AMERIWEST ENERGY CORP. - SB-2/A - 20050621 - SELLING_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. These shares are not being offer for sale by
Henley, none of our directors and officers will be engaged in any selling
efforts on behalf of the selling securities holders and Henley will not receive
any proceeds from the sale of the shares by the selling security holders.
Common Number of Common Shares
Stock Owned Common Beneficially
Beneficially Shares Offered Owned following
Name of Shareholder Prior to Offering Hereby the Offering
------------------- ---------------- --------------- ----------------
No. of Shares % No. of Shares %
------------- -- ------------- --
(*) 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 solders 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 holders 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
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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.
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.
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All expenses of the registration statement estimated to be $12,000, see
below, 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 this prospectus, including any prospectus
supplement, to any individual who purchases any shares from or through such
broker-dealer.
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. 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 Henley, 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.
NAME AND YEAR
MUNICIPALITY OF POSITION OR OFFICE WITHIN THE BECAME
RESIDENCE REGISTRANT AGE A DIRECTOR
Sam Hirji . . . Principal Executive Officer 58 2001
Vancouver, B.C. President and
Canada. . . . . Director (1)
Herbert Moeller Principal Financial Officer 56 2001
Richmond, B.C.. Secretary Treasurer and
Canada. . . . . Director (2)
Terry Heard Director (3) 68 2004
Vancouver, B.C.
Canada. . . . .
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(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 Henley'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
Henley.
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 a director, from February 1998 to May 2001, of
Minera Cortez Resources Ltd. which was a development stage company involved in
exploration for gold and copper property in Mexico. Subsequently, Minera changed
its name to Western Wind Energy Corporation (TSX listing under the symbol of
MND) and is now involved with wind tunnels in the generation of energy and is
still considered to be in the development stage. In September 1999, Mr. Hirji
became a director of Falcon Oil and Gas Ltd., a development stage company listed
on the TSX under the symbol of FO, which has certain oil and gas properties in
Hungary. Mr. Hirji resigned from Falcon Oil and Gas Ltd, on March 31, 2005.
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
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 before studying at Halleybury School of Mines in
Halleybury, Ontario where he obtained, in 1958, a diploma in mining technology.
After graduation, he worked for Milliken Lake Uranium Mines in Elloit Lake,
Ontario until January 1959. In 1960, Mr. Heard 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 he staked 125 claims around the Hudson Bay
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Mountain range. During the same year, he worked 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 was employed by Cassiar Asbestos Corporation in Cassiar, B. C. where
he was in charge of the quality control laboratory conducting circuit tests to
produce a better product. In 1964, Mr. Heard joined United Keno Hill Mines Ltd.
in Elsa, Yukon 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. responsible
for mineral exploration British Columbia and the Yukon Territories, setting up
cost accounting systems and field coding procedures. In 1969, he applied for
three year program to obtain a Bachelor of Science and Geological Engineering
degree from Montana Tech. In 1971, he was employed by Great Plains Development
Company of Canada Ltd. as exploration manager and later that year 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 United was employed by Keno Mines as their
assistant exploration manager and in 1977, Mr. Heard became the exploration
manager for Consolidated Coal in Red Deer responsible for coal reserve
calculations, preliminary mine layouts and feasibility studies. In 1979, he
became exploration manager for Canadian Island Creek Coal Company where he was
responsible for the exploration and mining of all their coal holding throughout
the world.
In 1980, Mr. Heard incorporated his own private consulting company called
R.T. Heard & Associates Ltd. Some of his initial clients were Canadian Island
Creek Coal Company, Placer Dome, and approximately 89 other companies. In 1992,
Mr. Heard staked 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. 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 in such areas
as Montana, Idaho, Wyoming, Utah, Colorado, Nevada, California, Oregon,
Washington, British Columbia, Alberta, Northwest Territories and the Yukon. 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
such as Mayonh Minerals Ltd. Through his new company he staked nearly 8.5
million acres of land in Mexico for resale. 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.
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 Henley, 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 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 the
Red Bird claims.
Once we commence our exploration program, 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 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 have no employees. We might have to engage the services of certain
consultants to assist in the exploration of the Red Bird. These individuals
will be responsible for the completion of the geological work on our claim 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 Henley has filed a petition for bankruptcy, convicted in a criminal
proceeding or violated any federal or state securities laws.
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 May 31, 2005 (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.
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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 100,000 (5) 6.90%
Stock 3-22268 - 116 Street
. . . . . . . . . . . . Maple Ridge, B.C.
. . . . . . . . . . . . Canada, V2X 1P5
Common . . . . . . . . . . . . Ownership of all directors 350,000 24.14%
Stock. . . . . . . . . . . . and officers as a group
(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. 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 Henley 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 Henley 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.
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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.
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 Henley available for
distribution upon winding up of the affairs of Henley; 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.
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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 Red Bird to a point where either a viable ore reserve is
discovered or a decision is made to abandon it. 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.
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, 2009 at which time the option will terminate
and be null and void and no longer binding on either Terry Heard or Henley. 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 Henley. No options have been exercised to date.
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 Henley
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
Henley 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 find a market maker who will make an application to the NASD to
have our shares accepted for trading on the OTCBB. At the present time, there
is no established market for the shares of Henley. There is no assurance an
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application to the NASD 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; being as a minimum Forms
10Q-SB and 10K-SB. Market makers will not be permitted to begin quotation of a
security whose issuer does not meet these filing requirements. 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;
the exploration results on 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 Henley. 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.
