U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A
Amendment No. 4
File No.: 000-29621
CIK:0001039466
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SUN RIVER MINING, INC.
----------------------
(Name of Small Business Issuer in its charter)
COLORADO 84-1384159
----------------------------------- ----------
State or other jurisdiction of IRS Employer ID Number
incorporation or organization
9084 Armadillo Trail, Evergreen Colorado 80439
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(New Address of principal executive offices) (Zip Code)
Issuer's telephone number: 303-670-3827
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Not Applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of class)
TABLE OF CONTENTS
PART I
Page
Item 1. Business..................................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 23
Item 3. Properties.................................................. 25
Item 4. Security Ownership of Certain Beneficial Owners
and Management........................................ 25
Item 5. Directors and Executive Officers of the Registrant.......... 26
Item 6. Executive Compensation...................................... 29
Item 7. Certain Relationships and Related Transactions.............. 31
Item 8. Description of Securities................................... 33
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters............................... 35
Item 2. Legal Proceedings........................................... 35
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 35
Item 4. Recent Sales of Unregistered Securities..................... 36
Item 5. Indemnification of Directors and Officers................... 47
PART F/S
Signature Page................................ 48
Index to Financial Statements...................... 49
Financial Statements and Supplementary Data...... F-1 - F-22
Index to Exhibits................................ 50
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
---------------------------------
GENERAL
CURRENT BUSINESS
The Company has no commercial operations as of date hereof. The Company
has no employees. The Company owns no real estate.
The Company is a "shell" company and its only current business plan is
to seek, investigate, and, if warranted, acquire one or more properties or
businesses, and to pursue other related activities intended to enhance
shareholder value. The acquisition of a business opportunity may be made by
purchase, merger, exchange of stock, or otherwise, and may encompass assets or a
business entity, such as a corporation, joint venture, or partnership. The
Company has no capital, and it is unlikely that the Company will be able to take
advantage of more than one such business opportunity. The Company intends to
seek opportunities demonstrating the potential of long-term growth as opposed to
short-term earnings.
At the present time the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any agreement
or definitive understanding with any person concerning an acquisition. The
Company is filing Form 10-SB on a voluntary basis in order to become a 12(g)
registered company under the Securities Exchange Act of 1934. As a "reporting
company," the Company may be more attractive to a private acquisition target
because it may be listed to trade its shares on the OTCBB.
It is anticipated that the Company's officers and directors will
contact broker-dealers and other persons with whom they are acquainted who are
involved in corporate finance matters to advise them of the Company's existence
and to determine if any companies or businesses they represent have an interest
in considering a merger or acquisition with the Company. No assurance can be
given that the Company will be successful in finding or acquiring a desirable
business opportunity, given that no funds that are available for acquisitions,
or that any acquisition that occurs will be on terms that are favorable to the
Company or its stockholders.
The Company's search will be directed toward small and medium-sized
enterprises which have a desire to become public corporations and which are able
to satisfy, or anticipate in the reasonably near future being able to satisfy,
the minimum asset requirements in order to qualify shares for trading on NASDAQ
or a stock exchange (See "Investigation and Selection of Business
Opportunities"). The Company anticipates that the business opportunities
presented to it will (i) be recently organized with no operating history, or a
history of losses attributable to under-capitalization or other factors; (ii) be
experiencing financial or operating difficulties; (iii) be in need of funds to
develop a new product or service or to expand into a new market; (iv) be relying
upon an untested product or marketing concept; or (v) have a combination of the
characteristics mentioned in (i) through (iv). The Company intends to
concentrate its acquisition efforts on properties or businesses that it believes
to be undervalued. Given the above factors, investors should expect that any
acquisition candidate may have a history of losses or low profitability.
3
The Company does not propose to restrict its search for investment
opportunities to any particular geographical area or industry, and may,
therefore, engage in essentially any business, to the extent of its limited
resources. This includes industries such as service, finance, natural resources,
manufacturing, high technology, product development, medical, communications and
others. The Company's discretion in the selection of business opportunities is
unrestricted, subject to the availability of such opportunities, economic
conditions, and other factors.
As a consequence of this registration of its securities, any entity
which has an interest in being acquired by, or merging into the Company, is
expected to be an entity that desires to become a public company and establish a
public trading market for its securities. In connection with such a merger or
acquisition, it is highly likely that an amount of stock constituting control of
the Company would be issued by the Company or purchased from the current
principal shareholders of the Company by the acquiring entity or its affiliates.
If stock is purchased from the current shareholders, the transaction is
very likely to result in substantial gains to them relative to their purchase
price for such stock. The sale of a controlling interest by certain principal
shareholders of the Company could occur at a time when the other shareholders of
the Company remain subject to restrictions on the transfer of their shares.
Depending upon the nature of the transaction, the current officers and
directors of the Company may resign management positions with the Company in
connection with the Company's acquisition of a business opportunity. See "Form
of Acquisition," below, and "Risk Factors - The Company - Lack of Continuity in
Management." In the event of such a resignation, the Company's current
management would not have any control over the conduct of the Company's business
following the Company's combination with a business opportunity.
It is anticipated that business opportunities will come to the
Company's attention from various sources, including its officers and director,
its other stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plans, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
The Company does not foresee that it would enter into a merger or
acquisition transaction with any business with which its officers or directors
are currently affiliated. Should the Company determine in the future, contrary
to foregoing expectations, that a transaction with an affiliate would be in the
best interests of the Company and its stockholders, the Company is in general
permitted by Colorado law to enter into such a transaction if:
4
1. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known to
the Board of Directors, and the Board in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors constitute less than a
quorum; (at present, the Company would be unable to enter into any such
transactions because there may be no disinterested directors who might vote on
an affiliate transaction) or
2. The material facts as to the relationship or interest of the
affiliate and as to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
3. The contract or transaction is fair as to the Company as of the time
it is authorized, approved or ratified, by the Board of Directors or the
stockholders.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business
opportunity may be made upon management's analysis of the quality of the other
company's management and personnel, the anticipated acceptability of new
products or marketing concepts, the merit of technological changes, the
perceived benefit the company will derive from becoming a publicly held entity,
and numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of the
possible need to shift marketing approaches substantially, expand significantly,
change product emphasis, change or substantially augment management, or make
other changes. The Company will be dependent upon the owners of a business
opportunity to identify any such problems which may exist and to implement, or
be primarily responsible for the implementation of, required changes. Because
the Company may participate in a business opportunity with a newly organized
firm or with a firm which is entering a new phase of growth, it should be
emphasized that the Company will incur further risks, because management in many
instances will not have proved its abilities or effectiveness, the eventual
market for such company's products or services will likely not be established,
and such company may not be profitable when acquired.
It is anticipated that the Company will not be able to diversify, but
will essentially be limited to one such venture because of the Company's limited
financing. This lack of diversification will not permit the Company to offset
potential losses from one business opportunity against profits from another, and
should be considered an adverse factor affecting any decision to purchase the
Company's securities.
5
It is emphasized that management of the Company may effect transactions
having a potentially adverse impact upon the Company's shareholders pursuant to
the authority and discretion of the Company's management to complete
acquisitions without submitting any proposal to the stockholders for their
consideration. Holders of the Company's securities should not anticipate that
the Company necessarily will furnish such holders, prior to any merger or
acquisition, with financial statements, or any other documentation, concerning a
target company or its business. In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for
their consideration, either voluntarily by such directors to seek the
stockholders' advice and consent or because state law so requires.
The analysis of business opportunities will be undertaken by or under
the supervision of the Company's President, who is not a professional business
analyst. See "Management." Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and
selection of business opportunities, and might pay a finder's fee. Since Company
management has no current plans to use any outside consultants or advisors to
assist in the investigation and selection of business opportunities, no policies
have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided,
the term of service, or regarding the total amount of fees that may be paid.
However, because of the limited resources of the Company, it is likely that any
such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things,
the following factors:
1. Potential for growth and profitability, indicated by new technology,
anticipated market expansion, or new products;
2. The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's stockholders;
3. Whether, following the business combination, the financial condition
of the business opportunity would be, or would have a significant prospect in
the foreseeable future of becoming sufficient to enable the securities of the
Company to qualify for listing on an exchange or on a national automated
securities quotation system, such as NASDAQ, so as to permit the trading of such
securities to be exempt from the requirements of Rule 15c2-6 recently adopted by
the Securities and Exchange Commission. See "Risk Factors - The Company
-Regulation of Penny Stocks."
6
4. Capital requirements and anticipated availability of required funds,
to be provided by the Company or from operations, through the sale of additional
securities, through joint ventures or similar arrangements, or from other
sources;
5. The extent to which the business opportunity can be advanced;
6. Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the industry as a
whole;
7. Strength and diversity of existing management, or management
prospects that are scheduled for recruitment;
8. The cost of participation by the Company as compared to the
perceived tangible and intangible values and potential; and
9. The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required items.
In regard to the possibility that the shares of the Company would
qualify for listing on NASDAQ, the current standards include the requirements
that the issuer of the securities that are sought to be listed have total net
tangible assets of at least $4,000,000. Many, and perhaps most, of the business
opportunities that might be potential candidates for a combination with the
Company would not satisfy the NASDAQ listing criteria.
No one of the factors described above will be controlling in the
selection of a business opportunity, and management will attempt to analyze all
factors appropriate to each opportunity and make a determination based upon
reasonable investigative measures and available data. Potentially available
business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex. Potential investors must recognize that, because of the Company's
limited capital available for investigation and management's limited experience
in business analysis, the Company may not discover or adequately evaluate
adverse facts about the opportunity to be acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more. Prior
to making a decision to participate in a business opportunity, the Company will
generally request that it be provided with written materials regarding the
business opportunity containing such items as a description of products,
services and company history; management resumes; financial information;
available projections, with related assumptions upon which they are based; an
explanation of proprietary products and services; evidence of existing patents,
trademarks, or services marks, or rights thereto; present and proposed forms of
compensation to management; a description of transactions between such company
and its affiliates during relevant periods; a description of present and
required facilities; an analysis of risks and competitive conditions; a
financial plan of operation and estimated capital requirements; audited
financial statements, or if they are not available, unaudited financial
statements, together with reasonable assurances that audited
7
financial statements would be able to be produced within a reasonable period of
time not to exceed 60 days following completion of a merger transaction; and
other information deemed relevant.
As part of the Company's investigation, the Company's executive
officers and directors may meet personally with management and key personnel,
may visit and inspect material facilities, obtain independent analysis or
verification of certain information provided, check references of management and
key personnel, and take other reasonable investigative measures, to the extent
of the Company's limited financial resources and management expertise.
It is possible that the range of business opportunities that might be
available for consideration by the Company could be limited by the impact of
Securities and Exchange Commission regulations regarding purchase and sale of
"penny stocks." The regulations would affect, and possibly impair, any market
that might develop in the Company's securities until such time as they qualify
for listing on NASDAQ or on another exchange which would make them exempt from
applicability of the "penny stock" regulations. See "Risk Factors -- Regulation
of Penny Stocks."
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current shareholders,
acquisition candidates which have long-term plans for raising capital through
the public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates which have a need for an immediate cash infusion are not
likely to find a potential business combination with the Company to be an
attractive alternative.
There are no loan arrangements or arrangements for any financing
whatsoever relating to any business opportunities.
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may
participate in a business opportunity. Specific business opportunities will be
reviewed as well as the respective needs and desires of the Company and the
promoters of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure or
method deemed by management to be suitable will be selected. Such structure may
include, but is not limited to leases, purchase and sale agreements, licenses,
joint ventures and other contractual arrangements. The Company may act directly
or indirectly through an interest in a partnership, corporation or other form of
organization. Implementing such structure may require the merger, consolidation
or reorganization of the Company with other corporations or forms of business
organization, and although it is likely, there is no assurance that the Company
would be the surviving entity. In addition, the present management and
stockholders of the Company most likely will not have control of a majority of
the voting shares of the Company following a reorganization transaction. As part
of such a transaction, the Company's existing directors may resign and new
directors may be appointed without any vote by stockholders.
8
It is likely that the Company will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under the
Internal Revenue Code of 1986, depends upon the issuance to the stockholders of
the acquired company of a controlling interest (i.e. 80% or more) of the common
stock of the combined entities immediately following the reorganization. If a
transaction were structured to take advantage of these provisions rather than
other "tax free" provisions provided under the Internal Revenue Code, the
Company's current stockholders would retain in the aggregate 20% or less of the
total issued and outstanding shares. This could result in substantial additional
dilution in the equity of those who were stockholders of the Company prior to
such reorganization. Any such issuance of additional shares might also be done
simultaneously with a sale or transfer of shares representing a controlling
interest in the Company by the current officers, directors and principal
shareholders. (See "Description of Business - General").
It is anticipated that any new securities issued in any reorganization
would be issued in reliance upon exemptions, if any are available, from
registration under applicable federal and state securities laws. In some
circumstances, however, as a negotiated element of the transaction, the Company
may agree to register such securities either at the time the transaction is
consummated, or under certain conditions or at specified times thereafter. The
issuance of substantial additional securities and their potential sale into any
trading market that might develop in the Company's securities may have a
depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its
officers and principal shareholders will enter into a letter of intent with the
management, principals or owners of a prospective business opportunity prior to
signing a binding agreement. Such a letter of intent will set forth the terms of
the proposed acquisition but will not bind any of the parties to consummate the
transaction. Execution of a letter of intent will by no means indicate that
consummation of an acquisition is probable. Neither the Company nor any of the
other parties to the letter of intent will be bound to consummate the
acquisition unless and until a definitive agreement concerning the acquisition
as described in the preceding paragraph is executed. Even after a definitive
agreement is executed, it is possible that the acquisition would not be
consummated should any party elect to exercise any right provided in the
agreement to terminate it on specified grounds.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Moreover, because many providers of goods and services
require compensation at the time or soon after the goods and services are
provided, the inability of the Company to pay until an indeterminate future time
may make it impossible to procure goods and services.
9
In all probability, upon completion of an acquisition or merger, there
will be a change in control through issuance of substantially more shares of
common stock. Further, in conjunction with an acquisition or merger, it is
likely that management may offer to sell a controlling interest at a price not
relative to or reflective of any value of the shares sold by management, and at
a price which could not be achieved by individual shareholders at the time.
INVESTMENT COMPANY ACT AND OTHER REGULATION
The Company may participate in a business opportunity by purchasing,
trading or selling the securities of such business. The Company does not,
however, intend to engage primarily in such activities. Specifically, the
Company intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore to avoid application of the costly and restrictive
registration and other provisions of the Investment Act, and the regulations
promulgated thereunder.
Section 3(a) of the Investment Act contains the definition of an
"investment company," and it excludes any entity that does not engage primarily
in the business of investing, reinvesting or trading in securities, or that does
not engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). The Company intends to implement its business plan in a manner which
will result in the availability of this exception from the definition of
"investment company." Consequently, the Company's participation in a business or
opportunity through the purchase and sale of investment securities will be
limited.
