The Mount McGuire limestone deposit is located at the eastern end of the Fraser
Valley approximately 17 km from the City of Chilliwack. We believe that athat a
potentially large occurrence of limestone situated favorably near an expanding
region could be a profitable business. We acquired the claims and commenced the
procedure to investigate the geology and grade of the deposit and to determine
the possible market for the limestone. The Fraser Valley businesses, communities
and residents currently use an unknown tonnage of limestone products. The
nearest major limestone quarry is located on Texada Island, a distance of 220 km
from the Mount McGuire deposit.
7
We have reviewed a summary of the main producers and users of limestone
products. We will have to carry out significantly more exploration on the Mount
McGuire limestone occurrence and then carry out detailed and comprehensive
market analysis of the Fraser Valley limestone products demand in order to
determine the viability of placing the Mount McGuire limestone deposit into
commercial production. The British Columbia provincial economy is expected to
grow dramatically over the next few years and with the City of Vancouver hosting
the 2010 Winter Olympics the demand will be further stoked. We will not have a
clear picture of the limestone market for the Mount McGuire deposit until we
know the limestone quality and quantity. We have outlined a four step program
that is designed to determine if the Mount McGuire limestone occurrence can be
profitably developed to produce and sell limestone products. The first critical
task will be to determine the quality and quantity of limestone products that
can be potentially produced from the Mount McGuire limestone occurrence. The
second task will be to determine the markets for the limestone products
identified. The third task will to prepare a comprehensive business plan that
will outline the most profitable development scenarios.
If all the findings are positive the Company will seek the funding required to
place the Mount McGuire limestone deposit into production.
The Province of British Columbia population has experienced tremendous growth in
the last 50 years and development has spread from Vancouver into the Fraser
Valley. Sources of aggregates have been depleted or compromised by encroaching
residential development. The same scenario has been happening to major
metropolitan centers along the west coast of United States. Limestone materials
can be developed to supply raw fed for Portland cement kilns, to make
agriculture products, to be converted into lime and to be used in pulp and paper
mills. The waste limestone can be manufactured into aggregates that can be used
by construction companies in residential buildings, commercial developments and
in sub-bases for roadways.
REGIONAL MAP OF MOUNT MACGUIRE LIMESTONE MARKET
PLEASE SEE ATTACHED EXHIBIT 99
Industrial Minerals
Industrial Minerals are an increasingly significant component of international
trade. British Columbia is strategically located to take advantage of such
trade, by its location on the west coast of North America. It has a
well-developed transportation and industrial infrastructure, particularly in the
southern, populated third of the province. It has several deep-water ports, a
well-maintained all-weather highway system that permits efficient, long-distance
trucking. Rail lines link British Columbia's industrial centers to terminal
points across Canada and USA.
The province has attractive energy costs, a well-trained and experienced
workforce and untapped mineral resources. British Columbia's industrial mineral
production for 2002 was $56 million, and mineral exploration expenditures were
$2.6 million, which is about 8% of the province's exploration investment in
2002. Production is expected to increase in 2003, even though exploration
expenditures declined. Structural material production is estimated at $493
million
Trends
Over the last three years, the most significant industrial minerals trend in
British Columbia has been the increasing export of crushed stone and natural
aggregate to urban centers along the west coast of the United States. This
market, however, is becoming very competitive as industry identifies new
potential for development. Another important trend, which was not apparent
during the 1990s, is the increase in value-added processing of raw industrial
minerals.
8
Limestone Production
The largest limestone production centre in the British Columbia is Texada
Island, where two quarries, Gillies Bay (Texada Quarrying Ltd.) and Blubber Bay
(Ash Grove Cement Corporation), ship 5 to 6 million tonnes annually to customers
in British Columbia, Washington, Oregon and California, for cement, chemical and
more recently agricultural use. In 2002, 5.1 and 3.8 million tonnes of rock were
quarried from Gillies Bay and Blubber Bay respectively, but not all was shipped.
Texada Quarrying Ltd. recently invested $10 million in an aggregate crushing
plant and shipped crushed rock as far as Los Angeles and San Diego, California.
Ash Grove upgraded their crushing plant in 2002 and is expected to ship over 2
million tonnes of rock, while Texada Quarrying is expected to ship about 4.1
million tonnes. Both operations currently have excess capacity and are
aggressively marketing in Vancouver and the USA.
In addition to pulp mills, which normally produce their own lime, three cement
plants and two lime plants in British Columbia process limestone. Graymount
Western Canada Inc.'s Pavilion Lake limestone quarry and lime plant, near Cache
Creek, has a capacity of about 190,000 tonnes of lime annually. The Kamloops
cement plant of Lafarge Canada Inc. is forecast to mine about 187,000 tonnes of
limestone, and to produce about 122,000 tonnes of cement, from the Harper Ranch
quarry. Lafarge's plant located in Richmond and Lehigh Northwest Cement Ltd.
plants in Delta are state-of-the-art operations. Lafarge's plant has the
capacity to produce one million tonnes of cement. Pacific Lime Products Ltd. of
Giscome, near Prince George, sells small quantities of limestone to pulp mills
in the region.
Northrock Industries Ltd. provided a limited amount of limestone from its Dahl
Lake quarry for riprap and landscaping. I.G. Machine and Fibers Ltd. and
Homegold completed a 5,000-tonne, bulk sample in 2002 from its South Slesse
quarry near Chilliwack. Graymount Western Canada Inc. may submit its proposed
250,000-tonnes per year chemical limestone Var quarry, on Rupert Inlet near Port
Hardy.
Crushed Stone and Aggregate
Grassroots exploration for traditional construction materials is expanding along
the British Columbia coastline. It is expected that shipments of crushed stone
from Texada Island and other coastal sources will make significant inroads into
the Vancouver, Seattle, San Diego, San Francisco and Los Angeles markets. Texada
Island limestone producers have already started to exploit this market
opportunity. Texada Island producers are well established, and crushed rock is
the natural by-product of their limestone operations. Natural aggregate is the
focus of similar market demands. Tilbury Cement Ltd. shipped aggregate from its
facility at Sechelt to the San Francisco Bay area in 2001. Although Polaris
Minerals Corporation abandoned its efforts to develop aggregate and crushed rock
operations in Bella Coola, it is in the permitting process for a combined
crushed rock/aggregate operation at Port Alberni. Other companies, including
South Pacific Development Corp.'s project near Renfrew, Vancouver Island,
propose similar ventures.
Railroad ballast stockpiles, produced last year from Canadian Pacific Railway's
Giscome basalt quarry and from British Columbia's Ahbau basalt quarry,
diminished. No new production took place at either of these two quarries.
Canadian National Railways however, also operated at least six other railroad
ballast operations in British Columbia McAbee (near Ashcroft), Boulder (near
Clearwater), Taverne (near Tete-Jaune), Pacific (east of Terrace) and Kwinitsa
(Mile 40 on Skeena). Canadian Pacific Railway mined, crushed and shipped
railroad ballast at its Swansea Ridge gabbro quarry south of Cranbrook.
Fraser Valley Regional District
The Fraser Valley Regional District is located in the eastern Fraser Valley of
British Columbia approximately 100 kilometres east of the City of Vancouver.
Aggregate Potential Growth
The majority of the population of the Fraser Valley Regional District (FVRD)
live in the 60 kilometer long fertile agricultural valley of the Fraser River.
9
The current population of 250,000 is projected to almost double to over 450,000
in the next 20 years. The additional population growth would be concentrated in
the three urban areas - Abbotsford, Chilliwack and Mission, the present home to
89% of the region's population. It is projected that 93% of the new population
would settle in the three urban centers with over 50% settling in the largest
centre - Abbotsford. The following Table summarize the present populations and
employment and the projected population and employment for 2021.
TABLE
Forecasts of Employment by Sub region in the FVRD by 2021
1996 (actual 1) 2021 (forecast)
----------------- -------------------------------------------- ----------------------------------------------
Subregions2 Employment Share of Jobs to Employment Share of Jobs to
Lower Population Lower Population
Mainland Ratios Mainland Ratios4
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Abbotsford 36,465 3.6% 0.34 73,000 to 4.6% to 4.9% 0.35 to 0.40
84,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Chilliwack 24,060 2.4% 0.34 49,000 to 3.1% to 3.2% 0.34 to 0.38
54,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Hope 2,655 0.3% 0.34 3,000 0.2% n/a
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Mission 8,170 0.8% 0.24 13,000 to 0.8% to 0.9% 0.19 to 0.22
15,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
No fixed 12,530 1.2% n/a 25,000 to 1.6% to 1.9% n/a
workplace 32,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
FVRD TOTAL3 84,345 8.3% 0.38 163,000 to 10.2% to 11.0% 0.36 to 0.42
188,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Lower Mainland 1,014,065 100.0% 0.49 1,600,000 to 100.0% 0.48 to 0.51
1,700,000
----------------- --------------- ------------- -------------- --------------- ---------------- -------------
Note 1: 1996 employment is from Statistics Canada. The sum of the communities
does not exactly match the FVRD total due to rounding by Statistics Canada. Note
that "No fixed workplace" includes Reserves.
Note 2: Sub regions are defined as follows:
Abbotsford: Abbotsford, Subdivision D
Chilliwack: Chilliwack, Kent, Harrison Hot Springs, Subdivision B
Mission: Mission, Subdivisions C and E
Hope: Hope, Subdivision A
Note 3: FVRD total does not exactly match sum of the sub regions due to
rounding.
The population expansion will require a significant aggregate supply in the
region over the next seventeen years. The aggregate market will need increasing
sources of aggregate for roads and buildings in the eastern Fraser Valley. The
final projection will be developed when the McGuire limestone material is
quantified to type of products and grade of the products.
Agriculture Project Growth
The FVRD has the highest farm gate receipts of any regional district in the
province. The diverse output includes dairy products; greenhouse cultivation,
sod, vegetables, berries, nursery stock and specialty crops. Innovative products
include nutraceuticals and component extractions.
The agriculture community currently uses a yet to be determined number of tonnes
of limestone products for agriculture purposes.
The current supply of agriculture products is imported into the region from one
main supplier located in Langley. The final projection of agricultural limestone
products that would be marketed to the local agriculture industry will be
developed when the McGuire limestone material has sufficient technical
information to formulate a product package.
10
The Mount McGuire Limestone material will be assessed by a four-phase review and
exploration process. Each subsequent phase is contingent on the results in the
previous stage. In all phases the marketing program will be refined as the
physical information on the material is developed. The key physical issues of
the Mount McGuire Limestone material are the quantity of mineable limestone, the
quality of that mineable limestone and the costs to extract and deliver the
limestone products to market. Limestone material of this size and location might
be able to profitably produce lime, construction aggregates, agricultural
limestone, feed for cement plants, ballast for railway beds, and quarried stone
for the building industry.
Transportation costs are a major element in the delivery of most limestone
products to market. All things equal, the closest supplier to a market can
usually deliver the products at a lower unit price than a more distant supplier.
As shown on the Regional Map of the Mount McGuire Limestone Market, the nearest
supplier is located 220 km air distance on Texada Island up the coast of British
Columbia. The Mount McGuire limestone occurrence is located 17 km from the
eastern end of the Fraser Valley. . We envisage that the evaluation process will
take at least four phases and we have completed the first phase.
