AMERIWEST ENERGY CORP. - SB-2 - 20050201 - PROSPECTUS_SUMMARY
ITEM 3. SUMMARY INFORMATION AND RISK FACTORS
SUMMARY INFORMATION OF THE COMPANY
This summary provides an overview of selected information and does not contain
all the information you should consider before investing in our securities. To
fully understand this offering and its consequences to you, you should read the
entire prospectus carefully, including "Risk Factors" section and the remainder
of the prospectus, before making an investment decision. In this prospectus we
refer to Henley Ventures Inc. as "Henley", "we", "our" and "us".
HENLEY VENTURES INC.
Our Company was incorporated as Henley Ventures Inc. by Articles of
Incorporation dated January 3, 2001 pursuant to laws of the State of Nevada.
Our executive offices are located at 3rd Floor - 830 West Pender Street,
Vancouver, British Columbia, Canada, V6C 1J8 (Tel: 604-683-6991; Fax:
604-681-1775). Presently, we do not have any subsidiaries, affiliated companies
or joint venture partners.
We are an exploration stage company (being engaged in the search of mineral
deposits (reserves) and are not considered to be in the development or
production stage) without any assurance that a commercially viable mineral
deposit, a reserve, exists on our mineral claims until appropriate exploration
work is done and a comprehensive study based upon such work concludes legal and
economic feasibility. A reserve is defined as that part of a mineral deposit
which could be economically and legally extracted or produced at the time of the
reserve determination. Reserves are customarily stated in terms of "ore" (a
natural occurrence of one or more minerals that may be mined and sold at a
profit or from which some part may be profitably separated) when dealing with
metalliferous minerals (metal bearing ore). Reserves are either "proven" or
"probable" and are defined as follows:
Proven (Measured) Reserves: Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral content of
reserves is well-established.
Probable (Indicated) Reserves: Reserves for which quantity and grade and/or
quality are computed from information similar to that used in proven (measured)
reserves, but the sites for inspection, sampling,
and measurement are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven (measured) reserves, is
high enough to assume continuity between points of observation.
We have a 100 percent interest in the HV mineral claim group (the "HV") located
in the Alberni Mining Division of British Columbia comprising 493 acres. We
undertook several exploration programs on the HV mineral claim group which has
maintained the claims in good standing until January 24, 2005.
In addition, we have a 100 percent interest in the mineral rights on certain
claims in British Columbia, Canada called the Red Bird Property (the "Red
Bird"). The claim consists of approximately 1,544 acres. It is 93 air miles
northeast of Vancouver, British Columbia. We have not yet undertaken any
exploration work on the Red Bird. There is no assurance we will find a
commercially viable mineral reserve on the Red Bird. The Red Bird is in good
standing until July 25, 2006 at which time assessment work or cash in lieu of
assessment work will have to be filed with the Ministry of Energy and Mines for
the Province of British Columbia (the "Ministry") in the amount of approximately
$1,900 to keep it in good standing for a further twelve months.
The Company has 1,450,000 shares outstanding.
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We have no revenues and very limited operations since our incorporation. We
acquired the HV from Paul Saulnier on January 24, 2001. In addition, we
acquired the Red Bird by way of a Bill of Sale Absolute (Exhibit 10.3) from
Richard J. Billingsley on July 28, 2004. There are no proven ore reserves on
either the HV or the Red Bird. Therefore, any expenses incurred in exploring
these two mineral claims are expensed during the period they are incurred. We
have cash of $9,615 as at September 30, 2004 with no other assets, and have
liabilities of $18,242 of which $8,425 is owed to our directors. Since our
inception we have incurred accumulated losses of $75,876. We anticipate minimum
operating expenses for the next twelve months of $21,650 (page 42).
We do not have any employees either full or part time.
THE OFFERING
The Selling Security Holders are offering for resale 1,220,000 shares of our
common stock that they currently own. We will not be involved in the offer or
the sale of these shares other than registering such shares pursuant to this
prospectus.
We are not listed for trading on any stock exchange or an automated quotation
system.
SUMMARY FINANICAL INFORMATION
Date of Date of
Inception Inception
January 3, January 3,
2001 to . 2001 to
September 30, December 31,
2004 2003
(Unaudited) (Audited)
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Statement of Expenses Information:
Revenue . . . . . . . . . . . . . . $ Nil $ Nil
Net Losses (75,876) (57,765)
Total Operating Expenses 75,876 57,765
Staking and Exploration Costs 10,945 5,915
General and Administrative 67,308 56,430
As of . . . As of
September 30, . .December 31,
2004 2003
(Unaudited) (Audited)
--------- --------
Balance Sheet Information:
Cash 9,615 160
Total Assets 9,615 160
Total Liabilities 18,242 15,485
Stockholders Equity (deficit) (8,627) (15,325)
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RISK FACTORS
An investment in our shares, being offered in this prospectus, involves a high
degree of risk. In deciding whether to purchase shares of our common stock, you
should carefully consider the following risk factors, in addition to other
information contained in this prospectus. This prospectus also contains
forward-looking statements that involves risks and uncertainties. If any of the
events or circumstances described in the following risks actually occurs, our
business, financial condition, or results of operations could be materially
adversely affected and the price of our common stock could decline.
If any of the events or circumstances described in the following risks
actually occurs, our business, financial condition, or results of operations
could be materially adversely affected and the price of our common stock could
decline.
1. BEING A START UP BUSINESS WE WILL FACE ALL THE CHALLENGES ASSOCIATED WITH A
NEW BUSINESS
Since our Company is in the start-up stage, common to all new businesses, we
will face certain challenges in the future which we must address. These
include the following but are not limited only to these challenges:
- Assessing the HV and the Red Bird to determine the correct exploration
programs warranted;
- Ensuring professional staff is available to oversee the exploration program
on the HV and Red Bird;
- Preparing budgets for our two exploration programs which will be strictly
adhered to;
- Ensuring we are able to raise money when and if needed;
- Maintaining both the HV and the Red Bird as well as the Company itself in
good standing with the various regulatory authorities; and
- Applying for a listing on the OTC Bulletin Board (the "OTCBB").
It is essential we address all of the above challenges in order to ensure the
Company is able to continue as a going concern in the future.
2. SINCE INCEPTION WE HAVE NOT MADE A PROFIT AND HAVE ACCUMULATED SIGNIFICANT
OPERATING LOSSES
Since inception we have never realized a profit from operations and do not
anticipate making a profit for a number of years into the future. In addition,
we presently have accumulated operating losses of $75,876 as at September 30,
2004. We cannot continue to operate without eventually realizing a profit since
without a profit in the foreseeable future it will be extremely difficult for us
to attract investment.
3. LOSS OF TOTAL INVESTMENT BY OUR SHAREHOLDERS DUE TO HAVING INSUFICIENT
FUNDS TO MEET FUTURE OBLIGATIONS
With only $9,615 in our bank account as at September 30, 2004 and our
estimated money required for operations over the next twelve months being
$21,650, we do not have sufficient funds to meet our future obligations which
might result in our stockholders losing their total investment in our Company.
4. PENNY STOCK RULES MAY MAKE BUYING OR SELLING OF OUR SHARES DIFFICULT
Broker-dealer practices in connection with transactions in penny stock are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission (the "SEC"). Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain national
securities exchanges and quoted on the NASDAQ system). The penny stock rules
requires a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a
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standardized risk disclosure document that provides information about the penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These requirements may have the effect
of reducing the level of trading activity, if any, in the secondary market for a
security that becomes subject to the penny stock rules. Our shares will be
subject to the penny stock rules thereby resulting in our shareholders finding
it more difficult to sell their shares.
5. THERE IS NO CURRENT MARKET FOR OUR SHARES AND IF ONE DOES NOT DEVELOP OUR
SHAREHOLDERS MAY BE UNABLE TO SELL THEIR SHARES
There is currently no market for our common stock and there may never be a
public market. If no market ever develops for our shares, it will be difficult
for our shareholders to sell their shares. Even if a market is developed, there
may be no share volume to allow our shareholders to sell their shares at any
market price.
6. IF WE FAIL TO MAINTAIN MARKET MAKERS IT WILL AFFECT THE LIQUIDITY OF THE
SHARES OWNED BY OUR SHAREHOLDERS
If we are unable to maintain at least one National Association of Securities
Dealers, Inc. (the "NASD") member broker/dealer as market maker, our
shareholders will find the liquidity of their shares are impaired, through
delays in effecting a buy or sell transaction and the number of the shares which
could be bought or sold. If this were the case, the price of our shares might
be lower than expected. In the event there are no market makers our
shareholders might be unable to sell their shares on any secondary market.
7. A STOCKHOLDER MAY NOT BE ABLE TO SELL THEIR SHARES ON THE TERMS THEY
CONSIDER REASONABLE
Our shares are not presently quoted on any exchange or quotation service.
As at the date of this Form SB-2 we do not have a market maker and therefore
have not submitted any material to the NASD to have our securities quoted on the
OTCBB. The development of a public trading market is dependent upon
individuals willing to buy shares which are being offered for sale. We do not
have control over the willingness to purchase and sell shares and neither will
our future market maker. Even with a market maker there is not assurance an
active and liquid market will develop in the foreseeable future. If it does
develop, there is no assurance it will continue or that shareholders wishing to
sell their shares will be able to do so at the price they consider reasonable.
8. IF A MARKET DEVELOPS FOR OUR SHARES THERE MAY BE WIDE FLUCTUATIONS IN THE
SHARE PRICE WHICH WE HAVE NO CONTROL OVER
If a market for our shares develops, the share price may be volatile with wide
fluctuations in response to several factors, including:
- Potential investors' anticipated feeling regarding our results of
operations;
- Increased competition and/or variations in mineral prices;
- Our ability or inability to generate future revenues; and
- Market conception of the future of the mineral exploration industry.
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In addition, if our shares are traded on the OTCBB, our share price may be
impacted by factors that are unrelated or disproportionate to our operating
performance. Our share price might be affected by general economic, political
and market conditions, such as recessions, interest rates or international
currency fluctuations. These factors, which are not under our control, may have
a material effect on our share price.
9. WE WILL NOT BE PAYING ANY DIVIDENDS TO OUR SHAREHOLDERS IN THE IMMEDIATE
FUTURE.
We are not planning to pay any dividend in the immediate future and in the event
we are successful in developing a revenue source we will retain the money in our
Company to meet our on-going obligations, further exploring of the HV and the
Red Bird and to seek out other mineral properties for exploration. If this is
the case, it might be years before our Board of Directors are willing to
consider the payment of a dividend to our shareholders.
10. IF WE HAVE TO SELL TREASURY SHARES IN OUR COMPANY THERE WILL BE A DILUTION
EFFECT TO OUR SHAREHOLDERS.
We feel the only way we will be able to acquire additional funds is through the
sale of our common stock. This will result in a dilution effect to our
shareholders whereby their percentage ownership interest in our Company is
reduced. The magnitude of this dilution effect will be determined by the number
of shares we will have to issue in the future to obtain the funds required.
11. NO MATTER HOW MUCH MONEY IS SPENT ON THE HV AND RED BIRD WE CANNOT
GUARANTEE A COMMERCIALLY VIABLE ORE RESERVE WILL EVER BE DISCOVERED
No matter how much money is spent over the years on the HV and Red Bird we might
never be able to find a commercially viable ore reserve. Over the next ten or
more years, we could spend a great deal of money on the either of these mineral
claims and never advance mineralization-wise from the point where they are in
today. In other words, our exploration efforts and money might prove
unsuccessful in identifying a commercially viable ore reserve.
12. EVEN WITH POSITIVE RESULTS DURING EXPLORATION OF EITHER OF OUR CLAIMS, THEY
MIGHT NEVER BE PUT INTO COMMERCIAL PRODUCTION
We might be successful during our future exploration programs on either of our
claim groups to identify a source of minerals of good grade but not in the
tonnage required to enter into commercial production. If the cost of
extracting the minerals is in excess of the selling price of the minerals, we
will not be able to develop either the HV or the Red Bird. In other words,
having satisfactory ounces per ton with low tonnage would not allow us to
economically extract the minerals on our claims. This being the case, we would
either have to abandon the one or both of the claims and seek another mineral
claim or cease operations all together.
13. WE WILL BE AFFECTED BY RISK AND HAZARDS OFTEN ASSOCIATED WITH A COMPANY IN
THE EXPLORATION STAGE
When, and if, we commence an exploration program on either the HV or the Red
Bird we will be subject to the normal risk inherent with an exploration program.
Some of these risks are as follows:
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- Environmental hazards;
- Industrial accidents;
- Forest fire during summer months;
- Unusual terraine formations;
- Snow and flooding conditions during the spring and winter months;
- Possibilities of cave-in associated with unknown adits on the Red Bird; and
- Broken ground and rock from trenching and explosive work on the HV and the
Red Bird.
If any of the above risks are realized, we could suffer delays in our
exploration and monetary losses which we might not be able to afford. If the
risk causes injury to our workers, we might be forced to defend ourselves in a
court of law which again will result in the use to money which presently we do
not have.
14. THERE IS NO CERTAINTY WE WILL BE ABLE TO OBTAIN THE USE OF A SMELTER WHEN
REQUIRED
If we are fortunate to extract minerals from the either the HV or the Red Bird,
we might not be able to locate a smelter which will be able to refine our ore
into concentrate due to other exploration companies having established long term
contractual agreements with the smelter. Even if we were able to negotiate with
a refinery, the distance to the refinery, especially in the case of the HV,
might be too far away increasing our transportation costs thereby making the
refining of our ore uneconomical. At the present time, we have not identified
nor negotiated with any smelter, either on Vancouver Island for the HV or in
southwestern British Columbia for the Red Bird, to process any ore we might
identify on either of these claim groups.
15. WE HAVE NOT PERFORMED A SURVEY ON EITHER THE HV OR THE RED BIRD AND
THEREFORE THEIR BOUNDARIES ARE UNCERTAIN
We have not performed a survey to determine the exact boundaries of either the
HV or the Red Bird and, therefore, there is uncertainty as to their exact
location. We have, nevertheless, filed our information with the Ministry which
gives us the rights to the minerals thereon, excluding coal and placer. When,
and if, we discover a commercially viable ore reserve on either of our claims,
it would be extremely important to have undertaken a survey on the claim in
question since we do not know what legal claims will be filed against us. For
example, there may be unregistered agreements, transfers or native land claims
which will only surface once we have identified an ore reserve. Even though we
realize, without a survey, there could be litigation against us, we are
presently not prepared to undertake a survey on either the HV or the Red Bird.
16. WITHIN THE EXPLORATION INDUSTRY THERE ARE MANY SMALL AND LARGE FIRMS
SEEKING MONEY, EXPLORATION PROPERTIES AND PROFESSIONAL STAFF
Within North America there are many large and small exploration companies all
seeking money, properties of merit and professional staff to work them. The
competition is overwhelming with the larger exploration companies commanding the
biggest piece of the pie with regards to money, properties and professional
staff. We are not able to compete with these larger exploration companies and
we will not try. The smaller exploration companies are often more well known,
better financed and have full time professional staff which will allow them to
identify properties of merit. At the present time, due to our lack of money, it
is doubtful if we can compete against these smaller companies in obtaining
money, properties and professional staff.
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17. THE MAJORITY OF OUR DIRECTORS HAVE NO HISTORY MANAGING AN EXPLORATION
COMPANY AND ITS PROPERTIES
Neither Sam Hirji nor Herbert Moeller have had any experience in managing an
exploration company and its properties. Only Terry Heard, being a Professional
Geologist, has had any experience in running an exploration company and
management exploration properties. In the event Terry Heard is not available to
oversee the work programs on either the HV or Red Bird, we will have to consider
hiring a geologist to oversee any exploration program undertaken on these claims
including hiring of workers, purchase to the required equipment and supplies,
overseeing the daily exploration work and compiling the results. This will
become an expense to our Company which we might have avoided if Terry Heard was
available or one of our other directors had exploration experience.
18. WE MIGHT NOT BE ABLE TO ACQUIRE OTHER MINERAL PROPERTIES FOR EXPLORATION
Presently, we hold the mineral rights to the HV and Red Bird claims and no other
claim. If, in the future, we are unable to raise additional money we will not
be able to acquire another mineral property in addition to the two we presently
have. Raising of money might become extremely difficult in the event no
commercially viable ore reserve is identified on either the HV or the Red Bird
therefore not allowing us to have surplus funds to seek out and identify another
mineral claim. Therefore, presently the acquisition of another mineral claim is
seriously in doubt.
19. WE WILL BE CONFRONTED WITH VARIOUS GOVERNMENTAL REGULATIONS AND
ENVIRONMENTAL RISKS THAT COULD PREVENT US FROM EXPLORING OUR MINERAL
CLAIMS.
The exploration of either the HV or the Red Bird is subject to extensive
federal and provincial laws and regulations governing exploration, production,
labor standards, occupational health, waste disposal, use of toxic substances,
environmental regulations, mine safety and other matters. At any time, new
legislation and regulation could be introduced by either the federal or
provincial governments which we are completely unaware with at this time but
might have a large impact on our exploration activities. These new regulations
might result in increased exploration costs or the delay in undertaking the
exploration of the either of our claims.
We have not established any reserve funds to offset any environmental
requirements. Once we undertake a trenching or drilling program on either the
HV or Red Bird, we will have to establish a reclamation bond with the Ministry
to ensure proper clean-up of these claims. Unless we were able to establish a
reclamation bond we would be unable to undertaken this work and the HV or the
Red Bird, or both, might not be in good standing and we would lose our interest
in the minerals thereon.
20. OUR INDEPENDENT ACCOUNTANTS ARE CONCERNED AS TO WHETHER WE BE ABLE TO
CONTINUE AS A GOING CONCERN
Cordovano & Honeck, our independent accountants, are concerned as to whether we
will be able to continue as a going concern unless adequate financing is
obtained in the near future. In their audit opinion they have stated the
following:
"The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability as a going concern. The financial
statements do not include any adjustments that might result form the outcome of
this uncertainty."
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If we do not obtain adequate funding there is a good possibility we will not be
able to pay our accounts payable owed to third parties on a timely basis which
might result in us having to cease operations.
21. WE DO NOT HAVE KEY MAN INSURANCE
At the present time, we do not have an insurance policy for key man
insurance in the event that one of our officers and directors decided to leave
us. This is important regarding Terry Heard since he is the only geologist on
our Board of Directors. If any of our present officers and directors departed we
would have to replace them with another individual; preferable with geological
background. This will cost money and we presently do not have sufficient money
available to attract such a person or to purchase a key man insurance policy.
22. OUR DIRECTORS DEVOTE AN IMMATERIAL AMOUNT OF TIME TO OUR AFFAIRS
Sam Hirji spends approximately 10 hours, Herbert Moeller spends
approximately 5 hours and Terry Heard several hours each month on the affairs of
our Company. Having no full time management results in business decisions not
being made on a timely basis and could in the future have a detrimental effect
on our growth since outside consultants and advisors might have to be hired on a
part time basis.
23. OUR DIRECTORS AND OFFICERS HAVE OTHER BUSINESS INTERESTS WHICH REQUIRED
THEM TO DEVOTE A SIGNIFICANT AMOUNT OF THEIR TIME
Our president, Sam Hirji, is the President of Samco Printers Ltd. in Vancouver,
British Columbia, which takes a significant amount of his time. Herbert Moeller
is an independent consultant whose time is limited to working on the affairs of
our Company. Terry Heard has his own exploration consulting company; being
Mount Royale Ventures, LLC. Therefore, we might have to hire independent
consultants to undertake the exploration work on the HV and the Red Bird claim
since Terry Heard is involved in rehabilitating a mine in Boulder, Colorado and
therefore might not be available to us when needed.
FORWARD LOOKING STATEMENTS
In addition to the other information contained in this Form SB-2, it contains
forward-looking statements which involve risk and uncertainties. When used in
this Form SB-2, the words "may", "will", "expect", "anticipate", "continue",
"estimate", "project", "intend", "believe" and similar expressions are intended
to identify forward-looking statements regarding events, conditions and
financial trends that may affect our future plan of operations, business
strategy, operating results and financial position. Readers are cautioned that
any forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results could differ
materially from the results expressed in or implied by these forward-looking
statements as a result of various factors, many of which are beyond our control.
Any reader should review in detail this entire Form SB-2 including financial
statements, attachments and risk factors before considering an investment.
ITEM 4. USE OF PROCEEDS
We will not receive any proceeds from the resale of the shares of common
stock offered by the Selling Security Holders.
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ITEM 5. DETERMINATION OF OFFERING PRICE
There is not established public market for our common equity being
registered. The Selling Security Holders are expected to sell their stock at
$0.10 per share, until our shares are quoted on the "Pink Sheets" or OTCBB. The
Selling Security Holders can then sell their shares at market price. The only
factor considered in the initial $0.10 per share price was based on the price
paid in our last private placement as at August 31, 2004 and the price set for
the stock options granted to Terry Heard on September 15, 2004.
ITEM 6. DILUTION
Since there are no shares being offered under this prospectus, there will
be no dilution to existing shareholders.
ITEM 7. SELLING SECURITY HOLDERS
Set forth below is a list of all stockholders who may sell shares pursuant
to this prospectus. The number of shares column represents the number of
shares owned by the Selling Security Holders prior to the offering. The
"Common Shares Beneficially Owned Following the Offering" column assumes all
shares registered are resold by the Selling Security Holders. The Selling
Security Holders identified in the following table are offering for sale
1,220,000 shares of common stock. We will not receive any proceeds from the
sale of the shares by the Selling Security Holders.
(*) Sam Hirji is our President, Principal Executive Officer and Herbert Moeller
is our Principal Financial Officer. Both are directors.
(**) Claus Andrup was a former director.
ITEM 8. PLAN OF DISTRIBUTION
We are registering on behalf of the Selling Security Holders 1,220,000
shares of our common stock which they own. The Selling Security Holders may,
from time to time, sell all or a portion of the shares of common stock in
private negotiated transactions or otherwise. Such sales will be offered at
$0.10 per share unless and until the offering price is changed by subsequent
amendment to this prospectus or our shares are quoted on the OTCBB. If our
shares become listed on the OTCBB, Selling Security Holderrs may then sell their
shares at prevailing market prices or private negotiated prices.
The common stock may be sold by the Selling Security Holders by one or more of
the following methods, without limitation:
- on the over-the-counter market;
- to purchasers directly;
- in ordinary brokerage transactions in which the broker solicits purchasers;
- or commissions from a seller/or the purchasers of the shares for whom they
may act as agent;
- through underwriters, dealers and agents who may receive compensation in
the form of
- underwritten discounts, concessions and commissions from a seller/or the
purchaser of the shares for whom they may act as agent;
- through the pledge of shares as security for any loan or obligation,
including pledges to brokers or dealers who may from time to time effect
distribution of the shares or other interest in the shares;
- through purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account pursuant to this prospectus;
- through block trades in which the broker or dealer so engaged will attempt
to sell the shares as agent or as riskless principal but may position and
resell a portion of the block as principal to faciliate the transaction;
- in any combination of one or more of these methods; or
- in any other lawful manner.
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Both Sam Hirji and Herbert Moeller have registered 10,000 shares of their own to
be sold pursuant to this prospectus. Messrs. Hirji and Moeller will sell their
shares at $0.10 per shares unless and until the offering price is changed by
subsequent amendment to this prospectus.
Brokers or dealers may receive commissions or discounts from the Selling
Security Holders, if any of the broker-dealer act as an agent for the purchaser
of said shares, from the purchaser in the amount to be negotiated which are not
expected to exceed those customary in the types of transactions involved.
Broker-dealers may agree with the Selling Security Holders to sell a specified
number of the shares of common stock at a stipulated price per share. In
connection with such re-sales, the broker-dealer may pay to or receive from the
purchasers of the shares, commissions as described above. The Selling Security
Holders may also sell the common shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this prospectus.
The Selling Security Holders and any broker-dealer or agents that participate
with the Selling Security Holders in the sale of the shares of common stock may
be deemed to be "underwriters" within the meaning of the Securities Act in
connection with these sales. In that event, any commissions received by the
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Furthermore, Selling Security Holders are
subject to Regulation M of the Exchange Act. Regulation M prohibits any
activities that could artificially influence the market of our common stock
during the period when shares are being sold pursuant to this prospectus.
Consequently, Selling Security Holders, particularly those who are also our
officers and directors, must refrain from directly or indirectly attempting to
induce any person to bid for or purchase the common stock being offered with any
information not contained in this prospectus. Regulation M also prohibits any
bids or purchases made in order to stabilize the price of our common stock in
connection with the stock offered pursuant to this prospectus.
Selling Security Holders may enter into hedging transactions with broker-dealers
and the broker-dealers may engage in short sales of our common stock in the
course of hedging the positions they assume with such Selling Security Holders,
including, with limitation, in connection with the distribution of our common
stock by such broker-dealers or pursuant to exemption from such registration.
Selling Security Holders may also enter into option or other transactions with
broker-dealers that involve the delivery of the common stock to the
broker-dealers, who may then resell or otherwise transfer such common stock.
Selling Security Holders may also loan or pledge the common stock to a
broker-dealer and the broker-dealer may sell the common stock so loaned or upon
default may sell or otherwise transfer the pledged common stock.
We have not registered or qualified offers and sales of shares of common stock
under the laws of any country, other than the United States. To comply with
certain states' securities laws, if applicable, the Selling Security Holders
will offer and sell their shares of common stock in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states the Selling Security Holders may not offer or sell shares of common stock
unless we have registered or qualified such shares for sale in such states or we
have complied with an available exemption from registration or qualification.
All expenses of the registration statement estimated to be $12,000 (refer to
page 13) including but not limited to, legal, accounting, printing and mailing
fees are and will be paid by us. We have agreed to pay costs of registering
the Selling Security Holders' shares in this prospectus. However, any selling
costs or brokerage commissions incurred by each Selling Security Holder relating
to the sale of his/her shares will be paid by them.
Any broker or dealer participating in any distribution of the shares may be
required to deliver a copy of the prospectus, including any prospectus
supplement, to any individual who purchases any shares from or through such
broker-dealer.
