SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
_X_ Registration statement pursuant to Section 12(b) or (g) of the Securities
Exchange Act of 1934 or
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to _________________
Commission file number
Dynamic Resources Corp.
- ---------------------------------------------------------
(Exact name of registrant as specified in this charter)
Province of Alberta, Canada
- ---------------------------------------------------------
(Jurisdiction of incorporation or organization)
1936 Alcova Ridge Drive
Las Vegas, NV 89135
- ------------------------------------------
(Address of principal executive offices)
Securities registered or to be registered pursuant to section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange
on which registered)
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Common Shares Without Par Value
---------------------------------
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:
None
------------------
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the
registration statement.
70,313,149
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 X Item 18
II
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Identity of Directors, Senior Management and Advisors...........1
1.1 Directors and Senior Management............................1
1.2 Advisors...................................................1
1.3 Auditors...................................................2
ITEM 2. Offer Statistics and Expected Timetable.........................2
ITEM 3. Key Information.................................................2
3.1 Selected Financial Data....................................2
3.2 Capitalization and Indebtedness............................5
3.3 Reasons for the Offer and Use of Proceeds..................5
3.4 Risk Factors...............................................5
ITEM 4. Information on the Company......................................9
4.1 History and Development....................................9
4.2 Franklin Creek and TB1-12 Properties......................10
4.3 Good Hope Property........................................11
4.4 Competition...............................................12
4.5 Management & Employees....................................12
4.6 Office Space..............................................12
4.7 Environmental Regulations................................12
ITEM 5. Operating and Financial Review and Prospects...................13
5.1 Results of Operations.....................................13
5.2 Liquidity and Capital Resources...........................14
ITEM 6. Directors, Senior Management and Employees.....................15
6.1 Directors and Senior Management...........................15
6.2 Compensation of Directors.................................16
6.3 Board Practices...........................................17
6.4 Employees.................................................17
6.5 Share Ownership of Directors and Officers.................18
ITEM 7. Major Shareholders and Related Party Transactions..............18
7.1 Beneficial Ownership......................................19
7.2 Related Party Transactions................................19
7.3 Interests of Experts and Counsel..........................19
ITEM 8. Financial Information..........................................19
8.1 Legal Proceedings.........................................19
8.2 Significant Changes.......................................20
ITEM 9. The Offer and Listing..........................................20
9.1 Offering and Listing Details..............................20
ITEM 10.Additional Information.........................................21
10.1 Share Capital............................................21
10.2 Bylaws and Articles......................................25
10.3 Material Contracts.......................................26
10.4 Exchange Controls and other Limitations Affecting
Security Holders.................................. ....27
10.5 Certain Canadian Federal Income Tax Consequences to U.S.
Investors..............................................27
10.6 Documents on Display.....................................28
ITEM 11.Quantitative and Qualitative Disclosures About Market Risk.. ..28
ITEM 12.Descriptions of Securities Other than Equity Securities........28
12.1 Warrants.................................................28
12.2 Stock Options............................................29
PART II
ITEM 13.Defaults, Dividend Arrearages and Delinquencies................29
ITEM 14.Material Modifications to the Rights of Security Holders and
Use of Proceeds.........................................29
ITEM 15.Controls and Procedures........................................29
ITEM 16.Audit Committee Financial Expert...............................29
PART III
ITEM 17. Financial Statements
ITEM 18. Financial Statements
ITEM 19. Exhibits
SIGNATURE
I
FORWARD-LOOKING STATEMENTS
We caution you that certain important factors (including without limitation
those set forth in this Form 20-F) may affect our actual results and could cause
such results to differ materially from any forward-looking statements that may
be deemed to have been made in this Form 20-F registration statement, or that
are otherwise made by or on our behalf. For this purpose, any statements
contained in this registration statement that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
generality of the foregoing, words such as "may," "except," "believe,"
"anticipate," "intend," "could," estimate," or "continue," or the negative or
other variations of comparable terminology, are intended to identify forward-
looking statements.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
1.1 DIRECTORS AND SENIOR MANAGEMENT:
The following table sets forth the name, business address and position of each
of the directors and executive officers of the Company:
Name & Address Position
Robert D. Fedun President, Chief Executive Officer,
1936 Alcova Drive Chief Financial Officer and Director
Las Vegas, Nevada
Glen C. MacDonald Secretary and Director
#410 - 455 Granville St.
Vancouver, BC V6C 1T1 Canada
Kenneth R. Ralfs Director
4615 London Mews
Ladner, BC, V4K 4W9 Canada
Peter Hill Director
1075 Barclay Street
Vancouver, BC, V6E 1G5 Canada
1.2 ADVISORS:
The following table sets forth the name, business address and position of each
of the advisors to the Company:
Name & Address Position
Bank of Montreal Banker
Commercial Banking
Main Floor, First Bank Tower
P.O. Box 49500, 595 Burrard Street
Vancouver, B.C., Canada V7X 1L7
Gregory S. Yanke Law Corporation Legal Counsel
200 - 675 West Hastings Street
Vancouver, B.C., Canada V6B 1N2
1.3 AUDITORS
Name & Address Position
Amisano Hanson Auditors
Chartered Accountants
750 West Pender Street, Suite 604
Vancouver, BC V6C 2T7
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable
ITEM 3. KEY INFORMATION
3.1 SELECTED FINANCIAL DATA
The following tables set forth the audited data of the Company for the fiscal
years ended December 31, 2005, 2004, 2003, 2002, and 2001. We derived all
figures from our financial statements which were examined by our independent
auditor. This information should be read in conjunction with our financial
statements included in this registration statement.
Our financial statements included in this registration statement and the table
set forth below have been prepared in accordance with accounting principles
generally accepted in Canada. A reconciliation to United States generally
accepted accounting principles is included in the notes to our financial
statements. All amounts in this document are expressed in Canadian dollars,
except as expressly indicated otherwise. The first table presents this
financial data in accordance with
2
United Statements generally accepted accounting principles. The second table
presents the data in accordance with Canadian generally accepted accounting
principles.
U.S. Generally Accepted Accounting Principles
SIX- MONTH PERIOD SIX- MONTH PERIOD FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED JUNE 30, ENDED JUNE 30, ENDED ENDED DEC. ENDED DEC. ENDED DEC. ENDED DEC.
2006 2005 DECEMBER 31, 31, 2004 31, 2003 31, 2002 31, 2001
(UNAUDITED) (UNAUDITED) 2005
Net Operating $ 20,798 Nil Nil Nil Nil Nil Nil
Revenue
Income (Loss) ($712,123) ($451,355) ($702,731) ($605,647) $ 4,605 $154,098 ($51,332)
from
operations
Income (Loss) ($0.01) ($0.01) ($0.02) ($0.03) $0.01 $0.04 $0.00
per common
share
Total assets $19,559,548 16,925,670 $18,553,694 $16,840,684 $ 5,323 81 $3,852
Net assets $2,469,489 ($226,154) $ 1,813,794 $ 49,336 ($1,088,039) ($1,095,144) ($1,249,242)
(liabilities)
Long term $16,985,211 $16,686,594 16,594,221 $16,686,594 Nil Nil Nil
debt
Cash Nil Nil Nil Nil Nil Nil Nil
dividends per
common share
Deficit $16,491,635) ($15,528,136) ($15,779,512) $(15,076,781) ($14,471,134) ($14,475,739) ($14,629,837)
Capital stock $18,664,255 $15,154,117 $17,354,359 $15,014,177 $13,383,095 $13,380,595 $13,380,595
Weighted 66,506,998 33,682,208 41,189,782 19,595,448 3,854,657 3,854,657 3,854,657
average
number
of common
shares
Canadian Generally Accepted Accounting Principles
3
SIX-MONTH PERIOD ENDED SIX-MONTH PERIOD ENDED FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
JUNE 30, 2006 JUNE 30, 2005 ENDED DEC. ENDED DEC. ENDED DEC. 31, ENDED DEC. ENDED DEC.
