As filed with the Securities and Exchange
Commission on February 25, 2005
Registration No. 333-120691
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SPARTA HOLDING CORP.
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(Exact name of small business issuer as specified in its charter)
NEVADA 1040 11-31956
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification Number)
203 Pebble Beach Path
Riverhead, NY 11901
(631) 574-8862
(Address and Telephone Number of Principal Executive Offices
and Principal Place of Business)
Marilyn K. Radloff
115 Taurus Circle
Reno, Nevada 89511
(775) 359-1703 ext. 7329 (Name, Address
and Telephone Number of Agent for Service)
Copies to:
Dennis C. O'Rourke
Denise A. Menikheim
Ruskin Moscou Faltischek, P.C.
190 EAB Plaza, East Tower, 15th Floor
Uniondale, New York 11556
516-663-6600
Approximate Date of Commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Number of Shares toOffering Price Per Aggregate Amount of
Registered be Registered Share(1) Offering Price(2) Registration Fee(2)
=======================================================================================================
Common stock, par 1,457,610 shares $0.35 $510,163.50 $60.05
value $.001 per share
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(1) Our common stock is not traded on any national exchange and, in accordance
with Rule 457, the offering price was determined by the price at which the
shares were sold in a private placement. The price of $0.35 is a fixed price at
which the selling security holders may sell their shares until our common stock
is qualified on the OTC Bulletin Board, at which time the shares may be sold at
the prevailing market prices or privately negotiated prices.
(2) Estimated solely for purposes of calculating the amount of the registration
fee pursuant to Rule 457(g) of the Securities Act of 1933 (the "Securities
Act").
The registrant hereby amends the registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Acts of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS Subject to completion; Dated February 25, 2005
The information in this prospectus is subject to completion or amendment. The
selling shareholders may not sell our common stock until the registration
statement filed with the Securities and Exchange Commission becomes effective.
This prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any state in
which an offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of that state.
SPARTA HOLDING CORP.
1,457,610 Shares of Common Stock
We are registering a total of 1,457,610 shares of our common stock, par
value $.001 per share, on behalf of our selling shareholders. Upon the
effectiveness of the registration statement, Castle Holding Corp. ("Castle")
shall distribute our shares to its shareholders of record as of February 5, 2004
on a one share for every 100 shares of Castle common stock basis. The
shareholders, together with Castle, are deemed to be selling shareholders.
The selling shareholders will sell our shares at $0.35 per share until
our shares are quoted on the OTC Bulletin Board, and thereafter, at prevailing
market prices or privately negotiated prices. There can be no assurance that our
shares will be quoted on the OTC Bulletin Board. The shares may be sold or
distributed from time to time by the selling shareholders directly to one or
more purchasers or through brokers or dealers who act solely as agents at market
prices prevailing at the time of sale or at privately negotiated prices. We will
not receive any of the proceeds from the sales of our shares by the selling
shareholders.
Our common stock is not listed on any national securities exchange or
the Nasdaq Stock Market.
Our common stock involves a high degree of risk. You should consider
carefully the "Risk Factors" contained in this prospectus beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February 25, 2005.
PROSPECTUS SUMMARY
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This summary highlights information contained elsewhere in this prospectus. You
should read this entire prospectus carefully, including "Risk Factors" and the
financial statements and the notes to those financial statement included
elsewhere in this prospectus.
Our Company
Sparta Holding Corp. ("we" or "us"), a Nevada corporation, was formed
on December 23, 1993 as a wholly owned subsidiary of Castle Holding Corp.
("Castle"), a company trading on the Pink Sheets under the symbol "CHOD.PK". We
are an exploration stage company. An exploration stage company is one engaged in
the search for precious metals and base metals. We have not conducted any
significant business operations. We have not generated any revenues or income.
We are in the process of acquiring the mining interests associated with
the Da-an Silver Mine located in Shouning County, Ningde City, Fujian Province,
People's Republic of China (the "Da-an Project"). On August 14, 2004, we entered
into the Share Purchase and Exchange Agreement (the "Share Purchase Agreement")
with Fujian Tiancheng Mining Industry Corp. Ltd., a corporation registered with
the Jianou City Industrial and Commercial Administrative Bureau, Fujian
Province, People's Republic of China ("Fujian Tiancheng"). In the Share Exchange
Agreement, it was contemplated that we would close the transactions described
therein on or before December 31, 2004 and that, consideration for the Da-an
Project, we agreed that on or before December 31, 2004, Fujian Tiancheng would
receive 5,500,000 shares of our common stock. These shares have been issued and
are being held in escrow by the transfer agent pending the closing of the
transaction. At this time, we are preparing an amendment to the Share Purchase
and Exchange Agreement amending the terms upon which we are to acquire the Da-an
Project. A finder's fee of 220,000 shares of common stock will be issued to
International Investment Group, who acted as the agent in bringing the Da-an
Project to our attention and assisted us in completing the transaction.
International Investment Group was also granted an option to acquire 240,000
additional shares of restricted common stock at $0.35 per share. The option
expires on December 31, 2005.
In order to raise additional capital to finance such mining projects,
on June 25, 2004, we commenced a private placement offering seeking to raise
$400,000, whereby we offered to accredited investors a total of 1,142,857 shares
of common stock at $0.35 per share pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act") and/or Rule 506 of Regulation D.
We completed this offering on November 19, 2004. We raised $391,165 and issued
1,117,610 shares of our common stock in connection with such offering.
On November 12, 2004, we commenced a Bridge Loan Financing whereby we
are seeking to raise up to $500,000. The terms of the Bridge Loan are set forth
in and evidenced by a convertible promissory note executed and delivered by us
to the investor in the principal amount loaned by such investor. Among other
things, the Note shall (i) be payable to the investor, (ii) bear interest from
the date of issuance at a rate of eight percent per annum, (iii) be convertible
by the investor into shares of our common stock on the terms provided therein,
and (iv) have a maturity date which is twelve (12) months after date of
issuance. In addition, we will issue to each investor warrants to purchase
shares of our common stock, exercisable for a period of two (2) years at an
exercise price of $1.50 per share. The number of shares of common stock issuable
upon the exercise of each investor's warrant shall be determined by reference to
the following formula: one (1) share of common stock for each $2.00 of the
principal amount of the convertible promissory note. We are commencing the
bridge loan financing pursuant to Section 4(2) of the Securities Act and/or Rule
506 of Regulation. We also are contemplating entering into a placement agent
arrangement in connection with this offering.
We are also in the process of commencing a private placement offering
to be made to accredited investors in reliance on Section 4(2) of the Securities
Act of 1933 and/or Rule 506 of Regulation D, whereby we are seeking to raise up
to $8,000,000 by offering to accredited investors the opportunity to purchase
shares of our Series A Preferred Stock at a purchase price of $1.25 per share.
Each share of the Series A Preferred Stock shall be automatically converted into
shares of common stock on a one-for-one basis, twelve (12) months after the
closing of the offering. The Offering closing date is March 31, 2005 unless
extended at the Company's sole discretion. The Series A Preferred Stock shall
pay an eight percent (8%) dividend per annum. Investors subscribing for shares
of the Series A Preferred Stock prior to March 31, 2005 shall receive a warrant
to purchase one share of common stock for every five shares of Series A
Preferred Stock subscribed for. The Warrant is exercisable into shares of Common
Stock for a period of two (2) years at an exercise price of $1.50 per share.
Our executive office is located at 203 Pebble Beach Path, Riverhead,
New York 11901. Our telephone number is (631) 574-8862.
The Offering
Issuer:
Sparta Holding Corp.
Selling Shareholders:
Castle Holding Corp. and its shareholders of record as of February 5, 2004. See
"Selling Shareholders"
Common Shares Being Offered:
Up to 1,457,610 shares of common stock $.001 par value
Terms of the Offering:
Castle will distribute approximately 336,695 shares to its shareholders of
record as of February 2, 2004 on a one share for every 100 shares basis. The
selling shareholders will determine when and how they will sell the common stock
offered in this prospectus.
Termination of the Offering:
The offering will conclude when all of the 1,457,610 shares of common stock have
been sold, the shares no longer need to be registered in order to be sold or we
decide to terminate the registration of the shares.
Securities Issued:
12,117,610 shares of our common stock are issued and outstanding as of the date
of this prospectus. All of the common stock to be sold under this prospectus
will be sold by existing shareholders.
Use of Proceeds:
We will not receive any proceeds from the sale of the common stock by the
selling shareholders.
Summary Financial Information
The following information is derived from our audited financial
statements for the year ended September 30, 2004. The financial information set
forth below should be read in conjunction with the more detailed financial
statements and related notes appearing elsewhere in this prospectus and should
be read along with the section entitled Management's Discussion and Analysis of
Financial Condition and Results of Operations.
For the Period From Inception
Year Ended December 23, 1993 to
September 30, 2004 September 30, 2004
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Income Statement Data:
- ------------------------------
Revenues $0 $0
General and Administrative Expenses $62,102 $66,744
Net Income (Loss) ($62,102) ($66,744)
Income (Loss) Per Share $ (0.01) (0.00)
Average Shares Outstanding 12,104,685
Balance Sheet Data:
- ------------------------
Cash $30,614
Total liabilities $12,670
Total current assets $2,165,003
Stockholders Equity $2,165,003
RISK FACTORS
An investment in our common stock is speculative in nature and involves
a high degree of risk. You should carefully consider each of the risks described
below, together with all of the other information contained in this prospectus,
before deciding to invest in our common stock. If any of the following events
actually occur, our business could be harmed and you may lose all or part of
your investment.
RISKS RELATED TO OUR BUSINESS
WE ARE AN EXPLORATION STAGE COMPANY WITH NO HISTORY OF OPERATIONS, WHICH HAS
INCURRED SUBSTANTIAL LOSSES AND, THEREFORE, THERE IS A STRONG LIKELIHOOD THAT WE
MAY FAIL.
Due to the fact that we have not commenced any business operations, we
have no operating history upon which to evaluate the likelihood that our
business will be successful. We have never earned any revenues. In order for us
to achieve and maintain profitability, we must successfully locate a mineable
mineral property. Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
failure of such companies. We are subject to all of the risks inherent to a new
business enterprise, such as established bank relationships, limited capital
resources, lack of manpower, and possible cost overruns. In addition, we have
incurred net losses of approximately $55,744 for the period from our inception
in December 1993 through September 30, 2004 and, based upon current plans,
expect that our losses will continue into the future. Potential investors must
also weigh the likelihood of success in light of any problems, complications,
and delays that may be encountered with the exploration of the Da-an Property.
IF WE DO NOT RAISE THE ADDITIONAL FUNDS REQUIRED TO ACQUIRE THE MINING RIGHTS
ASSOCIATED WITH THE DA-AN PROPERTY, WE WILL NOT HAVE ANY MINING PROPERTIES.
Our current operating funds are less than is necessary to acquire the
Da-an Property as set forth in the Share Purchase and Exchange Agreement. We are
in the process of preparing an amendment to such agreement, which would provide
for our acquisition of such property regardless of our ability to raise
additional financing. However, we would still need significant additional funds
to commence and complete our intended exploration of the Da-an Property. If
adequate funds are not available to us or available to us on satisfactory terms,
we may be required to substantially reduce, or eliminate, certain areas of our
exploration activities or significantly limit our operations, which could have a
substantial effect on the likelihood that we successfully locate property
containing economic mineralization.
We anticipate that most of our financing will derive from the sale of
equity securities. Any sale of equity securities will result in dilution to our
existing shareholders as there are no preemptive rights in connection with such
securities.
OUR VICE PRESIDENT/TREASURER/SECRETARY WILL ONLY DEVOTE A LIMITED AMOUNT OF TIME
TO THE COMPANY.
At the present time, Stephen J. Schmid, our Vice
President/Treasurer/Secretary will devote only 50% of his time, or 20 hours per
week, to the operation of the day-to-day affairs of the Company. His remaining
time shall be spent acting as the President and Chief Executive Officer of
Summit Capital Group, Inc.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINERAL PROPERTIES, THERE IS
A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
The search for valuable minerals as a business is extremely risky. We
can provide investors with no assurance that the exploration of the Da-an
Property will uncover commercially exploitable mineral reserves. The probability
of the Da-an Property containing commercial quantities of gold, silver and
platinum is extremely remote. It is unlikely that the property contains any
reserves and, in all likelihood, any funds spent on exploration will probably be
lost. In addition, problems such as unusual or unexpected geological formations
or other variable conditions are involved in exploration and, often result in
unsuccessful exploration efforts.
In addition, due to our limited capital and resources, we are limited
in the amount of exploration work we can do. As a result, our already low
probability of successfully locating mineral reserves will be reduced
significantly further. Therefore, we may not find a commercial mineable ore
deposit prior to exhausting our funds. Furthermore, exploration costs may be
higher than anticipated, in which case, the risk of utilizing all of our funds
prior to locating any ore deposits shall be greatly increased. Factors that
could cause exploration costs to increase are: adverse conditions, difficult
terrain and shortages of qualified personnel.
FRED SCHMID, OUR PRESIDENT, MAY HAVE A CONFLICT OF INTEREST SINCE HE IS THE
OWNER OF AN OPTION TO ACQUIRE OTHER MINING CLAIMS.
Certain conflicts of interest now exist and will continue to exist
between the Company and Fred R. Schmid, a director and our President/Chief
Executive Officer due to the fact that Mr. Schmid has the option to acquire up
to ten unpatented mining claims in Colorado. Therefore, in the future, there is
the possibility that Mr. Schmid may choose to devote his time and focus his
activities to the exploration of such claims.
OUR FAILURE TO COMPETE WITH OUR COMPETITORS IN THE MINING INDUSTRY FOR FINANCING
AND FOR QUALIFIED MANAGERIAL AND TECHNICAL EMPLOYEES WILL CAUSE OUR BUSINESS
OPERATIONS TO SLOW DOWN OR BE SUSPENDED.