The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, in order to protect purchasers of investment company securities.
Since the Company will not register as an investment company, stockholders will
not be afforded these protections.
Any securities which the Company might acquire in exchange for its
common stock are expected to be "restricted securities" within the meaning of
the Securities Act of 1933, as amended (the "Act"). If the Company elects to
resell such securities, such sale cannot proceed unless a registration statement
has been declared effective by the Securities and Exchange Commission or an
exemption from registration is available. Section 4(1) of the Act, which exempts
sales of securities not involving a distribution, would in all likelihood be
available to permit a private sale. Although the plan of operation does not
contemplate resale of securities acquired, if such a sale were to be necessary,
the Company would be required to comply with the provisions of the Act to effect
such resale.
An acquisition made by the Company may be in an industry which is
regulated or licensed by federal, state or local authorities. Compliance with
such regulations can be expected to be a time-consuming and expensive process.
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COMPETITION
The Company expects to encounter substantial competition in its efforts
to locate attractive opportunities, primarily from business development
companies, venture capital partnerships and corporations, venture capital
affiliates of large industrial and financial companies, small investment
companies, and wealthy individuals. Many of these entities will have
significantly greater experience, resources and managerial capabilities than the
Company and will therefore be in a better position than the Company to obtain
access to attractive business opportunities. The Company also will possibly
experience competition from other public "blank check" companies, some of which
may have more funds available than does the Company.
NO RIGHTS OF DISSENTING SHAREHOLDERS
The Company does not intend to provide Company shareholders with
complete disclosure documentation including audited financial statements,
concerning a possible target company prior to acquisition, because Colorado
Business Corporation Act vests authority in the Board of Directors to decide and
approve matters involving acquisitions within certain restrictions. A
transaction could be structured as an acquisition, not a merger, with the
Registrant being the parent company and the acquiree being merged into a wholly
owned subsidiary. Therefore, a shareholder will have no right of dissent under
Colorado law.
The Business Corporation Act allows mergers and acquisitions without
shareholder vote under the following circumstances:
7-111-101. Merger. A corporation may merge into a Colorado corporation
if the board of directors of each corporation adopts a plan of merger
and the shareholders of each corporation, if required by section
7-111-103, approve the plan of merger.
7-111-102. Share Exchange. A Colorado corporation may acquire all of
the outstanding shares of one or more classes or series of another
domestic corporation if the board of directors of each corporation
adopts a plan of share exchange and the shareholders of each
corporation, if required by section 7-111-103, approve the plan of
share exchange.
11
Colorado Revised Statute 7-111-103 (7) provides:
(7) Action by the shareholders of the surviving corporation on a plan
of merger is not required if:
(a) The articles of incorporation of the surviving
corporation will not differ, except for amendments enumerated
in section 7-110-102, from its articles of incorporation
before the merger;
(b) Each shareholder of the surviving corporation whose shares
were outstanding immediately before the merger will hold the
same number of shares, with identical designations,
preferences, limitations, and relative rights, immediately
after the merger;
(c) The number of voting shares outstanding immediately after
the merger, plus the number of voting shares issuable as a
result of the merger either by the conversion of securities
issued pursuant to the merger or by the exercise of rights and
warrants issued pursuant to the merger, will not exceed by
more than twenty percent the total number of voting shares of
the surviving corporation outstanding immediately before the
merger; and
(d) The number of participating shares outstanding immediately
after the merger, plus the number of participating shares
issuable as a result of the merger either by the conversion of
securities issued pursuant to the merger or by the exercise of
rights and warrants issued pursuant to the merger, will not
exceed by more than twenty percent the total number of
participating shares outstanding immediately before the
merger.
(8) As used in subsection (7) of this section:
(a) "Participating shares" means shares that entitle their
holders to participate without limitation in distributions.
(b) "Voting shares" means shares that entitle their holders to
vote unconditionally in elections of directors.
12
These provisions notwithstanding, Colorado Revised Statutes
7-111-102(4) provides:
This section does not limit the power of a corporation to
acquire all or part of the shares of one or more classes or
series of another corporation through a voluntary exchange of
shares or otherwise.
7-111-104 provides merger of parent and subsidiary. By
complying with the provisions of this section, a parent
corporation owning at least ninety percent of the outstanding
shares of each class of a subsidiary corporation may either
merge such subsidiary into itself or merge itself into such
subsidiary.
No vote of the shareholders of such subsidiary shall be
required with respect to the merger. If the subsidiary will be
the surviving corporation, the approval of the shareholders of
the parent corporation shall be sought in the manner provided
in section 7-111-103(1) to (6). If the parent will be the
surviving corporation, no vote of its shareholders shall be
required if all of the provisions of section 7-111-103 (7) are
met with respect to the merger. If all of such provisions are
not met, the approval of the shareholders of the parent shall
be sought in the manner provided in subsections (1) to (6) of
section 7-111-103.
In general these provisions allow the Company:
1) to merge with another company with shareholder approval;
2) to merge with a subsidiary without shareholder approval if 90%
of the outstanding stock is owned by the company, if the
company is the surviving entity;
3) to complete a share exchange agreement if shareholder approval
is obtained;
4) to complete a voluntary share exchange with another company to
acquire the outstanding shares of the other company without
shareholder approval, so long as the company is the survivor
and the Articles of Incorporation are not amended.
13
NO TARGET CANDIDATES FOR ACQUISITION
None of the Company's Officers, Directors, promoters, affiliates, or
associates have had any preliminary contact or discussion with any specific
candidate for acquisition. There are no present plans, proposals, arrangements,
or understandings with any representatives of the owners of any business or
company regarding the possibility of an acquisition transaction.
HISTORY
Sun River Mining Inc. ("Sun River", the "Company" or the "issuer") is a
Colorado corporation incorporated on February 25, 1997 to assume control of two
subsidiaries, Grupo Inversor Rio Del Sol S.A. ("Rio Del Sol"), and North
Bolivian Investment S.A. ("NBI"), respectively 99.6% and 99.9924% then owned by
Sun River. Rio Del Sol and NBI were both Bolivian corporations. Neither Sun
River nor the subsidiaries had any operational history or engaged in significant
business operations, and have not generated revenues since inception. The
Registered Office of Sun River is 1909 P Street, Ord, Nebraska 68862.
In 1997, the Company issued to its founding director, Randy McCall, a
total of 100,000 shares of common stock for a total of $100. In 1997, Randy
McCall and seven other entities exchanged shares of two Bolivian companies for
8,900,000 shares. Mr. McCall received 1,500,000 shares. Paul Enright, K. Mark
Skow and Ronald Sparkman each received 2,000,000 shares. William Petty received
400,000 shares, Grupo Inversor Rio Del Sol, S.A. received 788,000, Oscar Morales
received 200,000 and Mery Villarreal Filipovich received 12,000 shares. The
Company had transactions with the following promoters: (i) Scott Wilding was
issued 25,000 common shares for his assistance in newsletter and press release
preparation, (ii) Larry McNabb was issued 500,000 common shares for assistance
with investor and broker/dealer relations, and (iii) Capital Investment
Resources was issued 450,000 common shares for financing consultation and
broker/dealer relations (see Item 7. Certain Relationships and Related
Transactions).
The original planned business of Sun River was the acquisition and
evaluation of gold prospects, the exploration and development of such prospects,
and the production of gold to be sold to international gold wholesalers. The
business plan was unsuccessful. No new products or services have been announced
to the public. The issuer does not does not currently own any patents,
trademarks, licenses, franchises, concessions, royalty agreements or labor
contracts. The issuer has no current sources of raw materials. Governmental
approval of principal products or services is not required. The estimate of the
amount spent the last two fiscal years on direct costs of searching for mining
concessions with merit are approximately $335,000 for the current fiscal year
and $599,000 for the prior fiscal year. No significant cost has been incurred
regarding compliance with environmental laws.
In March 1997, Rio Del Sol entered into a Letter of Understanding
whereby Rio Del Sol would acquire an 81% interest in Aluvion S.A., a Bolivian
corporation, engaged in the acquisition and exploration of alluvial gold
properties in Bolivia, for a total consideration of approximately $9.7 million
including the assumption of certain indebtedness. Rio Del Sol's rights and
obligation under the Aluvion Agreement have been transferred to NBI. On June 10
and September 11, 1998 NBI received, from Aluvion and its shareholders, an
addendum to the original Letter of Understanding agreement amending certain
terms including extending the time for payments of the balance due until January
31, 1999. The initial business of Sun River was the acquisition and evaluation
of gold properties in Bolivia, the exploration and development of such
properties for the production of gold.
14
Aluvion owned or expected to acquire contractual rights to explore
and/or produce gold from several alluvial properties in Bolivia in the Tipuani
gold mining district in northwestern Bolivia, which includes the Tipuani and
Kaka Rivers and neighboring properties whose mineral rights are held by Central
de Cooperativas Cangalli. Alluvion expected to acquire similar rights to explore
and/or produce gold from alluvial properties in and along the Upper Tipuani
River and Kaka River. Following the completion of the Aluvion Acquisition, the
Sun River Group was to have interests in several gold properties, which it
intended to bring into production. Those properties may be considered in two
categories: dredging properties and dry land properties. Aluvion was to own all
of the Sun River Group's rights to dredging properties and be the operator of
those properties. The proportionate net interest of Sun River in the dredging
properties of Aluvion was to be equivalent to Sun River's indirect equity
interest of approximately 81% in Aluvion. The Aluvion transaction was not
completed due to numerous factors including lack of funding and contract and
title issues, and Sun River did not acquire an 81% interest in Aluvion.
Sun River retained Watts, Griffis and McOuat Limited, an international
firm of consulting geologists and engineers, to review Aluvion's estimates of
these reserves and of the capital and operating costs of the various projects.
In order to bring the planned projects into commercial production in
the preferred time period, Sun River needed to complete a major financing in the
estimated minimum amount of $16.4 million. That amount would have allowed Sun
River to complete the acquisition of 81% of Aluvion and provide enough capital
to put the operating plan into effect. Although Sun River intended to seek a
capital commitment of $20 million from a perspective joint venture partner, the
amount over $16.4 million was expected to be released back to the joint venture
partner at an early stage. As an alternative to the joint venture structure, Sun
River had analyzed a corporate financing whereby new investors would contribute
the required capital in return for common shares of Sun River. The necessary
financing to carry out the Company's plans in the mineral industry was never
achieved, and the Company had to abandon all of its mineral business ventures
and plans.
In May 1998 Sun River entered into a Letter of Intent with Empire
Ventures, Inc. ("Empire") to acquire all of the outstanding shares of Empire,
which owns mineral properties in Colorado in exchange for 2,300,000 shares of
Sun River common stock. Empire was unable to provide to Sun River assurances
that there was no material liability regarding environmental issues, and
therefore the transaction was not completed.
15
On January 9, 1999, Rio Del Sol entered into an agreement with
Cooperativa Minera Aurifera 26 de Septiembre Poroma Ltda ("Cooperativa")
concerning a prospect ("Challana"), which is located along the Challana River in
the Tipuani gold mining district of Bolivia.
Sun River Mining, Inc. received a report entitled "Review and
Evaluation of the Challana Project, Tipuani Mining District, Bolivia" from
Patagonia Capital Corp. ("Patagonia") of Evergreen, Colorado. Patagonia was
retained to provide an independent, third party assessment of the Challana
Project and recommendations concerning the Sun River Group's financial needs.
Discussions contained in the Patagonia report included the belief that "Challana
is a low-risk exploration project with significant upside potential, and a
property that clearly merits further exploration and development." An
exploration/development budget of US$500,000 was proposed and agreed to by the
parties. Rio Del Sol was to retain ownership of the capital equipment required
for the project (estimated to be approximately one-half of the $500,000 required
investment). Sun River did not have the funds to fulfill the contractual terms
of the agreements with the Cooperativa and unsuccessfully pursued funding to
meet the terms of these agreements.
Sun River had two Bolivian subsidiaries which it has abandoned and they
are dissolved. Due to the extremely difficult financial environment now present
in the precious metals mining industry, the payment terms of the agreements
regarding the Bolivian prospects, the marginal economics indicated in light of
recent gold prices, the continuing decline in the price of gold, and the risk of
doing business in a foreign country including relying on other people to manage
certain aspects of the business or provide necessary professional services,
neither the subsidiaries nor the Sun River was able to secure the funds, or a
commitment for such funds, necessary to fulfill contractual agreements. Sun
River ceased funding to its former Bolivian subsidiaries and has expensed all
investment, $923,834 including the initial April 3, 1997 investment of $312,106,
in such subsidiaries.
On June 9, 1999, Sun River entered into an agreement with Compania
Minera Cerros del Sur S. de R.L. de C.V. to purchase the mineral company and its
principal holdings, including a mineral concession, a producing mine and a
processing plant at Clavo Rico, near the city of Choluteca, southern Honduras.
The companies agreed for Sun River Mining to evaluate the company for a period
of up to 90 days, after which time Sun River had the option to acquire 100% of
the operating company. The assets included a mining concession of approximately
500 acres and approximately 23 acres of deeded surface. On October 19, 1999, the
Agreement was reaffirmed as the parties agreed that Sun River shall have up to
an additional 90 days in which to continue to evaluate the property and disburse
the first acquisition payment. Total purchase price was $335,000 payable in two
installments within 90 days after signing a definitive agreement to purchase.
The Company does not presently have adequate funds secured to fulfill any
contractual agreements and the option to purchase has expired. The Company does
not intend to further pursue any venture in the minerals industry.
16
ADMINISTRATIVE OFFICES
The Company currently maintains a mailing address at 9084 Armadillo Trail,
Evergreen, Colorado 80439 which is the office address of its President, Stephen
B. Doppler. Other than this mailing address, the Company does not currently
maintain any other office facilities, and does not anticipate the need for
maintaining office facilities at any time in the foreseeable future. The Company
pays no rent or other fees for the use of this mailing address. The Company
rented office facilities until December 1999.
EMPLOYEES
The Company is a "shell" company and currently has no salaried employees.
Management of the Company expects to use consultants, attorneys and accountants
as necessary, and does not anticipate a need to engage any full-time employees
so long as it is seeking and evaluating business opportunities. The need for
employees and their availability will be addressed in connection with the
decision whether or not to acquire or participate in specific business
opportunities. Although there is no current plan with respect to its nature or
amount, remuneration may be paid to or accrued for the benefit of, the Company's
officers prior to, or in conjunction with, the completion of a business
acquisition for services actually rendered, if any. Officers have no
compensation arrangements, however the Board may determine compensation for
services rendered to the company on a case by case basis. See "Executive
Compensation" and under "Certain Relationships and Related Transactions."
