director 33,000 0.16 October 2/03
7,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
Xxxxxxx Xxxxx Director 20,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxx Director 10,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
Xxxxxx Xxxx 66,000 0.29 April 8/04
34,000 0.16 October 2/03
--------------------------------------------------------------------------------------------
Xxxx Xxxx 14,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
Xxxxxxxx Xxxxxx 10,000 0.29 April 8/04
--------------------------------------------------------------------------------------------
TOTAL OPTIONS 294,000
OUTSTANDING
--------------------------------------------------------------------------------------------
FEDORA INDUSTRIES INC.
SCHEDULE "H"
The following table sets forth information as of September 2, 1999 with respect
to the beneficial ownership of the Common Stock by each person known by the
Company to own beneficially 10% or more of the common stock and all directors
and officers:
--------------------------------------------------------------------------------
AMOUNT OF
BENEFICIAL PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNERSHIP CLASS
-------------- ------------------------ ---------- ----------
Common Stock Xxxxx Xxxxx 378,200 10.32%
Common Stock Chesa Management Co. Ltd. 700,000 19.09%
Common Stock Ubex Capital Inc. 562,100 15.33%
Common Stock Xxxxxxx Xxxxx (Director) 152,500 4.16%
Common Stock Xxxxxx Xxxxx (Director) 39,865 1.09%
Common Stock Xxxxx Xxxxxxxx (Director) Nil
Common Stock Xxxx XxXxxxxxxx (Director) Nil
Common Stock Xxxxxxx Player (Corp. Secretary) Nil
--------------------------------------------------------------------------------
FORM 61
QUARTERLY REPORT
Incorporated as part of: X Schedule A
-----
X Schedule B and C
-----
(place x in appropriate category)
ISSUER DETAILS:
NAME OF ISSUER Fedora Industries Inc. (Formerly Specialty Medical Products Inc.)
-----------------------------------------------------------------
ISSUER ADDRESS Suite 505 - 1155 Xxxxxx Xxxxxx, Xxxxxxxxx, X.X., X0X 0X0
-----------------------------------------------------------------
ISSUER TELEPHONE NUMBER (000) 000-0000
--------------------------------------------------------
CONTACT PERSON Xxxxxx X. Xxxxx
-----------------------------------------------------------------
CONTACT'S POSITION Director
-------------------------------------------------------------
CONTACT TELEPHONE NUMBER (000) 000-0000
-----------------------------------------------------
FOR QUARTER ENDED June 30, 1999
--------------------------------------------------------------
DATE OF REPORT August 10, 1999
-----------------------------------------------------------------
CERTIFICATE
THE SCHEDULE(S) REQUIRED TO COMPLETE THIS QUARTERLY REPORT ARE ATTACHED AND THE
DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY
OF THIS QUARTERLY REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT.
PLEASE NOTE THIS FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF
SCHEDULE A AND SCHEDULES B & C.
XXXXXX XXXXX "XXXXXX XXXXX" 99/08/10
--------------------------------------------------------------------------------
NAME OF DIRECTOR SIGN (TYPED) DATE SIGNED
(YY/MM/DD)
XXXX XXXXXXXXXX "XXXX XXXXXXXXXX" 99/08/10
--------------------------------------------------------------------------------
NAME OF DIRECTOR SIGN (TYPED) DATE SIGNED
(YY/MM/DD)
FEDORA INDUSTRIES INC.
(FORMERLY SPECIALTY MEDICAL PRODUCTS, INC.
QUARTERLY REPORT
JUNE 30, 1999
SCHEDULE A: FINANCIAL INFORMATION
See attached financial statements
SCHEDULE B: SUPPLEMENTARY INFORMATION
1. See attached financial statements
2.a) Securities issued during the period:
Date Type of Type of Number Issue Total Type of Commission
Issued Security Issue of Shares Price Proceeds Consideration Paid
------------------------------------------------------------------------------------------
April 8/99 Common Exercise 1,575,000 (Cash already
share special received on issue
warrants of special warrants)
May 7/99 Common Exercise 10,000 $0.18 $1,800 Cash None
share warrants
May 7/99 Common Exercise 10,000 $0.18 $1,800 Cash None
share warrants
b) Options granted during the period:
Date Number Exercise
Granted of Shares Optionee Price Expiry Date
--------------------------------------------------------------------
April 8/99 66,000 Xxxxxx Xxxxx $0.29 April 8, 2004
April 8/99 7,000 Xxxx XxXxxxxxxx $0.29 April 8, 2004
April 8/99 20,000 Xxxxxxx Xxxxx $0.29 April 8, 2004
April 8/99 10,000 Xxxxxxxx Xxxxxx $0.29 April 8, 2004
April 8/99 10,000 Xxxxx Xxxxxxxx $0.29 April 8, 2004
April 8/99 66,000 Xxxxxx Xxxx $0.29 April 8, 2004
April 8/99 14,000 Xxxx Xxxx $0.29 April 8, 2004
3.a) Authorized Capital--100,000,000 common shares without par value
Issued Capital--2,966,087 common shares for total
consideration of $5,387,220
700,000 special warrants for total
consideration of $105,000
-2-
b) Option and warrants outstanding
See note 5(c) and note 6 to the attached financial statements
c) 5,625 shares held in escrow
No shares subject to pooling agreements
d) List of Directors:
Xxxxxx Xxxxx
Xxxxx Xxxxxxxx
Xxxxxxx Xxxxx
Xxxx XxXxxxxxxx
Schedule "C"
Management Discussion
The Company is continuing to evaluate potential financing proposals as well
as possible other opportunities.
