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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
AMENDMENT #3
REGISTRATION NO.: 333-126504
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HOST VENTURES INC.
---------------------------
(Name of small business issuer in its charter)
NEVADA 1000 Applied For
- -------------------------- ----------------------- ----------------------
State or jurisdiction of Primary Standard Industrial I.R.S. Employer
incorporation or organization Classification Code Number Identification No.
Host Ventures Inc.
9544 South Chesapeake Street
Highlands Ranch, Colorado 80126
Telephone: 970-567-7717
Facsimile: 720-344-0920
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(Address and telephone number of principal executive offices)
Empire Stock Transfer Inc.
7251 West Lake Mead Blvd Suite 300
Las Vegas, NV 89128
Telephone: 702-562-4091
Facsimile: 702-562-4081
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(Name, address and telephone number of agent for service)
Approximate date of
proposed sale to the public: as soon as practicable after the effective
date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.
| X |
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
| |
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
| |
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
| |
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. | |
<page>
<table>
<caption>
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF DOLLAR AMOUNT TO BE PROPOSED MAXIUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE (2)
REGISTERED SHARE (1) PRICE (2)
<s> <c> <c> <c> <c>
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Common Stock $156,250 $0.05 $156,250 $18.39
- -------------------------------------------------------------------------------------------------------------------
</table>
(1) Based on the last sales price on March 31, 2005.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
SUBJECT TO COMPLETION, Dated October 31, 2005
<page>
PROSPECTUS
HOST VENTURES INC.
3,125,000 SHARES
COMMON STOCK
----------------
The selling shareholders named in this prospectus are offering all of the shares
of common stock offered through this prospectus.
Our common stock is presently not traded on any market or securities exchange.
----------------
The purchase of the securities offered through this prospectus involves a high
degree of risk. SEE SECTION ENTITLED "RISK FACTORS" ON PAGES 6-8.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The selling shareholders will sell our shares at $0.05 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We determined this offering price based
upon the price of the last sale of our common stock to investors.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
----------------
The Date Of This Prospectus Is: October 31, 2005
2
<page>
Table Of Contents
Page
Summary 4
Risk Factors 5
Use of Proceeds 8
Determination of Offering Price 8
Dilution 8
Selling Securityholders 8
Plan of Distribution 11
Legal Proceedings 12
Directors, Executive Officers, Promoters and Control Persons 12
Security Ownership of Certain Beneficial Owners and Management 13
Description of Securities 13
Interest of Named Experts and Counsel 14
Disclosure of Commission Position of Indemnification for
Securities Act Liabilities 14
Organization Within Last Five Years 15
Description of Business 15
Plan of Operations 18
Description of Property 19
Certain Relationships and Related Transactions 19
Market for Common Equity and Related Stockholder Matters 20
Executive Compensation 21
Financial Statements 21
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
3
<page>
Summary
Prospective investors are urged to read this prospectus in its entirety.
We are in the business of mineral property exploration as an exploration stage
company. An "exploration stage company" includes all issuers engaged in the
search for mineral deposits (reserves) which are not in either the development
or production stage. Development stage companies are engaged in the preparation
of an established commercially minable deposit (reserves) for its extraction,
which are not in the production stage. Production stage companies are engaged in
the exploitation of a mineral deposit (reserve).
To date, we have only recently commenced exploration on our sole exploration
target, the Scadding West mineral claim located in Scadding Township, Sudbury
Mining Division, Ontario. We acquired a 100% interest in the Scadding West claim
from Margaret Loney of Sudbury, Ontario. In order to maintain our interest in
the Scadding West claim in good standing, we must expend at least $2,400 in
exploration on the claim each year.
Our objective is to conduct mineral exploration activities on the Scadding West
claim in order to assess whether it possesses economic reserves of gold, copper,
nickel, platinum and palladium. We have not yet identified any economic
mineralization on the Scadding West claim. Our proposed exploration program is
designed to search for an economic mineral deposit.
Our business plan calls for us to spend $15,000 on the recommended phase one and
two exploration programs on the claim. In addition, we anticipate spending an
additional $20,000 on administrative expenses in the next 12 months. Our cash on
hand as at October 12, 2005 is $26,165.
We have no revenues or operations, have achieved losses since our inception and
currently rely upon the sale of our securities to fund operations. Aside from
our cash on hand and our interest in the Scadding West mineral claim, we do not
have any other assets, whether tangible or intangible, such as plant, property
or equipment.
Aside from William Stewart, our sole director and executive officer, we do not
have any employees.
We were incorporated on July 20, 2004 under the laws of the state of Nevada. Our
principal offices are located at 9544 South Chesapeake Street, Highlands Ranch,
Colorado, 80126. Our telephone number is (970) 567-7717.
The Offering:
Securities Being Offered Up to 3,125,000 shares of common stock.
Offering Price The selling shareholders will sell
our shares at $0.05 per share until our
shares are quoted on the OTC Bulletin
Board, and thereafter at prevailing
market prices or privately negotiated
prices. We determined this offering price
based upon the price of the last sale of
our common stock to investors.
Terms of the Offering The selling shareholders will determine
when and how they will sell the common
stock offered in this prospectus.
Termination of the Offering The offering will conclude when all of
the 3,125,000 shares of common stock have
been sold, the shares no longer need to
be registered to be sold or we decide to
terminate the registration of the shares.
4
<page>
Securities Issued and to be 5,125,000 shares of our common stock are
Issued issued and outstanding as of the date
of this prospectus. All of the common
stock to be sold under this prospectus
will be sold by existing shareholders.
Use of Proceeds We will not receive any proceeds from the
sale of the common stock by the selling
shareholders.
Summary Financial Information
Balance Sheet
June 30, 2005
Cash $34,745
Total Assets $34,745
Liabilities $0
Total Stockholders' Equity $34,745
Statement of Operations
From Incorporation on
July 20, 2004 to June 30, 2005
Revenue $ 0
Net Loss and Deficit ($18,005)
Risk Factors
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
Our current operating funds are less than necessary to complete all intended
exploration of the Scadding West claim, and therefore we will need to obtain
additional financing in order to complete our business plan. We currently do not
have any operations and we have no income. As well, we will not receive any
funds from this registration.
Our business plan calls for significant expenses in connection with the
exploration of the Scadding West claim. While we have sufficient funds to
conduct the recommended phase one and two exploration programs on the claim,
which are estimated to cost $5,000 and $10,000 respectively, we will need
additional funds to complete any additional exploration and to cover anticipated
administrative expenses. Even after completing an additional phase of
exploration, we will not know if we have a commercially viable mineral deposit.
We will require additional financing to sustain our business operations if we
are not successful in earning revenues once exploration is complete. We do not
currently have any arrangements for financing and may not be able to find such
financing if required.
BECAUSE WE ONLY HAVE SUFFICIENT CAPITAL FOR INITIAL EXPLORATION OF THE SCADDING
WEST CLAIM, WE MAY NEED TO SELL ADDITIONAL SHARES TO FUND OPERATIONS, WHICH WILL
DILUTE THE INTERESTS OF INVESTORS IN THIS OFFERING.
5
<page>
Our current capital is only sufficient to cover the initial two phases of
exploration on the Scadding West claims, as well as a portion of anticipated
administrative expenses over the next 12 months. We will likely have to sell
additional shares of our common stock in order to fund future operations. Any
sale of shares will result in dilution to existing shareholders, which may have
a negative impact on the value of their investment.
