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 SEPTEMBER, 2005.
Commission File Number: 0-30390
ROCHESTER 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.
ROCHESTER RESOURCES LTD
Date: SEPTEMBER 27, 2005 /s/ Nick DeMare
----------------------------- -------------------------------------
Nick DeMare,
Director
- --------------------------------------------------------------------------------
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
MAY 31, 2005 AND 2004
- --------------------------------------------------------------------------------
D & H
group
Chartered
AUDITORS' REPORT Accountants
To the Shareholders of
Rochester Resources Ltd. (formerly Hilton Resources Ltd.)
We have audited the consolidated balance sheets of Rochester Resources Ltd.
(formerly Hilton Resources Ltd.) as at May 31, 2005 and 2004 and the
consolidated statements of operations and deficit and cash flows for the years
then ended. 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 Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at May 31, 2005 and
2004 and the results of its operations and cash flows for the years then ended
in accordance with Canadian generally accepted accounting principles.
On August 5, 2005 we reported separately to the shareholders of Rochester
Resources Ltd. (formerly Hilton Resources Ltd.) on consolidated financial
statements as at May 31, 2005 and 2004 and for the years ended May 31, 2005 and
2004 audited in accordance with Canadian generally accepted auditing standards
and the standards of the Public Company Accounting Oversight Board (United
States) which include a reconciliation to United States generally accepted
accounting principles.
Vancouver, B.C.
August 5, 2005, except as to Note 5(a), /s/ D&H GROUP LLP
which is as of August 25, 2005 CHARTERED ACCOUNTANTS
D&H Group LLP
a BC Limited Liability Partnership of Corporations
member of BHD Association with affiliated offices
across Canada and Internationally
10th Floor, 1333 West Broadway, Vancouver, B.C. V6H 4C1
www.dhgroup.ca F (604) 731-9923 T (604) 731-5881
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
AS AT MAY 31
2005 2004
$ $
ASSETS
CURRENT ASSETS
Cash 227,589 528,040
Amounts receivable 39,027 30,289
Prepaid expenses and deposits 9,636 8,959
------------ ------------
276,252 567,288
CAPITAL ASSET, net of accumulated
depreciation of $5,840 (2004 - $1,976) 4,764 19,467
UNPROVEN MINERAL INTERESTS (Note 3) - 220,582
OTHER ASSETS (Note 4) 6,300 65,591
------------ ------------
287,316 872,928
============ ============
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities 31,006 16,356
------------ ------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) 70,970,313 70,593,713
CONTRIBUTED SURPLUS 286,125 154,000
DEFICIT (71,000,128) (69,891,141)
------------ ------------
256,310 856,572
------------ ------------
287,316 872,928
============ ============
NATURE OF OPERATIONS AND CHANGE OF NAME (Note 1)
APPROVED BY THE BOARD
/s/ NICK DEMARE , Director
- -------------------
/s/ DES O'KELL , Director
- -------------------
The accompanying notes are an integral part of these
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED MAY 31
2005 2004
$ $
EXPENSES
Accounting and administration 78,788 64,840
Audit 19,301 19,348
Depreciation 5,840 1,976
Investor relations 36,000 18,000
Legal 15,832 44,540
Office 8,161 16,128
Professional fees 54,941 141,821
Regulatory 7,037 15,518
Shareholder costs 3,767 7,884
Stock-based compensation 138,725 154,000
Transfer agent 10,612 15,443
Travel 12,173 11,404
------------ ------------
391,177 510,902
------------ ------------
LOSS BEFORE OTHER ITEMS (391,177) (510,902)
------------ ------------
OTHER ITEMS
Loss on sale of capital assets (1,717) -
Bad debts (27,827) -
Write-off of unproven mineral interests (Note 3) (703,058) -
Interest and other income 19,601 119,191
Interest expense on debentures - (233,761)
Foreign exchange (4,809) 43,077
------------ ------------
(717,810) (71,493)
------------ ------------
NET LOSS FOR THE YEAR (1,108,987) (582,395)
DEFICIT - BEGINNING OF YEAR (69,891,141) (69,308,746)
------------ ------------
DEFICIT - END OF YEAR (71,000,128) (69,891,141)
============ ============
BASIC AND DILUTED LOSS PER SHARE $(0.56) $(0.57)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,966,152 1,025,146
