U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
HADRO RESOURCES, INC.
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(Name of Small Business Issuer in its Charter)
Nevada 87-0571853
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
145 Tyee Road #1526
Point Roberts, Washington 98281
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(Address of Principal Executive Offices) (Zip Code)
(604) 943-7515
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(Issuer's Telephone Number)
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
----------------------- --------------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
------------------------------
(Title of Class)
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TABLE OF CONTENTS
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PART I Page
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Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis 7
Item 3. Description of Property 10
Item 4. Security Ownership of Certain Beneficial 11
Owners and Management
Item 5. Directors, Executive Officers, Promoters 12
and Control Persons
Item 6. Executive Compensation 13
Item 7. Certain Relationships and Related Transactions 13
Item 8. Description of Securities 14
PART II
Item 1. Market Price of and Dividends on the Company's 14
Common Equity and Other Shareholder Matters
Item 2. Legal Proceedings 15
Item 3. Changes in and Disagreements with Accountants 15
Item 4. Recent Sales of Unregistered Securities 15
Item 5. Indemnification of Officers and Directors 16
Part F/S - FINANCIAL STATEMENTS AND EXHIBITS 18
PART III
Item 1. Index to Exhibits 26
SIGNATURES 26
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PART I
The Company is filing this Form 10-SB on a voluntary basis to provide
current public information to the investment community with a view
toward a future listing of its securities on the Over-The-Counter Bulletin
Board. .
ITEM 1. DESCRIPTION OF BUSINESS
General
Hadro Resources, Inc. (the "Company") was incorporated in the State of
Nevada on December 3, 1997 under the name Hadrosaurus Resources, Inc. On
January 20, 1998, the Company filed an Amendment to its Articles of
incorporation changing the name of the Company to Hadro Resources, Inc. The
Company is engaged in the acquisition of oil and gas leases for future
exploration purposes. The Company intends to enter into joint venture agreements
with established and experienced oil and gas companies to explore and, if
warranted, develop its properties. The distribution of the oil and gas would be
handled by the joint venture oil and gas company.
The Company expects to generate revenues from operations and obtain
additional working capital through future sales of equity and/or
financings.
The Company maintains principal business offices at (1) 145 Tyee Road
#1526, Point Roberts, Washington 98281 and (2) 5405 12th Avenue, Suite 204,
Delta, B.C., Canada V4M 2B2. Its statutory office is located at 3230 East
Flamingo Road, Suite 156, Las Vegas, Nevada 89121. The Company's fiscal year end
is December 31.
BUSINESS OF THE COMPANY
The Company is a natural resource exploration company engaged in the
acquisition of oil and natural gas properties for exploration.
On August 1, 1998, the Company entered into an Option to Purchase Agreement
to acquire an interest in an oil and gas property in Alberta, Canada from
Donn Capital Corp., a privately-held company wholly owned by Frank W. Donis,
President of the Company. On June 15, 1999, the Company terminated the
Option Agreement.
On November 1, 1998, the Company entered into an Agreement and Declaration of
Trust with W.G. Van Bebber, an unrelated third party, whereby Mr.Van Bebber
will research and acquire available oil and gas leases on behalf of the Company.
Pursuant to the terms of the Agreement, leases will be taken in the name of W.G.
Van Bebber, or his designee as Trustee for the exclusive use and benefit of the
Company and all approved costs and expenses incurred in such leasing and
acquisition will be paid by the Company.
On June 14, 1999, Mr. Van Bebber, on behalf of the Company, entered into an
Assignment Agreement with Ibis Petroleum, Inc.("Ibis"), whereby Ibis sold,
assigned, transferred and conveyed all of its right, title and interest in and
to certain State of New Mexico Oil and Gas Leaseholds located in the
Hadrosaurus Area of Union County, New Mexico to Mr. Van Bebber, as Trustee for
the Company. Pursuant to the terms of the Assignment, Ibis and certain other
individuals will retain a total of 3% gross overriding royalty interests in and
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to the Leases. To date, the Company has reimbursed Mr. Van Bebber a total
$32,732.22 in lease payments and $3,344.27 in expenses. In addition, the
Company agrees to pay all future lease payments, charges, costs, fees and other
expenses necessary to the continuation of the Leases on a timely basis and for
the acquisition or any additional leases. The properties subject of the Leases
are exploratory properties only and none has been developed to date.
Location and Background of Area
The Hadrosaurus Area is located along the New Mexico-Colorado state
line in the extreme northeastern corner of Union County, north of the town of
Clayton, which is situated near the northwestern corner of the Texas panhandle.
The properties subject of the Company's current oil and gas leases encompasses
two parallel, northwest-southwest trending structural highs identified mainly
on the basis of outcrop data and photogeologic interpretations. Commercial
production of hydrocarbons has not yet been realized in northeastern New Mexico
even though potential source beds have been identified in the region. However,
lack of hydrocarbon production has not deterred exploratory activity in the
area. Part of this activity is attributable to the commercial development of
inert gas (CO2)production from a nearby field in northeastern Harding County.