Exploration and Marketing Evaluation
Mount McGuire has a substantial resource of limestone material and tests
indicate that certain beds of the limestone material are high grade. The Fraser
Valley's population is predicted to grow over the next 17 years. Our company
will seek to develop the limestone material by advancing the geological
information, developing a quarrying plan, determining what limestone products
can be manufactured and at what cost and carrying out marketing studies for
those products in the Fraser Valley.
Phase I
Laurence Stephenson, P. Eng., the independent engineer who has carried out the
first report on the project has confirmed management's initial assessment that
the Mount McGuire Limestone material is potentially large and any products
produced from the limestone materials are easily transportable to local markets
and maybe to existing transportation systems that connect to regional and
international markets.
Mr. Stephenson estimates from preliminary whole rock testing, air photo
interpretation and government topographic maps that the Mount McGuire material
could contain a potentially large amount of limestone. According to a joint
Federal and Provincial study ("Limestone and Dolomite Occurrences of British
Columbia" map prepared by Province of British Columbia Ministry of Energy Mines
and Petroleum
Resources Geological Survey Branch 1985-1990) Mount McGuire is the largest
undeveloped limestone occurrence in the Lower Mainland region of British
Columbia. Hence we are seeking to hold the property while developing the
potential of this property and paying for the future development work from the
proceeds of a more modest production program. Our initial goal is to locate an
Initial Quqrry of high grade limestone that can be profitability developed to
annually produce limestone products.
Mr. Stephenson reports that some layers of limestone contain 96% calcium
carbonate and have a very low iron content (<0.2% Fe2O3). We will determine if
high grade limestone products could be marketed in the local Fraser Valley. We
therefore are moving forward to identify an Initial Quarry of high grade
mineable limestone within the very large limestone occurrence on Mount McGuire.
We will continue our market research in the limestone products presently
required in the local Fraser Valley to determine how many annual tonnes of high
grade limestone products could be successfully marketed.
Phase II
The key objective is to identify and map the higher grade limestone beds. Mr.
Stephenson recommends that a helicopter be used to photograph the South Ridge
and to take samples from those areas that are not easily accessible by foot.
11
The site information collected would be drawn on a 1:1000 scale map. Mr.
Stephenson would prepare a geological model that would identify all the visually
known layers of limestone and determine if a mineable high grade bed of
limestone could be the Initial Quarry. If the engineer is successful in
identifying the above resources and potential grade of the limestone products,
management would approach end user groups and present suppliers to ascertain the
limestone products market at that time.
The following $7,635 budget which was prepared Mr. Stephenson P. Eng., outlines
an exploration program to map the project and to physically measure the location
of the high grade limestone beds.
BUDGET
Personnel
---------
(1) Geologist 3 days @ $500/day $ 1,500.00
(1) Geological Assistant 3 days @ $200/day 600.00
Equipment
---------
(1) 4x4 Truck 3 days @ $85/day $ 255.00
(1) 4-Trax 3 days @ $60/day 180.00
Expenses
--------
(1) hour helicopter 1 hour @ $1,100/hour all in $ 1,100.00
Room and board and travel 500.00
Analytical work 2,000.00
Report 1,500.00
===================
TOTAL $ 7,635.00
Based on acceptable results from the above site exploration program and a
preliminary market analysis, a diamond drilling program would be developed.
Phase III
Based on a successful program in Phase II, the consulting engineer would prepare
a drilling program that would be designed to intersect the higher grade
limestone beds. The drill pattern selected would supply sufficient information
for the engineer to compute the high grade mineable tonnage and to design a
preliminary quarry plan to extract the limestone. Once the tonnage, grade and
characteristic of the high grade limestone have been quantified, a preliminary
marketing plan can be developed. The tonnage and physical specification of the
following potential products would be assessed:
- agriculture products
- building aggregate
- lime manufacturing
- quarry stone
- raw material for cement kilns
Management would approach the local limestone suppliers and end users once a
better idea of the Mount McGuire quantity, quality and production costs have
been estimated. If the property exploration results and marketing feedback are
positive, a decision would be made to prepare a limestone quarry scoping study.
Phase IV
An infill drilling program would be carried out to substantiate and confirm the
tonnage and grade estimates prepared previously. The drilling program would be
designed to produce proven reserves of a higher grade mineable limestone bed.
12
We will then prepare a project Limestone Quarry Scoping Study that will cost out
the following steps.
a) Quarry pit preparation
b) Infrastructure
o Roads
o Electrical power
o Building facilities
o Water supply
o Site working area
c) Equipment
o Earth movers
o Crushers
o Storage bins
o Conveyors
o Fuel storage
d) Permitting and licenses
e) Environmental considerations
f) The limestone products that can be produced
g) The market for limestone products in the Fraser Valley
If the scoping study is positive then management would prepare a business plan.
The business plan would incorporate a detailed analysis of the project to
determine the optimal method to extract limestone and to produce limestone
products that can be profitable marketed in the Fraser Valley. . The business
plan will address and describe in detail the following key corporate areas:
1. Company Description
2. Limestone Market Analysis
3. Target Market
4. Competition
5. Strategic Position and Risk Assessment
6. Marketing Plan and Sales Strategy
7. Quarry and Sales Operations
8. Management and Organization
9. Development, Milestones and Exit Plan
10. Financial Data and Projections
The annual production rate finally selected would depend on the markets for
products that would be produced from the Mount McGuire Limestone occurrence, the
selling price and contract terms that could be negotiated with end users and
suppliers. The business plan would be used to finance the project and place the
property into production. Any commercially viable industrial mineral operations
will dependent on our ability to obtain contracts to supply various customers.
Without these contracts we may be successful in our plan to develop the property
but we will not be profitable without contracts in place to sell the materials.
DESCRIPTION OF PROPERTY
We currently use approximately 200 square feet of leased office space in the
8400 East Crescent Pkwy #600, Greenwood Village, Colorado 90111. We lease such
space from Peter Banysch, our sole officer and principal shareholder for $200
month which covers the use of the telephone, office equipment and furniture.
Western Exploration's Mount McGuire mineral claims situated 17 km south east of
the City of Chilliwack in South-western British Columbia.
13
Mineral Property Agreement
We purchased the property containing mineral claims from Brock McMichael on
January 30, 2004. The property consists of 2 unpatented two post mineral claims
representing 36 units that have been staked and recorded and occur in the New
Westminster mining division. The claims are contiguous. In March 2004, the
"Mount McGuire Claims" was transferred in Trust to Peter Banysch, President of
our company. The total purchase price of the claims will be $32,000, of which
$12,000 was paid in February 2004. The final payment of $20,000 is due on or
before August 15, 2005. Pursuant to the terms of the contract, advance royalties
of $25,000 are to be paid annually commencing 36 months from the date of
signature of the agreement. Such advanced royalties are due in a timely manner
regardless of whether we find or removed high grade limestone material from the
property. Failure to pay the advance royalties will cause a reversion of the
property within ten days of such failure. Mr. McMichael is required to keep the
claims in good standing for at least 24 months from the date of the agreement.
In addition, Mr. McMichael is required to provide geological consulting services
for the claims and maintain the claims in good standing for a period of 24
months.
These claims are subject to a 2.5% Net Smelter Royalty and a 7.5% Gross Rock
Royalty. Brock McMichael is the beneficiary of such royalties. 1 1/2% of the Net
Smelter Royalty can be acquired for $1.0 million within 12 months from the
commencement of commercial production. Even if we acquire this 1 1/2% of the Net
Smelter Royalty, Mr. McMichael will still be owed the 1% of the Net Smelter
Royalty and the 7.5% Gross Rock Royalty. A summary of payments and obligations
to Brock McMichael are as follows:
O Payment of $12,000 by February 15th 2004 (paid).
O Payment of $20,000 by August 15, 2005.
O Minimum payment of $25,000 commencing 36 months from the signing of
the Purchase Agreement (January 30, 2007) and then annually
thereafter.
O Provide funds to complete assessment work in order to maintain the
property in good standing. Assessment work will be a minimum of
$3,600Cdn per year for the first three years and $7,200Cdn per year
thereafter.
Location and Land Status
The Mount McGuire group consists of two contiguous mineral claims, LST 1 and LST
2. The claims cover a 9 sq. km. area, representing 900 hectares. The claims are
located in the New Westminster Mining Division of British Columbia at
coordinates: Latitude 49(0)02' 41" and longitude 121(0)41' 00" and on map sheet
BCGS: 92H/002. The pertinent property information is as follows:
Claim Name Tenure No. No. of Units Staking Date
------------------------------ --------------------------- ---------------------------- ----------------------------
LST 1 407199 18 December 7, 2004
LST 2 407200 18 December 7, 2004
------------------------------ --------------------------- ---------------------------- ----------------------------
In British Columbia, for assessment purposes in the first three years, $100 of
work or cash in lieu per unit plus 10% filing fees are due to maintain the
claims in good standing. Thereafter it rises to $200 per unit plus 10% filing
fees. The claims have not been legally surveyed.
Geology of the Mount McGuire Claims
The geological setting is comprised of a complicated structure of folded and
thrust faulted sedimentary rocks. The rock units underlying the Chilliwack River
valley consist of the Cultus Lake formation and the Chilliwack Group. The Cultus
Lake formation is made up of mainly siltstone, shale and sandstone of Triassic
to Jurassic age. The Chilliwack Group consists of Permian sandstone, shale and
conglomerate and Pennsylvanian limestone and basic to intermediate volcanics.
Limestone of Pennsylvanian age has been documented by the G.S.C, along Borden
Creek and on the summit of Mount McGuire, along which the Borden Creek claims
are located.
14
The Chilliwack River valley is a glacial U-shaped valley. The valley floor along
the south side of the river is covered by Pleistocene and recent glacial,
glaclofluvial and fluvial gravels. A small gravel quarry operation owned by the
BC Ministry of Highways occurs on one of the large gravel benches. Rising above
the valley floor are prominent ridges. The ridges are mainly composed of low
angle thrust faulted, shallow to steeply dipping shale, sandstone and limestone.
The author has previously examined limestone outcrops along a 4 kilometer
section on the north side of the river. The limestone beds that are exposed
along this section are interpreted as being a series of repetitive low angle
thrusts. Samples collected by previous operators from sections of the limestone
analyzed between 80% to 95% calcium carbonate with corresponding silica.
The majority of rocks exposed along the banks of Borden Creek consist
predominately of dark grey to black shale, calcareous shale and minor limestone.
However, on the west side of the creek along which the claims occur, is an
extensive exposure of bedded limestone. Found near the centre of the claims is a
small east flowing stream, a branch of Borden Creek, which divides the limestone
material into 2 ridges, the north and south ridges. The south ridge (south
limestone material) is covered by the LST 1 claim and the north ridge (north
limestone material) is covered by the LST 2 claim. Both ridges expose a thick
sequence of shallow to steeply dipping beds of limestone. The limestone can be
traced from just west of the creek, which forms the eastern boundary of the
claims at an elevation of approximately 1,160 m, to the summit of Mount McGuire,
at elevation of 2,019 m, forming the western boundary of the claims.
The north and south limestone materials are believed to be essentially part of
one large continuous occurance. Based on the limestone material exposed on the
south ridge, preliminary volume calculations can roughly be determined. By
measuring the ridge from a topographical map the dimensions were estimated as
length (2000 m), average width (750 m), and height (400 m). Specific gravity for
the limestone of 2.6 was used. Mr. Stephenson P.Eng. believes Mount McGuire
limestone occurrence is very large. An initial assessment is that a 500,000 to
1,000,000 tonne high grade minable limestone material could be proven to lie
within the Mount McGuire limestone occurence.