(UNAUDITED) (UNAUDITED) 31, 2005 31, 2004 2003 31, 2002 31, 2001
Net 20,798 Nil Nil Nil Nil Nil Nil
Operating
Revenue
Earnings ($727,051) ($388,075) (482,415) ($364,051) $4,605 $156,098 ($51,332)
(Loss)
from
operations
Earnings ($0.01) ($0.01) (0.02) ($0.02) $0.00 $0.04 $0.00
(Loss) per
common
share
Total $20,008,532 $17,232,546 $19,017,606 $17,084,280 $7,323 $ 2,081 $3,852
assets
Net assets $ 2,918,473 $ 80,722 $ 2,277,706 $ 292,932 (1,086,039) (1,093,144) (1,249,242)
Long term $16,985,211 $17,081,958 $16,594,221 $16,686,594 Nil Nil Nil
debt
Cash Nil Nil Nil Nil Nil Nil Nil
dividends
per common
share
Deficit ($16,042,651) ($15,221,260) ($15,315,600) ($14,833,185) ($14,469,134) ($14,473,739) ($14,629,837)
Capital $18,664,255 15,154,117 $17,354,359 $15,014,117 $13,383,095 $13,380,595 $13,380,595
stock
Weighted 66,506,998 33,682,208 41,189,782 19,595,448 3,854,657 3,854,657 3,854,657
average
number
of common
shares
Since June 1, 1970, the government of Canada has permitted a floating exchange
rate to determine the value of the Canadian dollar as compared to the United
States dollar. On November 7, 2006, the exchange rate in effect for Canadian
dollars exchanged for United States dollars, expressed in terms of Canadian
dollars was $1.1276. This exchange rate is based on the noon buying rates in
New York City, for cable transfers in Canadian dollars, as certified for customs
purposes by the Federal Reserve Bank of New York. For the past fiscal year
ended December 31 and for the six month period between July 1, 2005 and December
30, 2005, the following exchange rates were in effect for Canadian dollars
exchanged for United States dollars, calculated in the same manner as above:
Period
Average
Period ended Mar. 31, 2005 $1.2262
Year ended Dec. 31, 2005 $1.2083
Year ended Dec. 31, 2004 $1.2984
Year ended Dec. 31, 2003 $1.3916
Year ended Dec. 31, 2002 $1.5703
Year ended Dec. 31, 2001 $1.5519
Year ended Dec. 31, 2000 $1.4870
Low High
Month ended Jan 31, 2006 $1.1436- $1.1726
Month ended Feb 28, 2006 $1.1379- $1.1577
4
Month ended Mar. 31, 2006 $1.1320 - $1.1722
Month ended Apr. 30, 2006 $1.1203 - $1.1718
Month ended May. 31, 2006 $1.0989 - $1.1232
Month ended Jun. 30, 2006 $1.0991 - $1.1241
Month ended Jul 31, 2006 $1.1415 - $1.1112
Month ended Aug 31, 2006 $1.1312 - $1.1066
Month ended Sept 30, 2006 $1.1272 - $1.1052
Month ended Oct 31, 2006 $1.1384 - $1.1151
3.2 CAPITALIZATION AND INDEBTEDNESS
The following table sets forth our capitalization and indebtedness as at
June 30,2006 in accordance with United States generally accepted accounting
principles:
- ----------------------------------------------------------------------
| | June 30, 2006 |
| |(in Canadian Dollars)|
- ----------------------------------------------------------------------
| | $104,848|
|Short term debt (unsecured and not guaranteed)| |
- ----------------------------------------------------------------------
|Long term debt | $16,985,211|
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| TOTAL DEBT | $17,090,059|
- ----------------------------------------------------------------------
| | |
- ----------------------------------------------------------------------
|Shareholder's Equity: | |
- ----------------------------------------------------------------------
|Capital Stock | $18,664,255|
- ----------------------------------------------------------------------
|Contributed Surplus | $296,869|
- ----------------------------------------------------------------------
|Accumulated Deficit | ($16,491,635)|
- ----------------------------------------------------------------------
| TOTAL SHAREHOLDERS' EQUITY | $2,469,489|
- ----------------------------------------------------------------------
| | |
- ----------------------------------------------------------------------
|TOTAL CAPITALIZATION | $19,559,548|
- ----------------------------------------------------------------------
3.3 REASONS FOR THE OFFER AND USE OF PROCEEDS
Not Applicable
3.4 RISK FACTORS
Any investment in our common shares involves a high degree of risk. You should
consider carefully the following information before you decide to buy our common
shares. If any of the events discussed in the following risk factors actually
occurs, our business, financial condition or results of operations would likely
suffer. In this case, the market price of our common shares could decline, and
you could lose all or part of your investment in our shares. In particular, you
should consider carefully the following risk factors:
WE HAVE A HISTORY OF LOSSES.
We have incurred losses in our business operations since inception, and we
expect that we will continue to lose money for the foreseeable future. From our
incorporation on May 21, 1993 to June 30, 2006, we have incurred losses
totalling $16,491,635. Very few junior resource companies ever become
5
profitable. Failure to achieve and maintain profitability may adversely affect
the market price of our common stock.
WE HAVE LIMITED FINANCIAL RESOURCES AND NO SOURCE OF CASH FLOW.
We have limited financial resources, no source of operating cash flow and no
assurance that additional funding will be available to us for further
exploration of our projects or to fulfil our obligations under any applicable
agreements. Failure to obtain such additional financing could result in delay
or indefinite postponement of further exploration of our projects with the
possible loss of such properties.
VERY FEW MINERAL PROPERTIES ARE ULTIMATELY DEVELOPED INTO PRODUCING MINES.
The business of exploration for minerals and mining involves a high degree of
risk. Few properties that are explored are ultimately developed into producing
mines. At present, our mineral properties have no known body of commercial ore.
Most exploration projects do not result in the discovery of commercially
mineable deposits of ore.
Substantial expenditures are required for us to establish ore reserves through
drilling, to develop metallurgical processes, to extract the metal from the ore
and, in the case of new properties, to develop the mining and processing
facilities and infrastructure at any site chosen for mining.
Although substantial benefits may be derived from the discovery of a major
mineral deposit, no assurance can be given that we will discover minerals in
sufficient quantities to justify commercial operations or that we can obtain the
funds required for development on a timely basis. The economics of developing
precious and base metal mineral properties is affected by many factors including
the cost of operations, variations in the grade of ore mined, fluctuations in
metal markets, costs of processing equipment and other factors such as
government regulations, including regulations relating to royalties, allowable
production, importing and exporting of minerals and environmental protection.
We have no producing mines at this time.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.
Except for those planned for the current year, our current operating funds are
less than necessary to complete exploration of our mineral claims, and therefore
we will need to obtain additional financing in order to complete our business
plan. As at June 30, 2006 we had cash in the amount of $148,355. Our business
plan calls for significant expenses in connection with the exploration of our
mineral claims. We will require additional financing in order to complete these
activities. In addition, 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 we can provide no assurance to investors that we will be able to
find such financing if required.
We believe the only realistic source of future funds presently available to us
is through the sale of equity capital. Any sale of share capital will result in
dilution to existing shareholders. The only other alternative for the financing
6
of further exploration would be the offering by us of an interest in our
properties to be earned by another party or parties carrying out further
exploration thereof.
BECAUSE MANAGEMENT HAS ONLY LIMITED EXPERIENCE IN RESOURCE EXPLORATION, THE
BUSINESS HAS A HIGHER RISK OF FAILURE.
Our management, while experienced in business operations, has only limited
experience in resource exploration. Only one of our directors or officers has
any significant technical training or experience in resource exploration or
mining. We rely on the opinions of consulting geologists that we retain from
time to time for specific exploration projects or property reviews. As a result
of our management's inexperience, there is a higher risk of our being unable to
complete our business plan.
MINERAL EXPLORATION INVOLVES A HIGH DEGREE OF RISK AGAINST WHICH WE ARE NOT
CURRENTLY INSURED.
Unusual or unexpected rock formations, formation pressures, fires, power
outages, labour disruptions, flooding, cave-ins, landslides and the inability to
obtain suitable or adequate machinery, equipment or labour are risks involved in
the operation of mines and the conduct of exploration programs. We have relied
on and will continue to rely upon consultants and others for exploration
expertise.
It is not always possible to fully insure against such risks and we may decide
not to take out insurance against such risks as a result of high premiums or
other reasons. Should such liabilities arise, they could reduce or eliminate
any future profitability and result in increasing costs and a decline in the
value of our common stock. We do not currently maintain insurance against
environmental risks relating to our property interest.
THERE IS NO ASSURANCE OF THE TITLE TO OR BOUNDARIES OF OUR RESOURCE PROPERTIES.
Our resource property interests may be subject to prior unregistered agreements
or transfers or native land claims and title may be affected by undetected
defects. We have not conducted surveys on the property and there is a risk that
the boundaries could be challenged.
WE MAY REQUIRE PERMITS AND LICENSES THAT WE MAY NOT BE ABLE TO OBTAIN.
Our operations may require licenses and permits from various governmental
authorities. There can be no assurance that we will be able to obtain all
necessary licenses and permits that may be required to conduct exploration,
development and mining operations at our projects.
METAL AND NATURAL GAS PRICES FLUCTUATE WIDELY.
Factors beyond our control may affect the marketability of any resource we
discover. Metal and natural gas prices have fluctuated widely, particularly in
recent years. The effect of these factors cannot accurately be predicted.
7
THE RESOURCE INDUSTRY IS VERY COMPETITIVE.
The resource industry is intensely competitive in all its phases. We compete
with many companies possessing greater financial resources and technical
facilities than us for the acquisition of mineral concessions, claims, leases
and other mineral interests as well as for the recruitment and retention of
qualified employees.
OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL REGULATIONS.
Our operations may be subject to environmental regulations promulgated by
government agencies from time to time. Environmental legislation provides for
restrictions and prohibitions on spills, release or emissions of various
substances produced in association with certain mining industry operations, such
as seepage from tailings disposal areas, which would result in environmental
pollution. A breach of such legislation may result in the imposition of fines
and penalties. In addition, certain types of operations require the submission
and approval of environmental impact assessments. Environmental legislation is
evolving in a manner which means that standards, enforcement, fines and
penalties for non-compliance are more stringent. Environmental assessments of
proposed projects carry a heightened degree of responsibility for us and our
directors, officers and consultants. The cost of compliance with changes in
governmental regulations has a potential to reduce the profitability of our
operations. We do not maintain environmental liability insurance.
THE TRADING MARKET FOR OUR SHARES IS NOT ALWAYS LIQUID.
Although our shares trade on the Pink Sheets and the Canadian Trading and
Quotations System ("CNQ"), the volume of shares traded at any one time can be
limited, and, as a result, there may not be a liquid trading market for our
shares.
OUR SECURITIES MAY BE SUBJECT TO PENNY STOCK REGULATION.
If a market for our securities develops and the price of our common stock falls
below $5.00 per share, then we will be subject to "penny stock" regulation.
"Penny stock" rules impose additional sales practice requirements on broker-
dealers who sell such securities to persons other than established customers and
accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with a spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the transaction, of a disclosure schedule
prescribed by the Commission relating to the penny stock market. The broker-
dealer also must disclose the commissions payable to both the broker-dealer and
the registered representative and current quotations for the securities.
Finally, monthly statements must be sent disclosing recent price information on
the limited market in penny stocks. Consequently, the "penny stock" rules may
8
restrict the ability of broker-dealers to sell our shares of common stock. The
market price of our shares would likely suffer as a result.
ITEM 4. INFORMATION ON THE COMPANY
4.1 HISTORY AND DEVELOPMENT
We were incorporated under the name "Dynamic Ventures Ltd." pursuant to the
Business Corporations Act in the Province of Alberta, Canada by registration of
our Memorandum and Articles of Association and the issuance by the Registrar of
Companies of a Certificate of Incorporation on May 21, 1993. Our previous
business activities included the acquisition and development of mineral
properties, directly and through joint ventures. At our annual and special
meeting of shareholders held on February 23, 2004, shareholders approved a
special resolution to consolidate our issued share capital, of which 40,546,565
common shares were issued and outstanding, into 4,054,657 common shares, every
ten of such shares before consolidation being consolidated into one common share
without par value. This share consolidation was effective on March 5, 2004.
