U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB
File No.: __________________
CIK:
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
4058 HISTEAD WAY, EVERGREEN, COLORADO 80439
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 308-728-3509
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)
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TABLE OF CONTENTS
PART I
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Page
Item 1. Business..................................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 17
Item 3. Properties.................................................. 19
Item 4. Security Ownership of Certain Beneficial Owners
and Management........................................ 19
Item 5. Directors and Executive Officers of the Registrant.......... 20
Item 6. Executive Compensation...................................... 23
Item 7. Certain Relationships and Related Transactions.............. 25
Item 8. Description of Securities................................... 27
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters............................... 28
Item 2. Legal Proceedings........................................... 28
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 28
Item 4. Recent Sales of Unregistered Securities..................... 29
Item 5. Indemnification of Directors and Officers................... 40
PART F/S
Signature Page................................................................ 41
Financial Statements and Supplementary Data.................................. F-1 - F-19
Index to Exhibits............................................................ 42
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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General
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. Sun River
and the Bolivian Subsidiaries are herein referred to collectively as "the Sun
River GROUP". The Registered Office of Sun River is 10200 W. 44th Ave., Suite
400, Wheat Ridge, Colorado 80033.
The planned business of Sun River is 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. 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. Compliance with laws imposed by federal and local governmental
authorities may necessitate significant capital outlays, may materially affect
the earning power of the Company, or may cause material changes in the any
proposed Company activities. 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. None of the costs are borne by the customers. No significant cost
has been incurred regarding compliance with environmental laws.
Exploration for minerals is highly speculative and involves greater
risks than many other businesses. The search for valuable minerals often results
in the failure to discover mineralization, or the discovery of mineralization
which will not return a profit over the costs incurred. The Company's operations
will be subject to all of the operating hazards and risks normally incident to
exploring for and developing mineral properties, such as encountering unusual or
unexpected formations, environmental pollution, price of fuel, flood or drought
conditions, fluctuations in price of gold, uninsured loss or liability, changes
in taxes, changes in government policy, lack of diversification, and competition
with a number of larger entities which have greater resources and more extensive
operating histories than the issuer.
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.
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. Following the completion of the Aluvion
Acquisition, the Sun River Group was to have interests in several
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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.
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.
With respect to reserves, WGM's estimates agree with those of Aluvion in all
material respects except that WGM ascribes a lower grade of 530 mg per cubic
meter to the other mineralization of the Upper Tipuani, based on the incomplete
nature of the exploration data.
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.
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.
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). The Sun River Group 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.
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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 Honduras unless it has available
funds with which to pay any venture costs.
The Company has no commercial operations as of date hereof. The Company
has two employees, one of which is full-time. 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.
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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. In the Company's judgment, none of its officers and
directors would thereby become an "underwriter" within the meaning of the
Section 2(11) of the Securities Act of 1933, as amended. 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:
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; 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.
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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.
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;
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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."
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
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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.
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
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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.
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.
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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.
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.
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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.
ADMINISTRATIVE OFFICES
The Company currently maintains a mailing address at 4058 Histead Way,
Evergreen, Colorado 80439 which is the office address of its President, Steven
Davis. 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.
EMPLOYEES
The Company is a development stage company and currently has two
employees, one of which is full time. 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. See "Executive Compensation" and under "Certain Relationships and
Related Transactions."
RISK FACTORS
1. 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."
2. 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.
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3. 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.
4. 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.
5. 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.
6. 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."
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7. TYPE OF BUSINESS ACQUIRED. 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.
8. 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.
9. 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.
10. 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.
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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.
11. 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.
12. DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has only two individuals who are serving as its officers
and directors on a part time basis. 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.
13. 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.
14. 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.
15. 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.
16. 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.
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17. 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.
18. 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.
19. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its
Common Stock and does not anticipate paying such dividends in the foreseeable
future.
20. 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.
21. 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.
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22. 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.
23. 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 President has an option to purchase 300,000 shares of common stock at $.10
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 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.
RESULTS OF OPERATIONS FOR YEAR ENDED SEPTEMBER 30, 1999
COMPARED TO SEPTEMBER 30, 1998
During the period from February 25, 1997 (inception) through date of
this registration statement the Company has engaged attempts at commencing
mineral exploration operations and organizational activities, acquisition of
capital and preparation for registration of its securities under the Securities
Exchange Act of 1934, as amended. No revenues were ever received by the Company.
The company incurred operating expenses in year ended September 30, 1999 of
($837,082). The net loss on operations was $(837,082) compared to operating
expenses of $770,858 in year ended September 30, 1998 which resulted in a net
loss of ($770,858). Such losses will continue unless revenues and business can
be acquired by the company. There is no assurance that revenues or profitability
will ever be achieved by the company.
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RESULTS OF OPERATIONS FOR QUARTER ENDED DECEMBER 31, 1999
The Company had no revenues in the period ended December 31, 1999 or
1998. The Company incurred $107,381 in expenses for the period in 1999.
The net operating loss in the quarter ended December 31, 1999 was
$(107,381). The losses were as a result of salaries and out-of-pocket expenses.
The net loss per share was less than ($.01) per share. Losses will continue
unless a profitable business opportunity can be acquired.
For the current fiscal year, the Company anticipates incurring a loss
as a result of legal and accounting expenses, expenses associated with
registration under the Securities Exchange Act of 1934, and expenses associated
with locating and evaluating acquisition candidates. The Company anticipates
that until a business combination is completed with an acquisition candidate, it
will not generate revenues other than interest income, and may continue to
operate at a loss after completing a business combination, depending upon the
performance of the acquired business.
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.
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 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.
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ITEM 3. DESCRIPTION OF PROPERTY.
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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
4058 Histead Way, Evergreen, CO 80439, which is the office address of its
President, Steven R. Davis. 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
- ------------------------------------------------------------------------
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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Steven R. Davis
President and Director
4058 Histead Way
Evergreen, CO 80439 0 (1) 0%
Randy McCall
Secretary, Treasurer and Director
1909 "P" Street
Ord, NE 68862 1,580,000 9.66%
Paul Enright
7391 Grant Ranch Rd., #1312
Littleton, CO 80123 1,900,000 11.61%
K. Mark Skow
P.O. Box 3614
Carefree, AZ 85377 1,843,000 11.27%
All directors and executive
officers as a group (2 persons) 1,580,000 9.66%
(1) Steven R. Davis has the right to purchase, under an Option Agreement, 25,000
shares of common stock per month and has the right to purchase 300,000 shares of
common stock.
Each principal shareholder has sole investment power and sole voting power over
the shares.
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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
Steven R. Davis President, CEO & Director Annual since 1999
Randy A. McCall Secretary, Treasurer, Chairman Annual since 1997
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
STEVEN R. DAVIS, age 57, the Company President, Chief Executive Officer
and a Director joined the Company in March 1999. Mr. Davis is a minerals
geologist with an extensive career in the mining industries of the United
States, Canada, and Latin America. His career includes over 32 years of
exploration, development and production activities, including a total of 20
years with ASARCO, Inc. and Homestake Mining Company, two of the nations premier
precious- and base-metals mining companies with extensive domestic and
international operations. Mr. Davis has held numerous management positions in
his career, including Regional Geologist, Manager of Exploration Projects and
Manager of Central Great Basin Exploration for Homestake Mining Company; Vice
President of Exploration for Mallon Resources (Costa Rica); and Director of
Exploration/Vice President of Operations for Zamora Gold Corp./Comcumay, S.A.
(Ecuador). While in these positions, he has been responsible for the discovery
and development of several mineral deposits, including substantial deposits of
both precious and base metals. Prior to Joining Sun River Mining, Mr. Davis was
an independent consulting geologist providing geological services with focus on
exploration, acquisition and development of precious- and base-metals properties
in the Western United States and Latin America since 1996. From 1994 to 1996 he
was Vice President of Operations with Zamora Gold Corporation. From 1993 into
1994 Mr. Davis held the position of Resource Evaluation Geologist with the U.S.
Bureau of Mines in Denver Colorado.
RANDY A. MCCALL, age 49, has been Chairman of 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. 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.
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Management will devote minimal 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.
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 and principals of the Company have 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
21
<PAGE>
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.
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.
22
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION.