Our competition includes large established mining companies with
substantial capabilities and with greater financial and technical resources than
we have. As a result of this competition, we may be unable to acquire additional
attractive mining claims or financing on terms we consider acceptable. We may
also compete with other mining companies in the recruitment and retention of
qualified managerial and technical employees. If we are unable to successfully
compete for financing or for qualified employees, our exploration programs may
be slowed down or suspended.
RISKS RELATED TO OUR BUSINESS
WE ARE SUBJECT TO ALL THE RISKS INHERENT TO THE MINING INDUSTRY, WHICH MAY HAVE
AN ADVERSE AFFECT ON OUR BUSINESS OPERATIONS.
We are subject to the numerous risks and hazards inherent to the mining
industry including, without limitation, the following:
o mining activities are subject to substantial operating hazard some of which
are not insurable or may not be insured due to economic considerations;
o the availability of water, which is essential to milling operations;
o interruptions caused by adverse weather conditions;
o unforeseen limited sources of supplies may resulted in shortages of
material and equipment such as dynamite, earth moving equipment like bull
dozers, backhoes and drilling equipment, fuel supplies, assaying and
milling facilities, and availability of experienced manpower. The prices
and availability of such equipment, facilities, supplies and manpower may
change and have an adverse effect on our operations, causing us to suspend
operations or cease our activities completely.
RISKS RELATED TO THIS OFFERING
IF AND WHEN WE COMMENCE MINING OPERATIONS WITH RESPECT TO THE DAAN PROJECT, WE
WILL BE SUBJECT TO CHINESE LAW AND OTHER DIFFICULTIES WHICH ARISE FROM DOING
BUSINESS IN A FOREIGN COUNTRY WHICH MAY INCREASE OUR OPERATING EXPENSES.
If and when we commence mining operations with respect to the Da-an
Project, we will be subject to applicable Chinese law, which is currently
fashioned after Australian and Canadian law. While the restrictions imposed by
such countries tend to be less restrictive than those of the United States,
there can be no certainty that the laws in China will remain the same or that
the enforcement of such laws will also be in line with Australia and Canada. In
addition, we shall also be faced with those difficulties which arise from doing
business in a foreign country including, but not limited to, translation of
information, obtaining equipment and skillful labor. These obstacles may
increase our operating expenses.
THERE IS NO MARKET FOR OUR COMMON STOCK AND, DUE TO SUCH ILLIQUIDITY, YOU MAY BE
UNABLE TO SELL YOUR SHARES.
There is currently no market for our common stock and we can provide no
assurance that a market will develop. We plan to apply for listing of our common
stock on the OTC Bulletin Board upon the effectiveness of the registration
statement. However, we can provide investors with no assurance that our shares
will be traded on the bulletin board or, if traded, that a public market will
materialize. If no market is ever developed for our shares, it will be difficult
for shareholders to sell their stock.
OUR SELLING SHAREHOLDERS MAY BE DEEMED TO BE UNDERWRITERS UNDER THE FEDERAL
SECURITIES LAWS AND, THEREFORE, MAY INCUR LIABILITY
The selling shareholders must comply with the requirements of the
Securities Act and the Securities Exchange Act in the offer and sale of the
common stock. In particular, during such times as the selling shareholders may
be deemed to be engaged in a distribution of the common stock, and therefore be
considered to be an underwriter, they must comply with applicable law and, among
other things, the following: (1) to not, directly or indirectly, bid for,
purchase, or attempt to induce any person to bid for or purchase, any of our
securities, except as otherwise permitted under the Securities Exchange Act; (2)
furnish each broker or dealer through which common stock may be offered, such
copies of this prospectus, as amended from time to time; and (3) to not engage
in any stabilization activities in connection with our common stock. In the
event the selling shareholders fail to comply with applicable law, they will
incur personal liability.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters described in this prospectus contain
forward-looking statements that are subject to a number of risks and
uncertainties, many of which are beyond our control. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements include, but are not limited to,
statements about our:
o business strategy;
o ability to locate mineral reserves;
o uncertainty regarding our future operating results; and
o plans, objectives, expectations and intentions.
Statements, other than statements of historical fact included in this
prospectus regarding our strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans and objectives
of management are forward-looking statements. When used in this prospectus, the
words "believe," "anticipate," "intend," "estimate," "expect," "project" and
similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance that these plans, intentions or expectations will be achieved.
We have included important factors that could cause our actual results to differ
materially from our expectations under "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere in
this prospectus. These cautionary statements qualify all forward-looking
statements.
USE OF PROCEEDS
We will not receive any proceeds from the common shares offered through
this prospectus by the selling shareholders. See the sections of this prospectus
entitled "Selling Shareholders" and "Plan of Distribution." We will, however,
incur all costs associated with this registration statement and prospectus.
DETERMINATION OF OFFERING PRICE
The selling shareholders will sell our shares at $0.35 per share until
our shares are quoted on the OTC Bulletin Board, and thereafter at prevailing
market prices or privately negotiated prices. We determined this offering price,
based upon the price of the last sale of our common stock to investors.
DILUTION
The common stock to be sold by the selling shareholders is common stock
that is currently issued and outstanding. Accordingly, there will be no dilution
to our existing shareholders.
SELLING SHAREHOLDERS
The selling shareholders named in this prospectus are offering all
1,457,610 shares of common stock described in this prospectus. Some of the
selling shareholders are acquiring our shares by way of a distribution by
Castle, upon the effectiveness of the registration statement, of approximately
336,695 shares of the 340,000 shares of common stock described in this
prospectus. Prior to such distribution, Castle held approximately 2.8% of our
issued and outstanding common stock. After the distribution, Castle will be the
holder of approximately 3,305 shares of our common stock. The remaining selling
shareholders acquired our shares by investing in our private placement.
The following table sets forth the name of the selling shareholders,
the number of shares of common stock beneficially owned by each upon the
distribution by Castle of our common stock to such persons, the amount to be
offered by each selling shareholder, the amount to be owned by each selling
shareholder after the offering is complete and the percentage held by each
selling shareholder after the offering is complete. Except as may be indicated
in the footnotes to the table below, none of the selling shareholders has, or
within the past three years has had, any position, office or material
relationship with us.
Name of Selling Shareholder Shares Owned Total Number of Shares Total Shares to Be Percentage of Shares Owned
Prior to this to be Offered Owned Upon Completion Upon Completion of This
Offering of This Offering Offering
Nicholas Abadiotakis 8 8 0 0
Joseph R. Accurso 8 8 0 0
Rosa Alcala 1 1 0 0
Selena R. Alcala 1 1 0 0
Maria Dolores Arambul 1 1 0 0
Sehba S. Arif 1 1 0 0
Rohan Artwell 16 16 0 0
Armand C. Aurellano 1 1 0 0
Maria Azofeifa 11 11 0 0
Rowland Balcom 1 1 0 0
Suzanne Batchelor 1 1 0 0
Ken Baumer 1 1 0 0
Darrell R. Benjamin 80 80 0 0
Tazio Bent 1 1 0 0
Jeannie Benz 1 1 0 0
Veronica Browne 1 1 0 0
Mary Jane Buhain 1 1 0 0
Cheryl Bunales 1 1 0 0
Louis Butzgy 16 16 0 0
Josetina Cabagnot 1 1 0 0
Joe Cantore 1 1 0 0
Steven Caraco 1 1 0 0
Roxy Caranfil 1 1 0 0
Castle Advisors Limited 16400 16400 0 0
Partnership 94-1
Castle Holding Corp. Deferred 121600 121600 0 0
Compensation Plan for the benefit
of George Herbert (1)
Castle Holding Corp. Deferred 2600 2600 0 0
Compensation Plan for the benefit
of Michael T. Studer (2)
Anthony Catalfo 32 32 0 0
Frank Cavallaro 8 8 0 0
Cede & Co 17768 17768 0 0
Michael J. Chiodo 1 1 0 0
Denise Choy 1 1 0 0
Roger Ciriello 8 8 0 0
Michael Cormier 1 1 0 0
Bobbie Cortes 1 1 0 0
Christopher Cox 16 16 0 0
J E Crockett 3 3 0 0
David J. Dejesus 8 8 0 0
Georgene Deluca 176 176 0 0
Marissa Desilva 1 1 0 0
Richard Desulo 1 1 0 0
Steven L. Diaz 16 16 0 0
Diversified Financial Group Inc. 320 320 0 0
Juan Dominguez 1 1 0 0
Jamie Dufauchard 1 1 0 0
Delores Durant 1 1 0 0
Malcom L. Edwards 30 30 0 0
Tonnie R. Edwards 164 164 0 0
Amanda Elizaga 1 1 0 0
Equities Magazine LLC 160 160 0 0
Clifton B Erber 8 8 0 0
Les Erber 8 8 0 0
Lani Estipona 1 1 0 0
Zenovia N. Evans 1 1 0 0
Wycliffe A. Falconer 16 16 0 0
Joseph P. Fanning 8 8 0 0
Louis A. Farley 13 13 0 0
Robert Feldman 16 16 0 0
Frank Ferraro 300 300 0 0
Joseph Ferraro 5 5 0 0
Justin Ferraro 5 5 0 0
John Fisher 1 1 0 0
Kevin Flanagan 8 8 0 0
Mark W. Fuhlbruck & Mathilde A. 16 16 0 0
Fuhlbruck, JTTEN
Jimmy Gabriel 1 1 0 0
Ronaldo Galang 1 1 0 0
Jorge R. Galero 1 1 0 0
Brian R. Gallagher 8 8 0 0
Henry Gallegos 1 1 0 0
Lee Gamer 1 1 0 0
Walter Gartner 8 8 0 0
Frank R. Giraldi 8 8 0 0
Frank P. Giraldi 56 56 0 0
Paul F. Giraldi 16 16 0 0
Melissa Gorz 8 8 0 0
John J. Gremmo III 20 20 0 0
Edgar Guzman 1 1 0 0
Scott Haahr 1 1 0 0
Michele Halder 1080 1080 0 0
Ratan Halder & Michele Halder 800 800 0 0
Marcia Hammarstron 16 16 0 0
David H. Hawk 2 2 0 0
George R. Hebert (1) 10880 10880 0 0
Arlene Hefferon 1 1 0 0
Brian Hendrickson 20 20 0 0
Teresa Hebert Ttee FBO Jaclyn M. 3959 3959 0 0
Hebert
Robert Hendrickson 8 8 0 0
Teresa M Hebert 1048 1048 0 0
Teresa M. Hebert Ttee FBO Jaclyn 10000 10000 0 0
M. Hebert
Robert M. Hinsch 80 80 0 0
Joseph M. Hoehn 1 1 0 0
D. W. Howard 48 48 0 0
Ebony N. Hoyte 1 1 0 0
Judy Ann Hyman 1 1 0 0
Joseph Incandela 500 500 0 0
Robert Ingram 1 1 0 0
Tom Jackson 1 1 0 0
Terrence E. Jones 4 4 0 0
James M. Jordan Iii 80 80 0 0
Elman San Jose 1 1 0 0
Charles S. Kafeiti 416 416 0 0
Karen A. Kafeiti 380 380 0 0
Tony S. Kafeiti 416 416 0 0
Joseph Kamide 16 16 0 0
Kevin Kane 1 1 0 0
Walentin Kardos 16 16 0 0
Sandra A. Kilbride 8 8 0 0
Michael Kimmel 8 8 0 0
Christopher T. Kline 8 8 0 0
Frank Labriola 8 8 0 0
Bruce M. Landreth 3 3 0 0
Charles Lane 8 8 0 0
Albert R. Laubenstein 1 1 0 0
Curtis Paul Lawson 1 1 0 0
James Leivas 1 1 0 0
Brian Lennox 1 1 0 0
Lewis C. Lepore 80 80 0 0
Eddie Lepper 1 1 0 0
David Levin 220 220 0 0
Lisa Lindberg 1 1 0 0
Merlyn J. Logsdon & Marjorie J. 3 3 0 0
Logsdon, JTTEN
Joe Lyon, Jr. 96 96 0 0
Joseph Macdonald 16 16 0 0
Jesus Robert Magana 1 1 0 0
Mandrake Capital Corp. 320 320 0 0
Jeff Marchese 1 1 0 0
Matthew J Marcus & Erin A. Rahe, 385 385 0 0
JTTEN
Kenneth J. Mcguire 8 8 0 0
Lincoln Mclean 16 16 0 0
Daniel Medina 1 1 0 0
Rosa I. Medrano 1 1 0 0
Noel Meeks 576 576 0 0
Marsha M. Melcher 3 3 0 0
Samuel Mellito & Theresa E. 320 320 0 0
Melliot, JTTEn
Mitchell G. Menik 200 200 0 0
Salvatore Messina & Katherine 400 400 0 0
Messina
Mark Milana 8 8 0 0
Pat Miller 8 8 0 0
Scott Monson 1 1 0 0
Teresita Montes 1 1 0 0
Mark Mooney 1 1 0 0
Dale Morisco 8 8 0 0
William L. Myers 13 13 0 0
William L. Namen 35 35 0 0
Alex Neria 1 1 0 0
Ian S. Netupsky 8 8 0 0
Sylvia M. Newkirk 1 1 0 0
Shakespeare Newsome 1000 1000 0 0
Mary B. Nolan 16 16 0 0
David C. Nuccio 8 8 0 0
Judd Odzer 8 8 0 0
Matthew T. Olson 8 8 0 0
Daniel O'Rourke 28 28 0 0
Manny Panlilio 1 1 0 0
Agapios W. Pavlides 8 8 0 0
Shyne Payne 1 1 0 0
David L. Perdie 8 8 0 0
Glenn A. Perkins 816 816 0 0
Richard Poirier 4 4 0 0
Jaime Pollak 1 1 0 0
Francis D. Pope, Sr. 400 400 0 0
Francis D. Pope, Jr. 400 400 0 0
John C. Power 80 80 0 0
Joseph C. Powell 120 120 0 0
Daniel J. Priscu 496 496 0 0
Stephen Pruitt 1 1 0 0
Celestina Pugliese 8 8 0 0
Faustino Pugliese 8 8 0 0
Joe Quesada 1 1 0 0
Sherry Ramirez & Keith Higgins 3 3 0 0
JTTEN
Charles Rauch 8 8 0 0
Arthur Redler 80 80 0 0
Llewelyn Reid 16 16 0 0
Nita M. Renfrew 50 50 0 0
Michael G. Reppeto 12 12 0 0
Liza Reyes 1 1 0 0
Glenn A. Richardson 8 8 0 0
Sarah B. Rivera 1 1 0 0
Timothy Rizzoto 1 1 0 0
Kenneth N. Roth 48 48 0 0
Leslie S. Roth 48 48 0 0
Ricky Roxas 1 1 0 0
Victoria Roxas 1 1 0 0
Laforrest T. Roxbury 1 1 0 0
Cynthia A. Russo 5 5 0 0
Imelda Saldivar 1 1 0 0
Cheria Sallia 50 50 0 0
Juan Sanchez 1 1 0 0
Vivian Sanders 1 1 0 0
Sandor Marketing Group, Inc. 90 90 0 0
Eugene Sarbu 16 16 0 0
Susana Sarceno 1 1 0 0
Cindy Sarelis 8 8 0 0
Brian S. Savitch 8 8 0 0
Fred R. Schmid (2) 100 100 0 0
Jim Schmitt 1 1 0 0
Karen Shannon 1 1 0 0
Thomas Shaughnessy 400 400 0 0
Johnnie B. Shepheard Jr. & Ruth D. 3 3 0 0
Schepheard, JTTEN
Galina Shuster 1 1 0 0