Due to current market conditions, there are no funds being expended on
investor relations at this present time.
Uncertainty Due to the Year 2000 issue has been addressed in the accompanying
notes to the financial statements. The effects of the Year 2000 issue may be
experienced before, on, or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor errors to
significant systems failure which could affect an entity's ability to conduct
normal business operations.
The Company believes that it is taking all necessary precautions that it can
to avoid any potential problems that may occur as a result of the Year 2000
issue. Because the Company does not generally rely on date-sensitive software
applications for its business operation, endogenous Y2K risks are minimal.
Notably the Company's in-house software has been upgraded to Y2K compliant
status. Finally, with few critical counter-party business relationships, the
company is confident it has very limited exposure to exogenous Y2K risks.
On behalf of the Board
Xxxxxx X. Xxxxx
President
FEDORA INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(STATED IN CANADIAN DOLLARS)
(Unaudited--see Notice to Reader)
NOTICE TO READER
We have compiled the consolidated balance sheet of Fedora Industries Inc. (a
development stage company) as at June 30, 1999 and the consolidated statements
of operations and deficit, stockholders' equity and cash flow for the six
month period then ended from information provided by management. We have not
audited, reviewed or otherwise attempted to verify the accuracy or
completeness of such information. Readers are cautioned that these statements
may not be appropriate for their purposes.
Vancouver, B.C. "Xxxxxx & Company"
August 9,1999 Chartered Accountants
FEDORA INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(STATED IN CANADIAN DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
JUNE 30
1999 1998
----------- -----------
ASSETS
CURRENT
Cash $ 50,163 $ 51,026
Accounts receivable 1,742 1,942
Prepaid expenses 2,675 5,584
----------- -----------
54,580 58,552
FIXED ASSETS (Note 2) 518 918
OTHER ASSETS (Note 3) 1 227,617
----------- -----------
$ 55,099 $ 287,087
=========== ===========
LIABILITIES
CURRENT
Accounts payable and accrued liabilities
-related parties $ 16,906 $ 74,958
-others 24,200 23,854
Loans payable (Note 4) 50,000 20,000
----------- -----------
91,106 118,812
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
SHARE CAPITAL (Note 5) 5,387,220 5,130,437
SPECIAL WARRANTS (Note 6) 105,000 248,063
DEFICIT (5,528,227) (5,210,225)
----------- -----------
(36,007) 168,275
----------- -----------
$ 55,099 $ 287,087
=========== ===========
FEDORA INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(STATED IN CANADIAN DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
INCEPTION
JANUARY 22,
SIX MONTHS ENDED 1987 TO
JUNE 30 June 30,
1999 1998 1999
---------- ---------- ----------
REVENUE
Interest income $ 78 $ 1,553 $ 61,455
---------- ---------- ----------
EXPENSES
Administrative services - - 11,088
Audit and accounting 5,117 3,500 145,055
Bank charges, interest and exchange - 1,765 220,970
Consulting services - - 177,905
Corporate finance services - - 27,000
Depreciation and amortization 200 48,200 494,789
Legal 10,447 26,167 433,416
Management fees 15,000 15,000 275,500
Office and sundry 13,580 14,262 319,298
Printing - - 54,219
Product liability insurance - - 25,795
Regulatory authorities and transfer agent 5,300 3,563 110,057
Rent and operating costs 12,376 7,200 310,317
Shareholder information, public relations
and advertising - - 670,100
Shop expenses - - 50,908
Telephone - - 79,015
Travel and business promotion - - 248,500
Wages and benefits 4,500 4,500 1,263,032
Write off leasehold improvements - - 30,347
Write off costs related to abandoned properties - - 472,788
Write down other assets - - 169,583
---------- ---------- ----------
66,520 124,157 5,589,682
---------- ---------- ----------
LOSS FOR THE PERIOD 66,442 122,604 $5,528,227