None of our directors or officers are subject to a "statutory disqualification",
as defined under Section 3 (a) (39) of the Exchange Act of 1934 wherein it
states that:
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1. "A person is subject to a "statutory disqualification" with respect to
membership or participation in, or association with a member of, a
self-regulatory organization, if such person:
A. has been and is expelled or suspended from membership or participation in,
or barred or suspended from being associated with a member of, any
self-regulatory organization, foreign equivalent of a self regulatory
organization, foreign or international securities exchange, contract market
designated pursuant to Section 5 of the Commodity Exchange Act (7 U.S.C.
7), or any substantial equivalent foreign statute or regulation, or futures
association registered under section 17 of such Act (7 U.S.C. 21), or any
substantially equivalent foreign statute regulation, or has been and is
denied trading privileges on any such contract market or foreign
equivalent;
B. is subject to:
i. an order of the Commission, other appropriate regulatory agency, or
foreign financial regulatory authority; denying, suspending for a
period not exceeding 12 months, or revoking his registration as a
broker, dealer, municipal securities dealer, government securities
broker, or government securities dealer or limiting his activities as
a foreign person performing a function substantially equivalent to any
of the above; or barring or suspending for a period not exceeding
12 months his being associated with a broker, dealer, municipal
securities dealer, government securities broker, government securities
dealer, or foreign person performing a function substantially
equivalent to any of the above;
ii. an order of the Commodity Future Trading Commission denying,
suspending, or revoking his registration under the Commodity Exchange
Act (7 U.S.C. 1 et seq.); or
iii. an order by a foreign financial regulatory authority denying,
suspending, or revoking the person's authority to engage in
transactions in contracts or sale of a commodity for future delivery
or other instruments traded on or subject to the rules of a contract
market, board of trade, or foreign equivalent thereof.
C. by his conduct while associated with a broker, dealer, municipal securities
dealer, government securities broker, or government securities dealer, or
while associated with an entity or person required to be registered under
the Commodity Exchange Act (7 U.S.C.A. 1 et seq.), has been found to be a
cause of any effective suspension, expulsion, or order of the character
described in subparagraph (A) or (B) of this paragraph, and in entering
such suspension, expulsion, or order, the Commission, an appropriate
regulatory agency, or any such self-regulatory organization shall have
jurisdiction to find whether or not any person was a cause thereof;
D. by his conduct while associated with any broker, dealer, municipal
securities dealer, government securities broker, government securities
dealer, or any other entity engaged in transactions in securities, or while
associated with an entity engaged in transactions in contracts of sale of a
commodity for the future delivery or other instruments traded on or subject
to the rules of a contract market, board of trade, or foreign or
international securities exchange or foreign financial regulatory authority
empowered by a foreign government to administer or enforce its laws
relating to financial transactions as described in subparagraph (A) or (B)
of this paragraph;
E. has associated with him any person who is known, or in the exercise of
reasonable care should have known, to him to be a person described by
subparagraph (A), (B), (C), or (D) of this paragraph; or
F. has committed or omitted any act, or is subject to an order or finding,
enumerated in subparagraph (D), (E), (H), or (G) or paragraph (4) of
section 15 (b), has been convicted of any offense specified in subparagraph
(B) of such paragraph (4) or any other felony within ten years of the date
of filing of an application for membership or participation in, or to
become associated with a member of, such self-
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regulatory organization, is enjoined from any action, conduct, or practice
specified in subparagraph (C) of such paragraph (4), has willfully made or
caused to be made in any application for membership or participation in, or
to become associated with a member of, a self regulatory organization,
report required to be filed with a self-regulatory organization, or
proceeding before a self-regulatory organization, any statement which was
at the time, and in the light of the circumstances under which it was made,
false or misleading with respect to any material fact, or has omitted to
state in any such application, report, or proceeding any material fact
which is required to be stated therein."
None of our officers and directors will be compensated either directly or
indirectly by any of the Selling Security Holders and we will not pay a finder's
fee to a third party.
Our officers and directors are not broker-dealers and are not an associated
person of a broker-dealer.
Our officers and directors were not a broker-dealer or an associated
person of a broker-dealer within the 12 months preceding the filing of this
prospectus.
We will bear all the costs associated with the registration of the Selling
Security Holders' common stock. The following tables sets out our estimate of
the fees associated with this registration:
We are not a party to any material pending legal proceedings and, to the
best of our knowledge, no such action by or against us has been threatened.
Neither the HV or the Red Bird is subject to pending legal proceedings.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The name, municipality of residence, position held within our Company, age
and the year the individual was first elected or appointed are set forth in the
following table. Each director is to serve until the Annual Meeting of
Shareholders or until his or her successor is elected or appointed. The work
experience of each of the directors and officers is indicated in their
individual biographies noted below.
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NAME AND YEAR
MUNICIPALITY OF POSITION OR OFFICE WITHIN THE BECAME
RESIDENCE REGISTRANT AGE A DIRECTOR
Sam Hirji . . . Principal Executive Officer
Vancouver, B.C. President and
Canada. . . . . Director (1) 57 2001
Herbert Moeller Principal Financial Officer, Secretary
Richmond, B.C.. Treasurer and
Canada. . . . . Director (2) 56 2001
Terry Heard
Vancouver, B.C.
Canada. . . . . Director (3) 67 2004
(1) Sam Hirji became a director on November 6, 2001 and was appointed on the
same day as Principal Executive Officer and President.
(2) Herbert Moeller became a director on November 6, 2001 and was appointed on
the same day as Principal Financial Officer and Secretary Treasurer.
(3) Terry Heard became a director on August 15, 2004.
The Audit Committee currently consists of Sam Hirji and Herbert Moeller.
The general function of the audit committee is to review the overall audit plan
and our Company's system of internal control, to review the results of the
external audit, and to resolve any potential dispute with our auditors. The
percentage of common shares beneficially owned, directly, indirectly or
collectively, by our directors and officers is 24.14 percent of the outstanding
shares. This percentage includes 100,000 options granted to Terry Heard on
September 15, 2004.
The following are detailed biographies of the directors and officers of the
Company.
SAM HIRJI graduated from Aga Khan high school, Uganda in 1972. Mr. Hirji
was founder of Samco Printers Ltd in 1976, where he now resides as President and
Director. Mr. Hirji has been self-employed in the printing industry since the
age of 19. Samco is a mid-sized full service printing company, managed
full-time by Mr. Hirji and employing 30 permanent staff. The Company has a wide
range of national, local and international customers and also undertakes
printing projects for the Federal and Provincial Governments. Since the
inception of Samco Printers Ltd. Mr. Hirji has been fully employed with this
company for the past 28 years. Mr. Hirji was once a director and co-founded
Minera Cortez Resources Ltd. He was partly responsible for the raising of seed
capital and bringing the company public in 1999. The only public company Mr.
Hirji is a director of is Falcon Oil and Gas Ltd. which trades on the Toronto
Venture Exchange in Toronto, Canada.
HERBERT MOELLER graduated in electro-mechanics from the Provincial
Technical Institute in Hamburg, Germany in 1966. Mr. Moeller became a sales
manager for Graco Inc., from 1971 to 1980, and acted as an effective liaison
between the marketplace and Graco by implementing corporate programs through the
district managers and distributors. During this period he increased sales by
100 percent and made the President's Advisory Board award five years running.
In 1980, Mr. Moeller founded Howard Marten Company Ltd, which was located in
British Columbia, Canada. Mr. Moeller became President and was responsible for
the company's operations in Western Canada until the company was sold in 1989.
Up to 1993, Mr. Moeller worked with H. Jager Developments Inc. as their Vice
President and Project Coordinator helping them raise capital, negotiating the
wood supply contract with the Province of Ontario, material and equipment supply
contracts, and contracted the engineers and brought in MacMillan Bloedel as a
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partner into the project. Since 1996, he worked as a Vice-President and
Director of H.J. Forest Products Inc., and has been working on a variety of
projects in the forestry industry as an independent consultant.
TERRY HEARD graduated from Peterborough Collegiate High School in Southern
Ontario, Canada in 1956 and during that summer worked for Canadian Dyno Uranium
Ltd. in Bancroft being an underground worker in their uranium mine. For the
next two years, Mr. Heard studied at the Halleybury School of Mines in
Halleybury, Ontario where he obtained, in 1958, a diploma in mining technology.
During the summers while studying at Halleybury he worked for Aer Nickel
Corporation in Sudbury, Ontario where he was a construction clerk responsible
for time reports, filing, inventory checking and assisted in both underground
and surface surveying. After graduation, he accepted a position with Milliken
Lake Uranium Mines in Elloit Lake, Ontario until January 1959 before returning
for a year to Canadian Dyno Uranium Ltd. in Bancroft. In 1960, Mr. Heard moved
to Vancouver where he was employed by Phillips Dodge Corporation of Arizona
doing grass root exploration work in British Columbia and the Yukon Territories.
The next year Mr. Heard was hired by Southwest Potash Corporation in Vancouver
where his position was to stake claims around the Hudson Bay Mountain range and
during that period of time actually staked some 125 claims for the company.
During the same year he moved to Ontario to work with Kam Kotia Mines Ltd. as an
assistant engineer responsible for preparation of geological reports,
calculation of strip ore reserves, bench tonnage for their open pit operation.
In 1962, he returned to British Columbia where he was employed by Cassiar
Asbestos Corporation in Cassiar, British Columbia where he was in charge of the
quality control labatory for two years employing fourteen persons conducting
routine laboratory tests as well as conducting mill circuit tests in an effort
to produce a better product. In 1964, Mr. Heard joined United Keno Hill Mines
Ltd. and worked for their office in Elsa, Yukon for two years where he was
responsible for a fourteen man geochemical laboratory, supervision of overburden
drill crews, budgeting and cost control. In 1966, he became project manager for
Macdonald Consultants Ltd. where he was responsible for all phases of mineral
exploration in many different areas of British Columbia and the Yukon
Territories, setting up cost accounting systems for office and field coding
procedures and assisted in the preparation of a bid on behalf of a client to
strip the Brenda ore body and mine it for a three year period. In 1969, he
departed from the work force for three years in order to obtain his Bachelor of
Science degree and Geological Engineering degree from Montana Tech. During the
summer months, Mr. Heard was employed in 1969 by MacDonald Consultants Ltd.
conducing geological, geochemical and geophysical surveys on four separate
projects in British Columbia.
During the summer of 1970, he was employed by Cordilleran Engineering Ltd. to
perform a 6,000 square mile regional silt sampling program in northern British
Columbia. After obtaining his degree in geology in 1971, he was employed by
Great Plains Development Company of Canada Ltd. of Calgary where he was
responsible for ongoing exploration of five properties in British Columbia and
as a representative on one property in the Yukon Territories where he was
responsible for the selection of personnel for field crews, as well as
organization and direction of personnel in the field. In the same year he was
employed by Kewannee Australia Pty. Ltd. of Darwin in the Northern Territory of
Australia where he was responsible for the management of geological,
geochemical, geophysical and physical (drilling and trenching) surveys and
administration of fifteen personnel conducting this work on 37 property leases
comprising 6,000 square miles in addition to setting up the office, account
codes, filing procedures, liaison with the government with respect to status of
leases, grants, etc. and doing ore reserve calculations over potentially
favorable prospects.
In 1973, Mr. Heard returned to Canada and was employed by United Keno Mines in
Whitehorse, Yukon as their assistant exploration manager responsible for
formulation and implementation of regional exploration programs employing all
exploration methods, prospecting and property evaluation, budget preparation,
cost control, administration of the office and ore reserve calculations. In
1977, Mr. Heard became the exploration manager for Consolidated Coal in Red
Deer, Alberta where he was responsible for coal reserve calculations,
preliminary mine layouts and feasibility studies. In 1979, he became exploration
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manager for Canadian Island Creek Coal Company where he was responsible for the
exploration and mining of all their coal holding throughout Canada, except
Prince Edward Island, 13 of the western States in United States, Indonesia,
Malaysia, Brazil and Alaska. While employed with Canadian Island Creek Coal
Company, Mr. Heard incorporated his own private consulting company under the
name of R.T. Heard & Associates Ltd. which continued to offer consulting
services to Canadian Island Creek Coal Company after he departed it in 1980. In
addition to Canadian Island Creek Coal Company, R. T. Heard & Associates
consulted with Placer Dome between 1987 and 1992 where he was responsible for
using "flow-though funds" to explore Placer's 800 properties located in Canada.
When these funds were fully spent in 1992, Mr. Heard staked some 10 million
acres of land in the Yukon and Northwest Territories of Canada during the
diamond rush. This constituted nearly 41% of all land staked during the
original diamond play. In addition, Mr. Heard's consulting company performed
property examination, evaluations and project management for clients with
interests in base metals, precious metals, oil gas and coal. The consulting
services main areas of concentration were Montana, Idaho, Wyoming, Utah,
Colorado, Nevada, California, Oregon, Washington, British Columbia, Alberta,
Northwest Territories and the Yukon. During this period, Mr. Heard assisted in
the consulting services for 89 individual clients and wrote 53 reports that were
required to be filed with the Toronto, Alberta and Vancouver Stock Exchanges.
This occurred between 1980 and 1987. In 1987, Mr. Heard became General Manager
for Equity Silver Mines Limited since the company was faced with the closure of
its 40,000 mtpd silver-copper-gold producer at Houston, British Columbia, and
required Mr. Heard to provide an exploration budget to be used to give Equity
exposure across Canada, evaluate mining properties, conduct exploration programs
and acquire properties of merit with the express purpose of finding a
replacement for Equity's existing mine.
In 1991, he again became a consultant for R. T. Heard & Associates Ltd. and in
1996 he sold R. T. Heard & Associates with many of the claims and ongoing
royalties still in the company. In 1997, Mr. Heard incorporated Mount Royale
Ventures, LLC to undertake various consulting work for exploration companies.
He was consulting for Mayon Minerals Ltd. to oversee some of their mineral
properties and, through his private consulting company, staked nearly 8.5
million acres of land in Mexico where there were showings of lead and zinc.
Many of these claims were sold to exploration companies for cash, some shares
and a royalty. In 1998, he staked 800 claims in Nevada and became a consultant
for Consolidated Global Minerals who had claims in Boulder, Colorado. Since
1998, Mr. Heard has been working on rehabilitating the old mine workings in
Boulder, Colorado in preparation of extracting gold and silver there from. He
is a member of the following associations:
Associate of Professional Engineers, Geologist & Geophysicists of Alberta
Associate of Professional Engineers of the Yukon Territory
Associate of Professional Engineers of British Columbia
Canadian Institute of Mining and Metallurgy, Whitehorse and Yukon Territories
(past Chairman)
American Institute of Mining, Metallurgy and Petroleum Engineers
Northwest Mining Association
Advisory Board Member - British Columbia and Yukon Chamber of Mines
Mr. Heard is a director of only one public company being AMI Resources Inc.
which trades on the Toronto Venture Exchange in Ontario, Canada.
Although Sam Hirji, Herbert Moeller and Terry HeardiH do not work full time
for our Company, they plan to devote whatever time is required as we advance in
our exploration programs. Presently, Sam Hirji spends approximately 10 hours,
Herbert Moeller spends approximately 5 hours and Terry Heard spends several
hours each month on our affairs. Once either the HV or the Red Bird is ready
for exploring, we might hire a professional geologist to oversee the program and
to prepare a geological report for presentation to the Board of Directors in the
event that Terry Heard is not available to undertaken the supervision himself.
Regardless whether Terry Heard is available or not, we will have to use the
services of an independent geologist to prepare a report on the exploration
activities of either the HV or the Red Bird claims.
Once we commence our exploration programs, the time spent on our affairs by
our directors will increase but at this time we cannot assess the number of
hours each will have to work on our affairs. In the case of both Sam Hirji and
Herbert Moeller, their time will be spent mainly on attempting to raise money
for the exploration programs where Terry Heard will concentrate on the
establishment of the exploration programs on the HV and the Red Bird and with
the analysis of all results obtained therefrom. We are hopeful Terry Heard will
have the time to undertake the above.
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Significant Employees
We might have to engage the services of certain consultants to assist in
the exploration of the HV and Red Bird. These individuals will be responsible
for the completion of the geological work on our claims under the supervision of
Terry Heard and therefore will be an integral part of our operations although
they will not be considered employees either on a full time or part time basis.
This is because our exploration programs will not last more than a few weeks and
once completed these individuals will no longer be required. We have not
identified any individual who would work as a consultant for us.
Family Relationships
There are no family relationships among directors, executive officers, or
persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To our knowledge, during the past five years, no present director,
executive officer or person nominated to become a director or an executive
officer of our Company:
(1) filed a petition under the federal bankruptcy laws or any state insolvency
law, nor had a receiver, fiscal agent or similar officer appointed by the
court for the business or property of such person, or any partnership in
which he was a general partner at or within two years before the time of
such filings;
(2) was convicted in a criminal proceeding or named subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting, the
following activities:
(i) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, associated person of any of the foregoing, or as
an investment advisor, underwriter, broker or dealer in securities, or
as an affiliate person, director or employee of any investment
company, or engaging in or continuing any conduct or practice in
connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activities in connection with the purchase or sale of
any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgment, or decree, not subsequently
reversed, suspended, or vacated, of any federal or state authority barring,
suspending or otherwise limiting for more than 60 days the right of such
person to engage in any activity described above under this Item, or to be
associated with persons engaged in any such activities;
(5) was found by a court of competent jurisdiction in a civil action or by the
Securities and Exchange Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated.
(6) was found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or
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finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated.
Audit committee financial expert
We have an audit committee comprising of Sam Hirji and Herbert Moeller but
do not have an audit committee financial expert. It is our intention to
identify a person who meets the attributes of a financial expert; being
(i) an understanding of generally accepted accounting principles and
financial statements;
(ii) the ability to assess the general application of such principles in
connection with the accounting for estimates, accruals and reserves;
(iii) experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and
complexity of issues that can reasonably be expected to be raised by
the small business issuer's financial statements, or experience
actively supervising one or more persons engaged in such activities;
(iv) an understanding of internal controls and procedures for financial
reporting; and
(v) an understanding of audit committee functions.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of our common stock as of December 31, 2004 (1,450,000
shares issued and outstanding) by all stockholders known to us to be beneficial
owners of more than 5 percent of our outstanding common stock.
AMOUNT AND NATURE
TITLE OR NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
CLASS BENEFICIAL OWNER (1) OWNERSHIP (2) CLASS
------------------------------ ---------------- ----------- -----------
Common Sam Hirji 150,000 (3) 10.34%
Stock 2203-1275 Pacific Boulevard
. . . . . . . . . . . . Vancouver, B.C.
. . . . . . . . . . . . . Canada, V6Z 2R6
Common Herbert Moeller 100,000 (3) 6.90%
Stock 7200 Langton Road
. . . . . . . . . . . . Richmond, B.C.
. . . . . . . . . . . . Canada, V7C 4B2
Common Terry Heard 100,000 (4) 6.90%
Stock 2203 - 837 West Hastings St.
. . . . . . . . . . . . Vancouver, B.C.
. . . . . . . . . . . . Canada, V6C 3N7
Common Claus Andrup
Stock 3-22268 - 116 Street
Common . . . . . . . . . . . . Maple Ridge, B.C.
Stock. . . . . . . . . . . . . Canada, V2X 1P5 100,000 (5) 6.90%
Common . . . . . . . . . . . . Ownership of all directors
Stock. . . . . . . . . . . . . and officers as a group 350,000 24.14%
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(1) Unless otherwise noted, the security ownership disclosed in this table is
of record and beneficial.
(2) Under Rule 13-d under the Exchange Act, shares not outstanding but subject
to options, warrants, rights, conversion privileges pursuant to which such
shares may be acquired in the next 60 days are deemed to be outstanding for
the purpose of computing the percentage of outstanding shares owned by the
persons having such rights, but are not deemed outstanding for the purpose
of computing the percentage for such other persons.
(3) These shares are restricted since they were issued in compliance with the
exemption from registration provided by Section 4(2) of the Securities Act
of 1933, as amended. After these shares have been held for one year, Sam
Hirji, Herbert Moeller and Terry Heard (when his options are exercised)
could sell 1% of the outstanding stock in our Company every three months.
Therefore, this stock can be sold after the expiration of one year in
compliance with the provisions of Rule 144. There are "stock transfer"
instructions placed against these certificates and a legend has been
imprinted on the stock certificates themselves.
(4) Terry Heard has been granted a stock option for the purchase of 100,000
common shares in our capital stock at a price of $0.10 per share
exercisable in whole or in part on or before September 15, 2009. To date no
options have been exercised.
(5) Claus Andrup was a director of the Company who resigned December 1, 2003
due to having other business interests. He is part of the Selling Security
Holders.
We do not know of any other shareholder who has more than 5 percent of the
issued shares.
The number of shares under Rule 144 is 350,000; being the above noted
shares held by the Directors and Officers and a former director. The number of
shares which could be sold pursuant to Rule 144 is 14,500 shares.
Our two largest shareholders, Sam Hirji and Herbert Moeller, own,
collectively, 250,000 issued and outstanding shares of our common stock. These
shares are "restricted shares" as that term is defined in Rule 144 of the Rules
and Regulations of the SEC promulgated under the Securities Act. Under Rule
144, shares can be publicly sold, subject to volume restrictions and
restrictions on the manner of sale, commencing one year after their acquisition.
We have agreed to register 20,000 of these shares held by both Sam Hirji and
Herbert Moeller pursuant to this prospectus.
We have issued 1,100,000 shares of our common stock pursuant to two
separate private placements which closed on July 23 and August 31, 2004. We
have agreed to register these shares pursuant to this prospectus.
Shares purchased in this offering, which will be immediately resalable, and
sales of all other shares after applicable restrictions expire, could have a
depressed effect on the market price, if any, of our common stock.
There are no voting trusts or similar arrangements known to us whereby
voting power is held by another party not named herein. We know of no trusts,
proxies, power of attorney, pooling arrangements, direct or indirect, or any
other contract arrangement or device with the purpose or effect of divesting
such person or persons of beneficial ownership of our common shares or
preventing the vesting of such beneficial ownership.
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ITEM 12. DESCRIPTION OF SECURITIES
We have only common shares authorized and there are no preferred shares or other
forms of shares. Our authorized common stock consists of 200,000,000 shares of
common stock, par value $0.001 per share. The holders of our common stock:
- have equal ratable rights to dividends from funds legally available
therefore, when, as, and if declared by our Board of Directors;
- are entitled to share ratably in all of the assets of our Company available
for distribution upon winding up of the affairs of our Company; and
- do not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions or rights; and
- are entitled to one non-cumulative vote per share on all matters on which
shareholders may vote at all meetings of shareholders.
The shares of common stock do not have any of the following rights:
- preference as to dividends or interest;
- preemptive rights to purchase in new issues of shares;
- preference upon liquidation; or
- any other special rights or preferences.
All our shares of commons stock now issued and outstanding are fully paid
and non-assessable.
Convertible Securities
The shares are not convertible into any other securities.
Non-Cumulative Voting.
The holders of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such outstanding shares, voting
for the election of directors, can elect all of the directors to be elected, if
they so choose. In such event, the holders of the remaining shares will not be
able to elect any of our directors. Our directors and officers have 17.24
percent (24.14 percent if Terry Heard exercises his stock options) of the shares
outstanding making it difficult for any shareholder or group of shareholders to
accumulate sufficient votes of shares from other shareholders to change our
directors.
Dividend Policy
We have not declared or paid any dividends on our common stock. The declaration
of any future cash dividend will be at the discretion of our Board of Directors
and will depend upon earnings, if any, capital requirements and financial
position, general economic conditions, and other pertinent conditions. It is
our present intention not to pay any cash dividends in the foreseeable future,
but rather to reinvest earnings, if any, into our business operations in hopes
of exploring the HV and the Red Bird to a point where either a viable ore
reserve is discovered or a decision is made to abandon them. If the latter is
the case, we will have to use any funds we have to identify another mineral
claim of merit and therefore will not be willing to distribute any funds to our
shareholders.
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Options
We have issued stock options to Terry Heard in the amount of 100,000
options at a price of $0.10 per share exercisable in whole or in part on or in
part until 5:00 pm on September 15, 2004 at which time the option will terminate
and be null and void and no longer binding on either Terry Heard or our Company.
The option will vest at the rate of 25,000 options at the beginning of every
three month period commencing September 15, 2004 while Terry Heard acts as
either a director or officer of our Company. No options have been exercised to
date. Refer to Exhibit 99.3 - Share Purchase Option.
Share Purchase Warrants
We have not issued and nor do we have any outstanding warrants to purchase
shares of our common stock.
Change in Control of the Company
We do not know of any arrangements, which might result in a change in control.
Debt Securities and Other Securities
We do not have any debt securities outstanding or other securities
outstanding other than our common stock.
Transfer Agent
The Company has engaged the services of Empire Stock Transfer Inc., 7251 West
Lake Mead Boulevard, Suite 300, Las Vegas, Nevada, 89128, to act as transfer
agent and registrar.
Market Information
We are not a reporting entity in any jurisdiction in North America or
elsewhere. Our shares are not traded on any public market but it is our
intention to make an application with OTCBB. At the present time, there is no
established market for the shares of the Company. There is no assurance an
application to the OTCBB will be approved. Although the OTCBB does not have any
listing requirements per se, to be eligible for quotation on the OTCBB, issuers
must remain current in their filings with the SEC. Market makers will not be
permitted to begin quotation of a security whose issuer does not meet this
filing requirement. Securities already quoted on the OTCBB that become
delinquent in their required filings will be moved following a 30 or 60 day
grace period if they do not make their filing during that time. If our common
stock were not quoted on the OTCBB, trading in our common stock would be
conducted, if at all, in the over-the-counter market. This would make it more
difficult for stockholders to dispose of their common stock and more difficult
to obtain accurate quotations on our common stock. This could have an adverse
effect on the price of the common stock (refer to Risk Factor # 7).