BECAUSE WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, HAVE NOT EARNED
REVENUE AND ARE UNLIKELY TO EARN REVENUE IN THE FORESEEABLE FUTURE, WE FACE A
HIGH RISK OF BUSINESS FAILURE.
We have only recently commenced exploration on the Scadding West claim.
Accordingly, we have no way to evaluate the likelihood that our business will be
successful. We were incorporated on July 20, 2004 and to date have been involved
primarily in organizational activities and the acquisition of the Scadding West
claim. We have not earned any revenues as of the date of this prospectus and are
unlikely to earn revenue in the foreseeable future. Potential investors should
be aware of the difficulties normally encountered by new mineral exploration
companies and the high rate of failure of such enterprises. The likelihood of
success must be considered in light of the problems, expenses, difficulties,
complications and delays encountered in connection with the exploration of the
mineral properties that we plan to undertake. These potential problems include,
but are not limited to, unanticipated problems relating to exploration, and
additional costs and expenses that may exceed current estimates.
Prior to completion of our exploration stage, we anticipate that we will incur
increased operating expenses without realizing any revenues. We therefore expect
to incur significant losses into the foreseeable future. We recognize that if we
are unable to generate significant revenues from development of the Scadding
West Property and the production of minerals from the claim, we will not be able
to earn profits or continue operations.
There is no history upon which to base any assumption as to the likelihood that
we will prove successful, and it is doubtful that we will generate any operating
revenues or ever achieve profitable operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.
BECAUSE OF THE SPECULATIVE NATURE OF EXPLORATION OF MINING PROPERTIES, THERE IS
A SUBSTANTIAL RISK THAT OUR BUSINESS WILL FAIL.
The search for valuable minerals as a business is extremely risky. The
likelihood of our mineral claim containing economic mineralization or reserves
is extremely remote. Exploration for minerals is a speculative venture
necessarily involving substantial risk. In all probability, the Scadding West
claim does not contain any reserves and funds that we spend on exploration will
be lost. As well, problems such as unusual or unexpected formations and other
conditions are involved in mineral exploration and often result in unsuccessful
exploration efforts. In such a case, we would be unable to complete our business
plan. In such circumstances, we intend to acquire an interest in an alternative
mineral property in order to assess its potential to contain a mineral deposit.
BECAUSE OF THE INHERENT DANGERS INVOLVED IN MINERAL EXPLORATION, THERE IS A RISK
THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS.
The search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins and
other hazards against which we cannot insure or against which we may elect not
to insure. The payment of such liabilities may have a material adverse effect on
our financial position.
EVEN IF WE DISCOVER COMMERCIAL RESERVES OF METALS ON THE SCADDING WEST CLAIM, WE
MAY NOT BE ABLE TO SUCCESSFULLY COMMENCE COMMERCIAL PRODUCTION.
The Scadding West claim does not contain any known bodies of mineralization. If
our exploration programs are successful in establishing gold of commercial
tonnage and grade, we will require additional funds in order to place the
Scadding West claim into commercial production. We may not be able to obtain
such financing.
6
<page>
BECAUSE WILLIAM STEWART ACTS AS OUR SOLE DIRECTOR AND OFFICER, HE WILL BE THE
ONLY PERSON RESPONSIBLE FOR ALL ASPECTS OF OUR BUSINESS. IF HE IS UNABLE TO
ADEQUATELY MAINTAIN PROPER DISCLOSURE, CONTROLS AND PROCEDURES, OUR OPERATIONS
WILL SUFFER.
Our sole director and officer, Mr. William Stewart, will be the only person
responsible for our managerial responsibilities. As such, he will have ultimate
authority with respect to our business decisions, our disclosure and our
implementation of accounting controls and procedures. If Mr. Stewart is unable
to properly institution such procedures and comply with reporting obligation
requirements, our operations may be adversely impacted.
BECAUSE OUR PRESIDENT HAS OTHER BUSINESS INTERESTS, HE MAY NOT BE ABLE OR
WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO OUR BUSINESS OPERATIONS,
CAUSING OUR BUSINESS TO FAIL.
Our president, Mr. William Stewart, intends to devote approximately 15% of his
business time providing his services to us. While Mr. Stewart presently
possesses adequate time to attend to our interests, it is possible that the
demands on Mr. Stewart from his other obligations could increase with the result
that he would no longer be able to devote sufficient time to the management of
our business.
BECAUSE OUR SOLE DIRECTOR HAS NO TECHNICAL EXPERIENCE IN MINERAL EXPLORATION,
OUR BUSINESS HAS A HIGHER RISK OF FAILURE.
William Stewart, our sole director, has no technical training in the field of
geology and specifically in the areas of exploring for, starting and operating a
mine. He has not completed any education in the fields of geology or mining
engineering.
As a result, we may not be able to recognize and take advantage of potential
acquisition and exploration opportunities in the sector without the aid of
qualified geological consultants. As well, with no direct training or
experience, our management may not be fully aware of the specific requirements
related to working in this industry. As well, his decisions may not take into
account standard engineering or managerial approaches that mineral exploration
companies commonly use. His decisions and choices may not be well thought out
and our operations, earnings and ultimate financial success may suffer
irreparable harm as a result.
IF A MARKET FOR OUR COMMON STOCK DOES NOT DEVELOP, SHAREHOLDERS MAY BE UNABLE TO
SELL THEIR SHARES.
There is currently no market for our common stock and no certainty that a market
will develop. We currently plan to apply for listing of our common stock on the
over the counter bulletin board upon the effectiveness of the registration
statement, of which this prospectus forms a part. Our shares may never trade on
the bulletin board. If no market is ever developed for our shares, it will be
difficult for shareholders to sell their stock. In such a case, shareholders may
find that they are unable to achieve benefits from their investment.
A PURCHASER IS PURCHASING PENNY STOCK WHICH LIMITS HIS OR HER ABILITY TO SELL
THE STOCK.
The shares offered by this prospectus constitute penny stock under the Exchange
Act. The shares will remain penny stock for the foreseeable future. The
classification of penny stock makes it more difficult for a broker-dealer to
sell the stock into a secondary market, thus limiting investment liquidity. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in our company will be subject to rules 15g-1 through 15g-10 of the
Exchange Act. Rather than creating a need to comply with those rules, some
broker-dealers will refuse to attempt to sell penny stock.
Please refer to the "Plan of Distribution" section for a more detailed
discussion of penny stock and related broker-dealer restrictions.
7
<page>
Forward-Looking Statements
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as anticipate, believe, plan, expect, future,
intend and similar expressions to identify such forward-looking statements. You
should not place too much reliance on these forward-looking statements. Our
actual results may differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described in the "Risk Factors" section and elsewhere in this prospectus.
Use Of Proceeds
We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders.
Determination Of Offering Price
The selling shareholders will sell our shares at $0.05 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We determined this offering price, based
upon the price of the last sale of our common stock to investors.
Dilution
The common stock to be sold by the selling shareholders is common stock that is
currently issued and outstanding. Accordingly, there will be no dilution to our
existing shareholders.
