UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of JANAURY, 2005.
Commission File Number: 0-30390
HILTON RESOURCES LTD
- --------------------------------------------------------------------------------
(Translation of registrant's name into English)
#1305 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7, Canada
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F: FORM 20-F [X] FORM 40-F [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form, is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
YES [ ] NO [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3- 2(b): 82-_____________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
HILTON RESOURCES LTD
Date: January 26, 2005 /s/ Nick DeMare
----------------------------- -------------------------------------
Nick DeMare,
President & CEO
- --------------------------------------------------------------------------------
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
- --------------------------------------------------------------------------------
MANAGEMENT'S COMMENTS ON UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements of Hilton
Resources Ltd. for the six months ended November 30, 2004, have been prepared by
and are the responsibility of the Company's management. These statements have
not been reviewed by the Company's external auditors.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
NOVEMBER 30, MAY 31,
2004 2004
$ $
ASSETS
CURRENT ASSETS
Cash 182,208 528,040
Amounts receivable 73,676 30,289
Prepaid expenses and deposits 9,339 8,959
------------ ------------
265,223 567,288
CAPITAL ASSETS 17,997 19,467
UNPROVEN MINERAL INTERESTS (Note 3) 492,242 220,582
OTHER ASSETS (Note 4) 7,650 65,591
------------ ------------
783,112 872,928
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 29,424 16,356
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 70,605,484 70,593,713
CONTRIBUTED SURPLUS 214,429 154,000
DEFICIT (70,066,225) (69,891,141)
------------ ------------
753,688 856,572
------------ ------------
783,112 872,928
============ ============
NATURE OF OPERATIONS (Note 1)
APPROVED BY THE BOARD
/s/ ANDREW CARTER , Director
- --------------------
/s/ NICK DEMARE , Director
- --------------------
The accompanying notes are an integral part of these interim
consolidated financial statements.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------------- -----------------------------
2004 2003 2004 2003
$ $ $ $
EXPENSES
Accounting and administration 22,500 26,915 38,300 52,456
Depreciation 835 - 1,670 -
Investor relations 9,000 - 18,000 -
Legal 6,773 3,458 10,317 7,825
Office 3,756 5,183 5,584 9,377
Professional fees 6,482 3,561 7,232 36,539
Regulatory 4,538 6,325 5,263 6,996
Rent - - - 1,769
Shareholder costs 3,558 7,883 3,558 7,883
Stock-based compensation 64,700 - 64,700 -
Transfer agent 5,801 5,288 6,650 7,536
Travel 1,477 4,821 3,839 7,821
------------ ------------ ------------ ------------
129,420 63,434 165,113 138,202
------------ ------------ ------------- ------------
LOSS BEFORE OTHER ITEMS (129,420) (63,434) (165,113) (138,202)
------------ ------------ ------------- ------------
OTHER ITEMS
Interest and other income 958 11,608 6,838 15,337
Interest expense on debentures - (90,878) - (183,870)
Foreign exchange (20,992) (27,935) (16,809) (22,783)
Recoveries of expenses previously recorded
in prior year-end - 24,381 - 24,381
------------ ------------ ------------- ------------
(20,034) (82,824) (9,971) (166,935)
------------ ------------ ------------- ------------
NET LOSS FOR THE PERIOD (149,454) (146,258) (175,084) (305,137)
DEFICIT - BEGINNING OF PERIOD (69,916,771) (69,467,625) (69,891,141) (69,308,746)
------------ ------------ ------------- ------------
DEFICIT - END OF PERIOD (70,066,225) (69,613,883) (70,066,225) (69,613,883)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.01) $(0.03) $(0.01) $(0.06)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,540,032 5,705,654 18,538,688 5,289,024
============ ============ ============= ==============
The accompanying notes are an integral part of these interim
consolidated financial statements.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
----------------------------- -----------------------------
2004 2003 2004 2003
$ $ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (149,454) (146,258) (175,084) (305,137)
Adjustment for items not involving cash
Depreciation 835 - 1,670 -
Stock-based compensation 64,700 - 64,700 -
Amortization of deferred financing charges - 10,480 - 20,960
Accretion of liability component of debentures - 36,855 - 73,710
Interest expense settled through
issuance of shares - - - 45,657
Other - 23,352 (5,880) 15,352
------------ ------------ ------------ ------------
(83,919) (75,571) (114,594) (149,458)
(Increase) decrease in amounts receivable (8,200) (7,116) (43,387) (6,508)
(Increase) decrease in prepaid expenses
and deposits 982 15,782 (380) 32,174
Increase (decrease) in accounts payable
and accrued liabilities (140) 11,063 13,068 6,017
------------ ------------ ------------ ------------
(91,277) (55,842) (145,293) (117,775)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 7,500 403,000 7,500 403,000