While careful review of the available geological and other data indicates the
presence of hydrocarbons in the region, any consideration of the economic value
of the prospects will be examined with a clear understanding of the high
exploratory risks involved. The Company believes there are potentially viable
prospects for inert gas production which warrant exploration of the properties
subject of its oil and gas leases, provided the market for inert gas resources
continues to be commercially viable.
Proposed Exploration Program
The Company intends to seek a joint venture partner who is an experienced oil
and gas property operator to perform all exploration and, if warranted,
development of its properties. The Company projects the minimum exploratory
effort will require the drilling of one test well on top of each structural
anomaly located, plus two additional flank wells. The latter will be intended
to augment the exploratory effort by testing the stratigraphic relationships and
hydrocarbon potential within a thicker and more fully developed off-structure
sedimentary section. This consideration becomes particularly important where
pinchouts or erosional processes have reduced the stratigraphic section along
the structural highs. A seismic survey will be completed to confirm the
structural interpretation and optimize the location of any intended test wells.
Oil and Gas Exploration Risks
Oil and gas exploration involves a high degree of risk and there is no
assurance that expenditures to be made by the Company on prospective oil and gas
properties will result in any discoveries of any natural resource in any
commercial quantities. The Company intends to enter into a joint venture
agreement with an experienced oil and gas operator to explore and, if warranted,
drill exploratory wells on its properties . Exploratory wells have a much
greater dry hole risk than do wells which are drilled offsetting established
production. The marketability of any oil and gas which may be acquired or
discovered will be affected by numerous factors beyond the control of the
Company. These factors include market fluctuations, the proximity and capacity
of oil and gas pipelines and processing equipment, supply and demand for
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petroleum and petroleum products, rig availability and government
regulation, including regulations relating to prices, taxes, royalties, land
tenure, allowable production and environmental protection. The extent of these
factors cannot be accurately predicted, but the combination of these factors
may result in the Company not receiving an adequate return on invested
capital.
Competition
The oil and gas exploration and production industry is highly
competitive. The Company expects to encounter competition from other oil and
gas companies in all areas of its operations, including the acquisition of
leases and properties.
Competitors include major integrated oil and natural gas companies, natural gas
pipeline companies, numerous independent oil and natural gas companies,
individuals and drilling and income programs. Many of the Company's competitors
are large, well-established companies with substantially larger operating staffs
and greater capital resources than the Company has and which, in many instances,
have been engaged in the energy and/or natural resource production and develop-
ment business for a much longer time than the Company. These companies may be
able to offer more attractive rates for natural gas gathering commitments and to
pay more for productive oil and natural gas properties and exploratory prospects
than the Company's financial or human resources would permit. The Company's
ability to acquire additional properties, discover reserves and attract
experienced joint venture partners in the future will be dependent on its
ability to evaluate and select suitable properties and to consummate
transactions in this highly competitive environment. In addition, joint venture
partners may not be available to the Company on terms or at prices which the
Company can afford.[/R]
Laws and Regulations.
The Company's proposed business operations will be affected by extensive
regulation by various federal, state and local laws and regulations relating to
the exploration and possible development, production, gathering and marketing of
oil and gas. Matters subject to regulation include discharge permits for
drilling operations, drilling and abandonment bonds or other financial
responsibility requirements, reports concerning operations, wells, unitization
and pooling of properties, and taxation. From time to time, regulatory
agencies have imposed price controls and limitations on production by
restricting the rate of flow of oil and gas wells below actual production
capacity in order to conserve supplies of oil and gas. However, at this time,
the Company is only acquiring oil and gas leases for exploration and
development, if warranted, by a yet-to-be engaged joint venture partner.
Compliance with Environmental Regulations
Operations of the Company are also subject to numerous environmental laws,
Including, but not limited to, those governing management of waste, protection
Of water, air quality, the discharge of materials into the environment, and
preservation of natural resources. Non-compliance with environmental laws and
the discharge of oil, gas, or other materials into the air, soil or water may
give rise to liabilities to the government and third parties, including civil
and criminal penalties, and may require the Company to incur costs to remedy
the discharge. Laws and regulations protecting the environment have become
more stringent in recent years, and may in certain circumstances impose
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retroactive, strict, and joint and several liability rendering entities liable
for environmental damage without regard to negligence or fault. From time-to-
time the Company may have to agree to indemnify sellers of producing properties
from whom the Company has acquired reserves against certain liabilities for
environmental claims associated with such properties. There can be no assurance
that new laws or regulations, or modifications of or new interpretations of
existing laws and regulations, will not increase substantially the cost of
compliance or otherwise adversely affect the Company's operations and financial
condition or that material indemnity claims will not arise against the Company
with respect to properties acquired by or from the Company. While the Company
does not anticipate incurring material costs in connection with environmental
compliance and remediation, it cannot guarantee that material costs will not be
incurred.