Conclusions and Recommendations of the Geology Report
Based on the preliminary positive results of the 1999 work, it is recommended
that proper mapping and sampling surveys be conducted on the LST 1 & 2 claims. A
majority of the surveys should be concentrated on the South ridge limestone
material.
When the snow is gone off the claims, a helicopter aerial survey should be
conducted and photos taken of the material. As well, samples should be collected
where possible by helicopter, especially areas that are not accessible by foot
and where higher grade limestone sections may be defined.
A mapping and sampling survey should be carried out over the South Ridge
material at reasonable scale (e.g. 1:1000) in order to properly identify the
areas of limestone that are of higher quality and grade. As well, various beds
of limestone should be identified and approximate thickness and grades
determined.
If results warrant, a limited drilling program would be conducted in Phase II.
The objective would be to analyze the drill core samples to determine the
location and grade of the higher grade limestone beds and their continuity.
WEBSITE
We currently own our own domain name www.western-exploration.com. We are
currently in the process of constructing a website to provide our shareholders
and investors with information relating to the exploration of the Mount McGuire
claims. We anticipate that our website will be operational by the end of August
2004.
OFFICES
Our corporate offices are located at 8400 East Crescent Pkwy #600, Greenwood
Village, Colorado 90111. Our telephone number is (720) 528-4326.
15
EMPLOYEES
We currently have no employees. We have one person in management as well as one
other part-time director. We plan to employ additional people as we deem
necessary as we continue to implement our plan of operation and exploration of
the Mount McGuire property.
LEGAL PROCEEDINGS
To the best of our knowledge, there are no known or pending litigation
proceedings against us.
MANAGEMENT
Directors and Executive Officers
The following table sets forth information about our executive officers and
directors.
NAME AGE POSITION
---- --- --------
PETER BANYSCH 61 CEO/President
Secretary/CFO/Treasurer/
Director
VICTOR BOWMAN 64 Director
PETER BANYSCH,
Peter Banysch has served as the President and on our Board of Directors since
our inception. Mr. Banysch is President and owner of Banysch Systems Inc. which
is a general contracting company that specializes in painting, restorations and
renovations. Banysch Systems commenced operations in 1975 and has employed up to
35 skilled tradesmen. The company built its reputation on its high quality
workmanship and its commitment to deliver the project on time and on budget.
Mr.Banysch served as the President of Baha Resources Inc. from 1983 to 1987.
Baha Resources was a junior exploration publicly traded company whose main
activity was exploring for gold deposits in the Watson Lake and Cranbrook areas
of British Columbia. Baha Resources raised $480,000 by successfully carrying out
public equity offerings to finance the exploration work.
In his capacity as founder and President, Mr. Banysch oversees our day-to-day
operations, and manages our long-term strategic exploration. Oversight of our
operations involves financial and information systems management and
exploration.
VICTOR BOWMAN
Victor Bowman has served on our Board of Directors since January 2004. The
majority of Mr. Bowman's 45 year working career has been in the building supply,
aggregate and concrete products fields in British Columbia for the
multi-national corporation, Lehigh Northwest Cement Ltd. He spent his senior
management career in managing operating facilities in Vancouver, Vancouver
Island, the Northwest and Prince George. The operating facilities included
concrete plant and concrete delivery, aggregate supplies and concrete block
manufacturing plant. The combined operations employed up to 35 and his
operations were the lead supplier in each of the communities that he managed
operations. Mr. Bowman was assigned by senior executives of the multi-national
corporation to special task forces and other assignments throughout their
concrete and aggregate operations in Western Canada.
In July of 1999, Mr. Bowman set up Integra Directions Incorporated. Integra
supplies management level services in planning and development to corporate and
Institutional clients. Integra, aided by its team of experts develops long range
resource plans. The process is one of first problem definition and then
developing appropriate solutions that overcome the identified currant problems
and a strategy to avoid future problems. His extensive background in senior
management, labor relations and leadership development has honed the skills and
tools to enhance this process.
16
Mr. Bowman has served and assisted numerous organizations in the community and
in the Industry. Mr. Bowman was a founding director and the second president of
the Prince George Regional Development Corporation, past president of the Rotary
club of Prince George, past Chairman of the Prince George Construction
Association, past Chairman of Northern British Columbia Construction
Association, former board member of the British Columbia and Canadian
Construction Associations, past Director and Treasurer of the British Columbia
Ready Mix Concrete Association, former trustee and Chairman of the Prince George
Library Board, past president of the Prince George Chamber of Commerce and many
others.
Currently Mr. Bowman is the Chairman of the Board of Directors of the Seniors
Foundation of British Columbia, and the Chairman of the Seniors Lottery
Association as well as continuing many other community volunteer activities. He
sits as a public representative on the council of the College of Dental Surgeons
of British Columbia. In addition to operating a successful consulting business,
he is also a session instructor in Marketing at the College of New Caledonia in
Prince George.
All officers and directors listed above will remain in office until the next
annual meeting of our stockholders, and until their successors have been duly
elected and qualified. There are no agreements with respect to the election of
Directors. We have not compensated our Directors for service on our Board of
Directors, any committee thereof, or reimbursed for expenses incurred for
attendance at meetings of our Board of Directors and/or any committee of our
Board of Directors. Officers are appointed annually by our Board of Directors
and each Executive Officer serves at the discretion of our Board of Directors.
Mr. Banysch serves as our sole officer and is expected to spend approximately
eighty (80) hours per month on our business. However, Mr. Banysch may spend
additional time as needed if we are successful in obtaining additional funding.
Mr. Bowman will spend no more than five (5) hours per month on our business.
None of our Officers and/or Directors have filed any bankruptcy petition, been
convicted of or been the subject of any criminal proceedings or the subject of
any order, judgment or decree involving the violation of any state or federal
securities laws within the past five (5) years.
BOARD OF DIRECTORS
The board of directors consists of two directors.
BOARD COMMITTEES
In January 2004, our Board of Directors created the Compensation Committee,
which is comprised of Peter Banysch and Victor Bowman. The Compensation
Committee has the authority to review all compensation matters relating to us.
The Compensation Committee has not yet formulated compensation policies for
senior management and executive officers. However, it is anticipated that the
Compensation Committee will develop a company-wide program covering all
employees and that the goals of such program will be to attract, maintain, and
motivate our employees.
It is further anticipated that one of the aspects of the program will be to link
an employee's compensation to his or her performance, and that the grant of
stock options or other awards related to the price of the Common Shares will be
used in order to make an employee's compensation consistent with shareholders'
gains.
It is expected that salaries will be set competitively relative to the mineral
exploration industry and that individual experience and performance will be
considered in setting salaries.
In January 2004, our Board of Directors created an Audit Committee, which is
comprised of Peter Banysch and Victor Bowman. The Audit Committee is charged
with reviewing the following matters and advising and consulting with the entire
Board of Directors with respect thereto:
17
(i) the preparation of our annual financial statements in
collaboration with our independent accountants;
(ii) annual review of our financial statements and annual report; and
(iii) all contracts between us and our officers, directors and other
affiliates. The Audit Committee, like most independent committees
of public companies, does not have explicit authority to veto any
actions of the entire Board of Directors relating to the
foregoing or other matters; however, our senior management,
recognizing their own fiduciary duty to us and our stockholders,
is committed not to take any action contrary to the
recommendation of the Audit Committee in any matter within the
scope of its review.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Lack of Market for Our Common Stock
There is no established public trading market for our securities. We intend to
seek a market maker to apply for a listing on the OTC Electronic Bulletin Board
in the United States. Our shares are not and have not been listed or quoted on
any exchange or quotation system.
Holders of Our Common Stock
As of October 22, 2004, we have 61 registered shareholders.
Rule 144 Shares
As of October 22, 2004, we have a total of 24,621,000 shares of our common stock
issued and outstanding. As of July 2004, the 18,000,000 shares owned by Mr.
Banysch became available for resale to the public and in accordance with the
volume and trading limitations of Rule 144 of the Act. After October 2004, a
total of 2,400,000 shares held by twelve shareholders who purchased their shares
in the offering by us in October 2003 will become available for resale to the
public and in accordance with the volume and trading limitations of Rule 144 of
the Act. After January 2005, the 4,000,000 shares held by Victor Bowman will
become available for resale to the public and in accordance with the volume and
trading limitations of Rule 144 of the Act. After January 2005, a total of
150,000 shares held by Gerard Lenoski who purchased his shares in the offering
by us in January 2004 will become available for resale to the public and in
accordance with the volume and trading limitations of Rule 144 of the Act. After
May 2005, a total of 12,000 shares held by Michelle Lemon who purchased her
shares in the offering by us in May 2004 will become available for resale to the
public and in accordance with the volume and trading limitations of Rule 144 of
the Act. After June 2005, a total of 59,000 shares held by forty five
shareholders who purchased their shares in the offering by us in June 2004 will
become available for resale to the public and in accordance with the volume and
trading limitations of Rule 144 of the Act. In general, under Rule 144 as
currently in effect, a person who has beneficially owned shares of a company's
common stock for at least one year is entitled to sell within any three month
period a number of shares that does not exceed 1% of the number of shares of the
company's common stock then outstanding which, in our case, would equal
approximately 246,210 shares as of the date of this prospectus.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
Under Rule 144(k), a person who is not one of the company's affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
18
Dividends
To date, we have not declared or paid any dividends on our common stock. We
currently do not anticipate paying any cash dividends in the foreseeable future
on our common stock, when issued pursuant to this offering. Although we intend
to retain our earnings, if any, to finance the exploration and growth of our
business, our Board of Directors will have the discretion to declare and pay
dividends in the future.
Payment of dividends in the future will depend upon our earnings, capital
requirements, and other factors, which our Board of Directors may deem relevant.
EXECUTIVE COMPENSATION
PETER BANYSCH has been our President and Secretary since inception and received
no compensation for services performed during the 2003 fiscal year, other than
the 18,000,000 restricted shares issued to him for services in 2003.
The following table sets forth information concerning annual and long-term
compensation, on an annualized basis for the 2003 fiscal year, for our Chief
Executive Officer and for our other director whose compensation on an annualized
basis exceeded $100,000 during fiscal 2003.
ANNUAL COMPENSATION LONG TERM COMPENSATION
ANNUAL COMPENSATION LONG TERM COMPENSATION
NAME AND RESTRICTED SECURITIES OPTIONS
PRINCIPAL FISCAL CASH ANNUAL STOCK UNDERLYING (NO. OF ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS SHARES COMPENSATION
---- ---- ------ ----- ------------ ---------- ------- ------------
PETER BANYSCH 2003 0 0 (1) 0 0 0
President and
Secretary
(1) Mr. Banysch received 18,000,000 founders' shares for services rendered to
us. He will not receive such compensation in the future.