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31
2005 2004
$ $
CASH PROVIDED FROM (USED FOR)
OPERATING ACTIVITIES
Net loss for the year (1,108,987) (582,395)
Adjustment for items not involving cash
Depreciation 5,840 1,976
Loss on sale of capital assets 1,717 -
Gain on sale of investments (17,239) (2,645)
Write-off of unproven mineral interests 703,058 -
Stock-based compensation 138,725 154,000
Amortization of deferred financing charges - 26,200
Accretion of liability component of debentures - 92,139
Impairment of investment, advances and other - 5,516
Interest expense settled through issuance
of shares - 65,371
Unrealized foreign exchange - (44,506)
------------ ------------
(276,886) (284,344)
Decrease (increase) in amounts receivable (8,738) 1,996
Decrease (increase) in prepaid expenses
and deposits (677) 38,288
Increase (decrease) in accounts payable
and accrued liabilities 14,650 (3,882)
------------ ------------
(271,651) (247,942)
------------ ------------
FINANCING ACTIVITY
Issuance of common shares, net of share issue costs 360,000 918,275
------------ ------------
INVESTING ACTIVITIES
Proceeds from sale of capital assets 7,146 -
Drilling advances - (57,221)
Expenditures on capital assets - (21,443)
Expenditures on unproven mineral interests (415,255) (220,582)
Proceeds from sale of investments 19,309 9,845
------------ ------------
(388,800) (289,401)
------------ ------------
INCREASE (DECREASE) IN CASH FOR THE YEAR (300,451) 380,932
CASH - BEGINNING OF YEAR 528,040 147,108
------------ ------------
CASH - END OF YEAR 227,589 528,040
============ ============
SUPPLEMENTARY CASH FLOW INFORMATION - Note 10
The accompanying notes are an integral part of these
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED SCHEDULE OF UNPROVEN MINERAL INTERESTS
FOR THE YEARS ENDED MAY 31
2005 2004
$ $
BALANCE - BEGINNING OF YEAR 220,582 -
------------ ------------
EXPLORATION COSTS DURING THE YEAR
Access road construction 40,022 -
Assays 5,483 4,343
Camp costs 7,633 -
Consulting 63,442 -
Drilling 62,612 -
Fuel 9,018 -
Geological 122,230 87,529
Geophysics 2,932 -
Legal 4,664 -
Permits and fees 13,583 -
Office 20,363 -
Other 4,549 14,090
Salaries 34,776 -
Topography 5,886 -
Transport 3,905 -
Travel 14,842 10,649
------------ ------------
415,940 116,611
OPTION PAYMENTS DURING THE YEAR 66,536 103,971
------------ ------------
482,476 220,582
------------ ------------
BALANCE BEFORE WRITE-OFF 703,058 220,582
WRITE-OFF OF UNPROVEN MINERAL INTERESTS (Note 3) (703,058) -
------------ ------------
BALANCE - END OF YEAR - 220,582
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
1. NATURE OF OPERATIONS AND CHANGE OF NAME
During the 2004 and 2005 fiscal years, the Company was engaged in the
acquisition and exploration of unproven mineral interests in Mexico. As
described in Note 3, the Company conducted exploration on the El Nayar
Project during the 2005 fiscal year and, based on the results,
wrote-off its interest. As at May 31, 2005, the Company does not hold
any mineral interest and has initiated a corporate restructuring and
recapitalization to allow it to continue to identify and evaluate
potential resource acquisitions or business opportunities. On August
25, 2005 the Company completed a consolidation of its share capital, as
described in Note 5(a), and changed its name from Hilton Resources Ltd.
to Rochester Resources Ltd.
As at May 31, 2005, the Company had working capital of $245,246. The
Company will require additional equity financing to pursue the
acquisition and exploration of unproven mineral interests and meet
ongoing corporate overhead requirements. The Company expects to
generate the necessary resources for the 2006 fiscal year through the
sale of equity securities. 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 unable
to meet its obligations and continue its operations.
These consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles
("Canadian GAAP") applicable to a going concern which assumes that the
Company will realize its assets and discharge its liabilities in the
normal course of business. Realization values may be substantially
different from the carrying values shown in the consolidated financial
statements should the Company be unable to continue as a going concern.