- ------------------------------
SUMMARY COMPENSATION TABLE OF EXECUTIVES
<S> <C> <C> <C> <C> <C> <C>
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 1999 $69,875 0 0 0 300,000
shares
Randy A. McCall, 1998 $60,000* 0 0 0 0
Secretary/Treasurer 1999 $60,000* 0 0 0 0
- --------------------------- --------- -------------- ----------- --------------------- --------------- ----------------
*accrued, but not paid
</TABLE>
<TABLE>
<CAPTION>
Directors' Compensation
<S> <C> <C> <C> <C> <C>
Name Annual Meeting Consulting Number Number of
Retainer Fees ($) Fees/Other of Securities
Fee($) Fees ($) Shares Underlying
(#) Options
SARS (#)
- --------------------------------------------------------------------------------------------------------------------------
A. Director, Steven R. Davis $1,000 $100 0 0 0
B. Director, Randy A. McCall $1,000 $100 0 0 0
- --------------------------------------- -------------- ------------- ---------------- ------------- --------------------
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants Table
<S> <C> <C> <C> <C>
Name Number of Securities % of Total Exercise Expiration
Underlying Options/SARs or Price Date
Options/SARs Granted to Employees ($/Sh)
Granted (#) in Fiscal Year
- -------------------------------------------------------------------------------------------------------------------
Steven R. Davis 300,000 100% $.10/Sh Apr - Sept.
2004
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR value
<S> <C> <C> <C> <C>
Name Shares Value Number of Securities Value of Unexercised
Acquired Realized Underlying In the Money
on ($) Unexercised Options/SARs at FY-
Exercise Options/SARs at FY- End ($) Exercisable/
(#) End (#) Exercisable/ Unexercisable
Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Steven R. Davis 0 0 300,000 Exercisable 0
Randy A. McCall 400,000 $24,000 0 0
Sam Del Cielo(1) 400,000 $24,000 0 0
- --------------------------- ----------------- -------------- ---------------------------- ----------------------------
(1) Former officer and director, now resigned.
</TABLE>
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.
24
<PAGE>
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, 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.
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.
25
<PAGE>
Summary of Employment Related Contracts and Options
(a) (1) Director or executive officer in the past two years, (i) Stephen 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, Secretary,
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, and (iv) Sam Del Cielo, employment contract
company Secretary and Treasurer April 1, 1998 to March 31, 1999, annual
compensation of $30,000 plus option to purchase 400,000 shares of common stock.
<TABLE>
<CAPTION>
Transactions with promoters:
<S> <C> <C>
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
valued at $8,750 and press release preparation
September - December 1998
(ii) Larry McNabb 500,000 common shares Investor and broker/dealer
valued at $75,000 relations
January - February 1999
(iii) Capital Investment Resources 450,000 common shares Consulting - financing and
broker/dealer relations
February - June 1999
</TABLE>
26
<PAGE>
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.
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.
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.
27
<PAGE>
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.
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 $.0312
A public trading market exists for the Company's securities on the OTCBB
There were fifty-seven (57) holders of record of the Company's common stock on
February 15, 2000. No dividends have been paid to date and the Company's Board
of Directors does not anticipate paying dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
- ------------------------------------
The Company is not a party to any pending legal proceedings, and no
such proceedings are known to be contemplated.
No director, officer or affiliate of the Company, and no owner of
record or beneficial owner of more than 5.0% of the securities of the Company,
or any associate of any such director, officer or security holder is a party
adverse to the Company or has a material interest adverse to the Company in
reference to any litigation.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
- ---------------------------------------------------------------
Not applicable.
28
<PAGE>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Since February 25, 1997 (the date of the Company's formation), the
Company has sold its Common Stock to the persons listed in the table below in
transactions summarized as follows:
<S> <C> <C> <C> <C> <C>
Price per Number Total Date of
NAME ADDRESS SHARE ($) 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
29
<PAGE>
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
30
<PAGE>
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
31
<PAGE>
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
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
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 8,750 12-15-98
Pembroke Pines, FL Services
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 12,250 12-15-98
Inc.(6) Naples, FL 34108 Services
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
35
<PAGE>
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
36
<PAGE>
Randy A. McCall(5) 1909 P St. 0.35 50,000 17,500 12-31-98
Ord, NE 68862
Randy A. McCall(7) 1909 P St. 0.01 400,000 4,000 1-7-99
Ord, NE 68862 ex. options
Samuel Del Cielo(7) 4269 Sumac Ct. 0.01 400,000 4,000 1-7-99
Boulder, CO 80303 ex. Options
Oriential New Rue Des Baines 35 0.075 750,000 52,500 1-15-99
Investments(6) Geneva, Switzerland
Larry D. McNabb(6) 213 E. Highlan Ave 0.15 500,000 75,000 1-21-99
Atlantic Highlands, NJ Services
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
37
<PAGE>
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 45,000 4-5-99
Resources LLC (6) Services
Long H. Nguyen(8) 6776 SW Freeway #180 0.10 62,500 6,250 4-4-99
Houston, TX 77074
Sam Del Cielo(8) 4269 Sumac Ct. 0.10 100,000 10,000 4-5-99
Boulder, CO 80303
Randy A. McCall(8) 1909 P Street 0.10 150,000 15,000 4-5-99
Ord, NE 68862
John & Carmen Exkert 729 Lilac Lane 0.05 700,000 35,000 6-9-99
(9) Glendora, CA 91740
Reid Johnson(9) 11803 E. Beryl 0.05 700,000 35,000 6-7-99
Scottsdale, AZ 85259
Mary Ann Kelley(9) 55 Mingus Mtn. Rd. 0.05 400,000 20,000 7-7-99
Sedona, AZ 86336
Hangen Family Trust(9) 9429 E Conquistadore 0.05 400,000 20,000 7-12-99
Donald Hangen, Trustee Scottsdale, AZ 85255
David A. Jacobs(9) 2751 Mill Ave. 0.05 300,000 15,000 10-1-99
Brooklyn, NY 11234
</TABLE>
38
<PAGE>
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 pursuant to private offering under Regulation D, Rule 504
(9) Shares issued pursuant to private placement under Regulation D, Rule 504
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) of the Securities Act of 1933, as amended
including 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.
39
<PAGE>
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.
40
<PAGE>
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: February 18, 2000
SUN RIVER MINING, INC.
BY:/S/STEVEN R. DAVIS
Steven R. Davis, President
Directors:
/S/STEVEN R. DAVIS
------------------
Steven R. Davis, President & Director
/S/RANDY A. MCCALL
------------------
Randy A. McCall, Secretary, Treasurer
& Director
41
<PAGE>
SUN RIVER MINING, INC.
INDEX TO FINANCIAL STATEMENTS
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-10
Unaudited Interim Financial Statements for December 31, 1999
Cover Page F-11
Balance Sheet F-12
Statement of Operations F-13
Statement of Cash Flows F-14
Statement of Stockholders' Equity F-15
Notes to Financial Statements F-16 -F-19
31
<PAGE>
SUN RIVER MINING, INC.
FINANCIAL STATEMENTS
September 30, 1999
F-1
<PAGE>
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.
We have audited the accompanying balance sheet of Sun River Mining, Inc. as of
September 30, 1999, and the related statements of operations, cash flows, and
stockholders' equity for the periods then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These 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.
As shown in the financial statements, the company incurred a net loss of
$837,082 for 1999 and a net loss of $770,858 for 1998. 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 asset, or the amount and
classification of liabilities that might be necessary in the event the company
cannot continue in existence.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sun River Mining, Inc., as of
September 30, 1999, and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/S/MICHAEL JOHNSON & CO., LLC
Michael Johnson & Co., LLC
Denver, Colorado
February 15, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Balance Sheet
For The Year Ended September 30, 1999
With Comparative Totals for September 30, 1998
<S> <C> <C>
1999 1998
---- ----
ASSETS:
Current assets:
Cash $ 1,026 $ 23,323
Accounts Receivable 1,884 0
Prepaid Expenses 200 3,726
------------------- ----------------
Total current assets 3,110 27,049
Noncurrent assets
Office Equipment (Net $995 Depreciation) 1,924 3,156
------------------- ----------------
Total noncurrent 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 256,163 136,565
Directors' Fee Payable 6,683 6,100
Loans Payable 223,013
Notes Payable 47,303 159,555
------------------- ----------------
Total current liabilities 586,056 311,230
------------------- ----------------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000
SHARES AUTHORIZED; NO SHARES ISSUED AND OUTSTANDING 0 0
Common Stock, no par value; 500,000,000 shares
authorized;
15,062,090 shares issued and outstanding in 1999 and 1,220,891 683,806
9,333,800 shares issued and outstanding in 1998
Net Loss (Accumulated) (1,801,913) (964,831)
------------------- ----------------
TOTAL STOCKHOLDERS' EQUITY (581,022) (281,025)
------------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,034 $ 30,205
=================== ================
The accompanying notes are an integral part of these financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUN RIVER MINING, INC.