Warren Sicherman 8 8 0 0
Gayane Simonian 1 1 0 0
Mary B. Smith 80 80 0 0
Raymond T. Snediker 16 16 0 0
Dorothy Stames 1 1 0 0
Scott Stolper 8 8 0 0
Michael T. Studer (3) 6800 6800 0 0
Michael J. Studer 1 1 0 0
Michael T. Studer Ttee FBO 1760 1760 0 0
Kathleen E. Studer (3)
Michael T. Studer Ttee FBO Kristin 1760 1760 0 0
A. Studer (3)
Michael T. Studer Ttee FBO Michael 1760 1760 0 0
J. Studer (3)
Michael T. Studer Family Trust (3) 129000 129000 0 0
Sheila Tessler 1 1 0 0
The Investor Relations Group, Inc. 25 25 0 0
The OTC Equity Fund Inc. 40 40 0 0
Henry Trimble 160 160 0 0
Henry W. Trimble III 192 192 0 0
Gerard Tuccillo 10 10 0 0
Michael J. Turner III 1 1 0 0
Ricardo Uribe 1 1 0 0
John Valdez 1 1 0 0
Michael B. Vanrensselar & Joseph 105 105 0 0
A. Vanrensselar, JTTEN
Edwin Vargas 1 1 0 0
Albert E. Vatter 12 12 0 0
Jim Velasquez 1 1 0 0
Roland M. Villasenor 1 1 0 0
Jack Wagenti 400 400 0 0
Judith Walters 1 1 0 0
Joseph Ward 8 8 0 0
Beth D. Wargi 1 1 0 0
Jane Wachsmuth 8 8 0 0
Jerome W. Wenger 16 16 0 0
Fred Wheeler & Marian Wheeler, 35 35 0 0
JTTEN
John Wihlen 19 19 0 0
Terry W. Wihlen 19 19 0 0
Mark Williams 8 8 0 0
Michael J. Williams 16 16 0 0
Clifford Coffey Wright 6 6 0 0
Kirby Wyllie 32 32 0 0
Harry W. Zacher, Jr. 16 16 0 0
Stanley Zahner 8 8 0 0
Sylvia Ang 14,286 14,286 0 0
Scott Balterman 142,857 142,857 0 0
Leslie Balterman
Edward Borrelli 28,571 28,571 0 0
E. Borrelli-Custodian for 20,000 20,000 0 0
Keith Hernandez
E. Borrelli-Custodian for Nicholle 20,000 20,000 0 0
Hernandez
Reynold Chow 42,857 42,857 0 0
Shu K. Chow 57,143 57,143 0 0
Cong. Darkei Tshivo Dinov 68,571 68,571 0 0
Michael E. Kahan 105,500 105,500 0 0
Robert J. Lancelotti 15,000 15,000 0 0
Karin A. Lancellotti
JTWROS
Alfred O.P. Leubert 15,000 15,000 0 0
Lee Shuo Liu 31,428 31,428 0 0
Lin Chun Hui Liu 40,000 40,000 0 0
Bernt Nygaard 15,000 15,000 0 0
Robert Picciano 10,000 10,000 0 0
2P Management Holding AG 28,542 28,542 0 0
Hans G. Schmid 28,571 28,571 0 0
Robert Schneider 40,000 40,000 0 0
Sparten Establishment (Trust) 50,000 50,000 0 0
Anthony Swartz 28,571 28,571 0 0
Andreas Typaidos Family LP 28,571 28,571 0 0
Wang Li Tong 142,857 142,857 0 0
Joanne Yan 30,000 30,000 0 0
Dietmar Zessin 114,285 114,285 0 0
(1) From our inception to February 5, 2004, George R. Hebert served as a
director, Chairman of the Board and our President and Chief Executive Officer.
(2) From February 5, 2004 until the date of the registration statement, Fred R.
Schmid has served as a director, Chairman of the Board and our President and
Chief Executive Officer. (3) From our inception to February 5, 2004, Michael T.
Studer served as a director and our Secretary and Treasurer.
PLAN OF DISTRIBUTION
Castle has authorized Atlas Stock Transfer Corporation, its stock
transfer agent, to distribute, upon the effectiveness of the Registration
Statement, approximately 336,695 shares of common stock described in this
prospectus to the other selling shareholders, with each such individual
receiving one share of our common stock for every one hundred shares of Castle
common stock held.
The selling shareholders may sell some or all of their shares at a
fixed price of $0.35 per share, until our shares are quoted on the OTC Bulletin
Board, and thereafter, at prevailing market prices or privately negotiated
prices. We determined this offering price based upon the price per share offered
to investors in connection with our most recent private placement.
The selling shareholders may sell their shares directly to market
makers acting as principals or brokers or dealers, who may act as agent or
acquire the common stock as a principal. Any broker or dealer participating in
such transactions as agent may receive a commission from the selling
shareholders, or, if they act as agent for the purchaser of such common stock,
from such purchaser. The selling shareholders will pay the usual and customary
brokerage fees for such services. Brokers or dealers may agree with the selling
shareholders to sell a specified number of shares at a stipulated price per
share and, to the extent such broker or dealer is unable to do so acting as
agent for the selling shareholders, to purchase, as principal, any unsold shares
at the price required to fulfill the respective broker's or dealer's commitment
to the selling shareholders. Brokers or dealers who acquire shares as principals
may thereafter resell such shares from time to time in transactions in a market,
in negotiated transactions or otherwise, at market prices prevailing at the time
of sale or at negotiated prices, and in connection with such re-sales may pay or
receive commissions to or from the purchasers of such shares. These transactions
may involve sales to and through other brokers or dealers. If applicable, the
selling shareholders may distribute shares to one or more of their affiliates
who are unaffiliated with us. Such affiliates may, in turn, distribute such
shares as described above. We can provide no assurance that all or any of the
common stock offered will be sold by the selling shareholders.
We are bearing all costs relating to the registration of the common
stock. These are estimated to be $45,000. The selling shareholders, however,
will pay any commissions or other fees payable to brokers or dealers in
connection with any sale of the common stock.
Our common stock may be deemed a "penny stock". Penny stocks generally
are equity securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or quoted on the
NASDAQ Stock Market, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system. Our common stock is neither listed nor quoted. Penny stock regulations
impose additional sales practice requirements on broker dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse). For transactions covered by
these regulations, the broker dealer must make a special suitability
determination for the purchase of such securities and have received the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
penny stock regulations require the delivery, prior to the transaction, of a
disclosure schedule prescribed by the SEC relating to the penny stock market.
The broker dealer also must disclose the commissions payable to both the broker
dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. Consequently, the penny stock
regulations may restrict the ability of broker dealers to sell our common stock
and may have an adverse effect on any trading of our common stock.
LEGAL PROCEEDINGS
We currently are not a party to any material legal proceedings and, to
our knowledge, no such proceedings are threatened or contemplated.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our executive officers and directors are as follows:
Name Age Position
- ---- --- --------
Fred R. Schmid 69 Director and Chairman of the Board;
Chief Executive Officer
and President
Stephen J. Schmid 44 Director; Chief Financial Officer,
Vice President, Secretary and Treasurer
All of our Directors have held office since February 5, 2004 and shall
continue to hold office until the next annual meeting of shareholders or until
their successors are elected and qualified. Officers serve at the discretion of
our Board of Directors. Fred R. Schmid and Stephen J. Schmid are father and son.
None of our directors are currently serving as directors of reporting companies.
The following is a brief description of the background and business
experience of each of our executive officers and directors for the past five
years:
Fred R. Schmid has acted as a director, and Chairman of the Board, and
as our President and Chief Executive Officer since February 2004. From January
2000 to January 2004, he held the following positions: (i) the Managing Partner
of Feltsen Partners, LLC, a company that provides business consulting services;
(ii) business consultant for Atlantic Manufacturing Company, which is engaged in
the business of manufacturing and distributing skin and hand care products; and
(iii) business partner is SES Designs, a company engaged in the business of
designing and manufacturing jewelry. From January 2000 to September 2000, Mr.
Schmid was engaged as the business consultant to Nexland, Inc., a network
hardware manufacturer and distributor of interconnection and communication
products in the Ethernet network environment.
This past year, Fred Schmid devoted 100% of his business time to our
business affairs.
Stephen J. Schmid has acted as a director and as our Chief Financial
Officer, Vice President, Secretary and Treasurer since February 2004. From
August 1996 to the present, he has acted as President and Chief Executive
Officer of Summit Capital Group, Inc., a company engaged in the business of
arranging commercial real estate debt and equity among institutional, public and
private companies. His main responsibilities are related to brokering investment
property sales. From January 2004 to October 2004, he also served as the Vice
President and Chief Financial Officer of Trefoil Properties, Inc. where he
assisted with equity and debt raising activities and, from February 2002 to
October 2003, he served as the Vice President of Capital Markets at Liberty
Property Trust, where he assisted the Chief Financial Officer with accounting
and finance projects.
This past year, Stephen Schmid devoted 50% of his business time to our
business affairs.
Committees of the Board of Directors.
We currently do not have any committees of the Board of Directors,
including audit, compensation and nominating. In order to comply with the
Sarbanes-Oxley Act of 2002, we have plans to add additional members to our board
of directors who are "independent" as such term is defined under the Act and to
create audit, compensation and nominating committees.
Director Compensation
Our directors do not receive any cash compensation for their service as
members of the board of directors, but they are reimbursed for reasonable
out-of-pocket expenses incurred in connection with their attendance at meetings
of the board of directors.
Significant Employees
Currently, we do not have any employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of December 31,
2004, regarding the beneficial ownership of our common stock held by each of our
executive officers and directors, our officers and directors as a group; and
each person who beneficially owns in excess of five (5%) percent of our common
stock. Other than as set forth in the table, there are no other beneficial
owners.
The number of shares of common stock beneficially owned by each person
or entity is determined under the rules promulgated by the SEC. Under those
rules, beneficial ownership includes any shares as to which the person or entity
has sole or shared voting power or investment power and shares which that person
or entity has the right to acquire from options, warrants, rights and conversion
privileges within sixty (60) days after December 31, 2004. The inclusion in this
section of any shares deemed beneficially owned does not constitute an admission
by that person of beneficial ownership of those shares.
Before Offering After Offering
Number of shares of Percent of Common Number of shares of Percent of Common
Common Stock Stock beneficially Common Stock Stock beneficially
Name of Beneficial Owner beneficially owned (1) owned (1)___ beneficially owned (2) owned (2)____
- ------------------------ ---------------------- ------------ ---------------------- -------------
Fred R. Schmid 1,150,000(3) 9.5% 1,150,000 9.2%
203 Pebble Beach Path
Riverhead, New York 11901
Stephen J. Schmid 350,000(4) 2.9% 350,000 2.8%
51 Summit Road
Malvern, Pennsylvania 19355
Michael T. Hines 1,750,000 14.4% 1,750,000 14.0%
101 West 57th Street
New York, New York 10019
Fujian Tiancheng Mining 5,500,000(5) 45.4% 5,500,000 44.1%
Industry Corp. Ltd.
New Construction Industrial
Zone
Nanya Town, Jianou City,
Fujian Province, P.R. of China
Officers and Directors as a 1,500,000(6) 12.4% 1,500,000 12.0%
group (2 persons)
(1) Such figures are based upon 12,117,610 shares of our common stock
outstanding as of the date of this filing. Except as otherwise noted in
these footnotes, the nature of beneficial ownership for shares reported in
this table is sole voting and investment power.
(2) Such figures are based upon the number of shares of our common stock
outstanding after the distribution of 340,000 shares to Castle.
(3) Fred R. Schmid is the direct beneficial owner of 575,000 shares. In
addition, he is an indirect beneficial owner of the 575,000 shares held by
Maryanna Schmid.
(4) Stephen J. Schmid is the direct beneficial owner of 100,000 shares and the
indirect beneficial owner of the 100,000 shares held by Signature
Development Group, Inc. and the 150,000 shares held by the Signature
Development Group, Inc. Retirement Plan.
(5) Represents shares of common stock that have been issued to Fujian Tiancheng
but are being held in escrow pending the closing of the Share Purchase and
Exchange whereby we shall indirectly acquire the mining rights to the Da-an
Siver Mine by acquiring the equity securities of China Mining Corp, Ltd., a
British Virgin Island corporation. Fujian Tiancheng shall have no rights as
a shareholder with respect to such common stock until the closing of the
Share Purchase and Exchange and the delivery to it of such shares.