We estimate this prospectus will take six months to become effective and
another twelve to eighteen weeks for the NASD to review the documents submitted
by the market maker before we are able to be quoted on the OTCBB. There is no
assurance we will ever be quoted on the OTCBB. To date, we have not identified a
market maker to sponsor our application to the NASD.
"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
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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 and may cause the price of our shares to
decline.
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 prospectus as having prepared or
certified any part of this prospectus 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 Henley or any of
our parents or subsidiaries, in the event such entities occur in the future.
Nor was any such person connected with Henley 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
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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
Henley against liabilities which they may incur in such capacities.
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 Henley.
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 Henley.
Acquisition of Assets from Promoters, Founders or Organizers of Henley
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
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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 Red Bird, we have not purchased or sold
any assets at all.
Our business activities to date have been related to:
1. Incorporating Henley 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 prospectus.
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,
2001, we acquired the mineral rights to the HV from Paul Saulnier, an unrelated
individual who is not a director, officer or shareholder of Henley. 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 did 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. The HV claims expired as more fully described on page 27.
On July 28, 2004, we acquired the mineral rights to the Red Bird claim by
Bill of Sale Absolute from Richard J. Billingsley for the staking cost of
$1,667; the cost incurred by him to stake the Red Bird on behalf of Henley. In
addition, we paid $2,680 for a geological report and $683 for PAC grants (see
page 37).
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 Red Bird until either an ore reserve of commercial value is discovered or
this claim is proven to be of little value. If the latter occurs, we will seek
out other mineral properties of merit to ensure Henley 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.
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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 a pre-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 claim until appropriate exploration
work is done and a comprehensive study based upon such work concludes legal and
economic feasibility. A reserve is, defined as by Industry Guide 7, 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.
There is no assurance a commercially viable mineral deposit exists on the
Red Bird. Further exploration will be required before a final evaluation as to
the economic and legal feasibility is determined for 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.
Our exploration program, as noted on page 30, is a phase based program.
Phase I is to determine if mineralization exists on the Red Bird and, if the
results are favorable, whether to proceed to Phase II. Phase II will increase
our knowledge of the Red Bird by exploring other parts of the property, taking
additional rock and soil samples in the areas of interest determined by Phase I
and attempting to identify drill targets. If Terry Heard and an independent
geologist indicate the results from Phase II are encouraging, we will undertake
Phase III. Initially, the problem will be to raise money to complete each
Phase. If we are successful in raising money and Phase III identifies a
mineral deposit we will have to spend substantial funds on further drilling and
engineering studies before we will know if we have a commercially viable mineral
deposit, reserve.
We have the rights to the minerals on 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 Red Bird 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 the Red Bird for
placer.
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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 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.
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 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 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 the Red Bird there is no guarantee we will be
able to raise sufficient funds in the future to maintain this claim in good
standing. Therefore, if we do not have sufficient funds for exploration the
Red Bird it 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 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.
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.
Sources and Availability of Supplies and Raw Materials
We will require supplies during our exploration of the Red Bird which
initially will consist of two marking posts (cost of $10 each) and seven rolls
of flagging tape (cost of $7.50 per roll) for establishing a systemic grid, link
chain for measuring out the grid (which is presently owed by Terry Heard and can
be used at no cost to us) and various shovels and picks (estimated at a total
cost of $100) to take samples within the grid. These supplies can all be
obtained 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 Princeton but in the event
they cannot be we can easily obtain them from Vancouver when and if need.
Normally the cost of these raw materials are included in the overall price
submitted by the drillers but in the event we were require to purchase the
cement, lumber and sand we estimate the cost would not exceed $1,000.
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Dependence on one or a few major customers
We do not have any customers and may never have any customers if the Red
Bird does not have a viable ore reserve of commercial value on it.
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 as noted below.
- Establishing a grid to take soil and rock samples does not require approval
from the provincial government. When the work is completed, we will be
required to complete a "Statement of Work, Cash Payment and Rental" form
and submit it to the Ministry along with a filing fee of $150. The work
recorded on this form will maintain the Red Bird in good standing for a
further twelve months.
- When undertaking either a trenching or drilling program, we will be
required to complete a "Notice of Work" form indicating the work to be
undertaken by us on the Red Bird. At the same time, we will have to
complete and file with the Ministry a "Reclamation Permit" and a
"Safekeeping Agreement" to ensure that subsequent to the completion of our
program that we leave the area in roughly the same state it was previously.
- If we wish to cut any trees on the Red Bird we will have to apply for a
"License to Cut" under the Forestry Ministry. The cost of applying for this
license is approximately $150.
- Our exploration work will have to be done in accordance with the
"Mineral Exploration Code - Part II - Health, Safety and Reclamation Code
of Mines" See details under "Cost of Compliance with Environmental
Regulations" on page 26.
- While exploring the Red Bird, we will have to adhere to the requirements of
the "Fire Protection and Suppression Regulations of Forest Practice Codes"
of British Columbia which related to open fires, use of stoves, use of
explosives and what to do during forest closures.
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
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not the case with 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 the Red Bird.
Terry Heard has filed Statement of Work, Cash Payment and Rental forms as
well as Reclamation Permits, Safekeeping Agreements, License to Cut, and Notice
to Work forms. He has worked under the Mineral Exploration Code - Part II -
Health Safety and Reclamation Code of Mines and Fire Protection and Suppression
Regulations of Forest Practice Codes.