Share issue costs - (8,899) - (8,899)
------------ ------------ ------------ ------------
7,500 394,101 7,500 394,101
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures on capital assets - - (200) -
Expenditures on unproven mineral interests (78,560) (46,388) (214,439) (46,388)
Proceeds from sale of investment - 9,845 6,600 9,845
------------ ------------ ------------ ------------
(78,560) (36,543) (208,039) (36,543)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH (162,337) 301,716 (345,832) 239,783
FOR THE PERIOD
CASH - BEGINNING OF PERIOD 344,545 85,175 528,040 147,108
------------ ------------ ------------ ------------
CASH - END OF PERIOD 182,208 386,891 182,208 386,891
============ ============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION - Note 8
The accompanying notes are an integral part of these interim
consolidated financial statements.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF UNPROVEN MINERAL INTERESTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
$
BALANCE - BEGINNING OF PERIOD 220,582
------------
EXPLORATION COSTS DURING THE PERIOD
Access road construction 35,345
Assays 3,202
Drilling deposit 60,302
Environmental 7,504
Field labour 22,575
Geological 71,640
Geophysics 56
Mining rights 11,758
Office 17,032
Other 2,671
Supplies 16,245
Travel 8,355
Vehicles 1,745
------------
258,430
------------
ACQUISITION COSTS DURING THE PERIOD 13,230
------------
BALANCE - END OF PERIOD 492,242
============
The accompanying notes are an integral part of these interim
consolidated financial statements.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
1. NATURE OF OPERATIONS
The Company is in the process of exploring its unproven mineral
interests in Mexico. The Company presently has no proven or probable
reserves and on the basis of information to date, it has not yet
determined whether these mineral interests contain economically
recoverable ore reserves. The amounts shown as unproven mineral
interests represent costs incurred to date, less amounts amortized
and/or written off, and do not necessarily represent present or future
values. The underlying value of the unproven mineral interests is
entirely dependent on the existence of economically recoverable
reserves, securing and maintaining title and beneficial interest in the
properties, the ability of the Company to obtain the necessary
financing to complete development, and future profitable production.
As at November 30, 2004, the Company had working capital of $235,799.
The Company will require additional equity financing to pursue the
exploration of its unproven mineral interests and meet ongoing
corporate overhead requirements. The Company expects to generate the
necessary resources for the 2005 fiscal year through a combination of
the sale of equity securities through private placements and the
exercises of warrants and stock options. No assurances can be given,
however, that the Company will be able to obtain sufficient additional
resources. If the Company is unsuccessful in generating anticipated
resources from one or more of the anticipated sources and is unable to
replace any shortfall with resources from another source, the Company
may be able to extend the period for which available funds would be
adequate by joint venturing or selling its unproven mineral interests
and otherwise scaling back operations. If the Company were unable to
generate the required unproven mineral interests, its ability to meet
its obligations and to continue its operations would be adversely
affected. See also Note 9.
2. SIGNIFICANT ACCOUNTING POLICIES
The interim consolidated financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the interim financial statements and accompanying notes.
Actual results could differ from those estimates. The interim
consolidated financial statements have, in management's opinion, been
properly prepared using careful judgement with reasonable limits of
materiality. These interim consolidated financial statements should be
read in conjunction with the most recent annual consolidated financial
statements. The significant accounting policies follow that of the most
recently reported annual financial statements.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its 60% owned subsidiary, Compania Minera Nayarit S.A. de
C.V., which was incorporated on April 29, 2004, to pursue its Mexican
mineral exploration activities. Inter-company balances and transactions
are eliminated on consolidation.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
3. UNPROVEN MINERAL INTERESTS
NOVEMBER 30, 2004 MAY 31, 2004
----------------------------------------- ----------------------------------------
ACQUISITION EXPLORATION ACQUISITION EXPLORATION
COSTS COSTS TOTAL COSTS COSTS TOTAL
$ $ $ $ $ $
El Nayar Project 117,201 375,041 492,242 103,971 116,611 220,582
=========== =========== =========== =========== =========== ===========
On October 1, 2003, the Company entered into an option agreement, with
a Mexican private corporation which is at arm's length to the Company,
whereby the Company can acquire up to a 100% interest in five unproven
mineral concessions (the "El Nayar Project") in Mexico, covering
approximately 6,766 hectares.
