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 APRIL, 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: April 30, 2005 /s/ Nick DeMare
----------------------------- -------------------------------------
Nick DeMare,
President & CEO
- --------------------------------------------------------------------------------
HILTON RESOURCES LTD.
(An Exploration Stage Company)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED
FEBRUARY 28, 2005
(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 nine months ended February 28, 2005, 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)
FEBRUARY 28, MAY 31,
2005 2004
$ $
ASSETS
CURRENT ASSETS
Cash 299,064 528,040
Amounts receivable 82,895 30,289
Prepaid expenses and deposits 13,415 8,959
------------ ------------
395,374 567,288
CAPITAL ASSETS 16,962 19,467
UNPROVEN MINERAL INTERESTS (Note 3) 640,976 220,582
OTHER ASSETS (Note 4) 7,650 65,591
------------ ------------
1,060,962 872,928
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 81,563 16,356
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 70,915,313 70,593,713
CONTRIBUTED SURPLUS 283,063 154,000
DEFICIT (70,218,977) (69,891,141)
------------ ------------
979,399 856,572
------------ ------------
1,060,962 872,928
============ ============
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 NINE MONTHS ENDED
---------------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
2005 2004 2005 2004
$ $ $ $
EXPENSES
Accounting and administration 23,788 18,785 62,088 71,241
Depreciation 835 - 2,505 -
Investor relations 9,000 9,000 27,000 9,000
Legal 5,109 23,778 15,426 31,603
Office 1,875 673 7,459 10,050
Professional fees 37,010 72,036 44,242 108,575
Regulatory 950 6,715 6,213 13,711
Rent - - - 1,769
Shareholder costs 209 - 3,767 7,883
Stock-based compensation 70,963 154,000 135,663 154,000
Transfer agent 2,490 4,127 9,140 11,663
Travel 10,739 - 14,578 7,821
------------ ------------ ------------ ------------
162,968 289,114 328,081 427,316
------------ ------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (162,968) (289,114) (328,081) (427,316)
------------ ------------- ------------- -------------
OTHER ITEMS
Interest and other income 617 2,945 7,455 18,282
Interest expense on debentures - (48,368) - (232,238)
Foreign exchange 9,599 (10,715) (7,210) (33,498)
Recoveries of expenses previously recorded
in prior year-end - - - 24,381
------------ ------------ ------------ ------------
10,216 (56,138) 245 (223,073)
------------ ------------ ------------ ------------
NET LOSS FOR THE PERIOD (152,752) (345,252) (327,836) (650,389)
DEFICIT - BEGINNING OF PERIOD (70,066,225) (69,613,883) (69,891,141) (69,308,746)
------------ ------------ ------------ ------------
DEFICIT - END OF PERIOD (70,218,977) (69,959,135) (70,218,977) (69,959,135)
============ ============ ============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.01) $(0.03) $(0.02) $(0.09)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 19,488,910 12,200,451 18,841,540 6,897,907
============ ============ ============ ============
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 NINE MONTHS ENDED
---------------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
2005 2004 2005 2004
$ $ $ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the period (152,752) (345,252) (327,836) (650,389)
Adjustment for items not involving cash
Depreciation 835 - 2,505 -
Stock-based compensation 70,963 154,000 135,663 154,000
Amortization of deferred financing charges - 5,240 - 26,200
Accretion of liability component of debentures - 18,429 - 92,139
Interest expense settled through
issuance of shares - 19,714 - 65,371
Other - 9,574 (5,880) 24,926
------------ ------------ ------------ ------------
(80,954) (138,295) (195,548) (287,753)
(Increase) decrease in amounts receivable (9,219) 15,115 (52,606) 8,607
(Increase) decrease in prepaid expenses
and deposits (4,076) 3,467 (4,456) 35,641
Increase (decrease) in accounts payable
and accrued liabilities 52,139 50,054 65,207 56,071
------------ ------------ ------------ ------------
(42,110) (69,659) (187,403) (187,434)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of common shares 310,000 135,000 317,500 538,000
Share subscriptions received - 320,850 - 320,850
Share issue costs (2,500) (7,745) (2,500) (16,644)
------------ ------------ ------------ ------------
307,500 448,105 315,000 842,206
------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Expenditures on capital assets 200 - - -