Selling Securityholders
The selling shareholders named in this prospectus are offering all of the
3,125,000 shares of common stock offered through this prospectus. These shares
were acquired from us in private placements that were exempt from registration
under Rule 504 of Regulation D of the Securities Act of 1933 and pursuant to a
mineral Scadding West Property purchase agreement. The shares include the
following:
1. 2,825,000 shares of our common stock that the selling shareholders
acquired from us in an offering that was exempt from registration
under Rule 504 of Regulation D of the Securities Act of 1933 and was
completed on February 18, 2005. The aggregate proceeds from the
offering were $28,250;
2. 300,000 shares of our common stock that the selling shareholders
acquired from us in an offering that was exempt from registration
under Rule 504 of Regulation D of the Securities Act of 1933 and was
completed on March 31, 2005. The aggregate proceeds from the offering
were $15,000;
The following table provides as of the date of this prospectus, information
regarding the beneficial ownership of our common stock held by each of the
selling shareholders, including:
1. the number of shares owned by each prior to this offering;
2. the total number of shares that are to be offered for each;
3. the total number of shares that will be owned by each upon completion
of the offering; and
4. the percentage owned by each upon completion of the offering.
8
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<table>
<caption>
Total Number of
Shares to be Total Shares Percent Owned
Shares Owned Offered for Owned Upon Upon Completion
Prior to this Selling Completion of of this Offering
Offering Shareholders this Offering
Name of Selling Stockholder Account
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<s> <c> <c> <c> <c>
Robert G. Austin 150,000 150,000 Nil Nil
7557 S. Filmore Way
Centennial, CO 80122
Jeff Brubaker 200,000 200,000 Nil Nil
455 Poplar Ln
Boulder, CO 80304
Mitch Burroughs 100,000 100,000 Nil Nil
1716 E. Lincoln Ave #1
Ft. Collins CO 80524
Mike Caple 100,000 100,000 Nil Nil
7550 S. Blackhawk St. #11303
Englewood, CO 80112
Michael John Cook 150,000 150,000 Nil Nil
2911 E. Wyecliff Way
Highlands Ranch, CO 80126
Charles B. Davis 250,000 250,000 Nil Nil
5693 East Valley Hi Dr
Parker, CO 80138
Stephen L. Eggleston 125,000 125,000 Nil Nil
7971 Arrowhead Ct.
Littleton, CO 80124
Dean Galbreath 100,000 100,000 Nil Nil
9506 S. Harford Ct.
Highlands Ranch, CO 80126
Charles L Gamber 100,000 100,000 Nil Nil
3940 W. 66th Ave.
Arvada, CO 80003
Dennis C. Grover 150,000 150,000 Nil Nil
7225 Oak Hills Trail
Colorado Springs, CO 80919
John Herzog 100,000 100,000 Nil Nil
17790 E. Purdue Pl
Aurora, CO 80013
Jason Knox 250,000 250,000 Nil Nil
1920 S Asbury
Colorado Springs, CO 80919
John Kobar 250,000 250,000 Nil Nil
7177 E Mineral Dr.
Englewood, CO 80112
Kevin S. Knoll 150,000 150,000 Nil Nil
7584 S Mt. Marcy
Littleton, CO 80127
Bradley R. Morrell 100,000 100,000 Nil Nil
12842 W. Jewel Circle
Lakewood, CO 80228
Benjamin K. Peal 250,000 250,000 Nil Nil
6725 Winnipeg Circle, #105
Aurora, CO 80016
Donald W. Prosser 150,000 150,000 Nil Nil
4565 E. Mexico Ave., # 17
Denver, CO 80222
Orland Stewart 150,000 150,000 Nil Nil
9544 Chesapeake St.
Highlands Ranch, CO 80126
</table>
9
<page>
<table>
<caption>
Total Number of
Shares to be Total Shares Percent Owned
Shares Owned Offered for Owned Upon Upon Completion
Prior to this Selling Completion of of this Offering
Offering Shareholders this Offering
Name of Selling Stockholder Account
- ------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Iaonnis Andrianakos 20,000 20,000 Nil Nil
7472 S. Odessa Circle
Aurora, CO 80016
Jim Cunningham 20,000 20,000 Nil Nil
758 Meadow Lane
Marble, CO 81623
Patricia K. Davies 20,000 20,000 Nil Nil
6917 Parfet St.
Arvada, CO 80004
H. Jay Harkins 20,000 20,000 Nil Nil
1732 Wazee St, # 206
Denver, CO 80202
Konstantinos M. Kalasountas 20,000 20,000 Nil Nil
11233 E Berry Dr.
Englewood, CO 80111
Phil Levy 20,000 20,000 Nil Nil
2250 S Kipling
Lakewood, CO 80227
Carl Mattei 50,000 50,000 Nil Nil
2907 West Deer Creek Trail
Highlands Ranch, CO 80129
James E. Millen, III 25,000 25,000 Nil Nil
8910 Edgefield Dr.
Colorado Springs, CO 80920
Patricia Ringeman 20,000 20,000 Nil Nil
8783 Quail Glen Dr.
Colorado Springs, CO 80920
Gary Robinson 20,000 20,000 Nil Nil
4382 S Dover Ct.
Littleton, CO 80123
Christian Stein 20,000 20,000 Nil Nil
4769 S Winterbrook Dr.
Highlands Ranch, CO 80126
Delbert Stiewart 20,000 20,000 Nil Nil
5402 S Green Way
Littleton, CO 80127
George Wolff 25,000 25,000 Nil Nil
16259 W. 10th Ave. E-2
Golden, CO 80401
</table>
Each of the above shareholders beneficially owns and has sole voting and
investment over all shares or rights to the shares registered in his or her
name. The numbers in this table assume that none of the selling shareholders
sells shares of common stock not being offered in this prospectus or purchases
additional shares of common stock, and assumes that all shares offered are sold.
The percentages are based on 5,125,000 shares of common stock outstanding on the
date of this prospectus.
Orland Stewart is the brother of William Stewart.
Otherwise, none of the selling shareholders:
(1) has had a material relationship with us other than as a shareholder at
any time within the past three years;
(2) has ever been one of our officers or directors; or
(3) is a broker-dealer or affiliate of a broker dealer.
10
<page>
Plan Of Distribution
The selling shareholders may sell some or all of their common stock in one or
more transactions, including block transactions.
The selling shareholders will sell our shares at $0.05 per share until our
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing market
prices or privately negotiated prices. We determined this offering price
arbitrarily based upon the price of the last sale of our common stock to
investors. The shares may also be sold in compliance with the Securities and
Exchange Commission's Rule 144.
We are bearing all costs relating to the registration of the common stock. These
are estimated to be $16,500. The selling shareholders, however, will pay any
commissions or other fees payable to brokers or dealers in connection with any
sale of the common stock.
The selling shareholders must comply with the requirements of the Securities Act
and the Exchange Act in the offer and sale of the common stock. In particular,
during such times as the selling shareholders may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, they must comply with applicable law and may, among other things:
1. Not engage in any stabilization activities in connection with our
common stock;
2. Furnish each broker or dealer through which common stock may be
offered, such copies of this prospectus, as amended from time to time,
as may be required by such broker or dealer; and
3. Not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under
the Exchange Act.
The Securities Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Commission, which:
o contains a description of the nature and level of risk in the market
for penny stocks in both public offerings and secondary trading;
o contains a description of the broker's or dealer's duties to the
customer and of the rights and remedies available to the customer with
respect to a violation of such duties;
o contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" prices for penny stocks and the significance
of the spread between the bid and ask price;
o contains a toll-free telephone number for inquiries on disciplinary
actions;
o defines significant terms in the disclosure document or in the conduct
of trading penny stocks; and
o contains such other information and is in such form (including
language, type, size, and format) as the Commission shall require by
rule or regulation;
The broker-dealer also must provide, prior to proceeding with any transaction in
a penny stock, the customer:
o with bid and offer quotations for the penny stock;
o details of the compensation of the broker-dealer and its salesperson in
the transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny stock
held in the customer's account.