With a lack of liquidity in our common stock, trading prices might be
volatile with wide fluctuations. This assumes that there will be a secondary
market at all. Things that could cause wide fluctuations in our trading price
of our stock could be due to one of the following or a combination of several of
them:
- our variations in our operation results; either quarterly or annually;
- trading patterns and share prices in other exploration companies which our
investors consider similar to ours;
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- the exploration results on the HV and the Red Bird claims; and
- other events which we have no control over.
In addition, the stock market in general, and the market prices for thinly
traded companies in particular, have experienced extreme volatility that often
has been unrelated to the operating performance of such companies. These wide
fluctuations may adversely affect the trading price of our shares regardless of
our future performance and that of our Company. In the past, following periods
of volatility in the market price of a security, securities class action
litigation has often been instituted against such company. Such litigation, if
instituted, whether successful or not, could result in substantial costs and a
diversion of management's attention and resources, which would have a material
adverse effect on our business, results of operations and financial conditions.
"Penny Stock" Requirements
Our common shares are not quoted on any stock exchange or quotation system
in North America or elsewhere in the world. The SEC has adopted a rule that
defines a "penny stock", for purposes relevant to us, as any equity security
that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules require:
- that a broker or dealer approve a person's account for transactions in
penny stock; and
- that the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny stock
to be purchased.
To approve a person's account transactions in penny stock, the broker or dealer
must:
- obtain financial information and investment experience and objectives of
the person; and
- make a reasonable determination that the transactions in penny stock are
suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, which, in highlight form:
- sets forth the basis on which the broker or dealer made the suitability
determination; and
- that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks
and about commissions payable by both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock transactions.
Finally, monthly statements have to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks.
Because of the imposition of the foregoing additional sales practices, it
is possible that brokers will not want to make a market in our shares. This
could prevent you from reselling shares purchased under this prospectus and may
cause the price of our shares to decline.
-22-
No shares are being offered under this Form SB-2
There are no shares being offered to the public under this prospectus and no
shares have been offered pursuant to an employee benefit plan or dividend
reinvestment plan.
ITEM 13. INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Form SB-2 as having prepared or certified any
part of this Form SB-2 or having given an opinion upon the validity of the
shares being registered or upon other legal matters in connection with the
registration of the common stock was employed on a contingent basis, or had, or
is to receive, in connection with this registration, a substantial interest,
direct or indirect, in our Company or any of our parents or subsidiaries, in the
event such entities occur in the future. Nor was any such person connected with
our Company or any of its parent or subsidiaries as a promoter, managing or
principal underwriter, voting trustee, director, officer or employee.
Our independent accountants are Cordovano and Honeck, PC, 201 Steele Street,
Suite 300, Denver, Colorado, 80206-5221 (Tel: 303-329-0220).
ITEM 14. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or controlling persons of us
pursuant to the foregoing provisions or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
Our Articles of Incorporation limit, to the maximum extent permitted by
law, the personal liability of our directors and officers from monetary damages
for breach of their fiduciary duties as directors and officers, except in
certain circumstances involving certain wrongful acts, such as a breach of the
director's duty of loyalty or acts of omission which involve intentional
misconduct or a knowing violation of law.
Nevada law provides that Nevada corporations may include within their
articles of incorporation provisions eliminating or limiting the personal
liability of their directors and officers in shareholder actions brought to
obtain damages for alleged breach of fiduciary duties, as long as the alleged
acts or omissions did not involve intentional misconduct, fraud, a knowing
violation of law or payment of dividends in violation of the Nevada statutes.
Nevada law also allows Nevada corporations to include in their articles of
incorporation or bylaws provisions to the effect that expenses of officers and
directors incurred in defending a civil or criminal action must be paid by the
corporation as they are incurred, subject to an undertaking on behalf of the
officer or director that he or she will repay such expenses if it is ultimately
determined by a court of competent jurisdiction that such officer or director is
not entitled to be indemnified by the corporation because such officer or
director did not act in good faith and in a manner reasonably believed to be in
or not opposed to the best interest of the corporation.
Nevada law provides that Nevada corporations may eliminate or limit the
personal liability of its directors or officers. This means that the articles
of incorporation should state a dollar maximum for which directors would be
liable, either individually or collectively, rather than eliminating total
liabilities to the full extent permitted by the law.
Article Twelve of our Articles of Incorporation provides that no director
or officer shall have any personal liability to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except that this Article Twelve shall not eliminate or limit the liability of a
director or officer for (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of the Nevada Revised Statutes. In addition, Nevada
Revised Statutes, 78.751 of Article 11 of our Bylaws, under certain
circumstances, provides for indemnification of the officers and directors of the
Company against liabilities which they may incur in such capacities.
-23-
The Bylaws also provide that the Board of Directors may cause the
corporation to purchase and maintain insurance on behalf of any person who is or
was a Director or officer of the corporation, or is or was serving at the
request of the corporation as a Director or officer of another corporation, or
is its representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the corporation would
have the power to indemnify such person.
Once we are a public company we will be subject to the State of Nevada's
business combination statute. In general, the statute prohibits a publicly held
Nevada corporation from engaging in a business combination with a person who is
an interested shareholder for a period of three years after the date of the
transaction in which that person became an interested shareholder, unless the
business combination is approved in a prescribed manner. A business combination
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested shareholder. An interested shareholder is a person
who, together with affiliates, owns, or, within three years prior to the
proposed business combination, did own 15% or more of our voting stock. The
statute could prohibit or delay mergers or other takeovers or change in control
attempts and accordingly, may discourage attempts to acquire our Company.
ITEM 15. ORGANIZATION WITHIN LAST FIVE YEARS
We were incorporated under Nevada state law on January 3, 2001 by Michael
Laidlaw, who was the sole director at the time of incorporation. On November
6, 2001, Michael Laidlaw resigned as an officer and director and was replaced
with Sam Hirji, Claus Andrup and Herbert Moeller. The new Board of Directors
appointed Sam Hirji as Principal Executive Officer and President and Herbert
Moeller as Principal Financial Officer and Secretary Treasurer. On December 1,
2003, Claus Andrup resigned and on August 15, 2004, Terry Heard was appointed a
director of our Company.
Acquisition of Assets from Promoters, Founders or Organizers of Stanford
During the last three years there have been no transactions, or proposed
transactions, to which we were or are to be a party, in which the officers and
directors had or is to have a direct or indirect material interest. This also
relates to any transaction or proposed transactions between us and any member of
the immediate family, including spouse, parents, children, siblings and in-laws.
In addition, since inception we have not engaged or used the services of a
promoter or acquired any assets from such a person. We have not used the
services of an underwriter in the sale of our securities. Other than the
acquisition of the mineral rights on the HV and the Red Bird, we have not
purchased or sold any assets at all.
Our business activities to date have been related to:
1. Incorporating our Company under Nevada state law;
2. Acquiring the HV claim group and undertaking several exploration
programs thereon;
3. Preparation of two Offering Memorandums to 'seed stock' shareholders;
4. Identifying and acquiring the Red Bird property; and
5. Preparing this Form SB-2.
We do not have any revenue to date. The initial funds to acquire the HV
mineral claims came from the purchase of shares by the directors and officers
and certain personal advances from Sam Hirji.
Mineral Claims and Exploration Work Performed
We are engaged in the exploration of a mineral property and are considered
to be in the pre-exploration stage since we have not undertaken sufficient work
on any mineral claims to identify an ore reserve of any size. On January 24,
-24-
2001, we acquired the mineral rights to the HV from Paul Saulnier, an unrelated
individual who is not a director, officer or shareholder of our Company. The
HV is located three miles due east of Port Alberni, British Columbia, on
Vancouver Island. It consisted of ten contiguous two-post mineral claim
totaling 493 acres. No reserve was discovered on the HV claim group during the
limited exploration undertaken thereon.
We held the rights to the minerals on the HV, except for placer and coal, but do
not have an interest in the land since it is owned by the Province of British
Columbia (known as the "Crown"). The cost of the initial grid layout in 2001
was $1,374 and further exploration costs that year of $1,493. After this
exploration work, we had John Watkins, Professional Geologist prepare us a
geological report on the HV claim at a cost of $1,032. In 2002, we undertook
further exploration work which mainly concentrated on the extending of the
existing grid and taking rock and soil samples for assaying at a cost of $1,647.
These samples were assayed by A.L.S. Chemex Labs of North Vancouver at a cost of
$369. The work was applied to maintaining the HV in good standing until January
24, 2005,
On July 28, 2004, we acquired the mineral rights to the Red Bird claim by
Bill of Sale Absolute (Exhibit 10.3) from Richard J. Billingsley for the staking
cost of $1,667; the cost incurred by him to stake the Red Bird on behalf of the
Company. In addition, we paid $2,680 for a geological report and $683 for PAC
grants (see page 44).
Additional Mineral Properties
Our objective is to become a mineral exploration company. Our business
strategy for accomplishing this objective includes the continual exploration of
the HV and Red Bird until either an ore reserve of commercial value is
discovered or these two claim groups are proven to be of little value. If the
latter occurs, we will seek out other mineral properties of merit to ensure the
Company remains as a going concern. There is no assurance we will have the
funds available to identify a mineral property of merit.
ITEM 16. DESCRIPTION OF BUSINESS
Business Development
We are located at the business address of Sam Hirji on the 3rd Floor at 830
West Pender Street, Vancouver, B.C., Canada. We have not been a party to any
bankruptcy, receivership or similar proceedings since our inception. We have
not been involved in any reclassification, merger, consolidation, or purchase or
sale of a significant amount of assets not in the ordinary course of business.
We are a company without revenue, with little or no assets, having incurred
losses since inception, we have relied on loans from Sam Hirji and from the sale
of our common stock to give us money since our inception.
We are in the pre-exploration stage and will be in the pre-exploration stage
until we commence significant exploration activities. We will continue to be in
the exploration stage until we achieve significant revenues from operations.
There is no assurance a commercially viable mineral deposit exists on either the
HV or the Red Bird. Further exploration will be required before a final
evaluation as to the economic and legal feasibility is determined for the either
the HV or the Red Bird. Our ability to emerge from the exploration stage with
respect to our planned principal business activity is dependent upon our ability
to attain profitable operations. There is no guarantee we will be able to
identify, acquire or develop mineral properties that will produce profitability.
Moreover, if a potential mineral property is identified which warrants
acquisition or participation, additional funds will be required to complete the
acquisition or participation, and we may not be able to obtain such financing on
terms which are satisfactory to us. There is substantial doubt regarding our
ability to continue as a going concern. Our plans for our continuation as a
going concern include financing our operations through sales of our common
stock. If we are not successful with our plans, our shareholders and any future
investors could then lose all or a substantial portion of their investment.
-25-
We have the rights to the minerals on the HV and the Red Bird but do not have
the rights to any placer minerals (being mineral contained in the overburden
which is above the hard rock) or to coal. The placer rights could be staked by
us but we feel with limited overburden on the majority of the HV and the Red
Bird claims there is no need to do so at the present time. If, during the
exploration program, placer minerals are found to be of value, we will
immediately stake either the HV or the Red Bird for placer, depending on which
of the two claim groups show placer mineralization thereon.
Other mineral properties
We have not found any other mineral properties either for staking or
purchase but will seek other mineral properties during the next few years to
diversify our holdings. Any staking and/or purchasing of mineral properties
may involve the issuance of substantial blocks of our shares. We have no
intention of purchasing for cash or other considerations any mineral properties
from our officers and/or directors.
Our Principal Product or Services
Our principal product will be the sale of gold and silver that can be
extracted from the HV or the Red Bird when, and if ever, a commercially viable
ore reserve is discovered. There is no assurance a commercially viable ore
reserve will ever be identified and whether, if identified, it will be of the
size and grade to be economical. If we do not discover a commercially viable
mineral deposit, we will have no principal product. We do not have the rights
to either coal or placer on either the HV or the Red Bird.
Distribution Methods
We have given no consideration to the method or methods of distribution to be
used if we are able to discover a viable ore reserve on either the HV or the Red
Bird. When, and if, this occurs we will engage the services of consultants who
are experts in the distribution of minerals to determine the most efficient
method available to us. Until that time, we will rely upon the recommendation
of Terry Heard.
Competition
In the United States and Canada, there are numerous mining and exploration
companies, both big and small. All of these mining companies are seeking
properties of merit and availability of funds. We will have to compete against
such companies to acquire the funds to develop the HV and the Red Bird. The
availability of funds for exploration is sometimes limited and we may find it
difficult to compete with larger and more well-known companies for capital.
Even though we have the rights to the minerals on both the HV and the Red Bird
there is no guarantee we will be able to raise sufficient funds in the future to
maintain these two claim groups in good standing. Therefore, if we do not have
sufficient funds for exploration our two separate claim groups might lapse and
be staked by other mining interests. We might be forced to seek a joint
venture partner to assist in the exploration of the either or both of the HV or
the Red Bird. In this case, there is the possibility that we might not be able
to pay our proportionate share of the exploration costs and might be diluted to
an insignificant carried interest.
Even when a commercially viable reserve is discovered, there is no
guarantee competition in refining the ore will not exist.
Other companies may have long-term contracts with refining companies thereby
inhibiting our ability to process our ore and eventually market it. At this
point in time we do not have any contractual agreements to refine any potential
ore we might discover on either the HV or the Red Bird.
The exploration business is highly competitive and highly fragmented,
dominated by both large and small mining companies. Success will largely be
dependent on our ability to attract talent from the mining field. There is no
assurance that our mineral expansion plans in the future will be realized.
-26-
Sources and Availability of Supplies and Raw Materials
We will require supplies during our exploration of the HV and the Red Bird which
initially will consist of marking posts and flagging tape for establishing a
systemic grid, link chain for measuring out the grid and various shovels and
picks to take samples within the grid. These supplies can all be obtained from
Port Alberni on Vancouver Island for the HV claim and from Princeton, British
Columbia which is within a short distance from the Red Bird. During our initial
exploration program, we will not require any raw materials such as cement,
lumber and sand since these raw materials are normally purchased during a
drilling program. We do not know of any reason why these raw materials cannot
be easily purchased from either of the above mentioned towns but in the event
they cannot be we can easily obtain them from Vancouver when and if need.
Dependence on one or a few major customers
We do not have any customers and may never have any customers if either of the
HV or the Red Bird do not have a viable ore reserve of commercial value on them.
Requirements of Governmental Approvals and Mining Regulations
Our mineral exploration program is subject to the Canadian Mineral Tenure
Act Regulation. This act sets forth rules for locating claims, posting claims,
working claims and reporting work performed. We are also subject to the
British Columbia Mineral Exploration Code which indicates to a company where it
can explore for minerals. We must comply with these government laws in order to
operate our business. Complying with these rules will not adversely affect our
operations. These Acts will not have any material impact on our business or
operations. We will comply with these Acts.
We are continually subject to environmental regulations by the federal and
provincial governments of Canada. The environment is a "shared" power between
the Federal and Provincial governments of Canada. In regard to provincial laws,
we must provide prior notice and a description of the planned exploration work
before commencement of the work. Work that involves mechanized activities, such
as airborne geological surveys, off road vehicles and drilling, cannot commence
until the plan has been received by the Department of Natural Resources and
Exploration for approval. Compliance with provincial laws should not have a
material adverse effect on us. However, without provincial approval, we may be
unable to undertake our exploration activities on the Red Bird.
The Federal Government does not take an active part in environmental issues in
the mining industry unless a salmon spawning river is in danger. This is not
the case with either the HV or the Red Bird. Local governmental agencies do
not become involved with environmental issues since they rely upon the
Provincial Government to ensure regulations are adhered to.
It is reasonable to expect that compliance with environmental regulations
will increase our costs. Such compliance may include feasibility studies on the
surface impact of our future exploration operations; costs associated with
minimizing surface impact; water treatment and protection; reclamation
activities, including rehabilitation of various sites; on-going efforts at
alleviating the mining impact of wildlife; and permits or bonds as may be
required to ensure our compliance with applicable regulations. It is possible
that these costs and delays associated with such compliance could become so
prohibitive that we may decide to not proceed with exploration on either the HV
or the Red Bird.
Terry Heard is familiar with all aspects of governmental requirements and
regulations and therefore will oversee this area for us.
Amount spent on Research and Development
We have not spent any money on research and development since its inception.
-27-
Cost of Compliance with Environmental Regulations
We are subject to the Health, Safety and Reclamation Code for Mines in British
Columbia, Canada. This code deals with environmental matters relating to the
exploration mineral properties. The Code is meant to protect the environment
through a series of regulations affecting:
1. Health and Safety
2. Archeological Sites
3. Exploration Access
We are responsible to provide a safe work environment, no disruption of
archeological sites and conduct our activities in a manner as to not cause any
unnecessary damage to the HV and Red Bird claims.
We will secure all necessary permits for exploration, if required, and will file
final plans of operation prior to the commencement of any exploration
operations. It is anticipated no endangered species will be disturbed.
Re-contouring and re-vegetation of disturbed surface areas will be completed
pursuant to the law. There will be no discharge of water into active streams,
creeks, rivers or lakes and any other body of water regulated by the
environmental law, or regulation. Any portals, adits or shafts will be sealed.
The estimated amount of dollars incurred for environmental "clean-up" which we
will have to pay will be approximately $7,700 - the deposit posted with the
Ministry. The amount of dollars required for environmental clean-up will depend
upon the work being done on either the HV or the Red Bird. If we undertake a
trenching program the cost per cubic metre of material moved will range between
$0.55 to $0.77 if the government is required to undertaken the clean-up. No
charge will be incurred if we do the clean-up ourselves. If road access is
required or the site being explored will be unduly disturbed, the Inspector of
Mines will have to determine the amount of the bond in advance of work being
done. The Reclamation bond will have to be paid to the Government with the
preparation of the site for drilling and will be refunded, assuming we do our
own clean-up, when we complete that phase of our exploration program. This
could mean the refund for the Reclamation bond could be paid back to us within
several months of completing the drilling program since time would have to be
allowed for the Inspector of Mines to examine the drilling site on our claim
having been drilled and prepare the paper work required to refund the deposit.
If we choose, it might not make the application for a refund of the Reclamation
bond and apply it towards future drilling and exploration activities on either
the HV or the Red Bird. The Federal Government does not take an active part in
environmental issues in the mining industry unless a salmon spawning river is in
danger. This is not the case with the HV or the Red Bird claims. Local
governmental agencies do not become involved with environmental issues since
they rely upon the Provincial Government to ensure regulations are adhered to.
Facilities during pre-exploration
During the pre-exploration, we will not build facilities to house the
exploration crew on either the HV or the Red Bird since the town of Port Alberni
is within driving distance from the HV claims and the town of Coalmont is within
easy driving distance from the Red Bird. Consideration will be given to the
cost advantage of acquiring tent facilities in the event both claim groups are
worked on at different times of the year thereby allowing the same equipment to
be used for both properties. We will try to explore both claim groups at
different times to allow the use of the same equipment and people.
Construction of a Smelter Facility
We have no intention to construct any smelter facilities either near or on
the HV or the Red Bird. We are years away from making a decision as to which
smelter facility on either Vancouver Island or in the interior of British
Columbia would be available for our use. This will depend upon the cost of
hauling the ore to the smelter to be turned into concentrate. There is no
shortage of smelters in British Columbia but the inhibiting factor will be the
actual cost of transporting our ore to a smelter. When a decision has to be
made as to which smelter we should use, we will engage the services of an
engineer who specializes in transportation costing.
-28-
Our Mineral Properties
We have two mineral properties:
1. The HV mineral claims on Vancouver Island; and
2. The Red Bird claims located in southeastern British Columbia.
1. The HV Mineral Claims
We retained John J. Watkins, Professional Geologist, to summarize the geology
and mineral potential on HV. His report is dated April 18, 2001. The HV was
"staked" on January 24, 2001 by Paul Saulnier on our behalf.
"Staking" of a claim is the method used by the Ministry in verifying title to
the minerals on Crown property. The individual staking a claim, known as the
"staker" inserts a post or stake into the ground of the un-staked property and
defines this post as the corner post or "identification" post. A serial
pre-numbered tag, purchased from the Ministry, is affixed to the post and the
date and time of inserting the post into the ground is recorded on it as well as
the proposed name of the claim. The staker is required to walk a line in one
directions from the stake and another line at 90-degree angle from the original
walk starting at the corner post. The lines are walked for approximately 1,500
feet. Upon completion of these two walks the staker records the number of units
being staked upon the metal tag on the corner post. This information is
recorded on a two Post Mineral Claim form and filed with the Ministry.
Property Description and Location
The HV consists of ten contiguous two-post mineral claims, HV 1 to HV 10,
totaling 493 acres, located 2.5 miles due east of Port Alberni, on Vancouver
Island, British Columbia, NTS:92F/2 and centered at UTM coordinates: 545000mN
and 3574000mE.
List of mineral claims comprising the HV are as follows:
CLAIM NAME TENURE NO. DATE RECORDED DATE DUE
---------- ---------- ---------------- ----------------
HV 1 . . . 383518 January 24, 2001 January 24, 2005
HV 2 . . . 383519 January 24, 2001 January 24, 2005
HV 3 . . . 383520 January 24, 2001 January 24, 2005
HV 4 . . . 383521 January 24, 2001 January 24, 2005
HV 5 . . . 383522 January 24, 2001 January 24, 2005
HV 6 . . . 383523 January 24, 2001 January 24, 2005
HV 7 . . . 383524 January 24, 2001 January 24, 2005
HV 8 . . . 383525 January 24, 2001 January 24, 2005
HV 9 . . . 383526 January 24, 2001 January 24, 2005
HV10 . . . 383527 January 24, 2001 January 24, 2005
All claims are valid for one year from the date of recording. The anniversary
date is the annual occurrence of the date of record which is the staking
completion date of the claim. To maintain the HV we must, on or before the
anniversary date of the claim, pay the prescribed recording fee and either: (a)
record the exploration work carried out on the HV during the current anniversary
year; or (b) pay cash-in-lieu of work.
We can undertake exploration work on one or more of the HV mineral claims and
apply the total exploration costs to the entire mineral claim group so long as
the total, so applied, is equal to the amount required by assessment work.
During the first three years we are required to spend a minimum of $65 per claim
or a total of $650 on the entire HV group of claims. As mentioned above,
payment can be either in cash paid to the Ministry or exploration work can be
-29-
undertaken on the HV in the same amount. If we incur exploration expenses in
excess of the amount required in any given year to maintain the HV in good
standing, the excess funds can be carried forward and applied to future years.
This situation normally occurs when a company undertakes a large budgeted
exploration program in excess of the amount required to maintain the HV in good
standing for the year under consideration. After three years, the amount
required to maintain the HV in good standing increased to $130 per unit or in
our case of the HV to $1,300 per year. As noted previously, we have undertaken
sufficient work on the HV to maintain it in good standing until January 24,
2005.
The HV is located in south central Vancouver Island of British Columbia near the
head of Alberni Inlet, 2.5 miles due east of the seaport town of Port Alberni.
Elevation on the claim group ranges from a maximum of 1,221 feet, at the top of
Egg Hill, to a minimum of 660 feet. Immediately to the east of the claim group
boundary the topography steepens to greater than 3,300 feet elevation onto
McLaughlin Ridge, and to the west of the claim group topography slopes steadily
toward the Alberni Inlet. Over the past twenty years about 50% of the claim
group has been clear cut logged off trees.
Access to the claim group is excellent, gained from Port Alberni by the Cameron
Main logging road. The south boundary of the claim group is located near the 3
mile sign on the Cameron Main logging road. Access onto the claim group is best
gained by a number of secondary logging roads originating from Cameron Main that
circle the branch up onto Egg Hill.
The climate in the area is typical of the west coast of British Columbia with
moderate conditions and relatively high precipitation. At Port Alberni
temperatures seldom fall far below freezing in the winter or exceed 80
Fahrenheit in the summer. Extended periods of dry, sunny weather may cause
forest closures in the summer due to the forest fire hazard. Overall the
weather is not a serious impediment to exploration.
Port Alberni with a population of about 30,000 residents offers a full range of
business facilities including access to a deep water port. Vancouver Island has
an excellent highway going from Victoria to Port Hardy, some 400 miles, and a
ferry service to accommodate any type of vehicle. Supplies and equipment are
thereby fully obtainable.
Vancouver Island is the main component of the Insular Belt, the westernmost
major tectonic subdivision of the Canadian Cordillera. The Insular Belt
contains a middle Paleozoic member (the Sicker Group) and a Jurassic
volcanic-plutonic complex (Bonanza Group and Island Intrusions) overlain
respectively by Permo-Pennsylvanian sedimentary rocks and Cretaceous (Nanaimo
Group) clastic sedimentary rocks. A thick shield of Upper Triassic basalt
(Karmutsen Formation) overlain by carbonate-clastic sediments, separates these
two complexes in space and time.
On Vancouver Island the Paleozoic rocks of the Sicker Group are exposed in two
large fault-bound uplifts. The largest and southernmost is the Horne
Lake-Cowichan uplift, and the second is the Buttle Lake uplift located in the
center of the island.
The HV claim group covers mostly Sicker Group volcanic and lesser bedded
sedimentary rocks located near the north-western edge of the Horne Lake-Cowichan
uplift. The southern part of the HV is underlain by a Jurassic granitic stock
and northern edge of the group is underlain by shale, sandstone and conglomerate
of the Nanaimo Group that sits uncomformably on the Sicker Group rocks. A major
regional scale eastward dipping thrust fault is shown on the most recent
published district scale geology map crossing the claim group.
No economic mineralization has been identified on the HV. Traverses by John
Watkins along logging roads on the east side of Egg Hill did locate two wide
zones of strong pervasive ankerite altered mafic volcanic rocks of the Sicker
Group, cut locally by narrow quartz-rich veins, and with areas of strong
pervasive silicification. These zones are sulphide poor, containing minor
fine-grained crystalline pyrite and traces of a fine, grey colored sulphide in
some quartz-rich veins. The first ankerite zone seen is exposed in a road cut
for over 33 feet; the second is exposed in a road cut for over 300 feet.
-30-
The character of the property is of sufficient merit to justify a program to
identify targets worthy of drill hole tests. Recommended is a two-staged
program.