Concurrently, our name changed to "Dynamic Resources Corp." Our head office,
and address for service, is located at 1936 Alcova Ridge Drive, Las Vegas,
Nevada 89135. Our telephone number is (702) 254-5594.
We have not been involved in any bankruptcy, receivership or similar
proceedings, nor have we been a party to any material reclassification, merger,
consolidation or purchase or sale of a significant amount of assets.
We are engaged in the business of acquiring and exploring resource properties
and are considered to be a pre-exploration stage company.
During 2002, we acquired the rights to a 100% interest in 16 mineral property
claims located in the Whitehorse Mining District, Yukon Territory, Canada, known
as the Franklin Creek property.
In 2004, we entered into an option agreement to earn a 60% interest in 97
mineral claims located in Elko Country, Nevada, U.S.A, known as the Good Hope
property, our company's principal property; we entered into agreements to
purchase a 100% interest in and to mineral claims situated in the South Mining
district of the Northwest Territories, Canada, referred to as the TB1-12 claims
and the Mag 1-2 claims; and we acquired an interest in a limited partnership
involved in the petroleum and natural gas industry.
In 2005 (1) we signed two participation agreements with Bayshore Exploration
L.L.C. in respect of two separate 3% working interests in the Cooke Ranch Deep
Prospect in La Salle County, Texas; (2) we entered into two separate agreements
to acquire 100% interests in certain mineral claims located in the Northwest
Territories, Canada; and (3) we entered into two agreements to acquire 100%
working interests and 75% net revenue interests in oil and gas prospects located
in Motley and Floyd Counties, U.S.A.
9
Subsequent to our 2005 Fiscal Year End we entered into a joint venture
acquisition agreement to acquire an acreage position in an oil and gas filed in
Louisiana, acquired a 100% working interest and a 75% net revenue interest in
certain oil and gas leases in Floyd County, Texas, and sold 83% of our interest
in the Good Hope Property.
All of our resource property interests are in the exploration stage. There is no
assurance that a commercially viable mineral deposit exist on our mineral claim
interests and no guarantee that we will discover commercial quantities of oil
and gas on our oil and gas prospects.
All funds required for our principal capital expenditures were raised from the
sale of our securities.
4.2 FRANKLIN CREEK
By agreement dated October 1, 2002, we acquired the rights to a 100% interest in
16 mineral property claims located in the Whitehorse Mining District, Yukon
Territory, Canada, known as the Franklin Creek property. As consideration for
this acquisition, we issued 200,000 (pre-consolidation) common shares at an
agreed value of $2,000.
Location and Access
The Franklin Creek property is located in the Whitehorse Mining District, Yukon
Territory, Canada, 120 kilometres northwest of the Whitehorse area. The claims
are accessible by following the Alaska Highway west from Whitehorse to the
Aishihik Lake turnoff and by travelling north by gravel road 50 kilometres to
Hopkins Lake. The Aishihk Lake gravel road traverses the property south to
north.
Hopkins Lake lies at an elevation of 3,250 feet and the Aishinik road is at
about 3,340 feet. From the road a relatively flat area extends to the base of
the main ridge. Water for camp use and for drilling is available from Franklin
Creek. The town of Whitehorse, with a population of 25,000, has an experience
work force that is familiar with mining and all aspects of mineral development.
Claims Details
The Franklin Creek property consists of 16 mineral claims registered as the GUY
1- 16 claims under record number YC19466-481.
Exploration History
Work completed to date at the Franklin Creek prospect since 1968 includes
geophysical surveying (magnetometer and induced polarization), geological
mapping, prospecting, access road construction, trenching, 7,096 feet of core
drilling and 8,500 feet of percussion drilling.
Geophysical surveying is the search for mineral deposits by measuring the
physical property of near-surface rocks, and looking for unusual responses
caused by the presence of mineralization. Geophysical surveys are applied in
situations where there is insufficient information obtainable
10
from the property surface to allow informed opinions concerning the merit of
properties. Magnetometer and induced polarization surveys are two common types
of geophysical surveys. The magnetometer method involves measuring the strength
of the earth's magnetic field. Variations in the magnetic readings on the
property may indicate the increased likelihood of precious or base minerals in
the area. Induced polarization surveys measure various electrical responses to
the passage of alternating currents of different frequencies. Readings can
indicate the presence of certain types of mineral deposits.
In 1976, Whitehorse Copper Mines Ltd. optioned the property and conducted
programs of line cutting, geophysical surveying, geological mapping and
drilling. Line cutting involves removing bush from the property in order to
produce straight clearings. This provides grid boundaries for geophysical and
other surveys. 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. Drilling involves extracting
a long cylinder of rock from the ground to determine amounts of metals at
different depths. Pieces of the rock obtained, known as drill core, are
analysed for mineral content.
4.3 GOOD HOPE PROPERTY
By an agreement dated February 26, 2004, we entered into an option and joint
venture agreement with Consolidated Global Minerals Inc. whereby we were
granted the right to acquire a 60% interest in the Good Hope property,
located in Nevada, U.S.A.
The Good Hope property is located in the Tuscarora Mountains of Elko County,
north-central Nevada, approximately 56 miles from Elko. The property is
situated within the Tuscarora volcanic field, which hosts several producing
gold-silver mining camps.
The project area covers most of the Good Hope Mining District, about 12 miles
northwest of the old mining town of Tuscarora, which is about 38 miles northwest
of the town of Elko. Elko lies on Interstate Highway I-80 about halfway between
Reno, Nevada and Salt Lake City, Utah. From Reno, Nevada, access to the Good
Hope Project area is by Interstate Highway I-80 east for about 280 miles to Elko
(Exit 301 on I-80), then north on paved State Highway 225 for about 26 miles,
then northwest on paved State Highway 226, and then turning off to the west onto
gravel roads. Elko is the county seat and service centre for mining activities
in the area. Elko has a regional airport with helicopter services available.
The Good Hope property is situated within a zone of world class gold endowment
where the potential of finding a large, high-grade gold mine are favourable. The
project area covers the historic Good Hope mining district, where mineralization
was first discovered in the 1870's and originally named the Amazon district for
the mines on Amazon Creek and organized shortly after discovery. The western
area was organized as the Aurora district in 1875 and both areas were renamed
the Good Hope district in about 1878. The district had production between the
1870's and 1950, and the Good Hope property includes the past producing mines
within its claim boundaries.
11
Industrial scale exploration of the region began in the 1960's following the
discovery of the Carlin deposit, and included drilling in the Good hope property
in 1972 by Great Basin Exploration, Western Nuclear Corporation previous to
1986, Phelps Dodge Corporation in 1986 and Cominco American Resources in 1988.
Western States Minerals also drilled in the Good Hope property in the 1990's but
the locations and results of this drilling are uncertain.
On the Good Hope property, there are several caved shafts, adits, and open cuts,
with their associated small waste dumps. There are also numerous small prospect
pits and some old drill sites can still be recognized. Apart from various
unimproved dirt roads leading to the various old mine workings, there are no
improvements on the property.
On June 6, 2006 we entered into an agreement with Reno Gold Corp ("Reno"), and
Consolidated Global Minerals Inc. ("Consolidated") pursuant to which, and
subject to the following, all, except for a 10% carried interest, of our right,
title and interest in the Good Hope Property was sold to Reno in consideration
for: (1) Reno agreeing to transfer common shares in its capital stock equal in
value to US$ 50,000 to us; and (2) we agreeing to contribute 1/6 of all monies
required to be spent after December 31, 2007 in furtherance of the original
option and joint venture agreement with Consolidated.
4.4 ADDITIONAL PROPERTY INTERESTS
We also hold interests in the following resource properties:
1.We entered into an agreement dated June 9, 2004 with WGT Consultants (NWT)
Ltd. to acquire the rights to a 100% interest in the TB1-12 mineral claims
(the "TB1-12 Prospect") located in the South Mining District of the
Northwest Territories, Canada. As consideration, we paid $15,000 cash and
issued 1,000,000 common shares in our capital valued at $0.05 per share.
2.We entered into an agreement dated August 17, 2004 to acquire a 100%
interest in certain mineral claims (the "MAG 1-2 Prospect") in the
Northwest Territories, Canada. As consideration, we paid $5,000 cash and
issued 750,000 common shares in our capital stock valued at $0.05 per
share.
3.On June 30, 2004, we acquired an interest in a limited partnership (the
"Partnership") involved in the petroleum and natural gas industry for
US$16,759,130. In consideration, we issued to the vendors promissory notes
totaling US$16,759,130 which bear interest at 4.75% and are all repayable
on or before November 30, 2008. The promissory notes are entirely secured
by a charge on our interest in the Partnership.
4.On May 12, 2005 we signed a participation agreement with Bayshore
Exploration L.L.C. in respect to a 3% working interest in the Cooke Ranch
Deep Prospect (the "Cook Ranch Prospect One") in La Salle County, Texas.
As consideration, we paid US$351,000 cash.
12
Pursuant to further terms on the agreement, we will earn the right to
participate in future drilling on an area covering a total of 8,880 in the
same area.
5.On July 5, 2005 we entered into an agreement with Bill Timmins to acquire
a 100% interest in certain mineral claims (the "Alan Claims") located in
the Northwest Territories, Canada. As consideration, we paid $4,500 cash
and issued 1,000,000 common shares in our capital stock valued at $0.05
per share.
6.On September 21, 2005 we entered into an agreement with Dawn Petroleum
LLC to acquire a 100% working interest and a 75% net revenue interest in
an oil and gas prospect located in Motley and Floyd Counties, Texas,
U.S.A. (the "Motley and Floyd Prospect"). As consideration, we paid
US$92,216 cash and agreed to issue 900,000 common shares in our capital
stock valued at $0.15 per share.
7.On October 28, 2005 we entered into an agreement with Impala Resource
Services Ltd. to acquire a 100% interest in a mineral claim (the "Sunset
Lake Claim") located near Sunset Lake in the Northwest Territories,
Canada. As consideration, we paid $6,000 cash and issue 900,000 common
shares in or capital stock valued at $0.15 per share.