The Company may earn an initial 60% interest, upon TSX Venture Exchange
approval ("Approval Date"), in consideration of making option payments
to the optionor totaling US $50,000 (paid) and the issuances of a total
of 1.1 million common shares and funding US $1 million of expenditures
over a three year period. Payouts for land holding costs and underlying
option payments to the concession holder will be included as part of
the expenditure commitment for the Company's earn-in.
Upon having earned the initial 60% interest, the Company may purchase
the remaining 40% interest in the El Nayar Project by payment in cash
or issuances of common shares for an amount to be determined based on
the net present value of the El Nayar Project.
4. OTHER ASSETS
NOVEMBER 30, MAY 31,
2004 2004
$ $
Investment 7,650 8,370
Drilling advance - 57,221
------------ ------------
7,650 65,591
============ ============
As at November 30, 2004, the Company held 85,000 common shares of Halo
Resources Ltd. ("Halo"), a publicly traded company with common officers
and directors. During the six months ended November 30, 2004, the
Company sold 8,000 shares for $6,600, realizing a gain of $5,880. As at
November 30, 2004 the 85,000 shares of Halo had a quoted market value
of $87,550.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
5. SHARE CAPITAL
Authorized: Unlimited common shares without par value
Issued: SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2004 MAY 31, 2004
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
$ $
Balance, beginning of period 18,537,355 70,593,713 4,876,921 67,568,135
------------ ------------ ------------ ------------
Issued during the period
For cash
Private placements - - 6,130,000 865,750
Exercise of warrants - - 490,000 68,600
Exercise of options 30,000 7,500 - -
Reallocation from contributed surplus
relating to the exercise of stock
options - 4,271 - -
Retirement of debentures - - 6,233,843 2,041,932
Debenture interest - - 640,366 65,371
Finders fee - - 166,225 16,623
------------ ------------ ----------- ------------
30,000 11,771 13,660,434 3,058,276
Less: share issue costs - - - (32,698)
------------ ------------ ------------ ------------
30,000 11,771 13,660,434 3,025,578
------------ ------------ ------------ ------------
Balance, end of period 18,567,355 70,605,484 18,537,355 70,593,713
============ ============ ============ ============
(a) Stock Options
During the six months ended November 30, 2004, the Company
granted 820,000 stock options to employees, directors and
consultants and recorded compensation expense of $64,700.
The fair value of stock options granted to employees,
directors and consultants is estimated on the dates of grants
using the Black-Scholes option pricing model with the
following assumptions used for the grants made during the six
months ended November 30, 2004:
Risk-free interest rate 1.23%
Estimated volatility 147%
Expected life 1.5 years
The weighted average fair value per share of stock options,
calculated using the Black-Scholes option pricing model,
granted during the period to the Company's employees,
directors and consultants was $0.09 per share.
Option-pricing models require the use of estimates and
assumptions including the expected volatility. Changes in the
underlying assumptions can materially affect the fair value
estimates and, therefore, existing models do not necessarily
provide reliable measure of the fair value of the Company's
stock options.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
5. SHARE CAPITAL (continued)
A summary of the Company's outstanding stock options at
November 30, 2004, and the changes for the six months ended
November 30, 2004, is presented below:
WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
$
Balance, beginning of period 700,000 0.25
Granted 820,000 0.10
Exercised (30,000) 0.25
------------
Balance, end of period 1,490,000 0.17
============
The following table summarizes information about the stock
options outstanding and exercisable at November 30, 2004:
NUMBER NUMBER
OF OPTIONS OF OPTIONS EXERCISE
OUTSTANDING EXERCISABLE PRICE EXPIRY DATE
$
670,000 670,000 0.25 February 18, 2007
760,000 741,250 0.10 September 03, 2007
60,000 60,000 0.10 October 04, 2007
----------- -----------
1,490,000 1,471,250
=========== ===========
(b) As at November 30, 2004, the Company had outstanding warrants
issued pursuant to private placements, which may be exercised
to purchase 5,740,000 shares. The warrants expire at various
times until 2006 and may be exercised at prices ranging from
$0.14 per share to $0.31 per share.