The objective of Stage 1 will be to identify targets of sufficient quality to
test with drill holes.
Much of the claim group is covered by a relatively thick cover of unconsolidated
glacial till lying on shallow to moderate sloping ground and is ideally suited
to a soil geochemical survey. Exposed outcrops will be mapped geologically and
if altered or mineralized sampled for geochemical analysis. Ground geophysics
recommended includes a magnetometer survey over the total claim group, and IP
surveys over selected areas of interest. Stage 2 is contingent on positive
results from Stage 1 and will focus on a drill hole test to identified targets.
A Mines Act permit must be acquired to conduct work on the claim group under
Stage 2.
STAGE 1
--------
Control grid 15.6 miles of cut grid lines, 330 feet apart: $ 4,992
@ $320 per mile
Soil geochemical survey Sampled at 75 feet station on all lines and 11,200
analyzed by multi-element analysis,
. . . . . . . . . . 800 samples @ $14 per sample
Geological mapping 15 days at $260 per day 3,900
truck, fuel @ $50 per day 750
room, food @ $50 per day. 750
. . . . . . . . assistant @ $100 per day 1,500
Rock samples. . . 100 samples @ $14 per sample 1,400
Ground geophysics Megnetometer survey, 15.6 mi. @ $160 per mile 2,496
. . . IP survey, 6 miles @ $1,920 per mile 11,520
Report and presentation . . . . . . . . . . . . 3,300
--------
41,808
-------
STAGE 2 . . . . . (contingent on positive results in Stage 1)
---------
Diamond drilling 5 holes totaling 1650 feet @ $15 per foot . . 24,750
. . . 200 multi-element analysis @ $14 per sample 2,800
Geologist 15 days @ $260 per day. . . . . . . . . . . . 3,900
truck, fuel @ $50 per day 750
room, food @ $50 per day. . . 750
. . . . . . . . . . . assistant @ $100 per day 1,500
Report and presentation . . . . . . . . . . . . 3,300
-------
37,750
-------
Total of Stage 1 and 2. . . . . . . . . . . . $ 79,558
=======
Stage 1 is estimated to take approximately two weeks to complete the work on the
HV using three workers and another week for the geologist to prepare the
geological report of the results.
Stage 2 is estimated to take three weeks which will include mobilization and
de-mobilization by the drilling company.
In selecting a drilling company, we will issue tenders to the following drilling
companies to undertake the drilling program defined under Stage 2 above and will
accept the bid with the lower price per foot:
Connors Drilling Ltd. Kamloops, B.C.
Directional Mining and Drilling Ltd. Langley, B.C.
Industrial Drillers Ltd. Salmon Valley, B.C.
Mud Bay Drilling Co. Ltd. Surrey, B.C.
-31-
At this point in time, we do not know what drilling rig will be used since
the decision will be left to the drilling company. There is a possibility that
a NQ wireless drill rig will be used on the HV claims and could also be used for
the Red Bird but the final decision will be made by the drilling company. All
equipment and personnel for the drilling program will be supplied by the
drilling company and is included in the price per foot. It is estimated the
drilling program itself will take 10 to 14 days depending upon the overburden
and the bedrock the drill encounters. If Terry Heard is unable to supervise the
drilling program, we will have one individual on the HV claim the entire time of
drilling so that the core can be examined and split for assaying. In addition
this individual, who will also have to be a geologist, will ensure the drilling
company is adhering to the requirements of the drilling program; core size,
angle of the drill and depth of the hole.
Once the drilling program is completed and the drill has been removed from
the HV claim, the geologist will send samples of the core to Acme Analytical
Laboratories Ltd., Vancouver, British Columbia, for fire assaying to determine
the gold and precious metal content of each sample. If Terry Heard has
supervised the drilling program and sent the core samples in for assaying, we
will engage the services of an independent geologist to prepare a report on the
results of the drilling program and to recommend a Stage 3 program, if
warranted.
If the drilling company completes the drilling program on time and adheres
to the agreed price, we will use their services for drilling Phase III of the
Red Bird as indicated on page 40.
Recent Exploration Work on the HV claims:
Staking and exploration work in 2001
The HV mineral claim block was laid out and staked to encompass prospective
ground over lying the Sicker Group geological formation. The initial cost of
staking was $1,335 and a preliminary exploration program was undertaken to
establish a grid system at a cost of $2,865. At the end of the year, we had
John Watkins prepare a geological report and exploration recommendations at a
cost of $1,032.
Exploration work in 2002
The objective of this physical work program was to locate a copper-gold bearing
ore deposit, below the overburden, utilizing the geochemical soil sampling
technique, on the present grid system. A total budget of $2,016 was expended to
soil sample and assay 48 grid stations and the commencement of mapping the
surface rock outcroppings.
There has been no previous work documented with the British Columbian Ministry
of Mines on the claim area. Historic trenching was located at grid station 2 +
165 S - 0 + 1007 W.
A south grid layout was first conducted prior to taking soil samples. Soil
sample grid lines were laid out every 100 feet on the baseline with sampling
stations horizontally chained and flagged every 33 feet.
BASELINE: 2,046 ft
--------
GRID LINES:
STN 0 + 282 S to 1056 E. 1,056 ft
STN 0 + 2310 S to 1122 E. 1,122 ft
STN 0 + 2410 S to 1122 E. 1,122 ft
STN 0 + 2510 S to 1089 E. 1,089 ft
STN 0 + 2610 S to 1056 E. 1,056 ft
STN 0 + 2710 S to 1023 E. 1,023 ft
STN 2 + 0000 S to 1320 E. 1,320 ft
STN 2 + 0000 S to 330 E 330 ft
STN 2 + 165 S to 1386 E 1,386 ft
--------
TOTAL GRID WORK. . . . . . 9,504 FT
========
-32-
Soil Sampling Technique
The soils sampling program was commenced on line 0 + 594 E of the established
grid layout. The grid system covers a small segment of the overall claim
territory. Every 80 feet, on the west line, a hole was dug through the humus
layer to the top of the sandy clay layer. All samples tested the "B" Horizon;
soils contact below the humus and root system.
A representative grab sample of soils, approximately half a pound in weight, was
collected and deposited in industry acceptable standard kraft paper sample bags.
These individual sample bags were labeled and documented to the applicable
sample station on the grid for assay reference.
Part of this grid has been logged by the clear cut method providing good soil
exposure for sampling. The line sampling had to be terminated due to a seasonal
swamp in the low ground. Soil sampling can be contaminated when dealing with
submerged sampling procedures, thus providing false data.
These lines can be sampled in late summer or fall, after the swamp has dried up.
Most of the soil sampling procedures between the baseline and the old logging
road were routine due to the rolling topography and light humus covering. From
the road down to the swamp, there is heavy tree slash, thick vegetation growth
and deeper humus covering with a matted tree root system.
The grid sampling lines can be extended through the swamps in the summer months.
The thicker humus and mud layer may hamper proper sampling techniques.
GRID LINE . . NUMBER OF SOIL SAMPLES
0 + 594 E . . 12
0 + 693 E . . 8
0 + 792 E . . 14
0 + 891 E . . 14
----------------------
TOTAL SAMPLES 48
======================
The rock outcrops on the logging road were mapped to correlate to the soil
sampling grid.
Recommendation
The results of the soil sample assays, for the grid segment, did not determine
any anomalis halos for copper, lead or zinc.
The grid system should be extended and the soil sampling program expanded
northward to encompass the Sicker - Karmutsen contacts. The grid should be
extended southward over the Quartz intrusive and a soil-sampling program
commenced.
2. Acquisition of the Red Bird
Subsequent to the acquisition of the Red Bird, we engaged the services of
Joe T. Shearer, Master of Science and Professional Geologist, to summarize the
geology and mineral potential of the Red Bird. We purchased the Red Bird from
Richard Billingsley by way of Bill of Sale Absolute (Exhibit 10.3) on July 28,
2004.
-33-
Location and Access
The Red Bird is located 1.9 miles northwest of Tulameen, British Columbia
and is approximately 94 miles from Vancouver, British Columbia. It occupies the
upland area immediately west of Otter Lake. The southern part of the claim
covers the crest and slopes of the southeasterly trending ridge between Mount
Rabbit and Mount Riddle. The claim extends north from the Lawless Creek
logging road, 1.6 miles to 3.1 miles west of Tulameen, to Lockie (Boulder)
Creek, an easterly flowing tributary of Otter Creek.
The upper slopes of Rabbit and Boulder Mountains are gently sloping with
deeply incised creek canyons. The slopes of the valleys of the Tulameen River,
Otter Valley and Lockie Creeks, are steep to precipitous. Elevations vary from
1,850 feet in Lockie Creek to slightly over 5,900 feet on Rabbitt and Boulder
Mountains. The Red Bird is at an elevation of 5,783 feet.
Access to the Red Bird is provided by a steep four-wheel drive road at the
south end of the property. The Rabbitt Mountain area is accessible by a network
of roads, which leave the main Lawless Creek road between 2 and 5 miles west of
Tulameen. The towns of Coalmont and Princeton on the Southern Trans-Provincial
Highway are 17 and 34 miles by paved highway southeast of Tulameen. The
Canadian Pacific Railway follows Otter Valley immediately east of the Red Bird.
The Coquihalla Toll Highway is located 7.5 miles to the west of the property.
Climate
The climate is transitional between that of the dry southern interior and
the much wetter Cascade and Coast Mountains to the west. Summers are hot and
dry, and winters are cold with heavy snowfall at high elevations.
We will be only able to explore the Red Bird during the late spring or
early summer due to the snow falls, which could be upwards towards 40 inches,
which starts towards the end of October and are basically gone by the end of
April. With the snow during the winter it will make it difficult for us to
obtain any soil or rock samples for analysis. To access the Red Bird during the
winter, we will have to use snowmobiles.
During the summer months we can assess the Red Bird by four-wheel drive
pick-up or by four-wheeler/quad/all terrain vehicle. One problem which we
might have to face during the summer, which will reduce our exploration time,
will be forest closures due to hot and dry conditions. With the number of
recent fires in British Columbia during the last several summers this is a
distinct possibility.
Claim Status
The Red Bird is held by one modified grid claim and five 2-post claims as shown
below:
Claim Name Tenure Number Number of Units Current Expiry Date
----------------- ------------- --------------- -------------------
Red Bird . 412526 20 July 23, 2006
Red Bird 1 412527 1 July 23, 2006
Red Bird 2 412528 1 July 23, 2006
Red Bird 3 412529 1 July 23, 2006
Red Bird 4 412530 1 July 23, 2006
Red Bird 5 412531 1 July 23, 2006
The above noted claims are registered in the name of Richard J. Billingsley
under his personal Free Miners' License # 139085. We are in procession of a
signed Bill of Sale Absolute giving ownership of the mineral rights to the Red
Bird to us. A mineral claim in the Province of British Columbia has to be held
in the name of a resident of the Province or by a company either incorporated in
British Columbia or extra-provincially incorporated. At the present time, we do
not wish to extra-provincially incorporate in British Columbia due to the cost.
In addition, to obtain a Free Miner's License, if we were extra-provincially
incorporated, would cost $385 whereas there is no cost to us using Richard
Billingsley's Free Miner's License to hold the Red Bird. By having a Bill of
Sale Absolute (Exhibit 10.3) signed to our benefit, we have control over the
mineral rights on the Red Bird. Eventually, we will extra-provincially
incorporate but not until sufficient exploration work has been undertaken on the
Red Bird to warrant us doing so.
-34-
Mineral Title in British Columbia is held via the "Mineral Act". The Red
Bird is kept in good standing by applying appropriate assessment work in the
amount of $65 per unit per year for the first three years and then $154 per unit
per year thereafter. In the case of the Red Bird, the cost to us for the first
three years would be $1,625 and subsequent years would be $3,250. This amount
can either be paid for by way of cash-in-lieu of work being done on the Red Bird
or by way of assessment work on the property. In the initial stages, assessment
work would comprise establishing a geological grid system, rock and soil
sampling for analysis of mineral content, trenching and diamond drilling. As
noted above, the Red Bird is in good standing until July 23, 2006.
Land Tenure
The Red Bird is located in a highly mineralized region of southwestern
British Columbia in which bulk of mineral occurrences are closely related in
their distribution and origin to the volcanic history of the Nicola rocks and
co-magnetic intrusives (a mass of igneous rock that, while molten, was forced
into or in between other rocks).
We have the rights to the minerals on the Red Bird except for placer and
coal. Placer is obtained by "staking" the property specifically for placer
whereas coal rights are granted under Coal Act of British Columbia. Once the
Red Bird is staked, we would have to make a separate application for a lease for
placer minerals under the Titles Division of the Ministry. In British Columbia,
a lease is a higher form of tenure than a claim. By having a lease there is no
production limit whereas a placer claim's production is limited to 2,000 cubic
metres of pay dirt (usually gravel or sand rich enough to be excavated and
treated to recover its valuable contents) per year. At the present time we do
not anticipate staking the Red Bird for placer until sufficient exploration work
has been performed to warrant the expenditure.
Regional Geology
The Red Bird is located within the southwest portion of the Intermontaine
Tectonic Belt of the Canadian Cordillera, dominated by the Upper Traissic Nicola
Group, a volcanic assemblage of mainly basaltic-andesitic nature (a
dark-colored, fine grain volcanic rock composed of one or more of the mafic
minerals) comprised of complex interfingering lava flows (changes in lava flows)
and associated with intrusions, pyroclastic (produced by explosive or aerial
ejection of ash, fragments and glassy material from a volcanic vent), epiclastic
(sediments deposited on land) and bioclastic sediments (formed by the action of
organisms).
Major north-south faulting (a break in the continuity of a body of rock),
developed during the early Mesozoic, appears related to the volcanic island
arc/subduction complex. This North-South arc/back arc basin complex commenced
during the Permian-Lower Triassic time and continued throughout Nicola Group
deposition. These major faults controlled the distribution of later large
intrusives, felsic (a light colored rock containing an abundance of feldspar,
which comprises 60% of the Earth's surface and occurs in all rock types and
decomposes to form much of the clay in soil), and Cretaceous volcanism as well
as major Tertiary volcanics and basin sedimentation.
Within the Nicola Group there is a progressive compositional change towards
younger, more siliceous, felsic volcanic rocks representing a waning stage of
vocanism within the rapidly subsiding, north-south trending basin.
-35-
The Red Bird is underlain by the fault-bounded Western belt where shallow
water Nicola rocks includes basaltic-andesitie of rhyolitic flows (felsic
volcanic rocks), breccias (a rock type with angular fragments of one composition
surrounded by rock of another composition or texture), volcanoclasytics (clastic
rocks with a volcanic component), epiclastic sediments (sediments deposited on
land) and reefoidal limestones (a limestone formed from a reef, typically
contains abundance of fossils). This formed the rapidly accumulating volcanic
pile, which gradually become subaerial (above the ground in open air).
The Nicola Group is associated with the majority of the economic ore
deposits in the region surrounding the Red Bird. Chemically, the bulk of the
Nicola Group belongs to an alkaline rock suite (a collection of rock specimens
from a single area which have properties high in potassium and sodium). This
is characteristic of the Copper Mountain-Ingerbelle porphyry copper deposits
nearby which are classified as alkaline suite deposits. Compared to the
calc-alkaline deposits, porphyry deposits of the alkaline suite commonly grade
into pyrometasomatics (formed by metasomatic changes in rock, principally in
limestone under the influence of high temperatures and pressure) and skarn
deposits (at the contact of the limestone and intrusive), they lack appreciable
amounts of molybdenite (a silverly-white, very hard, metallic element which is
as valuable as an alloying agent for steel and nickel), and are usually richer
in gold and silver. The alkaline deposits are associated with small, complex,
alkaline plutons (a body of medium-to coarse-grained igneous rock that formed
beneath the surface by crystallization of a magna) that are co-magnetic with the
enclosing volcanic rocks.
Alteration products and sulfides are spatially coextensive and
contemporaneous. Classic zoning patterns evident in calc-alkaline porphyries
do not normally apply in the alkaline suite due to the absence of phyllic
(hydrothermal alteration typically resulting from removal of sodium, calcium and
magnesium from calc-alkaline rocks) and argillic zones (pertaining to clay or
alkaline pluton and not to associated ore bodies. Primary rock compositions
have a marked control on the alteration assemblages produced.
The Nicola assemblage has been subsequently deformed and cut by a series of
co-magnetic and later intrusives and subjected to low-grade metamorphism (the
mineralogical, chemical, and structural adjustment of solid rocks to physical
and chemical conditions that have generally been imposed at depth below the
surface zones of weathering and cementation, and that differ from the conditions
under which the rocks in question originated).
In the vicinity of the Red Bird, intrusive rocks include the Jurassic or
later Eagle Granodiorite; related dykes of the Coastal Plutonic Complex,
Jurassic or later peridotite, pyroxenite and gabbro dikes (a course-grained
igneous rock consisting of 90% magnesium-iron which has formed an intrusion
which cuts across the bedding of country rock) and plugs probably related to the
Olivine Mountain body to the south and pink or grey granite and granodiorite (a
group of course-grained plutonic rocks intermediate in composition between
quartz diorite (a plutonic rock which is the most common of all solid minerals
and may be colorless and transparent or colored) of the Upper Cretaceous or
later Otter Intrusions.
These are all evidenced on the Red Bird by cross-cutting and concordant
bodies of felsic (chiefly quartz) to intermediate composition and by irregular
outcrops of basic to ultrabasic rock. Relations to other rocks are often
obscured due to poor outcrop. Intrusive rocks are non-foliated (not being in
thin leaf-like layers) and include fine quartz-eye feldspar porphyry (a rock
type characterized by coarse crystals floating in a fine grained matrix); medium
grained feldspar porphyry, pink feldspar-hornblende porphyry and fine, dark
brown weathering basic rocks.
Local Geology and Mineralization
Within the eastern-central portion of the Red Bird, possible Cretaceous
rocks include andesitic tuffs (a rock composed of the finer kinds of volcanic
detritus which is usually stratified), breccias (a rock type with angular
fragments of one composition surrounded by rock of another composition or
texture) and porphyritic dikes. These are characterized by their relatively
fresh, blocky nature and maroon to salmon-pink feldspar.
-36-
Towards the northern end of the Red Bird there are exposures of fresh
andesitic pyroclastics (rocks that have been produced by explosive or aerial
ejection from a volcanic vent), tuffs and conglomeratic fragmentals (with Nicola
clasts), which may either represent local Cretaceous units or
subacqueous-subaerial Nicola volcanosedimentary units.
The north-central part of the Red Bird is composed essentially of two
units, as follows:
1. andesitic volcanoclastic sediments (intermediate volcanic rocks); and
2. andesitic tuffaceous pyroclastics (intermediate volcanic rocks with
relatively fine fragements).
Both units are schistose (readily split into thin flakes or slabs), chloritized
(applies to the roasting of silver ores with salt) and local epidotized (a basic
silicate of aluminum, calcium and iron) throughout. Calcareous alternation
(rocks that contain calcium carbonate) is common, as a thin calcite lenses (line
strips of calcium carbonate), flattened pods and sub-parallel to schistosity (a
type of cleavage) and as distinct, rounded blebs (a small, usually rounded
inclusion of one mineral in another). These occurrences may reflect secondary
alternation and replacement associated with low grade metamorphic events
(involving physical transformation).
The central portion of the Red Bird claims are predominately andesite,
local dacitic (a fine-grained extrusive rock with intermediate composition),
feldspar porphyritic and pyroclastic flows and dykes. Throughout the area the
fragments are mainly felsic but there are consistently 3 to 20% mafic fragments
(dark mineral fragments). This may reflect the bimodal distribution (contains
two main size fractions) of the volcanic source material, which is masked by
regional metamorphism. The south-centre of the Red Bird exposures comprise
epidotized porphyritic andesitic flows (this is a calcium-iron calc-silicate
mineral) as well as andestic tuffaceous pyroclastics. These units appear
somewhat fresher in appearance and may represent a later stage Nicola volcanism.
The regional metamorphic grade is low-grade greenschist facies (a
metamorphic rock which has a green color due to the presence of chlorite and
other minerals), possibly further altered through latter retrograde/metasomatic
adjustments along the local hydrothermal activity. Each unit of the Nicola
sequence containing a varying degree of chlorite (a brittle micaceous green
mineral), siliceous epidote (containing both silica and epidote) and calcareous
alternation (the rocks that have been altered by carbonate); as well as local
saussurite/sericite epidote (sericite is a white mica mineral and saussurite is
an assemblage of various minerals) and secondary amphibole development (is a
family of minerals which include hornblende). The almost ubiquitous
epidotization (associated with metamorphism which is characteristically
everywhere on the Red Bird claim) observed within the Red Bird area may be
further enhanced by the weak to strongly sheared and jointed nature of the rock
units.
The Red Bird area is structurally complex with a large northerly trending
open synclinal to homoclinalsequence (the rocks are folded with the younger
rocks surrounded by older rocks), cut by later Cretaceous and Tertiary
structures.
Prior mapping work indicates a bedding trend of 010-050 with shallow
westerly dips, although directions of 150-170 are locally preserved. The
Nicola rocks appear to be drawn-out along 010-050 in response to dilational
forces possibly a result of Cretaceous and Tertiary compression and uplift.
Clockwise rotation may also have had an effect as well, with sub-horizonal
strike-slip faulting producing the dominant 020-040 shear. Late
Nicola/Cretaceous units are not as sheared in appearance though they are
strongly joined along 150-170 . Later Tertiary events may have produced major
faulting. Fracturing at 110-130 is observed to cut both Nicola and Cretaceous
units.
The Nicola group hosts local concentration of copper mineralization.
However, no significant mineralization has been found in Cretaceous or Tertiary
volcanic sequences except as documented below.
Sulfide concentrations within the Red Bird claim area are tabulated as
follows:
-37-
a. Intensely silicified, pyritiferous lenses (containing pyrite - "fool's
gold") occur concordant to volcanic layering. At the Red Bird portal,
massive chalcopyrite-quartz lenses (soft mineral similar to pyrite and the
most important source of copper) up to 0.5 metre thick are exposed and
traceable for short (15-25 metre) distances along strike before pinching
out. The wall rock (foot-hanging walls) around the chalcopyrite-pyrite
lenses is highly bleached displaying saussurite and sericite alteration.
Other workings about 100 metres to the north of the Red Bird also expose
similar types of mineralization and occur along the same volcanic horizon.
Some of the lenses are predominately massive pyrite with little to no
chalcopyrite.
b. The host rock is an andesitic-dacitic sequence, which is pervasively
calcareous and altered to greenschist facies. At the Red Bird portal, the
mineralized lenses are also associated with a silicified mylonite zone. The
mineralization follows the layered sequence striking 340 to 35 to the west.
c. Pyrite mineralization is observed along Lockie Creek, within a
volcanosedimentary-Cretaceous intrustion and hornfels zone. Sulfides occur
as distinct belbs within the Cretaceous porphyritic dyke material as well
as fine disseminations located along the planar bedding of the argillaceous
volcanosediments. The altered, baked appearance of these units may suggest
a metasomatic type mineralization.
Volcanic rocks of the Red Bird claim appear to occur as a relatively simple
homoclinal sequence that is complicated by normal and strike slip faulting.
North-south strikes and shallow to moderate westerly dips typify the sequence.
A weak to moderately well developed foliation is ubiquitous and varies from 130
to 180 in strike (dominantly 160 to 170 ) with shallow westerly dips.
Intensity of foliation is variable and largely a function of lithology, as finer
grained fragmental rocks tend to be more schistose than their coarser
counterparts. Layering is difficult to discern due the massive nature of many
of the rocks, but where observed is subparallel to the foliation.
Faulting, of probable Tertiary age disturbs the volcanoclastic rocks. It
is difficult to determine offset and movement on these faults due to scarcity of
outcrop, the relative homogeneity of rocks, lack of distinctive layering and
market horizons, and the lensoid nature of units within the sequence and faults
are largely recognized by distinctive linear structures. North, northeast
trends for faults are dominant but some east-west trends are also evident.
Structural features on the Red Bird claims are very similar to those of the
entire belt of Nicola rocks, which are typified by large open folds cut by later
faults.
The Red Bird has a long history of extensive work that indicates two cross
cut adits (tunnels). The upper adit (Red Bird Shaft) is open, has a total
length of 400 feet with a short winze (a vertical opening driven downward
connecting two levels in a mine) 30 feet from the portal. The portal of the
lower adit is now partially covered so it cannot be accessed. Two thin
sulphide lenses with a maximum thickness of 1.2 feet each are exposed at the
portal of the Red Bird Shaft. They have a length down dip of 6 to 9 feet, an
exposed strike length of 12 to 15 feet with potential for up to 150 feet
(defined by small scattered exposures of sulfide mineralization along strike)
and are separated by a 2.4 to 3 feet thick layer of massive dacitic tuff that is
cut by sphalerite (occurs with galena in veins and irregular replacement in
limestone), galena (an important source of lead and silver) and
chalcopyrite-bearing quartz veinlets. Pyrite is the dominant sulfide with small
amounts of chalcopyrite being evident.
Conclusions
The Red Bird is a large claim block which covers a number of old gold and
copper showings, which were first discovered in the early part of the last
century. A considerable amount of somewhat disjointed exploration, including
geochemistry, geophysics, geology, trenching and diamond drilling has been
completed since 1965; prior to us obtaining the Red Bird. However, due to the
number of different operators the database is somewhat fragmented. As a
consequence, the strategy behind some of the diamond drill programs is not
immediately clear from the available reports.
-38-
A probable stratabound horizon of massive sulfide mineralization has been
recognized on the Red Bird. The sulfide horizons appear stratabound, lensoid
and showing remarkable potential strike length. Sulfide mineralization is
hosted in andesitic to rhyolitic fragmental rocks, which may also replace
massive sulfide mineralization along strike as barren pyrite schists. The
massive sulfide mineralization is tabular to lensoid in shape and apparently
concordant with layering in country rocks, trending northerly and dipping
shallowly to the west. Thickness of the horizons ranges from approximately
three to twelve feet and sulfide mineralization may contain lenses of acid and
intermediate volcanic rocks. Numerous small scale faults transect and offset
sulfide mineralization.