11
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In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
those securities. Regulation M deems it unlawful for us, a selling security
holder or any other distribution participant to bid for, purchase, or attempt
to induce any person to bid for or purchase, our shares of common stock during
the period beginning on the later of five business days prior to the
determination of the offering price or such time that a person becomes a
distribution participant, and ending upon such person's completion of
participation in the distribution. In order to ensure compliance with this
regulation, we will advise each selling security holder of the regulation and
advise our transfer agent not to process any share transfers during the
restricted period.
Legal Proceedings
We are not currently a party to any legal proceedings. Our address for service
of process in Nevada is 7251 West Lake Mead Blvd Suite 300 Las Vegas, NV 89128.
Directors, Executive Officers, Promoters And Control Persons
Our executive officer and director and his age as of the date of this prospectus
is as follows:
Directors:
Name of Director Age
- --------------------------------------------------------------------------------
William Stewart 44
Executive Officers:
Name of Officer Age Office
- --------------------------------------------------------------------------------
William Stewart 44 President, Secretary,
Treasurer and Chief
Executive Officer
Biographical Information
Set forth below is a brief description of the background and business experience
of our executive officer and director for the past five years.
Mr. William Stewart has acted as our president, secretary, treasurer, chief
executive officer and as a director since our incorporation on July 20, 2004. In
1983, he graduated from the University of Denver with a bachelor's degree in
business administration. From December 2001 to present Mr. Stewart has acted as
a director and secretary of Arete Industries, Inc., a Niwot, Colorado based
reporting company involved in the oil and gas sector. He also acts as president
and chairman of the board of directors of Arete Industries, Inc.'s subsidiary,
Colorado Oil and Gas, Inc.
From 1994 to the present, Mr. Stewart has also acted as the principal of S.W.
Gordon Capital, Inc., a private company involved in providing consulting
services relating to corporate finance, merger and acquisitions transactions.
Mr. Stewart does not have any professional training or technical credentials in
the exploration, development and operation of mines.
12
<page>
Mr. Stewart intends to devote approximately 15% of his business time to our
affairs. The remainder of his business time is devoted to his positions with
Arete Industries, Inc. and its subsidiary, Colorado Oil and Gas, Inc. As these
companies are solely involved in the oil and gas business, there will not be a
conflict between their business activities and ours.
Term of Office
Our sole director is appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our sole officer is appointed by our board of
directors and hold office until removed by the board.
Significant Employees
We have no significant employees other than William Stewart, our sole officer
and director.
Security Ownership Of Certain Beneficial Owners And Management
The following table provides the names and addresses of each person known to us
to own more than 5% of our outstanding common stock as of the date of this
prospectus, and by the officers and directors, individually and as a group.
Except as otherwise indicated, all shares are owned directly.
<table>
<caption>
Amount of
Title of Class Name and address beneficial Percent of class
of beneficial owner ownership
- ------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Common stock William Stewart 2,000,000 39.02%
9544 South Chesapeake Street
Highlands Ranch, Colorado 80126
Common stock All officers and directors as a group that consists 2,000,000 39.02%
of two people
</table>
The percent of class is based on 5,125,000 shares of common stock issued and
outstanding as of the date of this prospectus.
Description Of Securities
General
Our authorized capital stock consists of 75,000,000 shares of common stock at a
par value of $0.001 per share.
Common Stock
As of October 28, 2005, there were 5,125,000 shares of our common stock issued
and outstanding that are held by 32 stockholders of record. Holders of our
common stock are entitled to one vote for each share on all matters submitted to
a stockholder vote. Holders of common stock do not have cumulative voting
rights. Therefore, holders of a majority of the shares of common stock voting
for the election of directors can elect all of the directors. Two persons
present and being, or representing by proxy, shareholders are necessary to
constitute a quorum at any meeting of our stockholders. A vote by the holders of
a majority of our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to our
articles of incorporation.
Holders of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of a liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock.
13
<page>
Holders of our common stock have no pre-emptive rights, no conversion rights and
there are no redemption provisions applicable to our common stock.
Preferred Stock
We do not have an authorized class of preferred stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
Share Purchase Warrants
We have not issued and do not have outstanding any warrants to purchase shares
of our common stock.
Options
We have not issued and do not have outstanding any options to purchase shares of
our common stock.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into
shares of our common stock or any rights convertible or exchangeable into shares
of our common stock.
Interests Of Named Experts And Counsel
No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant. Nor was any such person
connected with the registrant as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.
Bradford J. Lam has provided an opinion on the validity of our common stock.
The financial statements included in this prospectus and the registration
statement have been audited by Ronald R. Chadwick, P.C., Certified Public
Accountant, to the extent and for the periods set forth in their report
appearing elsewhere in this document and in the registration statement filed
with the SEC, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
Disclosure Of Commission Position Of Indemnification For Securities Act
Liabilities
Our directors and officers are indemnified as provided by the Nevada Revised
Statutes and our Bylaws. These provisions provide that we shall indemnify a
director or former director against all expenses incurred by him by reason of
him acting in that position. The directors may also cause us to indemnify an
officer, employee or agent in the same fashion.
We have been advised that in the opinion of the Securities and Exchange
Commission indemnification for liabilities arising under the Securities Act is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by the
court's decision.
14
<page>
Organization Within Last Five Years
We were incorporated on July 20, 2004 under the laws of the state of Nevada. On
that date, William Stewart was appointed as our sole director. As well, Mr.
Stewart was appointed as our president, secretary, treasurer and chief executive
officer.
Description Of Business
In General
We have commenced operations as an exploration stage company. An "exploration
stage company" includes all issuers engaged in the search for mineral deposits
(reserves) which are not in either the development or production stage.
Development stage companies are engaged in the preparation of an established
commercially minable deposit (reserves) for its extraction, which are not in the
production stage. Production stage companies are engaged in the exploitation of
a mineral deposit (reserve).
We have no revenues or operations, have achieved losses since our inception and
currently rely upon the sale of our securities to fund operations.
We will be engaged in the acquisition and exploration of mineral properties with
a view to exploiting any mineral deposits we discover. We own a 100% interest in
one mineral claim known as the Scadding West claim. This interest does not
confer any real property rights. We solely own the right to explore the Scadding
West claim for minerals and extract them from the surface and subsurface of the
property. The owner of the real property interest in the land covered by the
Scadding West claim is the government of Canada. Because the land covered by our
mineral claim is in a remote, undeveloped area, we do not anticipate any
conflict between our proposed exploration activities and the government's
interest.
In the course of our exploration programs, we will be required to return the
property to as close as possible to its original state. This is known as
reclamation. Reclamation may include planting trees, moving earth and filing
holes that we create during exploration. Due to minimal land disturbance, we
will not be required to conduct any reclamation activities on the Scadding West
claim after the planned phase one and two programs. When our exploration program
proceeds to the drilling stage, we may be required to post small bonds if the
rights of a private land owner may be affected. We anticipate that the cost of a
bond for a phase three drilling program and any required reclamation would not
exceed $5,000.
There is no assurance that a commercially viable mineral deposit exists on the
Scadding West claim. We do not have any current plans to acquire interests in
additional mineral properties, though we may consider such acquisitions in the
future.