==========
DEFICIT, BEGINNING OF PERIOD 5,461,785 5,087,621
---------- ----------
DEFICIT, END OF PERIOD $5,528,227 $5,210,225
========== ==========
LOSS PER SHARE $ 0.02 $ 0.10
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 3,643,700 1,189,087
========== ==========
FEDORA INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
JUNE 30, 1999
(STATED IN CANADIAN DOLLARS)
(UNAUDITED - SEE NOTICE TO READER)
SHARES AMOUNT DEFICIT TOTAL
---------- ---------- ----------- ---------
BALANCE DECEMBER 31, 1997 1,139,087 $5,098,937 $(5,087,621) $ 11,316
ISSUE OF SPECIAL WARRANTS 1,775,000 279,563 279,563
EXERCISE OF SPECIAL WARRANTS (200,000) (31,500) (31,500)
ISSUE OF SHARES ON EXERCISE OF
SPECIAL WARRANTS 200,000 31,500 31,500
NET LOSS (122,604) (122,604)
---------- ---------- ----------- ---------
BALANCE JUNE 30, 1998 2,914,087 $5,378,500 $(5,210,225) $ 168,275
========== ========== =========== =========
BALANCE DECEMBER 31, 1998 3,614,087 $5,483,500 $(5,461,785) $ 21,715
EXERCISE OF STOCK OPTIONS 32,000 5,120 5,120
EXERCISE OF WARRANTS 20,000 3,600 3,600
EXERCISE OF SPECIAL WARRANTS (1,575,000) (248,063) (248,063)
ISSUE OF SHARES ON EXERCISE OF
SPECIAL WARRANTS 1,575,000 248,063 248,063
NET LOSS (66,442) (66,442)
---------- ---------- ----------- ---------
BALANCE JUNE 30, 1999 3,666,087 $5,492,220 $(5,528,227) $ 36,007
========== ========== =========== =========
FEDORA INDUSTRIES INC.
(FORMERLY SPECIALTY MEDICAL PRODUCTS INC.)
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
(STATED IN CANADIAN DOLLARS)
INCEPTION
JANUARY 22,
SIX MONTHS ENDED 1987 TO
JUNE 30 June 30
1999 1998 1999
-------- --------- -----------
CASH FLOWS >FROM OPERATING ACTIVITIES
From operations
Loss for the period $(66,442) $(122,604) $(5,528,227)
Add non-cash items
Depreciation and amortization 200 48,200 494,789
Write off leasehold improvements - - 30,347
Write off costs related to abandoned properties - - 472,788
Write down other assets - - 169,583
-------- --------- -----------
(66,242) (74,404) (4,360,720)
-------- --------- -----------
Changes in non-cash working capital (increase)
decrease in accounts receivable (1,742) (1,942) (1,742)
(Increase) decrease in prepaid expense 6,420 (2,909) (2,675)
Increase (decrease) in accounts payable 39,574 (70,595) 41,106
-------- --------- -----------
44,252 (152,446) 36,689
-------- --------- -----------
Cash flows from operating activities (21,990) (226,850) (4,324,031)
-------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Non-current assets of subsidiary company acquired - - (36,434)
Mineral property - - (68,785)
Exploration expenditures - - (404,003)
Fixed assets - - (383,078)
Other assets - (2,154) (640,636)
-------- --------- -----------
Cash flows from investing activities - (2,154) (1,532,936)
-------- --------- -----------
CASH FLOWS >FROM FINANCING ACTIVITIES
Proceeds on disposal of fixed assets and
product rights - - 364,910
Issue of shares and special warrants for cash 8,720 279,563 5,492,220
Increase in loans payable 50,000 (77,000) 50,000
-------- --------- -----------
Cash flows from financing activities 58,720 202,563 5,907,130
-------- --------- -----------
NET INCREASE (DECREASE) IN CASH 36,730 50,559 50,163
CASH, BEGINNING OF PERIOD 13,433 467 -
-------- --------- -----------
CASH, END OF PERIOD $ 50,163 $ 51,026 $ 50,163
======== ========= ===========
FEDORA INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(STATED IN CANADIAN DOLLARS)
(UNAUDITED--SEE NOTICE TO READER)
1. a) NATURE OF OPERATIONS
Development Stage Activities
The Company, through its wholly owned U.S. subsidiary Safety-Ject
intends to develop, manufacture and market disposable medical devices
designed to protect health care professionals from the risk of
needlestick injuries. There have been no commercial sales of the
products to date.
b) SIGNIFICANT ACCOUNTING POLICIES
i) Consolidation
These financial statements include the accounts of the Company
and its wholly owned U.S. subsidiary Safety-Ject.