(6) Includes the shares over which Fred R. Schmid and Stephen J. Schmid
maintain indirect beneficial ownership.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 102,000,000 shares of capital stock,
$.001 par value per share, 100,000,000 shares of which are common stock and
2,000,000 shares of which are preferred stock. We are in the process of amending
our Articles of Incorporation to increase the number of shares of preferred
stock authorized for issuance to 10,000,000.
Common Stock
The holders of shares of our common stock are entitled to share ratably
in such dividends and distributions as may be legally declared by the Board of
Directors with respect to our common stock and in any of our assets available
for distribution to shareholders upon their liquidation. Upon our liquidation,
assets will only be available for distribution after satisfaction or provision
for all of our debts and other obligations, including to holders of preferred
stock designated as senior in right of payment upon liquidation. The holders of
shares of our common stock have one vote per share, in person or by proxy, at
all meetings of shareholders. There are no cumulative voting rights with respect
to the election of our directors, which means that holders of a majority of the
shares of our common stock voting in an election for directors, so long as the
holders of a majority of our outstanding common stock are present in person or
by proxy, can elect all of the directors then to be elected. There are no
preemptive, conversion, or redemption rights applicable to our common stock.
All shares of common stock issued and outstanding are fully paid for
and non-assessable and all shares of common stock which are the subject of this
offering, when issued, will be fully paid for and non-assessable. We refer you
to our Articles of Incorporation, Bylaws and the applicable statutes of the
State of Nevada for a more complete description of the rights and liabilities of
holders of our securities.
Preferred Stock
Our Articles of Incorporation provides that we are authorized to issue
preferred stock, which may be issued from time to time in one or more series
upon authorization by our Board of Directors. Our Board of Directors, without
approval of our shareholders, is authorized to fix any dividend rights,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences and any other rights, preferences, privileges and restrictions
applicable to each such series of preferred stock. The issuance of preferred
stock, while providing us flexibility in connection with possible acquisitions
and other corporate purposes, could, among other things, adversely affect the
voting power of the holders of the common stock. Under certain circumstances,
the issuance of our preferred stock could also make it more difficult for a
third party to gain control of us, discourage bids for our outstanding
securities at a premium or otherwise adversely affect the price of our
outstanding securities.
Non-cumulative Voting
Holders of shares of our common stock do not have cumulative voting
rights, which means that the holders of more than 50% of the outstanding shares,
voting for the election of directors, can elect all of the directors to be
elected, if they so choose, and, in that event, the holders of the remaining
shares will not be able to elect any of our directors. After the distribution of
the shares described in this prospectus to the Castle shareholders, such
shareholders will own approximately 2.7% of our outstanding shares.
Cash Dividends
As of the date of this prospectus, we have not paid any cash dividends
to shareholders. The declaration of any future cash dividend to the holders of
our common stock will be at the discretion of our Board of Directors and will
depend upon our earnings, if any, our capital requirements and financial
position, our general economic conditions, and other pertinent conditions. It is
our present intention not to pay any cash dividends with respect to the Common
Stock in the foreseeable future, but rather to reinvest earnings, if any, in our
business operations. Our Series A Preferred Stock pay an annual dividend of 8%
per annum.
Common Stock Held in Escrow
As of September 30, 2004, we authorized Atlas Stock Transfer
Corporation, our transfer agent to issue 5,500,000 shares of common stock to
Fujian Tiancheng and instructed them to hold such shares in escrow until further
instructed. Upon the closing of the Share Purchase and Exchange, we will
instruct the transfer agent to release such shares to Fujian Tiancheng. Fujian
Tiancheng shall have no rights as a shareholder with respect to such common
stock until then.
Stock Transfer Agent
Our stock transfer agent for our securities is Atlas Stock Transfer
Corporation, 5899 South State Street, Salt Lake City, Utah 84107 and its
telephone number is (801) 266-7151.
INTEREST OF NAMED EXPERT AND COUNSEL
No expert or counsel named in this prospectus as having prepared or
certified any part of this prospectus or upon other legal matters in connection
with the registration or offering of the common shares was employed on a
contingency basis, or had, or is to receive, in connection with the offering, a
substantial interest, direct or indirect, in the company. Nor was any such
person connected with the company as a promoter, managing or principal
underwriter, voting trustee, director, officer, or employee.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our directors and officers are indemnified as provided by the Nevada
Revised Statutes.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us 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 us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
DESCRIPTION OF BUSINESS
General
We were incorporated under the laws of Nevada on December 23, 1993 as a
wholly owned subsidiary of Castle Holding Corp., a company trading on the Pink
Sheets under the symbol "CHOD.PK" ("Castle"). We are an exploration stage
company. An exploration stage company is one engaged in the search for precious
metals and base metals. As an exploration stage company, we seek opportunities
to acquire properties, which may contain economically mineable minerals such as
gold, silver and platinum group metals. We have never conducted any significant
business operations and have never generated any revenues or income.
Da-an Silver Mine Property
On May 25, 2004, we executed a Letter of Understanding with Feltsen,
Tiancheng (China) Corp. ("Tiancheng") and Fujian Tiancheng Mining Industry Corp.
LTD. ("Fujian Tiancheng") to acquire certain mining rights associated with
property located in China and referred to as Da-an Silver Mine Property ("Da-an
Property"). These rights were held by Fujian Tiancheng and may contain
economically mineable precious metals for extraction.
As part of our due diligence, we hired Dr. Linus T. Keating, D. Sc., a
consulting geologist to visit the Da-an Silver Mine Property and report on his
observations. Dr. Keating graduated from the University of Arizona in Tucson,
Arizona with a Bachelors of Science in Geological Engineering (Mining &
Exploration Option) in 1984 and, in 1998, from the Vrije Universiteit Brussel,
Brussels, Belgium with a Doctor of Science - High Distinction in Geology. He is
a registered geologist in Arizona (Registration #40815) and a Certified
Professional Geologist (#10742) in the American Institute of Professional
Geologists (AIPG). He is also a member of the Arizona Geological Society.
Dr. Keating first visited the property from May 29, 2004 through June
6, 2004. He reported all observations in a written document entitled "Initial
Geological Report On The Da-an Property, Fujian Province, People's Republic Of
China" dated July 3, 2004 (the "Geological Report"), which provides a
description of the property and its location, climate, physiology,
mineralization and history. In addition, the Geological Report states that the
Da-an Property is uncommon in that it represents a large cordilleran vein system
that is relatively unexplored in this century and that there exists good
potential to discover high-grade silver and/or gold deposits.
The following are the proposed work plan recommendations for the
Da-an Silver Mine property as outlined by Dr. Keating:
o Clarify legal status (land position, land obligations, reports required
and/or available) with complete copies of all relevant documents sent
to the Sparta USA headquarters;
o Establish a consistent sample and drill-hole numbering system to be
used by all personnel working on the property for all samples
collected, no matter what type of sample, so that a coherent database
can be constructed. Assign all previous samples collected a distinctive
series number that fits into the new database;
o Establish shipping, laboratory and quality control protocols for all
laboratory work performed on samples;
o Obtain copies of all prior sample and geologic reports for the property
no matter the age and send to the Company's USA headquarters, for
translation into English;
o Establish a Base Map for the USA and Chinese geologic teams use
(topographic for China use - streams and roads for USA use) that uses a
single coordinate system. All new information generated must fit perfectly
onto this base map;
o Coordinate schedules for USA geologists and Chinese technical teams;
o Provide GPS and train the Chinese technical team in their use so at to
accelerate the mapping of old mines and stream sediment locations;
o Complete a thorough Geologic Map of the entire property with structural
(faults and folds) emphasis at 1:10,000 scale using US geologists working
in tandem with the Chinese technical team and sharing technology;
o Complete computerized geo-chemical processing and analysis for all soil
survey areas sampled to date on the property using USA software to identify
subtle patterns for both key and pathfinder elements;
o Carry out a comprehensive Stream Silt / Panned Concentrate geo-chemical
survey over the entire property: collect 1 sample per 0.5 km along creeks,
compile at 1:10,000 scale;
o Old Hole Catalog: find and locate on 1:10,000 base map all old mines, show
size of mine, shape, and trend direction; collect at least one high-grade
sample from each mine found; compile at 1:10,000 scale;
o Complete detail Geologic Mapping at 1:2,000 scale for the Tan Shan and Shen
Ji Keng areas jointly with the Chinese and USA geologic teams; map other
areas as appropriate;
o Evaluate effectiveness of geophysical methods in probing for underground
targets - design and contract out a geophysical survey if necessary;
o Obtain government agency approvals, if necessary, for geophysical
line-cutting and cut lines through heavy vegetation if necessary to permit
geophysical surveying;
o Drill Site Identification: Use the relationship of old mines to mapped
geology and structure, geo-chemical and geophysical data of the entire area
to define drill targets;
o Obtain government agency permits if necessary, for drilling and trail /
road construction; design and build access to each drill site, making
trails and roads as necessary;
o Drilling: depending on drill targets identified, drill from 5 to 20 holes
for a total of up to 5,000m using up to two angle-capable core-drilling
machines;
o Evaluate drilling results and propose send tranch drilling plan, if
appropriate.
The following table outlines the major milestones with approximate
completion dates and estimated budgetary expenses related to the proposed Plan
of Operation noted above:
Table 1. Major Milestones:
- -------------- ------------------------------------------- ---------------------
Phase # Critical Tasks Approximate Completion Date
- -------------- ------------------------------------------- ---------------------
1 Da'an Project start-up March 15, 2005
- -------------- ------------------------------------------- ---------------------
1 Team Preparation Complete March 30, 2005
- -------------- ------------------------------------------- ---------------------
1 Mobilization / Field Work Begins April 1, 2005
- -------------- ------------------------------------------- ---------------------
1 "Old Hole" Surveying Complete April 30, 2005
- -------------- ------------------------------------------- ---------------------
1 Stream Sediment Survey Complete May 31, 2005
- -------------- ------------------------------------------- ---------------------
1 District-wide mapping Complete June 6, 2005
- -------------- ------------------------------------------- ---------------------
1 Detail Mapping Completed July 15, 2005
- -------------- ------------------------------------------- ---------------------
1 Geophysical Survey (if needed) Completed September 16, 2005
- -------------- ------------------------------------------- ---------------------
2 Drilling Starts October 10, 2005
- -------------- ------------------------------------------- ---------------------
2 1st Phase Drilling Completed March 10, 2006
- -------------- ------------------------------------------- ---------------------
3 2nd Phase Drilling Proposal Due April 13, 2006
- -------------- ------------------------------------------- ---------------------
On August 14, 2004, we entered into a Share Purchase and Exchange
Agreement (the "Share Purchase Agreement") with Fujian Tiancheng whereby we
shall acquire two Da-an Silver Mine Prospecting Rights (the "Da-an Mining
Rights"). In consideration for the Da-an Mining Rights, we agreed to issue, on
or before December 31, 2004, 5,500,000 shares of our common stock to Fujian
Tiancheng. In addition, we agreed to raise by December 31, 2004, $3,600,000 in
order to finance the Da-an Project operations. It was contemplated in the
agreement that this money shall be raised by way of private placements or a
public offering of our common stock.
Prior to the execution of the Share Purchase Agreement, we loaned to
Fujian Tiancheng an amount equal to $200,000 to be used in connection with the
Da-an Project. In return, on July 26, 2004, we received from Fujian Tiancheng a
Promissory Note in the amount of $200,000 evidencing our loan. The note was
canceled upon the execution of the Share Purchase Agreement and applied to the
$3,600,000 that we are required to raise.
At the present time, we do not own the Da-an Mining Rights or any
interests in Fujian Tiancheng or the Da-an Property.
Since the execution of the Share Purchase Agreement, we have been
informed by Chinese counsel that Chinese law prohibits the acquisition of all of
the capital stock of a Chinese entity by a non-Chinese entity. Therefore, in
order to effectuate the purpose of the Share Purchase Agreement, Fujian
Tiancheng formed China Mining Corp., Ltd., a British Virgin Island corporation
("CMC"), and shall transfer the Da-an Mining Rights into such company. We shall
then acquire the equity securities of CMC and, indirectly the Da-an Mining
Rights. In addition, all contributions required to be made to Fujian Tiancheng
in order to finance the Da-an Project operations shall be made to CMC. The Share
Purchase Agreement is being amended to reflect these new items.
As of the date hereof, we have not been able to raise the $3,600,000
required by the Share Purchase Agreement. Therefore, Fujian Tiancheng has agreed
to extend such deadline to March 31, 2005. In the event that we are unable to
raise the $3,600,000 by March 31, 2005, then Fujian Tiancheng will provide us
with an amount equal to the difference between the total amount raised and
$3,600,000 and, Fujian Tiancheng shall have the right to receive additional
shares of our common stock. The amount of additional shares that Fujian
Tiancheng shall be entitled to receive shall be equal to the total amount of
funds provided to us by Fujian Tiancheng divided by the price per share being
offered to prospective investors in the private placement. Therefore, regardless
of whether we raise $3,600,000, we will acquire CMC and the Da-an Mining Rights.
Current State of Exploration
To date, our exploration consists only of two visits to the Da-an
Property by Dr. Keating. No systematic surveys or investigations have been
conducted. The purpose of both visits were to gather as much information
regarding the property as possible, both on the ground and from Fujian
Tiancheng, in order to lay the groundwork for a more comprehensive exploration
program leading to target drilling. During his first visit, Dr. Keating
personally inspected a number of different locations on and adjacent to the
property and recorded his notes, photographed such locations and collected 19
outcrop grab samples. His second visit took place on January 3, 2005 through
January 17, 2005. He is in the process of updating the Geological Report with
the information collected during this visit.
