August 22, 1997
Borealis owns and develops intellectual property in basic industrial
fields. We select areas where change has been customarily slow
with correspondingly increased rewards available for the right
These technological advances are becoming commercial realities
as we talk to and deal with forward-looking industrial companies,
many of them leaders in their fields.
We have a Letter of Intent signed with Landis & Gyr (Europe)
Corp. in regards to the Borealis Refrigeration Technology.
If the due diligence process now underway is successful, Borealis
and Landis & Gyr expect to establish a long-term, exclusive
cooperation to exploit this technology in Landis & Gyr (Europe)
Landis & Gyr (Europe) Corp. is a wholly-owned subsidiary of
Electrowatt Ltd., a Zurich, Switzerland-based company. Siemens
AG, a $60 billion industrial company, has an acquisition of Electrowatt
pending, through the purchase of CS Holdings' shares in Electrowatt.
Wide-ranging discussions over our technologies continue with other
companies of similar size as well as with smaller enterprises.
As a companion to our research and development work, for the past
32 years Borealis has owned one of the largest viable untapped
magnetite deposits in the world. We believe these properties are
now close to commercialization. We will announce transactions
as they become material.
Your management has been associated with Borealis as shareholders
for over 27 years. The last few years have been exciting times
for us all. We have worked with the singular aim of realizing
a return of tens of billions of dollars for our shareholders,
and we are closer to success than ever before.
A. Borealis Roche Bay Magnetite Deposit contains over $1 trillion
USD in future revenue if the property is developed to maximize
revenue and profit. In the lowest estimate, these proved reserves,
as defined under Ontario Securities Commission rules, at current
market prices will have in excess of 60 billion US dollars in
future revenue from the sales of iron ore and precious metals.
We have signed contracts and undertaken extensive work to see
that these properties are now capitalized which will allow for
their development in a timely and profitable manner. We firmly
expect to develop these properties for the benefit of the Inuit
people, Canada and the Borealis Shareholders.
These properties are now held by Roche Bay Mining Company Limited
and will show up on the future books as share interests, not as
B. Fruechen Bay Polymetallic Project, according to our technical
staff, is a classic polymetallic structure. We hold this property
in good standing, because of work carried out by Borealis with
Kennecott Copper and RTZ, until 2002. Our geologists inform us
that Freuchen Bay could be worth billions of dollars. We intend
to use internal company money to drill and prove up this property
when funds become available.
C. Borealis Refrigeration Technology is in development.
Please note the Landis & Gyr Letter of Intent, and the fact
that other transactions are in advanced discussion stages with
major world class players. The Press Release is available at www.borealis.com.
D. Borealis Motor Works is in the final testing phase prior
to commercialization. We have one major player wanting to use
the technology for Locomotives and Off Road Haul Trucks. Once
we achieve certification, we expect relatively rapid optimization
E. Borealis ZVT Sound has certified results from the Defense
Research Agency, a sub-agency of the British Ministry of Defence.
Intense worldwide discussions are underway, and contracts are
pending. We expect significant revenue from this technology in
fiscal 1998. Our web site, at www.borealis.com has graphs showing
some of the advantages of the technology and a copy of the certification
letter from DRA.
F: The ThalesScope is a device which helps blind people
to interpret visual information - in a sense, to "see"
again - using sound. Borealis is managing the work on contract,
for a fee, and we will do similar work for other parties on similar
terms granted to ThalesScope Limited. This significant work is
a showcase of the technical abilities Borealis can draw on.
G. Borealis Green Steel is very exciting technology. We
plan to make one step Green Steel economically with the Roche
Bay Ore, in a combination of our various holdings. This technology
should be widely available, and will be useable almost everywhere
steel is made. We expect to attract outside interest for this
technology and hope to begin serious work on a melt shop in late
fiscal 1998 or early fiscal 1999.
H. Other Borealis Technologies are under development and are
not being discussed at this time.
Borealis is a virtual company, and the Internet plays a dominant
role in our day-to-day working practices as the means by which
we manage our business, discuss new ideas, and promote ourselves
to the outside world. Making full use of this modern communications
technology allows us to work in many countries without problems
of different time zones and locations.
We have consultants around the world, all of whom work over e-mail.