RISK FACTORS
1. ABILITY TO CONTINUE AS A GOING CONCERN. The Company has a history of
losses and accumulated deficit. The Company has never had revenues from
operations. These factors, as noted by the Company's auditors, indicate that the
Company has substantial doubt about its ability to continue as a going concern.
2. CONFLICTS OF INTEREST. Certain conflicts of interest may exist
between the Company and its officers and directors. They have other business
interests to which they devote their attention, and may be expected to continue
to do so although management time should be devoted to the business of the
Company. As a result, conflicts of interest may arise that can be resolved only
through exercise of such judgment as is consistent with fiduciary duties to the
Company. See "Management," and "Conflicts of Interest."
It is anticipated that Company's officers and directors may actively
negotiate or otherwise consent to the purchase of a portion of his common stock
as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's officers may consider his own
personal pecuniary benefit rather than the best interests of other Company
shareholders, and the other Company shareholders are not expected to be afforded
the opportunity to approve or consent to any particular stock buy-out
transaction. See "Conflicts of Interest."
17
3. NEED FOR ADDITIONAL FINANCING. The Company has no funds, and such
funds are not adequate to take advantage of any available business
opportunities. Even if the Company's funds prove to be sufficient to acquire an
interest in, or complete a transaction with, a business opportunity, the Company
may not have enough capital to exploit the opportunity. The ultimate success of
the Company may depend upon its ability to raise additional capital. The Company
has not investigated the availability, source, or terms that might govern the
acquisition of additional capital and will not do so until it determines a need
for additional financing. If additional capital is needed, there is no assurance
that funds will be available from any source or, if available, that they can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
4. REGULATION OF PENNY STOCKS. The Company's securities, when available
for trading, will be subject to a Securities and Exchange Commission rule that
imposes special sales practice requirements upon broker-dealers who sell such
securities to persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means, in general
terms, institutions with assets in excess of $5,000,000, or individuals having a
net worth in excess of $1,000,000 or having an annual income that exceeds
$200,000 (or that, when combined with a spouse's income, exceeds $300,000). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and also
may affect the ability of purchasers in this offering to sell their securities
in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rules 3a51-1,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker- dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
18
5. LACK OF OPERATING HISTORY. The Company was formed in February 1997
for the purpose of entering the minerals mining business which business plan was
unsuccessful. The Company must be regarded as a new or start-up venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
6. NO ASSURANCE OF SUCCESS OR PROFITABILITY. There is no assurance that
the Company will acquire a favorable business opportunity. Even if the Company
should become involved in a business opportunity, there is no assurance that it
will generate revenues or profits, or that the market price of the Company's
common stock will be increased thereby.
7. POSSIBLE BUSINESS - NOT IDENTIFIED AND HIGHLY RISKY. The Company has
not identified and has no commitments to enter into or acquire a specific
business opportunity and therefore can disclose the risks and hazards of a
business or opportunity that it may enter into in only a general manner, and
cannot disclose the risks and hazards of any specific business or opportunity
that it may enter into. An investor can expect a potential business opportunity
to be quite risky. The Company's acquisition of or participation in a business
opportunity will likely be highly illiquid and could result in a total loss to
the Company and its stockholders if the business or opportunity proves to be
unsuccessful. See Item 1 "Description of Business."
8. UNKNOWN BUSINESS MAY ACQUIRE CONTROL. The type of business to be
acquired may be one that desires to avoid effecting its own public offering and
the accompanying expense, delays, uncertainties, and federal and state
requirements which purport to protect investors. Because of the Company's
limited capital, it is more likely than not that any acquisition by the Company
will involve other parties whose primary interest is the acquisition of control
of a publicly traded company. Moreover, any business opportunity acquired may be
currently unprofitable or present other negative factors.
9. IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION. The Company's lack of
funds and the lack of full-time management will likely make it impracticable to
conduct a complete and exhaustive investigation and analysis of a business
opportunity before the Company commits its capital or other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
19
10. LACK OF DIVERSIFICATION. Because of the limited financial resources
that the Company has, it is unlikely that the Company will be able to diversify
its acquisitions or operations. The Company's probable inability to diversify
its activities into more than one area will subject the Company to economic
fluctuations within a particular business or industry and therefore increase the
risks associated with the Company's operations.
11. RELIANCE UPON FINANCIAL STATEMENTS. The Company generally will
require audited financial statements from companies that it proposes to acquire.
Given cases where audited financials are available, the Company will have to
rely upon interim period unaudited information received from target companies'
management that has not been verified by outside auditors. The lack of the type
of independent verification which audited financial statements would provide,
increases the risk that the Company, in evaluating an acquisition with such a
target company, will not have the benefit of full and accurate information about
the financial condition and recent interim operating history of the target
company. This risk increases the prospect that the acquisition of such a company
might prove to be an unfavorable one for the Company or the holders of the
Company's securities.
Moreover, the Company will be subject to the reporting provisions of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
will be required to furnish certain information about significant acquisitions,
including audited financial statements for any business that it acquires.
Consequently, acquisition prospects that do not have, or are unable to provide
reasonable assurances that they will be able to obtain, the required audited
statements would not be considered by the Company to be appropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable. Should the Company, during the time it remains subject to the
reporting provisions of the Exchange Act, complete an acquisition of an entity
for which audited financial statements prove to be unobtainable, the Company
would be exposed to enforcement actions by the Securities and Exchange
Commission (the "Commission") and to corresponding administrative sanctions,
including permanent injunctions against the Company and its management. The
legal and other costs of defending a Commission enforcement action would have
material, adverse consequences for the Company and its business. The imposition
of administrative sanctions would subject the Company to further adverse
consequences.
In addition, the lack of audited financial statements would prevent the
securities of the Company from becoming eligible for listing on NASDAQ, or on
any existing stock exchange. Moreover, the lack of such financial statements is
likely to discourage broker-dealers from becoming or continuing to serve as
market makers in the securities of the Company. Without audited financial
statements, the Company would almost certainly be unable to offer securities
under a registration statement pursuant to the Securities Act of 1933, and the
ability of the Company to raise capital would be significantly limited until
such financial statements were to become available.
12. OTHER REGULATION. An acquisition made by the Company may be of a
business that is subject to regulation or licensing by federal, state, or local
authorities. Compliance with such regulations and licensing can be expected to
be a time-consuming, expensive process and may limit other investment
opportunities of the Company.
20
13. DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has only four individuals who are serving as its officers
and directors on a part time basis, currently less than five hours per month
each. The Company will be heavily dependent upon their skills, talents, and
abilities to implement its business plan, and may, from time to time, find that
the inability of the officers and directors to devote their full time attention
to the business of the Company results in a delay in progress toward
implementing its business plan. See "Management." Because investors will not be
able to evaluate the merits of possible business acquisitions by the Company,
they should critically assess the information concerning the Company's officers
and directors.
14. LACK OF CONTINUITY IN MANAGEMENT. After March 15, 2000, the Company
does not have an employment agreement with its officers and directors, and as a
result, there is no assurance they will continue to manage the Company in the
future. In connection with acquisition of a business opportunity, it is likely
the current officers and directors of the Company may resign subject to
compliance with Section 14f of the Securities Exchange Act of 1934. A decision
to resign will be based upon the identity of the business opportunity and the
nature of the transaction, and is likely to occur without the vote or consent of
the stockholders of the Company.
15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Colorado Statutes
provide for the indemnification of its directors, officers, employees, and
agents, under certain circumstances, against attorney's fees and other expenses
incurred by them in any litigation to which they become a party arising from
their association with or activities on behalf of the Company. The Company will
also bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company which it will be unable to recoup.
16. DIRECTOR'S LIABILITY LIMITED. Colorado Statutes exclude personal
liability of its directors to the Company and its stockholders for monetary
damages for breach of fiduciary duty except in certain specified circumstances.
Accordingly, the Company will have a much more limited right of action against
its directors than otherwise would be the case. This provision does not affect
the liability of any director under federal or applicable state securities laws.
17. DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the business
experience of its officers and directors, the Company may be required to employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. The selection of any such advisors will be made by the Company's
President without any input from stockholders. Furthermore, it is anticipated
that such persons may be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to the Company. In the event the President of the
Company considers it necessary to hire outside advisors, he may elect to hire
persons who are affiliates, if they are able to provide the required services.
21
18. LEVERAGED TRANSACTIONS. There is a possibility that any acquisition
of a business opportunity by the Company may be leveraged, i.e., the Company may
finance the acquisition of the business opportunity by borrowing against the
assets of the business opportunity to be acquired, or against the projected
future revenues or profits of the business opportunity. This could increase the
Company's exposure to larger losses. A business opportunity acquired through a
leveraged transaction is profitable only if it generates enough revenues to
cover the related debt and expenses. Failure to make payments on the debt
incurred to purchase the business opportunity could result in the loss of a
portion or all of the assets acquired. There is no assurance that any business
opportunity acquired through a leveraged transaction will generate sufficient
revenues to cover the related debt and expenses.
19. COMPETITION. The search for potentially profitable business
opportunities is intensely competitive. The Company expects to be at a
disadvantage when competing with many firms that have substantially greater
financial and management resources and capabilities than the Company. These
competitive conditions will exist in any industry in which the Company may
become interested.
20. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future.
21. LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS. The Company
may consider an acquisition in which the Company would issue as consideration
for the business opportunity to be acquired, an amount of the Company's
authorized but unissued common stock that would, upon issuance, represent the
great majority of the voting power and equity of the Company. The result of such
an acquisition would be that the acquired company's stockholders and management
would control the Company, and the Company's management could be replaced by
persons unknown at this time. Such a merger would result in a greatly reduced
percentage of ownership of the Company by its current shareholders. In addition,
the Company's major shareholders could sell control blocks of stock at a premium
price to the acquired company's stockholders.
22. RULE 144 SALES. All of the outstanding shares of common stock held
by present officers, directors, and stockholders are "restricted securities"
within the meaning of Rule 144 under the Securities Act of 1933, as amended. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemptions from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the restricted securities have been held by the owner for a
period of two years. Nonaffiliate shareholders holding common shares of the
Company have held their shares for two years and under Rule 144(K) are eligible
to have freely tradable shares. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registration of
shares of common stock of present stockholders, may have a depressive effect
upon the price of the common stock in any market that may develop. Of the total
shares outstanding, shares become available for resale (subject to volume
limitations for affiliates) under Rule 144 when the Company's 12(g) Registration
Statement becomes effective subject to other applicable requirements under the
Rule.
22
23. BLUE SKY CONSIDERATIONS. Because the securities registered
hereunder have not been registered for resale under the blue sky laws of any
state, the holders of such shares and persons who desire to purchase them in any
trading market that might develop in the future, should be aware that there may
be significant state blue-sky law restrictions upon the ability of investors to
sell the securities and of purchasers to purchase the securities. Accordingly,
investors should consider the secondary market for the Company's securities to
be a limited one.
24. BLUE SKY RESTRICTIONS. Many states have enacted statutes or rules
which restrict or prohibit the sale of securities of "blank check" companies to
residents so long as they remain without specific business companies. To the
extent any current shareholders or subsequent purchaser from a shareholder may
reside in a state which restricts or prohibits resale of shares in a "blank
check" company, warning is hereby given that the shares may be "restricted" from
resale as long as the company is a shell company.
At the date of this registration statement, the Company has no
intention of offering further shares in a private offering to anyone except that
its former President, Steven R. Davis, has an option to purchase 300,000 shares
of common stock at $.01 per share. Further, the policy of the Board of Directors
is that any future offering of shares will only be made after an acquisition has
been made and can be disclosed in appropriate 8-K filings.
In the event of a violation of state laws regarding resale of "blank
check" shares the Company could be liable for civil and criminal penalties which
would be a substantial impairment to the Company. At date of this registration
statement, all shareholders' shares bear a "restrictive legend," and the Company
will examine each shareholders' resident state laws at the time of any proposed
resale of shares now outstanding to attempt to avoid any inadvertent breach of
state laws.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF OPERATIONS
--------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
The Company remains in the development stage and, since inception, has
experienced significant liquidity problems and has no significant capital
resources now and has stockholder's deficit of ($673,403) at December 31, 1999.
The Company has nominal current assets in the form of cash of $81 and total
assets of $3,697 at December 31, 1999.
The Company is unable to carry out any plan of business without
funding. The Company cannot predict to what extent its current lack of liquidity
and capital resources will impair the consummation of a business combination or
whether it will incur further operating losses through any business entity which
the Company may eventually acquire. There is no assurance that the Company can
continue as a going concern without substantial funding, for which there is no
source.
23
The Company hs no cash for any operations. It will have to make private
placements of stock, for which it has no sources or obtain loans from
shareholders, to have any cash for even limited operations. There are no
committed loan sources at this time.
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
complete a business combination. Once a business combination is completed, the
Company's needs for additional financing are likely to increase substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
The Company has no plans for any research and development in the next
twelve months. The Company has no plans at this time for purchases or sales of
fixed assets which would occur in the next twelve months.
The Company has no expectation or anticipation of significant changes
in number of employees in the next twelve months, however, if it achieves a
business acquisition, it may acquire or add employees of an unknown number in
the next twelve months.
The Company's auditor has issued a "going concern" qualification as
part of his opinion in the Audit Report.
YEAR 2000 ISSUES
Year 2000 problems result primarily from the inability of some computer
software to properly store, recall, or use data after December 31, 1999. These
problems may affect many computers and other devices that contain embedded
computer chips. The Company's operations, however, do not rely on information
technology (IT) systems. Accordingly, the Company does not believe it will be
material affected by Year 2000 problems. The Company experienced no disruption
for year 2000 problems.
The Company could be improved by non-IT systems that may suffer from
Year 2000 problems, including telephone systems and facsimile and other office
machines. Moreover, third-parties suppliers may suffer from Year 2000 problems
that could affect the Company's operations, including banks, oil field
operators, and utilities. In light of the Company's minimal operations, the
Company does not believe that such non-IT systems or third-party Year 2000
problems will affect the Company in a manner that is different or more
substantial than such problems affect other similarly situated companies or
industry generally. Consequently, the Company does not currently intend to
conduct a readiness assessment of Year 2000 problems or to develop a detailed
contingency plan with respect to Year 2000 problems that may affect the Company.
24
ITEM 3. DESCRIPTION OF PROPERTY.