We do not have written employment agreements with Peter Banysch, our sole
officer or and Victor Bowman, the other member of our Board of Directors. In the
future, we will determine on an annual basis how much compensation our officers
and director will receive.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 22, 2004, certain information with
respect to the beneficial ownership of the common stock by (1) each person known
by us to beneficially own more than 5% of our outstanding shares, (2) each of
our directors, (3) each Named Executive Officer and (4) all of our executive
officers and directors as a group. Except as otherwise indicated, each person
listed below has sole voting and investment power with respect to the shares of
common stock set forth opposite such person's name.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP OUTSTANDING
SHARES
-------------------- -------------------- ------------------
5% STOCKHOLDERS, DIRECTORS
AND NAMED EXECUTIVE OFFICERS
PETER BANYSCH 18,000,000 73.11%
8400 EAST CRESCENT PKWY #600
GREENWOOD VILLAGE, COLORADO 90111
VICTOR BOWMAN 4,000,000 16.25%
8400 EAST CRESCENT PKWY #600
GREENWOOD VILLAGE, COLORADO 90111
Officers and Directors 22,000,000 89.35%
as a Group
19
(1) Under the rules of the SEC, a person is deemed to be the beneficial owner of
a security if such person has or shares the power to vote or direct the voting
of such security or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities if
that person has the right to acquire beneficial ownership within 60 days of the
date hereof. Unless otherwise indicated by footnote, the named entities or
individuals have sole voting and investment power with respect to the shares of
common stock beneficially owned.
(2) This table is based upon information obtained from our stock records. Unless
otherwise indicated in the footnotes to the above table and subject to community
property laws where applicable, we believe that each shareholder named in the
above table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned.
SELLING STOCKHOLDERS
The shares being offered for resale by the 59 selling stockholders consist of
the shares of common stock sold to a total of twelve seed investors in an
offering in October 2003 pursuant to an exemption from registration at Section
4(2) of the Securities Act of 1933. In addition, the selling stockholders
consist of forty-seven investors who purchased shares of common stock in three
separate Regulation D Rule 506 private placements undertaken by us in January,
May, and June of 2004. None of the selling stockholders have had within the past
three years any position, office or other material relationship with us or any
of our predecessors or affiliates.
The following table sets forth the name of the selling stockholders, the number
of shares of common stock beneficially owned by each of the selling stockholders
as of October 22, 2004 and the number of shares of common stock being offered by
the selling stockholders. The shares being offered hereby are being registered
to permit public secondary trading, and the selling stockholders may offer all
or part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
Shares of Common Percent of Shares of Shares of Common
Name of Selling Stock Owned Prior Common Stock Owned Common Stock Stock Owned After
Stockholder To Offering Prior to Offering To Be Sold(1) Offering(2)
----------- ----------- ----------------- ------------- -----------
Wilma Alexander 1,000 0.004 1,000 0
Georgina Bresolin 150,000 0.609 150,000 0
Marilyn Cardinal 1,000 0.004 1,000 0
Daphne Carter 1,000 0.004 1,000 0
Richard Choi 150,000 0.609 150,000 0
Janet Clarke 2,000 0.008 2,000 0
Ernie Dahl 100,000 0.406 100,000 0
Kerry Donahue 1,000 0.004 1,000 0
Elena Eberlein 2,000 0.008 2,000 0
Frank Eberlein 2,000 0.008 2,000 0
Dominique Elophe 150,000 0.609 150,000 0
Thomas James Fedichin 1,000 0.004 1,000 0
Adam Ford 150,000 0.609 150,000 0
Gordon D. Ford 1,000 0.004 1,000 0
Bella M. Foster 1,000 0.004 1,000 0
Kenneth M. Foster 1,000 0.004 1,000 0
Kathleen Gallagher 2,000 0.008 2,000 0
Peter Gallagher 2,000 0.008 2,000 0
Laurence C. Gingras 1,000 0.004 1,000 0
Madeleine Gingras 1,000 0.004 1,000 0
Marion G. Green 1,000 0.004 1,000 0
Fiona Hanson 200,000 0.812 200,000 0
Richard Hunter 400,000 1.625 400,000 0
Elizabeth Johnson 150,000 0.609 150,000 0
Donal Kelly 200,000 0.812 200,000 0
Carol A. Kirkwood 1,000 0.004 1,000 0
Cecile L. Lam 1,000 0.004 1,000 0
Michelle Lemon 12,000 0.049 12,000 0
Gerard Lenoski 150,000 0.609 150,000 0
Wilson Lo 150,000 0.609 150,000 0
Mary V. McDonald 2,000 0.008 2,000 0
Jason Munro Mann 1,000 0.004 1,000 0
Christina R. Michalewicz 1,000 0.004 1,000 0
20
Paul M. Michalewicz 1,000 0.004 1,000 0
Sally Louise Mutis 2,000 0.008 2,000 0
Albert Henry Mutis 2,000 0.008 2,000 0
Richard Nuessler 400,000 1.625 400,000 0
Cindy Olsen 1,000 0.004 1,000 0
Shane Olsen 1,000 0.004 1,000 0
Ramona Phemister 2,000 0.008 2,000 0
Scott Phemister 2,000 0.008 2,000 0
Hans Quitzau 1,000 0.004 1,000 0
Scott Raleigh 200,000 0.812 200,000 0
John T. Ramsay 2,000 0.008 2,000 0
Glen L. Reid 1,000 0.004 1,000 0
Nicole Reilly 1,000 0.004 1,000 0
Scott Reilly 1,000 0.004 1,000 0
Michael Savvis 1,000 0.004 1,000 0
Douglas R. St.Arnault 1,000 0.004 1,000 0
Dave R. Thompson 2,000 0.008 2,000 0
Karen Thompson 1,000 0.004 1,000 0
Arthur Uitto 1,000 0.004 1,000 0
Harry K. Urschitz 2,000 0.008 2,000 0
Jeff Webb 1,000 0.004 1,000 0
Todd Weeks 2,000 0.008 2,000 0
Kathy Woods 1,000 0.004 1,000 0
Rick Woods 1,000 0.004 1,000 0
Wayne Yack 1,000 0.004 1,000 0
Glenn K. Yamada 1,000 0.004 1,000 0
(1) Assumes that all of the shares of common stock offered in this prospectus
are sold and no other shares of common stock are sold or issued during the
offering period.
PLAN OF DISTRIBUTION
The selling security holders may sell some or all of their shares at a fixed
price of $.25 per share until our shares are quoted on the OTC Bulletin Board
and thereafter at prevailing market prices or privately negotiated prices. Sales
by selling security holder must be made at the fixed price of $.25 until a
market develops for the stock.
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the selling stockholders, directly to one or more purchasers (including
pledgees) or through brokers or dealers who act solely as agents or may acquire
shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices, which may be changed. The distribution of the shares may be effected in
one or more of the following methods:
o ordinary brokers transactions, which may include long or short sales,
o transactions involving cross or block trades on any securities or
market where our common stock is trading,
o purchases by brokers or dealers as principal and resale by such
purchasers for their own accounts pursuant to this prospectus,
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents,
o through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally available
means.
In addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
21
Brokers, dealers, or agents participating in the distribution of the shares may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer or
agent relating to the sale or distribution of the shares. We do not anticipate
that either our shareholders or we will engage an underwriter in the selling or
distribution of our shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $15,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We currently use approximately 200 square feet of leased office space in the
8400 East Crescent Pkwy #600, Greenwood Village, Colorado 90111. We lease such
space from Peter Banysch, our President for $200 month which covers the use of
the telephone, office equipment and furniture.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by-laws, copies of which have
been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
General
Our Articles of Incorporation authorize us to issue up to 100,000,000 Common
Shares, at $0.001 par value per common share. As of October 22, 2004, there were
24,621,000 shares of our common stock issued and outstanding.
Common Stock
The holders of the common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Our certificate of
incorporation and by-laws do not provide for cumulative voting rights in the
election of directors. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board out of funds legally
available therefore. In the event of our liquidation, dissolution or winding up,
holders of common stock are entitled to share ratably in the assets remaining
after payment of liabilities. Holders of common stock have no preemptive,
conversion or redemption rights. All of the outstanding shares of common stock
are fully- paid and non-assessable.
Liquidation Rights
Upon our liquidation or dissolution, each outstanding Common Share will be
entitled to share equally in our assets legally available for distribution to
shareholders after the payment of all debts and other liabilities.
Dividend Rights
We do not have limitations or restrictions upon the rights of our Board of
Directors to declare dividends, and we may pay dividends on our shares of stock
in cash, property, or our own shares, except when we are insolvent or when the
payment thereof would render us insolvent subject to the provisions of the
Delaware Statutes. We have not paid dividends to date, and we do not anticipate
that we will pay any dividends in the foreseeable future.
22
Voting Rights
Holders of our Common Shares are entitled to cast one vote for each share held
of record at all shareholders meetings for all purposes.
Other Rights
Common Shares are not redeemable, have no conversion rights and carry no
preemptive or other rights to subscribe to or purchase additional Common Shares
in the event of a subsequent offering.
There are no other material rights of the common shareholders not included
herein. There is no provision in our charter or by-laws that would delay, defer
or prevent a change in control of us. We have not issued debt securities.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the DGCL enables a corporation in its original certificate
of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to a corporation or its stockholders for violations of
the director's fiduciary duty, except:
o for any breach of a director's duty of loyalty to the corporation of
its stockholders,
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
o pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions), or
o for any transaction from which a director derived an improper personal
benefit.
Our certificate of incorporation provides in effect for the elimination of the
liability of directors to the extent permitted by the DGCL.
Section 145 of the DGCL provides, in summary, that directors and officers of
Delaware corporations are entitled, under certain circumstances, to be
indemnified against all expenses and liabilities (including attorney's fees)
incurred by them as a result of suits brought against them in their capacity as
a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful; provided, that no
indemnification may be made against expenses in respect of any claim, issue or
matter as to which they 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 shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, they
are fairly and reasonably entitled to indemnity for such expenses which the
court shall deem proper. Any such indemnification may be made by the corporation
only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct. Our bylaws entitle
our officers and directors to indemnification to the fullest extent permitted by
the DGCL.
We have agreed to indemnify each of our directors and certain officers against
certain liabilities, including liabilities under the Securities Act of 1933.
23
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, 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 Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person 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, we will, unless in the opinion of our 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.
WHERE YOU CAN FIND MORE INFORMATION
You may read and copy any report, proxy statement or other information we file
with the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices at 75 Park Place, Room 1400, New York, New York
10007 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may obtain further information by calling the Commission at
1-800-SEC-0330. In addition, we file electronic versions of these documents on
the Commission's Electronic Data Gathering Analysis and Retrieval, or EDGAR,
System. The Commission maintains a web site at http://www.sec.gov that contains
reports, proxy statements and other information filed with the Commission.
We have filed a registration statement on Form SB-2 with the Commission to
register shares of our common stock to be sold by the selling stockholders and
to register additional shares to be sold. This prospectus is part of that
registration statement and, as permitted by the Commission's rules, does not
contain all of the information set forth in the registration statement.
For further information with respect to us or our common stock, you may refer to
the registration statement and to the exhibits and schedules filed as part of
the registration statement. You can review a copy of the registration statement
and its exhibits and schedules at the Commission, and on the Commission's web
site, as described above. You should note that statements contained in this
prospectus that refer to the contents of any contract or other document are not
necessarily complete. Such statements are qualified by reference to the copy of
such contract or other document filed as an exhibit to the registration
statement.
TRANSFER AGENT
The Transfer Agent and Registrar for our common stock is American Registrar and
Transfer Company, 342 East 900 South, Salt Lake City, Utah 84111. Its telephone
number is (801) 363-9065.
LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus has been
passed upon for us by Anslow & Jaclin, LLP, 195 Route 9 South, Suite 204,
Manalapan, New Jersey 07726. Its telephone number is (732) 409-1212.
EXPERTS
The financial statements included in this prospectus included elsewhere in the
registration statement have been audited by Gately & Associates, LLC independent
auditors, as stated in their report appearing herein and elsewhere in the
registration statement and have been so included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
24
WESERN EXPLORATION, INC.