Competition
The precious metals mining industry is fragmented. In comparison to
other participants in the gold and silver mining market, we are one of the
smallest companies. Although, we compete with other exploration companies
looking for gold, silver and other minerals, there will be no competition for
the exploration or removal of minerals from the Da-an Property once we have
acquired the mining rights to such property. There are readily available markets
for gold and silver in the United States and around the world. Therefore, we
will be able to sell any gold and/or silver that is recovered.
Government Regulations
The Mineral Resources Law of the People's Republic of China is China's
principal mining law. Such law is currently fashioned after similar statutes in
Canada and Austrailia.
Employees
Initially, we intend to use the services of subcontractors for manual
labor exploration work and technical evaluation on our property.
At the present time, we have no employees, other than Fred R. Schmid
and Stephen J. Schmid, our officers and directors, who at the present time are
not being compensated for their services. The approximate amount of time per
week that Fred R. Schmid and Stephen J. Schmid will devote to our business
affairs is 40 hours and 20 hours, respectively. At some point in the future, Mr.
Fred Schmid and Mr. Stephen J. Schmid will enter into employment agreements with
the Company for their services. We intend to retain a translator for the field
and office use. We presently do not have pension, health, annuity, insurance,
stock options, profit sharing or similar benefit plans; however, we may adopt
plans in the future. There are presently no personal benefits available to any
employees.
Reports to Security Holders
After we complete this registration, we will not be required to furnish
you with an annual report. Further, we will not voluntarily send you an annual
report. We will be required to file reports with the SEC under section 15(d) of
the Securities Act. The reports will be filed electronically. The reports we
will be required to file are Forms 10-KSB, 10-QSB, and 8-K.
We have filed with the SEC under the Securities Act a registration
statement on Form SB-2 with respect to shares of the common stock offered
hereby, and of which this prospectus is a part. This prospectus does not contain
all the information shown in the registration statement or the exhibits and
schedules which are part of the registration statement, portions of which may be
omitted as permitted by the rules and regulations of the SEC. Statements made in
this prospectus regarding the contents of any contract or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
registration statement, each such statement being qualified in all respects by
such reference. For further information pertaining to us and the common stock
offered hereby, reference is made to the registration statement, including the
exhibits and schedule thereto, copies of which may be inspected without charge
at the public reference facilities of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of all or any portion of the registration
statement may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains a website that contains reports and other information that is
filed through the SEC's EDGAR System. The website can be accessed at
http://www.sec.gov.
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATION
This section of the prospectus includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like: believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements, which apply only
as of the date of this prospectus. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from historical results or out predictions.
Plan of Operation
We have provided Fujian Tiancheng with Dr. Linus Keating's
independent Geological Report dated July 3, 2004 and Trip Report dated January
28, 2005; which both contain his recommendations for the 1st and 2nd stage of
the exploration program. We believe a relatively unexplored property must be
examined in detail using sound western exploration standardized methods to
determine viable drilling and trenching sites to substantiate a mineral resource
on the property, if any. Dr. Keating's Reports provides a plan of operation that
Sparta would follow and is the basis of the cost estimates shown below, based on
USA standards. Such costs, when based on Chinese-equivalent figures could be 25%
less than USA based estimates. Dr. Keating has also created a Gant Chart showing
the start and completion times for each activity under his exploration plan.
During the exploration period there are approximate decision points
(milestones) that occur when the collected data is reviewed in detail and
adjustments made based on the information captured and the exploration and
mining experience of our technical staff. These milestones will permit
management and technical staff to more efficiently utilize budget funds in such
a fashion as to achieve maximum results. Key milestones are shown on Table 1,
below.
Sparta, with a western geological team of approximately four consulting
geologists (senior and junior), will provide a rotating consulting pool of
accomplished explorationists which, working together with its Chinese
counterparts as a joint technical group, will enhance the Chinese geologists and
engineering staff with its western exploration and mining experiences to carry
out the proposed 2005 exploration plan of operation. Concomitantly, the presence
of Sparta geologists in the field at every stage of the exploration process will
insure the quality of the work carried out and adherence to western professional
standards. The rotation plan calls for each Sparta geologist to be in the field
with his Chinese counterparts for a two-month tranch. Dr. Keating will be
present to review progress at each shift change.
The following are the proposed work plan recommendations for the
Da-an Silver Mine property as outlined by Dr. Keating:
o Clarify legal status (land position, land obligations, reports required
and/or available) with complete copies of all relevant documents sent to
the Sparta USA headquarters;
o Establish a consistent sample and drill-hole numbering system to be used by
all personnel working on the property for all samples collected, no matter
what type of sample, so that a coherent database can be constructed. Assign
all previous samples collected a distinctive series number that fits into
the new database;
o Establish shipping, laboratory and quality control protocols for all
laboratory work performed on samples;
o Obtain copies of all prior sample and geologic reports for the property no
matter the age and send to the Company's USA headquarters, for translation
into English;
o Establish a Base Map for the USA and Chinese geologic teams use
(topographic for China use - streams and roads for USA use) that uses a
single coordinate system. All new information generated must fit perfectly
onto this base map;
o Coordinate schedules for USA geologists and Chinese technical teams;
o Provide GPS and train the Chinese technical team in their use so at to
accelerate the mapping of old mines and stream sediment locations;
o Complete a thorough Geologic Map of the entire property with structural
(faults and folds) emphasis at 1:10,000 scale using US geologists working
in tandem with the Chinese technical team and sharing technology;
o Complete computerized geo-chemical processing and analysis for all soil
survey areas sampled to date on the property using USA software to identify
subtle patterns for both key and pathfinder elements;
o Carry out a comprehensive Stream Silt / Panned Concentrate geo-chemical
survey over the entire property: collect 1 sample per 0.5 km along creeks,
compile at 1:10,000 scale;
o Old Hole Catalog: find and locate on 1:10,000 base map all old mines, show
size of mine, shape, and trend direction; collect at least one high-grade
sample from each mine found; compile at 1:10,000 scale;
o Complete detail Geologic Mapping at 1:2,000 scale for the Tan Shan and Shen
Ji Keng areas jointly with the Chinese and USA geologic teams; map other
areas as appropriate;
o Evaluate effectiveness of geophysical methods in probing for underground
targets - design and contract out a geophysical survey if necessary;
o Obtain government agency approvals, if necessary, for geophysical
line-cutting and cut lines through heavy vegetation if necessary to permit
geophysical surveying;
o Drill Site Identification: Use the relationship of old mines to mapped
geology and structure, geo-chemical and geophysical data of the entire area
to define drill targets;
o Obtain government agency permits if necessary, for drilling and trail /
road construction; design and build access to each drill site, making
trails and roads as necessary;
o Drilling: depending on drill targets identified, drill from 5 to 20 holes
for a total of up to 5,000m using up to two angle-capable core-drilling
machines;
o Evaluate drilling results and propose send tranch drilling plan if
appropriate.
The following table outlines the major milestones with approximate
completion dates and estimated budgetary expenses related to the proposed Plan
of Operation noted above:
Table 1. Major Milestones:
- -------------- ------------------------------------------- ---------------------
Phase # Critical Tasks Approximate Completion Date
- -------------- ------------------------------------------- ---------------------
1 Da'an Project start-up March 15, 2005
- -------------- ------------------------------------------- ---------------------
1 Team Preparation Complete March 30, 2005
- -------------- ------------------------------------------- ---------------------
1 Mobilization / Field Work Begins April 1, 2005
- -------------- ------------------------------------------- ---------------------
1 "Old Hole" Surveying Complete April 30, 2005
- -------------- ------------------------------------------- ---------------------
1 Stream Sediment Survey Complete May 31, 2005
- -------------- ------------------------------------------- ---------------------
1 District-wide mapping Complete June 6, 2005
- -------------- ------------------------------------------- ---------------------
1 Detail Mapping Completed July 15, 2005
- -------------- ------------------------------------------- ---------------------
1 Geophysical Survey (if needed) Completed September 16, 2005
- -------------- ------------------------------------------- ---------------------
2 Drilling Starts October 10, 2005
- -------------- ------------------------------------------- ---------------------
2 1st Tranch Drilling Completed March 10, 2006
- -------------- ------------------------------------------- ---------------------
3 2nd Tranch Drilling Proposal Due April 13, 2006
- -------------- ------------------------------------------- ---------------------
Budget Items:
Preparation..............................................................$10,000
Old Hole Survey..........................................................$14,000
2 engineers, 2 assistants, 4 local guides; 100 rock chip samples
Stream Sediment Survey...................................................$43,000
2 engineers, 2 assistants, 4 local guides, 350 samples
District Mapping.........................................................$50,000
2 geologists, 2 assistants, 4 local guides, 1 translator,
Detail Mapping...........................................................$40,000
2 geologists, 2 assistants, 1 translator
Geophysical Survey.......................................................$80,000
Contractor
Data Compilation & Analysis..............................................$20,000
Permitting................................................................$5,000
Land Holding Costs.......................................................$20,000
Drilling................................................................$691,000
5000m, diamond core, 2 angle rigs
Logistics.................................................... ..........$250,300
Drivers, Vehicles, warehouse, translation, communication, travel
tickets, expat insurance, executive travel, maintenance, sample boxes and bags,
local casual labor
Sampling................................................................$245,300
Preparation, shipping, analysis, check assays, standards
Contingency (5%).........................................................$61,700
Total.................................................................$1,530,000
Off Balance Sheet Arrangements
There are no off balance sheet arrangements.
Foreign Currency Translation.
The Company's Chinese operation will maintain its books and accounting
records in Renminbi ("RMB"), the People's Rebublic of China's currency.
Translation of amounts from RMB in United States dollars ("US$) is being made
currently at a single rate of exchange of approximately US$1.00:RMB8.27. No
representation can be made that RMB amounts will be converted into US Dollars at
that rate in the future. On January 1, 1994, the PRC government introduced a
single rate of exchange as quoted daily by the People's Bank of China (the
"unified Exchange Rate"). The quotation of the exchange rates does not imply
free convertibility of RMB to other foreign currencies. All foreign exchange
transactions continue to take place either through the Bank of China or other
banks authorized to buy and sell foreign currencies at the exchange rates quoted
by the People's Bank of China. Approval of foreign currency payments by the Bank
of China or other institutions requires submitting a payment application form
together with supplier's invoices, shipping documents and signed contracts.
Cash Requirements For the Next Twelve Months:
To implement the Plan of Operations and manage the Company, we estimate that our
expenses for the next twelve months will be approximately $3,960,000, expended
as follows:
Exploration: $1,530,000
Acquire the Da-an Silver Mining Property: $1,500,000
Payroll ($180,000) and related taxes ($45,000): 225,000
Consulting and Research Report Services: 45,000
SG&A: 180,000
Accounting and Legal Counsel: 75,000
Printing and Engraving Expense: 25,000
Offering Expenses: 20,000
10% Misc. Expense: 360,000
---------
Total: $3,960,000
To date, the Company has raised $391,165 in an initial private
placement equity offering and $500,000 through a private placement Convertible
Bridge Loan for a total of $891,165. Under the Share Purchase and Exchange
Agreement between Sparta Holding and Fujian Tiancheng, the Company is required
to pay $3,600,000 by March 31, 2005 (the "Closing Date") to Fujian Tiancheng in
order to acquire control of the Da-an Silver Mine property and undertake the
ongoing exploration / development program. To date, the Company has advanced
$579,000 as loans to the Fujian Tiancheng toward the $3,600,000 payment, which
is being applied toward ongoing exploration work on the property. Should the
Company not raise the full $3,600,000 amount by March 31, 2005, Fujian Tiancheng
has agreed to lend the Company any balance still due, which the Company can
repay from proceeds it raises through its private placement offerings. The
Company is undertaking a private placement up to $8,000,000 through a Series A
Preferred Stock convertible into Common Stock. At this time we have not raised
any funds under the preferred stock offering.
Any additional funds raised above the required $3,960,000 estimated
expenses for the next twelve months may be used to acquire additional mining
properties in China and to conduct exploration work to establish mineral
resources on said properties, if any. Failure to raise sufficient funds through
our private placement offerings would require the Company to significantly
curtail its planned acquisition and exploration programs and we may be forced to
make other arrangements to continue to operate the Company, which there can be
no assurances that we will be able to do so, or cease our activities completely.
Sparta Holding Corp. completed a private placement of shares of
unregistered common stock for sale at $0.35 per share to a small group of
qualified purchasers without registration under the Securities Act of 1933, as
amended (the "1933 Act") or the securities laws of any state, in reliance on the
exemption contained in Section 4 (2) of the 1933 Act and on similar exemption
under applicable state laws. The Company raised $391,165 and issued 1,117,610
shares of common stock in this offering.
Sparta Holding Corp. is completing a $500,000 Bridge Loan Financing
with a small group of Lenders, issuing them a Note bearing interest at 8% per
annum, with conversion privileges of one share of Common Stock for each One
($1.00) Dollar of Note principal and interest being converted. The Note is due
and payable at the end of 12 months from the Note date. In addition, the Lender
received a 1/2 Warrant for each dollar of loan principal, exercisable for a
period of two (2) years at an exercise price of $1.50 per share. This Warrant or
the Warrant Shares or any other security issued or issuable upon the exercise of
this Warrant may not be sold or otherwise disposed of unless the Holder provides
the Company with an opinion of counsel reasonably satisfactory to the Company in
form that this Warrant or the Warrant Shares or such other security may be
legally transferred without violating the Securities act of 1933, as amended
(the "1933 Act") and any other applicable securities law and then only against
receipt of an agreement of the transferee to comply with the provisions of this
Section (g) with respect to any resale or other disposition of such securities.
Upon exercise of this Warrant, the Holder shall, if requested by the Company,
confirm in writing, that the Warrant Shares are being acquired solely for the
Holder's own account and that Holder or Holder's purchaser representative is an
accredited investor, as defined in Rule 501 under the 1933 Act.