Geological mapping of the volcanic succession is essential in predicting
the location of mineralized alkalic plutons. The common occurrence of magnetite
with alkalic intrusions suggest the re-plotting and re-interpretation of
previous magnetic data will aid in defining target areas. Drilling to test
geological targets is envisaged.
Recommendations
Since the bulk of mineral occurrences in Southern Quesnellia are closely
related in their distribution and origin to the volcanic history of the Nicola
volcanics and co-magnetic intrusives, a detailed geological mapping program is
recommended at a scale of 1:2500 on an accurate orthophoto-topographic basemap.
All previous work should be incorporated onto this basemap as accuracy permits.
In conjunction with this mapping program, all available diamond drill core
should be relogged.
Further geochemical sampling and deeper penetrating geophysical surveys is
recommended in the Lockie Creek hornfels zone and tightly controlled ground
magnetometer survey over the entire property is recommended.
Further geochemical sampling and deeper penetrating geophysical surveys is
recommended in the Lockie Creek hornfels zone and tightly controlled ground
magnetometer survey over the entire property is recommended.
Contingent on attractive targets being identified by the above work, together
with a synthesis of older data, Phase lll diamond drilling is recommended to
further test these targets contingent on success of Phases l and ll. A cost
estimate is included below outlining Phase l $5,800 and Phase ll $96,000 and
contingent Phase lll of $270,000
It is estimated Phase I will take approximately 10 days using the services
of two workers.
It is estimated Phase II will take approximately 3 weeks using the services of 3
workers and one geologist.
Phase III is estimated to take 5 weeks but will require our company to
supply only a site geologist and one worker to assist the geologist during the
drilling program. As mentioned under the HV on page 35 the drilling company
will supply the personnel to administer the drilling program.
Number of Total Employees and the Number of Full Time Employees
We do not have any employees either full or part time. Any personnel
working on either the HV or the Red Bird will be paid a daily rate and when the
exploration program is completed they will no longer work for us.
Reports to Shareholders
We intend to furnish our shareholders with annual reports, which will include
financial statements audited by Cordovano and Harvey, independent accountants,
and all other periodic reports as we may determine to furnish or as may be
required by law, including Sections 13(a) and 15(d) of the Exchange Act.
-40-
We are filing with the SEC a registration statement on the Form SB-2 under
the Securities Act with respect to the securities being registered under this
prospectus. This prospectus does not contain all the information set forth in
the registration statement and the accompanying exhibits, as permitted by the
rules and regulations of the SEC. For further information, please see the
registration statement and accompanying exhibits. Statements contained in this
prospectus regarding any contract or other document which has been filed as an
exhibit to the registration statement are qualified in their entirety by
reference to these exhibits for a complete statement of their terms and
conditions. The registration statement and the accompanying exhibits may be
inspected without charge at the office of the SEC and copies may be obtained
from the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C.,
20549 or at its regional office located at 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661 upon payment of the fees prescribed by the SEC.
Electronic reports and other information filed through the Electronic Data
Gathering, Analysis, and Retrieval System, known as Edgar, are publicly
available on the SEC's website, http://www.sec.gov. We are prepared to furnish
any shareholder requesting any documents filed with the SEC.
At the present time, we do not have our own website.
Incorporation in the State of Nevada
We incorporated in the State of Nevada on January 3, 2001 rather than
British Columbia because of tax reasons. For example, both the Federal and
Provincial Governments impose tax on any profits made. This corporate tax
could range as high as 51% of net income. In addition the Province of British
Columbia has an annual capital tax based on the number of shares outstanding. By
having a Nevada-based company, we, if we ex-provincially incorporate in British
Columbia, will only be subject to a 15% withholding tax as set forth in the
Canada/US Tax Treaty.
ITEM 17. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis explains the major factors affecting
our results of operations for the years ended December 31, 2001 to 2003 and for
the nine months ended September 30, 2004 and the variance of results between
periods. The following discussion of our financial condition and results of
operations should be read along with the financial statements and notes to the
financial statements included elsewhere in this Form SB-2.
(A) PLAN OF OPERATIONS
While we believe that both the HV and the Red Bird have value and the
definite opportunity for further exploration, we realize we are in the
pre-exploration stage since we have not yet generated or realized any revenues
from the HV or the Red Bird or any other part of our business operations. Our
continued existence and plans for future growth depend on our ability to obtain
the capital necessary to operate, through the generation of revenue and the
issuance of additional debt or equity. We may not be able to continue for the
next 12 months unless we obtain additional capital to pay our bills. We have
not generated any revenues and no revenues are anticipated unless and until
mineralized material is discovered, if ever, on either the HV or the Red Bird.
There is no assurance we will have successful operations whereby we will be able
to generate a cash flow which will provide us with the funds to maintain our
operations. Presently, we have no historical financial information upon which
to base an evaluation of our performance. We are subject to risks inherent in
the establishment of a new business enterprise, including limited capital
resources, possible delays in the exploration of the HV and the Red Bird and
possible cost overruns due to price and cost increases in services.
Eventually we will have to raise money for our exploration work on the HV
and the Red Bird either through the sale of our Treasury shares or by way of
loans from lending institutions. We have not yet made a decision as to how we
will raise money in the future. There is no commitment or agreement with our
officers and directors to provide any funds to us. If we cannot raise any money
or only a modest amount of money, there is the possibility our present and
future shareholders, if any, might lose their total investment.
-41-
Terry Heard will evaluate the results of the exploration program on the HV
and the Red Bird, when and if they are undertaken, and will present to the Board
of Directors his recommendation as to whether or not we should proceed with
further exploration on either or both of these claims. If his evaluation is to
undertake no further exploration work on either or both of these claims, the
claim in question, if only one claim, will be allowed to lapse at its
anniversary date. If this is the case, we will still have the other claim to
explore but we will want to consider whether or not to identify another mineral
property. If both claims prove to warrant no further exploration we will have
to identify another mineral property since we do not wish to become a shell
company (a company having no assets and no specific purpose).
We will not buy or sell any plant or significant equipment.
The number of employees is not expected to change.
To date we have concentrated on the HV but will direct our exploration
activities in the future to include the Red Bird. We have not tried to identify
any other mineral claims and will not do so until we have explored the HV and
the Red Bird to determine if there exist minerals thereon of a commercial
nature. Eventually, subject to the availability of financing, we will seek to
increase our inventory of exploration properties and, if acceptable to us, enter
into joint venture agreements with other exploration companies to explore
various mineral claims we have identified.
We will require money to operate over the next twelve months. We have
determined we will require the following funds:
Distribution of Funds Ref. Amount
------------------------------ -------- -------
Accounting and audit . . . . . (i) $ 7,000
Exploration on the HV claims . (ii) 1,650
Office . . . . . . . . . . . . (iii) 500
Transfer agent's fees. . . . . (iv) 500
-------
9,650
Expenses of Issuance and
Distribution (page 13). . . 12,000
--------
Estimated Funds Required over
the Next Twelve Months . . . . $ 21,650
=======
(i) Accounting and auditing
This represents the cost for the December 31, 2004 financial statements
preparation and examination by our independent accountants ($5,000) and
preparation and review of the interim financial statements ($2,000).
(ii) Exploration of the HV claims
Prior to January 24, 2004, we will have to either undertake exploration
activities on the HV or pay the Ministry cash-in-lieu of doing any work. The
cost to us to do the work or pay cash-in-lieu is Canadian $200 (US$155) for each
unit held by us for a total of Canadian $2,000 (US$1,550) and a filing fee of
US$100. During the next twelve months there is no requirement for us to
undertake any work on the Red Bird.
(iii) Office
Relates to photocopying, printing and courier charges which will be
incurred during the various filing processes with the SEC and with the
accountants and attorneys.
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(iv) Transfer agent's fees
The annual fee charged by Empire Stock Transfer is $500. Under Expenses
of Issuance and Distribution on page 17, we have accrued an additional $500 to
cover any charges the transfer agent might charge us; for example: preparation
of shareholders' reports, confirmation with auditors, etc. There are no share
certificates being issued under this offering and therefore no consideration has
been given to the issuance.
With cash of $9,615 as at September 30, 2004, we will require additional
funds during the next twelve months. To meet our future obligations we will
either have to issue treasury shares or seek loans from either our directors or
from financial institutes guaranteed by our directors. The directors have not
given any consideration to personally supporting our Company financially. No
decision has been made by our directors as to the best method to be used to meet
our cash requirements over the next twelve months.
(B) ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following represents an analysis of expenses incurred for the years
ended December 31, 2001 through to December 31, 2003 and for the nine months
ended September 30, 2004:
YEARS ENDED DECEMBER 31, 2001 TO 2003 AND FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2004
Accounting and audit
We have an independent bookkeeper who prepares the accounting records for
our year end and submits the records to our independent accountants, Cordovano &
Honeck, for their examination of our financial statements. Our independent
auditors have not performed any other accounting or consulting work for us other
than the issuance of audited financial statements.
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Bank charges
We have a bank account with one of the chartered banks in Canada which charges
us a service fee each month to operate the account.
Exploration expenses
As indicated elsewhere in this Form SB-2, in 2001 and 2002 we incurred
exploration expenses associated with the staking and establishment of a grid
system for soil and rock assaying on the HV. In 2004, we staked the Red Bird
and paid an additional amount of $683 to acquire certain PAC (portable
assessment credit) grants available to us. PAC grants are created by other
companies performing exploration work on their claims on which they cannot use
the entire money spent due to their claims being maintained to the maximum limit
in British Columbia; being 10 years of assessment work applied. The company or
individual holding the PAC grant can transfer them to any property within
British Columbia; hence the word "portable". If it is an unrelated company, as
in our case, the owner of the PAC grant charges a fee for the use of the credit
since once applied to the Red Bird, he can no longer use it on another property.
We purchased from Richard Billingsley a total of $1,780 in PAC grants for $443
not including filing fees of $208 and Good and Services Taxes of $32. By doing
this transaction, we were able to maintain the Red Bird in good standing until
July 23, 2006. We felt this was a prudent business decision since the
availability of all future PAC grants in the Province of British Columbia will
expire at the end of 2004.
Geological reports
We have had two geological reports prepared. The first was on April 18,
2001 by John J. Watkins on the HV. On August 15, 2004, Joe T. Shearer prepared
a report on the Red Bird. Extracts from both these reports are mentioned
elsewhere in this Form SB-2.
Incorporation costs
We incorporated our Company in Nevada and in 2001 wrote the entire
incorporation cost off as a period cost rather than capitalize it on the balance
sheet.
Management fees
Since we do not have sufficient money to pay our management team we have
not paid management salaries. Nevertheless we realize there is a cost
associated with the time spent by our directors and officers in the affairs of
our Company and, therefore, have given recognition to this fact by accruing as
management fees $500 per month. This amount has been expensed and credited to
Capital in Excess of Par Value on the balance sheet. We will never pay this
amount in either cash or shares to any of our directors and officers.
Office
Relates to such charges as photocopying, fax, courier and miscellaneous
expenses.
Rent
We are fortunate, at the present time, in being able to use the office of
Sam Hirji at no cost to us. Nevertheless, we realize there should be a cost of
operating an office and therefore, similar to management fees above, we have
accrued an amount of $350 per month. This amount represents the cost of
obtaining a shared office space in downtown Vancouver. No payment will ever be
made to Sam Hirji or any other director for the accrual of rent.
-44-
Staking fees
In 2001 we engaged the services of Paul Saulnier to stake the HV and, in
2004, we engaged the services of Richard Billingsley to stake the Red Bird for
us.
Telephone
We do not have our own telephone number since we wish to wait until we
select office premises on a full time basis. Similar to management fees and
rent noted above, we have accrued as a telephone charge $200 per month with an
offsetting credit to Capital in Excess of Par Value. The amount accrued was
determined based on the rates B.C. Telephone Company would normally charge a
company for a single telephone line.
Transfer agent fees
Original we used as our transfer agent, Nevada Agency & Trust Company in
Reno, Nevada but due to the cost associated with their services we switched in
2004 to Empire Stock Transfer Inc. in Las Vegas.
Meeting of Stockholders
We have not held since our inception a Meeting of Stockholders. We are planning
to hold a Meeting of Stockholders but no date has been set by our directors.
Other factors and trends to be considered:
(i) Short and long-term trend liabilities
We are unaware of any known trends, events or uncertainties that have or are
reasonably likely to have a material impact on our business either in the
long-term or long-term liquidity which have not been disclosed under Risk
Factors on page 6.
(ii) Internal and external sources of liquidity
There are no material internal and external sources of liquidity.
(iii) Commitments for capital expenditures
We have no commitments for any capital expenditures of a significant amount and
have not budgeted any future funds required over the next twelve months to
purchase any assets of any nature.
(iv) Known trends, events or uncertainties having an impact on income.
Since we are in the start-up stage and the HV and the Red Bird claims have not
produced any income, and there is a chance that they never will, we do not know
of any trends, events or uncertainties that are reasonably expected to have a
material impact on income in the future.
(v) Income from other sources.
We know of no significant elements of income or losses that do not arise from
our continuing operations. Until such time as we have defined a mineable ore
reserve we will not realize any income.
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(vi) Changes in the financial statements.
We do not know of any cause for any material changes from period to period in
one or more line items of our financial statements as shown in this Form SB-2.
These audited financial statements adhere with accounting principles generally
accepted in the United States of America.
(vii) Seasonal aspects affecting the financial condition.
The only seasonal aspect known to us which will affect our financial condition
or results of operations is the weather. With warmer weather on Vancouver
Island than the mainland, there is a possibility that only a few months of
winter will affect our exploration efforts on the HV. This will not be the case
for the Red Bird where the weather is harsher and lasts for many more months.
During the initial exploration stage, we will only be able to explore the Red
Bird during the late spring, summer and early fall months due to the possibility
of snow in winter. Winter weather conditions make it difficult to obtain soil
and rock samples, prospecting, trenching and removal of overburden.
(viii) Interim Periods
We have no historical financial information upon which to base an evaluation of
our performance other than the audited financial statements filed with this Form
SB-2. We are in the pre-exploration stage and have not generated any revenues
from our operations to date. There is no guarantee that we will have a
successful business operation. We are subject to risks inherent in the
establishment of a new business enterprise, including limited capital resources,
possible delays in the exploration of the HV and Red Bird claims, and possible
cost overruns due to price and cost increases in services required during our
exploration work.
To date we have concentrated on the HV. In the future, we will explore the Red
Bird and continue our exploration activities on the HV. Nevertheless, in the
future we will seek to increase our inventory of mineral properties and, if
acceptable to us, enter into joint venture agreements to explore various other
mineral properties of merit. No mineral properties or joint venture situations
have been identified to date.
(C) LIQUIDITY AND CAPITAL RESOURCES
There is limited historical financial information about us upon which to
base an evaluation of our performance. It might take several years for a
historical profile to be developed on our activities as a company and the
strengths of our management team to be useful for evaluating our performance.
Our continued existence and plans for future growth depend on our ability
to obtain the capital necessary to operate, through the generation of revenue
and the issuance of additional debt or equity. We will need to raise capital
to fund normal operating costs and exploration efforts. If we are not able to
generate sufficient revenues and cash flows or obtain alternative funding, we
will be unable to continue as a going concern. As disclosed in the report of
the independent auditors on our financial statements provided elsewhere in this
Form SB-2, our recurring losses and negative cash flows from operations raises
substantial doubt about our ability to continue as a going concern.
(D) NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141 "Business Combination" which
supersedes APB Opinion No 16 "Business Combinations" and FASB Statement No. 38
"Accounting for Preacquisition Contingencies of Purchased Enterprises". The
provisions of this statement requires that all business combinations be
accounted for using "purchase accounting" and it disallows the use of "pooling
of interests" as previously allowed under APB Opinion No. 16 and FASB Statement
No. 38. This statement is effective for all business combinations subsequent
to June 30, 2001. The adoption of this statement did not have a material
effect on the Company's financial statements.
-46-
Also in June 2001, the FASB issued SFAS No. 142 "Goodwill and other
Intangible Assets", which supersedes APB Opinion No. 17 "Intangible Assets".
The provisions of this statement changes the unit of accounting for goodwill and
takes a very different approach to how goodwill and other intangible assets are
accounted for subsequent to their initial recognition. Because goodwill and
some intangible assets will no longer be amortized, the reported amounts of
goodwill and intangible assets, as well as total assets, will not decrease at
the same time and in the same manner as under previous standards. This
statement is effective for all fiscal years beginning subsequent to December 15,
2001. The adoption of this statement will not have a material effect on the
Company's financial statements.
In August 2001, the FASB and SFAS No. 143 "Accounting for Asset Retirement
Obligations", which amends SFAS No. 19, establishes a uniform methodology for
accounting for estimated reclamation and abandonment costs. This statement
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The statement is required to be adopted by January 1,
2003, at which time the Company will record the estimated present value of
reclamation liability and increase the carrying value of related assets.
Subsequently, reclamation costs will be allocated to expense over the life of
the related assets and will be adjusted for changes resulting from the passage
of time and changes to either the timing or amount of the original present value
estimate underlying the obligation. Currently the Company is in the process of
quantifying the effect the adoption of this statement will have on its financial
statements.
The FASB also issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. It
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of", and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions", for the disposal of
a segment of a business. It also amends APB No. 51, "Consolidated Financial
Statements", to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provisions of this Statement are
effective for financial statements issued for the fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years, with early
application encouraged. The provisions of this Statement generally are not to
be applied prospectively. The adoption of this statement did not have a
material effect on the Company's financial statements.
ITEM 18. DESCRIPTION OF PROPERTY
Both the HV and the Red Bird are more fully described elsewhere in this Form
SB-2. We have no other mineral properties.
Title to the HV
The HV is recorded in the name of Paul Saulnier who staked the claim on
behalf of us. The HV has been left in the name of Mr. Saulnier since this would
save us from having to obtain a Free Miners License from the Ministry. To
protect us, Mr. Saulnier has signed a Bill of Sale Absolute which, when filed
with the Ministry, changes ownership in the mineral rights on the HV to us
(refer to Exhibit 10.2).
In the future, when we undertake a significant exploration program, we will
make application to obtain an extra-provincial registration and our own Free
Miners License. Even though we have a signed Bill of Sale Absolute in our
possession, we are exposed and might lose our interest in the HV if Mr. Saulnier
transfers title to another person and that deed is recorded prior to recording
of our deed, that person would have superior title and we would have none. If
that event occurs, however, Mr. Saulnier will be liable to us for monetary
damages for breach of his warranty to the title.
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Title to the Red Bird
The Red Bird is recorded in the name of Richard Billingsley for the same
reasons noted above with the HV. Mr. Billingsley has signed a Bill of Sale
Absolute (refer to Exhibit 10.3).
Investment Policy
We are not limited on the percentage of assets which may be invested in any one
investment or mineral property. A disposal of a future major asset would result
in our Board of Directors seeking shareholders' approval since this would ensure
no subsequent shareholder action could be brought against us. Our policy is to
acquire assets, being mainly mineral properties, primarily for income in the
future rather than capital gains. Our intention is to explore and develop, if
warranted, the HV and the Red Bird in hopes of eventually developing them into
income producing property from the sale of the minerals contained thereon.
ITEM 19. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the following parties has, since our date of incorporation, had any
material interest, direct or indirect, in any transaction with it or in any
presently proposed transaction.
- Any of the our directors or officers;
- Any person proposed as a nominee for election as a director in the future;
- Any person who beneficially owns, directly or indirectly, shares carrying
more than 10% of the voting rights attached to our outstanding common
stock; or
- Any relative or spouse of any of the foregoing persons who has the same
house as such person.
The common stock purchased by the directors and officers is shown below:
Sam Hirji, President and Director, purchased 150,000 shares at a price
of $0.01 per share for cash consideration.
Herbert Moeller, Secretary Treasurer and Director, purchased 100,000
shares at a price of $0.01 per share for cash consideration.
Claus Andrup, a former Director, purchased 100,000 shares at a price
of $0.01 per share for cash consideration.
All the above noted shares were issued in compliance with Rule 144.
Under the general rules of Rule 144 a minimum of one year must lapse
between the latter of the date of the acquisition of the shares of our Company
or from an affiliate of our Company, and any resale of such shares in reliance
on Rule 144 for the account of either the acquirer or any subsequent holder of
those shares. The one-year period shall not begin until the full purchase price
is paid by the person to our Company. The directors paid the full purchase
price at the time of acquiring the shares.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year is entitled
to sell within any three month period a number of shares that does not exceed
the greater of:
1. 1% of the number of shares of our common stock then outstanding which, in
our case, equals approximately 14,500 shares as of the date of this Form
SB-2; or
2. the average weekly trading volume of our common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with respect to
the sale.
-48-
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
On July 23, 2004, we accepted subscriptions for 1,000,000 shares at a price
of $0.01 per share from 24 individual investors for a total consideration of
$10,000. All payments were for cash consideration.
On August 31, 2004, we accepted subscriptions for 100,000 shares at a price
of $0.10 per share for 12 investors for a total consideration of $10,000. All
payments were for cash consideration.
Some of our Directors are directors and officers of other companies (refer
to biographies of Directors on pages 14 to 16). Therefore, conflicts of
interest may arise between their duties as our directors and as directors and
officers of other companies. All such possible conflicts will be disclosed and
the directors concerned will govern themselves in respect thereof to the best of
their ability in accordance with the obligations imposed on them under the laws
of the State of Nevada.
All officers and the director are aware of their fiduciary responsibilities
under corporate law, especially insofar as taking advantage, directly or
indirectly, of information or opportunities acquired in their capacities as
officers and directors of our Company. Any transaction with officers or
directors will only be on terms consistent with industry standards and sound
business practice in accordance with the fiduciary duties of those persons to
our Company, and depending upon the magnitude of the transactions and the
absence of any disinterested Board members, the transactions may be submitted to
the shareholders for their approval in the absence of any independent Board
members.
The following directors and officers have advanced money to us over the past
several years.
Sam Hirji $ 8,238
Herbert Moeller 187
As at September 30, 2004 $ 8,425
=====
The above noted advances are on a demand basis and bear no interest. Had
an annual compound interest rate of 5% been used, the amount of interest due and
payable would have been $1,498.
We have had no transactions with any promoter or promoters since its
inception. Nothing of value, including money, property, contracts, options or
rights of any kind has been received or will be received by a promoter, director
or indirectly from us which is not disclosed in this Form SB-2.
Except as indicated below, there were no material transactions, or series
of similar transactions, since inception of our Company and during our current
fiscal period, or any currently proposed transactions, or series of similar
transactions, to which the Company was or is to be a party, in which the amount
involved exceeds $60,000, and in which any director or executive officer, or any
security holder who is known by the Company to own of record or beneficially
more than 5% of any class of our common stock, or any member of the immediate
family of any of the foregoing persons, has an interest.
ITEM 20. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
We are neither a reporting issuer in the United States nor a publicly
traded company on any stock exchange. Therefore, there is no trading range in
our shares. Subsequent to the effective date of our registration statement
under the Securities Act of 1933, it is anticipated one or more broker dealers
may make a market in its securities over-the-counter, with quotations carried on
the OTCBB. There is no assurance we will ever be quoted on the OTCBB or any
other exchange.
-49-
Outstanding options, warrants and conversion privileges
We have granted Terry Heard 100,000 options at a price of $0.10 per share
as more fully described on page 56. There are no outstanding warrants or
conversion privileges for our Company.
Shares being offered pursuant to an employee benefit plan or dividend
reinvestment plan
We are offering no shares pursuant to an employee benefit plan or a
dividend reinvestment plan.
Holders of Record of Common Shares
There are 39 stockholders of record including two of our three directors.
Number of Shares under Rule 144
The number of shares which could be sold under Rule 144 is 350,000 shares.
Dividends
No cash or stock dividends have ever been declared by us since our
inception and we are extremely doubtful that any will be declared in the
immediate future; if at all.
Certain United States Tax Considerations for Non-United States Holders
The following is a general discussion of the principal United States
federal income and estate tax consequences of the ownership and disposition of
our common stock by a non-United States holder.
A non-United States holder generally will not be subject to United States
federal income tax on gain recognized on a disposition of our common stock
unless:
- the gain is effectively connected with your conduct of a trade of business
in the United States or, under an income tax treaty, the gain is
attributable to a permanent establishment maintained by you in the United
States;
- you are an individual who holds our common stock as a capital asset, are
present in the United States for 183 days or more in a taxable year of the
disposition and meet other requirements; or
- you are or have been a "United States real property holding corporation"
for United States federal income tax purposes.
The gross proceeds from the disposition of our common stock may be subject to
information reporting and backup withholdings. If you receive payments of the
proceeds of a sale of our common stock to or through a United States office of a
broker, the payment is subject to both United States withholding and information
reporting unless you provide a Form W-8BEN certifying that you are a non-United
States holder or you otherwise establish an exemption.
WE ENCOURAGE AND RECOMMEND THAT EACH NON-UNITED STATES HOLDER CONSULT THEIR TAX
ADVISOR REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES
INCOME AND OTHER TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES
OF OUR COMMON STOCK.
-50-
ITEM 21. EXECUTIVE COMPENSATION
Our directors and officers have not been compensated for their services and
there are no plans to compensate them in the near future until such time as we
generate sufficient revenue to do so.
Compensation of Directors
During the fiscal years ended December 31, 2001, 2002 and 2003 and for the
nine months ended September 30, 2004, we did not pay our directors for any
meetings.
Executive Compensation
The following table set forth the total compensation paid or accrued by us
for the three years ended December 31, 2003 and for the nine months ended
September 30, 2004 on behalf of our named executive officers. In addition, this
table sets forth information with respect to stock option to purchase common
stock granted to our named executive officers during the same periods mentioned
above.
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
Long Term Compensation
Annual Compensation Awards Payouts
(1) Incorporating director who resigned as President and Director on November
6, 2001.
(2) Appointed as a Director, Principal Executive Officer and President on
November 6, 2001.
(3) Appointed as a Director, Principal Financial Officer and Secretary
Treasurer on November 6, 2001.