(an exploration stage company)
FINANCIAL STATEMENTS
As Of June 30, 2004
BALANCE SHEET F-1
STATEMENT OF OPERATIONS F-2
STATEMENT OF STOCKHOLDERS' EQUITY F-3
STATEMENT OF CASH FLOWS F-4
FINANCIAL STATEMENT FOOTNOTES F-5
WESTERN EXPLORATION, INC.
(an exploration stage company)
BALANCE SHEET
As of June 30, 2004 and December 31, 2003
ASSETS
------
CURRENT ASSETS 6/30/2004 12/31/2003
-------------- --------------- ---------------
Cash $ 19,498 $ 1,808
--------------- ---------------
Total Current Assets 19,498 1,808
TOTAL ASSETS $ 19,498 $ 1,808
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ - $ -
Accrued expenses 7,500 3,000
Purchase agreement payable 20,000 -
--------------- ---------------
Total Current Liabilities 27,500 3,000
LONG-TERM LIABILITIES
None - -
--------------- ---------------
TOTAL LIABILITIES 27,500 3,000
--------------- ---------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value
Authorized: 100,000,000
Issued: 24,621,000 and 20,400,000, respectively 24,621 20,400
Additional paid in capital 55,129 9,600
Preferred stock, $.001 par value
Authorized: 10,000,000 Issued: none - -
Accumulated deficit during exploration stage (87,752) (31,192)
--------------- ---------------
Total Stockholders' Equity (8,002) (1,192)
--------------- ---------------
TOTAL LIABILITIES AND EQUITY $ 19,498 $ 1,808
=============== ===============
The accompanying notes are an integral part of these financial statements.
F-1
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENT OF OPERATIONS
For the six months ending June 30, 2004 and
from inception (July 22, 2003) through June 30, 2004
FROM
6/30/2004 INCEPTION
--------------- ------------
REVENUE $ - $ -
-------
COST OF SERVICES - -
---------------- --------------- ------------
GROSS PROFIT OR (LOSS) - -
----------------------
GENERAL AND ADMINISTRATIVE EXPENSES 24,560 55,752
-----------------------------------
GENERAL EXPLORATION 32,000 32,000
------------------- --------------- ------------
OPERATING INCOME (56,560) (87,752)
---------------- --------------- ------------
ACCUMULATED DEFICIT $ (56,560) $ (87,752)
------------------- =============== ============
Earnings (loss) per share, basic and diluted $ (0.00)
--------------------------------------------
Weighted average number of common shares 26,240,667
----------------------------------------
The accompanying notes are an integral part of these financial statements.
F-2
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
As of June 30, 2004
ADDITIONAL
COMMON PAR PAID IN ACCUM. TOTAL
STOCK VALUE CAPITAL DEFICIT EQUITY
--------------------------------------------------------------------------
Common stock issued as officer
compensation on company formation 18,000,000 $ 18,000 $ - $ - $ 18,000
July 22, 2003 at $0.001 per share
Common stock issued for cash 2,400,000 2,400 9,600 12,000
October 30, 2003 at $0.005
per share on private placement
Net income (loss) (31,192) (31,192)
--------------------------------------------------------------------------
Balance, December 31, 2003 20,400,000 $ 20,400 $ 9,600 $ (31,192) $ (1,192)
Common stock issued as 4,000,000 4,000 16,000 20,000
officer compensation
January 15, 2004 at $0.005
Common stock issued for cash 150,000 150 11,850 12,000
January 21, 2004 at $0.08
per share on private placement
Common stock issued for cash 12,000 12 2,988 3,000
May 14, 2004 at $0.25
per share on private placement
Common stock issued for cash 59,000 59 14,691 14,750
June 18, 2004 at $0.25
per share on private placement
Net income (loss) (56,560) (56,560)
--------------------------------------------------------------------------
Balance, June 30, 2004 24,621,000 $ 24,621 $ 55,129 $ (87,752) $ (8,002)
==========================================================================
The accompanying notes are an integral part of these financial statements.
F-3
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENTS OF CASH FLOWS
For the six months ending June 30, 2004 and
from inception (July 22, 2003) through June 30, 2004
FROM
CASH FLOWS FROM OPERATING ACTIVITIES 6/30/2004 INCEPTION
------------------------------------ --------------- ---------------
Net income (loss) $ (56,560) $ (87,752)
--------------- ---------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Stock issued as compensation 20,000 38,000
(Increase) Decrease in accounts receivable - -
Increase (Decrease) in accounts payable - -
Increase (Decrease) in accrued expenses 4,500 7,500
20,000 20,000
--------------- ---------------
Total adjustments to net income 44,500 65,500
--------------- ---------------
Net cash provided by (used in) operating activities (12,060) (22,252)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
None - -
--------------- ---------------
Net cash flows provided by (used in) investing activities - -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock issuance 29,750 41,740
--------------- ---------------
Net cash provided by (used in) financing activities 29,750 41,740
--------------- ---------------
CASH RECONCILIATION
Net increase (decrease) in cash 17,690 19,488
Cash - beginning balance 1,808 -
--------------- ---------------
CASH BALANCE END OF PERIOD $ 19,498 $ 19,488
=============== ===============
The accompanying notes are an integral part of these financial statements.
F-4
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
Western Exploration, Inc. (the Company), an exploration stage company, was
incorporated on July 22, 2003 in the State of Delaware and is headquartered in
Greenwood Village, Colorado. The Company is an exploration stage mining and
mineral company. On October 30, 2003 the Company became actively engaged in
acquiring mineral properties, raising capital, and preparing properties for
production. The Company did not have any significant mining operations or
activities from inception; accordingly, the Company is deemed to be in the
exploration stage.
On January 30, 2004, the Company acquired mineral claims located in Southwestern
British Columbia, Canada. The property consists thirty six mineral claims
representing. The Company has not commenced economic production and is therefore
still considered to be in the exploration stage.
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of the mineral properties and
other assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred losses of from inception. The Company has not
realized economic production from its mineral properties. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management continues to actively seek additional sources of capital to fund
current and future operations. There is no assurance that the Company will be
successful in continuing to raise additional capital, establishing probable or
proven reserves, or determining if the mineral properties can be mined
economically. These financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Cost Recognition
The Company uses the accrual basis of accounting for financial statement
reporting. Revenues and expenses are recognized in accordance with Generally
Accepted Accounting Principles for the industry. Certain period expenses are
recorded when obligations are incurred.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those results.
Accounts Receivable, deposits, Accounts Payable and accrued Expenses
Accounts receivable have historically been immaterial and therefore no allowance
for doubtful accounts has been established. Normal operating refundable Company
deposits are listed as Other Assets. Accounts payable and accrued expenses
consist of trade payables created from the normal course of business.
F-5
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
Mineral Properties and Mining Equipment
Mineral properties and mining equipment include land and mining equipment
carried at cost. Mining equipment including mill facilities is depreciated using
the straight-line method over estimated useful lives of 5 to 15 years, or the
units-of-production method based on estimated tons reserves if the
equipment is located at a producing property with a shorter economic life.
Mining equipment not in service is not depreciated.
During 1997, the Securities and Exchange Commission (SEC) staff reconsidered
existing accounting practices for mineral expenditures by United States junior
mining companies. They now interpret generally accepted accounting policy for
junior mining companies to permit capitalization of acquisition and exploration
costs only after persuasive engineering evidence is obtained to support
recoverability of these costs (ideally upon determination of proven and/or
probable reserves based upon dense drilling samples and feasibility studies by a
recognized independent engineer). Although the Company has obtained samples, and
an independent engineer has deemed the properties may contain high grade
limestone, management has chosen to follow the more conservative method of
accounting by expending all mineral costs, for which there is no feasibility
study.
Land Options
As noted above, since the Company interprets generally accepted accounting
policies to permit capitalization of acquisition costs including leases and land
options only after persuasive engineering evidence has been obtained to support
recoverability of these costs, these costs will be expensed.
Non-mining Property and Equipment
Property and equipment purchased by the Company are recorded at cost.
Depreciation is computed by the straight-line method based upon the estimated
useful lives of the respective assets. Expenditures for repairs and maintenance
are charged to expense as incurred as are any items purchased which are below
the Company's capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from accounts, and any related gain or loss is
reflected in income for the period.
Reclamation and Environmental Costs
Reclamation costs and related accruals are based on the Company's interpretation
of environmental and regulatory requirements. Minimum standards for mine
reclamation have been established by various governmental agencies. Reclamation,
site restoration, and closure costs for each producing mine are accrued over the
life of the mine using the units-of-production method. Ongoing reclamation
activities are expensed in the period incurred.
Income Taxes
The Company accounts for income taxes using the liability method which 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. Deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
F-6
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
The Company's management determines if a valuation allowance is necessary to
reduce any tax benefits when the available benefits are more likely than not to
expire before they can be used.
Inventory
Inventory is stated at net realizable value.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123), which is effective for periods beginning after
December 15, 1995. SFAS 123 requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value or provide pro-forma disclosure of the effect on
net income and earnings per share in the Notes to the Financial Statements. The
Company has adopted SFAS 123 in accounting for stock-based compensation.
Cash and Cash Equivalents, and Credit Risk
For purposes of reporting cash flows, the Company considers all cash accounts
with maturities of 90 days or less and which are not subject to withdrawal
restrictions or penalties, as cash and cash equivalents in the accompanying
balance sheet.
The portion of deposits in a financial institution that insures its deposits
with the FDIC up to $100,000 per depositor in excess of such insured amounts are
not subject to insurance and represent a credit risk to the Company.
Foreign Currency Translation and Transactions
The Company's functional currency is the US dollar. No material translations or
transactions have occurred. Upon the occurrence of such material transactions or
the need for translation adjustments, the Company will adopt Financial
Accounting Standard No. 52 and other methods in conformity with Generally
Accepted Accounting Principles.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share". SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average number
of common shares for the period.
Leases
The Company accounts for leases in accordance with Generally Accepted Accounting
Principles which require operating leases to be expensed and capital leases to
be capitalized and amortized over the lease term. Leased mining properties under
capital leases are expensed until such time that an engineering study has been
completed showing proven mining reserves.
F-7
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - AFFILIATES AND RELATED PARTIES
Significant relationships with (1) companies affiliated through common ownership
and/or management, and (2) other related parties are as follows:
The Company, from time to time, uses funds provided as a loan by shareholders.
NOTE 4 - MINERAL PROPERTIES AND MINING EQUIPMENT
The Company's net investment in mineral properties and mining equipment includes
the claims as described in footnote #1. All costs related to the claim
have been expended in accordance with Generally Accepted Accounting Principles
for the industry.
NOTE 5 - INCOME TAXES
The Company has available net operating loss carryforwards for financial
statement and federal income tax purposes. These loss carryforwards expire if
not used within 20 years from the year generated. The Company's management has
decided a valuation allowance is necessary to reduce any tax benefits because
the available benefits are more likely than not to expire before they can be
used.
NOTE 6 - LONG-TERM DEBT
The Company has no long-term debt.
NOTE 7 - SHAREHOLDERS' EQUITY
Preferred Stock
The Company has authorized ten million (10,000,000) shares of preferred stock
with a par value of $.001, none of which have been issued.
F-8
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
Common Stock
The Company has authorized one hundred million (100,000,000) shares of common
Stock with a par value of $.001.
Sale Restrictions on Common Stock
A total of 24,621,000 shares of common stock are outstanding at June 30, 2004.