Conflicts of Interests
Certain officers, directors and related parties have engaged in business
transactions with the Company which were not the result of arms'-length
negotiations between independent parties. Management believes that the terms
of these transaction were as favorable to the Company as those that could have
been obtained from unaffiliated parties under similar circumstances. All
future transactions between the Company and its affiliates will be on terms no
less favorable than could be obtained from unaffiliated third parties and will
be approved by a majority of the disinterested members of the Board of
Directors of the Company. See "Certain Relationships and Related
Transactions."
Title Risks
In the oil and gas industry, it is common practice for operators to refrain
from obtaining title opinions to oil and gas properties until commencement of
drilling and, accordingly, ownership of the Company's oil and gas properties
is subject to doubt until the title is confirmed. The Company intends to
follow usual industry practice in obtaining a satisfactory title
opinion prior to drilling a property.
Financing Risks
The Company has limited financial resources and there can be no assurance
that additional funding will be available for exploration and development of
its projects or to fulfill its obligations under any agreements, as and
when required. Although the Company has been successful in the past in
obtaining financing through the sale of equity securities, there can be no
assurance the Company will be able to obtain adequate financing in the
future, as and when needed, or that the terms of such financing, if any, will
be favorable. Failure to obtain such additional financing could result in delay
Or indefinite postponement of the exploration and development of prospective
properties, resulting in a possible loss of such properties. Such failure to
obtain financing could also materially affect the Company's ability to
continue as a going concern.
No Assurance of a Public Market for the Company's Common Stock
There is currently no trading market in the Company's Common Stock. Upon
completion of this registration, the Company intends to apply for listing and
trading of its securities on the NASD over-the-counter Bulletin Board; however,
there is no assurance that an active trading market will ever develop in the
Company's securities. Accordingly, there is a very high risk that purchasers of
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Common Stock of the Company may be unable to sell any shares they may own.
Year 2000 Computer Problems
Like other companies, Registrant could be adversely affected if the
computer systems it and/or its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" issue. Additionally, this issue could also impact non-
accounting systems.
Registrant has implemented a plan to modify its business operations
to be compliant for the Year 2000 and is in the process of converting critical
data processing systems and process control systems associated with its
accounting and office equipment. These projects are expected to be
substantially complete before the end of 1999 and the cost is estimated to be
minimal. Registrant does not expect this effort to have a significant effect
on its operations.
The failure to correct a material Year 2000 problem could result
in an interruption in normal business activity. Registrant's plan is
expected to significantly reduce the risk associated with this issue. However,
due to the inherent uncertainty of this issue and dependence on third-party
compliance, no assurance can be given that potential failures will not
adversely affect Registrant's operations, liquidity and financial position.
Employees
At present, the Company has no employees, other than its officers and
directors.
Legal Proceedings
There are no material legal proceedings to which the Company is a party or
to which its property is subject, nor, to the best of the knowledge of
management, are any material legal proceedings contemplated.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
This Registration Statement contains forward-looking statements that
involve risks and uncertainties, including, without limitation, statements
regarding the Company's expectations, beliefs, intentions or strategies
regarding future business operations, which are based on information available
to the Company on the date hereof. The Company assumes no obligation to
update any such forward-looking statements. The Company's actual results
may differ materially as a result of certain factors, including those
set forth hereafter and elsewhere in this Registration Statement.
Overview
Since its formation in December, 1997, the Company has been engaged
only in research activities relating to the acquisition of possible
oil and gas properties. Currently, it has two Offers to Lease and Oil and
Gas Lease Agreements acquired and held in the name of its agent, W.G.
Van Bebber. The properties subject of the Leases are located in Union County,
New Mexico.
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For a complete understanding of these activities, this Management's
Discussion and Analysis should be read in conjunction with Part I. Item 1.
Description of Business and Part F/S-Financial Statements to this Form 10-SB.
Results of Operations
Period Ended May 31, 1999 and for the year ended December 31, 1998:
As of the date of this filing, the Company has yet to generate any revenues
from business operations due to the preliminary nature of such operations and
substantial expenditure in ongoing research efforts relating to the
acquisition of properties. Consequently, the Company has been
substantially dependent on sales of its equity securities to fund its cash
requirements.
The Company's net loss for the period ended May 31, 1999 of $52,603, or
$.004 per share, based on 13,054,200 weighted average shares outstanding, and
$31,038, or $.003 per share, based on 12,300,000 weighted average shares
outstanding for the year ended December 31, 1998 and reflects the costs
expended for research activities relating to property acquisitions and costs
associated with the sale of equity securities to raise the capital required to
support the Company's operations until sufficient revenues are achieved.
Since inception, the Company has sold a total of 13,054,200 shares of
Its Common Stock in private placement transactions to unrelated third
parties, raising a total of $90,048. All stock sales were made offshore
to non-U.S. persons. The Company sold such securities in reliance upon
exemptions from registration provided by Section 4(2) and/or 3(b) of the
Securities Act of 1933, as amended, and/or Regulation D, Rule 504.
Liquidity and Capital Resources
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As of the date of this registration statement, the Company has yet to
generate any revenues from its operations due to the preliminary
nature of such operations, substantial ongoing research relating to possible
property acquisition targets and expenditures to build the appropriate
infrastructure to support expected future growth. Consequently, the Company
has been substantially dependent on sales of its equity securities to fund
its cash requirements.