Sparta Holding Corp. is offering up to $8,000,000 private placement of
Series A Preferred Stock (each, a "Share") at a purchase price of $1.25 per
Share (the "Offering") for 6,400,000 Shares, which are callable by the Company
into shares of Common Stock at One share of Preferred Stock for One share of
Common Stock at the end of twelve months from the closing date of the offering.
The Offering closing date is March 31, 2005 unless extended at the Company's
sole discretion. The Preferred Stock pays an eight percent (8%) dividend per
annum. Purchasers of the Preferred Stock prior to March 31, 2005 receive twenty
percent (20%) warrant coverage (the "Warrant") on the shares of Common Stock.
The Warrant is exercisable into shares of Common Stock for a period of two (2)
years at an exercise price of $1.50 per share.
Since there is not a minimum offering amount in this Offering, all
subscription amounts will not be placed in an escrow account and will be
immediately available to the Company for its use. The Company reserves the right
to pay commissions and/or finder's fees in cash, securities of the Company, a
combination thereof, or other combinations to individuals and/or entities in
connection with the sale of the Shares in this Offering, in amounts the Company
deems appropriate in the Company's sole and exclusive discretion. As of the date
hereof, in addition to a cash finder's fee, the Company intends to grant to such
individuals, upon the closing of such sale, a warrant to purchase a number of
shares of the Company's Common Stock equal to 10% of the purchase price of the
Sale, at a purchase price of $1.25 per share. The warrant shall have a term of
two years from the date of issuance. The Company has not raised any funds under
this private placement.
The Offering is being made in reliance upon an exemption from
registration under the Securities Act for an offer and sale of securities, which
does not involve a public offering. It is offered to accredited investors who
acknowledge that they understand that the Shares being purchased have not been
registered under the Securities Act of 1933, as amended (the "Act") or any state
securities laws and neither the Shares nor any interest therein may be offered,
sold, pledged, assigned or otherwise transferred unless (1) a registration
statement with respect thereto is effective under the Act and any applicable
state securities laws or (2) the Company receives an opinion of counsel to the
holder of such shares, which counsel and opinion are reasonably satisfactory to
the Company, that such securities may be offered, sold, pledge, assigned or
transferred in the manner contemplated without an effective registration
statement under the Act or applicable state securities laws.
DESCRIPTION OF PROPERTY
Our satellite business office is located at 8275 South Eastern Avenue,
Las Vegas, Nevada 89123. These premises are comprised of approximately 300
square feet and are subject to a month-to-month lease. The monthly rental
payment under such lease is $150.00 per month.
Da-an Property
Description, Location and Access
The Da-an Property is located in northern-most corner of Fujian
Province, 160 air-kilometers due north of the city of Fuzhou, capital of the
province. The Fujian Province lies on the eastern seaboard of the People's
Republic of China, across the straits from Taiwan.
The property is accessible by road year-round from Fuzhou. Located
approximately 30 minutes north of Shouning, a modern city with full emergency
and support services, the town of Da-an can be reached by a paved two-lane
mountain highway. From the town of Da-an, the Da-an Property is a 40-minute
drive on a local access maintained dirt road.
The property consists of over 20,000 acres of contiguous land, which is
subject to two "Mine Prospecting Rights" issued by the Fujian Province
Department of Land Resources pursuant to regulations promulgated by the Ministry
of Land Resources of the People's Republic of China to Fujian Tiancheng.
There is no time limit for the paid transfer of mineral rights, but
these rights cannot be left unused. As a result, a system of annual inspection
was introduced and accordingly, the owners of such rights annually report their
prospecting and exploration plans to the proper land and resource departments of
the provinces. The department of land and resources at the provincial level will
conduct its examination and verification on the implementation of the plans and
issue new certificates as substitutes for the previous ones, provided the work
of the previous year is in progress.
Physiographically, the property comprises steep vegetation-covered
slopes, with a moderate to thick soil profile typical of the tropics, dissected
by deep valleys. Year-round creeks occupy most valleys. Chest-high tropical
vegetation is thick throughout the area except at the higher elevations on the
ridges. Sporadic bamboo and cedar forests occur at the middle elevations. Except
in the main valley of Da-an village, no roads are present; access is limited to
an extensive network of footpaths. Off the footpaths, outcrops are present but
can be challenging to find.
Exploration History
The Da-an Property has a long history of silver mining, dating back at
least 450 years to the Ming Dynasty. Numerous old mine workings dot the
countryside, most of which do not appear to have been touched in many years.
There are no mines currently producing on the Da-an Property. No mining or
exploration infrastructure exists at the present time.
Work to date has been performed by the Fujian Provincial Geological
Research and Investigation Institute under the direction of Mr. Li Changze,
Brigade Chief Engineer. The Brigade is a provincial government entity that
conducted this work under contract with Fujian Tiancheng. A report "Profile of
the Project in Shouning" which appears to have been written in 2000 summarizes
early exploration work.
In the 1972, the Brigade engineers, first visited the Da-an Property
and focused on the Guan Tian Chang zone. According to the summary report, two
high-grade samples collected from old workings on that visit yielded silver
values ranging from 16,000 ppm to 17,000 ppm.
In 1979, the Brigade conducted a systematic exploration over the entire
district at that time assayed from 39 ppm to 800ppm silver.
From 1989 - 1992, the 4th Brigade finished surveying the Guan Tian
Chang, Wailou, Fuji, Tanchatou, Zhaiping, Wenyang, Tanshan, and Da-an zones. A
report detailing their findings is in our possession, has not been translated
into English at the date of this prospectus. Soil, stream sediment, heavy cons,
and rock chip sampling was conducted erratically throughout this period.
In 1999, a follow-up of stream sediment and panned concentrate led to
the discovery of a gold anomalous area near the Da-an Mine area and from Tanshan
to Laocuo. Later in 1999, one vertical core hole was drilled adjacent to old
stopes at Guantianchang but failed to cut ore grade mineralization or intersect
key structures.
Mineralization consists of high-grade cordilleran-style silver (+/-
gold), lead, zinc veins hosted in a Jurassic-Cretaceous age calc-alkaline
volcanic complex.
Ongoing field recognizance work is proceeding on the Da-an Property
area by Fujian Tiancheng's technical team, which is independent of the Company
until we have completed our acquisition of the company. At the present time, we
are not actively involved in any exploration activities on the Da-an Property.
Physiography
The Da-an Property in China is located in Shouning County at an
elevation of 750 to 1,150 meters and consists of geomorphologic structure of
mountainous areas. The property area boasts of deep terrain incisions and
valleys with full vegetation growth. Shouning County is part of a subtropical
monsoon climate zone. It enjoys warm weather and abundant sunlight. It has an
annual average temperature of 15.1(degree)C, annual precipitation of 247.2mm and
non-frost duration of 235 days. It is a rural agricultural area.
There are over 1,700 rivers and streams in the whole county with an
annual average runoff of 1.8 billion m3 of water. Electric Power is in the
vicinity of the property area and hydroelectric power can be developed. The
property area is accessible by major highway and good secondary roadways.
Ownership Interest
At the present time the Company does not possess any rights to the Da-an
Property.
[Insert Map Here - Map will be included in amendment]]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fred Schmid, a director and Chairman of the Board of Directors, and our
President/Chief Executive Officer, had loaned us approximately $7,500 for
start-up costs and operating capital. As of the date hereof, such loans have
been repaid from the financing raised in connection with the private placement.
There were no documents reflecting the loan, which did not bear any interest and
had no maturity date or other repayment terms.
On February 5, 2004, we entered into the Exchange Agreement with
Feltsen Partners, LLC, a Pennsylvania limited liability company ("Feltsen"),
whereby we acquired certain rights to explore several mining claims that are
under the jurisdiction of the United States Department of the Interior, Bureau
of Land Management and located in Greenlee County, Arizona. Fred Schmid is the
Managing Partner and sole member of Feltsen. In consideration for the mining
claims, we issued to Feltsen 11,000,000 shares of our common stock, of which
5,500,000 have been distributed to its members and related parties and the
balance returned to us for no consideration. The shares were returned in order
to keep the number of shares issued and outstanding at a reasonable number.
The Exchange Agreement also called for the distribution of 340,000
shares of our common stock to Castle for distribution to the Castle shareholders
of record on February 5, 2004. Upon the effectiveness of the registration
statement, such shares shall be distributed to the Castle Shareholders on a one
share for every 100 shares of Castle held basis. As a result of this
distribution, Fred R. Schmid will receive 100 shares of our common stock.
Conflicts of Interest
Certain conflicts of interest now exist and will continue to exist
between the Company and Fred R. Schmid, a director and our President/Chief
Executive Officer due to the fact that Mr. Schmid has the option to acquire up
to ten unpatented mining claims in Colorado. Therefore, in the future, there is
the possibility that Mr. Schmid may choose to devote his time and focus his
activities to the exploration of such claims.
We have formulated and adopted a policy to handle potential conflicts
of interest among our officers and directors relating to precious metals mining
interests which in the future come to the attention of our officers and
directors, who are also involved with other firms or ventures seeking precious
metals mining opportunities. This policy excludes precious metals properties
presently owned, subject to option or located in North America, by either of our
officers and directors or affiliated companies. Our policy requires that each
such officer or director shall disclose and offer to us all opportunities to
acquire and develop precious metals mining properties located outside of North
America which either come to their attention as being available or in which they
have either a controlling or majority interest before acquiring then for other
companies unless such opportunities (a) are not, by their terms, available to
public companies in general, or (b) require investments or other commitments by
us, which in our reasonable opinion, we are unable to make at the time such
opportunities are initially presented.
Except for the policy described in the preceding paragraph, we have
established no other policies or procedures for the resolution of current or
potential conflicts of interests between our officers and directors or
affiliated entities and us. In the opinion of management, this policy is
adequate to protect us from current or potential conflicts of interests.
However, potential investors should carefully consider the potential conflicts
of interest provision, which exists before purchasing our shares. Because the
policy recognizes that certain conditions need to be satisfied before business
opportunities as described herein are offered to us, there can be no assurance
that such opportunities, which are brought to the our attention will be offered
to us.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
No Market for Common Stock
At the present time, there is no public trading market for our common
stock. We anticipate applying for trading of our common stock on the OTC
Bulletin Board upon the effectiveness of the registration statement. However, we
can provide no assurance that our shares will be traded on the OTC Bulletin
Board or, if traded, that a public market will materialize. Accordingly, you may
need to hold our common stock for an indefinite period.
Stock Option Grants
As of the date of the registration statement, we have granted to
International Investment Group an option to purchase 240,000 shares of our
common stock at $0.35 per shares as a finder's fee for bringing the Da-an
Project to our attention and assisted us in negotiating and completing the
transaction. This option expires on December 31, 2005.
Convertible Promissory Notes
As of the date of the registration statement, we have issued
Convertible Promissory Notes in the aggregate amount of $306,000 in our Bridge
Loan Financing. Each note bears interest at a rate of eight percent per annum
and is convertible, at the option of the investor, into shares of our common
stock on a one share of common stock for every dollar of principal and interest
being converted. The term of the notes shall be 12 months from the date of their
issuance.
Warrant Grants
As of the date of the registration statement, we have issued to the
investors, in our Bridge Loan Financing, the right to purchase 153,000 shares of
our common stock at a $1.50 per share for a period of two years from the date of
issuance.
Rule 144 Shares
As of the date of the date of the registration statement, none of our
shares of common stock are available for resale to the public in accordance with
Rule 144 of the Securities Act.
Registration Rights
As of the date of the registration statement, the Bridge Loan Financing
investors have been granted piggy-back registration rights. Therefore, if at any
time following the effectiveness of the registration statement, we propose to
register our securities under the Securities Act for sale to the public, whether
for our own account or for the account of our shareholders for sale to the
public, we will give written notice to the Bridge Loan investors of such
proposed registration and, upon their request, we will use reasonable efforts to
cause their common stock to be covered by the proposed registration statement.
Shareholders
As of the date of this registration statement, we have approximately 48
record holders of our common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock.
We intend to retain future earnings, if any, to finance the expansion of our
business and we do not expect to declare or pay any cash dividends on our common
stock in the foreseeable future. We will, however, pay a dividend of eight (8%)
percent per annum on all issued and outstanding shares of our Series A Preferred
Stock.
EXECUTIVE COMPENSATION
Mr. Fred Schmid and Mr. Stephen Schmid, our officers and directors,
have not been compensated for their services and there are no plans to
compensate them in the near future until such time as we have raised a total of
$1,000,000 in connection with our private placement offering. At such time, Mr.
Fred Schmid and Mr. Stephen Schmid will enter into employment agreements and be
compensated for their services, commensurate to industry standards.
Executive Officer Compensation
Summary Compensation:
The table below shows summary information concerning annual and
long-term compensation awarded to, earned by or paid to Fred Schmid, our
President and Chief Executive Officer and Stephen Schmid, our Vice President,
Secretary and Treasurer, for the year ended September 30, 2004.
SUMMARY COMPENSATION TABLE
Other Compensation
Annual Compensation Long-Term Compensation
Name and Principal Position Year Salary Bonus Options Compensation
- ---------------------------- --------- -------------- --------------- ------------ ---------------- ---------------------
Fred Schmid, President and 2004 _______(1) - - -
Chief Executive Officer -
2005 _______(1) - - - -
Stephen Schmid, 2004 _______(1) - - -
Vice President, Secretary -
and Treasurer
2005 _______(1) - - - -
(1) Salary was not paid and was not contributed to them.
<FN>
</FN>
Employment Agreements
At this time, Fred Schmid and Stephen J. Schmid, our officers, are not
being compensated for their services. When $1,000,000 of capital is raised, Mr.
Fred Schmid and Mr. Stephen Schmid will both enter into employment agreements
and be compensated for their services commensurate to industry standards. We
presently do not have pension, health, annuity, insurance, stock options, profit
sharing or similar benefit plans; however, we may adopt plans in the future.
Stock Option Plans
At this time, there are no stock option plans.