And 20,400,000 at December 31, 2003. Sales of these shares of stock are
restricted under Rule 144 of the Securities Act of 1933. Our common stock will
be available for resale to the public after one year and can be sold in
accordance with the volume and trading limitations of Rule 144 of the Act.
Common Stock Subscribed and Issued for Cash
On June 18, 2004, the Company completed an offering exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 to raise
$14,750 in the issuance of 59,000 shares of common stock for the purpose of
the acquisition and exploration of mining properties. The Company's management
considers this offering to be exempt under the Securities Act of 1933.
On May 14, 2004 the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $3,000 in the
issuance of 12,000 shares of common stock for the purpose of the acquisition and
exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On January 21, 2004 the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $12,000 in the
issuance of 150,000 shares of common stock for the purpose of the acquisition
and exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On January 15, 2004, the Company issued 4,000,000 common shares of stock in the
form of compensation to a director of the company for services. The shares were
issued at a value of $0.005 per share for a total value of $20,000.
On October 30, 2003, the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $12,000 in the
issuance of 2,400,000 shares of common stock for the purpose of the acquisition
and exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On July 22, 2003, the Company issued 18,000,000 common shares of stock in the
form of officer compensation on the Company formation. The shares were issued at
par value for a total value of $18,000.
Common Stock Recorded as Employee Compensation
The Company does not have an employee stock compensation package set up at this
time. The stock compensation that has been granted falls under Rule 144.
Compliance with Rule 144 is discussed in the following paragraph.
In general, under Rule 144 as currently in effect, a person who has beneficially
owned shares of a company's common stock for at least one year is entitled to
sell within any three month period a number of shares that does not exceed the
greater of:
1. 1% of the number of shares of the company's common stock then outstanding.
2. The average weekly trading volume of the company's common stock during the
four calendar weeks preceding the filing of a notice on form 144 with
respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
F-9
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - ACQUISITIONS
On January 30, 2004, the Company entered into an agreement with Mr. Brock
McMichael for the purchase of a mining property (the Claim) near Chilliwack
Located in Southwestern British Columbia, Canada. The Claim has thirty six (36)
mineral claim units. The total purchase price of the claim is $32,000 due per
terms of the contract with advance royalties of $25,000 to be paid annually
commencing 36 months from the date of signature of the agreement. The property
is subject to a 2 1/2% Net Smelter Royalty (NSR) and a 7 1/2% Gross Rock Royalty
(GRR). 1 1/2% of the NSR can be acquired for $1.0 million within 12 months from
the commencement of commercial production. Mr. McMichael is required to keep the
claims in good standing for up to 24 months from the date of claims recordings
and provide geological consulting services for the claims. If the Company fails
to make the advance royalty payments on the 36 month anniversary of the
signature of the agreement, then the Company agrees to transfer ownership of the
Claims to Mr. McMichael within no less than a 10 day period.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company's Claim will revert back to the seller within no less than a 10 day
period if the Company fails to pay the property payment by August 15, 2005
and/or if the Company fails to make the $25,000 annual advance royalty payments
per the sales contract commencing 36 months from the date of the contract.
Management is not aware of any contingent matters that could have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.
NOTE 10 - LITIGATION, CLAIMS AND ASSESSMENTS
From time to time in the normal course of business the Company will be involved
in litigation. The Company's management has determined any asserted or
unasserted claims to be immaterial to the financial statements.
NOTE 11 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has experienced losses from inception. The
Company's financial position and operating results 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.
The Company lacks an operating history and has losses which we expect to
continue into the future.
F-10
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
The Company was incorporated in July 2003 and has not started the proposed
business operations or realized any revenues. The Company has no operating
history upon which an evaluation of our future success or failure can be made.
The ability to achieve and maintain profitability and positive cash flow is
dependent upon:
- ability to locate a profitable mineral property
- ability to generate revenues
- ability to raise the capital necessary to continue exploration of
the property.
Based upon current plans, the Company expects to incur operating losses in
future periods. This will happen because there are expenses associated with the
research and exploration of our mineral properties. The Company cannot guarantee
that it will be successful in generating revenues in the future. Failure to
generate revenues may cause the Company to go out of business.
The company intends to generate additional capital from the public markets to
increase its ability to locate profitable mineral property and generate
revenues. In the past, the Company has been successful with raising minimum cash
flows through private placement. The Company may also consider public or private
debt transactions and/or further private placement, but has no such actions in
place at this time.
F-11
WESTERN EXPLORATION, INC.
(an exploration stage company)
FINANCIAL STATEMENTS
As Of December 31, 2003
INDEPENDENT AUDITORS REPORT F-1
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENT OF CASH FLOWS F-5
FINANCIAL STATEMENT FOOTNOTES F-6
The Board of Directors and Shareholders
Western Exploration, Inc.
Gentlemen:
We have audited the accompanying balance sheet of Western Exploration, Inc.
(an exploration stage company) as of December 31, 2003 and the related
statements of operations, stockholder's equity and cash flows from inception
(July 22, 2003) through December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on the audit.
We conducted the audit in accordance with generally accepted auditing
standards. These 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 statement presentation.
We believe that the audit provides 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 Western Exploration, Inc. as
of December 31, 2003, and the statement of operations and cash flows from
inception (July 22, 2003) through December 31, 2003, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 11 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters are
also described in Note 11. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Gately & Associates, LLC
July 13, 2004
F-1
WESTERN EXPLORATION, INC.
(an exploration stage company)
BALANCE SHEET
As of December 31, 2003
ASSETS
------
CURRENT ASSETS 12/31/2003
-------------- ---------------
Cash $ 1,808
---------------
Total Current Assets 1,808
---------------
TOTAL ASSETS $ 1,808
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Accounts payable $ -
Accrued expenses 3,000
---------------
Total Current Liabilities 3,000
LONG-TERM LIABILITIES
---------------------
None -
---------------
TOTAL LIABILITIES 3,000
---------------
STOCKHOLDERS' EQUITY
--------------------
Common Stock, $.001 par value
Authorized: 100,000,000 Issued: 20,400,000 20,400
Additional paid in capital 9,600
Preferred stock, $.001 par value
Authorized: 10,000,000 Issued: None -
Accumulated deficit during exploration stage (31,192)
---------------
Total Stockholders' Equity (1,192)
---------------
TOTAL LIABILITIES AND EQUITY $ 1,808
===============
The accompanying notes are an integral part of these financial statements.
F-2
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENTS OF OPERATIONS
For the five months ending December 31, 2003, and
From inception (July 22, 2003) through December 31, 2003
FROM
12/31/2003 INCEPTION
-------------- -------------
REVENUE $ - $ -
-------
COST OF SERVICES - -
---------------- -------------- -------------
GROSS PROFIT OR (LOSS) - -
----------------------
GENERAL AND ADMINISTRATIVE EXPENSES 31,192 31,192
-----------------------------------
GENERAL EXPLORATION - -
------------------- -------------- -------------
OPERATING INCOME (31,192) (31,192)
---------------- -------------- -------------
ACCUMULATED DEFICIT $ (31,192) $ (31,192)
------------------- ============== =============
Earnings (loss) per share, basic and diluted $ (0.00)
--------------------------------------------
Weighted average number of common shares 7,900,000
----------------------------------------
The accompanying notes are an integral part of these financial statements.
F-3
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
As of December 31, 2003
ADDITIONAL
COMMON PAR PAID IN ACCUM. TOTAL
STOCK VALUE CAPITAL DEFICIT EQUITY
--------------------------------------------------------------------------
Common stock issued as officer
compensation on company formation
July 22, 2003 at $0.001 per share 18,000,000 $ 18,000 $ - $ - $ 18,000
Common stock issued for cash 2,400,000 2,400 9,600 - 12,000
October 30, 2003 at $0.005
per share on private placement
Net income (loss) (31,192) (31,192)
--------------------------------------------------------------------------
Balance, December 31, 2003 20,400,000 $ 20,400 $ 9,600 $ (31,192) $ (1,192)
==========================================================================
The accompanying notes are an integral part of these financial statements.
F-4
WESTERN EXPLORATION, INC.
(an exploration stage company)
STATEMENTS OF CASH FLOWS
For the five months ending December 31, 2003, and
From inception (July 22, 2003) through December 31, 2003
FROM
CASH FLOWS FROM OPERATING ACTIVITIES 12/31/2003 INCEPTION
------------------------------------ --------------- -------------
Net income (loss) $ (31,192) $ (31,192)
--------------- -------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Stock issued as compensation 18,000 18,000
(Increase) Decrease in accounts receivable - -
Increase (Decrease) in accounts payable - -
Increase (Decrease) in accrued expenses 3,000 3,000
--------------- -------------
Total adjustments to net income 21,000 21,000
--------------- -------------
Net cash provided by (used in) operating activities (10,192) (10,192)
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
None - -
--------------- -------------
Net cash flows provided by (used in) investing activates - -
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Proceeds from stock issuance 12,000 12,000
--------------- -------------
Net cash provided by (used in) financing activities 12,000 12,000
--------------- -------------
CASH RECONCILIATION
-------------------
Net increase (decrease) in cash 1,808 1,808
Cash - beginning balance - -
--------------- -------------
CASH BALANCE END OF PERIOD $ 1,808 $ 1,808
-------------------------- =============== =============
The accompanying notes are an integral part of these financial statements.
F-5
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS AND BASIS OF PRESENTATION
Western Exploration, Inc. (the Company), an exploration stage company, was
incorporated on July 22, 2003 in the State of Delaware and is headquartered in
Greenwood Village, Colorado. The Company is an exploration stage mining and
mineral company. On October 30, 2003 the Company became actively engaged in
acquiring mineral properties, raising capital, and preparing properties for
production. The Company did not have any significant mining operations or
activities from inception; accordingly, the Company is deemed to be in the
exploration stage.
On January 30, 2004, the Company acquired mineral claims located in Southwestern
British Columbia, Canada. The property consists thirty six mineral claims
representing. The Company has not commenced economic production and is therefore
still considered to be in the exploration stage.
The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of the mineral properties and
other assets and the satisfaction of liabilities in the normal course of
business. The Company has incurred losses of from inception. The Company has not
realized economic production from its mineral properties. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management continues to actively seek additional sources of capital to fund
current and future operations. There is no assurance that the Company will be
successful in continuing to raise additional capital, establishing probable or
proven reserves, or determining if the mineral properties can be mined
economically. These financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Cost Recognition
The Company uses the accrual basis of accounting for financial statement
reporting. Revenues and expenses are recognized in accordance with Generally
Accepted Accounting Principles for the industry. Certain period expenses are
recorded when obligations are incurred.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and
disclosure of contingent liabilities at the date of the financial statements,
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those results.
Accounts Receivable, deposits, Accounts Payable and accrued Expenses
Accounts receivable have historically been immaterial and therefore no allowance
for doubtful accounts has been established. Normal operating refundable Company
deposits are listed as Other Assets. Accounts payable and accrued expenses
consist of trade payables created from the normal course of business.
F-6
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
Mineral Properties and Mining Equipment
Mineral properties and mining equipment include land and mining equipment
carried at cost. Mining equipment including mill facilities is depreciated using
the straight-line method over estimated useful lives of 5 to 15 years, or the
units-of-production method based on estimated tons reserves if the
equipment is located at a producing property with a shorter economic life.
Mining equipment not in service is not depreciated.
