MAIL STOP 05-11
May 4, 2005
Peter Dodge, President
Stone Mountain Resources, Inc.
701 North Green Valley Parkway #200
Henderson, Nevada 89074
RE: Stone Mountain Resources, Inc.
Registration Statement on Form SB-2
File No. 333-123735
Filed April 1, 2005
Dear Mr. Dodge:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. The prospectus does not contain page numbers consistent with
the
table of contents. Please revise to include.
2. Section (a)(2) of Rule 419 to Regulation C defines a blank
check
company as a company that is issuing penny stock and that it is "a
development stage company that has no specific business plan or
purpose or has indicated that its business plan is to engage in a
merger or acquisition with an unidentified company or companies,
or
other entity." In discussing this definition in the adopting
release, the Commission stated that it would "scrutinize ...
offerings for attempts to create the appearance that the
registrant... has a specific business plan, in an effort to avoid
the
application of Rule 419." See Securities Act Release No. 6932
(April
13, 1992). In carrying out this mandate, the staff`s assessment
of
your status under the definition can be based only upon the public
representation of its proposed business in the instant
registration
statement. In this regard we also refer you to proposing
Securities
Act Release 33-6891 (April 17, 1991).
Your disclosure indicates that you are an exploration stage
company
that intends to explore mineral properties that have mineral
potential. Your disclosure also indicates that you have yet to
commence business operations, you have no operating history, no
revenues, you rely entirely on the sale of securities and you have
a
business plan that calls for growth through acquisitions. In view
of
the foregoing, we believe that your proposed business is
commensurate
in scope with the uncertainty ordinarily associated with a blank
check company. Please either disclose the blank check nature of
the
company and revise your offering throughout to comply with the
provisions of Rule 419 or affirmatively state in the summary and
business sections that you do not consider yourself a blank check
as
that term is defined in Rule 419 and do not intend to merge with
or
acquire another company now or in the foreseeable future.
Prospectus Cover Page
3. Please include the legend located on the registration statement
cover page beginning with "The information in this prospectus is
not
complete" on the prospectus cover page. See Item 501(a)(10)(iv)
of
Regulation S-B.
4. Revise the disclosure in the first paragraph to clarify that
the
shares "will be" sold at a fixed price until a market develops on
the
OTCBB rather than "can be" sold at a fixed price.
5. Please remove the disclosure regarding penny stocks from the
cover. The cover page should be limited to the information
required
under Item 501 of Regulation S-B.
About Our Company
6. Please provide the definition of "exploration stage
corporation"
set forth in Guide 7(a)(4)(i) to the Securities Act Industry
Guides.
Provide similar disclosure in the Business section.
7. We note that you do not have any lines of credit available.
Please indicate whether you have any other forms of financing
available.
Summary Financial Data
8. Revise the caption that now reads "Operating Income" to read
instead "Operating Income (Loss)" and reorder to put this caption
last.
Risk Factors
9. Clarify in risk factor 2 that your auditors have expressed
substantial doubt as to your ability to continue as a going
concern.
10. Reference is made to risk factor 10 where you allude to your
growth strategy. Elaborate here and in the Business section on
the
types of candidates you will seek to acquire, the reasons for this
growth strategy, the acquisition arrangements you will attempt to
enter into and the means by which you will finance the same.
11. The risk factor concerning weather interruptions in Nevada
does
not appear to represent a material concern. Please remove it.
12. There are three risk factors discussing the need for
additional
capital. They should be combined.
13. Intensions regarding Messrs. Dodge and Young to remain with
the
company should be discussed in the twelfth risk factor.
14. Disclose in risk factor 13 the number of hours and percentage
of
time per week each of your officers and directors will contribute
to
company business.
Management`s Discussion and Analysis
15. Revise to add a discussion that addresses the company`s
liquidity
as of the latest balance sheet date and includes working capital
requirements for the next 12 months. In this regard, we note that
the company has committed to pay the costs of the proposed
offering,
the costs of which are estimated to be approximately $12,700,
although both cash and total assets as of the latest balance sheet
date are less than the costs of the offering. Also consider other
significant working capital requirements, including the property
option payments due beginning February 2006 and the earnings costs
mandated by the Midas Agreement, and address how management
expects
to meet such obligations.
16. Under "Property Option Payments," disclose the date(s) the
initial and second payments were paid.
17. Under "Earning Costs," elaborate on the "specified
expenditures"
you are required to pay.
18. Indicate the cash balance as of the most recent practicable
date.
Description of Business
Mining Business in Nevada
19. Much of the disclosure in the first paragraph and in the last
sentence of the fourth paragraph is overly promotional and
unsubstantiated.
20. Please explain the "Bre-X scandal" and define "junior mining
companies."
Portfolio Approach
21. The disclosure under "Political Risk" that refers to Nevada as
the premier mineral exploration location in the world is overly
promotional and should be deleted.
22. Please define "junior capital markets" and substantiate your
claim that the "junior capital markets have strengthened and the
ability to raise capital is increasing and will continue to
improve
if the gold price continues to increase."