Mineral property exploration is typically conducted in phases. Each subsequent
phase of exploration work is recommended by a geologist based on the results
from the most recent phase of exploration. We have not yet commenced the initial
phase of exploration on the Scadding West claim. Once we have completed each
phase of exploration, we will make a decision as to whether or not we proceed
with each successive phase based upon the analysis of the results of that
program. Our director will make this decision based upon the recommendations of
the independent geologist who oversees the program and records the results.
Our plan of operation is to conduct exploration work on the Scadding West claim
in order to ascertain whether it possesses economic quantities of gold, copper,
nickel, platinum and palladium. There can be no assurance that an economic
mineral deposit exists on the Scadding West claim until appropriate exploration
work is completed. An "economic mineral deposit" exists on a claim when an
independent geologist or engineer determines that the property contains
sufficient mineralization that mining operations would be profitable.
Even if we complete our proposed exploration programs on the Scadding West claim
and we are successful in identifying a mineral deposit, we will have to spend
substantial funds on further drilling and engineering studies before we will
know if we have a commercially viable mineral deposit.
If our proposed exploration programs are not successful in identifying economic
mineralization on the Scadding West mineral claim, we intend to acquire an
interest in an alternative mineral property in order to assess its potential to
contain a mineral deposit.
15
<page>
Property Purchase Agreement
On April 26, 2005, we entered into a mineral purchase and sale agreement with
Margaret Loney of Sudbury, Ontario whereby she sold to us a 100% undivided right
title and interest in one mineral claim located in the Scadding Township,
Sudbury Mining Division, Ontario, Canada. We acquired this interest in the
Scadding West claim by paying Margaret Loney $7,500.
Description, Location and Access
The Scadding West claim is located approximately 33 kilometers northeast of the
city of Sudbury. The property is centered at approximately 46(0)39' north
latitude and 80(0)39' west longitude. The property is accessed by travelling
west from the Kukagami Lake road along several old trails and logging roads.
Alternatively, it can be accessed via the Wanapitei River which passes near the
southwest corner of the mining claim. While the existing roads are sufficient
for any anticipated exploration on the Scadding West property, we would want to
improve the roads, at an approximate cost of $20,000, if we proceeded to the
mining stage.
The region of the Scadding West property is considered to have a humid, high
cool temperate ecoclimate with an average mean annual temperature of 3.5(0)
Celsius. Average daily temperature range in the summer is from 11.8(0) to
23.1(0) Celsius, while in winter, the average range is from -16.8(0) to -6.9(0)
Celsius. Average annual precipitation is 872 millimeters and snow cover is
deepest in January and February, with an average depth of 0.40 meters.
The land is dominated by a cover of mixed wood forest that includes sugar maple,
yellow birch, poplar, eastern hemlock, eastern white pine and red pine. Other
species found in wet regions include the red maple, black ash, white spruce,
tamarack and eastern white cedar. The area is well-glaciated, characterized by
ridged to hummocky rock outcrops that may be covered in whole or part by glacial
moraines and till.
Title to the Claim
The Scadding West property consists of one mineral claim comprising 192
hectares. A "mineral claim" refers to a specific section of land over which a
title holder owns rights to explore the ground and subsurface, and extract
minerals. The claim is registered with the Ontario government under claim number
S-998541. The claim expires on January 27, 2006. In order to extend this expiry
date on an annual basis, we must incur at least $2,400 in exploration work on
the claim prior to the expiry date. Otherwise, we will lose our ownership of the
claim comprising the Scadding West property.
Mineralization
Geologically, the most prominent feature in the area of the Scadding West claim
is an igneous complex of rocks. Igneous rocks are formed from molten lava which
has hardened on or below the surface of the earth. Minerals contained in these
rocks are dyke-related, that is, they are contained in a tabular body of igneous
rock that cuts across the structure of adjacent rocks, and are hosted by quartz
diorite, norite and gabbro rocks. Quartz diorite is a medium-gray-colored,
coarse-grained, igneous rock, often with a "salt-and-pepper" appearance. Norite
is a coarsely crystalline igneous rock containing the mineral labradorite as the
main component. Gabbro is a dark, coarse-textured, heavy rock composed of
calcium feldspar and augite with a small amount of quartz.
Exploration History, infrastructure and Condition of the Property
No known exploration has been conducted on the Scadding West claim. As such, the
Scadding West claim does not contain any mineral workings. As well, there is no
equipment, power source or other infrastructure facilities located on the
property. We will use portable power generators if we require a power source for
exploration of claim. Proposed exploration will focus on a northwest trending
fault that cuts through the northern part of the claim.
16
<page>
Geology Report
We retained Dr. Scott Jobin-Bevans, a professional geoscientist, to complete an
evaluation of the Scadding West claim and to prepare a geology report on the
claim.
Based on his review, Dr. Jobin-Bevans concludes that the Scadding West claim
warrants further exploration due to its potential to contain economic quantities
of gold, copper, nickel, platinum and palladium.
Dr. Jobin-Bevans recommends an initial exploration program consisting of two
phases. The first phase would consist of a review of existing data concerning
the property, geological mapping and sampling. Geological mapping involves
plotting previous exploration data relating to a property on a map in order to
determine the best property locations to conduct subsequent exploration work.
Sampling involves gathering rock and soil samples from property areas with the
most potential to host economically significant mineralization. All samples
gathered are sent to a laboratory where they are crushed and analysed for metal
content.
The first phase is estimated to cost $5,000 and would consist of the following:
Geological Review $ 500
Geological Mapping and Sampling $ 2,500
Report writing/consulting $ 1,500
Operating Supplies $ 500
Total $ 5,000
The second phase would consist of geophysical surveying, as well as follow-up
mapping and sampling.
The second phase would cost approximately $10,000 and would consist of the
following:
Geophysical survey $ 6,250
Follow-up Mapping and Sampling $ 1,500
Report writing/consulting $ 1,500
Operating Supplies $ 750
Total $10,000
Compliance with Government Regulation
We will be required to conduct all mineral exploration activities in accordance
with the Mining Act of Ontario. While we do not require any authorization to
proceed with the initial two phases of the recommended exploration program, we
will be required to obtain work permits from the Ontario Ministry of Northern
Development and Mines for any subsequent drilling program and any other
exploration work that results in a physical disturbance to the land if the
program calls for the disturbance of more than 10,000 square meters of the
property surface, or such areas that would total that amount when combined. A
work permit is also required for the erection of structures on the property.
There is no charge to obtain a work permit under the Mining Act.
When our exploration program proceeds to the drilling stage, we may be required
to post small bonds if the rights of a private land owner may be affected. We
anticipate that the cost of a bond for the phase three drilling program would
not exceed $5,000.
We may also be required to file statements of work with the Ministry of Northern
Development and Mines. Such statements would be filed following the completion
of the exploration and would cost approximately $500. The filing of statements
of work would not have any impact on the timing or completion of our exploration
program. We will also be required to undertake remediation work on any
exploration that results in physical disturbance to the land. The cost of
remediation work will vary according to the degree of physical disturbance.
17
<page>
We will not incur any regulatory compliance costs in the first two phases of
proposed exploration. The amount of these costs for subsequent exploration
phases is not known at this time as we do not know the extent of the exploration
program that will be undertaken beyond completion of the recommended exploration
programs. Because there is presently no information on the size, tenor, or
quality of any minerals or reserve at this time, it is impossible to assess the
impact of any capital expenditures on earnings or our competitive position.
Employees
We have no employees as of the date of this prospectus other than our sole
director.