8.On November 17, 2005 we entered into an agreement with Baron Resources
LLC to acquire a 100% working interest and a 75% net revenue interest in
an oil and gas prospect located in Floyd County, Texas, U.S.A. (the "Palo
Duro Prospect"). As consideration we paid US$320,000 cash and agreed to
issue 3,000,000 common shares in our capital stock at an agreed value of
$0.135 each.
9.On December 16, 2005 we signed a participation agreement with Bayshore
Exploration L.L.C. in respect to a 3% working interest in the Cooke Ranch
Deep Prospect (the "Cook Ranch Prospect Two") in La Salle County, Texas.
As consideration, we paid US$19,200 cash.
10.On February 20, 2006 we entered into an agreement with Meaghan Oil & Gas
Properties, Inc. with respect to a 100% working interest and a 75% net
revenue interest in an oil and gas prospect located in the Floyd County,
Texas (the "Palo Duro Prospect"). As consideration we paid US$277,680
cash and issued 2,500,000 common shares in our capital stock valued at
$0.14 per share.
11.On February 12, 2006, we entered into a 50/50 joint venture acquisition
agreement with Tyner Texas Operating Company and Sierra Pine Resources
International to acquire an acreage position in an oil and gas prospect
in Bossier County, Louisiana (the "Sentell Field Prospect"). As
consideration we paid $263,885.
13
4.4 COMPETITION
The mineral property exploration business, in general, is intensively
competitive and there is not any assurance that even if commercial quantities of
ore are discovered, a ready market will exist for sale of same. Numerous
factors beyond our control may affect the marketability of any substances
discovered. These factors include market fluctuations, the proximity and
capacity of natural resource markets and processing equipment, government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of mineral and environmental
protection. The exact effect of these factors cannot be accurately predicted,
but the combination of these factors may make it difficult for us to receive an
adequate return on investment.
We compete with many companies possessing greater financial resources and
technical facilities for the acquisition of mineral concessions, claims, leases
and other mineral interests as well as for the recruitment and retention of
qualified employees. However, due to low metal prices, we do not anticipate any
difficulties retaining geologists or other consultants.
4.5 MANAGEMENT & EMPLOYEES
We have one employee other than our directors and officers.
Our President, Chief Financial Officer and Chief Executive Officer, Robert Fedun
devotes 90% of his business time to our affairs. We do not have a written
management agreement with Mr. Fedun, however the board of directors has agreed
to compensate him at a rate of US$6,000 per month.
4.6 OFFICE SPACE
We utilize about 300 square feet of office space in Las Vegas, Nevada. Our rent
and related office expenses total approximately US$2,000.00 per month.
4.7 ENVIRONMENTAL REGULATIONS
We will be required to comply with all regulations, rules and directives of
governmental authorities and agencies applicable to the exploration of minerals
in the Northwest Territories and Nevada respectively.
We will have to sustain the cost of reclamation and environmental mediation for
all exploration and development work undertaken. The amount of these costs 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 currently planned work
programs. Because there is presently no information on the size, tenor, or
quality of any resource or reserve at this time, it is impossible to assess the
impact of any capital expenditures on earnings or our competitive position in
the event a potentially economic deposit is discovered.
If we enter into production, the cost o f complying with permit and
regulatory environment laws will be greater than in the exploration phases
because the impact on the project area is greater. Permits and regulations will
control all aspects of any production program if the project
14
continues to that stage because of the potential impact on the environment.
Examples of regulatory requirements include:
- Water discharge will have to meet water standards;
- Dust generation will have to be minimal or otherwise re-mediated;
- Dumping of material on the surface will have to be re-contoured and
re-vegetated;
- An assessment of all material to be left on the surface will need to
be environmentally benign;
- Ground water will have to be monitored for any potential
contaminants;
- The socio-economic impact of the project will have to be evaluated
and if deemed negative, will have to be re-mediated; and
- There will have to be an impact report of the work on the local
fauna and flora.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5.1 OPERATING RESULTS
We were incorporated under the name "Dynamic Ventures Ltd." in the Province of
Alberta, Canada on May 21, 1993. Our previous business activities included the
acquisition and development of mineral properties, directly and through joint
ventures.
During 2002, we acquired the rights to a 100% interest in 16 mineral property
claims located in the Whitehorse Mining District, Yukon Territory, Canada, known
as the Franklin Creek Property. As consideration for this acquisition, we were
obligated to issue 2,000,000 (pre-consolidation) common shares at an agreed
value of $2,000. The shares have been issued relating to this agreement.
We were substantially inactive during the years ended December 31, 2003 and
2002. The income of $156,098 for the fiscal 2002 was primarily due to a gain on
settlement of accounts payable of $199,935. The income of $4,605 for the fiscal
2003 was a result of a gain on foreign exchange of $107,945 and administrative
expenses of $103,340.
We became more active in fiscal 2004 and incurred increased general and
administrative costs resulting in a loss of $364,051. The assets increased from
a nominal amount as at December 31, 2003 to $17,084,280 as at December 31, 2004
primarily due to the increase in mineral property interests of $261,088 and the
investment in the limited partnership in consideration for a promissory note
resulting in an investment in limited partnership of $16,686,594, and a long
term promissory note payable of $16,686,594 as at December 31, 2004.
15
In February, 2004, we entered into an option and joint venture agreement
pursuant to which we have the right to earn a 60% interest in 97 mining claims
situated in the Elko County, Nevada, U.S.A. We paid US$15,000 and issued
1,000,000 common shares with a deemed value of $50,000 as consideration for this
acquisition. To earn our interest, we are required to pay an additional
US$75,000 in stages and expend US$600,000 on exploration in stages over three
years. We have paid $35,000 of the staged payments to date, and we have expended
$100,000 to date on exploration.
In June, 2004, we entered into an agreement to acquire the rights to a 100%
interest in certain mineral claims located in the South Mining District of the
Northwest Territories, Canada. As consideration, we paid $15,000 and issued
1,000,000 common shares at a deemed value of $50,000.
In August, 2004, we entered into an agreement to acquire a 100% interest in
certain mineral claims located in the Northwest Territories, Canada. As
consideration, we paid $5,000 and issued 750,000 common shares valued at $0.05
per share.
On June 30, 2004, we acquired an interest in a limited partnership (the
"Partnership") involved in the petroleum and natural gas industry for
$16,759,130. In consideration, we issued to the vendors promissory notes
totaling $16,759,130 which bear interest at 4.75% and are all repayable on or
before November 30, 2008. The promissory notes are entirely secured by a charge
on our interest in the Partnership. The promissory notes payable balance of
$16,686,594 as at December 31, 2004 included accrued interest of $452,119. At
December 31, 2004, the investment in the Partnership was written down by
$3,781,723
The increase in the mineral properties during fiscal 2004 was as a result of
cash payments of $104,096 and the issuance of 2,750,000 shares valued at
$137,500 pursuant to the acquisition of various properties. Current assets
(components of working capital) also increased by $114,002 as a result of
various financings completed during fiscal 2004.
During the year ended Dec 31, 2004 we incurred a loss of $364,051. Some of the
significant expenses were accounting and audit fees of $38,747, consulting fees
of $160,130, investor relations costs of $59,596, legal fees of $17,037, office
costs of $12,896, rent of $16,070, telephone costs of $6,797, transfer agent and
filing fees of $30,968, travel costs of $ 35,269, and the management fees of
$72,000 paid or accrued to a director and stock based compensation expense of
$112,000 resulting from the granting of share purchase options during the year.
As well, we had a net gain of $224,337 during the fiscal year 2004 from the
investment in the Partnership effectively allowing us to utilize our tax losses.
The net gain of $224,337 includes the limited partnership income of $4,860,558,
the interest on promissory notes of $(854,498) and the write-down of the
investment in the Partnership of $(3,781,723).
At fiscal year end 2004 we had cash on hand of $105,395, accounts receivable of
$13,868 and prepaid expenses of $8,375. During the year ended December 31, 2005
16
we incurred a loss of $482,415. Some of the significant expenses were $79,972
for accounting and audit fees, $200,211 in consulting fees, $124,481 in
investor relations costs, $33,615 in legal fees, $83,479 in management fees
paid or accrued to a director, $32,319 in office costs, $23,839 in rent,
$8,728 in telephone costs, $18,751 in transfer agent and filing fees, $126,947
in stock-based compensation, and $45,813 in travel. As well, we had a net
gain of $314,079 from the investment in the Partnership.
In May, 2005 we signed participation agreement with Bayshore Exploration L.L.C.
in respect to a 3% working interest in the Cooke Ranch Deep Prospect One in La
Salle County, Texas. As consideration, we paid US$351,000 cash. Pursuant to
further terms on the agreement, we will earn the right to participate in future
drilling on an area covering a total of 8,880 in the same area. In the event
that an oil and gas well completion is attempted we have agreed to pay an
additional US$59,460.
In July, 2005 we entered into an agreement to acquire a 100% interest in certain
mineral claims located in the Northwest Territories, Canada. As consideration,
we paid $4,500 cash and issued 1,000,000 common shares in our capital stock at a
deemed value of $0.05 each.
In September, 2005 we entered into an agreement to acquire a 100% working
interest and a 75% net revenue interest in an oil and gas prospect located in
Motley and Floyd Counties, Texas, U.S.A. As consideration, we paid US$92,216
cash and issued 900,000 common shares in our capital stock valued at $0.15 per
share.
In October, 2005 we entered into an agreement with Impala Resource Services Ltd.
to acquire a 100% interest in a mineral claim located near Sunset Lake in the
Northwest Territories, Canada. As consideration, we paid $6,000 cash and issued
900,000 common shares in our capital stock valued at $0.15 per share.
In November, 2005 we entered into an agreement to acquire a 100% working
interest and a 75% net revenue interest in an oil and gas prospect located in
Floyd County, Texas, U.S.A. As consideration, we paid US$320,000 cash and agreed
to issue 3,000,000 common shares in our capital stock valued at $0.135 per
share.