Amount spent on Research and Development
We have not spent any money on research and development since its
inception.
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 Red Bird.
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 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 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.
Facilities during pre-exploration
During the pre-exploration, we will not build facilities to house the
exploration crew on the Red Bird since 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.
Our Mineral Properties
We had two mineral properties:
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a. The HV mineral claims on Vancouver Island; and
b. The Red Bird claims located in southeastern British Columbia.
A. The HV Claim
During the month of January, we undertook an exploration program on the HV
claim sufficient to maintain it in good standing for another twelve months.
When submitting the assessment report to the Ministry, we were advised that
effective January 12, 2005 the system has been changed and all recording of work
on the claim had to be done on the Internet. To access the Internet, an
individual requires a British Columbia Electronic Identification Number
("BCeID"). Our geologist performing our assessment work did not have a BCeID
number and therefore could not record our assessment work prior to the expiry of
the HV. We engaged the services of another individual who had a BCeID number
to "stake" on the Internet starting at 12:00 am on January 25, 2005.
Unfortunately, Paul Saulnier, who previously held our Bill of Sale Absolute on
our behalf, was able to successfully record the previous HV claim under his name
and to his benefit. Therefore, we no longer have an interest in the mineral
rights on the HV claim.
B. Red Bird Claims
(1) The Location and Means of Access to the Red Bird
The Red Bird is located 1.9 miles northwest of Tulameen, British Columbia
and is approximately 94 miles from Vancouver, British Columbia. The towns of
Coalmont and Princeton on the Southern Trans-Provincial Highway are 17 to 34
miles respectively by paved highway southeast of Tulameen. 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.
(2) Conditions to Retaining Title to the Red Bird
On July 28, 2004, we purchased the Red Bird from Richard Billingsley by way
of Bill of Sale Absolute. The Bill of Sale Absolute has not been registered with
the Ministry thereby keeping the Red Bird in the name of Richard Billingsley.
Refer to Risk Factor 11 on page 6.
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
As mentioned above, these 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.
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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 $155 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 $3,875.
We have the rights to the minerals on the Red Bird except for placer and
coal. Placer is obtained by applying for the rights to placer whereas coal
rights are granted under Coal Act of British Columbia. Even though we have the
rights to other minerals on the Red Bird, 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 applying for placer until
sufficient exploration work has been performed to warrant the expenditure.
(3) Current State of Exploration on the Red Bird
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.
The Red Bird has a long history of extensive work as indicated below.
In 1905, Boulder Mining Company developed several shafts and tunnels. A
period between 1908 and 1918 was relatively inactive due to the First World War.
In 1918, extensive surface and underground exploration was resumed and several
veins were discovered which could be traced along strike for hundreds of feet.
These veins were relatively lower-graded and therefore were not developed at the
time. Little work was carried out on the claim until the middle of the 1960s.
In 1965, Copper Mountain Consolidated Ltd. carried out bulldozer trenching
near the old workings and diamond drilled 5 holes totaling 1,250 feet. Between
1966 and 1967, Copper Mountain Consolidated Ltd. continued to explore the Red
Bird by bulldozer trenching, geophysical and geochemical surveys.
In 1967, Nelway Mines Ltd. acquired and explored the Red Bird with
geochemical surveys and diamond drilling.
Between 1971 and 1974 Gold River Mines Ltd. explored the claims by
extensive line cutting, soil sampling, magnetometer and VLF-EM surveys and
drilling a total of 33 holes totaling 5,800 feet
In 1978, Northern Lights Resources Ltd. conducted a ground magnetometer
survey and drilled two diamond drill holes, totaling 366 feet.
. In 1979, Kenman Resources Ltd., in conjunction with Ventures West Minerals
Ltd., began a program of detailed geological mapping of various previous
showings with a program of soil sampling.
In 1980, Brican Resources Ltd. acquired the rights held by Kenman Resources
Ltd. and began a program of systemic surface exploration. In 1984, a
lithogeochemcial survey was conducted over parts of the property and a detailed
magnetometer survey was completed.
-28-
In 1985, Aberford Resources Ltd. conducted geological, geochemical and
geophysical surveys on the northern part of the property. In addition, in 1986
Aberford Resources Ltd. conducted extensive trenching.
In 1997, two diamond drill holes were completed for a total of 540 feet by
Harold Adams of Tulameen but there was no significant mineralization in the
core.
Between 1994 and 2002 two individuals, T. Lisle and E. Ostensoe held parts
of the area of the Red Bird and filed numerous assessments reports documenting
their mainly geological mapping efforts.
(4) (i) Present Condition of Red Bird, Work Completed and Proposed
Program for Exploration
Present Condition and Climate
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).
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.
The climate is transitional between that of the dry southern interior and
the much wetter 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
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.
Work Completed on the Red Bird
Since the acquisition of the Red Bird we have not undertaken any
exploration work on the any part of the claim. In acquiring the Red Bird and in
having a geological report prepared on it cost us $2,680.
Proposed Exploration Program
Further geochemical sampling by way of the establishment of a grid to
obtain soil and rock samples for assaying is recommend as an initial stage.
Subsequently, deeper penetrating geophysical survey is recommended in the Lockie
Creek hornfels zone and tightly controlled ground magnetometer survey over the
entire property is also recommended.
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Contingent on attractive targets being identified by the above work,
together with a synthesis of older data, Phase III diamond drilling is
recommended to further test these targets contingent on success of Phases I.