-------------------------------
The Company has no property. The Company does not currently maintain an
office or any other facilities. It does currently maintain a mailing address at
9084 Armadillo Trail, Evergreen, CO 80439, which is the office address of its
President, Stephen B. Doppler. The Company pays no rent for the use of this
mailing address. The Company does not believe that it will need to maintain an
office at any time in the foreseeable future in order to carry out its plan of
operations described herein.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The following table sets forth, as of the date of this Registration
Statement, the number of shares of common stock owned of record and beneficially
by executive officers, directors and persons who hold 5.0% or more of the
outstanding common stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
SHAREHOLDERS/ NUMBER OF SHARES OWNERSHIP
BENEFICIAL OWNERS PERCENTAGE
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Randy McCall
Former President and Director
1909 "P" Street
Ord, NE 68862 1,580,000 10.2%
Stephen B. Doppler
President & Chairman
9084 Armadillo Trail
Evergreen, CO 80439 0 0%
Stephen W. Weathers
Secretary
1926 S. Xenon St.
Lakewood, CO 80228 135,700 .9%
Thomas Anderson
Director
1020 21st Street
Golden, Colorado 80401 238,000 1.5%
Paul Enright
7391 Grant Ranch Rd., #1312
Littleton, CO 80123 1,900,000 12.3%
K. Mark Skow
P.O. Box 3614
Carefree, AZ 85377 1,843,000 11.9%
All directors and executive
officers as a group (4 persons) 1,953,700 12.6%
Each principal shareholder has sole investment power and sole voting power over
the shares.
25
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
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The directors and executive officers currently serving the Company are
as follows:
NAME POSITION HELD TENURE
----------------- ------------------------------ ----------------
Stephen B. Doppler President Since August 2001
Chairman of the Board
Stephen W. Weathers Secretary Since August 2001
Randy A. McCall Former President Annual since 1999
Currently Director
Thomas Anderson Director Since August 2001
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions at
the pleasure of the board of directors, absent any employment agreement, of
which none currently exists or is contemplated. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis, but less than 20 hours per month. As
a result, the actual amount of time which they will devote to the Company's
affairs is unknown and is likely to vary substantially from month to month.
BIOGRAPHICAL INFORMATION
STEPHEN B. DOPPLER, age 44, was appointed President and Chairman of the
Board of Directors on August 2, 2001. Prior to joining the Company, Mr. Doppler
was an independent consultant providing strategic planning, M & A and management
consulting services to a wide range of public and private companies worldwide.
From August 1996 through February 1999 he served as President and Chairman of
Adamas Resources Corp., an international mineral exploration company listed on
the VSE.
STEPHEN W. WEATHERS, Age 41, was appointed as Secretary on August 2,
2001. Mr. Weathers earned his B. S. in Geology from Boise State University. He
has worked as an environmental geologist both in the mining industry and oil and
gas industry. His duties included permitting, environmental compliance,
environmental remediation/reclamation and natural gas asset acquisitions both in
the United States and Canada. Presently, Mr. Weathers is employed at Duke Energy
Field Services, a natural gas company since 1999.
RANDY A. MCCALL, age 49, has been on the Board of Directors of Sun
River Mining, Inc. since the inception of the company and was appointed
President in March 1997. He held the office of President until the appointment
of Steven R. Davis in March 1999. In May 1999, Mr. McCall assumed the positions
of CFO, Corporate Secretary, and Treasurer. In March 2000, he assumed position
of President of the Company again, when Steven R. Davis resigned. Mr. McCall
resigned as President on August 2, 2001 when Stephen B. Doppler was appointed
President. Mr. McCall is currently a Director only. Mr. McCall is a Certified
Public Accountant with over 25 years of senior financial management experience.
Prior to joining the Company, Mr. McCall was an independent consultant providing
tax, accounting, and managerial services. From 1972 to 1993 he has held
positions as the president of a public accounting firm and as the Chief
Executive Officer, Chief Financial Officer and/or Chairman of the Board of
telecommunications and marketing companies including Com-net, Inc., American
Buyers Network, Inc., and Voice Interactive Processing, Inc. Mr. McCall was
employed at Region III Behaviorial Science as Fiscal Director from 1999 to 2001.
26
THOMAS ANDERSON, age 36, became a director of the Company in August
2001. Mr. Anderson has spent much of the last 10 years working as a geologist in
the environmental consulting field. His primary focus has been stratigraphic,
hydrogeologic, and geochemical characterization, and remediation of hazardous
waste sites. Mr. Anderson completed a M.S. in Environmental Science and
Engineering at the Colorado School of Mines in 1998. Since 1998, he has provided
consulting services to the Department of Energy and Department of Defense for
complex problems encountered during characterization and remediation of
radioactive and hazardous waste sites. He has been a Senior Environmental
Scientist at Concurrent Technologies Corp. from November 2000 to date. From
March 2000 to November 2000 he was employed as a hydrologist at Stone & Webster
Engineering, Inc. From July 1998 to March 2000 he was employed by Advanced
Integrated Management Services as an Environmental Scientist/Engineer. From 1997
to 1998 he was a research assistant at Colorado School of Mines in Graduate
Program/Environmental Science.
Management will devote part time to the operations of the Company, and
any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's officers and/or directors receives any
compensation for their respective services rendered to the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors, which is not expected
to occur until the Company has generated revenues from operations after
consummation of a merger or acquisition. As of the date of filing this report,
the Company has no funds available to pay officers or directors. Further, none
of the officers or directors is accruing any compensation pursuant to any
agreement with the Company. No retirement, pension, profit sharing, stock option
or insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.
It is possible that, after the Company successfully consummates a
merger or acquisition with an unaffiliated entity, that entity may desire to
employ or retain one or a number of members of the Company's management for the
purposes of providing services to the surviving entity, or otherwise provide
other compensation to such persons. However, the Company has adopted a policy
whereby the offer of any post-transaction remuneration to members of management
will not be a consideration in the Company's decision to undertake any proposed
transaction. Each member of management has agreed to disclose to the Company's
Board of Directors any discussions concerning possible compensation to be paid
to them by any entity which proposes to undertake a transaction with the Company
and further, to abstain from voting on such transaction. Therefore, as a
practical matter, if each member of the Company's Board of Directors were
offered compensation in any form from any prospective merger or acquisition
candidate, the proposed transaction would not be approved by the Company's Board
of Directors as a result of the inability of the Board to affirmatively approve
such a transaction.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. However, if such compensation is in the form of cash, such
payment will be tendered by the acquisition or merger candidate, because the
Company has insufficient cash available. The amount of such finder's fee cannot
be determined as of the date of filing this report, but is expected to be
comparable to consideration normally paid in like transactions. No member of
management of the Company will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein.
27
The Company has adopted a policy that its affiliates and management
shall not be issued further common shares of the Company, except in the event
discussed in the preceding paragraphs.
PREVIOUS "BLANK CHECK" COMPANY INVOLVEMENT
Management of the Company has not been involved in prior "blank check"
companies.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Colorado Statutes, the Company may indemnify its
directors and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in any such
action, they are adjudged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
EXCLUSION OF LIABILITY
The Colorado Business Corporation Act excludes personal liability for
its directors for monetary damages based upon any violation of their fiduciary
duties as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of the Colorado
Business Corporation Act, or any transaction from which a director receives an
improper personal benefit. This exclusion of liability does not limit any right
which a director may have to be indemnified and does not affect any director's
liability under federal or applicable state securities laws.
CONFLICTS OF INTEREST
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
Conflicts of Interest - General. Certain of the officers and directors
of the Company may be directors and/or principal shareholders of other companies
and, therefore, could face conflicts of interest with respect to potential
acquisitions. In addition, officers and directors of the Company may in the
future participate in business ventures which could be deemed to compete
directly with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so. In addition, if the Company and other companies with
which the Company's officers and directors are affiliated both desire to take
advantage of a potential business opportunity, then the Board of Directors has
agreed that said opportunity should be available to each such company in the
order in which such companies registered or became current in the filing of
annual reports under the Exchange Act subsequent to January 1, 1997.
28
The Company's officers and directors may actively negotiate or
otherwise consent to the purchase of a portion of their common stock as a
condition to, or in connection with, a proposed merger or acquisition
transaction. It is anticipated that a substantial premium over the initial cost
of such shares may be paid by the purchaser in conjunction with any sale of
shares by the Company's officers and directors which is made as a condition to,
or in connection with, a proposed merger or acquisition transaction. The fact
that a substantial premium may be paid to the Company's officers and directors
to acquire their shares creates a potential conflict of interest for them in
satisfying their fiduciary duties to the Company and its other shareholders.
Even though such a sale could result in a substantial profit to them, they would
be legally required to make the decision based upon the best interests of the
Company and the Company's other shareholders, rather than their own personal
pecuniary benefit.
ITEM 6. EXECUTIVE COMPENSATION.
------------------------------
SUMMARY COMPENSATION TABLE OF EXECUTIVES
Fiscal Annual Compensation Awards
Name & Principal Year Salary Bonus Other Annual Restricted Securities
Position ($) ($) Compensation Stock Underlying
($) Award(s) Options/
($) SARS (#)
--------------------------------------------------------------------------------------------------------------------------
Steven R. Davis, 1998 0 0 0 0 0
President (resigned 2000) 1999 $45,750* 0 0 0 300,000 shares
2000 $22,500 0 0 0 0
Randy A. McCall, 1998 $60,000** 0 0 0 0
Former President, 1999 $60,000** 0 0 0 0
Former Secretary 2000 $0 0 0 0 0
Stephen B. Doppler,
President & Chairman 2001 $0 0 0 0 0
Stephen W. Weathers,
Secretary 2001 $0 0 0 0 0
--------------------------- --------- -------------- ----------- --------------------- --------------- ----------------
*$1,500 for partial month March 1999, $6,750 for April, and $7,500 for each
month thereafter in 1999 and while employed in 2000, total 1999 salary expense -
Steven R. Davis = $68,250.
**accrued, but not paid
In addition to the salaries above, salaries were paid or accrued to past
officers, Joseph R. Wojcik $42,500, and Sam Del Cielo $17,500, for a total in FY
1999 of $165,750.
29
Directors' Compensation
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options
SARS (#)
--------------------------------------------------------------------------------------------------------------------------
A. Director, Randy A. McCall $1,000 $100 0 0 0
B. Director, Thomas Anderson $0 $0 0 0
--------------------------------------- -------------- ------------- ---------------- ------------- --------------------
Option/SAR Grants Table
Name Number of Securities % of Total Exercise Expiration
Underlying Options/SARs or Price Date
Options/SARs Granted to Employees ($/Sh)
Granted (#) in Fiscal Year
-------------------------------------------------------------------------------------------------------------------
Steven R. Davis 300,000 100% $.10/Sh Apr - Sept.
(Former President) 2004
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR value
Name Shares Value Number of Securities Value of Unexercised
Acquired Realized Underlying In the Money
on ($) Unexercised Options/SARs at FY-
Exercise Options/SARs at FY- End ($) Exercisable/
(#) End (#) Exercisable/ Unexercisable
Unexercisable
---------------------------------------------------------------------------------------------------------------------
Steven R. Davis (1) 0 0 300,000 Shares Exercisable 0
Randy A. McCall 400,000 (1999) $24,000 0 0
Sam Del Cielo(1) 400,000 (1999) $24,000 0 0
--------------------------- ----------------- -------------- ---------------------------- ----------------------------
(1) Former officer and director, now resigned.
30
Long Term Incentive Plans - Awards in Last Fiscal Year - NONE
No officer or director has received any other remuneration in the two
year period prior to the filing of this registration statement. There is no
current plan in existence, to pay or accrue compensation to its officers and
directors for services related to seeking business opportunities and completing
a merger or acquisition transaction. See "Certain Relationships and Related
Transactions." The Company has no stock option, retirement, pension, or
profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or more such
programs in the future.
As of March 31, 2000 all salaries of officers had been terminated, and
any officers now serve without pay.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
------------------------------------------------------
In 1997, the Company issued to its founding Director, Randy McCall, a
total of 100,000 shares of common stock for a total of $100. In April 1997,
Randy McCall and seven other persons exchanged shares of two Bolivian companies
for 8,900,000 shares. Mr. McCall received 1,500,000 shares. Paul Enright, K.
Mark Skow and Ronald Sparkman each received 2,000,000 shares. Certificates
evidencing the common stock issued by the Company to these persons have all been
stamped with a restrictive legend, and are subject to stop transfer orders by
the Company.
Sam Del Cielo, formerly an Officer and Director, received 30,000 shares
for services in April 1997.
Sam Del Cielo, when an Officer and Director, purchased 25,000 shares
for $8,750 on December 31, 1998. Mr. Del Cielo exercised a 400,000 share option
at $.01 per shares for $4,000 on January 7, 1999.
31
Randy McCall, an officer and Director, purchased 50,000 shares for
$17,500 on December 31, 1998 and exercised a 400,000 share option on January 7,
1999 for $4,000.
No officer, director, or affiliate of the Company has or proposes to
have any direct or indirect material interest in any asset proposed to be
acquired by the Company through security holdings, contracts, options, or
otherwise.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party for consulting services to assist
management in evaluating a prospective business opportunity would be paid in
stock or in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether or in what amount such a
stock issuance might be made.
Although management has no current plans to cause the Company to do so,
it is possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the common stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
Summary of Employment Related Contracts and Options
(a) (1) Director or executive officer in the past two years, (i) Steven
R. Davis, President and CEO - employment contract term March 16, 1999 to March
15, 2000, $90,000 per year and option to purchase 300,000 shares of common
stock, (ii) Joseph R. Wojcik, Vice President - Expired employment contract term
January 16, 1999 to January 15, 2000, $60,000, (iii) Randy A. McCall, former
Secretary (now President), Treasurer, CFO and past CEO - Expired employment
contract term - April 1, 1998 to March 31, 1999, annual compensation of $60,000
with option to purchase 400,000 shares of common stock which option was
exercised in 1999, and (iv) Sam Del Cielo, company Secretary and Treasurer -
Expired employment contract - April 1, 1998 to March 31, 1999, annual
compensation of $30,000 plus option to purchase 400,000 shares of common stock.
OPTION TABLE
Issue date Options Option Option
Outstanding Price Exercised
---------- ------------ ---------- ----------
Steven R. Davis March 1999 300,000 $.10/share 0
Randy A. McCall April 1998 0 $.01/share 400,000
Sam Del Cielo April 1998 0 $.01/share 400,000
32
Transactions with promoters:
Nature and amount of
Nature & amount of value consideration received
NAME OF PROMOTER received by Promoter by registrant
------------------------------ -------------------- -----------------------------
(i) Scott Wilding 25,000 common shares Assistance in newsletter
688 NW 156th Ave. valued at $8,750 and press release preparation
Pembroke Pines, FL September - December 1998
(ii) Larry McNabb 500,000 common shares Investor and broker/dealer
213 E. Highland Ave. valued at $276,500 relations
Atlantic Highlands, NJ January - February 1999
(iii) Capital Investment Resources 450,000 common shares Consulting
14995 Horseshoe Trace valued at $45,000 broker/dealer relations
February - June 1999
(iv) Titanium Entertainment 35,000 common shares Consulting fees
767 106th Ave. N. valued at $12,250 December 1998
Naples, FL 34108
ITEM 8. DESCRIPTION OF SECURITIES.
---------------------------------
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
500,000,000 shares of common stock with no par value. Each record holder of
common stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. Cumulative voting for the election
of directors is not permitted by the Articles of Incorporation.