Details of warrants outstanding are as follows:
NUMBER
OF WARRANTS
Balance, beginning of period 5,823,650
Expired (83,650)
------------
Balance, end of period 5,740,000
============
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
6. RELATED PARTY TRANSACTIONS
During the six months ended November 30, 2004, the Company paid a total
of $39,050 for accounting, management, professional and consulting
services provided by a director of the Company and a company controlled
by the President of the Company.
7. SEGMENTED INFORMATION
The Company operates in one industry segment, the exploration of
unproven mineral interests. The Company's current unproven mineral
interests are located in Mexico and its corporate assets are located in
Canada.
NOVEMBER 30, 2004
----------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 510,239 - -
Corporate (Canada) 272,873 6,838 (175,084)
------------ ------------ ------------
783,112 6,838 (175,084)
============ ============ ============
8. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash financing activities were conducted by the Company during the
six months ended November 30, 2004 and 2003 as follows:
NOVEMBER 30, NOVEMBER 30,
2004 2003
$ $
Financing activities
Issuance of common shares for
finder's fees - 16,623
Share issue costs - (16,623)
Issuance of common shares on
exercise of options 4,271 -
Contributed surplus (4,271) -
------------ ------------
- -
============ ============
Other supplementary cash flow information:
NOVEMBER 30, NOVEMBER 30,
2004 2003
$ $
Interest paid in cash - 46,581
============ ============
Income taxes paid in cash - -
============ ============
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
9. SUBSEQUENT EVENT
Subsequent to November 30, 2004, the Company agreed to conduct ,
subject to regulatory approval, a non- brokered private placement
financing of up to 4,000,000 units at a price of $0.10 per unit, to
raise up to $400,000. Each unit will consist of one common share and
one-half share purchase warrant. Each full share purchase warrant will
entitle the holder thereof to purchase one additional common share in
the capital of the Company for a period of two years from closing at
the exercise price of $0.15 per share in the first year and $0.20 per
share in the second year. The funds will be used for general working
capital purposes and to fund ongoing exploration activities.
HILTON RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2004
BACKGROUND
This discussion and analysis of financial position and results of operation is
prepared as at January 24, 2004 and should be read in conjunction with the
interim consolidated financial statements and the accompanying notes for the six
months ended November 30, 2004 of Hilton Resources Ltd. (the "Company"). Those
financial statements have been prepared in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP"). Except as otherwise disclosed,
all dollar figures included therein and in the following management discussion
and analysis ("MD&A") are quoted in Canadian dollars. Additional information
relevant to the Company's activities, can be found on SEDAR at www.sedar.com .
COMPANY OVERVIEW
Since inception the Company has primarily been engaged in the mineral resource
and petroleum and natural gas industries. More recently it had been engaged in
the acquisition, exploration for and development of crude oil and natural gas
interests in the United States and in the research, development and marketing of
proprietary software programs. In 2003, the Company reorganized its corporate
structure and business objectives. The Company is currently a junior mineral
exploration company engaged in the acquisition and exploration of precious
metals on mineral interests located in Mexico. As of the date of this MD&A, the
Company has not earned any production revenue, nor found any proved reserves on
any of its mineral interests. The Company is a reporting issuer in British
Columbia, Alberta and Saskatchewan. The Company trades on the TSX Venture
Exchange ("TSXV") under the symbol "HPM" and on the Over the Counter Bulletin
Board ("OTCBB") under the symbol "HPMPF". The Company is also registered with
the U.S. Securities and Exchange Commission ("SEC") as a foreign private issuer
under the Securities Act of 1934.
FORWARD LOOKING STATEMENTS
Certain information included in this discussion may constitute forward-looking
statements. Forward-looking statements are based on current expectations and
entail various risks and uncertainties. These risks and uncertainties could
cause or contribute to actual results that are materially different than those
expressed or implied. The Company disclaims any obligation or intention to
update or revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.
EXPLORATION PROJECTS
El Nayar Project, Mexico
The Company has begun a detailed exploration program at its El Nayar silver-gold
Project (6,835 hectares), in the Mezquites Mining District, state of Nayarit,
Mexico. The Company has made new discoveries of silver-gold mineralization
during road building operations. The new discoveries are to the north of the
historical high grade La Castellana Mine site. The Company has retained Mr.
Victor Jaramillo M.Sc.(A.), P.Geo as project manager. Mr. Jaramillo has over 20
years experience working as an exploration geologist in Latin America, Canada
and the United States.