The ability of the Company to settle its liabilities as they come due
and to fund ongoing operations is dependent upon the ability of the
Company to obtain additional funding from equity financing. Failure to
continue as a going concern would require restatement of assets and
liabilities on a liquidation basis, which could differ materially from
the going concern basis.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
These consolidated financial statements have been prepared in
accordance with Canadian GAAP which necessarily involves the use of
estimates. The consolidated financial statements have, in management's
opinion, been properly prepared within reasonable limits of materiality
and within the framework of the significant accounting policies
summarized below.
The consolidated financial statements include the accounts of the
Company and its 60% owned subsidiary, Compania Minera Nayarit S.A. de
C.V. Inter-company balances and transactions are eliminated on
consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with Canadian
GAAP requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements, and the
reported amounts of revenues and expenditures during the period. Actual
results may differ from those estimates.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
CASH EQUIVALENTS
Cash includes cash and short-term deposits maturing within 90 days of
the original date of acquisition.
UNPROVEN MINERAL INTERESTS
Unproven mineral interests costs and exploration, development and field
support costs directly relating to mineral interests are deferred until
the interests to which they relate is placed into production, sold or
abandoned. The deferred costs will be amortized over the life of the
orebody following commencement of production or written off if the
mineral interest is sold or abandoned. Administration costs and other
exploration costs that do not relate to any specific mineral interest
are expensed as incurred.
On a periodic basis, management reviews the carrying values of deferred
unproven mineral interest acquisition and exploration expenditures with
a view to assessing whether there has been any impairment in value.
Management takes into consideration various information including, but
not limited to, results of exploration activities conducted to date,
estimated future metal prices, and reports and opinions of outside
geologists, mine engineers and consultants. When it is determined that
a project or interest will be abandoned or its carrying value has been
impaired, a provision is made for any expected loss on the project or
interest.
Although the Company has taken steps to verify title to the unproven
mineral interests, according to the usual industry standards for the
stage of exploration of such mineral interests, these procedures do not
guarantee the Company's title. Such mineral interests may be subject to
prior agreements or transfers and title may be affected by undetected
defects.
From time to time, the Company acquires or disposes of mineral
interests pursuant to the terms of option agreements. Options are
exercisable entirely at the discretion of the optionee and,
accordingly, are recorded as mineral interest costs or recoveries when
the payments are made or received.
ASSET RETIREMENT OBLIGATIONS
The fair value of a liability for an asset retirement obligation is
recognized when a reasonable estimate of fair value can be made. The
asset retirement obligation is recorded as a liability with a
corresponding increase to the carrying amount of the related long-lived
asset. Subsequently, the asset retirement cost is charged to earnings
using a systematic and rational method and is adjusted to reflect
period-to-period changes in the liability resulting from the passage of
time and revisions to either the timing or the amount of the original
estimate of undiscounted cash flow. As at May 31, 2005, the Company
does not have any asset retirement obligations.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are assessed for impairment when events and
circumstances warrant. The carrying value of a long-lived asset is
impaired when the carrying amount exceeds the estimated undiscounted
net cash flow from use and fair value. In that event, the amount by
which the carrying value of an impaired long-lived asset exceeds its
fair value is charged to earnings.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
TRANSLATION OF FOREIGN CURRENCIES
Monetary assets and liabilities are translated into Canadian dollars at
the balance sheet date rate of exchange and non-monetary assets and
liabilities at historical rates. Revenues and expenses are translated
at appropriate transaction date rates except for amortization,
depreciation and depletion, which are translated at historical rates.
Gains and losses resulting from the fluctuation of foreign exchange
rates have been included in the determination of income.
STOCK-BASED COMPENSATION
Stock-based compensation is accounted for at fair value as determined
by the Black-Scholes option pricing model using amounts that are
believed to approximate the volatility of the trading price of the
Company's stock, the expected lives of awards of stock-based
compensation, the fair value of the Company's stock and the risk-free
interest rate. The estimated fair value of awards of stock-based
compensation are charged to expense as awards vest, with offsetting
amounts recognized as contributed surplus.
INCOME TAXES
Income tax liabilities and assets are recognized for the estimated
income tax consequences attributable to differences between the amounts
reported in the consolidated financial statements and their respective
tax bases, using enacted income tax rates. The effect of a change in
income tax rates on future income tax liabilities and assets is
recognized in income in the period that the change occurs. Future
income tax assets are recognized to the extent that they are considered
more likely than not to be realized.