Limitation of Liability and Indemnification Matters
We may provide liability insurance for each director and officer for
certain losses arising from claims or changes made against them while acting in
their capabilities as our directors or officers, whether or not we would have
the power to indemnify such person against such liability, as permitted by law.
FINANCIAL STATEMENTS
Our fiscal year end is September 30. We will provide audited financial
statements on an annual basis prepared by an Independent Certified Public
Accountant. After we complete this registration, we will not be required to
furnish you with an annual report. Further, we will not voluntarily send you an
annual report. We will be required to file reports with the SEC under section
15(d) of the Securities Act. The reports will be filed electronically. The
reports we will be required to file are Forms 10-KSB, 10-QSB, and 8-K. You may
read copies of any materials we file with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that will contain copies
of the reports we file electronically. The address for the Internet site is
www.sec.gov.
Our audited financial statement from inception to September 30, 2004
immediately follows:
SPARTA HOLDING CORP.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
September 30, 2004
SPARTA HOLDING CORP.
(An Exploration Stage Company)
INDEX
-----
PAGE
----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F2
BALANCE SHEET F3
STATEMENTS OF OPERATIONS F4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) F5
STATEMENTS OF CASH FLOWS F6
NOTES TO FINANCIAL STATEMENTS F7-F12
KEMPISTY & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS, P.C.
15 MAIDEN LANE - SUITE 1003 -
NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
Board of Directors
Sparta Holding Corp.
(An Exploration Stage Company)
We have audited the accompanying balance sheet of Sparta Holding Corp. (An
Exploration Stage Company) as of September 30, 2004, and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows for the
two years in the period ended September 30, 2004 and the period December 23,
1993 (date of inception) to September 30, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sparta Holding Corp. (An
Exploration Stage Company) as of September 30, 2004, and the results of its
operations and its cash flows for the two years in the period ended September
30, 2004 and the period December 23, 1993 (date of inception) to September 30,
2004 in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has not generated any revenue and has incurred start-up
losses to date. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Kempisty & Company
Certified Public Accountants PC
New York, New York
November 1, 2004
SPARTA HOLDING CORP.
(An Exploration Stage Company)
BALANCE SHEET
SEPTEMBER 30, 2004
ASSETS
Current Assets
Cash ............................................................. $ 30,614
-----------
Total current assets ........................................ 30,614
Other assets
Fujian Deposit (Note 3) ......................................... 2,133,914
Other ........................................................... 475
---
Total Assets ............................................... $ 2,165,003
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses ........................... $ 12,670
-----------
Total Current Liabilities .................................. 12,670
Stockholders' Equity
Preferred stock $.001 par value; authorized 2,000,000
shares, issued and outstanding none ........................ --
Common stock $.001 par value; authorized 100,000,000
shares, issued and outstanding 12,153,252 shares (Note 5) .. 12,153
Additional paid in capital ...................................... 2,206,924
Deficit accumulated during the development stage ................ (66,744)
-------
Stockholders' Equity ......................................... 2,152,333
---------
Total Liabilities and Stockholders' Equity ....................... $ 2,165,003
===========
SPARTA HOLDING CORP.
(An Exploration Stage Company)
STATEMENTS OF OPERATIONS
For the Period
For the Year Ended December 23, 1993
September 30, (inception) to
September 30, 2004
2004 2003
---- ----
Revenues $ - $ - $ -
Expenses
Consultant geologic 8,626 8,626
Mining claims cost 11,000 11,000
Travel 12,003 12,003
Legal 17,773 17,773
Accountant 5,000 5,000
Other expenses 7,700 304 12,342
----- --- ------
62,102 304 66,744
------ --- ------
Net (loss) $ (62,102) $ (304) $ (66,744)
=================== =================== ===================
Net loss per share basic and diluted $ (0.01) $ (0.00)
=================== ===================
Weighted average number of shares outstanding $ 12,104,685 $ 340,000
=================== ===================
SPARTA HOLDING CORP.
(An Exploration Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD DECEMBER 23, 1993 (INCEPTION) TO SEPTEMBER 30, 2004
Total
Common Stock Additional Stockholders'
Paid-In Treasury Retained Equity
Shares Amount Capital Stock Earnings (Deficit)
------ ------ ------- ----- -------- ---------
Sale of common stock at
inception 340,000 $ 340 $ 660 $ - $ - $ 1,000
Loss for year ended
September 30, 1994 - - - - (237) (237)
Loss for year ended
September 30, 1995 - - - - (821) (821)
Loss for year ended
September 30, 1996 - - - - (554) (554)
Loss for year ended
September 30, 1997 - - - - (540) (540)
Loss for year ended
September 30, 1998 - - - - (565) (565)
Loss for year ended
September 30, 1999 - - - - (455) (455)
Loss for year ended
September 30, 2000 - - - - (392) (392)
Loss for year ended
September 30, 2001 - - - - (381) (381)
Loss for year ended
September 30, 2002 - - - - (393) (393)
Loss for year ended
September 30, 2003 - - - - (304) (304)
--- --- --- --- ---- ----
Balance September 30, 2003 340,000 340 660 - (4,642) (3,642)
Forgiveness of debt - - 3,635 - - 3,635
Issued for mining claims 11,000,000 11,000 - - - 11,000
Sale of common stock in a
private placement 813,252 813 283,129 - - 283,942
Contribution of 5,500,000 shares
of common stock (5,500,000) - - (5,500) - (5,500)
Common stock held in escrow 5,500,000 - 1,919,500 5,500 - 1,925,000
Loss for year ended
September 30, 2004 - - - - (62,102) (62,102)
--- --- --- --- ------- -------
Balance September 30, 2004 12,153,252 $ 12,153 $ 2,206,924 $ - $ 66,744) $ 2,152,333
========== ========= ============ ========= ======= ==============
See Notes to Financial Statements.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
STATEMENTS OF CASH FLOWS
For the Period
For the Year Ended December 23, 1993
September 30, (inception) to
September 30, 2004
2004 2003
---- ----
Operating Activities
- --------------------
Net loss for period $ (62,102) $ (304) $ (66,744)
Adjustments to reconcile net (loss) to net cash
used by operating activities:
Expenses not requiring the use of cash 11,000 - 11,000
Changes in operating assets and liabilities:
(Increase) in deposits and other assets (475) - (475)
Increase in accrued expenses 12,663 142 12,670
------ --- ------
Net cash (used) by operating activities (38,914) (162) (43,549)
Investing Activities
- --------------------
Deposit for investment in mining company (214,414) - (214,414)
-------- ---- --------
Net cash (used) by investing activities (214,414) - (214,414)
Financing Activities
- --------------------
Loans from related parties 2,135 - 5,770
Repayment of loans from related parties (2,135) - (2,135)
Sale of common stock 283,942 - 284,942
Net cash provided by financing activities 283,942 - 288,577
------- --- -------
Increase (decrease) in cash 30,614 (162) 30,614
Cash at beginning of period - 162 -
--- --- ---
Cash at end of period $ 30,614 $ - $ 30,614
=================== ================== ===================
Supplemental Cash Flow Information:
Non-cash investing activities:
Exchange of 11,000,000 shares of common
stock for mining claims $ 11,000 $ - $ 11,000
=================== ================== ===================
Non-cash financing activities:
Forgiveness of loan payable $ 3,635 $ - $ 3,635
=================== ================== ===================
See Notes to Financial Statements.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 1- ORGANIZATION AND OPERATIONS
Sparta holding Corp. (the "Company") was incorporated in Nevada on December 23,
1993. The Company is primarily engaged in the acquisition and exploration of
mineral properties in the United States and Peoples Republic of China ("PRC").
These financial statements are prepared in accordance with accounting principles
applicable to a going concern. The Company is in the exploration stage and has
not, as yet, achieved commercial production. At present, management devotes most
of its activities to raise sufficient funds to fund its asset purchase agreement
and to further explore and develop its mineral properties. Planned principal
activities have not yet begun. The ability of the Company to emerge from the
exploration stage with respect to any planned principal business activity is
dependent upon its successful efforts to raise additional equity financing
and/or attain profitable mining operations. The Company has raised additional
capital during the period through a private placement of common stock, as
described in Note 5. There is no guarantee that the Company will be able to
complete any of the above objectives. These factors raise substantial doubt
regarding the Company's ability to continue as a going concern.
Note 2- SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
For financial instruments, including cash, accounts receivable, accounts payable
and accrued expenses, it was assumed that the carrying amount approximated fair
value because of the short maturities of such intruments.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 2- SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
The Company follows SFAS No. 109, "Accounting for Income Taxes", which requires
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial statements and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.
Net Loss Per Common Share
Basic and diluted net loss per common share has been calculated based upon the
weighted average number of common shares outstanding.
Evaluation of Long-Lived Assets
Long-lived assets are assessed for recoverability on an on-going basis. In
evaluating the fair value and future benefits of long-lived assets, their
carrying value would be reduced by the excess, if any, of the long-lived asset
over management's estimate of the anticipated undiscounted future net cash flows
of the related long-lived asset.
Interests in Mineral Properties
Property acquisition costs and exploration and development costs are capitalized
until the property to which they relate is placed into production, sold,
abandoned or management has determined there to be an impairment in value. These
costs are to be charged to future operations on a unit-of-production basis
following commencement of production using estimated recoverable reserves of the
property as a base or written off if the property is sold, abandoned or where
there is an impairment in value. If the recoverability of acquisition costs is
presumed to be insupportable in accordance with FASB 144 they will be charged to
current operations. On an on-going basis, the Company evaluates each property
based on results to date to determine the nature of exploration and development
work that is warranted in the future. If there is little prospect of further
work on a property being carried out, the deferred costs related to that
property are written down to the estimated amount recoverable.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 2- SIGNIFICANT ACCOUNTING POLICIES (continued)
New Financial Accounting Standards
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires recording costs
associated with exit or disposal activities at their fair values when a
liability has been incurred. Under previous guidance, certain exit costs were
accrued upon management's commitment to an exit plan. The Company adopted SFAS
No. 146 on January 1, 2003. The adoption of SFAS No. 145 did not have a material
impact on the Company's result of operations or financial position.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities under FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement is effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. Management believes that this statement did not
have a material impact on the Company's results of operations or financial
position.
In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, and Interpretation of FASB
Statements No. 5, 57, and 107 and Recission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of FASB Statement No. 5, Accounting for
Contingencies, relating to the guarantor's accounting for, and disclosure of,
the issuance of certain types of guarantees. This interpretation clarifies that
a guarantor is required to recognize at the inception of certain types of
guarantees, a liability for the fair value of the obligation undertaken in
issuing the guarantee.
The initial recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The disclosure requirements in this interpretation are effective for
financial statements of interim or annual periods ending after December 15,
2002. The Company adopted FIN 45 on January 1, 2003. The adoption of FIN 45 did
not have a material impact on the Company's results of operations or financial
position.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 2- SIGNIFICANT ACCOUNTING POLICIES (continued)
In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest
Entities. In DecemberJanuaryt31,F2003,sthed FIN No. 46 (Revised) ("FIN 46-R") to
address certain FIN 46 implementation issues. This interpretation requires that
the assets, liabilities, and results of activities of a Variable Interest Entity
("VIE") be consolidated into the financial statements of the enterprise that has
a controlling interest in the VIE. FIN 46R also requires additional disclosures
by primary beneficiaries and other significant variable interest holders. For
entities acquired or created before February 1, 2003, this interpretation is
effective no later than the end of the first interim or reporting period ending
after March 15, 2004, except for those VIE's that are considered to be special
purpose entities, for which the effective date is no later than the end of the
first interim or annual reporting period ending after December 15, 2003. For all
entities that were acquired subsequent to or financial position.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
clarifies the accounting for certain financial instruments with characteristics
of both liabilities and equity and requires that those instruments be classified
as liabilities in statements of financial position. Previously, many of those
financial instruments were classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. The adoption of the provisions of SFAS No. 150 did not have a material
effect on the Company's financial position.
Note 3- MINING CLAIMS
On February 5, 2004, the Company acquired the Terra Mining Company Claims in
exchange for 11,000,000 shares of the Company's Common Stock. The $11,000 cost
of the Terra Mining Company Claims has been charged to expense for the year
ended September 30, 2004.
On August 14, 2004, the Company entered into an Asset Purchase and Exchange
Agreement with Fujian Tiancheng Mining Industry Corp, LTD ("Fujian") of China.
Pursuant to the Agreement, the Company has made deposit payments totaling
$214,414 as of September 30, 2004. The Company also issued 5,500,000 common
shares to be held in escrow, valued at $.35 per share, or $1,925,000 as part of
its deposit. The Company is required to raise an additional $3,600,000 to
explore the site but if they can not, then Fujian may lend the money to the
Company. The $1,925,000 for stock will be charged to expense when the Company
completes the transaction.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 3- MINING CLAIMS (continued)
Under United States GAAP, mineral property expenditures are expensed as
incurred. Once a final feasibility study has been completed, additional costs
incurred to bring the mine into production are capitalized as development costs.
Costs incurred to access ore bodies identified in the current mining plan after
production has commenced are considered production costs and are expensed as
incurred. Costs incurred to extend production beyond those areas identified in
the mining plan where additional reserves have been established are deferred as
development costs until the incremental reserves are produced. Capitalized costs
are amortized using the unit-of-production method over the estimated life of the
ore body based on proven and probable reserves.
Note 4- INCOME TAXES
No provision for income taxes has been recorded in the accompanying financial
statements as a result of the Company's net operating losses. The Company has
unused tax loss carry forwards of approximately $50,000 to offset future taxable
income. Such carryforward expires beginning 2014. The deferred tax asset
recorded by the Company as a result of this tax loss carryforward is
approximately $10,000. The Company has reduced the deferred tax asset resulting
from its tax loss carryforwards by a valuation allowance of an equal amount as
the realization of the deferred tax asset is uncertain. The net change in the
deferred tax asset and valuation allowance from September 30, 2003 to September
30, 2004 was an increase of $10,000.
From December 23, 1993 (inception) to September 30, 2003, the Company filed a
consolidated federal income tax return with Castle, its then parent.