In December, 2005 we signed another participation agreement with Bayshore
Exploration L.L.C. in respect to a 3% working interest in the Cooke Ranch Deep
Prospect Two in La Salle County, Texas. As consideration, we paid US$19,200
cash.
At the end of the six month period ended June 30, 2006 we had cash on hand of
$148,355, accounts receivable of $98,599 and prepaid expenses of $12,118.
In February 2006 we entered into an agreement with Meaghan Oil & Gas Properties,
Inc. with respect to a 100% working interest and a 75% net revenue interest in
the Palo Duro Prospect. As consideration we paid US$277,680 cash and issued
2,500,000 common shares in our capital stock valued at $0.14 per share.
17
Also in February 2006, we entered into a 50/50 joint venture acquisition
agreement with Tyner Texas Operating Company and Sierra Pine Resources
International to acquire an acreage position in the Sentell Field Prospect. As
consideration we paid US$263,885.
The joint ventures have agreed to pay US$20 per acre to acquire all leasehold,
mineral interests on contractual rights within the prospect area, subject to an
overriding royalty interest of 1% to 4%. The joint ventures have an obligation
to drill a well within the first year to earn the acreage.
5.1 LIQUIDITY AND CAPITAL RESOURCES
Since our incorporation, we have financed our operations to date primarily
through the issuance of common shares and the exercise of stock options. We
expect to finance operations through the sale of equity and/or debt in the
foreseeable future as we have no sources of revenue from our business
operations. There is no guarantee that we will be successful in arranging
financing on acceptable terms.
Net cash used in operating activities for the year ended December 31, 2004 was
$518,058 compared to net cash used of $70,611 during the year ended December 31,
2003. The cash used in operating activities for period consists primarily of the
operating loss from the general and administrative expenditures and a change in
non-cash working capital items. Working capital increased significantly during
the year ended December 31, 2004 due to the settlement of a total of $936,382 in
accounts payable and amounts due to a director with the issuance of 15,021,839
common shares. Net cash provided by investing activities for the year ended
December 31, 2004 was $1,027,783 compared to $Nil during the year ended December
31, 2003. Cash provided during the fiscal 2004 consists of distributions of
$1,151,371 from the Partnership. We acquired the interest in the Partnership for
$16,759,130 in consideration for a promissory note of $16,759,130. During fiscal
2004, we also incurred expenditures on mineral properties of $123,588 and issued
non-cash consideration of 2,950,000 common shares at a value of $139,500
pursuant to the acquisition of mineral properties.
Financing activities used cash of $406,831 during the year ended December 31,
2004, compared to $73,031 for the year ended December 31, 2003. Cash of $555,140
was provided from the issuance of capital stock, $927,034 was repaid on the
promissory notes financing the investment in the Partnership, and a director was
advanced $34,937.
During the year ended December 31, 2004 we consolidated our common stock on the
basis of ten old shares for one new share. All references to common shares and
per share amounts have been retroactively restated to give effect to the share
consolidation.
We issued 11,655,986 units pursuant to private placements for gross proceeds of
$582,799 of which $2,500 was received during the year ended December 31, 2003.
Each unit consists of one share of common stock and one share purchase warrant
18
entitling the holder to purchase one additional common share at $0.15 per share
for a period of two years. We also issued 100,000 shares of common stock at a
fair value of $0.05 per share as a financing fee.
We issued 200,000 common shares at a fair value of $2,000 and 2,750,000 common
shares at a fair value of $137,500 pursuant to the acquisition of mineral
properties. We issued 15,021,839 common shares in settlement of accounts payable
of $733,491 and due to related parties of $202,891 at prices ranging from $0.05
to $0.15 per share.
During the year ended December 31, 2005, we had a net increase of $290,290 in
cash compared to a net increase in 2004 of $102,894 and $2,420 in 2003.
Net cash used in operation activities for the year ended December 31, 2005 was
$667,393 compared to net cash used of $518,058 during the year ended December
31, 2004. The cash used in operating activities for these periods consists
primarily of the operating loss from the general and administrative expenditures
and a change in non-cash working capital items.
Net cash provided by investing activities for the year ended December 31, 2005
was $212,424 compared to cash provided of $1,027,783 during the year ended
December 31, 2004. The cash provided by investing activities consisted of
resource properties costs of $977, 645, and distributions from the Partnership
of $1,190,069.
Net cash provided by financing activities for the twelve month period ended
December 31, 2005 was $745,259 compared to net cash used of $406,831 during the
year ended December 31, 2004. The cash provided by financing activities
consisted of proceeds from the issuance of common shares of $1,575,242,
repayment of promissory notes of $875, 939, and advances from directors of
$46,006.
During the period ended June 30, 2006 we received total proceeds of $456,595
from a private placement of 3,043,967 units at $0.15 per unit. Each unit
consists of one common share and one common share purchase warrant exercisable
at $0.20 for a period of two years. A Finder's fee of $40,384 was paid in
connection with this placement as well as 269,230 agent's share purchase
options. Each agent option entitles the agent to acquire one unit at $0.15 for a
period of two years. We also issued 3,770,000 common shares at $0.15 per share
pursuant to the exercise of share purchase warrants 2,500,000 common shares
valued at $350,000 as consideration for the acquisition of a resource property,
and granted 300,000 stock options to a consultant, exercisable at $0.16 per
share until April 17, 2001.
We now have sufficient funds to meet our property maintenance payments for 2006
and cover anticipated administrative expenses throughout the year.
We will continue to focus exploration and development efforts on the Franklin
Creek properties located in Yukon Territory, the TB1-12 property located in the
NWT Canada, and the Good Hope property located in Nevada, U.S.A.
To a significant extent, our ability to raise capital is affected by trends and
uncertainties beyond our control. These include the market prices for base and
precious metals and results from our exploration programs. Our ability to
attain our business objectives may be significantly impaired if precious metal
19
prices fall or if results from our intended exploration programs on our
properties are unsuccessful.
Our auditors are of the opinion that our continued operations are dependent upon
our ability to receive continued financial support, to complete public equity
financing or generate profitable operations in the future. Due to the nature of
our business, there is substantial doubt about our ability to continue as a
going concern.
We have sufficient funds on hand to meet our 2006 commitments and anticipate
further equity offerings to fund our 2007 commitments.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.1DIRECTORS AND SENIOR MANAGEMENT
DIRECTORS:
Name of Director Age
- ---------------------- -----
Robert D. Fedun 62
Glen C. MacDonald 55
Kenneth R. Ralfs 57
Peter Hill 69
EXECUTIVE OFFICERS:
Name of Officer Age Office
Robert D. Fedun 62 President, Chief Executive Officer and CFO
Glen C. MacDonald 55 Secretary
- -------------------- ----- ------------------------------------------
The following describes the business experience of our directors and executive
officers, including other directorships held in reporting companies:
ROBERT D. FEDUN
Mr. Fedun has been our President, Chief Executive Officer, CFO and a Director
since 1994. Mr. Fedun attended the Northern Alberta Institute of Technology
(NAIT) in Edmonton, Alberta where he was enrolled in Hyrocarbon Technology,
commencing in 1961 and graduating in 1964 with a Diploma in Gas Technology.
After completing his studies, Mr. Fedun worked for Shell Canada, Home Oil and
Pan American Petroleum in Edmonton, Alberta until 1974. Between 1974 and 1980
he worked with Gardner Denver Corporation as a Sales & Marketing executive,
based in Edmonton and Calgary Alberta. Between 1980 and 1986 Mr. Fedun worked
as Vice President Sales and Engineering with Pamco Ltd. in Calgary, Alberta.
20
Following this, he continued his work in Calgary as President of International
Focus between 1986 and 1990. Between 1991 and 1994 Mr. Fedun was resident
of Petro Plus in Kelowna, B.C. before joining Dynamic Ventures Ltd. (now
Dynamic Resources Corp.).
GLEN MACDONALD
Mr. MacDonald has been our Secretary and a Director since 1996. After graduating
from St. Michaels School in Victoria, B.C. in 1966, Mr. MacDonald continued his
studies at the University of British Columbia (UBC), completing his Bachelor of
Arts in 1971 and a Bachelor of Science in 1973. After graduation, Mr. MacDonald
began working as a mine geologist with Whitehorse Copper Mines in Whitehorse
until 1975. Between 1975 and 1982 he worked as District Manager for the Yukon
Territory for Noranda Mines. Since 1982 to present Mr. MacDonald has been a
self-employed consulting geological engineer. He is currently a member of the
Alberta Professional Engineers and Geologists Association and a member of the
B.C. Association of Professional Engineers and Geoscientists.
KENNETH RALFS
For the last five years Mr. Ralfs has been self employed as an investor.
PETER HILL
Mr. Hill has been a director since September, 2005. For the last five years Mr.
Hill has been retired.
There are no arrangements or understandings between any of our directors or
executive officers, pursuant to which they were selected to be a director or
executive officer, nor are there any family relationships among any of our
directors and officers.
6.2COMPENSATION OF DIRECTORS
We are required, under applicable securities legislation in Canada, to disclose
to our shareholders details of compensation paid to our directors. The following
fairly reflects all material information regarding compensation paid to our
directors in our fiscal year ended December 31, 2005.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND PRINCIPAL AWARDS ALL OTHER
POSITION
RESTRICTED STOCK SECURITIES
YEAR SALARY BONUS OTHER OTHER AWARDS UNDERLYING OPTIONS/ LTIP
COMPENSATION SAR'S PAYOUTS COMPENSATION
Robert Fedun 2005 Nil Nil US$72,000 Nil 800,000 Nil Nil
President, CEO, CFO and
Director
Glen C. MacDonald 2005 Nil Nil Nil Nil 800,000 Nil Nil
Secretary and Director
Kenneth R. Ralfs 2005 Nil Nil Nil Nil 800,000 Nil Nil
Director
Peter Hill 2005 Nil Nil Nil Nil 500,000 Nil Nil
Director
The above options were granted for no consideration and entitle the holder
thereof the right to acquire one common share at $0.10 per share for each option
held, 500,000 options expire on February 4, 2010, with the balance of 2,400,000
expiring on October 1, 2009. As at July *, 2006 all 2,900,000 directors' share
purchase options were still outstanding.