Statement of Operations
For The Year Ended September 30, 1999
With Comparative Totals for September 30, 1998
<S> <C> <C>
1999 1998
------------------- -------------------
Revenue $ 0 $ 0
Expenses:
Advertising 18,500 0
Bank Charges 572 518
Consulting 92,682 14,940
Depreciation 1,232 511
Directors' Fees 3,883 3,500
Due Diligence 40,454 0
Equipment Rental 0 400
Interest 22,007 12,042
Legal and Accounting 20,805 15,952
Licenses & Fees 0 5,050
Meals & Entertainment 773 171
Office Expenses 4,415 7,062
Officer's Salaries 162,884 87,000
Postage 565 1,835
Printing 4,517 0
Public Relations 85,080 0
Rent 4,460 2,868
Subsidiary - Acquisition Loss 324,850 598,984
Taxes 4,604 0
Telephone 12,374 10,730
Transfer Agent Expense 3,701 1,550
Travel 28,724 7,745
------------------- -------------------
Total Expenses 837,082 770,858
Net Loss $ (837,082) $ (770,858)
=================== ===================
Per Share Information:
Weighted average number of
common shares outstanding 11,741,855 9,328,800
------------------- -------------------
Net Loss per Common Share $ (0.07) $ (0.08)
=================== ===================
The accompanying notes are an integral part of these financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Statement of Cash Flows
For the Year Ended September 30, 1999
With Comparative Totals For the Year Ended September 30, 1998
<S> <C> <C>
1999 1998
---- ----
Cash Flows from Operating Activities:
Net Loss $ (837,082) $ (770,858)
Depreciation 995 0
Increase (Decrease) in Accounts Payable 43,884 (19,118)
Increase (Decrease) in Accrued Liabilities 119,598 96,748
Increase (Decrease) in Directors' Fees Payable 583 3,500
Decrease (Increase) in Prepaid Expenses 3,526 2,274
Decrease (Increase) in Loans from
Subsidiary 0 534,137
----------------- ----------------
Net Cash Flows Used by Operations (668,496) (153,317)
Cash Flows from Investing Activities:
Acquisition of Fixed Assets 0 (1,878)
----------------- ----------------
Net Cash Flows Provided by Investing
Activities 0 (1,878)
Cash Flows from Financing Activities:
Proceeds from Loans 109,114 24,363
Issuance of Common Stock 537,085 154,000
----------------- ----------------
Net Cash Flows Provided by Financing Activities 646,199 178,363
Net Increase (Decrease) in Cash (22,297) 23,168
----------------- ----------------
Cash at Beginning of Period 23,323 155
------ ---
Cash at End of Period $ 1,026 $ 23,323
================= ================
The accompanying notes are an integral part of these financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Stockholders' Equity
For The Year Ended September 30, 1999
<S> <C> <C> <C> <C>
Deficit
Accum. During
ISSUANCE OF Common the Development
COMMON STOCK: # of Shares Stock Stage Totals
- ------------------ ----------- ----- ----- ------
February 25, 1997 0 $ 0 $ 0 $ 0
March 15, 1997 (Cash) 100,000 100 0 100
March 31, 1997 (Subscribed) 111,800 111,800 0 111,800
March 31, 1997 - Trans to Founders 282,200 0 0 0
April 3, 1997 - Consolidated 8,900,000 312,106 0 312,106
August 15, 1997 (Subscribed) 58,000 58,000 0 58,000
September 30, 1997 (Subscribed) 47,800 47,800 47,800
Net Loss as of 9/30/98 0 0 (193,973) (193,973)
-------------------------------------- ------------------------------------
Balance - September 30, 1997 9,499,800 529,806 (193,973) 335,833
====================================== ====================================
November 30, 1997 (Compensation) 30,000 0 0 0
September 15, 1998 (For Cash) 1,000,000 200,000 0 200,000
September 15, 1998 (Cancelled) (1,200,000) (50,000) 0 (50,000)
September 30, 1998 (For Cash) 4,000 4,000 0 4,000
Net Loss as of 9/30/98 0 0 (770,858) (770,858)
-------------------------------------- ------------------------------------
Balance - September 30, 1998 9,333,800 683,806 (964,831) (281,025)
====================================== ====================================
November 9, 1998 (For Cash) 215,900 148,635 0 148,635
January 5, 1999 (For Cash) 208,770 8,000 0 8,000
January 7, 1999 (For Compensation) 800,000 0 0 0
January 15, 1999 (For Cash) 750,000 139,225 0 139,225
January 21, 1999 (For Compensation) 500,000 0 0 0
February 2, 1999 (For Cash) 150,000 40,775 0 40,775
April 6, 1999 (For Cash) 904,500 200,450 0 200,450
June 30, 1999 (For Compensation 1,400,000 0 0 0
September 30, 1999 (Subscription) 800,000 0 0 0
Net Loss as of 9/30/99 0 0 (837,082) (837,082)
-------------------------------------- ------------------------------------
Balance - September 30, 1999 15,062,970 $ 1,220,891 $ (1,801,913) $ (581,022)
====================================== ====================================
The accompanying notes are an integral part of these financial statements.
F-6
</TABLE>
<PAGE>
SUN RIVER MINING, INC.
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. 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 deacquisition of these subsidiaries.
BASIS OF PRESENTATION:
The Company is in the mining business and is primarily engaged in
raising capital for exploration and acquisition of mining property. The
authorized capital stock of the corporation is 500,000,000 shares of
common stock no par value and 50,000,000 shares of preferred stock,
$.01 par value.
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
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
F-7
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
September 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
NOTES PAYABLE(CONT)
Note payable to Dakota Partners dated January 25, 1999,
INCURRING INTEREST AT 12%, DUE UPON COMPLETION OF PAYMENT 172,616
----------
TOTAL NOTES PAYABLE $ 270,316
=========
All notes payable are due within one year; therefore, are classified as
current liabilities.
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, 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
investment of $324,850. Management believes that remaining long-lived
assets in the balance sheet are appropriately valued.
REVENUE RECOGNITION:
Revenue is recognized when earned and expenses are recognized when they
occur.
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.
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.
F-8
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
September 30, 1999
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
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.
NOTE 2 - INCOME TAXES:
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax liabilities and
assets are as follows:
<S> <C> <C>
SEPTEMBER 30
1999 1998
---- ----
DEFERRED TAX LIABILITY $ 0 $ 0
================ =============
Deferred Tax Assets
Net Operating Loss Carryforwards 837,082 770,858
Book/Tax Differences in Bases of Assets 11,000 9,000
LESS VALUATION ALLOWANCE (848,082) (779,858)
----------- ---------
TOTAL DEFERRED TAX ASSETS $ 0 $ 0
================= ==============
NET DEFERRED TAX LIABILITY $ 0 $ 0
================ ==============
</TABLE>
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.
F-9
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
September 30, 1999
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 and Debentures for $200,000 bearing interest
at 8% convertible into common stock of SRM within one year at $1.00 per
share in exchange for 99.8% of the issued and outstanding shares each
of RIO and NBI. This purchase agreement has been cancelled per board
minutes of November 9, 1998
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 $837,082 for
1999 and $770,858 for 1998. At September 30, 1999, current liabilities
exceed current assets by $582,946. 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.
F-10
<PAGE>
SUN RIVER MINING, INC.
INTERIM FINANCIAL STATEMENTS
December 31, 1999
(Unaudited)
F-11
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Balance Sheet
For The Period Ended December 31, 1999
With Comparative Totals for September 30, 1998
(Unaudited)
<S> <C> <C>
Three Months Audited Fiscal
Ended Year Ended
Dec. 31, 1999 Sept. 30, 1999
------------- --------------
ASSETS:
Current assets:
Cash $ 81 $ 1,026
Accounts Receivable 0 200
Prepaid Expenses 1,884 1,884
------------------- -----------------
Total current assets 1,965 3,110
Noncurrent assets
Office Equipment (Net $995 Depreciation) 1,732 1,924
------------------- -----------------
Total noncurrent 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 394,260 256,163
Directors' Fee Payable 6,683 6,683
Loans Payable 222,266 223,013
Notes Payable 0 47,303
------------------- -----------------
Total current liabilities 677,100 586,056
------------------- -----------------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 50,000,000
SHARES AUTHORIZED; NO SHARES ISSUED AND OUTSTANDING 0 0
Common Stock, no par value; 500,000,000 shares authorized;
15,062,090 shares issued and outstanding in 1999 and 1,235,891 1,220,891
9,333,800 shares issued and outstanding in 1998
Net Loss (Accumulated) (1,909,294) (1,801,913)
------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY (673,403) (581,022)
------------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,697 $ 5,034
=================== =================
The accompanying notes are an integral part of these financial statements.