Expenses for the period ended May 31, 1999 were $52,603 and for the year
ended December 31, 1998 were $31,038. Expenditures increased due to increased
research activities relating to the acquisition of potential properties and
expenses related to financing activities .
The Company issued 12,350,000 shares of its Common Stock for cash at
$.001 per share from February through July, 1998, 7,750,000 of which are held
by officers and directors of the Company. The total proceeds were $12,350.
In July 1998, the Company sold 560,000 shares of its Common Stock to
unrelated third parties at a price of $.01 per share, or a total of $5,600.
In July and August 1998, the Company sold a total of 144,200 shares of
its Common Stock to unrelated third parties for $.50 per share, or a total of
$57,000.
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As of May 31, 1999, the Company's total assets consisted of cash in the
bank in the amount of $23,416.
The Company's total liabilities as of May 31, 1998 were $8,259,
Consisting of accounts payable consistent with normal office operations.
The Company has cancelled the option agreement entered into on August 1,
1998 with Donn Capital Corp. and has entered into two Oil and Gas Leases with
W.G. Van Bebber, an unrelated third party and agent for the Company.[/R]
The Company's auditors, Andersen, Andersen & Strong, L.C., have
deemed that continuation of the Company as a "going concern", as defined by
U.S. generally accepted accounting principles, is dependent upon the Company
obtaining additional working capital. The Company is taking steps to raise
additional capital, as its current cash reserves are only expected to last
for approximately three (3) months. The Company intends to conduct private
placement sales of its equity securities if and when its cash reserves are
depleted. There can be no assurance that any shares of Common Stock of the
Company can or will be sold or that other sources of loans Or funds will be
available to the Company if and when needed. The failure of the Company
to obtain adequate additional capital may require the Company to delay
or cut back some or all of its proposed business operations and, potentially,
to cease its operations. Any additional equity financings may involve
substantial dilution to the Company's then-existing shareholders.
Selected Financial Data
The following historical financial data for the period from inception to
the year ended December 31, 1998 and at May 31, 1999 was derived from the
historical financial statements of the Company that have been prepared by
Andersen Andersen & Strong, L.C., independent Certified Public Accountants (the
Financial Statements").
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Balance Sheet Data:
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5/31/99 12/31/98
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Cash and cash equivalents . . . . . $ 23,416 $ 59,139
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Total assets. . . . . . . . . . . . $ 23,416 $ 59,139
Total Liabilities . . . . . . . . . . $ 8,259 $ 129
Shareholders' Equity. . . . . . . . . $ 15,157 $ 57,010
Statements of Operations Data:
- ------------------------------
Sales . . . . . . . . . . . . . . . . $ 0 $ 0
Expenses. . . . . . . . . . . . . . $ 52,603 $ 31,038
Net Loss from operations. . . . . . $ (52,603) $ (31,038)
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Net loss per common share . . . . . . $ (.0004) $ (.003)
Weighted average common shares
outstanding . . . . . . . . . . . . . 13,054,200 12,300,000
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Limited Operating History; Accumulated Deficit; Need for Additional Capital
There is limited historical financial information about the Company upon
which to base an evaluation of the Company's performance or to make a decision
regarding any investment in shares of the Company's Common Stock. The Company
has an accumulated deficit of ($52,603) through May 31, 1999 and the
Company's cash and equivalents balance at May 31, 1999 was only $23,416 .The
Company has not yet realized any revenues from business operations and has
engaged in no active business operations. There can be no assurance the
Company will be successful in its business operations or will achieve any
significant revenues from its proposed operations. The Company's business
could be subject to any or all of the problems, expenses, delays and risks
inherent in the establishment of a new business enterprise, including limited
capital resources, possible delays in the exploration and/or development of
properties, possible cost overruns due to price and cost increases in raw
products and exploration and/or development processes, uncertain marketability
of any oil and gas recovered on its properties and the absence of an
operating history. Therefore, there can be no assurance the Company's business
or proposed ventures will be successful or that the Company will be able to
achieve or maintain profitable operations. Further, there can be no
assurance that the Company will not encounter unforeseen difficulties that
may deplete its capital resources more rapidly than
anticipated.
To become and remain profitable and competitive, the Company will likely be
required to make significant investments in the exploration and development of
its properties. The Company is seeking additional equity financing to
provide for the capital required to commence and develop its proposed
business operations.
The timing and total amount of capital requirements cannot be predicted at
this time as the Company has just recently acquired an interest in two (2)
Oil and Gas Leases and has not yet commenced operations. The Company is
Currently seeking a joint venture partner to perform exploration activities on
the properties and, if warranted, further development. At that time, the
Company will be required to contribute its proportionate share of capital to
the joint venture for exploration costs. There can be no assurance that
any financing will be available on acceptable terms, if at all, as and
when the Company requires cash for its proportionate share of proposed
exploration activities . If such financing is not available on satisfactory
terms, the Company may be unable to continue, explore, develop or expand its
business or develop new properties at the rate desired and its operating
results may be adversely affected. Any equity financing could result in
substantial additional dilution to existing shareholders.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company currently utilizes the offices of its President, Frank W.