During the 2004 fiscal year, we issued 4,057,820 shares to Mr. Robert Fedun in
settlement of debts of $202,891, and 100,000 units at $0.05 per unit to a
director of the Company. Each unit consists of one share of common stock and one
share purchase warrant entitling the director to purchase one additional common
share at $0.15 per share until April 19, 2006.
6.3 BOARD PRACTICES
Robert Fedun and Glen MacDonald have been Directors since 1994. Kenneth Ralfs
was appointed as our director on February 23, 2004 at our most recent annual
general meeting. Peter Hill was appointed as our director by our Board of
Directors on September 26, 2005. The Directors hold office until the next annual
general meeting of the shareholders at which time they may stand for re-
election. We are required to hold an annual general meeting once in every
calendar year and not longer than thirteen months from the last annual general
meeting.
22
Although we do not have a written management agreement with Mr. Fedun, the board
of directors has agreed to compensate him at a rate of US$6000 per month.
No other directors have service contracts with us, and no directors are entitled
to any termination benefits.
Our audit committee is comprised of Glen MacDonald and Kenneth Ralfs. We have
not appointed a remuneration committee.
6.4 EMPLOYEES
We have one employee, a secretary located at our office in Las Vegas, other than
our directors and officers. When required, we have retained geological and
other consultants to conduct work programs on our properties.
There are no management contracts currently in place.
6.5 SHARE OWNERSHIP OF DIRECTORS AND OFFICERS
Our directors and officers own beneficially the following shares as of the date
of this registration statement:
Percentage of Outstanding
Number of Shares Owned Common Shares
Robert Fedun 4,604,777 6.80%
Glen MacDonald 200,000 0.03%
Peter Hill 2,640,000 3.92%
Ken Ralfs Nil Nil
The above percentages are based on the number of common shares issued and
outstanding in our capital stock as of the date of this registration statement
which is 70,313,149 as at March 31, 2006.
There are currently 1,400,000 warrants outstanding to Directors.
7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.1 BENEFICIAL OWNERSHIP
As used in this section, the term "beneficial ownership" with respect to a
security is defined by Regulation 228.403 under the Securities exchange Act of
1934, as amended, as consisting of: (1) any person who, directly or indirectly,
through any contract, arrangement, understanding,
23
relationship or otherwise has or shares voting power (which includes the power
to vote, or to direct the voting of such security) or investment power (which
includes the power to dispose, or to direct the disposition of, such security);
and (2) any person who, directly or indirectly, creates or uses a trust, proxy,
power of attorney, pooling arrangement or any other contract, arrangement
or device with the purpose or effect of divesting such person of beneficial
ownership of a security or preventing the vesting of such beneficial ownership.
As of the date of this registration statement, 67,363,149 common shares were
issued and outstanding. The Company is authorized to issue an unlimited number
of common shares.
As of the date of this registration statement, the following persons known to
the Company were the beneficial owner of more than five percent of the
outstanding common shares of the Company.
NAME NUMBER OF SHARES PERCENTAGE OF TOTAL
Robert Fedun 4,604,777 6.8%
Of our 107 registered shareholders, 87 are Canadian residents,
representing 53,515,931 common shares or 79.4% of our issued and outstanding
common shares.
Each of our issued shares entitles the holder to one vote in general meeting.
There are no disproportionate or weighted voting privileges.
We are not controlled directly or indirectly by any other corporation or any
other foreign government or by any other natural or legal person, severally or
jointly.
There are no arrangements the operation of which at a subsequent date may result
in a change in our control.
7.2 RELATED PARTY TRANSACTIONS
There are no transactions, which have materially affected or will materially
affect the Company in which any director, executive officer or beneficial holder
of more than 10% of the outstanding common stock, or any of their respective
relatives, spouses, associates or affiliates, has had or will have any direct or
material indirect interest except as follows:
* During the 2005 fiscal year, an $83,479 management fee expense, and
$18,122 of this expense, to a Director and his spouse was incurred.
* During the 2005 fiscal year we issued 1,200,000 units at $0.05 per
unit pursuant to a private placement to directors. Each unit
consists of one share of common stock and one share purchase warrant
entitles the director to purchase one additional common share at
$0.15 per share until August 19, 2007
Subsequent to 2005 fiscal year end:
24
* We paid or accrued $21,226 for the three month period ended March
31, 2006, to Mr. Robert Fedun, our President and director.
Our bylaws provide that our directors or officers must disclose in writing to us
the nature and extent of any interest he has in a material contract, or proposed
material contract, with us. Such disclosure must be made immediately after the
director or officer becomes aware of the contract or proposed contract. A
director who is required to disclose an interest in a material contract or
proposed material contract may not vote on any resolution to approve the
contract except in very limited circumstances.
7.3 INTERESTS OF EXPERTS AND COUNSEL
Our experts and counsel have no interest in our shareholdings.
8 FINANCIAL INFORMATION
8.1 LEGAL PROCEEDINGS
To the best of our knowledge there are no legal or arbitration proceedings
threatened, pending or in progress against us except a third party notice issued
by Young West Resources Ltd. during the year December 31, 2002 to Dynamic
Ventures Ltd. (now Dynamic Resources Corp.) The initial claim was by the
plaintiff against Young West Resources, who was the operator on a well being
drilled on Indian land.
8.2 SIGNIFICANT CHANGES
There have been no significant changes since the date of the audited and interim
financial statements included herein other than subsequent to March 31, 2006 we:
a.) granted 300,000 stock options to a consultant exercisable at $0.16
per share until April 17, 2011; and
b.) issued 2,950,000 shares for $442,500 of which $226,500 was received
during the period ended March 31, 2006, pursuant to the exercise of
warrants.
9 THE OFFER AND LISTING
9.1 OFFER AND LISTING DETAILS
We were incorporated under the Alberta Business Corporations Act on May 21, 1993
and began trading with the Symbol "DVL" on the Alberta Stock Exchange. Our
stock was halted in August of 1998 and ceased trading on the Alberta Stock
Exchange in August 1999. Our common shares were listed on the pink sheets under
the symbol "DYRFF" on May 13, 2003 and commenced
25
trading on this exchange on May 17, 2004 after the previous cease trade order
issued by the Alberta Stock Exchange was removed (it was removed on April 6,
2004).
The following table sets forth the high and low closing prices in US funds of
our common shares traded on this exchange:
Period High Low
May 17, 2004 to December 31, 2004 $1.01 $0.01
January 1, 2005 to December 31, 2005 $0.87 $0.01
May 13, 2004 to June 30, 2004 $1.01 $0.05
July 1, 2004 to September 30, 2004 $0.10 $0.01
October 1, 2004 to December 31, 2004 $0.20 $0.02
January 1, 2005 to March 31, 2005 $0.05 $0.01
April 1, 2005 to June 30, 2005 $0.02 $0.015
July 1, 2005 to September 30, 2005 $0.1755 $0.02
October 1, 2005 to December 31, 2005 $0.87 $0.055
August 2005 $0.11 $0.06
September 2005 $0.1755 $0.05
October 2005 $0.20 $0.055
November 2005 $0.155 $0.10
December 2005 $0.87 $0.06
January 2006 $0.20 $0.13
February $0.18 $0.10
March $0.15 $0.10
April $0.17 $0.11
May $0.16 $0.105
June $0.15 $0.099
July $0.11 $0.07
August $0.125 $0.096
September $0.15 $0.085
October $0.13 $0.065
We were listed for trading on the Canadian Trading and Quotations System ("CNQ")
on September 22, 2004. The following table sets forth the high and low closing
prices in Canadian funds of our common shares traded on this exchange:
Period High Low
September 22, 2004 to December 31, 2004 $0.075 $0.03
January 1, 2005 to December 31, 2005 $$0.21 $0.04
26
October 1, 2004 to December 31, 2004 $0.075 $0.03
January 1, 2005 to December 31, 2005 $0.21 $0.04
October 1, 2004 to December 31, 2004 $0.075 $0.03
January 1, 2005 to March 31, 2005 $0.08 $0.045
April 1, 2005 to June 30, 2005 $0.065 $0.04
July 1, 2005 to September 30, 2005 $0.185 $0.04
October 1, 2005 to December 31, 2005 $0.21 $0.11
August 2005 $0.135 $0.10
September 2005 $0.185 $0.11
October 2005 $0.20 $0.11
November 2005 $0.185 $0.11
December 2005 $0.21 $0.155
January 2006 $0.195 $0.17
February 2006 $0.19 $0.135
March 2006 $0.18 $0.135
April 2006 $0.18 $0.14
May 2006 $0.17 $0.11
June 2006 $0.15 $0.10
July 2006 $0.14 $0.15
August 2006 $0.14 $0.10
September 2006 $0.125 $0.08
October 2006 $0.115 $0.09
Subsequent to the last fiscal year end, our common shares were consolidated such
that every ten pre-consolidation common shares were exchanged for one post-
consolidation common share. Concurrently, our name was changed from "Dynamic
Ventures Ltd." to "Dynamic Resources Corp." Articles of amendment effecting
these changes were filed March 5, 2004.
We intend to apply to have our common shares quoted on the National Association
of Securities Dealers over-the-counter electronic bulletin board. However,
there is no certainty that such listing or any other stock exchange listing will
occur.
10 ADDITIONAL INFORMATION
10.1 SHARE CAPITAL
Our authorized share capital consists of an unlimited number of common shares
without par value. Our issued share capital as of the date of this registration
statement is 70,313,149 fully paid common shares without par value. We do not
hold any of our own shares.
27
Since December 31, 2002, the following share activity has occurred:
1. on January 7, 2004 we issued 2,000,000 (200,000 post-consolidation) shares
with a fair value of $100,000 to Guy Delorme as part of purchase of the
Franklin Creek Property.
2. At our annual and special meeting of shareholders held on February 23,
2004, shareholders approved a special resolution to consolidate our issued
share capital, of which 40,546,565 common shares were issued and
outstanding, into 4,054,657 common shares, every ten of such shares before
consolidation being consolidated into one common share without par value.