Expenditures on unproven mineral interests (148,734) (76,790) (363,173) (123,178)
Proceeds from sale of investment - - 6,600 9,845
------------ ------------ ------------ ------------
(148,534) (76,790) (356,573) (113,333)
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH
FOR THE PERIOD 116,856 301,656 (228,976) 541,439
CASH - BEGINNING OF PERIOD 182,208 386,891 528,040 147,108
------------ ------------ ------------ ------------
CASH - END OF PERIOD 299,064 688,547 299,064 688,547
============ ============ ============ ============
SUPPLEMENTARY 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 NINE MONTHS ENDED FEBRUARY 28, 2005
(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 39,890
Assays 6,333
Camp costs 7,170
Consulting 40,772
Drilling deposit 62,612
Fuel 8,186
Geological 100,936
Geophysics 2,234
Legal 4,165
Permits and fees 13,331
Office 17,599
Other 3,382
Salaries 30,132
Topography 5,866
Transport 6,299
Travel 15,013
------------
363,920
------------
OPTION PAYMENTS DURING THE PERIOD 56,474
------------
BALANCE - END OF PERIOD 640,976
============
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 NINE MONTHS ENDED FEBRUARY 28, 2005
(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 February 28, 2005, the Company had working capital of $313,811.
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.
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 NINE MONTHS ENDED FEBRUARY 28, 2005
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
3. UNPROVEN MINERAL INTERESTS
FEBRUARY 28, 2005 MAY 31, 2004
---------------------------------------- ----------------------------------------
ACQUISITION EXPLORATION ACQUISITION EXPLORATION
COSTS COSTS TOTAL COSTS COSTS TOTAL
$ $ $ $ $ $
El Nayar Project 160,445 480,531 640,976 103,971 116,611 220,582
=========== =========== =========== =========== =========== ============
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, in consideration of
making option payments to the optionor totaling US $50,000 (paid) and
the issuance 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.
Subsequent to February 28, 2005, the Company issued 100,000 common
shares to the optionor.
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 issuance of common shares for an amount to be determined based on
the net present value of the El Nayar Project.
4. OTHER ASSETS
FEBRUARY 28, MAY 31,
2005 2004
$ $
Investment 7,650 8,370
Drilling advance - 57,221
------------ ------------
7,650 65,591
============ ============
As at February 28, 2005, the Company held 85,000 common shares (May 31,
2004 - 93,000 common shares) of Halo Resources Ltd. ("Halo"), a
publicly traded company with common officers and directors. During the
nine months ended February 28, 2005, the Company sold 8,000 shares for
$6,600, realizing a gain of $5,880. As at February 28, 2005 the 85,000
shares of Halo had a quoted market value of $110,500.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
5. SHARE CAPITAL
Authorized: Unlimited common shares without par value
Issued: NINE MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 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 3,100,000 310,000 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 - 6,600 - -
Retirement of debentures - - 6,233,843 2,041,932
Debenture interest - - 640,366 65,371
Finder's fee 90,000 9,000 166,225 16,623
------------ ------------ ------------ ------------
3,220,000 333,100 13,660,434 3,058,276
Less: share issue costs - (11,500) - (32,698)
------------ ------------ ------------ ------------
3,220,000 321,600 13,660,434 3,025,578
------------ ------------ ------------ ------------
Balance, end of period 21,757,355 70,915,313 18,537,355 70,593,713
============ ============ ============ ============
(a) During the nine months ended February 28, 2005, the Company
agreed to conduct a non-brokered private placement financing
totalling 3,550,000 units at a price of $0.10 per unit, for
gross proceeds of $355,000. Each unit consists of one common
share and one-half share purchase warrant. Each full share
purchase warrant entitles the holder to purchase one
additional common share for a period of two years, at an
exercise price of $0.15 per share in year one and, thereafter,
at $0.20 per share. As at February 28, 2005, the Company had
issued 3,100,000 units. The remaining 450,000 units were
completed and issued subsequent to February 28, 2005.