CAB Claims
23. Please provide the disclosure required under Guide 7(b)(1)
regarding access, (b)(3) regarding history of previous operations,
including names of previous operators, and (b)(4)(i) and (ii).
24. Please elaborate on the "promising geology and the geophysics
signatures" which led you to select the CAB claims.
25. Please disclose the time frame for beginning and completing
each
of the three phases. Clarify exactly what you have done to date
and
how you propose to conduct any actual mining work as it does not
appear you have any employees or equipment.
26. Please define "VSF" and "diamond drilling program."
Management
27. Please provide the business experience, including names and
dates, over the past 5 years for Mr. Dodge and the business
experience for the past 2 years, including dates, for Mr. Young as
required by Item 401 of Regulation S-B.
28. Please disclose the line of business for the Land Title
Office.
29. Delete or substantiate the statement that Mr. Dodge`s "primary
strength has been the challenge of creating maximum results with
minimum resources."
30. Please disclose Mr. Young`s relationship with Chubasco
Resources
Corp. and indicate what relationship exists, if any, between that
entity and Chubasco Resources Inc.
31. Indicate the type of mining currently being done by Chubasco
Resources.
Executive Compensation
32. Update the compensation table for the fiscal year ended March
2005.
Selling Shareholders
33. Confirm the percentage of common stock owned prior to this
offering.
Plan of Distribution
34. Regarding the reference to "pledgees, donees or transferees
of,
or their successors in interest," please note that all persons
using
this prospectus must be named as selling shareholders and all
disclosure pursuant to Item 507 of Regulation S-B must be included
in
the prospectus. This may be accomplished in an effective
registration statement by means of a prospectus supplement filed
pursuant to Rule 424(b) of Regulation C. Please disclose in the
prospectus or supplementally that the company will file such a
prospectus supplement(s).
35. We note your statement that the selling security holders may
"use
any combination of the foregoing, or by any other legally
available
means" when disposing of their shares. Item 508 of Regulation S-B
requires that the company indicate the plan of distribution.
Please
revise this statement and indicate all additional methods of
distribution that will be used.
36. Please include a brief discussion of the rules and limitations
imposed on selling shareholders pursuant to Regulation M.
Certain Relationships and Related Transactions
37. Please include the disclosure required by Item 404(d) of
Regulation S-B.
Description of Securities
38. The statement that "all outstanding shares of common stock are
fully-paid and non-assessable" is a legal conclusion you are not
qualified to make. Either attribute this statement to counsel and
file counsel`s consent to be named in this section, or delete it.
Experts
39. The disclosure indicates that Anslow & Jaclin was employed on
a
contingency basis. Please provide the information required by
Item
509 of Regulation S-B.
Financial Statements
Interim Unaudited Financial Statements as of February 28, 2005
Note 1 - Basis of Presentation, Page F-5
40. It appears that the date October 30, 2003 should be instead
2004.
Revise here to correct or clarify and also in Note 1 to the
audited
financial statements as of March 31, 2004.
41. Please revise to disclose the fiscal year-end.
42. Revise to add management`s representation regarding the
unaudited
financial statements in accordance with Item 310(b) of Regulation
S-
B.
Note 7 - Commitments
43. Revise to add disclosure of the company`s commitment to pay
the
registration costs of the proposed offering.
General
44. Include a currently dated consent of the independent
accountants
in any amendment to the registration statement.
45. The current financial statement presentation does not appear
to
meet the requirements of Item 310(a) of Regulation S-B. Since the
issuer is providing financial statements for a period less than
one
fiscal year, revise to provide audited financial statements for
that
period, as of a date within 135 days of filing, as required by
Item
310(a) of Regulation S-B. If the company`s fiscal year-end is
March
31, audited financial statements for the year ending March 31,
2005,
would be required in any filings after May 16, 2005. Please refer
to
Item 310(g) of Regulation S-B.
Part II
Item 26. Recent Sales of Unregistered Securities
46. For each offering made pursuant to Rule 506 of Regulation D,
please disclose the sophistication of the investors and how the
company satisfied any information requirements, as applicable.
47. Supplementally advise why the shares issued in February 2005
were
$.24 greater per share than those issued in August 2004.
Exhibits
48. We are unable to locate exhibit 4.1 (Specimen Stock
Certificate)
or exhibit 10.3 (Consent of David Shaw, PhD.).
49. Exhibit 10.1 is not signed nor does it contain exhibit B.
Please
file a validly executed agreement and include the map.
Signatures
50. Please have your principal accounting officer sign in that
capacity.
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
Any questions regarding the accounting comments may be
directed
to Don Wiland at (202) 551-3392. Questions on other disclosure
issues may be directed to William Bennett at (202) 551-3389.
Sincerely,
John Reynolds, Assistant
Director
Office of Emerging Growth
Companies
cc: Gregg E. Jaclin, Esq.
Fax: (732) 577-1188
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Stone Mountain Resources, Inc.
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