During 1997, the Securities and Exchange Commission (SEC) staff reconsidered
existing accounting practices for mineral expenditures by United States junior
mining companies. They now interpret generally accepted accounting policy for
junior mining companies to permit capitalization of acquisition and exploration
costs only after persuasive engineering evidence is obtained to support
recoverability of these costs (ideally upon determination of proven and/or
probable reserves based upon dense drilling samples and feasibility studies by a
recognized independent engineer). Although the Company has obtained samples, and
an independent engineer has deemed the properties may contain high grade
limestone, management has chosen to follow the more conservative method of
accounting by expending all mineral costs, for which there is no feasibility
study.
Land Options
As noted above, since the Company interprets generally accepted accounting
policies to permit capitalization of acquisition costs including leases and land
options only after persuasive engineering evidence has been obtained to support
recoverability of these costs, these costs will be expensed.
Non-mining Property and Equipment
Property and equipment purchased by the Company are recorded at cost.
Depreciation is computed by the straight-line method based upon the estimated
useful lives of the respective assets. Expenditures for repairs and maintenance
are charged to expense as incurred as are any items purchased which are below
the Company's capitalization threshold of $1,000.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from accounts, and any related gain or loss is
reflected in income for the period.
Reclamation and Environmental Costs
Reclamation costs and related accruals are based on the Company's interpretation
of environmental and regulatory requirements. Minimum standards for mine
reclamation have been established by various governmental agencies. Reclamation,
site restoration, and closure costs for each producing mine are accrued over the
life of the mine using the units-of-production method. Ongoing reclamation
activities are expensed in the period incurred.
Income Taxes
The Company accounts for income taxes using the liability method which 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. Deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
F-7
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
The Company's management determines if a valuation allowance is necessary to
reduce any tax benefits when the available benefits are more likely than not to
expire before they can be used.
Inventory
Inventory is stated at net realizable value.
Stock Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," (SFAS 123), which is effective for periods beginning after
December 15, 1995. SFAS 123 requires that companies either recognize
compensation expense for grants of stock, stock options, and other equity
instruments based on fair value or provide pro-forma disclosure of the effect on
net income and earnings per share in the Notes to the Financial Statements. The
Company has adopted SFAS 123 in accounting for stock-based compensation.
Cash and Cash Equivalents, and Credit Risk
For purposes of reporting cash flows, the Company considers all cash accounts
with maturities of 90 days or less and which are not subject to withdrawal
restrictions or penalties, as cash and cash equivalents in the accompanying
balance sheet.
The portion of deposits in a financial institution that insures its deposits
with the FDIC up to $100,000 per depositor in excess of such insured amounts are
not subject to insurance and represent a credit risk to the Company.
Foreign Currency Translation and Transactions
The Company's functional currency is the US dollar. No material translations or
transactions have occurred. Upon the occurrence of such material transactions or
the need for translation adjustments, the Company will adopt Financial
Accounting Standard No. 52 and other methods in conformity with Generally
Accepted Accounting Principles.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per
Share". SFAS 128 replaces the presentation of primary earnings per share with a
presentation of basic earnings per share based upon the weighted average number
of common shares for the period.
Leases
The Company accounts for leases in accordance with Generally Accepted Accounting
Principles which require operating leases to be expensed and capital leases to
be capitalized and amortized over the lease term. Leased mining properties under
capital leases are expensed until such time that an engineering study has been
completed showing proven mining reserves.
F-8
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - AFFILIATES AND RELATED PARTIES
Significant relationships with (1) companies affiliated through common ownership
and/or management, and (2) other related parties are as follows:
The Company, from time to time, uses funds provided as a loan by shareholders.
NOTE 4 - MINERAL PROPERTIES AND MINING EQUIPMENT
The Company's net investment in mineral properties and mining equipment includes
the claims as described in footnote #1. All costs related to the claim
have been expended in accordance with Generally Accepted Accounting Principles
for the industry.
NOTE 5 - INCOME TAXES
The Company has available net operating loss carryforwards for financial
statement and federal income tax purposes. These loss carryforwards expire if
not used within 20 years from the year generated. The Company's management has
decided a valuation allowance is necessary to reduce any tax benefits because
the available benefits are more likely than not to expire before they can be
used.
NOTE 6 - LONG-TERM DEBT
The Company has no long-term debt.
NOTE 7 - SHAREHOLDERS' EQUITY
Preferred Stock
The Company has authorized ten million (10,000,000) shares of preferred stock
with a par value of $.001, none of which have been issued.
F-9
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
Common Stock
The Company has authorized one hundred million (100,000,000) shares of common
Stock with a par value of $.001.
Sale Restrictions on Common Stock
A total of 24,621,000 shares of common stock are outstanding at June 30, 2004.
And 20,400,000 at December 31, 2003. Sales of these shares of stock are
restricted under Rule 144 of the Securities Act of 1933. Our common stock will
be available for resale to the public after one year and can be sold in
accordance with the volume and trading limitations of Rule 144 of the Act.
Common Stock Subscribed and Issued for Cash
On June 18, 2004, the Company completed an offering exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933 to raise
$14,750 in the issuance of 59,000 shares of common stock for the purpose of
the acquisition and exploration of mining properties. The Company's management
considers this offering to be exempt under the Securities Act of 1933.
On May 14, 2004 the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $3,000 in the
issuance of 12,000 shares of common stock for the purpose of the acquisition and
exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On January 21, 2004 the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $12,000 in the
issuance of 150,000 shares of common stock for the purpose of the acquisition
and exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On January 15, 2004, the Company issued 4,000,000 common shares of stock in the
form of compensation to a director of the company for services. The shares were
issued at a value of $0.005 per share for a total value of $20,000.
On October 30, 2003, the Company completed an offering exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933 to raise $12,000 in the
issuance of 2,400,000 shares of common stock for the purpose of the acquisition
and exploration of mining properties. The Company's management considers this
offering to be exempt under the Securities Act of 1933.
On July 22, 2003, the Company issued 18,000,000 common shares of stock in the
form of officer compensation on the Company formation. The shares were issued at
par value for a total value of $18,000.
Common Stock Recorded as Employee Compensation
The Company does not have an employee stock compensation package set up at this
time. The stock compensation that has been granted falls under Rule 144.
Compliance with Rule 144 is discussed in the following paragraph.
In general, under Rule 144 as currently in effect, a person who has beneficially
owned shares of a company's common stock for at least one year is entitled to
sell within any three month period a number of shares that does not exceed the
greater of:
1. 1% of the number of shares of the company's common stock then outstanding.
2. The average weekly trading volume of the company's common stock during the
four calendar weeks preceding the filing of a notice on form 144 with
respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
F-10
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - ACQUISITIONS
On January 30, 2004, the Company entered into an agreement with Mr. Brock
McMichael for the purchase of a mining property (the Claim) near Chilliwack
Located in Southwestern British Columbia, Canada. The Claim has thirty six (36)
mineral claim units. The total purchase price of the claim is $32,000 due per
terms of the contract with advance royalties of $25,000 to be paid annually
commencing 36 months from the date of signature of the agreement. The property
is subject to a 2 1/2% Net Smelter Royalty (NSR) and a 7 1/2% Gross Rock Royalty
(GRR). 1 1/2% of the NSR can be acquired for $1.0 million within 12 months from
the commencement of commercial production. Mr. McMichael is required to keep the
claims in good standing for up to 24 months from the date of claims recordings
and provide geological consulting services for the claims. If the Company fails
to make the advance royalty payments on the 36 month anniversary of the
signature of the agreement, then the Company agrees to transfer ownership of the
Claims to Mr. McMichael within no less than a 10 day period.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The Company's Claim will revert back to the seller within no less than a 10 day
period if the Company fails to pay the property payment by August 15, 2005
and/or if the Company fails to make the $25,000 annual advance royalty payments
per the sales contract commencing 36 months from the date of the contract.
Management is not aware of any contingent matters that could have a material
adverse effect on the Company's financial condition, results of operations, or
liquidity.
NOTE 10 - LITIGATION, CLAIMS AND ASSESSMENTS
From time to time in the normal course of business the Company will be involved
in litigation. The Company's management has determined any asserted or
unasserted claims to be immaterial to the financial statements.
NOTE 11 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in the notes to the
financial statements, the Company has experienced losses from inception. The
Company's financial position and operating results 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.
The Company lacks an operating history and has losses which we expect to
continue into the future.
F-11
WESTERN EXPLORATION, INC.
NOTES TO FINANCIAL STATEMENTS
The Company was incorporated in July 2003 and has not started the proposed
business operations or realized any revenues. The Company has no operating
history upon which an evaluation of our future success or failure can be made.
The ability to achieve and maintain profitability and positive cash flow is
dependent upon:
- ability to locate a profitable mineral property
- ability to generate revenues
- ability to raise the capital necessary to continue exploration of
the property.
Based upon current plans, the Company expects to incur operating losses in
future periods. This will happen because there are expenses associated with the
research and exploration of our mineral properties. The Company cannot guarantee
that it will be successful in generating revenues in the future. Failure to
generate revenues may cause the Company to go out of business.
The company intends to generate additional capital from the public markets to
increase its ability to locate profitable mineral property and generate
revenues. In the past, the Company has been successful with raising minimum cash
flows through private placement. The Company may also consider public or private
debt transactions and/or further private placement, but has no such actions in
place at this time.
F-12
WESTERN EXPLORATION INC.
2,621,000 Shares Common Stock
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Until _____________, 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.
October 22, 2004
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS II-1
Section 145 of the General Corporation Law of Delaware ("DGCL") provides that
directors, officers, employees or agents of Delaware corporations are entitled,
under certain circumstances, to be indemnified against expenses (including
attorneys' fees) and other liabilities actually and reasonably incurred by them
in connection with any suit brought against them in their capacity as a
director, officer, employee or agent, if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, if they
had no reasonable cause to believe their conduct was unlawful. Section 145 also
provides that directors, officers, employees and agents may also be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
them in connection with a derivative suit bought against them in their capacity
as a director, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification may be made without court approval if such person
was adjudged liable to the corporation.
Our Certificate of Incorporation provides that the we shall indemnify any and
all persons whom we shall have power to indemnify to the fullest extent
permitted by the DGCL. Article VII of our by-laws provides that we shall
indemnify our authorized representatives to the fullest extent permitted by the
DGCL. Our by-laws also permit us to purchase insurance on behalf of any such
person against any liability asserted against such person and incurred by such
person in any capacity, or out of such person's status as such, whether or not
we would have the power to indemnify such person against such liability under
the foregoing provision of the by-laws.
II-1
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission $ 60.28
registration fee
Federal Taxes $ 0
State Taxes and Fees $ 0
Transfer Agent Fees $ 2,500.00
Accounting fees and expenses $ 5,000.00
Legal fees and expenses $ 7,500.00
Blue Sky fees and expenses $ 0
Miscellaneous $ 0
Total $ 15,060.28
All amounts are estimates other than the Commission's registration fee. We are
paying all expenses of the offering listed above. No portion of these expenses
will be borne by the selling shareholders. The selling shareholders, however,
will pay any other expenses incurred in selling their common stock, including
any brokerage commissions or costs of sale.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Western Exploration Inc. was incorporated in the State of Delaware on July 22,
2003 and 18,000,000 shares were issued to Peter Banysch in reliance on the
exemption under Section 4(2) of the Securities Act of 1933, as amended (the
"Act"). Such shares were issued to Peter Banysch as founders shares as
compensation for payment of cash in the amount of $18,000.00 based on the par
value of the stock. On January 15, 2004 we issued 4,000,000 shares of our common
stock to Victor Bowman in reliance on the exemption under Section 4(2) of the
Securities Act of 1933 as compensation for services rendered valued at $0.005 as
compensation in the amount of $20,000 based on the offering price prior to this
issuance.