Field work will initially focus on the recently discovered silver-gold El Norte
Vein system, and to verify reported areas with stockwork and breccia type
mineralization. Exploration work will include detailed geological mapping along
a road cut that appears to have exposed lateral extensions of the El Norte Vein
System. Detailed geological mapping will also cover the nearby ground proximal
and along the strike of El Norte Vein. Systematic trenching will be done as
geological mapping progresses. The trenches will be dug, mapped and sampled
across the strike of the El Norte Vein in order to define its continuity along
strike and width. The area to be covered in this work program represents less
than 10% of the total area (6,835 hectares) that remains to be explored.
Favourable geological characteristics, colour anomalies,
-1-
proximity to old producing mines and early prospecting, indicate this large area
may host excellent geological potential for the discovery of precious metal
mineralization.
This exploration program will take approximately two months to complete. All
chip channel samples will be crushed at the GM LACME Preparation Laboratory in
Guadalajara. The pulps will be sent by GM LACME directly to International Plasma
Lab Ltd. in Vancouver, Canada for analyses. All work will be conducted as
defined under NI 43- 101, and all sample batches will include standards, blanks
and duplicate samples on a routine basis. The results of this exploration
program will assist in preparing for a second phase comprehensive drill program.
The objective being to explore and discover high grade precious metal
mineralization (particularly silver) with a good tonnage potential hosted in
veins, stockwork zones and/or breccias that may be suited to bulk mining
methods.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the unaudited
consolidated interim financial statements of the Company prepared in accordance
with Canadian GAAP.
----------------------- ------------------------------------------------- -----------------------
FISCAL 2005 FISCAL 2004 FISCAL 2003
----------------------- ------------------------------------------------- -----------------------
NOV. 30 AUG. 31 MAY 31 FEB. 29 NOV. 30 AUG. 31 MAY 31 FEB. 28
$ $ $ $ $ $ $ $
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATIONS:
Revenues - - - - - - - -
Net income (loss) (150,954) (25,630) 67,994 (345,252) (146,258) (158,879) (1,029,460) (268,147)
Basic and diluted
income (loss) per share (0.01) (0.00) 0.01 (0.03) (0.03) (0.03) (0.23) (0.06)
Dividends per share - - - - - - - -
BALANCE SHEET:
Working capital (deficiency) 235,799 390,778 550,932 647,522 (1,293,783) (1,441,922) (1,494,055) (1,406,378)
Total assets 783,112 860,506 872,928 860,895 636,002 323,023 411,006 1,393,384
Total long-term liabilities - - - - - - - -
----------------------- ------------------------------------------------- -----------------------
RESULTS OF OPERATIONS
During the six months ended November 30, 2004 ("2004") the Company recorded a
loss of $176,584 ($0.01 per share) compared to a loss of $305,137 ($0.06 per
share) for the six months ended November 30, 2003 ("2003"). A portion of the
increase in loss in 2004 is attributed to the accounting of non-cash stock-based
compensation on granting of stock options. During 2004, the Company recorded a
non-cash compensation expense of $66,200 relating to stock options granted. In
2003, there were no stock options granted.
Excluding the stock based compensation, general and administrative expenses of
$100,413 were reported in 2004, a decrease of $37,789, from $138,202 in 2003. In
general, costs decreased due mainly to the impact of reduced operations and
abandonment of petroleum and proprietary software program activities in 2003.
General and administrative costs in 2004 reflects the Company's current
operating levels. Specific expenses of note during 2004 and 2003 are as follows:
i) during 2004, the Company incurred accounting and administrative fees of
$38,300 (2003 - $44,335) provided by a private company controlled by
the current President of the Company;
ii) during 2003, the Company incurred general and administrative costs of
$33,185 for the proprietary software program activities, mainly in
professional fees to arm's length parties. The Company abandoned this
business segment in August 2003; and
iii) effective December 1, 2003, the Company resumed its investor relations
arrangement at a rate of $3,000 per month. A total of $18,000 was paid
in 2004.
-2-
During 2004, the Company sold marketable securities for $6,600, resulting in a
gain of $5,880. The Company did not sell any marketable securities in 2003.
During 2003, the Company recorded interest expense on debentures of $183,870.
The debentures matured and were retired in January 2004.
During 2004, the Company spent $13,230 relating to acquisition costs and
$258,430 for exploration expenditures on the El Nayar Project.