Holders of outstanding shares of common stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of common stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of common stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's common stock are issued, the
relative interests of then existing stockholders may be diluted.
33
PREFERRED STOCK
The Company's Articles of Incorporation authorize the issuance of
50,000,000 shares of Preferred Stock with a par value of $.01. The Board of
Directors of the Company is authorized to issue the Preferred Stock from time to
time in classes and series and is further authorized to establish such classes
and series to fix and determine the variations in the relative rights and
preferences as between series, to fix voting rights, if any, for each class or
series, and to allow for the conversion of Preferred Stock into common stock. No
Preferred Stock has been issued by the Company. Preferred Stock may be utilized
in making acquisitions. The existence of authorized but unissued preferred stock
may prevent or discourage transactions that stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over its then market price.
SHAREHOLDERS
Each shareholder has sole investment power and sole voting power over
the shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon. Under Colorado laws,
no lock up agreement is required regarding the Company's shares as it might
relate to an acquisition.
TRANSFER AGENT
The Company has engaged United Stock Transfer, Inc., 3615 So. Huron,
Suite #104, Englewood, Colorado 80110 as its transfer agent.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. The Company intends to
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934 for so long as it is subject to those requirements, and to file
unaudited quarterly reports and annual reports with audited financial statements
as required by the Securities Exchange Act of 1934.
34
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
-------------------------------------------------------------------
The Company's shares of common stock began trading on the Over-the-Counter
Bulletin Board on September 15, 1998. The prices set forth below represent
closing prices as quoted on the OTC BB.
HIGH BID LOW BID
---------- --------
1998
Fourth Quarter $.75 $.375
1999
First Quarter $.75 $.1562
Second Quarter $.2969 $.0469
Third Quarter $.1562 $.0469
Fourth Quarter $.0938 $.0312
2000
First Quarter $.0625 $.0312
All quotations reflect interdealer prices without retail markups,
markdown, or commission, and may not represent actual transactions.
A public trading market exists for the Company's securities on the
OTCBB There were fifty-seven (57) holders of record of the Company's common
stock on February 15, 2000. No dividends have been paid to date and the
Company's Board of Directors does not anticipate paying dividends in the
foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
------------------------------------
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of
record or beneficial owner of more than 5.0% of the securities of the Company,
or any associate of any such director, officer or security holder is a party
adverse to the Company or has a material interest adverse to the Company in
reference to any litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
---------------------------------------------------------------
Not applicable.
35
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
---------------------------------------------------------
Since February 25, 1997 (the date of the Company's formation), the
Company has sold its common stock to the persons listed in the table below in
transactions summarized as follows:
Price per Number Total Date of
Name Address Share ($) of Shares Consideration Purchase
($)
---- ------- --------- --------- ------------- --------
Randy McCall(1) 1909 P St $.001 100,000 100 3-31-97
Ord, NE 68862
Randy McCall(2) 1909 P St 0.000 1,500,000 * 4-3-97
Ord, NE 68862
Paul Enright(2) P.O Box 553 0.000 2,000,000 * 4-3-97
Morrison, CO 80465
K. Mark Skow(2) 7620 E. Balao 0.000 2,000,000 * 4-3-97
Scottsdale, AZ 85262
Ronald Sparkman(2) 11215 Chase Ct. 0.000 2,000,000 * 4-3-97
Broomfield, CO 80020
William Petty(2) 2016 Main St. 0.00 400,000 * 4-3-97
Houston, TX 77002
Grupo Inversor Rio Piso 19 C, Ave. Arce 0.00 788,000 * 4-3-97
Del Sol, S.A.(2) La Paz, Bolivia
Mery Villarreal Avenida Equador 2277 0.00 12,000 * 4-3-97
Filipovich(2) La Paz, Bolivia
Oscar Morales(2) Av Ormachea & 12th St 0.00 200,000 * 4-3-97
La Paz, Bolivia
J. Farrel & Therese 1345 42ND St 1.00 2,500 2,500 7-22-97
Adams (3) Boulder, CO 80303
Therese Adams(3) 1345 42ND St 1.00 2,500 2,500 7-22-97
Boulder, CO 80303
Arden Anderson(3) RR1 Box 112D 1.00 5,000 5,000 4-3-97
Blooming Prairie, MN
Thomas Bader(3) 833 N Tejon 1.00 75,000 75,000 4-3-97
Colorado Springs, CO
James Bennett,Cust.(3) P.O. Box 191 1.00 1,500 1,500 7-10-97
For Alexis M. Bennett Ward, CO 80481
James Bennett,Cust.(3) P.O. Box 191 1.00 1,500 1,500 7-10-97
For Clifford J. Bennett Ward, CO 80481
Charles E. Blaha(3) 1740 M St 1.00 21,000 21,000 4-3-97
Ord, NE 68862
36
Donald Blaha(3) P.O. Box 248 1.00 18,000 18,000 4-3-97
Ord, NE 68862
Michael A. Butler, Cust. 1910 Orchard Ave. 1.00 2,500 2,500 7-14-97
For Daniel S. Butler(3) Boulder, CO 80304
Michael A. Butler, Cust. 1910 Orchard Ave. 1.00 2,500 2,500 7-14-97
For Ryan P. Butler(3) Boulder, CO 80304
Ray & Olga Chase(3) P.O. Box 1378 1.00 2,000 2,000 8-14-97
Nederland, CO 80466
Errol A. Coslor(3) P.O. Box 759 1.00 13,000 13,000 7-21-97
Kearney, NE 68848
William R. Dodd(3) P.O. Box 324 1.00 10,000 10,000 4-3-97
Ord, NE 68862
Daniel Enright(3) 5161 5TH Ave. N.W. 1.00 10,000 10,000 4-3-97
Naples, FL 34119
James Enright(3) 29402 Gadsden Dr. 1.00 1,800 1,800 7-22-97
Brighton, CO 80601
Jerome M. & Dorothy 4123 S. Rosemary Way 1.00 5,000 5,000 7-11-97
A. Gotlieb(3) Denver, CO 80237
Cynthia Harpst(3) 5161 5TH Ave. N.W. 1.00 7,000 7,000 4-3-97
Naples, FL 34119
Kevin Hruza(3) 219 N. 23RD St. 1.00 5,500 5,500 4-3-97
Ord, NE 68862
Dennis Hulinsky(3) P.O. Box 67 1.00 5,000 5,000 4-3-97
Ord, NE 68862
Willaim P. Jancosko(3) 3344 Wright Court 1.00 2,500 2,500 7-11-97
Boulder, CO 80301
Scott Johnson(3) 5114 Balconies Woods 1.00 62,500 62,500 4-3-97
Austin, TX
Brad Keech(3) 1422 Delgany St. #1 1.00 20,000 20,000 4-3-97
Denver, CO 80202
Clemens J. Klimek(3) 419 S. 23RD St 1.00 2,000 2,000 4-3-97
Oprd, NE 68862
Renate Kuhar(3) P.O. Box 691 1.00 20,000 20,000 7-22-97
Pine, CO 80470
37
Bruce A. Lammers(3) 1920 P St. 1.00 29,200 29,200 4-3-97
Ord, NE 68862
Jill Trundle Lopez(3) 4539 Lee Hill Rd 1.00 3,000 3,000 7-16-97
Boulder, CO 80302
Robert McBride(3) RR1 Box 115 1.00 500 500 4-3-97
Ord, NE 68862
Allana E. Novotny(3) 813 N. 8TH St 1.00 1,000 1,000 4-3-97
Beatrice, NE 68310
Thomas P & Mary Ann 6334 S. Lamar Ct. 1.00 2,500 2,500 7-11-97
O'Neill(3) Littleton, CO 80123
Mel & Jenine Ortner(3) 7710 Ute Highway 1.00 2,500 2,500 7-3-97
Longmont, CO 80501
Terry J. Peltz(3) 2817 Laramie Dr. 1.00 2,000 2,000 4-3-97
Alliance, NE 69301
Charles E. Peterson(3) P.O. Box 2366 1.00 5,000 5,000 7-14-97
Boulder, CO 80306
Lisa J. Petska(3) 1812 N Street 1.00 1,000 1,000 4-3-97
Ord, NE 68862
Vernaon J. & Mercedes RR1 Box 9 1.00 1,500 1,500 4-3-97
A. Potrzeba JTWORS(3) Elyria, NE 68837
Richard Severson(3) 12516 Williams St 1.00 20,000 20,000 4-3-97
Omaha, NE 68144
Sandra Shipman(3) P.O. Box 2008 1.00 5,000 5,000 4-3-97
Littleton, CO 80161
Daniel J. Seifert, Jr(3). 1135 Pearl St 1.00 2,500 2,500 6-24-97
Boulder, CO 80302
Joel A. Thompson(3) 4770 Baseline Rd #200 1.00 2,500 2,500 7-10-97
Boulder, CO 80303
Jeff A. Tschida(3) 5114 Balconies Woods 1.00 62,500 62,500 4-3-97
Aistin, TX 78759
Brian Wicklein(3) 405 Central Ave. S 1.00 5,000 5,000 4-3-97
Dodge Center, MN
James Wiecking(3) 92671 Newa St 1.00 500 500 4-3-97
Kapolei, HI
38
William R. Williams(3) 7367 S. Chapparal Cr 1.00 5,000 5,000 7-11-97
Aurora, CO 80016
Allen Kent Wilson(3) 1414 Longs Peak Ave. 1.00 2,500 2,500 7-14-97
Longmont, CO 80501
Roberta Wolta(3) 5446 W. 100TH Pl. 1.00 47,800 47,800 7-20-97
Westminster, CO 80020
Sam Del Cielo(6) 4269 Sumac Ct 0.00 30,000 30,000 4-16-97
Boulder, CO 80303
Randall Downey(4) 9351 S Autumn Ash Ct 0.20 25,000 5,000 8-12-98
Highlands Ranch, CO
Fashion West (4) 1234 W Cedar Ave. 0.20 25,000 5,.000 8-12-98
Accessories, Inc Denver, CO 80223
Sharon Hilb(4) 5278 S. Kenton Way 0.20 125,000 25,000 8-12-98
Englewood, CO
Gordon M. Deblasio(4) 1016 Cassils Rd. W 0.20 50,000 100,000 8-12-98
Brooks, Alberta
Willaim C. Birge(4) 139 Mandra Dr N E 0.20 50,000 100,000 8-12-98
Calgary, Alberta
Terry J. Morishita(4) P.O. Box 236 0.20 25,000 5,000 8-12-98
Rosemary, Alberta
Norman J. Torre(4) 1845 Zinnia St. 0.20 25,000 5,000 8-18-98
Golden, CO 80401
Harold Smith(4) 1803 S. Weld Cr. 0.20 5,000 1,000 8-18-98
Lakewood, CO 80226
Jack Moore(4) 9952 Tiburon Cr. 0.20 5,000 1,000 8-18-98
Littleton, CO 80124
Victor Abbo(4) 250 Arapahoe Rd 0.20 25,000 5,000 8-18-98
Boulder, CO 80301
Patrick Bloom(4) 6454 S Present St. 0.20 10,000 2,000 8-18-98
Littleton, CO 80120
Carl S. Koch(4) 36 Lynn Ct 0.20 125,000 25,000 8-21-98
North Brunswick, NJ
Thomas A. Anderson(4) 1020 21ST St 0.20 63,500 12,700 8-21-98
Golden, CO
39
Stephen W. Weathers(4) 1926 S. Xenon St 0.20 50,000 10,000 8-21-98
Lakewood, CO 80228
Daniel Enright(4) 405 Roworth 0.20 25,000 5,000 8-15-98
Central City, CO 80427
Sanford Shwartz(4) 1010 Orange Pl. 0.20 10,000 2,000 8-25-98
Boulder, CO 80304
David Lilja(4) 4998 W. 103RD Cr. 0.20 10,000 2,000 8-25-98
Westminster, CO 80030
Michael Osebold(4) 911 16TH ST # 5 0.20 10,000 2,000 8-25-98
Boulder, CO 80302
Brian Wicklein(4) 405 Central Ave. S 0.20 17,500 3,500 8-27-98
Dodge Center, MN
Stephen W. Weathers(4) 1926 S. Xenon St 0.20 12,500 2,500 8-27-98
Lakewood, CO 80228
Tajinder Madan (4) 222 Hamptons Gardens 0.20 10,000 2,000 8-28-98
Calgary, Alberta
William D. Pate (4) 323 Martin Grove Rd. 0.20 20,000 4,000 8-28-98
Etobicoke, Ontario
Andrew Janiec(4) 1202 Harwood St. 0.20 10,000 2,000 8-28-98
Vancouver, B.C.