This share consolidation was effective on March 5, 2004. Concurrently,
our name changed to "Dynamic Resources Corp."
3. on April 19, 2004, we issued:
a. 500,000 shares with a fair value of $25,000 to Consolidated Global
Minerals Inc. as part of our purchase of the Good Hope Property;
b. 8,145,986 units at $0.05 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing. 100,000
additional shares were issued as a finder's fee.
4. on May 3, 2004 we issued 6,349,994 shares to various parties in settlement
of outstanding debts in the amount of $317,500.
5. on June 14, 2004 we issued 6,671,845 shares to various parties in
settlement of outstanding debts in the amount of $518,882.
6. on August 6, 2004 we issued 1,000,000 shares with a fair value of $50,000
to WGT Consultants (NWT) Ltd. as part of our purchase of the TB1-12
Prospect.
7. on August 9, 2004 we issued:
a. 600,000 shares to Cheryl More in settlement of a debt in the amount
of $30,000;
b. 1,400,000 shares to Cyrus Driver in settlement of a debt in the
amount of $70,000.
c. 60,000 units at $0.05 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing.
8. on November 12, 2004 we issued:
a. 500,000 shares with a fair value of $25,000 to Consolidated Global
Minerals Inc. as part of our purchase of the Good Hope Property;
b. 750,000 shares with a fair value of $37,500 to WGT Consultants (NWT)
Ltd. as part of our purchase of the MAG 1-2 claims.
9. on December 9, 2004 we issued 3,450,000 units at $0.05 per unit pursuant
to a private placement. Each unit consists of one common share and one
share purchase warrant entitling the holder to acquire an additional
common share for $0.15 per share for a period of two years from closing.
10.on June 17, 2005 we issued:
a. 2,400,000 units at $0.05 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing;
28
b. we issued 400,000 shares to Davidson and Company, Chartered
Accountants in settlement of a debt in the amount of $20,000.
11.on August 17, 2005 we issued:
a. 11,200,000 units at $0.05 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing.
b. 1,000,000 shares with a fair value of $50,000 to Bill Timmins as
part of our purchase of the Alan Claims;
c. 100,000 shares with a fair value of $10,000 to Sean Griffin as a
finders fee in respect of our purchase of the Cook Ranch Prospect;
d. 100,000 shares with a fair value of $10,000 to Keith McKenzie as a
finders fee in respect of our purchase of the Cook Ranch Prospect;
e. 100,000 shares with a fair value of $10,000 to 531287 B.C. Ltd. as a
finders fee in respect of our purchase of the Cook Ranch Prospect;
f. 100,000 shares with a fair value of $10,000 to Richard Brunette as a
finder's fee in respect of our purchase of the Cook Ranch Prospect.
12.on October 14, 2005 we issued:
a. 900,000 shares with a fair value of $135,000 to Margaret Kulerski as
part of our purchase of the Motley and Floyd Prospect;
b. 1,100,000 units at $0.10 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing.
c. 50,000 common shares upon the exercise of 50,000 share purchase
warrants at $0.15 each.
13.on November 18, 2005 we issued 900,000 shares with a fair value of
$135,000 to Impala Resource Services Ltd. as part of our purchase of the
Sunset Lake Claim.
14.on December 1, 2005 we issued:
a. 5,416,700 units at $0.15 per unit pursuant to a private placement.
Each unit consists of one common share and one share purchase
warrant entitling the holder to acquire an additional common share
for $0.15 per share for a period of two years from closing.
b. 1,550,000 shares with a fair value of $155,000 to Margaret Kulerski
as part of our purchase of the Motley and Floyd Prospect;
c. 450,000 shares with a fair value of $45,000 to James Robson Jr. as
part of our purchase of the Floyd Prospect.
d. 500,000 shares with a fair value of $50,000 to Ashley Robson as part
of our purchase of the Floyd Prospect.
e. 500,000 shares with a fair value of $50,000 to Amber Robson as part
of our purchase of the Floyd Prospect.
15.on December 8, 2005 we issued 340,000 common shares upon the exercise of
340,000 share purchase warrants at $0.15 each.
16.on December 13, 2005 we issued 200,000 common shares upon the exercise of
200,000 share purchase warrants at $0.15 each.
29
17.on December 15, 2005 we issued 110,000 common shares upon the exercise of
110,000 share purchase warrants at $0.15 each.
18.on February 13, 15 and March 8, 2006 we issued 820,000 common shares at
$0.15 per share pursuant to the exercise of share purchase warrants.
19.on March 7, 2006 we issued 2,500,000 common shares with a fair value of
$350,000 as consideration for the acquisition of a resource property.
20.on March 20, 2006 we issued 3,043,967 units at $0.15 per unit for total
proceeds of $456,595, or which $52,750 was received subsequent to March
31, 2006. Each unit consists of one common share and one common share
purchase warrant exercisable at $0.20 for a period of two years. An agent
was granted 269,230 options to acquire units. Each agent option entitles
the agent to acquire one unit at $0.15 for a period of two years.
21.on April 3, 2006 we issued 2,950,000 common shares at $0.15 per share
pursuant to the exercise of share purchase warrants.
We have the following potential obligations to increase our issued capital:
- Our directors, officers, employees, and consultants hold
incentive stock options entitling them to acquire additional common
shares in our capital stock as follows:
Number of Shares
Purchasable Upon Exercise Exercise Price Expiry Date
2,400,000 $0.10 September 30, 2009
500,000 $0.10 February 4, 2010
300,000 $0.10 July 21, 2010
1,000,000 $0.10 July 28, 2010
200,000 $0.13 September12, 2010
100,000 $0.17 November 29, 2010
300,000 $0.16 April 17, 2011
* various persons hold share purchase warrants to acquire additional
common shares in our capital stock as follows:
Number of Shares
Purchasable Upon Exercise Exercise Price Expiry Date
60,000 $0.15 August 9, 2006
3,450,000 $0.15 December 9, 2006
2,800,000 $0.15 June 17, 2007
11,200,000 $0.15 August 19, 2007
1,386,668 $0.15 November 23, 2007
2,066,700 $0.20 November 23, 2007
335,000 US$0.12 November 23, 2007
30
3,350,000 US$0.16 November 23, 2007
3,043,967 $0.20 March 20, 2008
269,230 $0.15 March 20, 2008
Of these warrants, 100,000 are held by Glen Macdonald, 300,000 are
held by Peter Hill and 1,000,000 are held by Robert Fedun, all of
whom are directors.
All shares issued and to be issued in the future must be and have been approved
by authorizing resolution consisting of a simple majority of our board of
directors.
10.2 BYLAWS AND ARTICLES OF ASSOCIATION
We were incorporated under the Business Corporations Act of Alberta by
registration of our articles of incorporation and bylaws. Pursuant to the
provisions of the Business Corporations Act, a company may conduct any business
that it is not restricted by the terms of its articles or bylaws from
conducting. Our articles and bylaws contain no such restrictions.
Our directors are required to disclose to the board of directors the nature and
extent of their interest in any proposed transaction or contract and must
thereafter refrain from voting in respect thereof. An interested director may be
counted in the quorum when a determination as to such director's remuneration is
being considered but may not vote in respect thereof. The directors have an
unlimited power to borrow money, issue debt obligations and mortgage or charge
our assets provided such actions are conducted bona fide and in the best
interests of the Company. There are no mandatory retirement ages for directors
or any required shareholdings.
All holders of common shares are entitled to receive dividends out of assets
legally available therefore at such times and in such amounts as the board of
directors may from time to time determine. All holders of common shares will
share equally on a per share basis in any dividend declared by the board of
directors. The dividend entitlement time limit will be fixed by the board of
directors at the time any such dividend is declared. Each outstanding common
share is entitled to one vote on all matters submitted to a vote of our
shareholders in general meeting. There are no cumulative voting rights attached
to any of our shares and, accordingly, the holders of more than half of the
shares represented at a general meeting can elect all of the directors to be
elected in a general meeting. All directors stand for re-election annually.
Upon any liquidation, dissolution or winding up, all common shareholders are
entitled to share ratably in all net assets available for distribution after
payment to creditors. The common shares are not convertible or redeemable and
have no preemptive, subscription or conversion rights. In the event of a merger
or consolidation, all common shareholders will be entitled to receive the same
per share consideration.
The rights of shareholders may only be altered by the shareholders passing a
special resolution at a general meeting. A special resolution may only be passed
when it has been circulated to all shareholders by way of information circular
and then must be passed by seventy-five percent of the votes cast at the general
meeting.
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The board of directors may call annual and extraordinary general meetings when
required. One or more shareholders holding in aggregate five percent or more of
our issued shares may requisition an extraordinary meeting and the directors are
required to hold such meeting within four months of such requisition. Only
registered shareholders or persons duly appointed by proxy may be admitted to
meetings unless otherwise permitted by the chairman of the meeting.
There are no national limitations or restrictions on the right to own our common
shares.
There are no provisions in our bylaws or articles of association that would have
the effect of delaying, deferring or preventing a change in control.
There are no provisions in our bylaws or articles of association that establish
any threshold for disclosure of ownership. However, the Alberta Securities
Commission requires that persons that are the registered owners of, and/or have
voting control over 10% or more of our common shares must file insider reports
disclosing securities holdings.
10.3 MATERIAL CONTRACTS
We are a party to the following material contracts, all of which are included as
exhibits to this registration statement:
1. Acquisition of the Franklin Property
2. Acquisition of the Good Hope Projects
3. Acquisition of the TB1 - 12 Claims
4. Acquisition of the MAG 1-2 Prospect
5. Acquisition of the Partnership
6. Acquisition of the Cook Ranch Prospect One
7. Acquisition of the Alan Claims
8. Acquisition of the Motley and Floyd Prospect
9. Acquisition of the Palo Duro Prospect One
10. Acquisition of the Sunset Lake Claim
11. Acquisition of the Cook Ranch Prospect Two
12. Acquisition of Palo Duro Prospect Two
13. Acquisition of Sentell Field Prospect
14. Amendment to Agreement for the Acquisition of the Good Hope Project
15. Sale of the Good Hope Project
10.4 EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
32
There is no law or governmental decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to a non-resident holder of common shares, other than
withholding tax requirements. See "Item 10.5. Taxation"
There is no limitation imposed by Canadian law or by our constituent documents
on the right of a non-resident to hold or vote common shares, other than are
provided in the Investment Canada Act (Canada). The following summarizes the
principal features of the Investment Canada Act (Canada).