-51-
(4) Appointed as a Director on November 6, 2001 and resigned in December 1,
2003.
(5) Appointed as a Director on August 15, 2004.
Option Grants in Last Fiscal Year and during the nine months ended September 30,
2004.
The stock options outstanding as at September 30, 2004 are as follows:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d) (e)
Number of Securities % of Total Option/SARs Exercise of
Underlying Options/ Granted to Employees in Base Price Expiration
Name SAR's Grants (#) Fiscal Year ($/Sh) Date
Sam Hirji. . Nil Nil - -
Herbert
Moeller . Nil Nil - -
Terry Heard. 100,000 100 % $ 0.10 September 15, 2009
Employment Agreements with Executive Officers
There are no employment agreements with any officers or directors.
Employment Contracts and Termination of Employment Agreements
We do not have any employment contracts with any of our directors or
officers or any other individual proposed to be an officer or director. There
are no compensation agreements in the event one or more of our officers or
directors terminates his involvement with our Company.
Stock Option Plan
We have never established any form of stock option plan for the benefit of
our directors, officers or future employees. We do not have a long-term
incentive plan nor do we have a defined benefit, pension plan, profit sharing or
other retirement plan.
-52-
ITEM 22. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors
of Henley Ventures, Inc.:
We have audited the accompanying balance sheet of Henley Ventures, Inc. as of
December 31, 2003, and the related statements of operations, stockholders'
deficit, and cash flows for the years ended December 31, 2003, and 2002 and for
the period from January 3, 2001 (inception) through December 31, 2003. 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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about 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 statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects,, the financial position of Henley Ventures, Inc. as of
December 31, 2003, and the results of its operations and its cash flows for the
years ended December 31, 2003 and 2002 and for the period from January 3, 2001
(inception) through December 31, 2003 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company's significant operating losses raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainity.
Cordovano & Honeck, P.C.
Denver, Colorado
December 16, 2004
-53-
HENLEY VENTURES, INC.
(An Exploration Stage Company)
HENLEY VENTURES, INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
NINE MONTH ENDED JANUARY 3, 2001 (inception)
through
SEPTEMBER 30 YEARS ENDED DECEMBER 31 December 31 September 30
2004 2003 2003 2002 2003 2004
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash flows from
operating activities:
Net loss $ (18,111) $ (11,270) $ (15,961) $ (20,138) $ (57,765) $ (75,876)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Contributed rent
And services (Note 2) 9,809 9,789 13,050 13,028 38,940 48,749
Changes in operating
assets and liabilities
Accounts payable 2,637 1,395 2,795 875 7,180 9,817
-------- ------------- --------- ------- ---------- -------
Net cash used in
operating activities (5,665 ) (86) (116) (6,235) (11,645) (17,310)
-------- --------- -------- -------- ---------- --------
Cash flows from
financing activities
Proceeds from related
party debt (Note 2) 120 - - 3,070 8,305 8,425
Proceeds from issuance
of common stock, net
of offering costs
(Note 4) 15,000 - - - 3,500 18,500
--------- -------- -------- --------- --------- -------
Net cash provided by
financing activities 15,120 - - 3,070 11,805 26,925
-------- --------- -------- --------- --------- -------
Net change in cash 9,455 (86) (116) (3,165) 160 9,615
Cash:
Beginning of period 160 276 276 3,441 - -
--------- -------- ------- -------- --------- --------
End of period $ 9,615 $ 190 $ 160 $ 276 $ 160 $ 9,615
======= ======== ======= ======= ======== =======
Supplemental disclosure
of cash flow information:
Cash paid during the
year for:
Income taxes $ - $ - $ - $ - $ - $ -
======== ======== ======== ======== ========= =======
Interest $ - $ - $ - $ - $ - $ -
======== ======== ======== ======== ========= =======
See accompanying notes to financial statements
-57-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIC OF PRESENTATION
Henley Ventures, Inc. was incorporated under the laws of the State of Nevada on
January 3, 2001 for the purpose of acquiring and developing mineral properties.
The Company is in the exploration stage in accordance with Industry Guide 7.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
The financial statements for the nine months ended September 30, 2004 and 2003
presented herein have been prepared by the Company in accordance with generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) which are necessary to provide
a fair presentation of operating results for the interim period presented have
been made. Financial data presented for the nine months ended September 30,
2004 and 2003 are unaudited.
On January 24, 2001, the Company acquired the mineral rights to the HV mineral
claim group (the "HV") from Paul Saulnier, an unrelated individual who is not a
director, officer or shareholder of the Company. The HV was "staked" on
January 24, 2001 by Paul Saulnier on the Company's behalf. "Staking" of a claim
is the method used to verify title to the minerals on the Province of British
Columbia (known as the "Crown') property. The Company has undertaken several
exploration work on the HV to maintain it in good standing until January 24,
2005. The Company holds the rights to the minerals on the HV, except for placer
and coal, but do not have an interest in the land since it is owned by the
Crown.
On July 28, 2004, the Company acquired the mineral rights to the Red Bird claim
(the "Red Bird"), located in British Columbia, by Bill of Sale Absolute from
Richard J. Billingsley for the purchase price of $1,667; the cost incurred by
him to stake the Red Bird on behalf of the Company. The Red Bird claims are
registered in the name of Richard J. Billingsley under his Free Miners' License
#139085. The Company is in procession of a signed Bill of Sale Absolute giving
ownership to the mineral rights of the Red Bird to them. A mineral claim in
the Province of British Columbia has to be held in the name of a resident of the
Province or by a company either incorporated in British Columbia or
extra-provincially incorporated. At the present time, the Company does not
wish to extra-provincially incorporate in British Columbia due to the cost. In
addition, to obtain a Free Miners' License, if the Company were
extra-provincially incorporated, would cost $385 whereas there is no cost to the
Company using Richard Billingsley's Free Miners' License to hold the Red Bird.
By having a Bill of Sale Absolute signed to the Company's benefit, the Company
has control over the mineral rights on the Red Bird. Eventually, the Company
will extra-provincially incorporate but not until sufficient exploration work
has been undertaken on the Red Bird to warrant the cost of doing so. The
Company holds the rights to the minerals on the Red Bird, except for placer and
coal, but do not have an interest in the land since it is owned by the Crown
(Note 3).
The Company's significant operating losses raise substantial doubt about the
ability to continue as a going concern. Inherent in the Company's business are
various risks and uncertainties, including its limited operating history,
historical operating losses, dependence upon strategic alliances, and the
historical success rate of mineral exploration.
The Company's future success is primarily dependent upon the existence of
minerals on the properties for which the Company owns claim to. No minerals
have yet been discovered on the properties. The Company's success will also be
dependent upon its ability to raise sufficient capital to fund its exploration
program and, if minerals are discovered, to mine the discovery on a timely and
cost-effective basis.
-58-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of financial statements and
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from these estimates.
FUNCTIONAL CURRENCY
Although the Company operates in Canada, the financial statements are measured
using U.S. dollars as the functional currency. During the period January 3,
2001 (inception) through December 31, 2003, the Company had a Canadian bank
account and a U.S. bank account, with significant transactions being conducted
from the U.S. bank account. The Canadian bank account was closed as of
September 30, 2004 (unaudited).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid securities with original maturities of
three month or less when acquired to be cash equivalents. There were no cash
equivalents at September 30, 2004 (unaudited) and December 31, 2003.
FINANCIAL INSTRUMENTS
At December 31, 2003, the fair value of the Company's financial instruments
approximate their carrying value based on their terms and interest rates.
MINERAL INTERESTS
Exploration and development expenses are expensed in the period incurred until
such time as the Company establishes the existence of commercial feasibility, at
which time these costs will be deferred. Administrative expenditures are
expensed in the period incurred.
Mineral interest acquisition costs and related interest and financing costs may
be deferred until the property is placed into production, sold or abandoned.
Mineral interest acquisition costs will be deferred only when and if proven and
probable reserves have been found to exist. No proven or probable reserves are
currently known to exist.
Any deferred costs will be amortized on a unit-of-production basis over the
estimated proven and probable reserves of the property following commencement of
commercial production or written off if the property is sold, allowed to lapse
or abandoned.
EARNINGS (LOSS) PER COMMON SHARE
The Company reports loss per share using a dual presentation of basic and
diluted loss per share. Basic loss per share excludes the impact of common
stock equivalent. Diluted loss per share utilizes the average market price per
share when applying the treasury stock method in determining common stock
equivalents. At September 30, 2004 (unaudited) and December 31, 2003, there
were no variances between the basic and diluted loss per share as there were no
potentially diluted securities outstanding.
-59-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109).
SFAS 109 requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a fair value based
method or the method defined in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") to account for stock-based
compensation arrangements. Directors, acting in their capacity as directors,
are in the employee category. Companies that elect to use the method provided
in APB 25 are required to disclose pro forma net income and earnings per share
that would have resulted from the use of the fair value based method. The
Company has elected to continue to determine the value of stock-based
compensation arrangements under the provisions of APB 25 and, accordingly, has
included pro forma disclosures under SFAS No. 123.
(2) RELATED PARTY TRANSACTIONS
The Company's president, who is also a director, contributed the use office
space, including the use of telephone, to the Company for all periods presented.
The office space was valued at $350 per month based on the market rate in the
local area and telephone charges estimated and valued at $200 per month. The
contributed use of office space is included in the accompanying financial
statements as contributed rent expense with a corresponding credit to additional
paid-in capital in the amount of $4,950 (unaudited) and $4,950 (unaudited) for
nine months ended September 30, 2004 and 2003 and $6,600 and $6,600 for periods
ended December 31, 2003 and 2002, respectively.
The president, who is also a director, contributed management services to the
Company for the periods presented. The time and effort was recorded in the
accompanying financial statements based on the prevailing rates for such
services, which equaled $500 per month based on the level of services performed.
The services are reported as contributed services with a corresponding credit to
additional paid-in capital in the amount of $4,500 (unaudited) and $4,500
(unaudited) for nine months ended September 30, 2004 and 2003 and $6,000 and
$6,000 for periods ended December 31, 2003 and 2002, respectively.
From January 3, 2001 (date on inception) through period ended December 31, 2003,
the directors of the Company paid certain organization costs, exploration costs
and certain office expenses on behalf of the Company totaling $7,695. This
balance remains outstanding at December 31, 2003, and is included in the
accompanying financial statements as Indebtedness of related parties. Interest
expense related to the unpaid balance is contributed by the Company's president,
director, and shareholder and is calculated at 5% pert annum with a
corresponding credit to additional paid-in capital in amount of $359 (unaudited)
and $337 (unaudited) for nine months ended September 30, 2004 and 2003 and $450
and $428 for periods ended December 31, 2003 and 2002, respectively.
In December 2001, the Company sold 350,000 shares of its restricted common stock
to its officers and directors for $3,500 ($.01/share).
-60-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(3) MINERAL CLAIMS
HV MINERAL CLAIMS
The HV claim group consists of ten contiguous two-post mineral claims, HV 1 to
HV 10, totaling 25 hectares, located 4 km due east of Port Alberni, on Vancouver
Island, British Columbia, NTS:92F/2 and centered at UTM coordinates: 545000mN
and 3574000mE. Access to the claim group is gained from Port Alberni by
Cameron Main logging road. The south boundary of the claim group is located
near the 5 kilometer sign on the Cameron Main logging road. Access onto the
claim group is best gained by a number of secondary logging roads originating
from Cameron Main that circle and branch up onto Egg Hill.
The HV claim group is listed as follows:
CLAIM NAME TENURE NO. DATE RECORDED
---------- ---------- ----------------
HV 1 . . . 383518 January 24, 2001
HV 2 . . . 383519 January 24, 2001
HV 3 . . . 383520 January 24. 2001
HV 4 . . . 383521 January 24, 2001
HV 5 . . . 383522 January 24, 2001
HV 6 . . . 383523 January 24, 2001
HV 7 . . . 383524 January 24, 2001
HV 8 . . . 383525 January 24, 2001
HV 9 . . . 383526 January 24, 2001
HV 10. . . 383527 January 24, 2001
All the claims are valid for one year. The anniversary date is the annual
occurrence of the date of record which is the staking completion date of the
claim. To maintain a claim the holder must, on or before the anniversary date
of the claim, pay the prescribed recording fee or either: (a) record the
exploration and development work carried out on that claim during the current
anniversary year; (b) pay cash in lieu of work. During 2002, the Company
undertook a work program on the HV claims, which maintained them in good
standing until January 24, 2005.
The HV claim group was covered by a larger mineral claim, the Pat claim, now
expired. It was examined in 1989 by Westmin Resources Ltd. (Crowe, 1989).
Westmin reported minor copper and pyrite mineralization associated with altered
volcanic and sedimentary rocks of the Sicker Group in outcrops along new logging
roads that now lie within the HV claim group. Thirty rock samples collected by
Westmin were analyzed for thirty-one elements. Elevated concentration of Cu,
Ag, Sb, As and B are reported. The best gold value reported was 137 ppb Au
(0.14 grams per tonne).
The Sicker Group hosts a number of volcanic hosted massive sulphide (VMS) ore
deposits, the largest is at Buttle Lake located 75 kilometers northwest of the
HV claim group and considered to be a world class deposit. Small mined out VMS
deposits are present in similar Sicker Group volcanic rocks of the Horne
Lake-Cowinchan uplift at Mount Sicker located 80 kilometers southeast of the HV
claim group.
Significant gold mineralization, hosted in Sicker Group rocks, is located in
Mineral Creek, eight kilometers southeast of the HV claim group. The Mineral
Creek deposits and prospects were explored in detail, including the construction
of an underground exploration tunnel, by Westmin Resources Ltd. in the 1980's.
Gold
-61-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
mineralization occurs over a wide vertical range and is related to the district
scale, north striking and steeply dipping Mineral Creek fault. The style of
mineralization varies form fine pervasive sulphides with gold mineralization in
strongly ankerite, sericite, quartz and pyrite altered volcanic rocks lying
within and in contact with the Mineral Creek fault zone; a quartz-rich veins and
breccia zones, steep and flat dipping, containing coarse gold and lying away
from and on both sides of the Mineral Creek fault; and as disseminated pyrite I
aresenopyrite mineralization hosted in cherty banded iron formation.
No ecomonic mineralization has been identified on the HV claim group.
Traverses along logging roads on the east side of Egg Hill did locate two wide
zones of strong pervasive ankerite altered mafic volcanic rocks of the Sicker
Group, cut locally by narrow quartz-rich veins, and with areas of strong
pervasive silicification. These zone are sulphide poor, containing minor fine
grained crystalline pyrite and traces of a fine, grey coloured sulphide in some
quartz-rich veins. The first ankerite zone seen is exposed in a road cut for
over 10 meters, the second is exposed in a road cut for over 100 meters.
RED BIRD CLAIM
The property is located 3 km northwest of Tulameen, B.C. It occupies the
upland area immediately west of Otter Lake. The southern part of the claims
covers the crest and slopes of the southeasterly trending ridge between Mount
Rabbitt and Mount Riddell.
The claims extend north from the Lawless Creek logging road, 2.5 to 5.0 km west
of Tulameen, to Lockie (Boulder) Creek, an easterly flowing tributary of Otter
Creek.
The upper slopes of Rabbit and Boulder Mountains are gently sloping with deeply
incised creek canyons. The slopes of the valleys of the Tulameen River, Otter
Valley and Lockie Creeks, are steep to precipitous. Elevations vary from 470
metres in Lockie Creek to slightly over 1,500 metres on Rabbit and Boulder
Mountains. The Red Bird Showing is at an elevation of 1,469 metres.
Access to the various showings is provided by steep four-wheel drive roads at
the south ends of the property. The Rabbit Mountain area is accessible by a
network of roads, which leave the main Lawless Creek road between 3.5 and 8.0 km
west of Tulameen. The town of Princeton on the Southern Trans-Provincial
Highway is 27 km by paved highway southeast of Tulameen. The Canadian Pacific
Railway follows the Otter Valley immediately east of the property. The
Coquihalla Toll Highway is located 12 km to the west of the property.
The Red Bird Property is held by one modified grid claim and five 2-post claims
as listed:
LIST OF CLAIMS
Tenure # of Current
Claim Name Number Units Size Expiry Date
Red Bird. . . 412526 20 4S5E July 23, 2006
Red Bird 1. . 412527 1 2 post July 23, 2006
Red Bird 2. . 412528 1 2 post July 23, 2006
Red Bird 3. . 412529 1 2 post July 23, 2006
Red Bird 4. . 412530 1 2 post July 23, 2006
Red Bird 5. . 412531 1 2 post July 23, 2006
-----
Total Units 25
======
-62-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Henley Ventures Inc. reportedly has acquired the Red Bird Property by Bill of
Sale from R. J. Billingsley. The claims are still registered in R B
Billingsley's name (FMC 139085) as of August 2004. A fractional claim (Rainbow
6, Tenure Number 371270) occurs in the center of the Red Bird Claim and is in
good standing until August 21, 2005. The size of the Rainbow 6 Claim is
dependant on the exact location of the forfeited Tyee 1-4 Claims. It is
recommended that Henley Ventures Inc. approach the owner of the Rainbow 6
mineral claim, Thomas Lisle, to understand what are his terms of option. There
are several placer claims along Lockie Creek, which should not normally
interfere with the Red Bird Mineral claims. Each unit is 25ha giving the Red
Bird Property a nominal area of 625ha.
Two 2-post claims supercede parts of Red Bird 1 and 2.
Mineral Title of British Columbia is held via the Mineral Act. Claims are kept
in good standing by applying appropriate assessment work in the amount of $100
per unit per year for the first 3 years and then $200 per unit per year
thereafter.
The Red Bird Property is a large claim block which covers a number of old gold
and copper showings, which were first discovered in the early part of the
century. A considerable amount of somewhat disjointed exploration, including
geochemistry, geophysics, geology, trenching and diamond drilling has been
completed since 1965. However, due to the number of different operators the
database is somewhat fragmented. As a consequence, the strategy behind some of
the diamond drilling programs is not immediately clear from the available
reports.
A probable stratabound horizon of massive sulfide mineralization has been
recognized on the property. The sulfide horizons appear stratabound, lensoid
and show remarkable potential strike length. Sulfide mineralization is hosted
in andesitic to rhyolitic fragmental rocks, which may also replace massive
sulfide mineralization along strike as barren pyretic schists. The massive
sulfide mineralization is tabular to lensoid in shape and apparently concordant
with layering in country rocks, trending northerly and dipping shallowly to the
west. Thickness of the horizons ranges form approximately one to four metres
and sulfide mineralization may contain lenses of acid and intermediate volcanic
rocks. Numerous small scale faults transect and offset sulfide mineralization.
Known sulfide occurrences include the Motherlode-Spokane, Red Bird, Shamrock,
Thynne, and Hilltop (Lloyd George) showings on the south side of Lockie Creek.
Geological mapping of the volcanic succession is essential in predicting the
location of mineralized alkalic plutons. The common occurrence of magnetite
with alkalic intrusions suggest that replotting and reinterpretation of previous
magnetic data will aid in defining target areas. Drilling to test geological
targets is envisaged.
4. CAPITAL STOCK (UNAUDITED)
On September 15, 2004, the directors approved the granting of stock option to
one of its directors whereby 100,000 common shares could be exercised at the
price of $0.10 per shares on or before September 15, 2009 in whole or in part
with a vesting at the rate of 25,000 options at the beginning of every three
month period commencing September 15, 2004 while the director serves of the
Company. (See Note 6)
On August 2004, the Company sold 100,000 common shares (unaudited) at a price of
$0.10 per share under Offering Memorandum dated August 23, 2004 through its own
"best efforts". All shares of common stock
-63-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
offered wee subject to resale restrictions under Regulation D, Rule 504.
Proceeds from the sale of common shares totaled $7,500 (unaudited), net of
offering cost of $2,500 (unaudited).
On June 2004, the Company sold 1,000,000 common shares (unaudited) at a price of
$0.01 per share under Offering Memorandum dated June 15, 2004 through its own
"best efforts". All shares of common stock offered were subject to resale
restrictions under Regulation D, Rule 504. Gross proceeds from the sale of
common shares totaled $7,500 (unaudited), net offering cost of $2,500
(unaudited). Following the June and August 2004 stock sales, the Company had
1,450,000 common shares (unaudited) issued and outstanding.
(5) INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the effective
tax rate is as follows:
DECEMBER 31,
2003 2004
-------- ---------
U.S. statutory federal rate 15.00 % 15.00 %
Contributed rent and services -2.81 % -5.41 %
Net operating loss for which no tax
benefit is currently available -12.19 % -9.59 %
--------- -------
0.00 % 0.00 %
========= =======
At December 31, 2003, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $57,760, which was fully allowed
for in the valuation allowance of $57,760. The valuation allowance offsets the
net deferred tax asset for which there is no assurance of recovery. The change
in the valuation allowance for the year ended December 31, 2003 was $15,956.
Due to the uncertainty of the ultimate utilization of the net operating loss
carryforward, no tax benefit for losses has been provided by the Company in the
accompanying financial statements. The net operating loss carryforward will
expire through the year 2023.
6. STOCK OPTION PLAN (UNAUDITED)
On September 15, 2004, the directors approved the granting of stock options to
one of its directors whereby 100,000 common shares (unaudited) could be
exercised at a price of $0.10 per shares on or before September 12, 2009 in
whole or in part with a vesting at the rate of 25,000 options (unaudited) at the
beginning of every three month period commencing September 15, 2004 while the
director serves to the Company.
The status of the Company's stock-option plan is summarized as follows:
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
The weighted average fair value of options granted during September 2004
estimated on the date of grant using the Black-Scholes option-pricing model was
$.015. The fair value of options granted is estimated on the date of the grant
using the following assumptions: dividend yield of 0%, expected volatility of
0%, risk-free interest rate of 3.39% and an expected life of five years.
Had compensation cost for the Company's stock option grants been determined
consistent with SFAS 123, the Company's net income (loss) and net income (loss)
per share would approximate the pro forma amounts below:
For the
Nine Months Ended
September 30,
2004
-----------
(Unaudited)
Net losses
As reported $ (16,867)
Increased loss due to:
Employee stock option plan (1,500)
---------
Pro forma $ (18,367)
=======
Loss per common shares
As reported $ (0.03)
=======
Pro forma $ (0.04)
=======
-65-
ITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSUREITEM 23. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The principal accountant's report, rendered by Cordovano &Honeck, P.C.,
Denver, Colorado, on the financial statements did not contain adverse opinion or
disclaimer of opinion, or was modified as to uncertainty, audit scope, or
accounting principles. No decision has been made by the shareholders of the
Company to change independent accountants since their appointment by the Board
of Directors on June 30, 2004. There has been no disagreement with the auditors
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures.
DEALER PROSPECTUS DELIVERY INSTRUCTIONS
Until , 2005, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
-66-
PART II - INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Nevada Revised Statutes 78.037 provides that Articles of Incorporation can
contain provisions which eliminate or limit the personal liability of our
officers and directors and even stockholders for damages for breach of fiduciary
duty, but a corporation cannot eliminate or limit a director's or officer's
liability for acts or failure to act which are based on intentional misconduct,
fraud, or a willful violation of law. Our Articles of Incorporation provides
that a director or officer is not personally liable to us or our shareholders
for damages for any breach of fiduciary duty as a director or officer, except
for liability for (i) acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or (ii) the payment of distribution in
violation of Nevada Revised Statures, 78.300.
Additionally, our By-laws provide that we will indemnify our officers and
directors to the fullest extent permitted by the Nevada Revised Statutes,
provided the officer or director acts in good faith and in a manner which he or
she reasonably believes to be in or not opposed to the company's best interest,
and with respect to any criminal matter, had no reasonable cause to believe that
his or her conduct was unlawful. Our By-laws also provide that, to the fullest
extent permitted by Section 78.751 of the Nevada Revised Statutes, we will pay
the expenses of our officers and directors incurred in defending a civil or
criminal action, suit or proceeding, as they are incurred and in advance of the
final disposition of the matter, upon receipt of an undertaking acceptable to
the Board of Directors for the repayment of such advances if it is ultimately
determined by a court of competent jurisdiction that the officer or director is
not entitled to be indemnified.
Subsection (1) of Section 78.7502 of the Nevada Revised Statutes empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party of any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of the fact that
the person is or was a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses (including attorney's fees), judgment, fines, and amounts paid in
settlement actually and reasonably incurred by him or her in connection with the
action, suit, or proceeding if the person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to be the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Subsection (2) of Section 78.7502 of the Nevada Revised Statutes empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in favor by reason of the
fact that such person acted in any of the capacities set forth in subsection (1)
enumerated above, against expenses (including amounts paid in settlement and
attorney's fees) actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if the person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation except that no indemnification may be
made in respect to any claim, issue, or matter as to which such person shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which such action or suit was brought determines that
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnify for such expenses which the court shall deem
proper.
Subsection (3) of Section 78.7502 of the Nevada Revised Statutes provides
that to the extent a director, officer, employee, or agent of a corporation has
been successful in the defense of any action, suit, or proceeding referred to in
subsection (1) and (2) or in the defense of any claim, issue, or matter therein,
that person shall be indemnified against expenses (including attorney's fees)
actually and reasonable incurred by him or her in connection therein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934 or the Rules and
Regulations of the Securities and Exchange Commission
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thereunder may be permitted under said indemnification provisions of the law, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, any such indemnification is against public policy and
is, therefore, unenforceable.
ARTICLES AND BYLAWS. The Company's Articles of Incorporation (Article 12)
and the Company's Bylaws (Article 11) provide that the Company shall, to the
fullest extent permitted by law, indemnify all directors of the Company, as well
as any officers or employees of the Company to whom the Company was agreed to
grant indemnification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Note: except for the SEC registration fee, all other expenses are an estimate.
The Selling Security Holders will not be responsible for any of the above
expenses.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
From inception through to October 31, 2004, we have issued and sold the
following unregistered shares of its common stock (the aggregated value of all
such offerings did not exceed $1,000,000):
(i) Subscription for shares by Directors and Officers
On June 11, 2002, we issued to our President, Sam Hirji, 150,000 shares, to
our Secretary Treasurer, Herb Moeller, 100,000 shares and to another director,
Claus Andrup, 100,000 shares; all these shares being issued at a price of $0.01
per share.