Tim Kohn(4) 7224-21 A St. SE 0.20 10,000 2,000 8-28-98
Calgary, Alberta
Joel Rheinbolt(4) 7608 Thornlee Dr. 0.20 30,000 6,000 8-28-98
Lake Worth, Florida
Genevieve Gray (4) 5508 Temple Rd. NE 0.20 10,000 2,000 8-28-98
Calgary, Alberta
Jason R. Kells(4) 158ResearchWarrndyte 0.20 20,000 4,000 8-28-98
Victoria, Australia
Paola Levet(4) 139 Manora Dr. NE 0.20 55,000 11,000 8-28-98
Calgary, Alberta
Manuel Galan(4) 723 15TH St. NW 0.20 10,000 2,000 8-28-98
Calgary, Alberta
Betty Mah(4) 6455 MacLeod Tr. S 0.20 10,000 2,000 8-28-98
Calgary, Alberta
40
Geoffrey A. Mussellam 1823 E. Georgia St. 0.20 10,000 2,000 8-28-98
(4) Vancouver, BC
William Dodd(4) P.O. Box 324 0.20 10,000 2,000 8-31-98
Ord, NE 68862
John Felton(4) 3014 Birch 0.20 10,000 2,000 8-31-98
Ord, NE 68862
Allana Novotny(4) 813 N. 8TH St 0.20 15,000 3,000 8-31-98
Beatrice, NE 68310
James Enright(4) 29402 Gadsden Dr. 0.20 7,500 1,500 8-31-98
Brighton, CO 80601
Steve Janiszewski(4) 9409 Grandview Ave. 0.20 6,500 1,300 8-31-98
Arvada, CO 80002
Brad Keech(4) 1422 Delgany St. #1 0.20 25,000 5,000 8-31-98
Denver, CO 80202
Stephen Weathers(4) 1926 S. Xenon St 0.20 15,000 3,000 8-31-98
Lakewood, CO 80228
Thomas A. Anderson(4) 1020 21ST St 0.20 22,500 4,500 8-31-98
Golden, CO
Dennis Hulinsky(7) P.O. Box 67 1.00 4,000 4,000 8-31-98
Ord, NE 68862 Warrant exercise
Stephen Weathers(5) 1926 S. Xenon St 0.35 5,000 1,750 10-9-98
Lakewood, CO 80228
Scot A. Donnato(5) 554 Emerson St 0.35 15,000 5,250 10-9-98
Denver, CO 80209
Thomas A. Anderson(5) 1020 21ST St 0.35 4,500 1,575 11-12-98
Golden, CO
John J. Bolders(5) 4330 E. 18TH Ave. 0.35 2,000 700 11-12-98
Denver, CO, 80220
David Parker(5) 1720 S. Upham St. 0.35 4,000 1,400 11-12-98
Lakewood, CO 80232
John Rinker(5) 9496 Brook Lane 0.35 2,000 700 11-19-98
Lone Tree, CO 80124
William H. Snowden(5) 3818 N. 26TH St. 0.35 10,000 3,500 11-25-98
Boulder, CO 80304
41
James W. Attwood(5) 19485 E. Garden Dr. 0.35 5,000 1,750 11-27-98
Aurora, CO 80015
Keith MacPhail(5) 4799 D. Whiterock Cr. 0.35 6,000 2,100 11-27-98
Boulder, CO 80301
Cory Peterson(5) 2016 W. 83RD 0.35 4,500 1,575 12-1-98
Bloominton, MN 55431
Colleen Marshall(5) 8046 Solotare Ct 0.35 7,400 2,590 12-2-98
Orlando, FL 32836
Jon C. Jelosek(5) 3686 Barbados Pl. 0.35 6,000 2,100 12-1-98
Boulder, CO 80301
Scott Wilding(6) 688 NW 156th Ave. 0.35 25,000 for Services 12-15-98
Pembroke Pines, FL Rendered valued
at $8,750
Cecil E. & Gladys M. 1205 Q St 0.35 7,000 2,450 11-12-98
McCall(5) Ord, NE 68862
Gene & Nancy Dorsey Rt 1 Box 173 0.35 15,000 5,250 11-12-98
(5) Arcadia, NE 68815
Allana Novotny(5) 813 N. 8TH St 0.35 15,000 5,250 12-24-98
Beatrice, NE 68310
Charles L. Abel (5) P.O. Box 294 0.35 15,000 5,250 11-12-98
North Loup, NE 68859
Harry J. & Susan K. 105 SOUTH 21ST St. 0.35 3,000 1,050 12-1-98
Zulkoski(5) Ord, NE 68862
David Kaslon(5) 104 NORTH 14TH St 0.35 9,500 3,325 12-18-98
Ord, NE 68862
Timothy G. Todsen(5) P.O. Box 111 0.35 4,000 1,400 12-1-98
Ord, NE 68862
Titanium Entertainment 767 106TH Ave. North 0.35 35,000 for Services 12-15-98
Inc.(6) Naples, FL 34108 Rendered valued
at $12,250
Thomas M. Osentowski 2002 O St 0.35 2,000 700 12-1-98
(5) Ord, NE 68862
Don Bryant(5) 8531 E. Chaparral Rd. 0.35 20,000 7,000 11-12-98
Scottsdale, AZ 85250
Monte R. McMechen(5) 15300 Great Rock Rd. 0.35 2,800 980 12-31-98
Brighton, CO 80601
42
Ray C. & Linda K. 334 N. 25TH Street 0.35 12,000 4,200 12-24-98
McCall (5) Beatrice, NE 68310
Kevin J. Hruza(5) 219 N. 23RD St. 0.35 3,000 1,050 12-24-98
Ord, NE 68862
Stephen B. Doppler(5) 9084 Armadillo Trail 0.35 14,000 4,900 12-15-98
Evergreen, CO 80439
Marilyn Hogue(5) 12373 W. Tufts Ave. 0.35 3,000 1,050 12-19-98
Morrison, CO 80465
Dennis Hulinsky(5) P.O. Box 67 0.35 1,400 490 12-15-98
Ord, NE 68862
David McMechen(5) 4658 S. Coors Ct. 0.35 1,300 455 11-19-98
Morrison, CO 80465
Sean F. Plumb(5) 1517 S. Pagosa St. 0.35 2,000 700 12-10-98
Aurora, CO 80017
Daniel J. Seifert (5) 1135 Pearl St #1 0.35 7,500 2,625 12-18-98
Boulder, CO 80302
Joel A. Thompson(5) 4770 Baseline Rd #200 0.35 7,500 2,625 12-18-98
Boulder, CO 80303
Scot Abeyta(5) 419 S. Jay St. 0.35 5,700 1,995 12-24-98
Lakewood, CO 80226
Randall Downey(5) 9351 S. Autumn Ash Ct 0.35 15,000 5,250 12-23-98
Highlands, Ranch, CO
Leslie Peats(5) 530 Vance St. 0.35 28,570 9,999.50 12-23-98
Lakewod, CO 80227
John R. & Janie 10975 Cty Rd # 331 0.35 2,500 875 12-31-98
Enright (5) Silt, CO 81652
Kurt Tribelhorn(5) 9469 S. Adelaide Cr. 0.35 3,000 1,050 12-31-98
Highlands Ranch, CO
Scott W. Johnson(5) 320 Ashwood Ln 0.35 9,250 3,237.5 12-28-98
Georgetown, TX 78628
Jeffrey Tschida(5) 13106 Tilder Dr. 0.35 9,250 3,237.5 12-28-98
Austin, TX 78729
Samuel Del Cielo(5) 4269 Sumac Ct. 0.35 25,000 8,750 12-31-98
Boulder, CO 80301 Restricted
43
Randy A. McCall(8) 1909 P St. 0.35 50,000 17,500 12-31-98
Ord, NE 68862 Restricted
Randy A. McCall(7) 1909 P St. 0.01 400,000 4,000 1-7-99
Ord, NE 68862 Restricted exercise of options
Samuel Del Cielo(7) 4269 Sumac Ct. 0.01 400,000 4,000 1-7-99
Boulder, CO 80303 Restricted exercise of options
Oriential New Rue Des Baines 35 0.4375 750,000 52,500 cash and 1-15-99
Investments(6) Geneva, Switzerland services valued
at $275,625
Larry D. McNabb(6) 213 E. Highland Ave. 0.553 500,000 services rendered 1-21-99
Atlantic Highlands, NJ valued at $276,500
David Kaslon(5) 104 North 14th St. 0.35 4,500 1,575 2-1-99
Ord, NE 68862
Kevin J. Hruza(5) 219 N. 23RD St. 0.35 2,000 700 2-1-99
Ord, NE 68862
Randall Downey(5) 9351 S Autumn Ash Ct 0.35 8,500 2,975 1-25-99
Highlands Ranch, CO
Gary A. & Bonnie L. 2339 West Betty Elyse 0.35 34,000 11,900 1-31-99
Williams(5) Phoenix, AZ 85223
Theodore M. 4149 West Gelding Dr. 0.35 22,000 7,700 1-31-99
Williams II(5) Phoenix, AZ 85053
Sanford L. Schwartz(5) 1010 Orange Pl. 0.35 7,500 2,625 1-27-99
Boulder, CO 80304
David Lilja, JR.(5) 4998 W. 103RD Circle 0.35 7,500 2,625 1-27-99
Westminster, CO 80030
Charles S. Swanson(5) 1895 Alpine Ave. # 4 0.35 10,000 3,500 1-27-99
Boulder, CO 80304
William R. Dodd(5) 807 S. 12TH St 0.35 4,000 1,400 1-29-99
Ord, NE 68862
Brian Welniak(5) Rt. 1 Box 5 0.35 2,000 700 1.29-99
Elyria, NE 68837
Harry J. & Susan K. 105 South 21st St 0.35 2,000 700 1-28-99
Zulkoski(5) Ord, NE 68862
Thomas M. Osentowski 2002 O St. 0.35 2,000 700 1-31-99
(5) Ord, NE 68862
44
Marcia Brando Viana R. Abilio Soares #121 0.35 44,000 15,400 1-31-99
(5) Sao Paulo - SP Brazil
Kurt Tribelhorn(8) 9649 S Adelaide Cr. 0.10 49,500 4,950 4-2-99
Highlands Ranch, CO
Carl S. Koch(8) 36 Lynn Ct. 0.10 31,500 3,150 4-5-99
North Brunswick, NJ
David R. Lilja(8) 4998 W. 103RD 0.10 20,000 2,000 4-5-99
Westminster, CO 80030
Sanford L. Schwartz(8) 1010 Orange Pl 0.10 20,000 2,000 4-5-99
Boulder, CO80304
Christopher M. Koch(8) 42 S. Tamadge St. 0.10 10,500 1,050 4-5-99
New Bruswick, NJ 08901
Lizbeth Koch Pajunas(8) 465 Route 513 0.10 10,500 1,050 4-5-99
Califon, NJ 07830
Capital Investment 14995 Horseshoe Trace 0.10 450,000 for Services 4-5-99
Resources LLC (6) Rendered valued
at $45,000
Long H. Nguyen(8) 6776 SW Freeway #180 0.10 62,500 for Services 4-4-99
Houston, TX 77074 Rendered valued
at $6,250
Sam Del Cielo(8) 4269 Sumac Ct. 0.10 100,000 10,000 4-5-99
Boulder, CO 80303 Restricted
Randy A. McCall(8) 1909 P Street 0.10 150,000 15,000 4-5-99
Ord, NE 68862 Restricted
John & Carmen Exkert 729 Lilac Lane 0.105 700,000 Services Rendered 6-9-99
(9) Glendora, CA 91740 Restricted valued at $73,500
Reid Johnson(9) 11803 E. Beryl 0.105 700,000 Services Rendered 6-7-99
Scottsdale, AZ 85259 Restricted valued at $23,500
Mary Ann Kelley(9) 55 Mingus Mtn. Rd. 0.0865 400,000 Services Rendered 7-7-99
Sedona, AZ 86336 Restricted valued at $34,600
Hangen Family Trust(9) 9429 E Conquistadore 0.0865 400,000 Services Rendered 7-12-99
Donald Hangen, Trustee Scottsdale, AZ 85255 Restricted valued at $34,600
David A. Jacobs(9) 2751 Mill Ave. 0.09 300,000 27,000 10-1-99
Brooklyn, NY 11234
45
Key to Footnotes:
* Share exchange for subsidiaries
(1) Founders shares - issued pursuant to exemption under Section 4(2) to
sophisticated purshasers.
(2) Exchange shares to acquire Bolivian subsidiaries - issued to
sophisticated investors pursuant to exemption under Section 4(2)
(3) Shares issued pursuant to offering under Regulation D, Rule 504.
(4) Shares issued pursuant to offering under Regulation D, Rule 504.
(5) Shares issued pursuant to offering under Regulation D, Rule 504.
(6) Shares issued for services rendered under Regulation D, Rule 504.
(7) Shares issued for exercise of options.
(8) Shares issued in private placement under Regulation D, Rule 504
(9) Shares issued in private placement under Section 4(2)
Each of the sales listed above was made for the Consideration as
listed. All of the listed sales were made in reliance upon the exemption from
registration offered by Section 4(2) and 4(6) of the Securities Act of 1933, as
amended when applicable, and Sec. 3(b), Reg. D, Rule 504 where applicable. Based
upon Subscription Agreements completed by each of the subscribers, the Company
had reasonable grounds to believe immediately prior to making an offer to the
private investors, and did in fact believe, when such subscriptions were
accepted, that such purchasers (1) were purchasing for investment and not with a
view to distribution, and (2) had such knowledge and experience in financial and
business matters that they were capable of evaluating the merits and risks of
their investment and were able to bear those risks. The purchasers had access to
pertinent information enabling them to ask informed questions. The shares were
issued without the benefit of registration. An appropriate restrictive legend is
imprinted upon each of the certificates representing such shares, and
stop-transfer instructions have been entered in the Company's transfer records.
All such sales were effected without the aid of underwriters, and no sales
commissions were paid.
46
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-------------------------------------------------
The Colorado Statutes provide that the Company may indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the officer or director acted in
good faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an officer or director,
absent a finding of negligence or misconduct in the performance of duty.
47
SIGNATURES:
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DATED: December 6, 2001
SUN RIVER MINING, INC.
By:/s/Stephen B. Doppler
---------------------------------
President and Chairman
/s/Stephen W. Weathers
---------------------------------
Secretary
DIRECTORS:
/s/Randy McCall
---------------------------------
Director
/s/Thomas Anderson
---------------------------------
Director
48
INDEX TO FINANCIAL STATEMENTS
Financial Statements for September 30, 1999
Cover Page F-1
Auditors Report for years ended September 30, 1999 and 1998 F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6
Notes to Financial Statements F-7 - F-11
Unaudited Interim Financial Statements for December 31, 1999
Cover Page F-12
Auditors Report F-13
Balance Sheet F-14
Statement of Operations F-15
Statement of Cash Flows F-16
Statement of Stockholders' Equity F-17
Notes to Financial Statements F-18-F-22
49
SUN RIVER MINING, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
September 30, 1999
F-1
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson, C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
Board of Directors
Sun River Mining, Inc.
Ord, NE 68862
We have audited the accompanying balance sheet of Sun River Mining, Inc. (An
Exploration Stage Company) as of September 30, 1999 and 1998, and the related
statements of operations, cash flows, and stockholders' equity for the years
ended September 30, 1999 and 1998 and for the period from February 25, 1997
(date of inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sun River Mining, Inc., at
September 30, 1999 and 1998 and the results of their operations and their cash
flows for the years ended September 30, 1999 and 1998 and for the period from
February 25, 1997 (date of inception) through September 30, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, conditions exist which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, Colorado
May 20, 2001
F-2
SUN RIVER MINING, INC.
(Exploration Stage Company)
Consolidated Balance Sheets
September 30,
1999 1998
---- ----
ASSETS:
Current assets:
Cash $ 1,026 $ 23,323
Accounts Receivable - Shareholders 1,884 -
Prepaid Expenses 200 3,726
----------------- -------------
Total current assets 3,110 27,049
Fixed assets
Office Equipment (Net $2,062 depreciation for 1999, 1,924 3,156
and $830 for 1998) ----------------- -------------
Total fixed assets 1,924 3,156
----------------- -------------
TOTAL ASSETS $ 5,034 $ 30,205
================= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
-------------------------------------
Current liabilities:
Accounts Payable $ 52,894 $ 9,010
Accrued Expenses 263,779 136,565
Directors' Fee Payable 6,683 4,693
Notes Payable 262,700 159,555
----------------- -------------
Total current liabilities 586,056 309,823
----------------- -------------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000
shares authorized; no shares issued and outstanding - -
Common Stock, no par value; 500,000,000 shares authorized;
15,062,970 shares issued and outstanding in 1999 and 1,222,298 713,806
9,333,800 shares issued and outstanding in 1998
Deficit accumluated during the Exploration Stage (1,803,320) (993,424)
----------------- -------------
TOTAL STOCKHOLDERS' DEFICIT (581,022) (279,618)
----------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,034 $ 30,205
================= =============
The accompanying notes are an integral part of these financial statements.