The Company issued 90,000 units, having the same terms as the
private placement, at a fair value of $9,000, in consideration
as finder's fees on a portion of the private placement.
Certain directors of the Company have purchased 600,000 units
of the private placement.
(b) Stock Options
During the nine months ended February 28, 2005, the Company
granted 1,785,000 stock options to directors and consultants
and recorded compensation expense of $135,663.
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
5. SHARE CAPITAL (continued)
The fair value of stock options granted to 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 nine months
ended February 28, 2005:
Risk-free interest rate 1.23% - 1.43%
Estimated volatility 146% - 147%
Expected life 1 - 1.5 years
Expected dividend yield 0%
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 directors and
consultants was $0.08 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.
A summary of the Company's outstanding stock options at
February 28, 2005, and the changes for the nine months ended
February 28, 2005, is presented below:
WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
$
Balance, beginning of period 700,000 0.25
Granted 1,785,000 0.10
Exercised (30,000) 0.25
Cancelled / expired (280,000) 0.25
------------
Balance, end of period 2,175,000 0.13
============
The following table summarizes information about the stock
options outstanding and exercisable at February 28, 2005:
NUMBER NUMBER
OF OPTIONS OF OPTIONS EXERCISE
OUTSTANDING EXERCISABLE PRICE EXPIRY DATE
$
390,000 390,000 0.25 February 18, 2007
760,000 747,500 0.10 September 03, 2007
60,000 60,000 0.10 October 04, 2007
590,000 590,000 0.10 January 12, 2007
375,000 318,750 0.12 February 8,2008
----------- -----------
2,175,000 2,106,250
=========== ===========
5. SHARE CAPITAL (continued)
(c) As at February 28, 2005, the Company had outstanding warrants
issued pursuant to private placements, which may be exercised
to purchase 7,335,000 shares. The warrants expire at various
times until 2007 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
Issued 1,595,000
Expired (83,650)
------------
Balance, end of period 7,335,000
============
6. RELATED PARTY TRANSACTIONS
During the nine months ended February 28, 2005, the Company paid a
total of $62,838 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.
FEBRUARY 28, 2005
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 712,818 - -
Corporate (Canada) 348,144 7,455 (327,836)
------------ ------------ ------------
1,060,962 7,455 (327,836)
============ ============ ============
HILTON RESOURCES LTD.
(An Exploration Stage Company)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005
(Unaudited - Prepared by Management)
(Expressed in Canadian dollars, unless otherwise stated)
8. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash financing and investing activities were conducted by the
Company during the nine months ended February 28, 2005 and February 29,
2004 as follows:
FEBRUARY 28, FEBRUARY 29,
2005 2004
$ $
Financing activities
Decrease in equity component of debentures
on conversion/retirement - (430,922)
Issuance of common shares on retirement
of debentures - 2,041,932
Retirement of debentures - (1,748,090)
Issuance of common shares for finder's
fees 9,000 16,623
Share issue costs (9,000) (16,623)
Issuance of common shares on exercise
of options 6,600 -
Contributed surplus (6,600) -
------------ ------------
- (137,080)
============ ============
Investing activity
Retirement of loan - 137,080
============ ============
Other supplementary cash flow information:
FEBRUARY 28, FEBRUARY 29,
2005 2004
$ $
Interest paid in cash - 113,898
============ ============
Income taxes paid in cash - -
============ ============
HILTON RESOURCES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005
BACKGROUND
This discussion and analysis of financial position and results of operation is
prepared as at April 27, 2005 and should be read in conjunction with the interim
consolidated financial statements and the accompanying notes for the nine months
ended February 28, 2005 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 conducted a detailed exploration program at its El Nayar silver-gold
Project (6,835 hectares), in the Mezquites Mining District, state of Nayarit,
Mexico. A new silver-gold vein has been discovered approximately 150 meters
southeast of the recently discovered El Norte Vein System. Both veins are to the
north of the historical high grade La Castellana Mine site. This new silver-gold
vein (Veta Rica) has been traced along strike for approximately 200 meters thus
far. An initial chip sample taken from this vein returned 249.2 g/t silver (8.01
oz/t) and 0.80 g/t gold across 1.80 meters. This result is very encouraging not
only for its silver content, but also for the gold. Trenching is being completed
along Veta Rica in order to determine its lateral continuity and width, sampling
will follow. To date a total of 52 trenches have been completed, approximately
half are pending chip sampling and mapping.