These shares are restricted since they were issued in compliance with the
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended. After this stock has been held for one year, Sam Hirji, Herb
Moeller or Claus Andrup could each sell within a three month period a percentage
of their shares based on 1% of the outstanding stock in our Company. Therefore,
this stock can be sold after the expiration of one year in compliance with the
provisions of Rule 144. There are "stop transfer" instructions placed against
these certificates and a legend has been imprinted on the stock certificates
themselves. We are registering for re-sale each from Sam Hirji and Herbert
Moeller as part of the shares pursuant to this prospectus.
(ii) Subscription for 1,000,000 shares
On June 23, 2004, we accepted subscriptions from 24 investors in the amount
of 1,000,000 shares at a price of $0.01 per share. In all cases, the
consideration was cash. These shares were issued in reliance upon the exemption
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from registration provided by Regulation S as the purchasers were not US Persons
as the term is defined in Regulation S. We are registering the resale of these
common shares issued as part of the shares pursuant to this prospectus. There
are "stop transfer" instructions placed against the certificates representing
these shares and a legend has been imprinted on the stock certificates. These
owners of record of this stock do not own 5% of our outstanding shares and
therefore were not controlling shareholders and none of them were officers and
directors of our company.
(iii) Subscription for 100,000 shares
On August 31, 2004, we accepted subscriptions from 12 investors in the
amount of 100,000 shares at a price of $0.10 per share. In all cases the
consideration was cash. These shares were issued in reliance upon the exemption
from registration provided by Regulation S as the purchasers were not US Persons
as the term is defined in Regulation S. We are registering the resale of these
common shares issued as part of the shares pursuant to this prospectus. There
are "stop transfer" instructions placed against the certificates representing
these shares and a legend has been imprinted on the stock certificates. These
owners of record of this stock do not own 5% of our outstanding shares and
therefore were not controlling shareholders and none of them were officers and
directors of our company.
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ITEM 27. EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- ----------------------------------------------------------------
3 Corporate Charter
3 (i) - Articles of Incorporation
3 (ii) - By-laws
4 Stock Specimen
5 Opinion re. Legality
10 Material contracts
10.1 Transfer Agent and Registrar Agreement
10.2 Bill of Sale Absolute - Red Bird
10.3 Bill of Sale Absolute - HV
11 Statement re: Computation of per share earnings
14 Code of Ethics
23 Consent of experts and counsel
23.1 Consent of legal counsel (refer to Exhibit 5)
23.2 Consent of independent accountants
23.3 Consent of John J. Watkins, Professional Geologist
23.4 Consent of J. T, Shearer, M.Sc., Professional Geologist
99 99.1 Indemnification Agreement (example)
99.2 Audit Committee Charter
99.3 Share Purchase Option
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant to
the foregoing provisions, or otherwise, the registrant has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are made, a
post-effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the Securities
Act;
b. To reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registrant statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424 (b)(S 230.424(b)) of the Securities Act, if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registrant Fee" table in the effective registration statements; and
c. To include any additional or changed material information with respect to
the plan of distribution.
2. For determining liability under the Securities Act to treat each such
post-effective amendment as a registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
3. to file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration to be
signed on its behalf by the undersigned, in the City of Vancouver, British
Columbia, Canada on February 1, 2005.
HENLEY VENTURES INC.
/s/ "Sam Hirji"
--------------------------
Sam Hirji
Principal Executive Officer
President and Director
KNOW ALL MEN BY THESE PRESENT, that each of the persons whose signatures appear
below constitutes and appoint Sam Hirji, as true and lawful attorney-in-fact and
agent, with full power to substitution, for his name, place and stead, in any
and all capacities, to sign any and all amendment (including post-effective
amendments) to this registration statement, and to file the same, therewith the
Securities and Exchange Commission, and to make any and all state securities law
or blue sky filings, granted unto said attorney-in-fact and agent, with full
power and authority to do and perform each and every act and thing requisite or
necessary to be done in about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or any substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act 1933, this
registration statement was signed by the following person in the capacities and
on the dates indicated.
February 1, 2005
/s/ "Sam Hirji"
-----------------
Sam Hirji
Principal Executive Officer,
President and Director
February 1, 2005
/s/ "Herbert Moeller"
-----------------------
Herbert Moeller
Principal Financial Officer,
Secretary Treasurer and Director
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EXHIBIT 3
SECRETARY OF STATE
(SEAL)
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that HENLEY VENTURES INC. did on JANUARY 3, 2001 file in this
office the original Articles of Incorporation; that said Articles are now on
file and of record in the office of the Secretary of State of Nevada, and
further, that said Articles contain all the provisions by the laws of said State
of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, on JANUARY 4, 2001.
/s/ "Dean Heller"
Secretary of State
By /s/ "Angle Clark"
(SEAL IMPRINTED)
Certification Clerk
EXHIBIT 3. (I)
ARTICLES OF INCORORATION
OF
HENLEY VENTURES INC.
* * * * *
The undersigned, acting as incorporator, pursuant to the
provisions of the laws of the State of Nevada relating to private corporations,
hereby adopts the following Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
HENLEY VENTURES INC.
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for
service of process is Nevada Agency and Trust Company, 50 West Liberty Street,
Suite 880, City of Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the
corporation is organized are to engage in any activity or business not in
conflict with the laws of the State of Nevada or of the United States of
America, and without limiting the generality of the foregoing, specifically:
1. [OMNIBUS]. To have to exercise all the powers now or
hereafter conferred by the laws of the State of Nevada upon corporations
organized pursuant to the laws under which the corporation is organized and any
and all acts amendatory thereof and supplemental thereto.
11. [CARRYING ON BUSINESS OUTSIDE STATE). To conduct and carry
on its business or any branch thereof in any state or territory of the United
States or in any foreign country in conformity with the laws of such state,
territory, or foreign country, and to have and maintain in any state, territory,
or foreign country a business office, plant, store or other facility.
111. [PURPOSES TO BE CONSTRUED AS POWERS]. The purposes specified
herein shall be construed both as purposes and powers and shall be in no wise
limited or restricted by reference to, or inference from, the terms of any other
clause in this or any other article, but the purposes and powers specified in
each of the clauses herein shall be regarded as independent purposes and powers,
and the enumeration of specific purposes and powers shall not be construed to
limit or restrict in any manner the meaning of general terms or of the general
powers of the corporation; nor shall the expression of one thing be deemed to
exclude another, although it be of like nature not expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall
have authority to issue an aggregate of TWO HUNDRED MILLION (200,000,000) Common
Capital Shares, PAR VALUE ONE MILL ($0.001) per share for a total capitalization
OF TWO HUNDRED THOUSAND DOLLARS ($200,000).
The holders of shares of capital stock of the corporation
shall not be entitled to pre-emptive or preferential rights to subscribe to any
unissued stock or any other securities which the corporation may now or
hereafter be authorized to issue.
The corporation's capital stock may be issued and sold
from time to time for such consideration as may be fixed by the Board of
Directors, provided that the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting
rights at all shareholders meetings called for the purpose of electing a Board
of Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of
the
corporation shall be governed by a Board of Directors of no more than seven (7)
nor less than one (1) person. The names and addresses of the first Board of
Director are:
NAME ADDRESS
---- -------
Michael Laidlaw 55 Falcon Way
Undine Road
Clipper Quay
Isle of Dogs
London, England E14 9UP
ARTICLE SIX. [ASSESSMENT OF STOCK]. The
capital stock of the corporation, after the amount of the subscription price or
par value has been paid in, shall not be subject to pay debts of the
corporation, and no paid up stock and no stock issued as fully paid up shall
ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and
address of the incorporator of the corporation is as follows:
NAME ADDRESS
---- -------
Amanda Cardinalli 50 West Liberty Street, Suite 880
Reno, Nevada 89501
ARTICLE EIGHT. [PERIOD OF EXISTENCE]. The period of
existence of the corporation shall be perpetual.
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the
corporation shall be adopted by its Board of Directors. The power to alter,
amend, or repeal the By-laws, or to adopt new By-laws, shall be vested in the
Board of Directors, except as otherwise may be specifically provided in the
By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meeting
of stockholders shall be held at such place within or without the State of
Nevada as may be provided by the By-laws of the corporation. Special meetings of
the stockholders may be called by the President or any other executive officer
of the corporation, the Board of Directors, or any member thereof, or by the
record holder or holders of at least ten percent (10%) of all shares entitled to
vote at the meeting. Any action otherwise required to be taken at a meeting of
the stockholders, except election of directors, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
stockholders having at least a majority of the voting power.
ARTICLE ELEVEN . [CONTRACTS OF CORPORATION].
No contract or other transaction between the corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by this corporation, and no act of this
corporation shall in any way be affected or invalidated by the fact that any of
the directors of this corporation are peculiarly or otherwise interested in, or
are directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be peculiarly or otherwise interested in any contract
or transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation, or a majority thereof; and any director
of this corporation who is also a director or officer of such other corporation,
or who is so interested, may be counted in determining the existence of a quorum
at any meeting of the Board of Directors of this corporation that shall
authorize such contract or transaction, and may vote thereat to authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE.TWELVE. [LIABILITY OF DIRECTORS AND
OFFICERS]. No director or officer shall have any personal liability to the
corporation or its stockholders for damages for breach of fiduciary duty as a
director or officer, except that this Article Twelve shall not eliminate or
limit the liability of a director or officer for (i) acts or omissions which
involve intentional misconduct, fraud or a knowing violation of law, or (ii)
the payment of dividends in violation of the Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto
affixed her signature at Reno, Nevada this 3rd day of January, 2001.
by /s/ "Amanda Cardinalli"
------------------------------
AMANDA CARDINALLI
CONSENT TO SERVE AS RESIDENT AGENT
The Nevada Agency and Trust Company, located at 50 West Liberty Street,
Suite 880, Reno, Nevada 89501, hereby consents to serve as Resident Agent in the
State of Nevada for the following corporation:
HENLEY VENTURES INC.
We understand that as agent for the Corporation, it will be our
responsibility to receive service of process in the name of the Corporation; to
forward all mail to the Corporation; and to immediately notify the office of the
Secretary of State in the event of our resignation, or any changes in the
registered office of the Corporation for which we are an agent.
IN WITNESS WHEREOF, the undersigned authorized
representative of the Nevada Agency and Trust Company has hereunto affixed her
signature at Reno, Nevada this 3rd day of January 2001.
by /s/ "Amanda Cardinalli"
------------------------------
AMANDA CARDINALLI
EXHIBIT 3. (II)
BY LAWS
OF
HENLEY VENTURES INC.
A NEVADA CORPORATION
ARTICLE I
OFFICES
SECTION 1. The registered office of this corporation shall be in the
City of Reno, State of Nevada.
SECTION 2. The Corporation may also have offices at such other
places both within and without the State of Nevada as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 1. All annual meetings of the stockholders shall be held
at the registered office of the corporation or at such other place within or
without the State of Nevada as the Directors shall determine. Special meetings
of the stockholders may be held at such time and place within or without the
State of Nevada as shall be stated in the notice of the meeting, or in a duly
executed waiver of notice thereof.
SECTION 2. Annual meetings of the stockholders shall be held on
the anniversary date of incorporation each year if not a legal holiday and, and
if a legal holiday, then on the next secular day following, or at such other
time as may be set by the Board of Directors from time to time, at which the
stockholders shall elect by vote a Board of Directors and transact such other
business as may properly be brought before the meeting.
SECTION 3. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called by the President or the Secretary, by resolution of
the Board of Directors or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose of the
proposed meeting.
SECTION 4. Notices of meetings shall be in writing and signed by
the President or Vice-President or the Secretary or an Assistant Secretary or by
such other person or persons as the Directors shall designate. Such notice shall
state the purpose or purposes for which the meeting is called and the time and
the place, which may be within or without this State, where it is to be held. A
copy of such notice shall be either delivered personally to or shall be mailed,
postage prepaid, to each stockholder of record entitled to vote at such meeting
not less than ten nor more than sixty days before such meeting. If mailed, it
shall be directed to a stockholder at his address as it appears upon the records
of the corporation and upon such mailing of any such notice, the service thereof
shall be complete and the time of the notice shall begin to run from the date
upon which such notice is deposited in the mail for transmission to such
stockholder. Personal delivery of any such notice to an officer of the
corporation or association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or partnership. In the
event of the transfer of stock after delivery of such notice of and prior to the
holding of the meeting, it shall not be necessary to deliver or mail such notice
of the meeting to the transferee.
SECTION 5. Business transactions at any special meeting of
stockholders shall be limited to the purpose stated in the notice.
SECTION 6. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Articles of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcements
at the meeting, until a quorum shall be presented or represented. At such
adjourned meetings at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
SECTION 7. When a quorum is not present or represented at any
meeting, the vote of the holders of 10% of the stock having voting power present
in person or represented by proxy shall be sufficient to elect Directors or to
decide any question brought before such meeting, unless the question is one upon
which by express provision of the statute or of the Articles of Incorporation, a
different vote shall govern and control the decision of such question.
SECTION 8. Each stockholder of record of the corporation shall be
entitled at each meeting of the stockholders to one vote for each share standing
in his name on the books of the corporation. Upon the demand of any stockholder,
the vote for Directors and the vote upon any question before the meeting shall
be by ballot.
SECTION 9. At any meeting of the stockholders any stockholder
may be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such instrument in writing shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall have and may
exercise all the powers conferred by such written instruction upon all of the
persons so designated unless the instrument shall otherwise provide. No proxy or
power of attorney to vote shall be voted at a meeting of the stockholders unless
it shall have been filed with the Secretary of the meeting when required by the
inspectors of election. All questions regarding the qualifications of voters,
the validity of proxies and the acceptance of or rejection of votes shall be
decided by the inspectors of election who shall be appointed by the Board of
Directors, or if not so appointed, then by the presiding officer at the meeting.
SECTION 10. Any action which may be taken by the vote of the
stockholders at a meeting may be taken without a meeting if authorized by the
written consent of stockholders holding at least a majority of the voting power,
unless the provisions of the statute or the Articles of Incorporation require a
greater proportion of voting power to authorize such action in which case such
greater proportion of written consents shall be required.
ARTICLE 3
DIRECTORS
SECTION 1. The business of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders.
SECTION 2. The number of Directors which shall constitute the
whole board shall be not less than one and not more than eight. The number of
Directors may from time to time be increased or decreased to not less than one
nor more than eight by action of the Board of Directors. The Directors shall be
elected at the annual meeting of the stockholders and except as provided in
section 2 of this Article, each Director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
SECTION 3. Vacancies in the Board of Directors including those
caused by an increase in the number of Directors, may be filed by a majority of
the remaining Directors, though less than a quorum, or by a sole remaining
Director, and each Director so elected shall hold office until his successor is
elected at the annual or a special meeting of the stockholders. The holders of a
two-thirds of the outstanding shares of stock entitled to vote may at any time
peremptorily terminate the term of office of all or any of the Directors by vote
at a meeting called for such purpose or by a written statement filed with the
Secretary or, in his absence, with any other officer. Such removal shall be
effective immediately, even if successors are not elected simultaneously and the
vacancies on the Board of Directors resulting therefrom shall only be filled
from the stockholders.
A vacancy or vacancies on the Board of Directors
shall be deemed to exist in case of death, resignation or removal of any
Director, or if the authorized number of Directors be increased, or if the
stockholders fail at any annual or special meeting of stockholders at which any
Director or Directors are elected to elect the full authorized number of
Directors to be voted for at that meeting.
The stockholders may elect a Director or Directors
at any time to fill any vacancy or vacancies not filled by the Directors. If the
Board of Directors accepts the resignation of a Director tendered to take effect
at a future time, the Board or the stockholders shall have power to elect a
successor to take office when the resignation is to become effective
No reduction of the authorized number of Directors
shall have the effect of removing any Director prior to the expiration of his
term of office.
ARTICLE 4
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. Regular meetings of the Board of Directors shall be
held at any place within or without the State which has been designated from
time to time by resolution of the Board or by written consent of all members of
the Board. In the absence of such designation regular meetings shall be held at
the registered office of the corporation. Special meetings of the Board may be
held either at a place so designated or at the registered office.
SECTION 2. The first meeting of each newly elected Board of
Directors shall be held immediately following the adjournment of the meeting of
stockholders and at the place thereof. No notice of such meeting shall be
necessary to the Directors in order legally to constitute the meeting, provided
a quorum be present. In the event such meeting is not so held, the meeting may
be held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.
SECTION 3. Regular meetings of the Board of Directors may be held
without call or notice at such time and at such place as shall from time to time
be fixed and determined by the Board of Directors.
SECTION 4. Special meetings of the Board of Directors may be
called by the Chairman or the President or by the Vice-President or by any two
Directors. Written notice of the time and place of
special meetings shall be delivered personally to each Director, or sent to each
Director by mail or by other form of written communication, charges prepaid,
addressed to him at his address as it is shown upon the records or if not
readily ascertainable, at the place in which the meetings of the Directors are
regularly held. In case such notice is mailed or telegraphed, it shall be
deposited in the postal service or delivered to the telegraph company at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered or taxed, it shall be so delivered or taxed at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, telegraphing, delivery or taxing as above provided shall be due, legal
and personal notice of such Director.
SECTION 5. Notice of the time and place of holding an adjourned
meeting need not be given to the absent Directors if the time and place be fixed
at the meeting adjourned.
SECTION 6. The transaction of any meeting of the Board of
Directors, however called and noticed or wherever held, shall be as valid as
though transacted at a meeting duly held after regular call and notice, if a
quorum be present, and if, either before or after such meeting, each of the
Directors not present signs a written waiver of notice, or a consent of holding
such meeting, or approvals of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SECTION 7. The majority of the authorized number of Directors
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done or made by
a majority of the Directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a greater
number be required by law or by the Articles of Incorporation. Any action of a
majority, although not at a regularly called meeting, and the record thereof, if
assented to in writing by all of the other members of the Board shall be as
valid and effective in all respects as if passed by the Board in regular
meeting.
SECTION 8. A quorum of the Directors may adjourn any Directors
meeting to meet again at stated day and hour; provided, however, that in the
absence of a quorum, a majority of the Directors present at any Directors
meeting, either regular or special, may adjourn from time to time until the time
fixed for the next regular meeting of the Board.
ARTICLE 5
COMMITTEES OF DIRECTORS
SECTION 1. The Board of Directors may, by resolution adopted by
a majority of the whole Board, designate one or more committees of the Board of
Directors, each committee to consist of two or more of the Directors of the
corporation which, to the extent provided in the resolution, shall and may
exercise the power of the Board of Directors in the management of the business
and affairs of the corporation and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee or
committees shall have such name or names as may be determined from time to time
by the Board of Directors. The members of any such committee present at any
meeting and not disqualified from voting may, whether or not they constitute a
quorum, unanimously appoint another member of the Board of Directors to act at
the meeting in the place of any absent or disqualified member. At meetings of
such committees, a majority of the members or alternate members at any meeting
at which there is a quorum shall be the act of the committee.
SECTION 2. The committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors.
SECTION 3. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board of Directors or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
ARTICLE 6
COMPENSATION OF DIRECTORS
SECTION 1. The Directors may be paid their expenses of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
Director. No such payment shall preclude any Director from serving the
corporation in any other capacity and receiving compensation therefore. Members
of special or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE 7
NOTICES
SECTION 1. Notices to Directors and stockholders shall be in
writing and delivered personally or mailed to the Directors or stockholders at
their addresses appearing on the books of the corporation. Notices to Directors
may also be given by fax and by telegram. Notice by mail, fax or telegram shall
be deemed to be given at the time when the same shall be mailed.
SECTION 2. Whenever all parties entitled to vote at any
meeting, whether of Directors or stockholders, consent, either by a writing on
the records of the meeting or filed with the Secretary, or by presence at such
meeting or oral consent entered on the minutes, or by taking part in the
deliberations at such meeting without objection, the doings of such meeting
shall be as valid as if had at a meeting regularly called and noticed, and at
such meeting any business may be transacted which is not excepted from the
written consent to the consideration of which no objection for want of notice is
made at the time, and if any meeting be irregular for want of notice or such
consent, provided a quorum was present at such meeting, the proceedings of said
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting; and such consent or approval of stockholders
may be by proxy or attorney, but all such proxies and powers of attorney must be
in writing.
SECTION 3. Whenever any notice whatever is required to be given
under the provisions of the statute, of the Articles of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE 8
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. Any
person may hold two or more offices.
SECTION 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chairman of the Board who shall be
a Director, and shall choose a President, a Secretary and a Treasurer, none of
whom need be Directors.
SECTION 3. The Board of Directors may appoint a Vice-Chairman of
the Board, Vice-Presidents and one or more Assistant Secretaries and Assistant
Treasurers and such other officers and agents as it shall deem necessary who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors.
SECTION 4. The salaries and compensation of all officers of the
corporation shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office at
the pleasure of the Board of Directors. Any officer elected or appointed by the
Board of Directors may be removed any time by the Board of Directors. Any
vacancy occurring in any office of the corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
SECTION 6. The CHAIRMAN OF THE BOARD shall preside at meetings
of the stockholders and the Board of Directors, and shall see that all orders
and resolutions of the Board of Directors are carried into effect.
SECTION 7. The VICE-CHAIRMAN shall, in the absence or disability
of the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board and shall perform other such duties as the Board of
Directors may from time to time prescribe.
SECTION 8. The PRESIDENT shall be the chief executive officer of
the corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all instruments
requiring such execution except to the extent the signing and execution thereof
shall be expressly designated by the Board of Directors to some other officer or
agent of the corporation.
SECTION 9. The VICE-PRESIDENTS shall act under the direction of
the President and in absence or disability of the President shall perform the
duties and exercise the powers of the President. They shall perform such other
duties and have such other powers as the President or the Board of Directors may
from time to time prescribe. The Board of Directors may designate one or more
Executive Vice-Presidents or may otherwise specify the order of seniority of the
Vice-Presidents. The duties and powers of the President shall descend to the
Vice-Presidents in such specified order of seniority.
SECTION 10. The SECRETARY shall act under the direction of the
President. Subject to the direction of the President he shall attend all
meetings of the Board of Directors and all meetings of the stockholders and
record the proceedings. He shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and will
perform other such duties as may be prescribed by the President or the Board of
Directors.
SECTION 11. The ASSISTANT SECRETARIES shall act under the
direction of the President. In order of their seniority, unless otherwise
determined by the President or the Board of Directors, they shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform other such duties and have such
other powers as the President and the Board of Directors may from time to time
prescribe.
SECTION 12 The TREASURER shall act under the direction of the
President. Section Subject to the direction of the President he shall have
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all money and other valuable effects in the name and to the credit
of the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the President or the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
corporation.
If required by the Board of Directors, the
Treasurer shall give the corporation a bond in such sum and with such surety as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
SECTION 13. The ASSISTANT TREASURERS in order of their seniority,
unless otherwise determined by the President or the Board of Directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
ARTICLE 9
CERTIFICATES OF STOCK
SECTION 1. Every stockholder shall be entitled to have a
certificate signed by the President or a Vice- President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more that one series of any class, the designations, preferences and relative,
participating, optional or other special rights of the various classes of stock
or series thereof and the qualifications, limitations or restrictions of such
rights, shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock.
SECTION 2. If a certificate is signed (a) by a transfer agent
other than the corporation or its employees or (b) by a registrar other than the
corporation or its employees, the signatures of the officers of the corporation
may be facsimiles. In case any officer who has signed or whose facsimile
signatures have been placed upon a certificate shall cease to be such officer
before such certificate is issued, such certificate may be issued with the same
effect as though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
SECTION 3. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost or destroyed.
SECTION 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duty endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation, if it is satisfied that all
provisions of the laws and regulations applicable to the corporation regarding
transfer and ownership of shares have been compiled with, to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
SECTION 5. The Board of Directors may fix in advance a date not
exceeding sixty (60) days nor less than ten (I0) days preceding the date of any
meeting of stockholders, or the date of the payment of any dividend, or the date
of the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining the consent of stockholders for any purpose, as a record date for the
termination of the stockholders entitled to notice of and to vote at any such
meeting, and any adjournment thereof, or entitled to receive payment of any such
dividend, or to give such consent, and in the such case, such stockholders, and
only such stockholders as shall be stockholders of record on the date so fixed,
shall be entitled to notice of and to vote as such meeting, or any adjournment
thereof, or to receive such payment of dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
such record date fixed as aforesaid.
SECTION 6. The corporation shall be entitled to recognize the
person registered on its books as the owner of the share to be the exclusive
owner for all purposes including voting and dividends, and the corporation shall
not be bound to recognize any equitable or other claims to or interest in such
shares or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
ARTICLE 10
GENERAL PROVISIONS
SECTION 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the Articles of Incorporation.
SECTION 2. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends or for repairing and maintaining any property of the corporation, or
for such other purpose as the Directors shall think conducive to the interests
of the corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
SECTION 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SECTION 5. The corporation may or may not have a corporate seal,
as may be from time to time determined by resolution of the Board of Directors.
If a corporate seal is adopted, it shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" and "Nevada". The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE 11
INDEMNIFICATION
Every person who was or is a party or is a threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a Director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a Director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise, shall
be indemnified and held harmless to the fullest legally permissible under the
General Corporation Law of the State of Nevada from time to time against all
expenses, liability and loss (including attorney's fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and Directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such Directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a Director or officer of the
corporation, or is or was serving at the request of the corporation as a
Director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
The Board of Directors may form time to time adopt further Bylaws with respect
to indemnification and amend these and such Bylaws to provide at all times the
fullest indemnification permitted by the General Corporation Law of the State of
Nevada.
ARTICLE 12
AMENDMENTS
SECTION 1. The Bylaws may be amended by a majority vote of all
the stock issued and outstanding and entitled to vote at any annual or special
meeting of the stockholders, provided notice of intention to amend shall have
been contained in the notice of the meeting.