F-3
SUN RIVER MINING, INC.
(Exploration Stage Company)
Consolidated Statements of Operations
February 25, 1997 (Inception) Through September 30, 1999
Year Ended February 25, 1997
September 30, (Inception) to
--------------------------------------- September 30,
1999 1998 1999
---------------- -------------- ---------------------
REVENUE $ - $ - $ -
EXPENSES:
Bank Charges 572 518 1,461
Consulting 761,451 14,940 854,939
Depreciation 1,232 511 2,062
Directors' Fees 3,883 3,500 9,983
Due Dilgence 40,454 - 40,454
Equipment Rental - 400 1,733
Interest 22,007 12,042 37,897
Impairment loss 298,150 598,984 923,834
Legal and Accounting 20,805 44,545 69,023
Licenses & Fees - 5,050 6,220
Meals & Entertainment 773 171 4,119
Office Expenses 4,415 7,062 13,446
Officer's Salaries 165,750 87,000 290,750
Postage 565 1,835 3,217
Printing 4,517 - 5,580
Public Relations 103,580 - 103,580
Rent 4,460 2,868 7,328
Taxes 4,604 - 4,604
Telephone 12,374 10,730 29,452
Transfer Agent Expense 3,701 1,550 6,651
Travel 28,724 7,745 59,108
---------------- -------------- ---------------------
TOTAL EXPENSES 1,482,017 799,451 2,475,441
---------------- -------------- ---------------------
NET LOSS $ (1,482,017) $ (799,451) $ (2,475,441)
================ ============== =====================
PER SHARE INFORMATION:
Weighted average number of
common shares outstanding 11,741,855 9,328,800
---------------- --------------
NET LOSS PER COMMON SHARE $ (0.13) $ (0.09)
================ ==============
The accompanying notes are an integral part of these financial statements.
F-4
SUN RIVER MINING, INC.
(Exploration Stage Company)
Consolidated Statements of Cash Flows
February 25, 1997 (Inception) Through September 30, 1999
Year Ended February 25, 1997
September 30, (Inception) to
----------------------------------- September 30,
1999 1998 1999
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,482,017) $ (799,451) $ (2,475,441)
Depreciation 1,232 511 2,062
Increase (Decrease) in Accounts Payable 43,884 (19,118) 24,767
Increase (Decrease) in Accrued Liabilities 127,214 96,748 (1,562)
Increase (Decrease) in Directors' Fees Payable 583 3,500 3,500
Decrease (Increase) in Accounts Rec - Shareholder (1,884) - (1,884)
Decrease (Increase) in Prepaid Expenses 3,526 2,274 5,800
--------------- ------------- --------------------
NET CASH FLOWS USED BY OPERATIONS (1,307,462) (715,536) (2,442,758)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Fixed Assts - (1,878) (1,559)
--------------- ------------- --------------------
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES - (1,878) (1,559)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 103,145 558,500 669,261
Issuance of Common Stock 1,182,020 182,082 1,776,082
--------------- ------------- --------------------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 1,285,165 740,582 2,445,343
NET INCREASE (DECREASE) IN CASH (22,297) 23,168 1,026
--------------- ------------- --------------------
CASH AT BEGINNING OF PERIOD 23,323 155 -
--------------- ----------- --------------------
CASH AT END OF PERIOD $ 1,026 $ 23,323 $ 1,026
=============== ============= ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ - $ - $ -
=============== ============= ====================
Cash paid for income taxes $ - $ - $ -
=============== ============= ====================
NON-CASH TRANSACTIONS
Common stock issued in exchange for services $ 383,688 $ - $ 383,688
=============== ============= ====================
The accompanying notes are an integral part of these financial statements.
F-5
SUN RIVER MINING, INC.
(Exploration Stage Company)
Consolidated Stockholders' Equity
For The Year Ended September 30, 1999
Deficit
ISSUANCE OF Common Stock Accumulated
COMMON STOCK: -------------------------------- During the
# of Shares Amount Exploration Stage TOTALS
-------------------------------- -------------------- --------------
Inception February 25, 1997 - $ - $ - $ -
Issuance of stock for cash 100,000 100 - 100
Issuance of stock for cash 111,800 111,800 - 111,800
Issuance of stock to Founders 282,200 1 - 1
Issuance of stock for Consolidation 8,900,000 312,105 - 312,105
Issuance of stock for cash 58,000 58,000 - 58,000
Issuance of stock for cash 47,800 47,800 47,800
Net Loss for year - - (193,973) (193,973)
-------------------------------- --------------------- ---------------
Balance - September 30, 1997 9,499,800 529,806 (193,973) 335,833
-------------------------------- --------------------- ---------------
Issuance of stock for compensation 30,000 30,000 - 30,000
Issuance of stock for cash 1,000,000 200,000 - 200,000
Consolidation stock cancelled (1,200,000) (50,000) - (50,000)
Issuance of stock for cash 4,000 4,000 - 4,000
Net Loss for year - - (799,451) (799,451)
-------------------------------- --------------------- ---------------
Balance - September 30, 1998 9,333,800 713,806 (993,424) (279,618)
-------------------------------- --------------------- ---------------
Issuance of stock for cash 424,670 159,367 - 159,367
Issuance of stock for compensation 800,000 40,000 - 40,000
Issuance of stock for cash 750,000 296,125 - 296,125
Issuance of stock for compensation 500,000 276,500 - 276,500
Issuance of stock for cash 150,000 70,313 - 70,313
Issuance of stock for cash & services 904,500 122,108 - 122,108
Issuance of stock for compensation 1,400,000 147,000 - 147,000
Issuance of stock for compensation 800,000 69,200 - 69,200
Net Loss for year - - (1,482,017) (1,482,017)
-------------------------------- --------------------- ---------------
Balance - September 30, 1999 15,062,970 $1,894,419 $ (2,475,441) $ (581,022)
================================ ===================== ===============
The accompanying notes are an integral part of these financial statements.
F-6
SUN RIVER MINING, INC.
(Exploration Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------------
ORGANIZATION:
-------------
On February 25, 1997, Sun River Mining, Inc. (the Company) was
incorporated under the laws of Colorado. The Company is in business of
raising capital to acquire or merge with any entity which has an
interest in being acquired by, or merging into the company. In May 1999
management decided to write-off the Sun River Bolivian subsidiaries and
to take the subsequent loss, of all investments associated with the
subsidiaries. These financial statements recorded the subsequent loss
in the current fiscal period. There is also a provision to pay the
balance of what was the debt of Rio Del Sol S.A. (a Bolivian
subsidiary) in the amount of $246,465, the only contingent liability
that the Company believes it will incur regarding the discontinuation
of operations of these subsidiaries.
EXPLORATION STAGE:
------------------
The Company has not earned significant revenues from planned principal
operations or raising capital for exploration and acquisition of mining
property. Accordingly, the Company's activities have been accounted for
as those of a "Exploration Stage Enterprise" as set forth in Financial
Accounting Standards Board Statement No. 7 ("SFAS 7"). Among the
disclosures required by SFAS 7 are that the Company's financial
statements be identified as those of an exploration stage company, and
that the statements of operations, stockholders' equity (deficit) and
cash flows disclose activity since the date of the Company's inception.
BASIS OF PRESENTATION:
---------------------
The consolidated financial statements include the accounts of Sun River
Mining, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS:
-------------------------
For purposes of the statements of cash flows, cash and cash equivalents
include cash in banks and money markets with an original maturity of
three months or less.
FIXED ASSETS AND DEPRECIATION:
------------------------------
The purchased equipment is recorded at cost. Depreciation is computed
on purchased property using the straight-line method over the following
estimated useful lives of the assets:
Equipment 5 years
F-7
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
NOTES PAYABLE:
--------------
Notes payable as of September 30, 1999 consist of the following:
Note payable to Commercial First National Bank incurring 8%
interest, due upon demand. $ 40,397
Note payable to Glen Pahnke for unpaid company
expenses, incurring interest at 8%, due upon demand. 10,000
Note payable to Randy McCall for unpaid company
expenses, incurring interest at 8%, due upon demand. 47,303
Note payable to Dakota Partners dated January 25, 1999,
Incurring interest at 12%, due January, 2001 165,000
----------
Total Notes Payable $ 262,700
=========
ACCOUNTING FOR IMPAIRMENTS IN LONG-LIVED ASSETS:
-----------------------------------------------
Long-lived assets and identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amounts of assets may not be recoverable. Management
periodically evaluates the carry value and the economic useful life of
its long-lived assets based on the Company's operating performance and
the expected future undiscounted cash flows and will adjust the carry
amount of assets, which may not be recoverable. On September 30, 1998
the Company recorded a charge against operations of $589,984 related to
the write-off of their subsidiaries. The write-off was comprised of
$222,031 loss on receivables and a write-off of an advance for expenses
of $312,106. On September 30, 1999 the Company recorded a charge
against operations of $324,850 related to the write-off of their
subsidiaries, comprised of a write-off of an advance for expenses of
$324,850. Management believes that remaining long-lived assets in the
balance sheet are appropriately valued.
USE OF ESTIMATES:
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates. Accounts
Receivable will be paid out of accrued salaries of Sam Del Cielo.
F-8
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS:
-----------------------------------
The Company's financial instruments include cash, cash equivalents and
notes payable. Estimates of fair value of these instruments are as follows:
Cash & Cash Equivalents - The carrying amount of cash and cash
equivalents approximates fair value due to relatively short maturity
of these instruments.
Notes payable - The carrying amount of the Company's notes payable
approximate fair value based on borrowing rates currently available to
the Company for borrowing with comparable terms and conditions.
FEDERAL INCOME TAX:
------------------
The Company accounts for income taxes under SFAS No. 109, which
requires the asset and liability approach to accounting for income
taxes. Under this approach, deferred income taxes are determined based
upon differences between the financial statement and tax bases of the
Company's assets and liabilities and operating loss carryforwards using
enacted tax rates in effect for the year in which the differences are
expected to reverse. Deferred tax assets are recognized if it is more
likely than not that the future tax benefit will be realized.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
September 30
------------
1999 1998
---- ----
Deferred Tax Liability $ 0 $ 0
========= ============
Deferred Tax Assets
Net Operating Loss Carryforwards 2,474,341 992,524
Book/Tax Differences in Bases of Assets 1,100 900
Less Valuation Allowance (2,475,441) (993,424)
---------- ------------
Total Deferred Tax Assets $ 0
========== $ 0
============
Net Deferred Tax Liability $ 0 $ 0
========== ============
F-9
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 2 - INCOME TAXES:
------------
As of September 30, 1999, the Company had a net operating loss carryforward for
federal tax purposes approximately equal to the accumulated deficit recognized
for book purposes, which will be available to reduce future taxable income. The
full realization of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income during the
carryforward period. Because the current uncertainty of realizing such tax
assets in the future, a valuation allowance has been recorded equal to the
amount of the net deferred tax asset, which caused the Company's effective tax
rate to differ from the statutory income tax rate. The net operating loss
carryforward, if not utilized, will begin to expire in the year 2010.
NOTE 3 - NET (LOSS) PER COMMON SHARE:
---------------------------
The net (loss) per common share of the Common Stock is computed based
on the weighted average number of shares outstanding.
NOTE 4 - PURCHASE AGREEMENT
------------------
Sun River Mining, Inc. delivered 8,900,000 newly issued common shares
to NBI and RIO shareholders pro rata and warrants to purchase 500,000
shares at $1.00 per share in exchange for 99.8% of the issued and
outstanding shares each of RIO and NBI. The acquisition of NBI and RIO
was accounted for by the purchase method of accounting.
NOTE 5 - GOING CONCERN
-------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company
has sustained a substantial operations loss this year. As shown in the
financial statements, the Company incurred a net loss of $1,482,017 for
1999 and $799,451 for 1998. At September 30, 1999, current liabilities
exceed current assets by $586,056. These factors indicate that the
Company has substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets,
or the amounts and classification of liabilities that might be
necessary in the event the Company cannot continue in existence.
In view of these matters, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to meet its financial requirements, and the success
of its future operations. Management believes that actions being taken
to revise the Company's operating and financial requirements provide
the opportunity for the Company to continue as a going concern. The
action being taken is to search for companies that wish to merge or be
acquired. In the event management cannot achieve funds to continue
operations and/or merge with an operating company, the Company will not
be able to continue in existence.
F-10
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 6 - SUBSEQUENT EVENT - SUBSIDIARY ACQUISITION LOSS:
-----------------------------------------------
In May 1999, management decided to write-off the Sun River Bolivian subsidiaries
and to take the subsequent loss, of all investments associated with the
subsidiaries. These financial statements recorded the subsequent loss in the
current fiscal period. There is a provision to pay the balance of what was the
debt of Rio Del Sol, S.A. (a Bolivian subsidiary) in the amount of $165,000, the
only contingent liability that the Company believes it will incur regarding the
deacquistion of these subsidiaries.
NOTE 7 - OPTION AGREEMENT
----------------
At the date of this registration the Company has no intention of offering
further shares in a private offering to anyone except that its former President,
Steve Davis, has an option to purchase 300,000 shares of common stock at $.10
per share. The options expire March 15, 2004.
NOTE 8 - EMPLOYMENT CONTRACTS
--------------------
Employment contract dated April 12, 1998 for Randy McCall, (former Officer)
contained an option to purchase 400,000 shares of common stock, this option was
exercised on January 7, 1999 for $.05 per share ($20,000). Employment contract
for Sam DelCielo (former Officer) dated April 12, 1998 contained an option to
purchase 400,000 shares of common stock, which option was exercised on January
7, 1999 for $.05 per share ($20,000).
F-11
SUN RINVER MINING, INC.
(AN EXPLORATION STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1999
(Unaudited)
F-12
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson, C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
Board of Directors
Sun River Mining, Inc.
Ord, NE 68862
We have audited the accompanying balance sheet of Sun River Mining, Inc. (An
Exploration Stage Company) as of September 30, 1999 and 1998, and the related
statements of operations, cash flows, and stockholders' equity for the years
ended September 30, 1999 and 1998 and for the period from February 25, 1997
(date of inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sun River Mining, Inc., at
September 30, 1999 and 1998 and the results of their operations and their cash
flows for the years ended September 30, 1999 and 1998 and for the period from
February 25, 1997 (date of inception) through September 30, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 5 to the
financial statements, conditions exist which raise substantial doubt about the
Company's ability to continue as a going concern unless it is able to generate
sufficient cash flows to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 5. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, Colorado
May 20, 2001
F-13
SUN RIVER MINING, INC.