Donis, at 145 Tyee Road, Point Roberts, Washington, on a rent-free basis
On August 1, 1998, the Company entered into an Option Agreement to acquire
an interest in an oil and gas property in Alberta, Canada from Donn Capital
Corp., a privately-held company wholly owned by Frank W. Donis, President of
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the Company. On June 15, 1999, the Company terminated the Agreement and has
no further right, title and/or interest in or to the property subject of the
Agreement and has no further obligation to Donn Capital regarding the property.
On November 1, 1998, the Company entered into an Agreement and Declaration
of Trust with W.G.Van Bebber, an unrelated third party, whereby Mr. Van Bebber
will Research and acquire available oil and gas leases on behalf of the
Company. Pursuant to the terms of the Agreement, leases will be taken in the
name of W.G Van Bebber, as Trustee for the exclusive use and benefit of the
Company and all approved costs and expenses incurred in such leasing and
acquisition will be paid by the Company.
On June 14, 1999, Mr. Van Bebber, on behalf of the Company, entered into an
Assignment Agreement with Ibis Petroleum, Inc.("Ibis"), whereby Ibis sold,
assigned, transferred and conveyed all of its right, title and interest in and
to certain State of New Mexico Oil and Gas Leaseholds located in the
Hadrosaurus Area of Union County, New Mexico to Mr. Van Bebber, as Trustee for
the Company. Pursuant to the terms of the Assignment, Ibis and certain other
individuals will retain a 3% gross overriding royalty interest in and to the
Leases. The Company agrees to pay all future lease payments, charges, costs,
fees and other expenses necessary to the continuation of the Leases on a timely
basis. The properties subject of the Leases are exploratory properties and
none has been developed to date.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table sets forth certain information regarding the Company's
Common Stock, par value $.001 ("Common Stock") beneficially owned as of May 31,
1999 for (i) each stockholder known by the Company to be the beneficial
owner of five (5%) percent or more of the Company's outstanding Common Stock;
(ii) each of the Company's directors; (iii) each named executive officer (as
defined in Item 402(a)(2) of Regulation S-B); and (iv) all executive officers
and directors as a group. At January 31, 1999, there were 13,054,200 shares of
Common Stock outstanding.
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Amount and
Nature of
Title of Name of Beneficial Percent of
Class Beneficial Ownership(2) Ownership (2)
Owner(1) - -
- --------------------------------------------------------------------------------
Common Stock. . Frank W. Donis 7,005,000 (i) (ii) 53.7 %
413 Tsawwassen
Beach Road
Delta, B.C.,
Canada, V4M 2J2
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Common Stock. . Marilyn J. Rafter 255,000 (i)(ii) 2%
5268 IA Avenue
Delta, B.C.,
Canada, V4M 1 C 1
Common Stock. . Gene Wilson 500,000 (i) 3.%%
811 Four Hills Rd. S.E.
Albuquerque, N.M. 87123
- --------------------------------------------------------------------------------
All Officers and
Directors as a Group - 7,750,000 59.5%
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(i) Each person named above may be deemed to be a "parent" and "promoter" of
the Company, within the meaning of such terms under the Securities Act of 1933,
as amended, by virtue of his/her direct and indirect holdings in the Company.
These persons are the only "promoters" of the Company.
(ii) Frank Donis and Marilyn Rafter's spouses each own 5,000 shares of the
Company's Common Stock included in these shares.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Each director of the Company is elected by the stockholders to a term of
one (1) year and serves until his or her successor is elected and qualified.
Each officer of the Company is elected by the Board of Directors to a term of
one (1) year and serves until his or her successor is duly elected and
qualified, or until he or she is removed from office. The Board of Directors
has no nominating, auditing or compensation committees.
The names, addresses, ages and positions of the present officers and
directors of the Company are set forth below:
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Name and Address. . . . . Age Position(s)
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Frank W. Donis. . . . . . 55 President and Director
413 Tsawwassen Beach Road
Delta, British Columbia
Canada, V4M 2J2
Marilyn Rafter. . . . . . 47 Secretary, Treasurer
5268 IA Avenue. . . . . . and Director
Delta, British Columbia
Canada, V4M ICI
Gene D. Wilson. . . . . . 70 Director
8 10 Four Hills Road
Albuquerque, NW
USA, 8712-3
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Background Information
Frank W. Donis has been the President and a Director of the Company since
inception. Since September 1980, he has also been the President of Epic Oil and
Gas Ltd., a publicly-traded Canadian corporation engaged in oil and gas
exploration. Since June 1968, he has also been a self-employed Dentist. He
graduated from the University of Alberta in 1968 with a Degree in Dentistry.
Mr. Donis currently devotes approximately 5 hours per week to the
business of the Company.