F-12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUN RIVER MINING, INC.
Statement of Operations
For The Period Ended December 31, 1999
With Comparative Totals for September 30, 1999
(Unaudited)
<S> <C> <C>
Three Months Audited Fiscal
Ended Year Ended
Dec. 31, 1999 Sept. 30, 1999
------------------- -------------------
Revenue $ 0 $ 0
Expenses:
Advertising 18,500
Bank Charges 136 572
Consulting 6,000 92,682
Depreciation 192 1,232
Directors' Fees 5,378 3,883
Due Diligence 0 40,454
Equipment Rental 0 0
Forgiveness of Debt 40,397 0
Interest 0 22,007
Legal and Accounting 0 20,805
Licenses & Fees 0 0
Meals & Entertainment 0 773
Office Expenses 328 4,415
Officer's Salaries 52,500 162,884
Postage 565
Printing 4,517
Public Relations 425 85,080
Rent 730 4,460
Subsidiary - Acquisition Loss 324,850
Taxes 53 4,604
Telephone 557 12,374
Transfer Agent Expense 500 3,701
Travel 185 28,724
------------------- -------------------
Total Expenses 107,381 837,082
Net Loss $ (107,381) $ (837,082)
=================== ===================
Per Share Information:
Weighted average number of
common shares outstanding 10,855,685 11,741,855
------------------- -------------------
Net Loss per Common Share $ (0.01) $ (0.07)
=================== ===================
The accompanying notes are an integral part of these financial statements.
F-13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Statement of Cash Flows
For the Period Ended December 31, 1999
With Comparative Totals For the Year Ended September 30, 1999
(Unaudited)
<S> <C> <C>
1999 1998
---- ----
Cash Flows from Operating Activities:
Net Loss $ (107,381) $ (837,082)
Depreciation 192 995
Increase (Decrease) in Accounts Payable 997 43,884
Increase (Decrease) in Accrued Liabilities 89,300 119,598
Increase (Decrease) in Directors' Fees Payable 0 583
Decrease (Increase) in Prepaid Expenses 200 3,526
----------------- ----------------
Net Cash Flows Used by Operations (16,692) (668,496)
Cash Flows from Financing Activities:
Proceeds from Loans 747 109,114
Issuance of Common Stock 15,000 537,085
----------------- ----------------
Net Cash Flows Provided by Financing Activities 15,747 646,199
Net Increase (Decrease) in Cash (945) (22,297)
----------------- ----------------
Cash at Beginning of Period 1,026 23,323
----------------- ----------------
Cash at End of Period $ 81 $ 1,026
================= ================
The accompanying notes are an integral part of these financial statements.
F-14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sun River Mining, Inc.
Stockholders' Equity
For The Period Ended December 31, 1999
(Unaudited)
<S> <C> <C> <C> <C>
Deficit
Accum. During
ISSUANCE OF Common the Development
COMMON STOCK: # of Shares Stock Stage Totals
- ------------------ ----------- ----- ----- ------
February 25, 1997 0 $ 0 $ 0 $ 0
March 15, 1997 (Cash) 100,000 100 0 100
March 31, 1997 (Subscribed) 111,800 111,800 0 111,800
March 31, 1997 - Trans to Founders 282,200 0 0 0
April 3, 1997 - Consolidated 8,900,000 312,106 0 312,106
August 15, 1997 (Subscribed) 58,000 58,000 0 58,000
September 30, 1997 (Subscribed) 47,800 47,800 47,800
Net Loss as of 9/30/97 0 0 (193,973) (193,973)
-------------------------------------- ------------------------------------
Balance - September 30, 1997 9,499,800 529,806 (193,973) 335,833
====================================== ====================================
November 30, 1997 (Compensation) 30,000 0 0 0
September 15, 1998 (For Cash) 1,000,000 200,000 0 200,000
September 15, 1998 (Cancelled) (1,200,000) (50,000) 0 (50,000)
September 30, 1998 (For Cash) 4,000 4,000 0 4,000
Net Loss as of 9/30/98 0 0 (770,858) (770,858)
-------------------------------------- ------------------------------------
Balance - September 30, 1998 9,333,800 683,806 (964,831) (281,025)
====================================== ====================================
November 9, 1998 (For Cash) 215,900 148,635 0 148,635
January 5, 1999 (For Cash) 208,770 8,000 0 8,000
January 7, 1999 (For Compensation) 800,000 0 0 0
January 15, 1999 (For Cash) 750,000 139,225 0 139,225
January 21, 1999 (For Compensation) 500,000 0 0 0
February 2, 1999 (For Cash) 150,000 40,775 0 40,775
April 6, 1999 (For Cash) 904,500 200,450 0 200,450
June 30, 1999 (For Compensation) 1,400,000 0 0 0
September 30, 1999 (Subscription) 800,000 0 0 0
Net Loss as of 9/30/99 0 0 (837,082) (837,082)
-------------------------------------- ------------------------------------
Balance - September 30, 1999 15,062,970 $ 1,220,891 $ (1,801,913) $ (581,022)
====================================== ====================================
October 1, 1999 (For Cash) 300,000 $ 15,000 $ 0 $ 15,000
Net Loss as of Dec. 31, 1999 0 $ 0 $ (107,381) $ (107,381)
-------------------------------------- ------------------------------------
Balance - December 31, 1999 15,362,970 $ 1,235,891 $ (1,909,294) $ (673,403)
====================================== ====================================
The accompanying notes are an integral part of these financial statements.
F-15
</TABLE>
<PAGE>
SUN RIVER MINING, INC.
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. 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 deacquisition of these subsidiaries.
BASIS OF PRESENTATION:
The Company is in the mining business and is primarily engaged in
raising capital for exploration and acquisition of mining property. The
authorized capital stock of the corporation is 500,000,000 shares of
common stock no par value and 50,000,000 shares of preferred stock,
$.01 par value.
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
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
F-16
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
NOTES PAYABLE(CONT)
Note payable to Dakota Partners dated January 25, 1999,
INCURRING INTEREST AT 12%, DUE UPON COMPLETION OF PAYMENT 165,000
----------
TOTAL NOTES PAYABLE $ 222,266
=========
All notes payable are due within one year; therefore, are classified as
current liabilities.
REVENUE RECOGNITION:
Revenue is recognized when earned and expenses are recognized when they
occur.
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.
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.
F-17
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
December 31, 1999
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT):
-------------------------------------------------------------------
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.
NOTE 2 - INCOME TAXES:
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax liabilities and
assets are as follows:
<S> <C> <C>
SEPTEMBER 30
1999 1998
---- ----
DEFERRED TAX LIABILITY $ 0 $ 0
================ ===============
Deferred Tax Assets
Net Operating Loss Carryforwards 837,082 770,858
Book/Tax Differences in Bases of Assets 11,000 9,000
LESS VALUATION ALLOWANCE (848,082) (779,858)
----------------- ---------------
TOTAL DEFERRED TAX ASSETS $ 0 $ 0
================= ===============
NET DEFERRED TAX LIABILITY $ 0 $ 0
================= ===============
</TABLE>
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.
F-18
<PAGE>
SUN RIVER MINING, INC
Notes to Financial Statements
December 31, 1999
(Unaudited)
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 - 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 $944,463 for
1999 and $770,858 for 1998. At December 31, 1999, current liabilities
exceed current assets by $675,135. 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.
F-19
<PAGE>
INDEX TO EXHIBITS
SK# 3.1 Articles of Incorporation
3.2 Bylaws of Sun River Mining, Inc.
27.1 Financial Data Schedule
42
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
SUN RIVER MINING, INC.
<PAGE>
ARTICLES OF INCORPORATION
OF
SUN RIVER MINING, INC.