Research and Development Expenditures
We have not incurred any other research or development expenditures since our
incorporation.
Subsidiaries
We do not have any subsidiaries.
Patents and Trademarks
We do not own, either legally or beneficially, any patents or trademarks.
Reports to Security Holders
Although we are not required to deliver a copy of our annual report to our
security holders, we will voluntarily send a copy of our annual report,
including audited financial statements, to any registered shareholder who
requests it. We will not be a reporting issuer with the Securities and Exchange
Commission until our registration statement on Form SB-2 is declared effective.
We have filed a registration statement on Form SB-2, under the Securities Act of
1933, with the Securities and Exchange Commission with respect to the shares of
our common stock offered through this prospectus. This prospectus is filed as a
part of that registration statement, but does not contain all of the information
contained in the registration statement and exhibits. Statements made in the
registration statement are summaries of the material terms of the referenced
contracts, agreements or documents of the company. We refer you to our
registration statement and each exhibit attached to it for a more detailed
description of matters involving the company. You may inspect the registration
statement, exhibits and schedules filed with the Securities and Exchange
Commission at the Commission's principal office in Washington, D.C. Copies of
all or any part of the registration statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, 100 F Street NE,
Washington, D.C. 20002. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The Securities and
Exchange Commission also maintains a web site at http://www.sec.gov that
contains reports, proxy statements and information regarding registrants that
file electronically with the Commission. Our registration statement and the
referenced exhibits can also be found on this site.
Plan Of Operations
Our plan of operation for the next twelve months is to complete the recommended
phase one and two exploration programs on the Scadding West claim consisting of
a geological mapping, prospecting and geochemical sampling. We anticipate that
these exploration programs will each cost approximately $5,000 and $10,000
respectively.
We commenced the phase one exploration program on the Scadding West claim in
October 2005. The program should take approximately up to a one month to
complete. We will then undertake the phase two work program during the spring of
2006. This program will take approximately one month to complete. We do not have
any verbal or written agreement regarding the retention of any qualified
engineer or geologist for this exploration program.
18
<page>
As well, we anticipate spending an additional $20,000 on administrative fees,
including fees payable in connection with the filing of this registration
statement and complying with reporting obligations.
Total expenditures over the next 12 months are therefore expected to be $35,000.
While we have enough funds to cover the cost of our exploration programs, we
will require additional funding in order to cover anticipated
administrative fees and to proceed with any additional recommended
exploration on the Scadding West claim following the completion of the phase two
program. We anticipate that additional funding will be in the form of equity
financing from the sale of our common stock or from director loans. We do not
have any arrangements in place for any future equity financing or loans.
If our proposed exploration programs are not successful in identifying economic
mineralization on the Scadding West mineral claim, we intend to acquire an
interest in an alternative mineral property in order to assess its potential to
contain a mineral deposit. It is likely that we would have to raise additional
funding in order to acquire an interest in an additional mineral claim and would
sell shares of our common stock to obtain this financing.
Results Of Operations For The Period From Inception Through June 30, 2005
We have not earned any revenues from our incorporation on July 20, 2004 to June
30, 2005. We do not anticipate earning revenues unless we enter into commercial
production on the Scadding West claim, which is doubtful. We have only recently
commenced the exploration stage of our business and can provide no assurance
that we will discover economic mineralization on the Scadding West claim, or if
such minerals are discovered, that we will enter into commercial production.
We incurred operating expenses in the amount of $18,005 for the period from our
inception on July 20, 2004 to June 30, 2005. These operating expenses were
comprised of mineral property acquisition costs of $7,500, administration and
management expenses of $5,000, legal and accounting costs of $3,000, office
expenses of $2,500 and bank charges of $5.
We have not attained profitable operations and are dependent upon obtaining
financing to pursue exploration activities.
Description Of Property
We own the mineral exploration rights relating to the Scadding West mineral
claim. We do not own any real property interest in the Scadding West claim or
any other property.
Certain Relationships And Related Transactions
We record rent expense of $250 per month for the use of office space that our
president, William Stewart donates to us. As well, we record compensation
expense of $500 per month for administrative and management services that he
donates to us.
Otherwise, none of the following parties has, since our date of incorporation,
had any material interest, direct or indirect, in any transaction with us or in
any presently proposed transaction that has or will materially affect us:
* Any of our directors or officers;
* Any person proposed as a nominee for election as a director;
* Any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to our outstanding
shares of common stock;
* Our sole promoter, William Stewart;
* Any member of the immediate family of any of the foregoing persons.
19
<page>
Market For Common Equity And Related Stockholder Matters
No Public Market for Common Stock
There is presently no public market for our common stock. We anticipate applying
for trading of our common stock on the over the counter bulletin board upon the
effectiveness of the registration statement of which this prospectus forms a
part. However, we can provide no assurance that our shares will be traded on the
bulletin board or, if traded, that a public market will materialize.
Stockholders of Our Common Shares
As of the date of this registration statement, we have 32 registered
shareholders.
Rule 144 Shares
A total of 2,000,000 shares of our common stock are available for resale to the
public after December 15, 2005 in accordance with the volume and trading
limitations of Rule 144 of the Act. In general, under Rule 144 as currently in
effect, a person who has beneficially owned shares of a company's common stock
for at least one year is entitled to sell within any three month period a number
of shares that does not exceed the greater of:
1. 1% of the number of shares of the company's common stock then
outstanding which, in our case, will equal 51,250 shares as of the date
of this prospectus; or
2. the average weekly trading volume of the company's common stock during
the four calendar weeks preceding the filing of a notice on Form 144
with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about the
company.
Under Rule 144(k), a person who is not one of the company's affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
As of the date of this prospectus, persons who are our affiliates hold all of
the 2,000,000 shares that may be sold pursuant to Rule 144.
Registration Rights
We have not granted registration rights to the selling shareholders or to any
other persons.
Dividends
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
20
<page>
Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to
our executive officers by any person for all services rendered in all capacities
to us for the fiscal period from our inception on July 20, 2004 to June 30, 2005
and the subsequent period to the date of this prospectus.
Annual Compensation
<table>
<caption>
Restrict-ed Options/SARS LTP payouts
Other Stock (#) ($)
Name Title Year Salary Bonus Comp. Awarded
- ---------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c>
William Stewart Pres, 2005 $0 0 0 0 0 0
Sec,
Treas,
CEO, &
Dir
</table>
Stock Option Grants
We have not granted any stock options to the executive officers since our
inception.
Consulting Agreements
We do not have any employment or consulting agreement with our directors or
officers. We do not pay Mr. Stewart any amount for acting as a director of the
Company.
Financial Statements
Index to Financial Statements:
1. Report of Independent Registered Public Accounting Firm;
2. Audited financial statements for the period ending June 30, 2005,
including:
a. Balance Sheets;
b. Statements of Operations;
c. Statements of Stockholders' Equity;
d. Statements of Cash Flows; and
e. Notes to Financial Statements
21
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
June 30, 2005
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
Financial Statements
TABLE OF CONTENTS
Page
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Balance sheet 2
Statement of operations 3
Statement of stockholders' equity 4
Statement of cash flows 5
Notes to financial statements 7
<page>
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Host Ventures, Inc.
Highlands Ranch, Colorado
I have audited the accompanying balance sheet of Host Ventures, Inc. (An
Exploration stage company) as of June 30, 2005, and the related statements of
operations, stockholders' equity and cash flows for the period from July 20,
2004 (inception) through June 30, 2005. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Host Ventures, Inc. as of June 30,
2005, and the results of its operations and its cash flows for the period from
July 20, 2004 (inception) through June 30, 2005 in conformity with accounting
principles generally accepted in the United States of America.