Other significant exploration results have been obtained on the recently
discovered Veta Norte System. Detailed geological mapping has been completed
along the upper surface segment of this vein for approximately 400 meters.
Trenching has revealed larger mineralized widths and silver mineralization
associated to hydrothermal breccias. Highlights in the Veta Norte include:
-1-
SAMPLE SILVER SILVER GOLD
LOCATION TYPE TRUE WIDTH g/t oz/t g/t
Trench-4 Chips 5.00 meters 359.3 11.55 1.89
includes 0.90 meters 1,348.3 43.35 7.00
Trench-6 Chips 3.00 meters 180.1 5.79 0.23
Trench-7 Chips 4.20 meters 207.3 6.67 0.44
includes 2.50 meters 213.6 6.87 0.54
Trench-8 Chips 1.00 meters 583.1 18.75 1.51
Trench-9A Chips 0.30 meters 168.4 5.41 3.56
Trench-9B Chips 1.00 meters 484.7 15.58 3.12
Trench-10 Chips 2.30 meters 102.6 3.30 0.22
Trench-11 Chips 1.00 meters 154.8 4.98 0.21
Trench-12 Chips 1.60 meters 161.1 5.18 0.22
Trench-13 Chips 1.60 meters 121.6 3.91 0.40
Trench-14 Chips 2.30 meters 678.3 21.81 4.05
Trench-18 Chips 0.80 meters 213.3 6.86 0.42
Trench-20 Chips 1.00 meters 451.5 14.52 1.03
Road Cut Chips 4.00 meters 231.85 7.45 2.97
includes 2.00 meters 314.7 10.12 3.3
Road Cut Chips 0.80 meters 183.3 5.89 0.41
Road Cut Chips 0.50 meters 171.8 5.52 0.70
Breccia Zone Panel 1.7 X 1.0 m 120.6 3.88 0.32
Breccia Zone Chips 1.50 meters 268.4 8.63 1.50
Trenching has revealed vein widths of up to 5 meters with significant silver and
gold contents. Silver-gold mineralization has also been observed in wide
hydrothermal breccia zones with very good potential for low grade bulk mineable
targets. To determine the width and extent of these mineralized breccias more
trenching is required. Exploration work at EL Nayar project focused in extending
the lateral continuity of both Veta Norte and Veta Rica along strike. Once all
results are in, a decision will be made regarding a follow-up 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.
The area to be covered in this work program represents less than 5% of the total
area (6,835 hectares) that remains to be explored. Favorable geological
characteristics, color anomalies, proximity to old producing mines and early
prospecting, indicate this large area may host excellent geological potential
for the discovery of additional precious metal mineralization.
All chip channel samples are being crushed at the GM LACME Preparation
Laboratory in Guadalajara. The pulps are sent by GM LACME directly to
International Plasma Lab Ltd. in Vancouver, Canada for analyses. All work is
conducted as defined under NI 43-101, and all sample batches include standards,
blanks and duplicate samples on a routine basis.
The field work was supervised by Victor Jaramillo, M. SCA., P. Geo., the project
manager and consulting geologist for the El Nayar Project.