FINANCIAL CONDITION / CAPITAL RESOURCES
The Company's practice is to proceed with staged exploration, where each stage
is dependent on the successful results of the preceding stage. To date the
Company has not received any revenues from its mining activities and has relied
on equity financing to fund its commitments and discharge its liabilities as
they come due. As of November 30, 2004, the Company had a working capital of
$235,799. The Company has budgeted $75,000 for the current field work and
trenching work program to be conducted on the El Nayar Project. The Company
anticipates that it will have sufficient funds to complete this phase and meet
ongoing overhead expenditures. However, results from its exploration programs
and/or additional mineral property acquisitions may result in additional
financial requirements. If needed, the Company would be required to conduct
additional financings, however, there is no assurance that funding will be
available on terms acceptable to the Company or at all. If such funds cannot be
secured, the Company may be forced to curtail additional exploration efforts to
a level for which funding can be secured or relinquish certain of its
properties. In January 2005, the Company agreed to conduct a private placement
financing of 4,000,000 shares for $400,000.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
PROPOSED TRANSACTIONS
The Company has no proposed transactions.
CRITICAL ACCOUNTING ESTIMATES
A detailed summary of all the Company's significant accounting policies is
included in Notes 2 and 3 to the May 31, 2004 audited consolidated financial
statements.
CHANGES IN ACCOUNTING POLICIES
The Company has no changes in accounting policies.
TRANSACTIONS WITH RELATED PARTIES
During the six months ended November 30, 2004, the Company was charged $39,050
for accounting, management, professional and consulting services provided by a
director of the Company and a company controlled by the President of the
Company.
RISKS AND UNCERTAINTIES
The Company competes with other mining companies, some of which have greater
financial resources and technical facilities, for the acquisition of mineral
concessions, claims and other interests, as well as for the recruitment and
retention of qualified employees.
The Company is in compliance in all material regulations applicable to its
exploration activities. Existing and possible future environmental legislation,
regulations and actions could cause additional expense, capital expenditures,
restrictions and delays in the activities of the Company, the extent of which
cannot be predicted. Before production can
-3-
commence on any properties, the Company must obtain regulatory and environmental
approvals. There is no assurance that such approvals can be obtained on a timely
basis or at all. The cost of compliance with changes in governmental regulations
has the potential to reduce the profitability of operations.
The Company's mineral properties are located in Mexico and consequently the
Company is subject to certain risks, including currency fluctuations and
possible political or economic instability which may result in the impairment or
loss of mining title or other mineral rights, and mineral exploration and mining
activities may be affected in varying degrees by political stability and
governmental regulations relating to the mining industry.
INVESTOR RELATIONS ACTIVITIES
The Company has an investor relations arrangement with Eland Jennings Inc.
("Eland Jennings") at a rate of $3,000 per month. During the six months ended
November 30, 2004, the Company paid $18,000 to Eland Jennings. The Company
maintains a web site at www.hiltonresourcesltd.com .
OUTSTANDING SHARE DATA
The Company's authorized share capital is unlimited common shares without par
value. As at November 30, 2004, there were 18,567,355 issued and outstanding
common shares. In addition there were 1,490,000 stock options outstanding and
exercisable, at exercise prices ranging from $0.10 to $0.25 per share, and
5,740,000 warrants outstanding, with exercise prices ranging from $0.14 and
$0.31 per share.
-4-
FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD
I, NICK DEMARE, the CHIEF EXECUTIVE OFFICER OF HILTON RESOURCES LTD., certify
that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 "Certification of Disclosure in Issuers'
Annual and Interim Filings") of HILTON RESOURCES LTD. for the interim
period ending November 30, 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings.
Date: January 26, 2005.
/s/ Nick DeMare
-----------------------
Nick DeMare
Chief Executive Officer
FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD
I, NICK DEMARE, DIRECTOR of HILTON RESOURCES LTD. and performing similar
functions to that of a Chief Financial Officer, certify that:
1. I have reviewed the interim filings (as this term is defined in
Multilateral Instrument 52-109 "Certification of Disclosure in Issuers'
Annual and Interim Filings") of HILTON RESOURCES LTD. for the interim
period ending November 30, 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated or that is necessary to make a statement not misleading in
light of the circumstances under which it was made, with respect to the
period covered by the interim filings; and
3. Based on my knowledge, the interim financial statements together with
the other financial information included in the interim filings fairly
present in all material respects the financial condition, results of
operations and cash flows of the issuer, as of the date and for the
periods presented in the interim filings.
Date: January 26, 2005.
/s/ Nick DeMare
-----------------
Nick DeMare
Director