Aurora, Colorado Ronald R. Chadwick, P.C.
September 26, 2005 RONALD R. CHADWICK, P.C.
1
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
BALANCE SHEET
June 30, 2005
ASSETS
Current assets
Cash $ 34,745
-----------
Total current assets 34,745
-----------
Total Assets $ 34,745
===========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities $ -
-----------
Stockholders' Equity
Common stock, $.001 par value;
75,000,000 shares authorized;
5,125,000 issued and outstanding 5,125
Additional paid in capital 47,625
Deficit accumulated during the exploration stage (18,005)
-----------
Total Stockholders' Equity 34,745
-----------
Total Liabilities and Stockholders' Equity $ 34,745
===========
The accompanying notes are an integral part of the financial statements.
2
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
STATEMENT OF OPERATIONS
July 20, 2004 (Inception) Through June 30, 2005
Revenue $ -
---------------
Expenses:
Bank charges 5
Legal & accounting 3,000
Mining property expenses 7,500
Office expense 2,500
Administration and management 5,000
---------------
18,005
---------------
Loss from operations (18,005)
---------------
Other income (expense) -
---------------
Income (loss) before provision for income taxes (18,005)
---------------
Provision for income tax -
---------------
Net income (loss) $ (18,005)
===============
Net income (loss) per share
(Basic and fully diluted) $ (0.01)
===============
Weighted average number of
common shares outstanding 2,745,909
===============
The accompanying notes are an integral part of the financial statements.
3
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
<table>
<caption>
Deficit
Accum.
During the Stock
Common Stock Paid In Exploration holders'
Shares Amount Capital Stage Equity
- --------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c>
Balances at July 20, 2004 - $ - $ - $ - $ -
December 15, 2004, 2,000,000 shares
of common stock issued for cash of
$2,000 to a founder, for
$.001 per share 2,000,000 2,000 2,000
January, 2005 - February, 2005,
2,825,000 shares of common stock
issued for cash of $28,250 pursuant
to a Regulation D offering,
at .01 per share 2,825,000 2,825 25,425 28,250
March, 2005 - April, 2005,
300,000 shares of common stock
issued for cash of $15,000 pursuant
to a Regulation D offering,
at .05 per share 300,000 300 14,700 15,000
August, 2004 - April, 2005,
Services and office space
provided by officer 7500 7,500
Gain (loss) for the period from
July 20, 2004 (Inception)
through June 30, 2005 (18,005) (18,005)
Balances at June 30, 2005 5,125,000 $ 5,125 $ 47,625 $ (18,005) $ 34,745
</table>
The accompanying notes are an integral part of the financial statements.
4
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
July 20, 2004 (Inception) Through June 30, 2005
Cash Flows From Operating Activities:
Net income (loss) during the exploration stage $ (18,005)
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Donated office space and services 7,500
Net cash provided by (used for) -----------
operating activities (10,505)
-----------
Cash Flows From Investing Activities: $ -
-----------
(Continued On Following Page)
The accompanying notes are an integral part of the financial statements.
5
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
STATEMENT OF CASH FLOWS
July 20, 2004 (Inception) Through June 30, 2005
(Continued From Previous Page)
Cash Flows From Financing Activities:
Sale of common stock 45,250
Net cash provided by (used for) ----------
financing activities 45,250
----------
Net Increase (Decrease) In Cash 34,745
Cash At The Beginning Of The Period -
----------
Cash At The End Of The Period $ 34,745
==========
Schedule Of Non-Cash Investing And Financing Activities
- -------------------------------------------------------
None
Supplemental Disclosure
- -----------------------
Cash paid for interest $ -
Cash paid for income taxes $ -
The accompanying notes are an integral part of the financial statements.
6
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Host Ventures, Inc. (the "Company"), was incorporated in the State of Nevada on
July 20, 2004. The Company was formed to engage in the acquisition, exploration,
and production of precious minerals. The Company may also engage in any other
business permitted by law, as designated by the Board of Directors of the
Company.
Exploration Stage
- -----------------
The Company is currently in the exploration stage and has no significant
operations to date.
Cash and cash equivalents
- -------------------------
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Income tax
- ----------
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 ("SFAS 109"). Under SFAS 109 deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Fiscal year
- -----------
The Company employs a fiscal year ending June 30.
7
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
Net income (loss) per share
- ---------------------------
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Revenue recognition
- -------------------
Revenue is recognized on an accrual basis as earned under contract terms. The
Company has had no revenue to date.
Mineral Properties
- ------------------
Costs of acquiring specific mineral properties are capitalized on a property by
property basis. Mineral properties are periodically assessed for impairment of
value and any impairments are charged to operations at the time of impairment.
Should a property be sold or abandoned, its capitalized costs are charged to
operations and gain or loss recognized. The Company recorded an expense of
$7,500 in fiscal year 2005 for amounts expended to acquire a mining lease.
Financial Instruments
- ---------------------
The carrying value of the Company's financial instruments, including cash and
cash equivalents, as reported in the accompanying balance sheet, approximates
fair value.
Recent Accounting Pronouncements
- --------------------------------
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs (An Amendment
of ARB No. 43, Chapter 4)". SFAS 151 amends and clarifies financial accounting
and reporting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). The Company has adopted the provisions of
SFAS No. 151 which are effective in general for inventory costs incurred during
fiscal years beginning after June 15, 2005. The adoption did not have a material
effect on the results of operations of the Company.
In December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
Time-Sharing Transactions (An Amendment of FASB Statements No. 66 and 67)".
SFAS 152 amends FASB 66 and 67 to reference the accounting and reporting
guidance for real
8
<page>
HOST VENTURES, INC.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
estate time-sharing transactions provided for in AICPA Statement of Position
04-2. of The Company has adopted the provisions of SFAS No. 152 which are
effective for financial statements for fiscal years beginning after June 15,
2005. The adoption did not have a material effect on the results of operations
of the Company.
In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmonetary Assets
(An Amendment of APB No. 29)". SFAS 153 amends Opinion 29 to eliminate the fair
value accounting exception for nonmonetary exchanges of similar productive
assets, and replaces that exception with a general exception for nonmonetary
assets that do not have commercial substance. The Company has adopted the
provisions of SFAS No. 153 which are effective in general for nonmonetary asset
exchanges occurring in fiscal years beginning after June 15, 2005. The adoption
did not have a material effect on the results of operations of the Company.
In March 2005, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment". SFAS 123(r) requires that the cost resulting from all share-based
payment transactions be recognized in the financial statements. The Company has
adopted the provisions of SFAS No. 123(r) which are effective in general for
transactions entered into or modified after June 15, 2005. The adoption did not
have a material effect on the results of operations of the Company.
In August 2005, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 154, "Accounting Changes
and Error Corrections." SFAS 154 changes the requirements for the accounting for
and reporting of a change in accounting principle, requiring in general
retrospective application to prior periods' financial statements of changes in
accounting principle. The Company has adopted the provisions of SFAS No. 154
which are effective for accounting changes and corrections of errors beginning
after December 15, 2005. The adoption did not have a material effect on the
results of operations of the Company.