Management discussions take place over the net, as do technical
discussions. Borealis runs a continual Board of Directors Meeting
24 hours a day, all year, with an annual traffic of over 3000
messages to each Board Member. Borealis has intense direct participatory
management, and many consultants to the company sit in on the
Board Meetings and provide input even though they are not voting
Our Web Page, www.borealis.com, makes information about our technology
available and informs people about the company. Additionally we
send out a weekly update (as well as daily closes) to shareholders
and interested parties, detailing our ongoing work and progress
(e-mail firstname.lastname@example.org if you would like to receive these updates).
Our wide distribution can keep people more informed than through
traditional channels. Your management is, as a result, attempting
to be very responsive to shareholder questions and comments.
The Borealis Annual Report, including financials, proxy solicitation,
information circulars, and the notice of annual meeting will all
be at www.borealis.com by September 1st.
We are even accepting proxies, after September 1st, for the 1997
Annual Meeting electronically. Proxies can be voted either in
hard copy, from a link on our web site, or by e-mail to email@example.com.
This virtual company structure puts Borealis at the cutting edge
of modern business practice.
Borealis remains short of cash, and the expenses involved maintaining
our activities are substantial for a company our size.
For the past two years to March 31, 1997 your management and friends
put well over $3 MM CDN into Borealis and the totals are over
$5 MM CDN for the past 29 months. We are committed to Borealis,
to its future, its past and present. Regardless of the difficulties
we encounter, your management puts its money where its mouth is,
and management share holdings are at an all-time high.
Our annualized operating expenses ran last year at $2,458,489,
up from $1,466,989. We can expect our expenses to be higher this
coming fiscal year.
With the step-up in our research activities, we expect significant
third party assistance in fiscal 1998, either in direct purchase
of development rights and royalty agreements or in the purchase
of subsidiary company shares.
We can easily expect another $2 MM loss for fiscal 1998, though
we do not expect our cumulative deficit to climb over $34 MM before
royalty payments and other income brings these loss totals down.
Our current assets-to-liabilities ratio is extremely low, at $14,927
in current assets as compared to $7,003,233 in liabilities for
a 0.00213 ratio, while last year it was $1,295 to $6,807,639,
for a .00019 ratio. We probably have among the worst current asset
to liability ratios of any viable operating company in the world.
Some explanation is in order:
Management has chosen to keep the number of shares outstanding
below 5 million. Management has lent millions of dollars to Borealis
through the years at no interest in order to facilitate the operation
of the corporation. Your Chairman is the largest single real creditor
of Borealis, owed $755,076 at year-end compared to $1,145,251
at March 31, 1996.
Borealis continues to run large accounts payable. Our accounts
payable cover everything that Borealis might owe. This figure
of $2,655,162 is consistent with last year's accounts payable
of $2,695,060. As of the date of this letter, the figure, in accordance
with our standard accounting procedure, is now under $1 million.
The deposits on share issue of $939,959 is capital that has been
raised by consolidated subsidiary companies and not an actual
liability as that is normally understood. These are minority shareholder
interests which are part of the capital of Borealis subsidiary
companies. We expect to be raising millions of dollars in this
manner through our subsidiary companies.
The Ontario Securities Commission has instructed Borealis and
our auditor that the royalty payable of $2,595,300, which is essentially
the same figure as last year, is a true book liability. This amount
is due upon sale of product from the company's mineral properties,
or sale of the properties themselves, which we believe makes this
amount a true contingent liability. However, we have entered the
sum in the manner the Securities Commission has dictated.
The mineral properties of $5,392,626 are valued essentially the
same as they were last year, at $5,364,601.
These figures for the mineral properties will be going to zero
as Borealis transfers Roche Bay and Fruechen Bay to free standing
companies and the amounts are carried as Investment in Shares.
All our other share holdings are carried at $1,707. This number
is conservative. For example, we are selling our Arktos Resource
Limited shares, valued at $1,706 for gross considerations of well
over $100,000. We are reactivating Faraway Gold Mines Limited,
and plan to issue shares, share for share (except escrow shares),
around January 1, 1998 in a new company Faraway Mines Limited.
All registered shareholders of Faraway are expected to receive
full instructions in the next few months. Borealis intends to
make the Faraway holdings valuable for all shareholders.
In addition, two subsidiary companies are now offering by way
of Private Placement Memorandums 610,870 shares each at $5.238
USD per share, and Borealis indirectly owns 5,200,000 shares in
each of these companies.
We expect many such sales of subsidiary company shares through
the coming years. All of these shares are carried on the consolidated
books at no value, which is correct conservative accounting on
the part of our auditors.