Marilyn Rafter has been the Secretary, Treasurer and a Director of the
Company since inception. Since April 1995, she has also been the Manager of
A.D. Garnet Investments, Ltd., a privately-held Canadian corporation, engaged in
the business of real estate development and management. From October 1991 to
August 1993, she was a Consultant for ExperDent Consulting, Inc., a Canadian
corporation engaged in the business dental consulting. From 1993 to 1995, she
was unemployed. Ms. Rafter currently devotes approximately 5 hours per week
to the business of the Company.
Gene Wilson has been a Director of the Company since inception. Since
1960, he has also been a self-employed Consulting Geologist. He graduated from
Marshall University in Huntington, W. Virginia, in 1950 with a Degree in
Geology and from the University of Illinois in 1954 with a Masters Degree in
Geology. Mr. Wilson currently devotes approximately 5 hours per week to
the business of the Company.
Each of the persons named above has held his/her office/position since
inception of the Company and is expected to hold said office/position until the
next annual meeting of stockholders.
ITEM 6. EXECUTIVE COMPENSATION
None of the Company's officers and directors are currently compensated for
their services as the Company is only in the development stage and has not yet
fully commenced business operations. However, the officers and directors are
reimbursed for any expenses they incur on behalf of the Company.
Employment Agreements
None of the Company's officers or directors are currently party to
employment agreements with the Company. The Company presently has no pension,
health, annuity, insurance, stock options, profit sharing or similar benefit
plans; however, the Company may adopt such plans in the future. There are
presently no personal benefits available for directors, officers or employees of
the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 5, 1998 , Frank Donis and Marilyn Rafter, officers and director
of the Company, purchased a total of 7,250,000 shares of Common Stock, at a
price of $.001 per share, for a total consideration of $7,250.
On February 23, 1998, the Company sold 500,000 shares of Common Stock to
Gene Wilson, a director of the Company, at a price of $.01 per share for a total
consideration of $5,000.
13
<PAGE>
On August 1, 1998, the Company entered into an Option Agreement to acquire
an interest in an oil and gas property in Alberta, Canada from Donn Capital
Corp., a privately-held company wholly owned by Frank W. Donis, President of the
Company. On June 15, 1999, the Agreement was terminated and the Company has
no further right, title or obligations due to Donn Capital.
Certain officers, directors and related parties have engaged in business
transactions with the Company which were not the result of arms'-length
negotiations between independent parties. Management believes that the terms
of these transaction were as favorable to the Company as those that could have
been obtained from unaffiliated parties under similar circumstances. All
future transactions between the Company and its affiliates will be on terms no
less favorable than could be obtained from unaffiliated third parties and will
be approved by a majority of the disinterested members of the Board of Directors
of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.001 per share. The holders of Common Stock (i)
have equal ratable rights to dividends from funds legally available therefor,
when, as and if declared by the Board of Directors of the Company; (ii) are
entitled to share ratably in all of the assets of the Company available for
distribution to holders of Common Stock upon liquidation, dissolution or winding
up of the affairs of the Company; (iii) do not have preemptive, subscription or
conversion rights and there are no redemption or sinking fund provisions or
rights applicable thereto; and (iv) are entitled to one non-cumulative vote per
share on all matters on which stockholders may vote. All shares of Common Stock
now outstanding are fully paid for and non-assessable. Reference is made to
the Company's Articles of Incorporation, By-Laws and the applicable statutes
of the State of Nevada for a more complete description of the rights and
liabilities of holders of the Company's securities.
Non-cumulative Voting
The holders of shares of Common Stock of the Company do not have cumulative
voting rights, which means that the holders of more than 50% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in such event, the holders of the remaining
shares will not be able to elect any of the Company's directors. The officers
and directors of the Company beneficially own, directly or indirectly,
approximately 58% of the total issued and outstanding shares.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
The Company's Common Stock is not currently listed or trading.
Upon completion of this registration statement, the Company intends to apply
for listing and trading of its Common Stock on the NASD over-the-counter
Bulletin Board. There is, however, no assurance the Company's securities will be
listed or, if listed, that an active trading market will ever develop.(See "Risk
Factors - No Assurance of a Public Market".)
14
<PAGE>
The Company has never paid cash dividends on its Common Stock. The
Company presently intends to retain future earnings, if any, to finance the
development and expansion of its business and does not anticipate that any cash
dividends will be paid in the foreseeable future. The future dividend policy
will depend on the Company's earnings, capital requirements, expansion plans,
financial condition and other relevant factors.
The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share, subject to certain
exceptions. The Company's Common Stock may be deemed to be a "penny stock" and
thus, if and when it becomes listed and trading, of which there can be no
assurance, will become subject to rules that impose additional sales practice
requirements on broker/dealers who sell such securities to persons other than
established customers and accredited investors, unless the Common Stock is
listed on The NASDAQ Small Cap Market. Consequently, the "penny stock" rules may
restrict the ability of broker/dealers to sell the Company's securities, and may
adversely affect the ability of holders of the Company's Common Stock to resell
their shares in the secondary market, assuming such market develops, of which
there can be no assurance.
The Company currently has a total of 13,054,000 shares of Common Stock
issued and outstanding, which are held by 38 shareholders.