The Investment Canada Act (Canada) requires certain "non-Canadian" individuals,
governments, corporation or other entities who wish to acquire a "Canadian
business" (as defined in the Investment Canada Act), or establish a "new
Canadian business" (as defined in the Investment Canada Act) to file either a
notification or an application for review with a governmental agency known as
"Investment Canada". The Investment Canada Act requires that certain acquisition
of control of Canadian business by a "non-Canadian" must be reviewed and
approved by the Minister responsible for the Investment Canada Act on the basis
that the Minister is satisfied that the acquisition is "likely to be of net
benefit to Canada", having regard to criteria set forth in the Investment Canada
Act. Only acquisitions of control are reviewable under the Investment Canada
Act; however, the Investment Canada Act provides detailed rules for the
determination of whether control has been acquired and, pursuant to those rules,
the acquisition of one-third or more of the voting shares of a corporation may,
in some circumstances, be considered to constitute an acquisition of control.
Certain reviewable acquisitions of control may not be implemented before being
approved by the Minister; if the Minister does not ultimately approve a
reviewable acquisition, which has been completed, the acquired Canadian business
must be divested. Failure to comply with the review provisions of the Investment
Canada Act could result in, amongst other things, an injunction or a court order
directing disposition of assets of shares.
10.5 CANADIAN FEDERAL INCOME TAX CONSEQUENCES TO UNITED STATES INVESTORS
A brief description of certain provisions of the tax treaty between Canada and
the United States is included below, together with a brief outline of certain
taxes, including withholding provisions to which United States security holders
are subject under existing laws and regulations of Canada and United States; the
consequences, if any, of state and local taxes are not considered. The following
information is general and security holders are urged to seek the advice of
their own tax advisors, tax counsel or accountants with respect to the
applicability or effect on their own individual circumstances of not only the
matters referred to herein, but also any state or local taxes.
Canadian federal tax legislation generally requires a 25% withholding from
dividends paid or deemed to be paid to the Company's nonresident shareholders.
However, shareholders resident in the United States will generally have this
rate reduced to 15% through the tax treaty between Canada and the United States.
The amount of stock dividends paid to non-residents of Canada will be subject to
withholding tax at the same rate as cash dividends. The amount of stock dividend
(for tax purposes) would generally be equal to the amount by which our stated
capital has increased by reason of the payment of such dividend. We will
furnish additional tax information to shareholders
33
in the event of such a dividend. Interest paid or deemed to be paid on our debt
securities held by non-Canadian residents may also be subject to Canadian
withholding tax, depending upon the terms and provisions of such securities and
any applicable tax treaty. Under present legislation in the United States, we
are generally not subject to United States back up withholding rules, which
would require withholding at a rate of 20% on dividends and interest paid to
certain United States persons who have not provided us with a taxpayer
identification number.
Gains derived from a disposition of shares of the company by a non-resident
shareholder will be subject to tax in Canada only if not less than 25% of any
class of our shares was owned by the nonresident shareholder and/or persons with
whom the nonresident did not deal at arm's length at any time during the five-
year period immediately preceding the disposition. In such cases gains derived
by a U.S. shareholder from a disposition of our shares would likely be exempt
from tax in Canada by virtue of the Canada-U.S. tax treaty.
ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON SHARES.
10.6 DOCUMENTS ON DISPLAY
You may review a copy of our filings with the SEC, including exhibits and
schedules filed with it, at the SEC's public reference facilities in Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
The SEC maintains a Web site (HTTP://WWW.SEC.GOV) that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC. Although we may make our filings with the SEC
electronically as a foreign private issuer, we are not obligated to do so.
11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
12 DESCRIPTIONS OF SECURITIES OTHER THAN EQUITY SECURITIES
12.1 Warrants
Various persons hold share purchase warrants to acquire additional common shares
in our capital stock as follows:
Number of Shares
Purchasable Upon Exercise Exercise Price Expiry Date
60,000 $0.15 August 9, 2006
34
3,450,000 $0.15 December 9, 2006
2,800,000 $0.15 June 17, 2007
11,200,000 $0.15 August 19, 2007
1,386,668 $0.15 November 23, 2007
2,066,700 $0.20 November 23, 2007
335,000 US$0.12 November 23, 2007
3,350,000 US$0.16 November 23, 2007
3,043,967 $0.20 March 20, 2008
269,230 $0.15 March 20, 2008
If and whenever we subdivide our common shares into a greater number or
consolidate our common shares into a lesser number, the exercise price shall be
decreased or increased proportionately as the case may be. Upon any such
subdivision or consolidation the number of common shares deliverable upon the
exercise of the warrants shall be increased or decreased proportionately as the
case may be.
12.2 Stock Options
Our directors, officers and employees hold incentive stock options entitling
them to acquire additional common shares in our capital stock as follows:
Number of Shares
Purchasable Upon Exercise Exercise Price Expiry Date
2,400,000 $0.10 September 30, 2009
500,000 $0.10 February 4, 2010
300,000 $0.10 July 21, 2010
1,000,000 $0.10 July 28, 2010
200,000 $0.13 September12, 2010
100,000 $0.17 November 29, 2010
300,000 $0.16 April 17, 2011
If and whenever we subdivide our common shares into a greater number or
consolidate our common shares into a lesser number, the exercise price shall be
decreased or increased proportionately as the case may be. Upon any such
subdivision or consolidation the number of common shares deliverable upon the
exercise of the share purchase options shall be increased or decreased
proportionately as the case may be.
PART II
13 DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
35
14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable
15 CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2003 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
LIMITATIONS ON THE EFFECTIVE OF CONTROLS
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A
design of a control system is also based upon certain assumptions about
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may occur and may
not be detected.
CONCLUSIONS
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
16 AUDIT COMMITTEE FINANCIAL EXPERT
We do not have an audit committee financial expert serving on our audit
committee.
36
37
PART III
17 FINANCIAL STATEMENTS
Our audited financial statements include:
* our balance sheet as at December 31, 2005 and December 31, 2004;
* the following statements for the fiscal years ended December 31, 2005 and
2004:
* statements of operations and deficit
* statements of cash flow; and
* statement of changes in shareholders' equity
All of these were prepared by our auditor, Amisano Hanson, Chartered
Accountants.
The financial statements are prepared in accordance with generally
accepted accounting principles in Canada and are reconciled to United States
generally accepted accounting principles in Note 12. All figures are expressed
in Canadian dollars.
Our unaudited financial statements include:
* our balance sheet at June 30, 2006;
* our statement of operations and deficit at June 30, 2006; and
* our statement of cash flows at June 30, 2006.
All of these were prepared in accordance with interim reporting requirements
under United States generally accepted accounting principles.
ITEM 18. FINANCIAL STATEMENTS
See "Item 17 Financial Statement"
ITEM 19. EXHIBITS
Exhibit 1: Financial Statements
Exhibit 2: Certificate of Incorporation
38
Exhibit 3: Certificate of Amendment - July 19, 1993
Exhibit 4: Certificate of Amendment - March 5, 2004
Exhibit 5: Restated Articles
Exhibit 6: Bylaws No. 1
Exhibit 7: Option Agreement dated October 28, 2001 between Dynamic Resources
Corp. and Guy Delrome.
Exhibit 8: Option to Purchase Agreement dated February 26, 2004 between
Dynamic Resources Corp. and Consolidated Global Minerals Ltd.
Exhibit 9: Letter Agreement dated June 9, 2004 between Dynamic Resources
Corp. and WGT Consultants (NWT) Ltd.
Exhibit 10: Letter Agreement dated August 17, 2004 between Dynamic Resources
Corp. and WGT Consultants (NWT) Ltd.
Exhibit 11: Amended and Restated Partnership Agreement dated November 28,
2003 between Dynamic Resources Corp., Moon Capital Inc. and
Newfield Minerals Inc.
Exhibit 12: Participation Agreement dated May 12, 2005 between Dynamic
Resources Corp. and Bayshore Exploration L.L.C.
Exhibit 13: Participation Agreement dated December 16, 2005 between Dynamic
Resources Corp. and Bayshore Exploration L.L.C.
Exhibit 14: Mineral Purchase Agreement dated July 5, 2005 between Dynamic
Resources Corp. and Bill Timmins
Exhibit 15: Purchase Agreement dated September 21, 2005 between Dynamic
Resources Corp and Dawn Petroleum L.L.C.
Exhibit 16: Option Agreement dated October 28, 2005 between Dynamic Resources
Corp. and Impala Resource Services Ltd.
Exhibit 17: Interim Purchase Agreement dated November 17, 2005 between
Dynamic Resources Corp. and Baron Resources L.L.C.
Exhibit 18: Purchase Agreement dated February, 12, 2006 between Dynamic
Resources Corp. and Tyner Texas Operation Company and Sierra Pine
Resources International
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Exhibit 19: Purchase Agreement dated February 20, 2006 between Dynamic
Resources Corp. and Meagher Oil & Gas Properties, Inc.
Exhibit 20: Amendment Agreement To Option To Purchase Joint Venture and
Royalty Agreement between Dynamic Ventures Ltd. and Consolidated
Global Minerals Ltd. dated May 8, 2006
Exhibit 21: Assignment of Option To Purchase Joint Venture and Royalty
Agreement between Dynamic Ventures Ltd., Reno Gold Corp, and
Consolidated Global Minerals Ltd, dated June 6, 2006
Exhibit 22: Certification Robert D. Fedun
Exhibit 23: Certification Glen C. MacDonald
Exhibit 24: Consent of Amisano Hanson, Chartered Accountants
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SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly cause and authorized the undersigned to sign
this statement on its behalf.
DYNAMIC RESOURCES CORP.
Dated: November 27, 2006
By: /s/ "Robert D. Fedun"
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Robert D. Fedun, President