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 III diamond drilling is
recommended to further test these targets contingent on success of Phases I and
II. A cost estimate is included below outlining Phase I - $5,800 and Phase II
- $96,000.
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 contingent Phase III of
$270,000. A breakdown of the work to be undertaken during each Phase is shown
below:
Phase I
It would be to our advance to locate and re-log the old drill core to determine
if there were any significant values. The practice in British Columbia is to
leave on the property the residual drill core not sent for assaying. In
addition, we should under take geochemical testing in the Lockie Creek to
determine if I any significant assay values located there. Areas of interest
should have a magnetometer survey performed on it.
Geological mapping, assaying and magnetometer survey $ 2,300
Transportation 385
Accommodation and meals 385
Data compilation 2,730
------
Total Phase I $ 5,800
======
It is estimated Phase I will take approximately 10 days using the services
of two workers.
Phase II
Depending upon the results of Phase I, areas of interest should be followed
up by establishing further geochemical grids for sampling, re-sampling within
the original grid the areas of interest, undertaking geological mapping and
performing geophysics where needed.
Geological supervision, mapping $ 23,100
Analytical 7,700
Contract geophysical 19,200
Follow-up geochemical 15,400
Transportation, accommodation and meals 5,400
Field supplies 7,700
Drafting (AutoCAD) 3,000
Line cutting 6,100
Data compilation 4,600
Report preparation 3,000
Word processing and reproduction 800
---------
Total Phase II $ 96,000
======
It is estimated Phase II will take approximately 3 weeks using the services
of 3 workers and one geologist.
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Phase III
Depending on our results under Phase II, we plan to undertake trenching in
various locations where the assays indicated a high concentration of
mineralization, followed up by a mapping and sampling program including
geophysics before we undertake a 9,900 foot drilling program.
Continued geological mapping and drill supervision $ 29,200
Contract diamond drilling (9,900 metres @
Approximately $19.15 per foot) 190,500
Core splitting and handling 6,100
Analytical 7,700
Contract geophysical 8,500
Transportation 3,850
Accommodation and meals 11,100
Field supplies 750
Drafting (AutoCAD) 3,000
Line cutting 4,600
Report preparation 3,000
Word processing and reproduction 1,700
------
Total Phase III $270,000
=======
Phase III is estimated to take 5 weeks but will require us to supply only
a site geologist and one worker to assist the geologist during the drilling
program since the drilling company will supply all other personnel.
4 (ii) Description of Equipment and Infrastructure Facilities
We do not have any equipment or facilities.
5. Rock Formation 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.
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
5. 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).
-31-
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 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.
Sulfide concentrations within the Red Bird claim area are tabulated as
follows:
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.
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
-32-
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 no proven or probable reserves on it and the above
proposed programs are exploratory in nature
Source of Power on the Red Bird
There is no source of power on the Red Bird. The only power which will be
available is the use of a gas operated generator if required during Phase III.
This power source will be supplied by the drilling company.
Conclusions and Recommendations
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.
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.
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 Honeck, 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.
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,
-33-
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 2004 and for
the three months ended March 31, 2005 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 prospectus.
(A) PLAN OF OPERATIONS
While we believe the Red Bird has value and should be explored further, we
are in the pre-exploration stage having generated no revenue. Our continued
existence and future plans depend on us having money to pay our bills.
Our plan of operations to overcome our present financial difficulties for
the next twelve months will be as follows:
to ensure this prospectus becomes effective;
to identify a market maker to submit, on our behalf, an application to the
NASD for a quotation on the OTCBB;
to raise money sufficient, once we are public, to meet our cash
requirements for the next twelve months as shown below. Raising money might be
done in three ways:
a. through the issuance of shares from treasury;
b. obtaining money from institutional lenders guaranteed by our directors
and officers; or
c. obtaining advances from our directors and officers.
If any of the above methods of raising money occurs, it would help to
eliminate the uncertainty of our ability to continue as a going concern.
With limited operations to date, it might be difficult for us to obtain
money through the issuance of shares especially at a price favorable to our
existing shareholders. If the price is too low, too many shares will have to
be issued for the same money and a greater dilution affect will happen to our
existing shareholders. If this is the case, the only alternative is to have the
directors and officers continue to made advance to Henley. Presently, the
directors and officers are not wishing to guarantee a loan and would rather not
-34-
continue to put money into Henley. Therefore, if financing was not available we
might have no choice but to allow Henley to cease as a going concern. All
shareholders, which include the directors and officers, would lose their
investment.
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. With the loss of the HV we will
now concentrate our interest on the Red Bird. We have not tried to identify any
other mineral claims and will not do so until we have explored 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 Red Bird. . . . (ii) 5,800
Office . . . . . . . . . . . . . . (iii) 500
Transfer agent's fees. . . . . . . (iv) 500
-------
13,800
Accounts payable to third parties. (v) 14,867
Expenses of Issuance and
Distribution (page 12). . . . . 12,000
--------
Estimated Funds Required over
the Next Twelve Months . . . . . . $ 40,667
=======
(i) Accounting and auditing
This represents the cost for the quarterly financial statements for the six
months ended June 30, 2005, nine months ended September 30, 2005, year ended
December 31, 2005 and for the three months ended March 31, 2006.
(*) The issuance costs have been allocated towards the earliest work undertaken
by the in-house accountant and the auditors.
Our in-house accountant prepares the accounting records and draft financial
statements for submission to Cordovano & Honeck, our auditors.