NOTE 2. RELATED PARTY TRANSACTIONS
The Company recorded rent expense of $250 per month for the use of office space
donated to the Company by an officer. Total rent expense under this arrangement
was $2,500. The Company also recorded compensation expense of $500 per month
($5,000 total) for administrative and management services donated to the Company
by an officer.
NOTE 3. INCOME TAXES
At June 30, 2005 the Company had a net operating loss carryforward for tax
purposes of approximately $10,000 which will expire in 2025. The deferred tax
asset of $2,000 created by the net operating loss has been offset by a 100%
valuation allowance. The change in the valuation allowance in 2005 was $2,000.
9
<page>
Changes In And Disagreements With Accountants on Accounting and
Financial Disclosure
We have had no changes in or disagreements with our accountants.
Until ______________, all dealers that effect transactions in these securities
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Part II
Information Not Required In The Prospectus
Indemnification Of Directors And Officers
Our officers and directors are indemnified as provided by the Nevada Revised
Statutes (the "NRS") and our bylaws.
Under the NRS, director immunity from liability to a company or its shareholders
for monetary liabilities applies automatically unless it is specifically limited
by a company's articles of incorporation that is not the case with our articles
of incorporation. Excepted from that immunity are:
(1) a willful failure to deal fairly with the company or its shareholders
in connection with a matter in which the director has a material
conflict of interest;
(2) a violation of criminal law (unless the director had reasonable cause
to believe that his or her conduct was lawful or no reasonable cause
to believe that his or her conduct was unlawful);
(3) a transaction from which the director derived an improper personal
profit; and
(4) willful misconduct.
Our bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by Nevada law; provided, however, that we may
modify the extent of such indemnification by individual contracts with our
directors and officers; and, provided, further, that we shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless:
(1) such indemnification is expressly required to be made by law;
(2) the proceeding was authorized by our Board of Directors;
(3) such indemnification is provided by us, in our sole discretion,
pursuant to the powers vested us under Nevada law; or
(4) such indemnification is required to be made pursuant to the bylaws.
Our bylaws provide that we will advance all expenses incurred to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was our director or
officer, or is or was serving at our request as a director or executive officer
of another company, partnership, joint venture, trust or other enterprise, prior
to the final disposition of the proceeding, promptly following request. This
advanced of expenses is to be made upon receipt of an undertaking by or on
behalf of such person to repay said amounts should it be ultimately determined
that the person was not entitled to be indemnified under our bylaws or
otherwise.
22
<page>
Our bylaws also provide that no advance shall be made by us to any officer in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made: (a) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding; or (b) if such quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision- making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to our best interests.
Other Expenses Of Issuance And Distribution
The estimated costs of this offering are as follows:
Securities and Exchange Commission registration fee $ 18.39
Transfer Agent fees $ 1,500.00
Accounting and auditing fees and expenses $ 3,500.00
Legal fees and expenses $10,000.00
Edgar filing fees $ 1,500.00
----------
Total $16,518.39
==========
All amounts are estimates other than the Commission's registration fee.
We are paying all expenses of the offering listed above. No portion of these
expenses will be borne by the selling shareholders. The selling shareholders,
however, will pay any other expenses incurred in selling their common stock,
including any brokerage commissions or costs of sale.
Recent Sales Of Unregistered Securities
We completed an offering of 2,000,000 shares of our common stock at a price of
$0.001 per share to our president, William Stewart, on December 15, 2004. The
total amount received from this offering was $2,000. These shares were issued
pursuant to section 4(2) of the Securities Act. Mr. Stewart is a sophisticated
and accredited investor who has thorough knowledge of our business and affairs.
The issuance of shares to Mr. Stewart did not constitute a public offering of
securities. Mr. Stewart's securities are restricted pursuant to Rule 144.
We completed an offering of 2,825,000 shares of our common stock at a price of
$0.01 per share to a total of 18 purchasers on February 18, 2005. The total
amount received from this offering was $31,250. These shares were issued
pursuant to Rule 504 of Regulation D of the Securities Act. Each purchaser
represented their intention to acquire the securities for investment only and
not with a view toward distribution. Appropriate legends were affixed to the
stock certificates issued in accordance with Regulation D. All purchasers were
given adequate access to sufficient information about us to make an informed
investment decision. None of the securities were sold through an underwriter and
accordingly, there were no underwriting discounts or commissions involved. The
purchasers in this offering were as follows:
Name of Subscriber Number of Shares
- --------------------------------------------------------------------------------
Robert G. Austin 150,000
Mitch Burroughs 100,000
Jeff Brubaker 200,000
Mike Caple 100,000
Michael John Cook 150,000
Charles B. Davis 250,000
Stephen L. Eggleston 125,000
Dean Galbreath 100,000
Charles L. Gamber 100,000
Dennis C. Grover 150,000
John Herzog 100,000
Jason Knox 250,000
John Kobar 250,000
Kevin S. Knoll 150,000
Bradley R. Morrell 100,000
Benjamin K. Peal 250,000
Donald W. Prosser 150,000
Orland Stewart 150,000
23
<page>
We completed an offering of 300,000 shares of our common stock at a price of
$0.05 per share to a total of 13 purchasers on March 31, 2005. The total amount
received from this offering was $15,000. These shares were issued pursuant to
Rule 504 of Regulation D of the Securities Act. Each purchaser represented their
intention to acquire the securities for investment only and not with a view
toward distribution. Appropriate legends were affixed to the stock certificates
issued in accordance with Regulation D. All purchasers were given adequate
access to sufficient information about us to make an informed investment
decision. None of the securities were sold through an underwriter and
accordingly, there were no underwriting discounts or commissions involved. The
purchasers in this offering were as follows:
Name of Subscriber Number of Shares
- --------------------------------------------------------------------------------
Iaonnis Andrianakos 20,000
Jim Cunningham 20,000
Patricia K. Davies 20,000
H. Jay Harkins 20,000
Konstantinos M. Kalasountas 20,000
Phil Levy 20,000
Carl Mattei 50,000
James E. Millen III 25,000
Patries Ringman 20,000
Gary Robinson 20,000
Christian Stein 20,000
Delbert Stiewart 20,000
George Wolff 25,000
Exhibits
Exhibit
Number Description
3.1* Articles of Incorporation
3.2* Bylaws
5.1** Legal opinion of Bradford J. Lam, with consent to use
10.1* Mineral property purchase agreement dated April 26, 2005
23.1 Consent of Ronald P. Chadwick, P.C., Certified Public
Accountant
23.2*** Consent of Dr. Scott Jobin-Bevans, Professional Geoscientist
99.1* Location map
99.2** Subscription agreement
* filed as an exhibit to our registration statement filed on July 11, 2005
** filed as an exhibit to our registration statement filed on August 22, 2005
*** filed as an exhibit to our registration statement filed on October 12, 2005
The undersigned registrant hereby undertakes:
1. To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
a. include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information
set forth in this registration statement; and notwithstanding
the forgoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
Statement; and
24
<page>
c. include any additional or changed material information on the plan
of distribution.
2. That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered hereby which remain unsold
at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
person sin connection with the securities being registered, we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Highlands Ranch, State of Colorado on October 31, 2005.
Host Ventures Inc.
By: /s/ William Stewart
------------------------------
William Stewart
President, Secretary, Treasurer,
Chief Executive Officer and Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated:
SIGNATURE CAPACITY IN WHICH SIGNED DATE
/s/ William Stewart President, Secretary, Treasurer, Chief October 31, 2005
- ------------------- Executive Officer, principal accounting
William Stewart officer, principal financial officer and
Director
25