SECTION 2. The Board of Directors by a majority vote of the whole
Board at any meeting may amend these Bylaws, including Bylaws adopted by the
stockholders, but the stockholders may from time to time specify particulars of
the Bylaws which shall not be amended by the Board of Directors.
APPROVED AND ADOPTED NOVEMBER 6, 2001.
CERTIFICATE OF THE SECRETARY
I, Herbert Moeller, hereby certify that I am the Secretary of HENLEY VENTURES
INC., and the foregoing Bylaws, consisting of 11 pages, constitute the code of
Bylaws of this company as duly adopted at a regular meeting of the Board of
Directors of the corporation held on November 6, 2001.
IN WITNESS WHEREOF, I have hereunto subscribed my name on November 6, 2001.
/s/"Herbert Moeller"
---------------------
Herbert Moeller, Secretary Treasurer
EXHIBIT 4
SPECIMEN STOCK CERTIFICATE
NUMBER SHARES
COMMON STOCK COMMON STOCK
CUSIP 42550W 10 5
HENLEY VENTURES INC.
SHARES AUTHORIZED: 200000000
PAR VALUE: $0.001
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF
======= HENLEY VENTURES INC. =======
transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
Witness this facsimile seal of said Corporation and the facsimile signatures of
this duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
CORPORATE SEAL
EMPIRE STOCK TRANSFER INC.
1001 Fourth Avenue, Suite 3827
Seattle, Washington, 98154
(206) 682-7626 FAX (206) 682-9963
FEBRUARY 1, 2005
Henley Ventures Inc.
Third Floor - 830 West Pender Street
Vancouver, British Columbia, Canada
V6C 1J8
Re: Registration Statement on Form SB-2
Gentlemen:
We have acted as counsel to Henley Ventures, Inc., a Nevada corporation (the
"Company") in connection with rendering an opinion as to the validity of the
issuance of stock and its non-assessability in connection with a Registration
Statement on Form SB-2 (the "Registration Statement") for the sale of up to
1,220,000 shares of common stock of the Company, par value $0.001 per share (the
"Common Stock"), all of which is in the hands of selling shareholders.
We have reviewed the Certificate of Incorporation of the Company and such other
documents that we considered necessary in order to render this opinion. As a
result of our review, we are of the opinion that, assuming payment in full of
the purchase price therefore and the validity of the resolutions approving the
issuance of the Common Stock, the shares of Common Stock were validly issued,
fully paid and nonassessable.
This opinion is limited to applicability of the Nevada General Corporation Law
to the issuance of the shares of Common Stock. We have not participated in the
preparation or review of the Registration Statement, nor do we express any
opinion thereon. This opinion does not cover nor is it in any way related to
the applicability of, or compliance by the Company or any shareholder with, any
other law, including any federal or state securities laws, any other state law
or any other federal law, nor do we approve or express any opinion, express or
implied, with respect to any of the material contained in the Registration
Statement, or any material that may have been omitted therefrom, or any other
matter respecting the registrant.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ "Frank W. Birkholz,
EXHIBIT 10.1
STOCK TRANSFER AGENT AND REGISTRAR AGREEMENT
THIS AGREEMENT is made and entered into on July 15, 2004
BETWEEN:
EMPIRE STOCK TRANSFER INC., a body corporate duly incorporated under the
laws of the State of Nevada and having an office situated at 7251 West Lake
Mead Boulevard, Suite 300, Las Vegas, NV 89128 (the "Transfer Agent")
AND:
HENLEY VENTURES INC., a body corporate duly incorporated under the laws of
the State of Nevada and having an office situated at 3rd Floor, 830 West
Pender Street, Vancouver, British Columbia, Canada, V6C 1J3 (the "Company")
In consideration of the mutual premises, covenants and agreements contained
herein, the parties agree as follows:
1. The Company hereby appoints Transfer Agent as the sole Transfer Agent and
Registrar for the Company's capital stock.
2. The Company warrants and represents to the Transfer Agent that the Company
has full power and absolute capacity to enter into this Agreement and that
the terms of this Agreement have been authorized by all necessary corporate
acts and deeds in order to give effect to the terms hereof, including the
execution of this Agreement by the authorized signatory indicated below.
3. The Company agrees to provide the Transfer Agent with a current, accurate
and complete shareholder list, inclusive of shareholder names, addresses,
applicable social security numbers, number of shares, dates of issue and
the certificate numbers by which these shares are represented. The Company
also covenants to notify the Transfer Agent of material changes in its
affairs that may affect the Transfer Agent's provision of services
hereunder including, without limitation, a change in directors, officers,
management and/or affiliates of the Company; alteration of the Company's
capitalization by way of split or reverse split; a change of Company name;
or a change of Company address. The Company agrees to indemnify and hold
harmless the Transfer Agent for any errors or omissions made on the part of
the Company or its previous transfer agent with respect to information
provided, or a failure to provide information, to the Transfer Agent.
4. The Transfer Agent agrees to maintain the Company's shareholder records in
accordance with accepted standards and agrees to process and register the
Company's transfers. The Transfer Agent agrees to make available these
records in the form of a shareholder list upon written request by an
authorized officer or agent of the Company.
5. The Company agrees to pay the transfer agent a fee of $500 to cover initial
costs. Other fees may include, without limitation, transfers borne by the
Company, shareholder lists, mailing labels, distributions and proxy
tabulation. In addition, the Company agrees to pay all expenses incurred by
the result of a lawsuit or government investigation including all legal and
professional fees, travel expenses, copying of documents, and postage or
courier fees.
6. The Transfer Agent shall not be under any obligation to prosecute or defend
any action or suit in respect of the Company unless the Company shall, so
often as required, furnish the Transfer Agent with satisfactory indemnity
and funding against such expense or liability.
7. This agreement may be terminated upon the delivery of written notice by one
party to the other at least thirty (30) days prior to the effective date of
termination. Upon termination, the Company agrees to pay all outstanding
fees owed to the Transfer Agent. The Transfer Agent shall have the
authority to hold the books and records of the Company until it has
received such payment.
IN WITNESS WHEREOF the parties hereto have hereunto affixed their respective
hands and seals or corporate seals, as the case may be, both as of the day and
year first above written.
HENLEY VENTURES INC. . . . . . . . . . . EMPIRE STOCK TRANSFER INC.
__/s/__"Sam_Hirji"______________________ __/s/__"Leah_Finke"___________________________
---------------------------------------- ----------------------------------------------
Sam Hirji. . . . . . . . . . . . . . . . Signature
Chief Executive Officer, President and
Director . . . . . . . . . . . . . . . . President
Title. . . . . . . . . . . . . . . . . . Title
EXHIBIT 10.2
BRITISH Ministry of Employment and Investment
COLUMBIA Energy and Minerals Division
Mineral Titles Branch
Mineral Tenure Number
Section 57 and 58
BILL OF SALE ABSOLUTE
Indicate Type of Title: MINERAL
(Mineral or Placer)
MINING DIVISION: SIMILKAMEEN
SELLER PURCHASER
I, RICHARD BILLINGSLEY HENLEY VENTURES INC.
11114 147A Street 3rd Floor - 830 West Pender Street
Surrey, B.C. Vancouver, British Columbia
V3R 3W2 604-868 2475 V6C 1J8
Client Number: 139085
For and in consideration of the sum of ONE dollars ($1.00)
Paid to me, do hereby sell the interest as specified below in the following
mineral titles:
CLAIM NAME OR LEASE TENURE PERCENTAGE OF
TYPE NUMBER TITLE BEING SOLD
---- ------ ------------------
RED BIRD 412526 100%
RED BIRD 1 412527 100%
RED BIRD 2 412528 100%
RED BIRD 3 412529 100%
RED BIRD 4 412530 100%
RED BIRD 5 412531 100%
I declare that I have a good title to these tenures and every right to sell the
same, in witness whereof I have today signed my legal name.
July 28, 2004
---------------
(Date)
/s/ "Gaye Richards" /s/ "R.J. Billingsley"
--------------------- ------------------------
(Signature of Witness) (Signature of Seller)
If a corporation, either the corporate seal or signature of a signing officer
with position in corporation stated.
EXHIBIT 10.3
BRITISH Ministry of Employment and Investment
COLUMBIA Energy and Minerals Division
Mineral Titles Branch
Mineral Tenure Number
Section 57 and 58
BILL OF SALE ABSOLUTE
Indicate Type of Title: MINERAL
(Mineral or Placer)
MINING DIVISION: ALBERNI M.D.
SELLER PURCHASER
I, PAUL SAULNIER HENLEY VENTURES INC.
RR#2 Site 222 C4 3rd Floor - 830 West Pender Street
Port Alberni, B.C. Vancouver, British Columbia
V9Y 7L6 (250) 724-1309 V6C 1J8
Client Number: 123745
For and in consideration of the sum of ONE dollars ($1.00)
Paid to me, do hereby sell the interest as specified below in the following
mineral titles:
CLAIM NAME OR LEASE TENURE PERCENTAGE OF
TYPE NUMBER TITLE BEING SOLD
---- ------ ------------------
HV - 1-10 100%
I declare that I have a good title to these tenures and every right to sell the
same, in witness whereof I have today signed my legal name.
Jan. 25, 2001
---------------
(Date)
/s/ "P. Shoemaker" /s/ "P. Saulnier"
-------------------- -------------------
(Signature of Witness) (Signature of Seller)
If a corporation, either the corporate seal or signature of a signing officer
with position in corporation stated.
EXHIBIT 11
STATEMENT RE. COMPUTATION OF PER SHARE EARNINGS
The following calculation of per share earnings is based on the average number
of shares outstanding for the nine months ended September 30, 2004.
Average number of shares outstanding for the nine months ended September 30,
2004: 490,000 shares (i)
Loss for the nine months ended September 30, 2004: $ 18,111
Net loss per common share: $ (0.04)
(i) This has been calculated based on 350,000 shares being outstanding for the
entire year; 1,000,000 shares being outstanding for 68 days and 100,000
shares being outstanding for 30 day. This calculation does not include the
100,000 stock options granted to Terry Heard.
No shares have been issued between September 30, 2004 and the date of this Form
SB-2.
EXHIBIT 14
HENLEY VENTURES INC
CODE OF ETHICS
FOR CHIEF EXECUTIVE, FINANCIAL AND OTHER OFFICERS
Henley Ventures Inc. (the "Company") is seeking to establish ethical conduct in
its financial management and reporting. As a Company that hopes to eventually
seek a quotation on the Over-the-Counter Bulletin Board, it is essential that
the Company's filings with the Securities and Exchange Commission are accurate,
complete and understandable. Senior financial officers hold an important and
elevated role in this process. This Code applies to:
(i) the Chief Executive Officer, the President, the Chief Financial Officer,
Chief Accounting Officer and the Secretary Treasurer of the Company, and
(ii) any other persons that may be designated by the Board of Directors (each, a
"Senior Officer".
Each Senior Officer shall:
1. Act with honesty and integrity, avoiding actual or apparent conflicts of
interest in personal and professional relationships.
2. Provide the Board of Directors with information that is accurate, complete,
objective, relevant, timely and understandable.
3. Comply with laws, rules and regulations of federal, state and local
governments and regulatory agencies.
4. Act in good faith, responsibly, with due care, competence and diligence,
without misrepresenting material facts or allowing his or her independent
judgment to be subordinated.
5. Respect the confidentiality of information acquired in the course of his or
her work at the Company except when authorized or otherwise legally
obligated to disclose. Confidential information acquired in the course of
his or her work will not be used for personal advantage.
6. Share knowledge and maintain skills important and relevant to the Company's
needs.
7. Proactively promote ethical behavior within the Company.
8. Promote responsible use of and control over all Company assets and
resources.
9. Disclose information required to be included in periodic reports filed with
the Securities and Exchange Commission or required to be provided to any
other governmental entity fully and fairly and in an understandable manner.
Violations of this Code of Ethics may subject a Senior Officer to disciplinary
action, ranging from a reprimand to dismissal and possible criminal prosecution.
Each Senior Officer shall certify each year that such Officer has not violated
this Code and is not aware of any violations of the Code that have not been
reported to the Board of Directors.
This Code may be amended, modified or waived by the Board of Directors, subject
to the disclosure and other provisions of the Securities Exchange Act of 1934,
and the rules thereunder.
EXHIBIT 23.3
JOHN J. WATKINS, PROFESSIONAL GEOLOGIST
3821 Meredith Drive
Royston, British Columbia
Canada
(TEL: 250-338-9345)
September 23, 2004
Henley Ventures Inc.
Suite 300
830 West Pender Street
Vancouver, British Columbia
Canada, V6C 1J8
ATTENTION: MR. SAM HIRJI, PRESIDENT
Dear Mr. Hirji:
This letter represents my consent for the inclusion, in whole or in part, in a
Form SB-2 registration statement to be filed with the United States Securities
and Exchange Commission of my geological report dated April 18, 2001 on the mine
potential and recommendations of work on the HV mineral claim group located in
the Alberni Mining Division of British Columbia, Canada.
Sincerely yours;
/ "J. J. Watkins"
John J. Watkins, P. Geo.
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
Securities and Exchange Commission
Washington, D.C.
We consent to the use in this Registration Statement of Henley Ventures, Inc. on
Form SB-2, of our report dated December 16, 2004, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Financial
Information" and "Experts" in this Prospectus.
"Cordovano and Honeck, LLP"
Cordovano and Honeck, LLP
(formerly Cordovano and Honeck, P.C.)
Denver, Colorado
January 24, 2005
EXHIBIT 23.4
J. T. SHEARER, M.SC., P. GEO.
Independent Consulting Geologist
Unit #5 - 2330 Tyner Street
Port Coquitlam, British Columbia
Canada, V3C 2Z1
Phone: 604-970-6402
Fax: 604-944-6102
E-mail: jo@HomegoldResourcesLtd.com
September 2, 2004
Henley Ventures Inc.
Suite 300 - 830 West Pender Street
Vancouver, British Columbia
Canada, V6C 1J8
ATTENTION: MR. SAM HIRJI
President and Director
re: Summary Report
Red Bird, Red Bird 1-5
Tulameen Area, South-Central British Columbia
Similkameen Mining Division
I hereby give my consent to the use of the above noted Summary Report prepared
by me on August 15, 2004 to be included in your company's filing of a Form SB-2
with the United Securities and Exchange Commission.
Yours very truly;
/s/ "J. Shearer"
J. T. Shearer, M.Sc., P. Geo.
EXHIBIT 99.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this 31st day of October 2002 and
between HENLEY VENTURES INC. a Nevada corporation (the "Corporation"), and SAM
HIRJI ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his/her
capacity as a Director of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the General Corporation Law in the State of
Nevada, as amended (the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to serve and continue to serve as
Director of the Corporation, the Corporation has determined and agreed to enter
into this Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's service and continued service
as after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
shareholders of the Corporation, as Director of the Corporation or as a
director, officer or other fiduciary of an affiliate of the Corporation
(including any employee benefit plan of the Corporation) faithfully and to the
best of his ability so long as he is duly elected and qualified in accordance
with provisions of the Bylaws or other applicable charter documents of the
Corporation or such affiliate; provided, however, that Agent may at any time and
for any reason resign for such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to the adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(A) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by his in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, employee or other agent of another corporation, partnership joint
venture, trust, employee benefit plan or other enterprise; and
(B) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(A) on account of any claim against Agent for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and the amendments thereto or similar provisions of any federal, state or
local statutory law; or
(B) if such indemnification is not lawful, and in such case, only
to the extent such indemnification is not lawful.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee, or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than sixty (60) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement, or
under this Agreement except to the extent the Corporation is directly prejudiced
by such failure to so notify the Corporation. With respect to any such action,
suit or proceeding:
(A) the Corporation will be entitled to participate therein at its
own expense;
(B) except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel reasonably
satisfactory to Agent to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Agent shall have made the conclusion provided for in clause (ii)
above; and
(C) The Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement for any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent, or any non-monetary obligation, without Agent's written
consent, which may be given or withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefore, all
expenses incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws or the Code.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, (ii) no disposition of such claim is made within
thirty (30) days of request therefore, or (iii) the Corporation should fail to
comply with the provisions of Section 8 hereof. Agent, in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expense of prosecuting his claim. It shall be a defense to any action for which
a claim for indemnification is made under Section 3 hereof (other than an action
brought to enforce a claim for expenses pursuant to Section 8 hereof, provided
that the required undertaking has been tendered to the Corporation) that Agent
is not entitled to indemnification because of the limitations set forth in
Section 4 hereof. Neither the failure of the Corporation (including its Board
of Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS.
(A) The rights on Agent by this Agreement shall continue after
Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(B) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
12. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
13. GOVERNING LAW. The Agreement shall be interpreted and enforced in
accordance with the laws of the State of Nevada.
14. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
15. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
16. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
17. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(A) If to Agent, to:
Sam Hirji
3rd Floor - 830 West Pender Street
Vancouver, British Columbia
Canada, V6C 1J8
(B) if to the Corporation, to
Henley Ventures Inc.
3rd Floor - 830 West Pender Street
Vancouver, British Columbia
V6C 1J8
ATTN: PRESIDENT
Or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executive this Agreement on and
as of the day and year first above written.
HENLEY VENTURES INC.
By: /s/ "Herbert Moeller"
-----------------------
Name: Herbert Moeller
Title: Secretary Treasurer and Director
AGENT
By: /s/ "Sam Hirji"
-----------------
Sam Hirji
EXHIBIT 99.2
AUDIT COMMITTEE CHARTER
Henley Ventures Inc.
(THE "COMPANY")
FUNCTION OF THE AUDIT COMMITTEE
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its oversight responsibilities relating to:
- The integrity of the financial statements of the Company;
- The Company's system of internal controls; and
- The independence and performance of the Company's internal and outside
auditors.
The function of the Audit Committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements, and is responsible for maintaining appropriate
accounting and financial reporting principles and policies and internal controls
and procedures designed to assure compliance with accounting standard and
applicable laws and regulations. The outside auditor is responsible for
planning and carrying out a proper audit and reviews in accordance with
generally accepted auditing standards. The Audit Committee has the powers and
responsibilities set forth in this Charter, but not the duty to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
While the Audit Committee provides an avenue for communication among the outside
auditors and management and the Board of Directors, it is not the responsibility
of the Audit Committee to conduct investigations, to resolve disputes, if any,
between management and the outside auditor or to assure compliance with laws.
COMPOSITION AND MEETINGS OF THE AUDIT COMMITTEE
The Audit Committee will consist of at least two Board members. Each
member of the Audit Committee must be independent of management and free from
any relationship with the Company that would interfere with the exercise of
independent judgment as an Audit Committee member.
Each member of the Audit Committee must be "financially literate" or must
become "financially literate" within a reasonable period of time after
appointment to the Audit Committee. The Board will determine, in its business
judgment, whether a director meets the financial literacy requirement.
At least one member of the Audit Committee must have "accounting or related
financial management expertise", as determined by the Board in its business
judgment.
In addition to such meetings of the Audit Committee as may be required to
discuss the matters set forth in this Charter, the Audit Committee shall meet
separately at least annually with management, the outside auditors, and as a
Committee to discuss any matters that the Audit Committee or any of these
persons or firms believe should be discussed privately. In addition, the
auditors quarterly to review the Corporation's interim unaudited financial
statements and significant findings, if any, based upon the auditors' limited
review procedures.
OUTSIDE AUDITOR
The outside auditor for the Corporation is ultimately accountable to the
Board and the Audit Committee. The Audit Committee and the Board have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the outside auditor. Alternatively, the Audit Committee
and the Board may nominate the outside auditor to be proposed for shareowner
approval or appoint such auditor subject to ratification by shareowners.
POWERS AND RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee will:
- Review and Recommend Outside Auditors. Review the performance of the
outside auditors and recommend to the Board annually, and at other appropriate
times, the firm to be retained as the Company's outside auditors.
- Review Independence of Outside Auditors. In connection with recommending
the firm to be retained as the Company's outside auditors, review the
information provided by management and the outside auditors relating to the
independence of such firm, including, among other things, information related to
the non-audit services provided and expected to be provided by the outside
auditors.
The Audit Committee is responsible for: (i) ensuring that the outside auditor
submits on a periodic basis, and at least annually, to the Audit Committee a
formal written statement delineating all relationships between the auditor and
the Company consistent with Independence Standards Board Standard No. 1, (ii)
actively engaging in dialogue with the outside auditor with respect to any
disclosed relationship or services that may impact the objectivity and
independence of the outside auditor and (iii) recommending that the Board take
appropriate action in response to the outside auditors' report to satisfy itself
of the outside auditors' independence.
- Review Compensation of Outside Auditors. Review the fees paid to the
outside auditors for audit and non-audit services.
- Review Audit Plan. Review with the outside auditors their plans for, and
the scope of, their annual audit and other examinations.
- Review Annual Financial Statements and Audit Results. Review with
appropriate officers of the Company and the outside auditors the annual audited
financial statements to be included in the Company's Annual Report on Form
10-KSB and Annual Report to Shareholders. Review with the outside auditors the
report of their annual audit, including matters required to be discussed by
Statement on Auditing Standards No. 61, as may be modified or supplemented,
relating to the conduct of the audit and the quality and appropriateness of the
Company's accounting principles as applied in its financial reporting, and the
accompanying management letter, if any, and including whether any restrictions
have been placed on the scope of their activities or if there has been any lack
of adequate response to their recommendations. Based upon these discussions and
reviews, and on its assessment of the independence of the outside auditor, the
Audit Committee will advise the Board of Directors whether it recommends that
the audited financial statements be included in the Annual Report on Form 10-KSB
and the Annual Report to Shareholders.
- Review of Quarterly Financial Statements. Review, prior to the Company's
public release of quarterly earnings, with appropriate officers of the Company
and the outside auditors the quarterly financial statements to be included in
the Company's Quarterly Reports on Form 10-QSB, and discuss with the outside
auditors their reviews of the Company's quarterly financial statements conducted
in accordance with Statement on Auditing Standards No. 71, and the matters, if
any, required to be discussed by Statement on Auditing Standards No. 61, as may
be modified or supplemented.
- Review Systems of Internal Accounting Controls. Review with the outside
auditors, the Chief Financial Officer and the Controller, and, if and to the
extent deemed appropriate by the Chairman of the Audit Committee, members of
their respective staffs, the adequacy of the Company's internal accounting
controls and of the Company's financial, auditing and accounting organizations
and personnel.
- Review Legal Matters. On a periodic basis, and at least annually, review
with the Company's General Counsel any legal matters that could have a material
impact on the financial statements.
- Securities Exchange Act Section 10A. Obtain from the outside auditor
assurance that it will inform the Company's management concerning any
information indicating that an illegal act has or may have occurred that could
have a material effect on the Company's financial statements, and assure that
such information has been conveyed to the Audit Committee.
- Review Corporate Compliance Program. Review on a periodic basis, and at
least annually, management's monitoring of the Company's Corporate Compliance
Program.
- Review Other Matters. Review such matters in relation to the accounting,
auditing and financial reporting practices and procedures of the Company as the
Audit Committee may, in its own discretion, deem desirable in connection with
the review functions described above.
- Board Reports. Report its activities to the Board in such manner at such
times as it deems appropriate.
ANNUAL REPORT
The Audit Committee with prepare, with the assistance of management,
including the General Counsel, and outside auditors, a report for inclusion in
the Company's proxy statement relating to the annual meeting of shareholders at
which directors are to be elected in accordance with the rules of the Securities
and Exchange Commission.
ANNUAL REVIEW OF CHARTER
The Audit Committee with review and reassess, with the assistance of
management, including the General Counsel and the outside auditors, the adequacy
of the Audit Committee's Charter at least annually. The Audit Committee will
submit the Charter to the Board of Directors for approval and have the document
included in the Company's annual meeting proxy statements at least every three
years in accordance with the rules of the Securities and Exchange Commission.
EXHIBIT 99.3
SHARE PURCHASE OPTION
THIS OPTION AND AGREEMENT made September 15, 2004
BETWEEN:
HENLEY VENTURES INC., a Nevada corporation;
(the "Optionor")
OF THE FIRST PART
AND:
TERRY HEARD;
(the "Optionee")
OF THE SECOND PART
NOW THEREFORE THIS OPTION AND AGREEMENT WITNESSES that in consideration of
the sum of $10.00 paid by the Optionee to the Optionor, and other good and
valuable consideration (the receipt and sufficiency of which is by the Optionor
hereby acknowledged), the parties hereto agree as follows:
1. The Optionor hereby grants to the Optionee the sole, exclusive and
irrevocable option to purchase 100,000 shares of Common Stock of the Optionor
(the "Shares") at a price of $0.10 United States funds per share, vesting at the
rate of 25,000 options at the beginning of every three month period commencing
September 15, 2004, while the Optionee is employed by the Company.
2. This option may be exercised in respect of all or any part of the options
that have vested according to this option at any time until 5:00 p.m. on
September 15, 2009, at which time this option shall terminate and be null and
void and no longer binding on either party hereto.
3. This option may be exercised in whole or in part at any time and from
time to time by giving the Optionor written notice specifying the number of
Shares being purchased, accompanied by payment in full for the number of Shares
so purchased, whereupon the Optionor shall forthwith deliver to the Optionee a
certificate representing the Shares so purchased.
4. If any change is made to the issued shares of the Optionor which are the
same class and kind as the Shares by way of consolidation, subdivision,
reclassification, amalgamation or otherwise at any time before this option is
exercised, the Shares shall be deemed to be increased or decreased to such
number or altered to such class and kind as would have resulted from such change
if this option had been exercised before the date of such change.
5. Time shall be of the essence of this option and agreement.
6. This option and agreement are personal to the Optionee and may not be
assigned by the Optionee.
7. This Agreement will enure to the benefit of and be binding on the parties
and their respective successors, heirs, executors and administrators, and will
be interpreted with such changes of gender and number as the context hereof
requires.
8. This Agreement constitutes the entire agreement, and supersedes all
previous understandings, expectations, communications, representations and
agreements, whether written or verbal, between the parties with respect to the
subject matter hereof.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
day and year first above written.
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