-35-
(ii) Exploration of the Red Bird
During the next twelve months there is no requirement for us to undertake any
work on the Red Bird. Nevertheless, we would like to undertake Phase I of the
recommended geological program at a cost of $5,800 as recommend on page 30.
Management is prepared to advance this money in order to ensure this exploration
program is completed.
(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.
(iv) Transfer agent's fees
The annual fee charged by Empire Stock Transfer is $500. Under Expenses
of Issuance and Distribution on page 12, 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 $218 as at March 31, 2005, we will require additional funds
during the next twelve months. As mentioned above, 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 Henley
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, 2004 and for the three months
ended March 31, 2005:
YEARS ENDED DECEMBER 31, 2001 TO 2004 AND FOR THE THREE MONTHS ENDED MARCH 31,
2005
Accounting and audit
We have an independent bookkeeper who prepares the accounting records for
our year end and submits the records to our auditors, Cordovano & Honeck, for
their examination of our financial statements. Our auditors have not performed
any other accounting or consulting work for us other than the issuance of
audited financial statements.
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 prospectus, 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
expired 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 the Red Bird report is mentioned
elsewhere in this prospectus.
Incorporation costs
We incorporated Henley 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
Henley 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.
-37-
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 has been expensed and
credited to Capital In Excess of Par Value on the Balance Sheet. 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.
Staking fees
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 3.
(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.
-38-
(iv) Known trends, events or uncertainties having an impact on income.
Since we are in the start-up stage and Red Bird claim have not produced any
income, and there is a chance that it 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.
(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 prospectus.
Our 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. The weather in the area of the Red
Bird tends to be harsh 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
prospectus. 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 Red Bird claim, and possible cost
overruns due to price and cost increases in services required during our
exploration work.
We will explore the Red Bird. 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 auditors on our financial statements provided elsewhere in this prospectus,
our recurring losses and negative cash flows from operations raises substantial
doubt about our ability to continue as a going concern.
-39-
(D) NEW ACCOUNTING PRONOUNCEMENTS
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share Based
Payment", that addresses the accounting transactions in which a company
exchanges its equity instruments for goods or services. SFAS No. 123R requires
that such transactions be accounted for using a fair value based method.
Adoption of SFAS No. 123R is effective for periods beginning after December 15,
2005. Henley will adopt this statement as required and management is currently
assessing the effect SFAS No. 123R will have on the Henley's financial
statements.
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 Henley's financial statements.
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
Henley'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 Henley 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 Henley 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 Henley's financial statements.
ITEM 18. DESCRIPTION OF PROPERTY
The Red Bird is more fully described elsewhere in this prospectus. We have
no other mineral properties.
-40-
Title to the Red Bird
The Red Bird is recorded in the name of Richard Billingsley who has signed
a Bill of Sale Absolute in favor of Henley. Our reason for allowing the Red
Bird to remain in the name of Richard Billingsley is two-fold: first, we will
not have to extra-provincially incorporate a British Columbia company at a cost
of approximately $800 and, second, we would not have to obtain a Free Miners
License at a cost of $385. Under the mining laws of British Columbia, only a
company incorporated in the Province of British Columbia can hold the rights to
minerals on land owned by the Crown and can apply and obtain a Free Miners
License. When the Bill of Sale Absolute is filed with the Ministry, the mineral
rights will be transferred to the name of Henley. Until this is done, we are
exposed and might lose our interest in the Red Bird to another third party if
Mr. Billingsley were to transfer the claims without our knowledge. The only way
to protect ourselves from this happening is to have the Red Bird registered in
Henley's name (see Risk Factor 11 on page 6).
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 Red Bird in hopes of eventually developing it 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 on December 12, 2001.
Herbert Moeller, Secretary Treasurer and Director, purchased 100,000 shares at a
price of $0.01 per share for cash consideration on December 12, 2001.
Claus Andrup, a former Director, purchased 100,000 shares at a price of $0.01
per share for cash consideration on December 18, 2001.
The price of $0.01 per share paid by the directors and officers was
arbitrarily determined by them.
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.
-41-
Some of our Directors are directors and officers of other companies (refer
to biographies of Directors on pages 13 to 14). 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 Henley. 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 Henley, 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 $ 11,306
Herbert Moeller 187
--------
As at March 31, 2005 $ 11,493
======
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 of
$1,656 was contributed by directors and officers of Henley.
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 prospectus.
There were no material transactions, or series of similar transactions,
since inception of Henley and during our current fiscal period, or any currently
proposed transactions, or series of similar transactions, to which Henley 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 Henley 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,
who we have not identified as yet, may make a market in our 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.
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 44. There are no outstanding warrants or
conversion privileges for Henley.
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.
-42-
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.