The undersigned hereby states as Articles of Incorporation pursuant to
Colorado Revised Statutes as follows:
ARTICLE I
The name of the corporation is: SUN RIVER MINING, INC., and its initial
principal place of business shall be: 10200 W. 44th Ave., #400, Wheat Ridge, CO
80033.
ARTICLE II
DURATION. The corporation shall have perpetual existence.
ARTICLE III
PURPOSE. The purposes for which the corporation is organized are: shall be
to transact all lawful business for which corporations may be organized pursuant
to the Colorado Corporation Code.
ARTICLE IV
CAPITAL STOCK
AUTHORIZED SHARES
SECTION 1. CLASSES AND SHARES AUTHORIZED. The authorized capital stock of
the corporation shall be 500,000,000 shares of Common Stock no par value and
50,000,000 shares of Preferred Stock, $.01 par value.
SECTION 2. PREFERRED STOCK. Shares of Preferred Stock may be divided into
such classes and series as may be established, from time to time, by the Board
of Directors. The Board of Directors, from time to time, may fix and determine
the relative rights and preferences of the shares of any series or class so
established. The Board of Directors may fix the preferred shares of any series
or class established as either voting, or non-voting, in the sole discretion of
the Board, and may determine dividends, cumulative or not, in the sole
discretion of the Board.
<PAGE>
SECTION 3. COMMON STOCK DIVIDENDS.
(a) After the requirements with respect to preferential
dividends on the classes or series of Preferred Stock, if any, shall
have been met and after the corporation shall have complied with all
the requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts, and subject further
to any other conditions which may be fixed in accordance with the
provisions of Section 2 of this Article IV, then, and not otherwise,
the holders of the Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of
Directors of the corporation paid out of funds legally available
therefor.
(b) After distribution in full of the preferential amount, if
any, to be distributed to the holders of the Preferred Stock of the
various classes or series in the event of voluntary or involuntary
liquidation and distribution or sale of assets, dissolution, or
winding-up of the corporation, the holders of the Common Stock shall be
entitled to receive all of the remaining assets of the corporation,
tangible and intangible, of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of the
Common Stock held by them respectively.
(c) Except as may otherwise be required by law, each holder of
the Common Stock shall have one vote in respect of each share of the
Common Stock held by him on all matters voted upon by the stockholders.
SECTION 4. GENERAL PROVISIONS. The capital stock of the Corporation may be
issued for money, property, services rendered, labor done, cash advanced for the
corporation, or for any other assets of value in accordance with the action of
the Board of Directors, whose judgment as to the value of the assets received in
return for said stock shall be conclusive, and said stock, when issued, shall be
fully paid and nonassessable.
ARTICLE V
CUMULATIVE VOTING. Cumulative voting by holders of the Common Stock or the
Preferred Stock is not authorized.
ARTICLE VI
PRE-EMPTIVE RIGHTS. SHAREHOLDERS OF THE CORPORATION SHALL NOT have
preemptive rights to acquire unissued or treasury shares of the corporation or
securities convertible into such shares or carrying a right to subscribe to or
acquire such shares.
ARTICLE VII
The address of the initial registered office of the corporation is 10200 W.
44th Ave., #400, Wheat Ridge, CO 80033, and the name of the initial registered
agent shall be M. A. Littman.
Accepted:/s/M.A. Littman
<PAGE>
ARTICLE VIII
PLACE OF BUSINESS. Part or all of the business of the corporation may be
conducted in any place in the State of Colorado or outside of the State of
Colorado, in other states or territories of the United States, and in foreign
countries.
ARTICLE IX
BOARD OF DIRECTORS
SECTION 1. BOARD OF DIRECTORS; NUMBER. The governing board of the
corporation shall be known as the Board of Directors, and the number of
directors may from time to time be increased or decreased in such manner as
shall be provided in the By-laws of the corporation, provided that the number of
directors shall not be reduced to less than three except that there need be only
as many directors as there are shareholders in the event that the outstanding
shares are held of record by fewer than three shareholders.
SECTION 2. CLASSIFICATION OF DIRECTORS. The Board of Directors shall be
divided into three classes, Class 1, Class 2, and Class 3, each class to be as
nearly equal in number as possible, the term of office of Class 1 directors to
expire at the first annual meeting of shareholders after their election, that of
Class 2 directors to expire at the second annual meeting after their election,
and that of Class 3 directors to expire at the third annual meeting after their
election. At each annual meeting after such classification, the number of
directors equal to the number of the class whose term expires at the time of
such meeting shall be elected to hold office until the third succeeding annual
meeting. No classification of directors shall be effective prior to the first
annual meeting of shareholders or at any time when the Board of Directors
consists of less than six members. Notwithstanding the foregoing, and except as
otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect one
or more directors of the company, the terms of the directors or directors
elected by such holders shall expire at the next succeeding annual meeting of
stockholders.
SECTION 3. DIRECTORS. The names and addresses of the persons who are to
serve as directors until the next annual meeting of shareholders or until their
successors shall be elected and shall qualify are as follows:
Randy McCall c/o 10200 W. 44th Ave. #400
Wheat Ridge, CO 80033
Frank Barnes c/o 10200 W. 44th Ave. #400
Wheat Ridge, CO 80033
SECTION 4. NOMINATION OF DIRECTORS.
a. Nominations for the election of directors may be made by
the board of Directors, by a committee of the Board of Directors, or by
any shareholder entitled to vote for the election of directors.
Nominations by shareholders shall be made by notice in writing,
delivered or mailed by first class United States mail, postage prepaid,
to the Secretary of the corporation not less than 14 days nor more than
50 days prior to any meeting of the shareholders called for the
election of directors; provided, however, that if less than 21 days
notice of the meeting is given to shareholders, such written notice of
<PAGE>
the meeting is given to shareholders, such written notice shall be
delivered or mailed, as prescribed, to the Secretary of the corporation
not later than the close of the seventh day following the day on which
notice of the meeting was mailed to shareholders.
b. Each notice under subsection (a) shall set forth (i) the
name, age, business address and, if known residence address of each
nominee proposed in such notice, (ii) the principal occupation or
employment of each such nominee, and (iii) the number of shares of
stock of the corporation which are beneficially owned by each such
nominees.
c. The chairman of the shareholders' meeting may, if the facts
warrant, determine, and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
SECTION 5. CERTAIN POWERS OF THE BOARD OF DIRECTORS. In furtherance and not
in limitation of the powers conferred by statute, the Board is expressly
authorized:
a. to manage and govern the corporation by majority vote of
members present at any regular or special meeting at which a quorum
shall be present, to make, alter, or amend the By-laws of the
corporation at any regular or special meeting, to fix the amount to be
reserved as working capital over and above its capital stock paid in,
to authorize and cause to be executed mortgages and liens upon the real
and personal property of the corporation, and to designate one or more
committees, each committee to consist of two or more of the directors
of the corporation, which, to the extent provided in the resolution or
in the By-laws of the corporation, shall have and may exercise the
powers of the Board of Directors in the management of the business and
affairs of the corporation (such committee or committees shall have
such name or names as may be stated in the By-laws of the corporation
or as may be determined from time to time by resolution adopted by the
Board of Directors);
b. to sell, lease, exchange or otherwise dispose of all or
substantially all of the property and assets of the corporation in the
ordinary course of its business upon such terms and conditions as the
Board of Directors may determine without vote or consent of the
shareholders.
c. to sell, pledge, lease, exchange, liquidate or otherwise
dispose of all or substantially all the property or assets of the
corporation, including its goodwill, if not in the ordinary course of
its business, upon such terms and conditions as the Board of Directors
may determine; provided, however, that such transaction shall be
authorized or ratified by the affirmative vote of the holders of at
least a majority of the shares entitled to vote thereon at a
shareholders' meeting duly called for such purpose, or is authorized or
ratified by the written consent of the holders of all of the shares
entitled to vote thereon; and provided, further, that any such
transaction with any substantial shareholder or affiliate of the
corporation shall be authorized or ratified by the affirmative vote of
the holders of at least 51% of the shares entitled to vote thereon at a
shareholders' meeting duly called for that purpose, unless such
transaction is with any subsidiary of the corporation, or is approved
by the affirmative vote of a majority of the continuing disinterested
directors of the corporation, in which case no vote of the shareholders
is necessary.