These shares of our common stock qualified for exemption under Section 4(2) of
the Securities Act of 1933 since the issuance shares by us did not involve a
public offering. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mr. Banysch and Mr. Bowman had the necessary
investment intent as required by Section 4(2) since he agreed to and received a
share certificate bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for this transaction.
In October 2003, we sold a total of 2,400,000 shares of our common stock to 12
investors at a price per share of $0.005 for an aggregate offering price of
$12,000. Such shares were issued in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933. The following sets forth the
identity of the class of persons to whom we sold these shares and the amount of
shares for each shareholder:
Georgina Bresolin 150,000
Richard Choi 150,000
Ernie Dahl 100,000
Dominique Elophe 150,000
Adam Ford 150,000
Fiona Hanson 200,000
Richard Hunter 400,000
Elisabeth Johnson 150,000
Donal Kelly 200,000
Wilson Lo 150,000
Rick Nuessler 400,000
Scott Raleigh 200,000
II-2
These shares of our common stock qualified for exemption under Section 4(2) of
the Securities Act of 1933 since the issuance shares by us did not involve a
public offering. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. We sold to a total of 12 investors, we only issued a total of
2,400,000 shares in the offering and we only sold the shares at $.005 per share
for a total of $12,000.In addition, these shareholders had the necessary
investment intent as required by Section 4(2) since they agreed to and received
share certificates bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that
these shares would not be immediately redistributed into the market and
therefore not be part of a "public offering." These investors received a
memorandum disclosing information on us similar to this prospectus. Each
investor also completed a questionnaire to confirm that there were sophisticated
and could bear the economic risk of their investment. Each of these investors
had some form of prior relationship with Mr. Banysch in that these investors
were all either friends or family of Mr. Banysch or friends of the family and
friends of Mr. Banysch.
Therefore this offering was done with no general solicitation or advertising by
Mr. Banysch. Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for this transaction.
In January 2004, we sold a total of 150,000 shares of our common stock to Gerard
Lenoski at a price per share of $0.08 for an aggregate offering price of
$12,000. Such shares were issued in reliance on an exemption from registration
under Section 4(2) of the Securities Act of 1933.. These shares of our common
stock qualified for exemption under Section 4(2) of the Securities Act of 1933
since the issuance shares by us did not involve a public offering. The offering
was not a "public offering" as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in which
we sold a high number of shares to a high number of investors. We sold to a
total of 1 investor, we only issued a total of 150,000 shares in the offering
and we only sold the shares at $.08 per share for a total of $12,000. In
addition, this shareholder had the necessary investment intent as required by
Section 4(2) since they agreed to and received share certificates bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. This restriction ensures that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." This investor received a memorandum disclosing information on us
similar to this prospectus. Thisinvestor also completed a questionnaire to
confirm that he was sophisticated and could bear the economic risk of his
investment. This investor had a prior relationship with Mr. Banysch in that he
wasa friends of Mr. Banysch.
Therefore this offering was done with no general solicitation or advertising by
Mr. Banysch. Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for this transaction.
In May 2004, we sold a total of 12,000 shares of our common stock to Michelle
Lemon at a price per share of $0.25 for an aggregate offering price of $3,000.
Such shares were issued in reliance on an exemption from registration under
Section 4(2) of the Securities Act of 1933.
II-3
These shares of our common stock qualified for exemption under Section 4(2) of
the Securities Act of 1933 since the issuance shares by us did not involve a
public offering. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. We sold to a total of 1 investor, we only issued a total of 12,000
shares in the offering and we only sold the shares at $.25 per share for a total
of $3,000.In addition, this shareholder had the necessary investment intent as
required by Section 4(2) since she agreed to and received a share certificate
bearing a legend stating that such shares are restricted pursuant to Rule 144 of
the 1933 Securities Act. This restriction ensures that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." This investor received a memorandum disclosing information on us
similar to this prospectus. This investor also completed a questionnaire to
confirm that she were sophisticated and could bear the economic risk of her
investment. This investor had a prior relationship with Mr. Banysch in that she
was a friend of Mr. Banysch.
Therefore this offering was done with no general solicitation or advertising by
Mr. Banysch. Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for this transaction.
In June 2004, we sold a total of 59,000 shares of our common stock in a private
placement to 45 investors at a price per share of $0.25 for an aggregate
offering price of $14,750. Such shares were issued in reliance on an exemption
from registration under Section 4(2) of the Securities Act of 1933. The
following sets forth the identity of the class of persons to whom we sold these
shares and the amount of shares for each shareholder:
Wilma Alexander 1,000
Marilyn Cardinal 1,000
Daphne Carter 1,000
Janet Clarke 2,000
Kerry Donahue 1,000
Elena Eberlein 2,000
Frank Eberlein 2,000
Thomas James Fedichin 1,000
Gordon D. Ford 1,000
Bella M. Foster 1,000
Kenneth M. Foster 1,000
Kathleen Gallagher 2,000
Peter Gallagher 2,000
Laurence C. Gingras 1,000
Madeleine Gingras 1,000
Marion G. Green 1,000
Carol A. Kirkwood 1,000
Cecile L. Lam 1,000
Mary V. McDonald 2,000
Jason Munro Mann 1,000
Christina R. Michalewicz 1,000
Paul M. Michalewicz 1,000
Sally Louise Mutis 2,000
Albert Henry Mutis 2,000
Cindy Olsen 1,000
Shane Olsen 1,000
Ramona Phemister 2,000
Scott Phemister 2,000
Hans Quitzau 1,000
John T. Ramsay 2,000
Glen L. Reid 1,000
Nicole Reilly 1,000
Scott Reilly 1,000
II-4
Michael Savvis 1,000
Douglas R. St.Arnault 1,000
Dave R. Thompson 2,000
Karen Thompson 1,000
Arthur Uitto 1,000
Harry K. Urschitz 2,000
Jeff Webb 1,000
Todd Weeks 2,000
Kathy Woods 1,000
Rick Woods 1,000
Wayne Yack 1,000
Glenn K. Yamada 1,000
These shares of our common stock qualified for exemption under Section 4(2) of
the Securities Act of 1933 since the issuance shares by us did not involve a
public offering. The offering was not a "public offering" as defined in Section
4(2) due to the insubstantial number of persons involved in the deal, size of
the offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. We sold to a total of 45 investors, we only issued a total of
59,000 shares in the offering and we only sold the shares at $0.25 per share for
a total of $14,750. In addition, these shareholders had the necessary investment
intent as required by Section 4(2) since they agreed to and received share
certificates bearing a legend stating that such shares are restricted pursuant
to Rule 144 of the 1933 Securities Act. This restriction ensures that these
shares would not be immediately redistributed into the market and therefore not
be part of a "public offering." These investors received a memorandum disclosing
information on us similar to this prospectus. Each investor also completed a
questionnaire to confirm that there were sophisticated and could bear the
economic risk of their investment. Each of these investors had some form of
prior relationship with Mr. Banysch in that these investors were all either
friends or family of Mr. Banysch or friends of the family and friends of Mr.
Banysch.
Therefore this offering was done with no general solicitation or advertising by
Mr. Banysch. Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for this transaction.
We have never utilized an underwriter for an offering of our securities. Other
than the securities mentioned above, we have not issued or sold any securities.
ITEM 27. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Articles of Incorporation*
3.2 By-Laws*
5.1 Opinion of Anslow & Jaclin, LLP
10.1 Purchase Agreement between Western Exploration Inc. and
Brock McMichael*
10.2 Summary Geology Report on the Mount McGuire Limestone Deposit*
10.3 Consent of Laurence Stephenson., P.Eng.
23.1 Consent of Gately & Associates, LLP
99.1 Regional Map of Mount McGuire Regional Market
* Filed as exhibits to the original Form SB-2 Registration Statement filed with
the Securities and Exchange Commission on August 11, 2004.
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-5
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and Notwithstanding the foregoing, any
increase or decrease in 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
prospects filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered hereby which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, 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 Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities, other than the
payment by us of expenses incurred or paid by one of our directors, officers, or
controlling persons in the successful defense of any action, suit or proceeding,
is asserted by one of our directors, officers, or controlling persons in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Securities Act, and we will be
governed by the final adjudication of such issue.
II-6
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
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Greenwood Village, State of Colorado on October 22, 2004.
By: /s/ Peter Banysch
-------------------------------------------
PETER BANYSCH
President, Chief Executive Officer and
Chief Financial Officer
POWER OF ATTORNEY
ALL MEN BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints Peter Banysch, true and lawful attorney-in-fact and
agent, with full power of substitution and re-substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all pre- or
post-effective amendments to this registration statement, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any one
of them, or their or his substitutes, may lawfully do or cause to be done by
virtue hereof. In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following persons in the
capacities and on the dates stated.
By: /s/ Peter Banysch President, Chief Executive Officer,
------------------------ Chief Financial Officer and Director
Peter Banysch
Dated: October 22, 2004
By: /s/ Victor Bowman Director
------------------------
Victor Bowman
Dated: October 22, 2004
II-7
ANSLOW & JACLIN, LLP RICHARD I. ANSLOW
Counselors at Law EMAIL: RANSLOW@ANSLOWLAW.COM
GREGG E. JACLIN
EMAIL: GJACLIN@ANSLOWLAW.COM
AMOD CHOUDHARY
EMAIL: ACHOUDHARY@ANSLOWLAW.COM
October 22, 2004
WESTERN EXPLORATION, INC.
8400 East Crescent Pkwy. #600
Greenwood Village, Colorado 90111
Gentlemen:
You have requested our opinion, as counsel for Western Exploration, Inc., a
Delaware corporation (the "Company"), in connection with the registration
statement on Form SB-2 (the "Registration Statement"), under the Securities Act
of 1933 (the "Act"), being filed by the Company with the Securities and Exchange
Commission.
The Registration Statement relates to an offering of 2,621,000 shares of
the Company's common stock.
We have examined such records and documents and made such examination of
laws as we have deemed relevant in connection with this opinion. It is our
opinion that the shares of common stock to be sold by the selling shareholders
have been duly authorized and are legally issued, fully paid and non-assessable.
No opinion is expressed herein as to any laws other than the State of
Delaware of the United States. This opinion opines upon Delaware law including
the statutory provisions, all applicable provisions of the Delaware Constitution
and reported judicial decisions interpreting those laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Experts" in the Registration Statement. In so doing, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
ANSLOW & JACLIN, LLP
By: /s/ Gregg E. Jaclin
-----------------------------------
GREGG E. JACLIN
195 Route 9 South, Suite 204, Manalapan, New Jersey 07726
CONSENT OF INDEPENDENT GEOLOGIST
I have reviewed Western Exploration, Inc.'s amendment No 1 of the Form SB-2
filing; I hereby provide my consent for the reference to my reports on the LST 1
and the LST 2 Mineral Claims located in the New Westminster Mining Division,
British Columbia. I hereby consent to the use of my name as a consultant to the
Company.
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated July 13, 2004, relating to the consolidated financial statements of
Western Exploration Inc. The audit was conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
We also consent to the reference to our firm under the caption "Experts" in the
Registration Statement.
/s/ Gately & Associates, LLC.
GATELY & ASSOCIATES, LLC.
Almonte Springs, Florida
October 22 , 2004
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