Reports
The Company will furnish annual financial reports to stockholders,
certified by its independent accountants, and will furnish unaudited quarterly
financial reports.
Stock Transfer Agent
The Company's stock transfer agent for its securities is Nevada Agency &
Trust Company, Suite 880, 50 West Liberty Street, Reno, Nevada 89501.
ITEM 2. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings that it believes will
result, individually or in the aggregate, in a material adverse effect upon its
financial condition or results of operations.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Since the Company's inception, there have been no disagreements with
Andersen Andersen & Strong, L.C., Independent Certified Public Accountants,
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
On January 5, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, Frank Donis and Marilyn Rafter, officers
and directors of the Company, purchased a total of 7,250,000 shares of
restricted Common Stock, at a price of $.001 per share.
On February 23, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, the Company sold 500,000 shares of
15
<PAGE>
restricted Common Stock to Gene Wilson, a director of the Company, at a price of
$.01 per share.
On January 5, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 100,000 shares of Common Stock to
Michelle Koot, an unrelated third party, at a price of $.001 per share.
On December 9, 1997, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 1,000,000 shares of Common Stock of
NNOD Investments Ltd., an unrelated third party, at a price of $.001 per share.
On February 3, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 4,000,000 shares of Common Stock to
four unrelated corporate entities, at a price of $.001 per share.
On February 15, 1998, pursuant to an exemption provided by Rule 504 of
Regulation D, the Company sold a total of 30,000 shares of Common Stock to
unrelated third parties, at a price of $.01 per share, at a price of $.01 per
share.
On February 15, 1998, pursuant to an exemption provided by Section 4(2) of
the Securities Act of 1933, as amended, four (4) family members of the directors
and officers of the Company purchased a total of 20,000 shares of Common Stock,
at a price of $.01 per share
Between February 27, 1998 and September 11, 1998, pursuant to an exemption
provided by Section 4(2) of the Securities Act of 1933, as amended, the Company
sold, in transactions not involving a public offering a total of 144,200
shares of Common Stock to a total of six unrelated third parties, at a
price of $.50 per share for investment purposes only. There were a total of 6
investors - 4 were accredited and 2 were unaccredited. The unaccredited
investors were provided information relating to the Hadrosaurus properties and
were given full access to the Company's books and records, including
financial data and stock ownership.
ITEM 5: INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 78.751 of the Nevada General Corporation Law, provides as follows:
1. A corporation may 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,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a Director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he 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 his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
16
<PAGE>
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may 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 judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a Director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, he must be indemnified by the corporation against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a court or
advanced pursuant to subsection 5, must be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper under the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of Directors by majority vote of a quorum consisting of
Directors who were not parties to the act, suit or proceeding;
(c) If a majority vote of a quorum consisting of Directors who were not parties
to the act, suit or proceeding so orders, by independent legal counsel in a
written opinion; or
(d) If a quorum consisting of Directors who were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of Officers and Directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
17
<PAGE>
advancement of expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation
or any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless ordered
by a court pursuant to subsection 2 or for the advancement of expenses made
pursuant to subsection 5, may not be made to or on behalf of any Director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
(b) Continues for a person who has ceased to be a Director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
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 express in the act and is therefore
unenforceable.
PART F/S
FINANCIAL STATEMENTS AND EXHIBITS
Audited financial statements of Registrant for the period from December 3, 1997
(date of incorporation) through the year ended December 31, 1998 and May
31, 1999, prepared by Andersen Andersen & Strong, L.C., Certified
Public Accountants, 941 East 3300 South, Suite 202, Salt Lake City, Utah
84106 immediately follow:
ANDERSEN ANDERSEN & STRONG, L.C.
Certified Public Accountants and Business Consultants
Member SEC Practice Section of the AICPA
941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail [email protected]
Board of Directors
Hadro Resources, Inc.
Point Roberts, Washington
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheets of Hadro Resources, Inc. (a
development stage company) at May 31, 1999, and December 31, 1998 the
statement of operations, stockholders, equity, and cash flows for the five
months ended May 31, 1999 and the year ended December, 31, 1998 and
the period from December 3, 1997 (date of inception) to January 31, 1999.
18
<PAGE>
These financial statements are the responsibility of the Company's management
Our responsibility is to express an opinion on these financial statements based
On our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hadro Resources, Inc. at
May 31, 1999, and December 31, 1998 and the results of operations, and
cash flows for the five months ended May 31, 1999 and the year
ended December 31,1998 and the period from December 3, 1997 (date of
inception) to January 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is in the development
stage and will need additional working capital for its planned activity, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 4. These
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Salt Lake City, Utah
Andersen Andersen & Strong
June 18, 1999
19
<PAGE>
<TABLE>
<CAPTION>
HADRO RESOURCES, INC.