<PAGE>
d. to merge, consolidate, or exchange all of the issued or
outstanding shares of one or more classes of the corporation upon such
terms and conditions as the Board of Directors may authorize; provide,
however, that such merger, consolidation, or exchange is approved or
ratified by the affirmative vote of the holders of at least a majority
of the shares entitled to vote thereon at a shareholders' meeting duly
called for that purpose, or is authorized or ratified by the written
consent of the holders of all of the shares entitled to vote thereon;
and, provided, further, that any such merger, consolidation, or
exchange with any substantial shareholder or affiliate of the
corporation shall be authorized or ratified by the affirmative vote of
the holders of at least 51% of the shares entitled to vote thereon at a
shareholders' meeting duly called for that purpose, unless such merger,
consolidation, or exchange is with any subsidiary of the corporation or
is approved by the affirmative vote of a majority of the continuing
disinterested directors of the corporation, in which case no vote of
shareholders is necessary.
e. to distribute to the shareholders of the corporation,
without the approval of the shareholders, in partial liquidation, out
of stated capital or capital surplus of the corporation, a portion of
its assets, in cash or in property, so long as the partial liquidation
is in compliance with the Colorado Corporation Code.
f. as used in this Section 5, the following terms shall
have the following meanings:
(i) an "affiliate" shall mean any person
or entity which is an affiliation
within the meaning of Rule 12b-2 of
the General Rules and Regulations
under the Securities Exchange Act of
1934, as amended;
(ii) a "continuing disinterested
director" shall mean: a director who
was elected before the proposed
transaction comes before the Board
for approval within the scope of
subsections (c) and (d) of this
Section 5, and who has no interest
in the proposed transaction except
as it benefits the corporation, in
their judgment.
(iii) a "subsidiary" shall mean any
corporation in which the corporation
owns the majority of each class of
equity security; and
(iv) a "substantial shareholder" shall
mean any person or entity which is
the beneficial owner, within the
meaning of Rule 13d-3 of the General
Rules and Regulations under the
Securities Exchange Act of 1934, as
amended, of 10% or more of the
outstanding capital stock of the
corporation.
g. The Board of Directors shall have the power to approve
acquisitions of assets, business, or corporations by the company in
exchange for stock and debt, so long ass any such proposed transaction
would not result in issuance of more than the equivalent of 51% of the
outstanding stock to any one shareholder.
<PAGE>
ARTICLE X
CONFLICTS OF INTEREST
SECTION 1. RELATED PARTY TRANSACTION. No contract or other transaction of
the corporation with any other person, firm or corporation, or in which this
corporation is interested, shall be affected or invalidated by (a) the fact that
any one or more of the directors or officers of this corporation is interested
in or is a director or officer of such other firm or corporation; or (b) the
fact that any director or officer of this corporation,, individually or jointly
with others, may be party to or may be interested in any such contract or
transaction, so long as the contract or transaction is authorized, approved or
ratified at a meeting of a Board of Directors by sufficient vote thereon by
directors not interested therein, to which such fact of relationship or interest
has been disclosed, or the contract or transaction has been approved or ratified
by vote or written consent of the shareholders entitled to vote, to whom such
fact of relationship or interest has been disclosed, or so long as the contract
or transaction is fair and reasonable to the corporation. Each person who may
become a director or officer of the corporation is hereby relieved from any
liability that might otherwise arise by reason of his contracting with the
corporation for the benefit of himself or any firm or corporation in which he
may be in any way interested.
SECTION 2. CORPORATE OPPORTUNITIES. The officers, directors and other
members of management of this corporation shall be subject to the doctrine of
corporate opportunities only insofar as it applies to business opportunities in
which this corporation has expressed and interest as determined from time to
time by resolution of the Board of Directors. When such areas of interest are
delineated, all such business opportunities within such areas of interest which
come to the attention of the officers, directors and other members of management
of this corporation shall be disclosed promptly to this corporation and made
available to it. The Board of Directors may reject any business opportunity
presented to it, and thereafter any officer, director or other member of
management may avail himself of such opportunity. Until such time as this
corporation, through its Board of Directors, has designated an area of interest,
the officers, directors and other members of management of this corporation
shall be free to engaged in such areas of interest on their own and the
provisions hereof shall not limit the rights of any officer, director or other
member of management of this corporation to continue a business existing prior
to the time that such area of interest is designated by this corporation. This
provision shall not be construed to release any employee of the corporation
(other than officer, directors or member of management) from any duties which
such employee may have to the corporation.
ARTICLE XI
INDEMNIFICATION
SECTION 1. DIRECT ACTIONS. The Corporation shall indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that such person is or was a director,
officer, employee, fiduciary, or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary,
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including Attorney fees), judgements, fines and
amounts paid in settlement, actually and reasonably incurred by such person in
<PAGE>
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The termination of any action, suit or proceeding by judgement,
order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not of itself create a presumption that such person did not
act in good faith and in a manner such person reasonably believed to be in, or
not opposed to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
persons' conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any person
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgement in its favor by reason of the fact that such person is or
was a director, officer, employee, fiduciary, or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee, fiduciary, or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorney fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person believed it to be in, or
not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Corporation, unless,
and only to the extent that, the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnification for such expenses which such court deems
proper.
SECTION 3. EXPENSES. To the extent that a director, officer, employee,
fiduciary, or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article XI, or in defense of any claims, issue or matter therein,
such person shall be indemnified against expenses (including attorney fees)
actually and reasonably incurred by him in connection therewith.
SECTION 4. DETERMINATION. Any indemnification under Sections 1 or 2 of this
Article XI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
officer, director and employee, fiduciary, or agent is proper in the
circumstances, because such person has met the applicable standard of conduct
set forth in Sections 1 or 2 of this Article XI. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum, consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if a
quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the affirmative vote of the holders of a majority of the shares of
stock entitled to vote and represented at a meeting called for such purpose.
SECTION 5. ADVANCE OF EXPENSES. Expenses (including attorney fees) incurred
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized in Section 4 of this Article XI, upon receipt of an
undertaking by or on behalf of the director, officer, employee, fiduciary, or
agent to repay such amount unless it shall be ultimately determined that such
person is entitled to be indemnified by the Corporation as authorized in this
Article XI.
<PAGE>
SECTION 6. INSURANCE. The Board of Directors may exercise the Corporation's
power to purchase and maintain insurance on behalf of any person who is or was a
director, office, employee, fiduciary, or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
fiduciary, or agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power to indemnify
such person against such liability under this Article XI.
SECTION 7. MISCELLANEOUS. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under these Articles of Incorporation, the
By-Laws, agreements, vote of the shareholders of disinterested directors, or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, fiduciary, of agent and
shall insure to the benefit of the heirs and personal representatives of such
person.
ARTICLE XII
ARRANGEMENTS WITH CREDITORS
Whenever a compromise or arrangement is proposed by the Corporation between
it and its creditors or any class of them, and/or between said Corporation and
its shareholders or any class of them, any court of equitable jurisdiction may,
on summary application by the Corporation, or by a majority of its shareholders,
or on the application of any receiver or receivers appointed for the
Corporation, or on the application of trustees in dissolution, order a meeting
of the creditors or class of creditors and/or of the shareholders or class of
shareholders of the Corporation, as the case may be, to be notified in such
manner as the court decides. If a majority in number representing at least
three-fourths in amount of the creditors or class of creditors, and/or the
holders of the majority of the stock or class of stock of the Corporation, as
the case may be, agree to any compromise or arrangement and/or to any
reorganization of the Corporation, as a consequence of such compromise or
arrangement , then said compromise or arrangement and/or said reorganization
shall, if sanctioned by the court to which the application has been made, be
binding upon all the creditors or class of creditors, and/or on all the
shareholders of class of shareholders of the Corporation, as the case may be,
and also on the Corporation.
ARTICLE XIII
SHAREHOLDERS' MEETINGS
Shareholders' meetings may be held at such time and place as may be stated
or fixed in accordance with the By-Laws. At all shareholders' meetings one-third
of all shares entitled to vote shall constitute a quorum.
<PAGE>
ARTICLE XIV
SHAREHOLDER VOTE
Whenever the laws of the State of Colorado require the vote or concurrence
of the holders of two-thirds of the outstanding shares entitled to vote thereon,
with respect to any action to be taken by the shareholders of the Corporation,
such action may be taken by vote or concurrence of the holders of at least a
majority of the shares entitled to vote. These Articles of Incorporation may be
amended by the affirmative vote of the holders of at least a majority of the
shares entitled to vote thereon at a meeting duly called for that purpose, or,
when authorized, when such action is ratified by the written consent of all the
shareholders entitled to vote thereon.