INVESTMENTS
Long-term investments are accounted for using the cost method.
CAPITAL ASSET
Capital asset, which is comprised of a vehicle, is recorded at cost
less accumulated depreciation calculated using the declining balance
method at a rate of 30%.
EARNINGS (LOSS) PER SHARE
Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares
outstanding during the period. The computation of diluted earnings per
share assumes the conversion, exercise or contingent issuance of
securities only when such conversion, exercise or issuance would have a
dilutive effect on earnings per share. The dilutive effect of
convertible securities is reflected in diluted earnings per share by
application of the "if converted" method. The dilutive effect of
outstanding options and warrants and their equivalents is reflected in
diluted earnings per share by application of the treasury stock method.
COMPARATIVE FIGURES
Certain of the 2004 fiscal year figures have been reclassified to
conform with the presentation used in the 2005 fiscal year.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
3. UNPROVEN MINERAL INTERESTS
2005 2004
---------------------------------------- ----------------------------------------
ACQUISITION EXPLORATION ACQUISITION EXPLORATION
COSTS COSTS TOTAL COSTS COSTS TOTAL
$ $ $ $ $ $
El Nayar Project - - - 103,971 116,611 220,582
============ ============ ============ ============ ============ ============
On October 1, 2003, the Company entered into an option agreement, with
a Mexican private corporation whereby the Company could acquire up to a
100% interest in five unproven mineral concessions (the "El Nayar
Project") in Mexico, covering approximately 6,766 hectares.
The Company could earn an initial 60% interest, in consideration of
making option payments to the optionor totaling US $50,000 (paid), the
issuance of a total of 110,000 common shares (10,000 shares issued) and
funding US$1 million of expenditures over a three year period. Payments
for land holding costs and underlying option payments to the concession
holder was included as part of the expenditure commitment for the
Company's earn-in.
The Company conducted a comprehensive geological work program during
the 2005 fiscal year. Based on the results the Company determined to
cease further work on the El Nayar Project and wrote-off $703,058 of
acquisition and exploration costs.
4. OTHER ASSETS
2005 2004
$ $
Investment 6,300 8,370
Drilling advance - 57,221
------------ ------------
6,300 65,591
============ ============
As at May 31, 2005, the Company held 70,000 common shares (2004 -
93,000 common shares) of Halo Resources Ltd. ("Halo"), a publicly
traded company with common officers and directors. During the 2005
fiscal year, the Company sold 23,000 shares of Halo for $19,309,
realizing a gain of $17,239. As at May 31, 2005 the 70,000 shares of
Halo had a quoted market value of $45,500.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
5. SHARE CAPITAL
Authorized: Unlimited common shares without par value
Issued: 2005 2004
---------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
$ $
Balance, beginning of year 1,853,735 70,593,713 487,691 67,568,135
------------ ------------ ------------ ------------
Issued during the year
For cash
Private placements 355,000 355,000 613,000 865,750
Exercise of warrants - - 49,000 68,600
Exercise of options 3,000 7,500 - -
Reallocation from contributed surplus
relating to the exercise of stock options - 6,600 - -
For unproven mineral interests 10,000 10,000 - -
Retirement of debentures - - 623,384 2,041,932
Debenture interest - - 64,037 65,371
Finder's fee 9,000 9,000 16,623 16,623
------------ ------------ ------------ ------------
377,000 388,100 1,366,044 3,058,276
Less: share issue costs - (11,500) - (32,698)
------------ ------------ ------------ ------------
377,000 376,600 1,366,044 3,025,578
------------ ------------ ------------ ------------
Balance, end of year 2,230,735 70,970,313 1,853,735 70,593,713
============ ============ ============ ============
(a) On August 25, 2005 the Company completed a consolidation of
its share capital on a 1 new for 10 old basis. The comparative
common share balances have been adjusted accordingly.
(b) During the 2005 fiscal year, the Company completed a
non-brokered private placement financing of 355,000 units at a
price of $1.00 per unit, for gross proceeds of $355,000. Each
unit comprised 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 $1.50 per share on or before
February 7, 2006 and, thereafter, at $2.00 per share on or
before February 7, 2007. The Company issued 9,000 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 and their immediate family members have purchased
65,000 units of the private placement.