Note 5- COMMON STOCK
In November 2003, the Company declared a 3,400 to 1 stock split, thereby
increasing the number of issued and outstanding shares of Common Stock from 100
to 340,000. All references to shares and per share amounts in the accompanying
financial statements have been restated to retroactively reflect this stock
split.
On February 5, 2004, the Company issued 11,000,000 newly issued shares of Common
Stock valued at $11,000 to a related party, Feltsen Partners LLC ("FP") in
exchange for eight mining claims owned by FP known as the Terra Mining Company
Claims located in Greenlee County, Arizona. Subsequently, FP contributed
5,500,000 shares of the common stock back to the Company.
Under a related agreement, Castle (at the Company's expense) is to distribute
pro rata 340,000 shares of the Company's common stock that it owns, to the
approximately 350 Castle shareholders of record as of February 5, 2004.
SPARTA HOLDING CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
Note 5- COMMON STOCK (continued)
On August 14, 2004, the Company entered into an Asset Purchase and Exchange
Agreement ("Agreement") with Fujian Tiancheng Mining Industry Corp, LTD
("Fujian") of China, whereby the Company will acquire Fujian Tiancheng and its
Daan Silver Mining District in exchange for Fujian receiving 5,500,000 shares of
the Company's common stock and the Company raising $3,600,000 for Fujian mining
operations. If the Company cannot raise the $3,600,000, then Fujian may loan the
Company the funds but the agreement would then be negotiated.
In June 2004, the Company commenced a private placement of shares of Common
Stock at $.35 per share. The Company expects to offer a total of approximately
1,142,857 shares of Common Stock for $400,000 total. Through September 30, 2004,
the Company has sold 811,257 shares of common stock for proceeds of $283,940.
On September 30, 2004, the Company received a contribution of 5,500,000 shares
of its common stock from FP and subsequently issued them to be held in escrow
for Fujian subject to the agreement. These shares were valued at $1,925,000 or
$0.35 per share.
Note 6- RELATED PARTY TRANSACTION
On February 5, 2004, the Company issued 11,000,000 shares of common stock to
("FP"), a company controlled by its President, in exchange for mining claims
(see Notes 3 and 5). Subsequently FP contributed 5,500,000 shares back to the
Company.
Note 7- COMMITMENTS AND CONTINGENCIES
The Company's main operations will be conducted in the PRC. Accordingly, the
Company's business, financial condition and results of operations may be
influenced by the political, economic and legal environments in the PRC, and by
the general state of the PRC economy.
The Company's operations in the PRC will be subject to special considerations
and significant risks not typically associated with companies in North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange.
The Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation, among other things.
PROSPECTUS
SPARTA HOLDING, INC.
TABLE OF CONTENTS
-----------------
Page
----
Prospectus Summary.......................................................2
Risk Factors.............................................................5
Disclosure Regarding Forward Looking Statements..........................7
Use of Proceeds..........................................................8
Selling Shareholders.....................................................8
Plan of Distribution....................................................15
Legal Proceedings.......................................................16
Directors, Executive Officers, Promoters and Control Persons............16
Security Ownership of Certain Beneficial Owners and Management..........17
Description of Securities...............................................19
Interest of Named Expert and Counsel....................................20
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities..............................................20
Description of Business.................................................21
Management's Discussion and Analysis of Financial Condition
and Plan of Operation..................................................25
Description of Property.................................................30
Certain Relationships and Related Transactions..........................32
Market for Common Equity and Related Shareholder Matters................33
Executive Compensation..................................................34
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information other than that
contained in this prospectus. This prospectus is not an offer to sell nor is it
a solicitation of an offer to purchase our common stock in any jurisdiction
where such offer 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.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Directors and Officers
Articles of Incorporation and Bylaws do not provide for indemnification of
directors and officers.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth our expenses in connection with
this registration statement. All of these expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Filing Fee -- Securities and Exchange Commission $ 0.00
Fees and Expenses of accountants and legal counsel $ 30,000.00
Printing and Engraving Expenses $ 5,500.00
Miscellaneous expenses $ 9,500.00
-----------
Total $ 45,000.00
Item 26. Recent Sales of Unregistered Securities
No securities of the registrant which were not registered under the
Securities Act of 1933, as amended have been issued or sold by the registrant
within the past three years except as follows (none of the securities listed
below are being registered in this registration statement):
On February 5, 2004, we entered into the Exchange Agreement with Feltsen
Partners, LLC, a Pennsylvania limited liability company ("Feltsen") whereby we
acquired certain rights to explore several mining claims that are under the
jurisdiction of the United States Department of the Interior, Bureau of Land
Management and located in Greenlee County, Arizona. Fred Schmid is the Managing
Partner and sole member of Feltsen. In consideration for the mining claims, we
issued to Feltsen 11,000,000 shares of our common stock, of which 5,500,000 have
been distributed to its members and related parties and the balance returned to
us for no consideration. The shares were returned in order to keep the number of
shares issued and outstanding at a reasonable number.
Commencing July 2004, pursuant to a private placement offering made to
accredited investors in reliance on Section 4(2) of the Securities Act of 1933
and/or Rule 506 of Regulation D, we offered up to 1,142,857 shares of our common
stock at $0.35 per share. A total of 1,117,610 shares of common stock were
purchased pursuant to this private offering which was terminated on November 16,
2004, and we raised approximately $391,165 after costs and expenses. The
purchasers listed below were accredited investors with access to all relevant
information necessary to evaluate these investments.
Name/Address/City-State No. of Shares of Amount Issue
- --------- Common Stock Paid Date
--------- -------- --------------
Sylvia Ang 14,286 $5,000 10/25/04
150 Baxter St. #23
New York, NY 10013
Scott Balterman 142,857 $50,000 10/25/04
Leslie Balterman
Joint Tenants w/right
of survivorship
31 Fall Lane
Jericho, NY 11753
Edward Borrelli 28,571 $10,000 10/25/04
350 East 79th St. #5E
New York, NY 10021
E. Borrelli-Custodian for 20,000 $7,000 10/25/04
Keith Hernandez
350 East 79th St. #5E
New York, NY 10021
E. Borrelli-Custodian for 20,000 $7,000 10/25/04
Nicholle Hernandez
350 East 79th St. #5E
New York, NY 10021
Reynold Chow 42,857 $15,000 10/25/04
26-15 Parson Blvd. #5F
Whitestone, NY 11354
Shu K. Chow 57,143 $20,000 10/25/04
149-48 Beech Ave.
Flushing, NY 11355
Cong. Darkei Tshivo Dinov 68,571 $24,000 12/07/04
574 East 9th St.
Brooklyn, NY 11218
Michael E. Kahan 105,500 $36,925 10/25/04
6 Horizon Road
Fort Lee, NJ 07024
Robert J. Lancelotti 15,000 $5,250 10/25/04
Karin A. Lancellotti
Joint Tenants w/right
of survivorship
659 Andover Road
Valley Cottage, NY 10989
Alfred O.P. Leubert 15,000 $5,250 12/07/04
One Lincoln Plaza
Apt. 25J New York, NY 10023
Lee Shuo Liu 31,428 $11,000 10/25/04
45-11 195 Street
Flushing, NY 11358
Lin Chun Hui Liu 40,000 $14,000 10/25/04
45-11 195 Street
Flushing, NY 11358
Bernt Nygaard 15,000 $5,250 12/07/04
127 South 4th St.
New Hyde park, NY 11040
Robert Piccianno 10,000 $3,500 12/07/04
14 Capitol St.
Williston Park, NY 11596
2P Management Holding AG 28,542 $9,990 10/25/04
Zugerstrasse 70
CH-8810 Horgen, Switzerland
Hans G. Schmid 28,571 $10,000 12/07/04
26 Locust Lane
Huntington Bay, NY
Robert Schneider 40,000 $14,000 10/25/04
30 Pond Hill Road
Chappaqua, NY 10514
Sparten Establishment (Trust) 50,000 $17,500 10/25/04
9490 - Vaduz
Liechtenstein
Anthony Swartz 28,571 $10,000 10/25/04
3012 NE 21st Street
Ft. Lauderdale, FL 33305
Andreas Typaidos Family 28,571 $10,000 10/25/04
Limited Partnership
130 West 79th St. #19A
New York, NY 10024
Wang Li Tong 142,857 $50,000 10/25/04
19-6 Jin Tang Tower
53 Jin Tang Street
Yuzhong District,
Chong Qing 400010 China
Joanne Yan 30,000 $10,500 12/07/04
2102 - 989 Nelson St.
Vancouver, BC
V6Z 2S1 Canada
Dietmar Zessin 71,428 $25,000 10/25/04
7, Avenue St. Roman 42,857 $15,000 12/07/04
Monte-Carlo, Monaco, 98000
TOTALS: 1,117,610 $391,165
On November 12, 2004, we commenced a Bridge Loan Financing whereby we
are seeking to raise up to $500,000. The terms of the Bridge Loan are set forth
in and evidenced by a convertible promissory note executed and delivered by us
to the investor in the principal amount loaned by such investor. Among other
things, the Note shall (i) be payable to the investor, (ii) bear interest from
the date of issuance at a rate of eight percent per annum, (iii) be convertible
by the investor into shares of our common stock on the terms provided therein,
and (iv) have a maturity date which is twelve (12) months after date of
issuance. In addition, we will issue to each investor warrants to purchase
shares of our common stock, exercisable for a period of five (5) years at an
exercise price of $1.50 per share. The number of shares of common stock issuable
upon the exercise of each investor's warrant shall be determined by reference to
the following formula: one (1) share of common stock for each $2.00 of the
principal amount of the convertible promissory note. The following were
accredited investors with access to all relevant information necessary to
evaluate these investments:
Name & Address Amount Loaned Date of Loan
- -------------- ------------- ------------
Kitty Chow $50,000.00 11/19/04
149-48 Beech Ave.
Flushing, NY 11355
Mabel Gong $50,000.00 11/19/04
1350 - 70th Street
Brooklyn, NY 11228
Mark Balaban $36,000.00 11/19/04
44 Wall St., 4th Fl.
New York, NY 10005
Robert Schneider $20,000.00 12/7/04
30 Pond Hill Rd.
Chappaqua, NY 10514
Stephen Schloss 10,000.00 12/27/04
17 Serenite Lane
Muttontown, NY11791
James Ladner $50,000.00 12/28/04
Gartenstrasse 10
8002 Zurich, Switzerland
John Cathersides $25,000.00 1/6/05
139 Kingsway
Pettswood Kent
BR5 1PP UK
Andreas Typaldos Family $20,000.00 1/7/05
Limited Partnership
130 West 79 St., 19A
New York, NY 10024
Umberto Fetz-Rapp $20,000.00 1/11/05
Bergstrasse 318
Uctikon am See 8707
Switzerland
Kahala Capital $25,000.00 1/26/05
4224 Waialae Avenue
Suite 105-102
Honolulu, HI 96816
On December 31, 2004, a finder's fee of 220,000 shares of common stock
will be issued to International Investment Group, who acted as the agent in
bringing the Da-an Project to our attention and assisted management in
completing the transaction. International Investment Group also has an option to
purchase 240,000 additional shares of our common stock at $0.35 per share. The
option period expires on December 31, 2005.
We are also in the process of commencing a private placement offering
to be made to accredited investors in reliance on Section 4(2) of the Securities
Act of 1933 and/or Rule 506 of Regulation D, whereby we are seeking to raise up
to $8,000,000 by offering to accredited investors the opportunity to purchase
shares of our Series A Preferred Stock at a purchase price of $1.25 per share.
Each share of the Series A Preferred Stock shall be automatically converted into
shares of common stock on a one-for-one basis, twelve (12) months after the
closing of the offering. The Offering closing date is March 31, 2005 unless
extended at the Company's sole discretion. The Series A Preferred Stock shall
pay an eight percent (8%) dividend per annum. Investors subscribing for shares
of the Series A Preferred Stock prior to March 31, 2005 shall receive a warrant
to purchase one share of common stock for every five shares of Series A
Preferred Stock subscribed for. The Warrant is exercisable into shares of Common
Stock for a period of two (2) years at an exercise price of $1.50 per share.
Item 27. Exhibits
Exhibits
The following exhibits are filed as part of this registration statement:
Exhibit
Number Description
3.1 Articles of Incorporation of the registrant and amendments*
3.2 Bylaws of the registrant and amendments*
3.3 Specimen common stock certificate*
5.1 Opinion of Ruskin Moscou Faltischek, P.C. as to the legality
of securities being registered**
10.1 Exchange Agreement*
10.2 Option*
10.3 Stock Purchase and Exchange Agreement*
23.1 Consent of Ruskin Moscou Faltischek, P.C.
(included in Exhibit 5.1)**
23.2 Consent of Kempisty & Company Certified Public
Accountants, P.C.*
24.1 Power of Attorney (part of signature page)
99.1 Initial Geological Report on The Da-an Property
* Previously filed with Form SB-2 on November 22, 2004.
** To be filed by amendment.
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;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the 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 therein, 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 which remain unsold at the termination of
the offering.
4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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 of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Uniondale, New York.
February 25, 2005
SPARTA HOLDING CORP.
By: /s/ Red R. Schmid
- ------------------------------------
Name: Fred R. Schmid
Title: President
February 25, 2005
/s/ Stephen J. Schmid
- ---------------------------
Stephen J. Schmid Chief Financial Officer, Vice President,
Secretary, and Treasurer
In accordance with the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated. The undersigned hereby constitute
Fred R. Schmid as the attorney-in-fact of the undersigned to sign any amendment,
and any post effective amendment, of this registration statement.
February 25, 2005
/s/ Fred R. Schmid
- ------------------
Fred R. Schmid Chief Executive Officer, President and
Chairman of the Board
February 25, 2005
/s/ Stephn J. Schmid Chief Financial Officer, Vice President,
- ------------------- Secretary, and Treasurer
Stephen J. Schmid