-2-
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
------------------------------------- -------------------------------------------------- -----------
FEB. 28 NOV. 30 AUG. 31 MAY 31 FEB. 29 NOV. 30 AUG. 31 MAY 31
$ $ $ $ $ $ $ $
OPERATIONS:
Revenues - - - - - - - -
Net income (loss) (151,252) (150,954) (25,630) 67,994 (345,252) (146,258) (158,879) (1,029,460)
Basic and diluted
income (loss) per share (0.01) (0.01) (0.00) 0.01 (0.03) (0.03) (0.03) (0.23)
Dividends per share - - - - - - - -
BALANCE SHEET:
Working capital (deficiency) 313,811 235,799 390,778 550,932 647,522 (1,293,783) (1,441,922) (1,494,055)
Total assets 1,060,962 783,112 860,506 872,928 860,895 636,002 323,023 411,006
Total long-term liabilities - - - - - - - -
------------------------------------- -------------------------------------------------- -----------
RESULTS OF OPERATIONS
During the nine months ended February 28, 2005 ("2005") the Company recorded a
loss of $327,836 ($0.02 per share) compared to a loss of $650,389 ($0.09 per
share) for the nine months ended February 29, 2004 ("2004"). A portion of the
increase in loss in 2005 is attributed to the accounting of non-cash stock-based
compensation on granting of stock options. During 2005, the Company recorded a
non-cash compensation expense of $135,663 (2004 - $154,000) relating to stock
options granted.
Excluding the stock based compensation, general and administrative expenses of
$192,418 were reported in 2005, a decrease of $80,898, from $273,316 in 2004. In
general, costs decreased due mainly to the impact of reduced operations and
abandonment of petroleum and proprietary software program activities in 2004.
General and administrative costs in 2005 reflects the Company's current
operating levels. Specific expenses of note during 2005 and 2004 are as follows:
i) during 2005, the Company incurred accounting and administrative fees
of $62,088 (2004 - $71,241) provided by a private company controlled
by the current President of the Company;
ii) during 2004, the Company incurred general and administrative costs of
$33,185 for the proprietary software program activities, mainly in
professional and legal fees to arm's length parties. The Company
abandoned this business segment in August 2003.
iii) effective December 1, 2003, the Company resumed its investor relations
arrangement at a rate of $3,000 per month. A total of $27,000 was paid
in 2005.
During 2005, the Company sold 8,000 common shares of Halo Resources Ltd. for
$6,600, resulting in a gain of $5,880. The Company did not sell any marketable
securities in 2004.
During 2004, the Company recorded interest expense on debentures of $232,238.
The debentures were retired in January 2004.
During 2005, the Company spent $56,474 relating to acquisition costs and
$363,920 for exploration the detailed mapping and trenching program on the El
Nayar Project.
-3-
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. In January 2005, the Company completed a non-brokered private
placement financing of 3,100,000 units for gross proceeds of $310,000. As of
February 28, 2005, the Company had a working capital of $313,811. Subsequent to
February 28, 2005, the Company completed the final tranche of the private
placement and issued 450,000 units for $45,000. The Company is currently
reviewing the results of the exploration program at El Nayar and determining the
next phase of exploration. No exploration budget has been determined. The
Company anticipates that it will have sufficient funds to complete this phase
and meet ongoing overhead expenditures. However, it may require additional
funding to meet future exploration programs and/or additional mineral property
acquisitions. 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.
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 nine months ended February 28, 2005, the Company was charged $62,838
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 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.
-4-
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 nine months ended
February 28, 2005, the Company paid $27,000 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 April 27, 2005 , there were 22,207,355 issued and outstanding
common shares. In addition there were 2,175,000 stock options outstanding and
exercisable, at exercise prices ranging from $0.10 to $0.25 per share, and
7,560,000 warrants outstanding, with exercise prices ranging from $0.14 and
$0.31 per share.
-5-
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 February 28, 2005;
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: April 29, 2005.
/s/ Nick DeMare
-----------------------
Nick DeMare
Chief Executive Officer
FORM 52-109FT2
CERTIFICATION OF INTERIM FILINGS DURING TRANSITION PERIOD
I, Nick DeMare, a 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 February 28, 2005;
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: April 29, 2005.
/s/ Nick DeMare
---------------
Nick DeMare
Director