(c) During the 2004 fiscal year, the Company completed the
following private placements:
i) 403,000 units at $1.00 per unit, for gross proceeds
of $403,000. Each unit comprised one common share and
one share purchase warrant. Each warrant entitles the
holder to purchase an additional common share at
$1.40 per share on or before November 25, 2005. The
Company issued 10,000 units, on the same terms as the
private placement units, and 6,623 common shares in
consideration of $16,623 of finders' fees and
incurred $8,330 of costs associated with the private
placement;
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
5. SHARE CAPITAL (continued)
ii) 67,500 units at $2.00 per unit, for gross proceeds of
$135,000. Each unit comprised one common share and
one share purchase warrant. Each warrant entitled the
holder to purchase an additional common share at
$2.60 per share on or before February 19, 2005. The
Company incurred $7,745 of costs associated with the
private placement. Certain directors, officers and a
private company controlled by a director purchased
45,000 units. During the 2005 fiscal year the
warrants expired without exercise; and
iii) 142,500 units at $2.30 per unit, for proceeds of
$327,750. Each unit comprised one common share and
one share purchase warrant. Each warrant entitles the
holder to purchase an additional common share for a
period of two years at $3.10 per share on or before
March 4, 2006.
(d) The Company has established a rolling stock option plan (the
"Plan"), in which the maximum number of common shares which
can be reserved for issuance under the Plan is 10% of the
issued and outstanding shares of the Company. The exercise
price of the options is set at the Company's closing share
price on the day before the grant date, less allowable
discounts in accordance with the policies of the TSX Venture
Exchange.
During the 2005 fiscal year, the Company granted 178,500 (2004
- 70,000) stock options to the Company's directors and
consultants and recorded compensation expense of $138,725
(2004 - $154,000).
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 2005 and 2004
fiscal years:
2005 2004
Risk-free interest rate 2.69% - 3.07% 2.54%
Estimated volatility 146% - 147% 140 %
Expected life 1 year - 1.5 years 1.5 years
Expected dividend yield 0% 0%
The fair value per share of stock options, calculated using
the Black-Scholes option pricing model, granted during the
year to the Company's directors and consultants was $0.80
(2004 - $2.20) 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 a reliable measure of the fair value of the Company's
stock options.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
5. SHARE CAPITAL (continued)
A summary of the Company's outstanding stock options at May
31, 2005 and 2004 and the changes for the years ending on
those dates is as follows:
2005 2004
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE
$ $
Balance, beginning of year 70,000 2.50 18,620 113.80
Granted 178,500 1.04 70,000 2.50
Exercised (3,000) 2.50 - -
Cancelled / expired (28,000) 2.50 (18,620) 113.80
------------ ------------
Balance, end of year 217,500 1.30 70,000 2.50
============ ============
The following table summarizes information about the stock
options outstanding and exercisable at May 31, 2005.
NUMBER NUMBER
OF OPTIONS OF OPTIONS EXERCISE EXPIRY
OUTSTANDING EXERCISABLE PRICE DATE
$
39,000 39,000 2.50 February 18, 2007
76,000 74,750 1.00 September 3, 2007
6,000 6,000 1.00 October 4, 2007
59,000 59,000 1.00 January 12, 2007
37,500 31,875 1.20 February 8,2008
------------ ------------
217,500 210,625
============ ============
(e) A summary of the number of common shares reserved pursuant to
the Company's outstanding warrants at May 31, 2005 and 2004
and the changes for the years ending on those dates is as
follows:
2005 2004
Balance, beginning of year 582,365 34,002
Issued pursuant to private
placements 182,000 623,000
Exercised - (49,000)
Expired (75,865) (25,637)
------------ ------------
Balance, end of year 688,500 582,365
============ ============
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
5. SHARE CAPITAL (continued)
The following table summarizes information about the warrants
outstanding and exercisable at May 31, 2005:
EXERCISE
PRICE NUMBER EXPIRY DATE
$
1.40 364,000 November 25, 2005
3.10 142,500 March 4, 2006
1.50 182,000 February 7, 2007
-------
688,500
=======
6. RELATED PARTY TRANSACTIONS
(a) During the 2005 fiscal year, the Company incurred $94,538
(2004 - $110,066) for accounting, management, professional and
consulting services provided by current and former directors
and officers of the Company. As at May 31, 2005, $15,615
remained outstanding and has been included in accounts payable
and accrued liabilities.