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, 2003 and 2004 and
for the three months ended March 31, 2005, 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 four years ended December 31, 2004 on behalf of our named executive
-43-
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
(a) (b) (c) (e) (f) (g) (h) (i)
Other Restricted All other
annual stock Options/ LTIP compen-
Name and Principal. . Comp. awards SAR payouts sation
Position. . . . . . . . Year Salary ($) ($) (#) ($) ($)
------------------ ---- ------- ----- -------- ------- ---- --------
Michael Laidlaw (1)
Former President and
former Director. . 2001 -0- -0- -0- -0- -0- -0-
Sam Hirji (2) . . . . . 2001 -0- -0- -0- -0- -0- -0-
Principal Executive . . 2002 -0- -0- -0- -0- -0- -0-
Officer, President and. 2003 -0- -0- -0- -0- -0- -0-
Director . . . . . 2004 -0- -0- -0- -0- -0- -0-
Herbert Moeller (3)
Principal Financial . . 2001 -0- -0- -0- -0- -0- -0-
Officer,. . . . . . . . 2002 -0- -0- -0- -0- -0- -0-
Secretary Treasurer . . 2003 -0- -0- -0- -0- -0- -0-
and Director. . . . . 2004 -0- -0- -0- -0- -0- -0-
2001 -0- -0- -0- -0- -0- -0-
Claus Andrup (4). . . . 2002 -0- -0- -0- -0- -0- -0-
former Director . . . . 2003 -0- -0- -0- -0- -0- -0-
Terry Heard (5)
Director. . . . . . . . 2004 -0- -0- -0- 100,000 -0- -0-
(1) Incorporating director who resigned as President and Director on November
6, 2001.
(2) Appointed as a Director, Principal Executive Officer and President on
November 6, 2001.
(3) Appointed as a Director, Principal Financial Officer and Secretary
Treasurer on November 6, 2001.
(4) Appointed as a Director on November 6, 2001 and resigned in December 1,
2003.
(5) Appointed as a Director on August 15, 2004.
Option Grants in Last Fiscal Year and during the three months ended March 31,
2005.
The stock options outstanding as at March 31, 2005 are as follows:
-44-
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d) (e)
Number of Securities % of Total Option/SARs Exercise of
Underlying Options/ Granted to Employees in Base Price Expiration
Name . . . . SAR's Grants (#) Fiscal Year ($/Sh) Date
Sam Hirji. . Nil Nil - -
Herbert
Moeller . Nil Nil - -
September
Terry Heard. 100,000 100 % $ 0.10 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 Henley.
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.
-45-
ITEM 22. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors
of Henley Ventures, Inc.:
We have audited the accompanying balance sheet of Henley Ventures, Inc. as of
December 31, 2004, and the related statements of operations, stockholders'
deficit, and cash flows for the years ended December 31, 2004, and 2003 and for
the period from January 3, 2001 (inception) through December 31, 2004. 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, 2004, and the results of its operations and its cash flows for the
years ended December 31, 2004 and 2003 and for the period from January 3, 2001
(inception) through December 31, 2004 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
uncertainty.
Cordovano & Honeck, LLP
Denver, Colorado
May 19, 2005
-46-
HENLEY VENTURES, INC.
(An Exploration Stage Company)
HENLEY VENTURES, INC.
(An Exploration Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- -------- ----------- --------- ----------
Balance January 3, 2001
Inception date . . . . . . . . . . . . - $ - $ - $ - $ -
Common stock issued to founders
at December 15, 2001. . . . . . . . . 350,000 350 3,150 - 3,500
Contributed rent and services (Note 2) . . - - 12,862 - 12,862
Net loss . . . . . . . . . . . . . . . . . - - - (21,666) (21,666)
---------- ------- ------- --------- ----------
Balance at
December 31, 2001 . . . . . . . . . . . 350,000 350 16,012 (21,666) (5,304)
Contributed rent and services (Note 2) . . - - 13,028 - 13,028
Net loss . . . . . . . . . . . . . . . . . - - - (20,138) (20,138)
---------- -------- ------- --------- ----------
Balance at
December 31, 2002 . . . . . . . . . . . 350,000 350 29,040 (41,804) (12,414)
Contributed rent and services (Note 2) .. . - - 13,050 - 13,050
Net loss . . . . . . . . . . . . . . . .. . - - - (15,961) (15,961)
---------- -------- ------- --------- ----------
Balance at
December 31, 2003 . . . . . . . . . .. . 350,000 350 42,090 (57,765) (15,325)
June 2004, sale of common
stock, pursuant to private offering, net of
offering costs of $2,500 (Note 4). . .. . 1,000,000 1,000 6,500 - 7,500
August 2004, sale of common
stock, pursuant to private offering, net of
offering costs of $2,500 (Note 4). . .. . 100,000 100 7,400 - 7,500
Contributed rent and services. . . . . .. . - - 13,057 - 13,057
Net loss . . . . . . . . . . . . . . . .. . - - - (28,666) (28,666)
---------- --------- ------- --------- ----------
Balance at December 31, 2004 . . . . . .. . 1,450,000 1,450 69,047 (86,431) (15,934)
Contribution rent and services (Unaudited)
(Note 2) . . . . . . . . . . . . . .. . - - 3,308 - 3,308
Net loss (Unaudited) . . . . . . . . . .. . - - - (13,516) (13,516)
---------- -------- -------- --------- ----------
Balance at March 31, 2005 (Unaudited). .. . 1,450,000 $ 1,450 $ 72,355 $ (99,947) $ (26,142)
========== ======= ====== ========= =========
See accompanying notes to financial statements
-49-
HENLEY VENTURES, INC.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
JAN.3, 2001
THREE MONTHS ENDED YEAR (INCEPTION) THROUGH
MAR. 31, ENDED DEC. 31, DEC. 31, MAR.31
2005 2004 2004 2003 2004 2005
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Cash flows from
operating activities:
Net loss . . . . . . .$(13,516) $ (5,654) $(28,666) $(15,961) $(86,431) $(99,947)
Adjustments to
reconcile net loss to
net cash used by
operating activities:
Contributed rent
And services (Note 2). 3,308 3,268 13,057 13,050 51,997 55,305
Changes in operating
assets and liabilities
Accounts payable . . (1,625) 2,350 9,312 2,795 16,492 14,867
------- ------- -------- ------- ------- --------
Net cash used in
operating
activities. (11,833) (36) (6,297) (116) (17,942) (29775)
-------- ------- -------- ------- -------- -------
Cash flows from
financing activities
Proceeds from related
party debt (Note 2). 3,033 - 155 - 8,460 11,493
Proceeds from issuance
of common stock, net
of offering costs
(Note 4). . . . . - - 15,000 - 18,500 18,500
-------- ------ ------- ------- ------- --------
Net cash provided by
financing
activities. 3,033 - 15,155 - 26,960 29,993
------- ------ ------ -------- ------- --------