ARTICLE XV
DISSOLUTION
SECTION 1. PROCEDURE. The Corporation shall be dissolved upon the
affirmative vote of the holders of at least a majority of the shares entitled to
vote thereon at a meeting duly called for that purpose, or when authorized or
ratified by the written consent of the holders of all of the shares entitled to
vote thereon.
SECTION 2. REVOCATION. The Corporation shall revoke voluntary dissolution
proceedings upon the affirmative vote of the holders of at least a majority of
the shares entitled to vote at a meeting duly called for that purpose, or when
authorized or ratified by the written consent of the holders of all of the
shares entitled to vote thereon.
ARTICLE XVI
The name and address of the Incorporator of the Corporation is
as follows:
NAME ADDRESS
---- -------
Michael A. Littman 10200 W. 44th Avenue, #400
Wheat Ridge, Colorado 80033
IN WITNESS WHEREOF, the undersigned, has executed said Articles of
Incorporation as of this 24th day of February, 1997.
/s/Michael A. Littman
Incorporator
<PAGE>
STATE OF COLORADO )
) SS.
COUNTY OF JEFFERSON )
Before me, Candi M. Cole, a Notary Public, in and for said County and
State, personally appeared Michael A. Littman and that he signed the foregoing
instrument as his free and voluntary act for the uses and purposes therein set
forth, and that the facts contained therein are true.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 24th
day of February, 1997.
My Commission expires: 2/24/98
/s/Candi M. Cole
Notary Public
10200 W. 44th Ave. #400
Wheat Ridge, CO 80033
EXHIBIT 3.2
BY-LAWS
OF
SUN RIVER MINING, INC.
<PAGE>
BY-LAWS
of
SUN RIVER MINING, INC.
a Colorado Corporation
ARTICLE I
The initial principal office of the Corporation shall be in Wheat Ridge,
Colorado. The Corporation may have offices at such other places within or
without the State of Colorado as the Board of Directors may from time to time
establish.
ARTICLE II
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with corporate action, by any provisions of the statutes of the
Certificate of Incorporation, the meeting and vote of stockholders may be
dispensed with, if all the stockholders who should have been entitled to vote
upon the action if such meeting were held, shall consent in writing to such
corporate action being taken.
ARTICLE III
Board of Directors
Section 1. GENERAL POWERS. The business of the Corporation shall be managed
by the Board of Directors, except as otherwise provided by statute or by the
Certificate of Incorporation.
Section 2. NUMBER AND QUALIFICATIONS. The Board of Directors shall consist
of up to three (3) members. Except as provided in the Certificate of
Incorporation, this number can be increased only by the vote or written consent
of the holders of ninety (90) percent of the stock of the Corporation
outstanding and entitled to vote. The current number of Directors shall be
determined by the Board of Directors at its annual meeting. No Director need be
a stockholder.
Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be elected
annually by the stockholders, and shall hold office until their successors are
respectively elected and qualified.
Election of Directors need not be by ballot.
<PAGE>
Section 4. COMPENSATION. The members of the Board of Directors shall be
paid a fee of $10.00 for attendance at all annual, regular, special and
adjourned meetings of the Board. No such fee shall be paid any director if
absent. Any director of the Corporation may also serve the Corporation in any
other capacity, and receive compensation therefor in any form. Members of
special or standing committees may be allowed like compensation for attending
committee meetings.
Section 5. REMOVAL AND RESIGNATIONS. The stockholders may, at any meeting
called for the purpose, by vote of two-thirds of the capital stock issued and
outstanding, remove any directors from office, with or without cause; provided
however, that no director shall be removed in case the vote of a sufficient
number of shares are cast against his removal, which if cumulatively voted at
any election of directors would be sufficient to elect him, if cumulative voting
is allowed by the Articles of Incorporation.
The stockholders may, at any meeting, by vote of a majority of such stock
represented at such meeting accept the resignation of any director.
Section 6. VACANCIES. Any vacancy occurring in the office of director may
be filled by a majority of the directors then in office, though less than a
quorum, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and qualified, unless
sooner displaced.
When one or more directors resign from the Board, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have powers to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations become effective.
ARTICLE IV
Meetings of Board of Directors
Section 1. REGULAR MEETINGS. A regular meeting of the Board of Directors
may be held without call or formal notice immediately after and at the same
place as the annual meeting of the stockholders or any special meeting of the
stockholders at such places within or without the State of Colorado and at such
times as the Board may by vote from time to time determine.
Section 2. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any place whether within or without the State of Colorado at any time
when called by the President, Treasurer, Secretary or two or more directors.
Notice of the time and place thereof shall be given to each director at least
three (3) days before the meeting if by mail or at least twenty-four hours if in
person or by telephone or telegraph. A waiver of such notice in writing, signed
by the person or persons entitled to said notice, either before or after the
time stated therein, shall be deemed equivalent to such notice. Notice of any
adjourned meeting of the Board of Directors need not be given.
Section 3. QUORUM. The presence, at any meeting, of one-third of the total
number of directors, but in no case less than two (2) directors, shall be
necessary and sufficient to constitute a quorum for the transaction of business
except as otherwise required by statute or by the Certificate of Incorporation,
the act of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a quorum,
a majority of the directors present at the time and place of any meeting may
adjourn such meeting from time to time until a quorum be present.
<PAGE>
Section 4. a. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise
restricted by the Certificate of Incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting, if prior to such action a written consent
thereto is signed by all members of the Board or committee, and such written
consent is filed within the minutes of the Corporation.
b. The Board of Directors may hold regular or special meetings by telephone
conference call, provided that any resolutions adopted shall be recorded in
writing within 3 days of such telephone conference, and written ratification of
such resolutions by the directors shall be provided within 10 days thereafter.
ARTICLE V
Committees of Board of Directors
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, each committee to consist of two or
more of the directors of the Corporation, which, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors.
The committees of the Board of Directors shall keep regular minutes of
their proceedings and report the same to the Board of Directors when required.
ARTICLE VI
Officers
Section 1. NUMBER. The Corporation shall have a President, one or more Vice
Presidents, a Secretary and a Treasurer, and such other officers, agents and
factors as may be deemed necessary. One person may hold any two offices except
the offices of President and Vice President and the offices of President and
Secretary.
Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. The officers
specifically designated in Section 1 of this Article VI shall be chosen annually
by the Board of Directors and shall hold office until their successors are
chosen and qualified. No officer need be a director.
<PAGE>
Section 3. SUBORDINATE OFFICERS. The Board of Directors from time to time
may appoint other officers and agents, including one or more Assistant
Secretaries and one or more Assistant Treasurers, each of whom shall hold office
for such period, have such authority and perform such duties as are provided in
these By-Laws or as the Board of Directors from time to time may determine. The
Board of Directors may delegate to any office the power to appoint any such
subordinate officers, agents and factors and to prescribe their respective
authorities and duties.
Section 4. REMOVALS AND RESIGNATIONS. The Board of Directors may at any
meeting called for the purpose, by vote of a majority of their entire number,
remove from office any officer or agent of the Corporation, or any member of any
committee appointed by the Board of Directors.
The Board of Directors may at any meeting, by vote of a majority of the
directors present at such meeting, accept the resignation of any officer of the
Corporation.
Section 5. VACANCIES. Any vacancy occurring in the office of President,
Vice President, Secretary, Treasurer or any other office by death, resignation,
removal or otherwise shall be filled for the expired portion of the term in the
manner prescribed by these By-Laws for the regular election or appointment to
such office.
Section 6. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business, affairs and property of the Corporation, and control over its
officers, agents and employees. The President shall preside at all meetings of
the stockholders and of the Board of Directors at which he is present. The
President shall do and perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 7. THE VICE PRESIDENT. At the request of the President or in the
event of his absence or disability, the Vice President, or in case there shall
be more than one Vice President, the Vice President designated by the President,
or in the absence of such designation, the Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when so
acting, shall have all the powers of, and be subject to all the restrictions
upon, the President. Any Vice President shall perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors, or the President.