(b) During the 2004 fiscal year, the Company negotiated a
settlement with Halo and third parties in which it
relinquished 61,286 shares of Halo and received $78,120 from
Halo, resulting in a recovery of $72,604, which was included
as part of interest and other income.
(c) See also Note 5.
7. INCOME TAXES
As at May 31, 2005, the Company has accumulated non-capital losses for
Canadian income tax purposes of approximately $7.2 million, expiring
from 2006 to 2015, which are available for application against future
taxable income.
Future income tax benefits which may arise as a result of these losses
have not been recognized in these financial statements as their
realization is unlikely.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
8. 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.
2005
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 39,585 - (732,601)
Corporate (Canada) 247,731 19,601 (376,386)
------------ ------------ ------------
287,316 19,601 (1,108,987)
============ ============ =============
200
--------------------------------------------
IDENTIFIABLE NET
ASSETS REVENUES LOSS
$ $ $
Mineral operations (Mexico) 293,529 - -
Corporate (Canada) 579,928 119,191 (582,395)
------------ ------------ ------------
872,928 119,191 (582,395)
============ ============ ============
9. FINANCIAL INSTRUMENTS
a) Concentration of Credit Risk
Financial instruments that potentially subject the Company to
a significant concentration of credit risk are cash and cash
equivalents and amounts receivable. The Company limits its
exposure to credit loss by placing its cash and cash
equivalents with high credit quality financial institutions.
b) Fair value of financial instruments
The fair value of the Company's financial instruments
consisting of cash, amounts receivable and accounts payable
and accrued liabilities approximate their carrying values.
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2005 AND 2004
10. SUPPLEMENTARY CASH FLOW INFORMATION
Non-cash investing and financing activities were conducted by the
Company as follows:
2005 2004
$ $
Operating activities
Drilling advance 57,221 -
============ ============
Financing activities
Issuance of common shares for unproven mineral interests 10,000 -
Decrease in equity component of debentures on conversion - (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) -
------------ ------------
10,000 (137,080)
============ ============
Investing activities
Expenditures on unproven mineral interests (67,221) -
Retirement of loan - 137,080
------------ ------------
(67,221) 137,080
============ ============
Other supplementary cash flow information:
2005 2004
$ $
Interest paid in cash - 46,557
============ ============
Income taxes paid in cash - -
============ ============
ROCHESTER RESOURCES LTD.
(FORMERLY HILTON RESOURCES LTD.)
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED MAY 31, 2005
BACKGROUND
This discussion and analysis of financial position and results of operation is
prepared as at September 23, 2005 and should be read in conjunction with the
audited consolidated financial statements and the accompanying notes for the
years ended May 31, 2005 and 2004 of Rochester 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
The Company is currently a junior mineral exploration company and was actively
engaged in the acquisition and exploration of precious metals on mineral
interests located in Mexico. During the 2005 fiscal year, the Company wrote off
its mineral interests. As of the date of this MD&A, the Company does not hold
any mineral interests and has commenced a corporate restructuring and
recapitalization to allow it to continue to identify and evaluate potential
resource acquisitions or business opportunities. On August 25, 2005, the Company
completed a consolidation of its share capital on a 1 new for 10 old basis and
changed its name from Hilton Resources Ltd. to Rochester Resources Ltd.
The Company is a reporting issuer in British Columbia, Alberta and Saskatchewan.
The Company trades on the TSX Venture Exchange ("TSXV") under the symbol "RCT"
and on the Over the Counter Bulletin ("OTCBB") under the symbol "RCTFF". The
Company is also registered with the U.S. Securities and Exchange Commission
("SEC") as a foreign private user 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.
APPOINTMENT OF PRESIDENT
On June 29, 2005, Mr. Nick DeMare resigned as President and Mr. Des O'Kell was
appointed President. Mr. DeMare remains as a director of the Company.
Mr. O'Kell has 16 years operations and finance experience in the public
marketplace. Since 1998 Mr. O'Kell has headed the firm Eland Jennings Investor
Services which enjoyed the success of providing consulting services to a range
of private and publicly traded corporations seeking financings, listings and
communications to the investment community.
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. The geological work program focused on a 1.0 km by 1.0 km sector of
steep mountainous terrain named La Castellana, where old mine workings exist.