Net change in cash (8,800) (36) (8,858) (116) 9,018 (218)
Cash:
Beginning of period. 9,018 160 160 276 - -
------- ------- ------ ------- ------ --------
End of period. . . $ 218 $ 124 $ 9,018 $ 160 $9,018 $ (218)
========= ======= ======= ======= ====== =======
Supplemental disclosure
of cash flow information:
Cash paid during the
year for:
Income taxes . $ - $ - $ - $ - $ - $ -
======== ======= ======= ====== ====== ========
Interest . . . .$ - $ - $ - $ - $ - $ -
========= ======== ====== ====== ====== ========
See accompanying notes to financial statements
-50-
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. (the "Company") 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 three months ended March 31, 2005 and 2004
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 three months ended March 31, 2005
and 2004 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. On January 24, 2005, the Company lost all of its rights to the mineral on
the HV mineral claim when the Provincial Government changed its method of
recording ownership. The Company has no further interest in the HV claims and
no liability attached thereto.
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 does not have an interest in the land since it is owned by the Crown
(Note 3). Legal status is that the Company has the rights to the minerals on
the Red Bird.
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 property for which the Company owns claim to. No minerals have
yet been discovered on the property. 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.
-51-
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, 2004, 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
December 31, 2004.
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 March 31, 2005 (unaudited) and December 31, 2004.
FINANCIAL INSTRUMENTS
At December 31, 2004, 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 computes earnings (loss) per share in accordance with Statement of
Financial Accounting Standard No. 128 "Earnings Per Share". Under the Provision
of SFAS No. 128, basic net income (loss) per share is computed by dividing the
net income (loss) available to common shareholders for the period by the
weighted average number of shares outstanding during the period. Diluted net
income (loss) per share is computed by dividing the net income (loss) available
to the common shareholders for the period by the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares, consisting of common shares issuable upon the exercise of
stock options are included in diluted net income (loss) per share to the extent
such shares are dilutive. At March 31, 2005 (unaudited) and December 31, 2004,
there were no variances between the basic and diluted loss per share as there
were no potentially diluted securities outstanding.
-52-
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 $1,650 (unaudited) and $1,650 (unaudited) for
three months ended March 31, 2005 and 2004 and $6,600 and $6,600 for the years
ended December 31, 2004 and 2003, 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 service preformed.
The services are reported as contributed services with a corresponding credit to
additional paid-in capital in the amount of $1,500 (unaudited) and $1,500
(unaudited) for three months ended March 31, 2005 and 2004 and $6,000 and $6,000
for years ended December 31, 2004 and 2003, respectively.
From January 3, 2001 (date on inception) through period ended December 31, 2004,
the directors of the Company paid certain organization costs, exploration costs
and certain office expenses on behalf of the Company totaling $8,460. This
balance remains outstanding at December 31, 2004, 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% per annum with a corresponding
credit to additional paid-in capital in amount of $158 (unaudited) and $118
(unaudited) for three months ended March 31, 2005 and 2004 and $457 and $450 for
years ended December 31, 2004 and 2003, respectively.
In December 2001, the Company sold 350,000 shares of its restricted common stock
to its officers and directors for $3,500 or $.01 per share.
-53-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(3) MINERAL CLAIMS
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
======
Henley Ventures Inc. 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 May 2005. The risk inherent in the Red Bird being held in the
name of a non-related party is that the party in question could sell it to
another third party without the permission or knowledge of the Company and
thereby resulting in the Company losing its interest in the Red Bird, even
though the Company has legal ownership. Only through the legal system might
the Company be able to recover its interest in the Red Bird. This would be a
costly matter and may take many years to resolve.
-54-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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
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 at a price of $0.10 per
share under Offering Memorandum dated August 23, 2004 through its own "best
efforts". The price of $0.10 per share was determined by the Board of Directors
based on "good faith estimates". All shares of common stock
-55-
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, net of offering cost of
$2,500.
On June 2004, the Company sold 1,000,000 common shares at a price of $0.01 per
share under Offering Memorandum dated June 15, 2004 through its own "best
efforts". The price of $0.01 per share was determined by the Board of Directors
based on "good faith estimate". 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, net offering cost of $2,500. Following
the June and August 2004 stock sales, the Company had 1,450,000 common shares
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,
2004 2003
---------- -----------
U.S. statutory federal rate 15.00 % 15.00 %
Contributed rent and services -6.83 % -12.26 %
Net operating loss for which no tax
benefit is currently available -8.17 % -2.74 %
-------- -------
0.00 % 0.00 %
========= ========
At December 31, 2004, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $86,431, which was fully allowed
for in the valuation allowance of $86,431. 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 years ended December 31, 2004 and 2003 was
$28,666 and $15,961, respectively. 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 2024.