(Exploration Stage Company)
Balance Sheet
(Unaudited)
December 31, September 30,
1999 1999
--------------- ---------------
ASSETS:
Current assets:
Cash $ 81 $ 1,026
Prepaid Expenses - 200
Accounts Receivable - Del Cielo 1,884 1,884
--------------- ---------------
Total current assets 1,965 3,110
--------------- ---------------
Fixed assets
Office equpiment - (Net $192 depreciation fo 1999, 1,732 1,924
and $2,062 for 1999. --------------- ---------------
Total fixed assets 1,732 1,924
--------------- ---------------
TOTAL ASSETS $ 3,697 $ 5,034
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 53,891 $ 52,894
Accrued Expenses 313,466 263,779
Directors' Fee Payable 6,683 6,683
Notes Payable 222,266 262,700
--------------- ---------------
Total Current Liabilities 596,306 586,056
--------------- ---------------
STOCKHOLDERS' EQUITY:
Preferred Stock, par value $0.01 per share; 50,000,000
shares authorized; no shares issued and outstanding - -
Common Stock, no par value; 500,000,000 shares authorized;
15,362,970 shares issued and outstanding for December, 1,921,419 1,894,419
1999 and 15,062,970 shares issued and outstanding for
September, 1999.
Deficit accumulated during the exploratory stage (2,514,028) (2,475,441)
--------------- ---------------
Total Stockholders' Equity (592,609) (581,022)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,697 $ 5,034
=============== ===============
See accountant's review report.
F-14
SUN RIVER MINING, INC.
(Exploration Stage Company)
Statements of Operations
(Unaudited)
Three Months Ended Feb. 25, 1997
December 31, (Inception) to
---------------------------------- December 31,
1999 1998 1999
--------------- -------------- -----------------
REVENUE $ - $ - $ -
EXPENSES:
Advertising - - 18,500
Bank Charges 136 454 1,597
Consulting 18,000 31,163 872,939
Depreciation 192 830 2,254
Directors' Fees 5,378 3,883 15,361
Due Diligence - - 40,454
Equipment Rental - - 1,733
Interest - 3,880 37,897
Legal & Accounting - 5,750 69,023
Licenses & Fees - - 6,220
Meals & Entertainment - 773 4,119
Office Expenses 328 1,182 13,774
Officer's Salaries 52,500 50,375 343,250
Postage & Shipping - 565 3,217
Printing - 1,481 5,580
Public Relations 425 28,162 85,505
Rent 730 1,220 8,058
Taxes 53 1,141 4,657
Telephone 557 3,796 30,009
Transfer Agent Expense 500 1,091 7,151
Travel 185 7,248 59,293
--------------- -------------- -----------------
TOTAL EXPENSES 78,984 142,994 1,630,591
EXTRAORDINARY (GAIN) LOSS
Forgiveness of Debt (40,397) - (40,397)
Impairment loss - 100,658 923,834
--------------- -------------- -----------------
NET (LOSS) $ (38,587) $ (243,652) $ (2,514,028)
--------------- -------------- -----------------
PER SHARE INFORMATION:
Weighted average number of
common shares outstanding 11,741,855 9,333,800
--------------- --------------
NET LOSS PER COMMON SHARE $ (0.003) $ (0.03)
=============== ==============
See accountant's review report.
F-15
SUN RIVER MINING, INC.
(Exploration Stage Company)
Statements of Cash Flows
(Unaudited)
Three Months Ended Feb. 25, 1997
December 31, (Inception) to
------------------------------- December 31,
1999 1998 1999
------------ -------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (38,587) $ (243,652) $ (2,514,028)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation 192 830 2,254
Forgiveness of Debt (40,397) - (40,397)
Issuance of Common Stock for Services - - 383,688
Increase (Decrease) in Accounts Payable 16,626 1,335 53,891
Increase (Decrease) in Accrued Liabilities 37,502 - 352,404
Decrease (Increase) in Accounts Rec - Shareholders 245 (2,129) (1,884)
Decrease (Increase) in Prepaid Expenses (3,526) (200) -
------------ -------------- -----------------
Net Cash Flows Used by Operations (27,945) (243,816) (1,764,072)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable - 72,884 222,266
Issuance of Common Stock 27,000 159,367 1,541,887
------------ -------------- -----------------
Net Cash Flows Provided by Financing Activities 27,000 232,251 1,764,153
Net Increase (Decrease) in Cash (945) (11,565) 81
------------ -------------- -----------------
Cash and cash equivalents - Beginning of period 1,026 23,323 -
------------ -------------- -----------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 81 $ 11,758 $ 81
============ ============== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest $ - $ - $ -
============ ============== =================
Income Taxes $ - $ - $ -
============ ============== =================
NON-CASH TRANSACTIONS
Common stock issued in exchange for services $ 8,000 $ - $ 383,688
============ ============== =================
See accountant's review report.
F-16
SUN RIVER MINING, INC.
(Exploration Stage Company)
Statements of Stockholders' Deficit
(Unaudited)
Deficit
Accumulated
Common Stock During the
----------------------------------- Exploration
# of Shares Amount Stage Totals
---------------- ---------------- ---------------- ---------------
Inception - February 25, 1997 - $ - $ - $ -
Issuance of stock for cash 100,000 100 - 100
Issuance of stock for cash 111,800 111,800 - 111,800
Issuance of stock to Founders 282,200 - - -
Issuance of stock for Consolidation 8,900,000 312,106 - 312,106
Issuance of stock for cash 58,000 58,000 - 58,000
Issuance of stock for cash 47,800 47,800 47,800
Net Loss - - (193,973) (193,973)
---------------- ---------------- ---------------- ---------------
Balance - September 30, 1997 9,499,800 529,806 (193,973) 335,833
---------------- ---------------- ---------------- ---------------
Issuance of stock for compensation 30,000 30,000 - 30,000
Issuance of stock for cash 1,000,000 200,000 - 200,000
Consolidation stock cancelled (1,200,000) (50,000) - (50,000)
Issuance of stock for cash 4,000 4,000 - 4,000
Net Loss - - (799,451) (799,451)
---------------- ---------------- ---------------- ---------------
Balance - September 30, 1998 9,333,800 713,806 (993,424) (279,618)
---------------- ---------------- ---------------- ---------------
Issuance of stock for cash 424,670 159,367 - 159,367
Issuance of stock for compensation 800,000 8,000 - 8,000
Issuance of stock for cash 750,000 328,125 - 328,125
Issuance of stock for compensation 500,000 276,500 - 276,500
Issuance of stock for cash 150,000 70,313 - 70,313
Issuance of stock for cash & services 904,500 122,108 - 122,108
Issuance of stock for compensation 1,400,000 147,000 - 147,000
Issuance of stock for compensation 800,000 69,200 69,200
Net Loss (1,482,017) (1,482,017)
---------------- ---------------- ---------------- ---------------
Balance - September 30, 1999 15,062,970 1,894,419 (2,475,441) (581,022)
---------------- ---------------- ---------------- ---------------
Issuance of stock for cash 300,000 27,000 - 27,000
Net Loss - - (38,587) (38,587)
---------------- ---------------- ---------------- ---------------
Balance - December 31, 1999 15,362,970 $ 1,921,419 $ (2,514,028) $ (592,609)
================ ================ ================ ===============
See accountant's review report.
F-17
SUN RIVER MINING, INC.
(Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------------------------
ORGANIZATION:
------------
On February 25, 1997, Sun River Mining, Inc. (the Company) was incorporated
under the laws of Colorado. The Company is in business of raising capital to
acquire or merge with any entity which has an interest in being acquired by, or
merging into the company. In May 1999 management decided to write-off the Sun
River Bolivian subsidiaries and to take the subsequent loss, of all investments
associated with the subsidiaries. These financial statements recorded the
subsequent loss in the current fiscal period. There is also a provision to pay
the balance of what was the debt of Rio Del Sol S.A. (a Bolivian subsidiary) in
the amount of $246,465, the only contingent liability that the Company believes
it will incur regarding the discontinuation of operations of these subsidiaries.
EXPLORATION STAGE:
-----------------
The Company has not earned significant revenues from planned principal
operations or raising capital for exploration and acquisition of mining
property. Accordingly, the Company's activities have been accounted for as those
of a "Exploration Stage Enterprise" as set forth in Financial Accounting
Standards Board Statement No. 7 ("SFAS 7"). Among the disclosures required by
SFAS 7 are that the Company's financial statements be identified as those of an
exploration stage company, and that the statements of operations, stockholders'
equity (deficit) and cash flows disclose activity since the date of the
Company's inception.
BASIS OF PRESENTATION:
---------------------
The consolidated financial statements include the accounts of Sun River Mining,
Inc. and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
-------------------------
For purposes of the statements of cash flows, cash and cash equivalents include
cash in banks and money markets with an original maturity of three months or
less.
FIXED ASSETS AND DEPRECIATION:
-----------------------------
The purchased equipment is recorded at cost. Depreciation is computed on
purchased property using the straight-line method over the following estimated
useful lives of the assets:
Equipment 5 years
F-18
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
NOTES PAYABLE:
-------------
Notes payable as of December 31, 1999 consist of the following:
Note payable to Glen Pahnke for unpaid company
expenses, incurring interest at 8%, due upon demand. 10,000
Note payable to Randy McCall for unpaid company
expenses, incurring interest at 8%, due upon demand. 47,266
Note payable to Dakota Partners dated January 25, 1999,
incurring interest at 12%, due January, 2001 165,000
----------
Total Notes Payable $ 222,266
=========
ACCOUNTING FOR IMPAIRMENTS IN LONG-LIVED ASSETS:
------------------------------------------------
Long-lived assets and identifiable intangibles are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amounts
of assets may not be recoverable. Management periodically evaluates the carry
value and the economic useful life of its long-lived assets based on the
Company's operating performance and the expected future undiscounted cash flows
and will adjust the carry amount of assets, which may not be recoverable. On
September 30, 1998 the Company recorded a charge against operations of $589,984
related to the write-off of their subsidiaries. The write-off was comprised of
$222,031 loss on receivables and a write-off of an advance for expenses of
$312,106. On September 30, 1999 the Company recorded a charge against operations
of $324,850 related to the write-off of their subsidiaries, comprised of a
write-off of an advance for expenses of $324,850. Management believes that
remaining long-lived assets in the balance sheet are appropriately valued.
USE OF ESTIMATES:
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates. Accounts Receivable will be paid out of
accrued salaries of Sam Del Cielo.
F-19
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS:
------------------------------------
The Company's financial instruments include cash, cash equivalents and notes
payable. Estimates of fair value of these instruments are as follows:
Cash & Cash Equivalents - The carrying amount of cash and cash
equivalents approximates fair value due to relatively short
maturity of these instruments.
Notes payable - The carrying amount of the Company's notes
payable approximate fair value based on borrowing rates currently
available to the Company for borrowing with comparable terms and
conditions.
FEDERAL INCOME TAX:
-------------------
The Company accounts for income taxes under SFAS No. 109, which requires the
asset and liability approach to accounting for income taxes. Under this
approach, deferred income taxes are determined based upon differences between
the financial statement and tax bases of the Company's assets and liabilities
and operating loss carryforwards using enacted tax rates in effect for the year
in which the differences are expected to reverse. Deferred tax assets are
recognized if it is more likely than not that the future tax benefit will be
realized.
Significant components of the Company's deferred tax liabilities and
assets are as follows:
December 31
-----------
1999 1998
---- ----
Deferred Tax Liability $ 0 $ 0
================ =============
Deferred Tax Assets
Net Operating Loss Carryforwards 2,512,928 778,958
Book/Tax Differences in Bases of Assets 1,100 900
Less Valuation Allowance (2,514,028) (779,858)
----------- -------------
Total Deferred Tax Assets $ 0 $ 0
================ =============
Net Deferred Tax Liability $ 0 $ 0
================ =============
F-20
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 2 - INCOME TAXES:
---------------------
As of December 31, 1999, the Company had a net operating loss carryforward for
federal tax purposes approximately equal to the accumulated deficit recognized
for book purposes, which will be available to reduce future taxable income. The
full realization of the tax benefit associated with the carryforward depends
predominantly upon the Company's ability to generate taxable income during the
carryforward period. Because the current uncertainty of realizing such tax
assets in the future, a valuation allowance has been recorded equal to the
amount of the net deferred tax asset, which caused the Company's effective tax
rate to differ from the statutory income tax rate. The net operating loss
carryforward, if not utilized, will begin to expire in the year 2010.
NOTE 3 - NET (LOSS) PER COMMON SHARE:
------------------------------------
The net (loss) per common share of the Common Stock is computed based on the
weighted average number of shares outstanding.
NOTE 4 - PURCHASE AGREEMENT
---------------------------
Sun River Mining, Inc. delivered 8,900,000 newly issued common shares to NBI and
RIO shareholders pro rata and warrants to purchase 500,000 shares at $1.00 per
share in exchange for 99.8% of the issued and outstanding shares each of RIO and
NBI. The acquisition of NBI and RIO was accounted for by the purchase method of
accounting.
NOTE 5 - GOING CONCERN
----------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained a substantial
operations loss this year. As shown in the financial statements, the Company
incurred a net loss of $2,514,028 for 1999 and $799,451 for 1998. At December
31, 1999, current liabilities exceed current assets by $594,341. These factors
indicate that the Company has substantial doubt about its ability to continue as
a going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, and the success of its future operations. Management
believes that actions being taken to revise the Company's operating and
financial requirements provide the opportunity for the Company to continue as a
going concern. The action being taken is to search for Company's that wish to
merge or be acquired.
F-21
SUN RIVER MINING, INC
(Exploration Stage Company)
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 6 - SUBSEQUENT EVENT - SUBSIDIARY ACQUISITION LOSS:
-------------------------------------------------------
In May 1999, management decided to write-off the Sun River Bolivian subsidiaries
and to take the subsequent loss, of all investments associated with the
subsidiaries. These financial statements recorded the subsequent loss in the
current fiscal period. There is a provision to pay the balance of what was the
debt of Rio Del Sol, S.A. (a Bolivian subsidiary) in the amount of $165,000, the
only contingent liability that the Company believes it will incur regarding the
deacquistion of these subsidiaries.
NOTE 7 - OPTION AGREEMENT
-------------------------
At the date of this registration the Company has no intention of offering
further shares in a private offering to anyone except that its President has an
option to purchase 300,000 shares of common stock at $.10 per share.
NOTE 8 - EMPLOYMENT CONTRACTS
-----------------------------
Employment contract for Randy McCall (Officer) contained an option to purchase
400,000 shares of common stock, this option was exercised on January 7, 1999 for
$.05 per share (20,000). Employment contract for Sam DelCielo (Officer)
contained an option to purchase 400,000 shares of common stock, this option was
exercised on January 7, 1999 for $.05 per share ($20,000).
F-22
INDEX TO EXHIBITS
SK# 3.1 Articles of Incorporation*
3.2 Bylaws of Sun River Mining, Inc.*
3.3 Amended Bylaws of Sun River Mining, Inc.
* Previously filed with Form 10SB12G under file #000-29621
50