The results of this program demonstrate that the observed mineralization takes
the form of steep narrow veins which would require underground
-1-
mining and conventional milling (the ore would not be amenable to open pit
mining or heap leaching). Whereas the property has excellent residual
exploration potential, it does not meet the Company's objective of providing
near term production. Accordingly, during fiscal 2005 the Company wrote off
$703,058 of acquisition and exploration costs.
SELECTED FINANCIAL DATA
The following selected financial information is derived from the audited annual
consolidated financial statements of the Company prepared in accordance with
Canadian GAAP.
--------------------------------------------
YEARS ENDED MAY 31,
--------------------------------------------
2005 2004 2003
$ $ $
OPERATIONS:
Revenues - - 127,782
Income (loss) (1,108,987) (582,395) (1,767,836)
Basic and diluted income
(loss) per share (0.56) (0.06) (2.17)
Dividends per share - - -
BALANCE SHEET:
Working capital 245,246 550,932 (1,494,055)
Total assets 287,316 872,928 411,006
Total long-term liabilities - - -
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
------------------------------------------------ ----------------------------------------------
MAY 31 FEB. 28 NOV. 30 AUG. 31 MAY 31 FEB. 29 NOV. 30 AUG. 31
$ $ $ $ $ $ $ $
OPERATIONS:
Revenues - - - - - - - -
Net income (loss) (781,151) (151,252) (150,954) (25,630) 67,994 (345,252) (146,258) (158,879)
Basic and diluted
income (loss) per share (0.40) (0.01) (0.01) (0.00) 0.01 (0.03) (0.03) (0.03)
Dividends per share - - - - - - - -
BALANCE SHEET:
Working capital (deficiency) 245,246 313,811 235,799 390,778 550,932 647,522 (1,293,783) (1,441,922)
Total assets 287,316 1,060,962 783,112 860,506 872,928 860,895 636,002 323,023
Total long-term liabilities - - - - - - - -
------------------------------------------------ ----------------------------------------------
RESULTS OF OPERATIONS
During the fiscal 2005 the Company recorded a loss of $1,108,987 ($0.56 per
share) compared to a loss of $582,395 ($0.57 per share) for fiscal 2004. The
increase in loss in fiscal 2005 is primarily attributed to the $703,058
write-off of the El Nayar Project
Excluding the stock based compensation, general and administrative expenses of
$252,452 were reported in fiscal 2005, a decrease of $104,450, from $356,902 in
fiscal 2004. In general, costs decreased due mainly to the impact of reduced
operations and the abandonment in fiscal 2004 of the Company's former petroleum
and proprietary software operations. Specific expenses of note during fiscal
2005 and fiscal 2004 are as follows:
i) during fiscal 2005, the Company incurred accounting, administrative and
management fees of $78,788 (2004 - $64,840) provided by a private
company controlled by Nick DeMare, the former President of the Company;
ii) during fiscal 2004, the Company incurred general and administrative
costs of $56,287 for the proprietary software program activities,
mainly in professional fees to arm's length parties and office costs.
The Company abandoned this business segment in August 2003;
-2-
iii)effective December 1, 2003, the Company resumed its investor relations
arrangement at a rate of $3,000 per month. A total of $36,000 was paid
in fiscal 2005 (2004 - $18,000);
iv) legal fees decreased by $28,708 from $44,540 in fiscal 2004 to $15,832
in fiscal 2005 mainly due to reduced operations in fiscal 2005;
v) during fiscal 2005, the Company recorded bad debts of $27,827 due to
the uncertainty of the recoverability of advances which had been made
to the operator of the El Nayar Project; and
vi) regulatory fees, shareholder costs and transfer agent fees decreased in
fiscal 2005 due to reduced operations.
Stock-based compensation is accounted for at fair value based on an option
pricing model based on various estimates, and are not cash-derived. During
fiscal 2005, the Company recorded a compensation expense of $138.725, compared
to $154,000 in fiscal 2004.
During fiscal 2005, the Company sold marketable securities for $6,600 (2004 -
$9,845), resulting in a gain of $5,880 (2004 - $2,645). In addition, in fiscal
2004, the Company recovered $23,792 for costs previously incurred and $72,604
for recovery of advances due from a related company previously written-off in
fiscal 2003. These recoveries were recorded in interest and other income in
fiscal 2004.