ii) Depreciation and Amortization
Office furniture and equipment - straight line over 7 years
Product rights - straight line over 7 years
Patents - straight line over 17 1/2 years
iii) Non-Monetary Transactions
Shares of common stock of the Company issued for non-monetary
consideration are valued at the quoted market price per share at
the close of trading on the date of completion of the
transaction except for those circumstances where, in the opinion
of the Company and due to the nature of the transaction, the
trading price does not fairly represent the value of the
transaction. In such circumstances, the value of the shares is
determined based on the estimated fair value of the consideration
received.
iv) Foreign Currency Translation
Transactions recorded in United States dollars have been
translated into Canadian dollars using the Temporal Method as
follows:
i) Monetary items at the rate prevailing at the balance sheet
date
ii) Non-monetary items at the historical exchange rate
iii) Revenue and expense at the average rate in effect during
the applicable accounting period.
b) SIGNIFICANT ACCOUNTING POLICIES (Continued)
Gain or losses arising on translation are included in the results of
operations.
i) Loss Per Share
Loss per share is based on the weighted average number of common
shares outstanding during the year. Common stock equivalents and
contingent issuances are not included in the computation as they
are antidilutive.
ii) Basis of Presentation
These financial statements are prepared in accordance with
accounting principles generally accepted in Canada. Had they been
prepared in accordance with accounting principles generally
accepted in the United States no significant difference in the
measurement of income, results of operation or shareholders'
equity would have resulted.
2. FIXED ASSETS
1999 1998
------------------------------------ --------
ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
---- ------------ -------- ---------
Office furniture and
equipment $ 4,210 $ 3,692 $ 518 $ 918
======== ======== ====== ======
3. OTHER ASSETS
1999 1998
---------------------------------------- --------
WRITTEN DOWN ACCUMULATED NET BOOK NET BOOK
VALUE DEPRECIATION VALUE VALUE
------------ ------------ -------- ---------
Patents and product
rights $ 390,081 $ 390,080 $ 1 $ 227,617
============ ============ ======== =========
4. LOANS PAYABLE
Loans in the amount of $50,000 bear interest at the rate of 18% per annum
and are to be repaid on September 29, 1999.
5. SHARE CAPITAL
a) Authorized
100,000,000 common shares without par value
b) Of the Company's issued and outstanding shares 5,625 are held in
escrow, their release being subject to the approval of the regulatory
authorities.
c) As at June 30, 1999 there were outstanding incentive stock options for
the purchase of up to 101,000 shares at $0.16 per share to October 2,
2003 and 193,000 shares at $0.29 per share to April 8, 2004.
d) As at June 30, 1999 there were outstanding warrants for the purchase
of up to 1,755,000 shares at $0.18 per share to March 25, 2000.
6. SPECIAL WARRANTS
As at June 30, 1999 the Company has issued 700,000 special warrants at
$0.15 per special warrant. Each special warrant entitles the holder to
receive one unit, with each unit consisting of one common share and one
non-transferable share purchase warrant, entitling the holder to purchase
an additional common share at $0.15 to October 30, 1999 or at $0.17 per
share to October 30, 2000.
7. RELATED PARTY TRANSACTIONS
a) During the period ended June 30, 1999 the Company incurred $36,000
(1998 - $34,500) to companies controlled by a director for office
rent, telephone, management, secretarial and miscellaneous office
supplies.
b) The loans payable described in note 4 are due to related parties.
8. INCOME TAXES
As at June 30, 1999 the amount of exploration expenditures incurred by
the Company exceeds the amount available for income tax purposes by
$299,500.
FEDORA INDUSTRIES INC.
SCHEDULE "J"
ACCOUNTS PAYABLE:
Loans Payable:
Ubex Capital Inc. $ 25,000.00
Monaco Investment Corp. 25,000.00
Legal $ 9,338.10
Accounting $ 5,269.75
Miscellaneous $ 15,789.61
TOTAL PAYABLES: $ 80,397.46
FEDORA INDUSTRIES INC.
SCHEDULE "K"
The following outlines any contracts, commitments, and/or agreements of
Fedora:
1. Stock option and share purchase warrants as outlined in Schedule 6;
2. Management Services Agreement with Ubex Capital Inc. whereby Ubex is paid
$2,500 per month plus GST on a month by month basis;
3. Management Services Agreement with Chesa Management Co. Ltd. whereby
Chesa is paid $300 per month plus GST on a month by month basis;
4. Office Services Agreement with Senate Capital Group Inc. whereby Senate
is paid $1700 per month plus GST for office rent; and $1800 per month plus
GST for office services, computers, supplies etc.
FEDORA INDUSTRIES INC.
SCHEDULE "L"
The following lists any salaries, bonuses or reimbursements to each officer,
director, employee or agent of Fedora Industries Inc.
1. Ubex Capital Inc. has received $2,500 per month for over three years; and
2. Chesa Management Co. Ltd. has received $300 per month for over three
years.
3. Reimbursements relating only to out-of-pocket expenses which have been
verified.
See also Schedule "K"