Section 8. THE SECRETARY. The Secretary shall:
a. Record all the proceedings of the meetings of the Corporation and
directors in a book to be kept for that purpose;
b. Have charge of the stock ledger (which may, however, be kept by any
transfer agent or agents of the Corporation under the direction of the
Secretary), an original or duplicate of which shall be kept at the principal
office or place of business of the Corporation in the State of Colorado;
c. Prepare and make, at least ten (10) days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order;
d. See that all notices are duly given in accordance with the provisions of
these By-Laws or as required by statute;
<PAGE>
e. Be custodian of the records of the Corporation and the Board of
Directors, and of the seal of the Corporation, and see that the seal is affixed
to all stock certificates prior to their issuance and to all documents, the
execution of which on behalf of the Corporation under its seal have been duly
authorized;
f. See that all books, reports, statements, certificates and the other
documents and records required by law to be kept or filed are properly kept or
filed; and
g. In general, perform all duties and have all powers incident to the
office of Secretary and perform such other duties and have such powers as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors or the President.
Section 9. THE TREASURER. The Treasurer shall:
a. Have supervision over the funds, securities, receipts, and disbursements
of the Corporation;
b. Cause all monies and other valuable effects of the Corporation to be
deposited in its name and to its credit, in such depositories as shall be
selected by the Board of Directors or pursuant to authority conferred by the
Board of Directors.
c. Cause the funds of the Corporation to be disbursed by checks or drafts
upon the authorized depositories of the Corporation, when such disbursements
shall have been duly authorized;
d. Cause to be taken and preserved proper vouchers for all monies
disbursed;
e. Cause to be kept at the principal office of the Corporation correct
books of account of all its business and transactions;
f. Render to the President or the Board of Directors, whenever requested,
an account of the financial condition of the Corporation and of his transactions
as Treasurer;
g. Be empowered to require from the officers or agents of the Corporation
reports or statements giving such information as he may desire with respect to
any and all financial transactions of the Corporation; and
h. In general, perform all duties and have all powers incident to the
office of Treasurer and perform such other duties and have such power as from
time to time may be assigned to him by these By-Laws or by the Board of
Directors or President.
Section 10. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretaries and Assistant Treasurers shall have such duties as from time to time
may be assigned to them by the Board of Directors or the President.
Section 11. SALARIES. The salaries of the officers of the Corporation shall
be fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person the power to fix the salaries or other
compensation of any officers or agents appointed in accordance with the
provisions of Section 3 of this Article VI. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
Section 12. SURETY BOND. The Board of Directors may secure the fidelity of
any or all of the officers of the Corporation by bond or otherwise.
<PAGE>
ARTICLE VII
Execution of Instruments
Section 1. EXECUTION OF INSTRUMENTS GENERALLY. All documents or writings of
any nature shall be signed, executed, verified, acknowledged and delivered by
such officer or officers or such agent of the Corporation and in such manner as
the Board of Directors from time to time may determine.
Section 2. CHECKS, DRAFTS, ETC. All notes, drafts, acceptances, checks,
endorsements, and all evidence of indebtedness of the corporation whatsoever,
shall be signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time may
determine. Endorsements for deposit to the credit of the Corporation in any of
its duly authorized depositories shall be made in such manner as the Board of
Directors from time to time may determine.
Section 3. PROXIES. Proxies to vote with respect to shares of stock of
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by the
President or Vice President and the Secretary or Assistant Secretary of the
Corporation or by any other person or persons duly authorized by the Board of
Directors.
ARTICLE VIII
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed in the name of the Corporation
by the Chairman or Vice President of the Board of Directors, the President or a
Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation; provided, however, that where such certificate
is signed by a transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and a registrar, the signature of any
such Chairman of the Board of Directors, President, Vice President, Treasurer,
Assistant Treasurer, Secretary, or Assistant Secretary may be facsimile. In case
any officer or officers who shall have signed, or whole facsimile signature or
signatures shall have been used thereon, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates, or
whose facsimile signature or signatures shall have been used thereon, had not
ceased to be such officer or officers of the Corporation, and any such delivery
shall be regarded as an adoption by the Corporation of such certificate or
certificates.
Certificates of stock shall be in such form as shall, in conformity to law,
be prescribed from time to time by the Board of Directors.
Section 2. TRANSFER OF STOCK. Shares of stock of the Corporation shall only
be transferred on the books of the Corporation by the holder of record thereof
or by his attorney duly authorized in writing, upon surrender to the Corporation
of the certificates for such shares endorsed by the appropriate person or
persons, with such evidence of the authenticity of such endorsement, transfer,
authorization and other matters as the Corporation may reasonably require, and
accompanied by all necessary stock transfer tax stamps. In that event, it shall
be the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction on its books.
<PAGE>
Section 3. RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior
to the surrender to the Corporation of the certificates for shares of stock with
a request to record the transfer of such shares, the Corporation may treat the
registered owner as the person entitled to receive dividends, to vote, to
receive notifications, and otherwise to exercise all the rights and powers of an
owner.
Section 4. CLOSING STOCK TRANSFER BOOK. The Board of Directors may close
the Stock Transfer Book of the Corporation for a period not exceeding fifty (50)
days preceding the date of any meeting of the stockholders or the date for
payment of any dividend or the date for the allotment of rights or the date when
any change or conversion or exchange of capital stock shall go into effect or
for a period of not exceeding (50) days in connection with obtaining the consent
of stockholders for any purpose. However, in lieu of closing the Stock Transfer
Book, the Board of Directors may fix in advance a date, not exceeding fifty (50)
days preceding the date of any meeting of stockholders or the date for the
payment of any dividend or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall go into effect,
or a date in connection with obtaining such consent, as a record date for the
determination of the stockholders entitled to notice of, and to vote at, any
such meeting and any adjournment thereof, or entitled to receive payment of any
such dividend, or to any such allotment of rights or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders, and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
Section 5. LOST, DESTROYED AND STOLEN CERTIFICATES. Where the owner of a
Certificate for shares claims that such certificate has been lost, destroyed or
wrongfully taken, the Corporation shall issue a new certificate in place of the
original certificate if the owner (a) so requests before the Corporation has
notice that the shares have been acquired by a bona fide purchaser; (b) files
with the Corporation a sufficient indemnity bond; and (c) satisfies such other
reasonable requirements, including evidence of such loss, destruction, or
wrongful taking, as may be imposed by the Corporation.
ARTICLE IX
Dividends
Section 1. SOURCES OF DIVIDENDS. The directors of the Corporation, subject
to any restrictions contained in the statutes and Certificate of Incorporation,
may declare and pay dividends upon the shares of the capital stock of the
Corporation either (a) out of its new assets in excess of its capital, or (b) in
case there shall be no such excess, out of its net profits for the fiscal year
then current or the current and preceding fiscal year.
Section 2. RESERVES. Before the payment of any dividend, the directors of
the Corporation may set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose, and the
directors may abolish any such reserve in the manner in which it was created.
Section 3. RELIANCE ON CORPORATE RECORDS. A director shall be fully
protected in relying in good faith upon the books of account of the Corporation
or statements prepared by any of its officials as to the value and amount of the
assets, liabilities and net profits of the Corporation, or any other facts
pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid.
<PAGE>
Section 4. MANNER OF PAYMENT. Dividends may be paid in cash, in property,
or in shares of the capital stock of the Corporation at par.
ARTICLE X
Seal
The Corporate seal, subject to alteration by the Board of Directors, shall
be in the form of a circle and shall bear the name of the Corporation and shall
indicate its formation under the laws of the State of Colorado. Such seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE XI
Fiscal Year
Except as from time to time otherwise provided by the Board of Directors,
the fiscal year of the Corporation shall be the calendar year.
<PAGE>
ARTICLE XII
Amendments
Section 1. BY THE STOCKHOLDERS. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, these By-Laws may be amended
or repealed, or new By-Laws may be made and adopted by a majority vote of all
the stock of the Corporation issued and outstanding and entitled to vote at any
annual or special meeting of the stockholders, provided that notice of intention
to amend shall have been contained in the notice of meeting.
Section 2. BY THE DIRECTORS. Except as otherwise provided in the
Certificate of Incorporation or in these By-Laws, these By-Laws, including
amendments adopted by the stockholders, may be amended or repealed by a majority
vote of the whole Board of Directors at any regular or special meeting of the
Board, provided that the stockholders may from time to time specify particular
provisions of the By-Laws which shall not be amended by the Board of Directors.
ARTICLE XIII
Indemnification
The Board of Directors hereby adopt the provision of C.R.S. 7-3-101 S (as
it may be amended from time to time) relating to Indemnification and in
corporate such provisions by this reference as fully as if set forth herein.
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