During fiscal 2004, the Company recorded interest expense on debentures of
$233,761. The debentures were retired in January 2004. Accordingly, there was no
interest expense in fiscal 2005.
During fiscal 2005, the Company spent $66,536 (2004 - $103,971) relating to
acquisition costs and $415,940 (2004 - $116,611) for exploration on the El Nayar
Project. During fiscal 2005, the Company wrote-off $703,058 of acquisition and
exploration costs on the El Nayar Project.
FINANCIAL CONDITION / CAPITAL RESOURCES
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. During fiscal 2005, the Company completed a non-
brokered private placement financing of 3,550,000 units for gross proceeds of
$355,000. As of May 31, 2005, the Company had a working capital of $245,246. The
Company anticipates that it will have sufficient funds to meet ongoing overhead
expenditures. However, it may require additional funding to identify and acquire
new mineral properties and conduct exploration activities, and or investigate
new business opportunities. 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. The Company has
commenced a corporate restructuring and recapitalization to facilitate future
financings.
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 Note 2 to the May 31, 2005 audited consolidated financial
statements.
-3-
CHANGES IN ACCOUNTING POLICIES
The Company has no changes in accounting policies.
TRANSACTIONS WITH RELATED PARTIES
During fiscal 2005:
(i) the Company was charged $94,538 (2004 - $110,066) for accounting,
management, professional and consulting services provided by current
and former directors and officers of the Company; and
(ii) certain directors and their immediate family members purchased 65,000
units (2004 - 45,000 units) of the Company through private placements.
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 activities were conducted in Mexico and the Company is assessing
whether it will continue to remain in Mexico. 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 fiscal 2005, the
Company paid $36,000 (2004 - $18,000) to Eland Jennings.
OUTSTANDING SHARE DATA
The Company's authorized share capital is unlimited common shares without par
value. As at September 23, 2005 , there were 2,230,735 issued and outstanding
common shares. In addition there were 210,625 stock options outstanding and
exercisable, at exercise prices ranging from $1.00 to $2.50 per share, and
688,500 warrants outstanding, with exercise prices ranging from $1.40 and $3.10
per share.
-4-
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
I, Des O'Kell, President and Chief Executive Officer of Rochester Resources
Ltd., certify that:
1. I have reviewed the annual filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Rochester Resources Ltd. (the issuer)
for the period ending May 31, 2005;
2. Based on my knowledge, the annual 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 annual filings;
3. Based on my knowledge, the annual financial statements together with
the other financial information included in the annual 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 annual filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the annual filings are being prepared;
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
(c) evaluated the effectiveness of the issuer's disclosure
controls and procedures as of the end of the period covered by
the annual filings and have caused the issuer to disclose in
the annual MD&A our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period
covered by the annual filings based on such evaluation; and
5. I have caused the issuer to disclose in the annual MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: September 26, 2005
/s/ DES O'KELL
-------------------
Des O'Kell,
President & CEO
FORM 52-109F1 CERTIFICATION OF ANNUAL FILINGS
I, Des O'Kell, President and Chief Executive Officer of Rochester Resources
Ltd., and performing similar functions to that of a Chief Financial Officer,
certify that:
1. I have reviewed the annual filings (as this term is defined in
Multilateral Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings) of Rochester Resources Ltd. (the issuer)
for the period ending May 31, 2005;
2. Based on my knowledge, the annual 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 annual filings;
3. Based on my knowledge, the annual financial statements together with
the other financial information included in the annual 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 annual filings;
4. The issuer's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures and
internal control over financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused
them to be designed under our supervision, to provide
reasonable assurance that material information relating to the
issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which the annual filings are being prepared;
(b) designed such internal control over financial reporting, or
caused it to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with the issuer's GAAP; and
(c) evaluated the effectiveness of the issuer's disclosure
controls and procedures as of the end of the period covered by
the annual filings and have caused the issuer to disclose in
the annual MD&A our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period
covered by the annual filings based on such evaluation; and
5. I have caused the issuer to disclose in the annual MD&A any change in
the issuer's internal control over financial reporting that occurred
during the issuer's most recent interim period that has materially
affected, or is reasonably likely to materially affect, the issuer's
internal control over financial reporting.
Date: September 26, 2005
/s/ DES O'KELL
-------------------
Des O'Kell,
President & CEO