One should note that all of our extensive Intellectual Property
activities are also being taken on the books at a nominal value.
The patents have a book value of $44,517 less accumulated amortization
of $2,904 compared to the previous year's value of $21,994 with
accumulated amortization of $1,123.
We remain optimistic that our extensive processing equipment in
NWT will finally make it to Rankin Inlet where it will form the
backbone of a crushed rock operation of which Borealis holds a
50% net profits interest. The equipment has, in our estimation,
a value of over $1 million in Rankin Inlet, and is carried on
our books at $13,990. 1996 carried the equipment at $18,996.
Our books are careful and conservative. Our liabilities are more
than fully reported. Many of our assets are tough to value. Having
many assets valued at zero on the books eliminates the need for
management to justify asset values. Borealis is pleased with this
careful accounting treatment. Given the large number of jurisdictions
we operate in, the zero valuation of assets has been the only
valuation acceptable to all.
The Ontario Securities Commission had discussions with Borealis
over the fiscal 1996 accounting being too conservative. After
discussions with our Auditors and ourselves, the OSC agreed to
let our books stand as published. We do not have their comments
yet on the 1997 figures, but we are confident that these books
can stand the most rigorous of examination and though our evaluations
of assets are very low, they can be defended from an accounting
point of view.
In fiscal 1997 the Alberta Court of Appeals overturned a decision
against your management and our lead Canadian Counsel by reducing
penalties to nominal periods. In a rare ruling, management was
vindicated in a dispute with the Alberta Securities Commission.
Further details and the entire decision are available at www.borealis.com.
As far as the Federal Government of Canada is concerned, Borealis
was fined substantial sums for spilling a very small quantity
of oil in a Northern lake. We are paying the fine and will continue
to pursue vigorously the Government and the Government Officials
who set this chain of events into motion and who ransacked and
destroyed our camp at Fat Lake. Ultimately, these matters will
be adjudicated by the Courts, but we expect much more in the way
of restitution from the Government than we have paid in fines.
We are pursuing legal action against Borealis Technology Corporation
Limited over their use of our name. There has been a great amount
of confusion between the companies, and as they started using
our name about 18 months ago, we feel our claim is solid. Again,
our web page at www.borealis.com has substantial documentation
on this case.
We have other legal actions pending, all of which concern our
past mineral exploration and development activities in Northern
Canada. We expect to win most of them and collect serious damages.
Settlement discussions are underway in several cases.
Borealis runs ongoing advertisement campaigns on an e-mail news
service in which Borealis and your management are shareholders.
The investment is carried at no value on our books though there
is a chance that the service may become a valuable asset for Borealis.
The web page is at http://www.iipub.com. The advertising has proven
valuable and very cost effective in terms of generating contacts
and developing the image of Borealis.
Our 1997 Auditors have informed Borealis that because of our wide-ranging
and global interests, they are no longer in a position to continue
overseeing our entire operations. Kenway Mack have arranged for
Ernst & Young to take over all responsibility for Borealis
audits, while Kenway Mack will continue to work with Borealis
under Ernst & Young direction. We would like to thank Kenway
Mack for their diligent efforts over the past 6 years. We have
a solid working relationship with Kenway Mack, and we look forward
to establishing a similar relationship with Ernst & Young.
Fiscal 1998 should be one of dramatically improved results as
our major projects begin to come to fruition.
We hope to achieve a positive cash-flow, and in doing so greatly
improve our financial position. We hope the days when Borealis
has to rely on its management to pay bills personally, lend money
at no interest or guarantee obligations are over.
Your management is confident that the Roche Bay Mining Company
Limited holdings will become cash flow positive for the first
time in 32 years. This will be a true pleasure vindicating the
millions of dollars invested throughout the decades in this property
by your company.
Our scientific research is of immense significance to many industries.
We have to turn that reality into a positive cash flow and profits.
Our main goal is to develop our technologies into marketable products,
where they can generate revenue. We are closer to achieving that
goal from our technologies than at any time in the past five years.
Please mail in your proxy, or vote at firstname.lastname@example.org, or on
the web at www.borealis.com.
We look forward to an exciting future for your company.
Thanks for your continued support.
Borealis Exploration Limited and the Borealis Group of Companies
Rodney T. Cox President/Chairman
Isaiah W. Cox Chief Operating Officer/Director