6. STOCK OPTION PLAN
On September 15, 2004, the directors approved the granting of stock options to
one of its directors whereby 100,000 common shares 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 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:
-56-
HENLEY VENTURES, INC.
(AN EXPLORATION STAGE COMPANY)
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 For the
Three months ended Year Ended
March 31, December 31,
2005 2004
(unaudited)
------------------- --------------
Net loss
As reported . . . . . . . . . . . $ (13,516) $ (28,666)
Increased loss due to:
Employee stock option plan. (375) (750)
---------- ---------
Pro forma. . . . . . . . . . . . $ (13,891) $ (29,416)
========== =========
Loss per common shares
As reported . . . . . . . . . . . $ (0.01) $ (0.05)
========== =========
Pro forma . . . . . . . . . . . . $ (0.01) $ (0.05)
========== =========
-57-
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 Henley
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.
-58-
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 Henley'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 thereunder may be
-59-
permitted under said indemnification provisions of the law, or otherwise, Henley
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. Henley's Articles of Incorporation (Article 12) and
Henley's Bylaws (Article 11) provide that Henley shall, to the fullest extent
permitted by law, indemnify all directors of Henley, as well as any officers or
employees of Henley to whom Henley 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 May 31, 2005, 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 Henley. 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
-60-
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 Henley.
-61-
ITEM 27. EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------------------------
5 Opinion re. Legality
11 Statement re: Computation of per share earnings
23 Consent of experts and counsel
23.1 Consent of legal counsel (refer to Exhibit 5)
23.2 Consent of independent accountants
EXHIBIT
NO. DESCRIPTION
-------- --------------------------------------------------
3 Corporate Charter (incorporated by reference from Henley's Registration
Statement on Form SB-2 filed on February 1, 2005)
3 (i) Articles of Incorporation (incorporated by reference from Henley's
Registration Statement on Form SB-2 filed on February 1, 2005)
3 (ii) By-laws (incorporated by reference from Henley's Registration
Statement on Form SB-2 filed on February 1, 2005)
4 Stock Specimen (incorporated by reference from Henley's Registration
Statement on Form SB-2 filed on February 1, 2005)
10 Material contracts
10.1 Transfer Agent and Registrar Agreement (incorporated by reference
from Henley's Registration Statement on Form SB-2 filed on
February 1, 2005)
10.2 Bill of Sale Absolute - Red Bird (incorporated by reference from
Henley's Registration Statement on Form SB-2 filed on February 1,
2005)
10.3 Bill of Sale Absolute - HV (incorporated by reference from Henley's
Registration Statement on Form SB-2 filed on February 1, 2005)
14 Code of Ethics (incorporated by reference from Henley's Registration
Statement on Form SB-2 filed on February 1, 2005)
23 Consent of experts and counsel
23.3 Consent of John J. Watkins, Professional Geologist (incorporated
by reference from Henley's Registration Statement on Form SB-2
filed on February 1, 2005)
23.4 Consent of J.T. Shearer, M.Sc., Professional Geologist (incorporated
by reference from Henley's Registration Statement on Form SB-2
filed on February 1, 2005)
99.1 Indemnification Agreement (example) (incorporated by reference
from Henley's Registration Statement on Form SB-2 filed on
February 1, 2005)
99.2 Audit Committee Charter (incorporated by reference from Henley's
Registration Statement on Form SB-2 filed on February 1, 2005)
99.3 Share Purchase Agreement (incorporated by reference from Henley's
Registration Statement on Form SB-2 filed on February 1, 2005)
-62-
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.
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.
-63-
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-2A and authorized this registration to be
signed on its behalf by the undersigned, in the City of Vancouver, British
Columbia, Canada.
Dated: June 20, 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.
Dated: June 20, 2005
/s/ "Sam Hirji"
-----------------
Sam Hirji
Principal Executive Officer, President and Director
/s/ "Herbert Moeller"
-----------------------
Herbert Moeller
Principal Financial Officer, Controller,
Secretary Treasurer and Director
-64-
Exhibit 5.1 and 23.2
FRANK W. BIRKHOLZ, P.S.
Attorney at Law
1001 Fourth Avenue, Suite 3827
Seattle, Washington 98154
(206) 682-7626 (Fax) (206) 682-9963
April 29, 2005
Henley Ventures, Inc.
Third Floor - 830 West Pender Street
Vancouver, British Columbia, Canada
V6C 1J8.
Re: Registration Statement of Form SB-2
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 the 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 the shares of Common Stock were
validly issued, fully paid and nonassessable.
This opinion relating to the issuance of shares of Common Stock is limited to
applicability of the Nevada General Corporation Law and applicable provisions of
the Nevada Constitution and reported judicial decisions interpreting these laws.
We have not participated in the preparation or review of the Registration
Statement, nor do we express any opinion thereon nor on compliance by the
Company or any shareholders with, any other law, including any federal or state
securities laws, any other state law or any other federal law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement
Very truly yours,
c/c "Frank W. Birkholz"
Frank W. Birkholz, Attorney at Law
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 three months ended March 31, 2005.
Number of shares outstanding as at March 31, 2005: 1,450,000 shares
Loss for the three months ended March 31, 2005: $ 13,516
Net loss per common share: $ (0.01)
======
No shares have been issued between March 31, 2005 and the date of this Form
SB-2.
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
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