VSE cans GMD directors and orders loan repayments

Farrell Financial and LMX Resources (LMX–V) have been ordered by the Vancouver Stock Exchange to repay $3 million in loans that were not properly disclosed. In addition, the VSE banned GMD President Don Farrell from acting as a director or officer of any VSE-listed company.

Trading of GMD Resources (GMD-V) shares resumed Feb. 9, following a 2-week investigation into a series of unsecured, non-arm’s-length loans made to Farrell Financial and LMX Resources.

GMD directors Garvin McMinn, Visco Jutronich and Paul Brownly resigned their positions in compliance with the Vancouver Stock Exchange’s orders. GMD Chief Financial Officer John Scholtz and Corporate Secretary Jean Bortolin also resigned.

The board of directors now comprises David Webb (who is acting president), Gilbert Dalton and Gerry Hess. Brian Weir is acting as interim corporate secretary. An advisory committee has been set up to assist the board in appointing new officers and directors.

LMX acknowledged its obligation to repay the loans with interest and will enter into a formal agreement to determine interest rate and payment dates.

Monies loaned to Farrell Financial and Variety Investments (companies controlled by Farrell) will be repaid in minimum monthly installments of $25,000, using

an interest rate of prime plus 2%. The principal must be repaid by June 30.

As collateral, Don Farrell has agreed to put up all shares he owns, directly or indirectly, in Air Packaging Technologies, GMD, LMX and Sanfred Resources (SND-V).

The current management of GMD has determined that company’s liabilities are approximately $794,208, on the basis of the Nov. 30, 1997 quarterly report and preliminary accounting work for December and January. The company has requested a formal audit for the period Sept. 1, 1997 to Jan. 31, 1998, and all new exploration programs have been put on hold pending the results of the audit.

In addition, the private placements announced on Nov. 16, 1997 and Jan. 16, 1998 have been cancelled. Together, the sales were valued at $686,000.

According to a press release dated Feb. 9, 1998, Sanfred granted $49,500 in non-arm’s-length loans to LMX and Farrell Financial that were not authorized by Sanfred’s board. The loan to LMX amounted to $40,000, all of which was repaid last week. A total of $9,500 went to Farrell Financial, $4,500 of which is still outstanding.