(A Development Stage Company)
BALANCE SHEET
May 31, 1999 and December 31, 1998
<S> <C> <C>
5/31/99 12/31/98
ASSETS --------- ---------
CURRENT ASSETS
Cash $ 23,416 $ 59,139
----------- ----------
Total Current Assets. . . . . . . . $ 23,416 $ 59,139
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -
related parties . . . . . . . . . . $ 366 $ 114
Accounts payable. . . . . . . . . . 7,893 15
----------- ---------
Total Current Liabilities . . . . . $ 8,259 $ 129
STOCKHOLDERS' EQUITY
Common Stock
100,000,000 shares authorized, at
$.001 par value;
13,054,200 shares issued and
outstanding. . . . . . . . $ 13,054 $ 13,054
Capital in excess of par value. . . . 85,744 76,994
Deficit accumulated during the
development stage . . . . . . . . . . (83,641) (31,038)
----------- ---------
Total Stockholders' Equity. . . . . $ 15,157 $ 57,139
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Five Months Ended May 31, 1999 and the Year Ended December 31,1998
and the Period from December 3, 1997 to December 31, 1997 and the
Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
May 31 Dec 31 Dec 31 Dec 3, 1997
1999 1998 1997 to May 31
1999
-------- --------- ------- -----------------
SALES . . . . . . . . . . . . . $ - $ - $ - $ -
EXPENSES. . . . . . . . . . . $ 52,603 $ 31,038 $ - $ 83,641
-------- -------- -------- --------
NET LOSS. . . . . . . . . . . $(52,603) $ (31,038) $ - $(83,641)
======== ========= ========= ========
NET LOSS PER COMMON SHARE
Basic . . . . . . . . . . . . $ (.004) $ (.003)
AVERAGE OUTSTANDING SHARES
Basic . . . . . . . . . . . . . 13,054,200 12,300,000
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
Capital in
Common Stock Excess of Accumulated
Shares Amount Par Value Deficit
----------------- ---------- -----------
Balance -
December 3, 1997
(date of inception). . . - $ - $ - $ -
Issuance of common
stock for cash
at $.001 February
through July 1998. . . . 12,350,000 $ 12,350 $ - -
Issuance of common
stock for cash at $.01
July 1998. . . . . . . . 560,000 $ 560 $ 5,040 -
Issuance of common
stock for cash at $.50
July 1998. . . . . . . . 114,000 $ 114 $ 56,886 -
Issuance of common
stock for cash at $.50
August 1998. . . . . . . 30,200 $ 30 $ 15,068 -
Net operating loss for
The year ended
December 31, 1998. . . . - $ - $ - $ (31,038)
---------- ---------- ----------- ----------
Balance December
31, 1998 13,054,200 $ 13,054 $ 76,994 $ (31,038)
Capital contributions-
Expenses - - 8,750 -
Net operating loss for
the five months
ended May 31, 1999 - - - $ (52,603)
--------- ---------- ---------- ----------
Balance May 31, 1999. . 13,054,200 $ 13,054 $ 85,7444 $ (83,641)
========== ========== ============ ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
For the Five Months Ended May 31, 1999 and
the Year Ended December 31, 1998
and the Period from December 3, 1997 to December 31, 1997 and the
Period from December 3, 1997 (Date of Inception) to May 31, 1999
<S> <C> <C> <C> <C>
May 31 Dec 31 Dec 31 Dec 3 1997
1999 1998 1997 to May 31,
1999
------ ------ ------ ------------
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss. . . . . . . . . . . . $(52,603) $(31,038) $ - $(83,641)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Capital contributions-
Expenses 8,750 - - 8,750
Changes in accounts payable . .. . 8,130 129. . . .- . . . . 8,259
-------- -------- ------ --------
Net (decrease) in Cash
from Operations . . . . . . . $(35,723) $(30,909) - $(66,632)
-------- -------- ------ --------
CASH FLOWS FROM INVESTING
ACTIVITIES
- - - -
-------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issuance of
common stock. . . . . . . . . . $ - $ 90,048 - $ 90,048
-------- -------- ------ --------
Net Increase(Decrease) in Cash .. $(35,723) $ 59,139 - $ 23,416
Cash at Beginning of Period . . ..$ 59,139 $ - - $ -
-------- -------- ----- --------
Cash at End of Period . . . . . .$ 23,416 $ 59,139 - $ 23,416
======== ======== ==== ========
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Company was incorporated under the laws of the State of Nevada on December
3, 1997 with authorized common stock of 100,000,000 shares at $0.001 par value
with the name "Hadrosaurus Resources, Inc". On January 12, 1998 the name was
changed to Hadro Resources Inc.
The Company was organized for the purpose of acquiring and developing mineral
properties.
The Company is in the development stage.
Since its inception the Company has completed a Regulation D offering of
4,174,200 shares of its capital stock for cash.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
At December 31, 1998, the Company had a net operating loss carry forward of
$31,038. The tax benefit from the loss carry forward has been fully offset by a
valuation reserve because the use of the future tax benefit is doubtful, since
the Company has no operations on which to project future net profits.
Earnings (Loss) Per Share
Earnings (loss) per share amounts are computed based on the weighted average
number of shares actually outstanding.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity,
at the time of purchase of less than three months, to be cash equivalents.
Foreign Currency Translation
The transactions of the Company completed in Canadian dollars have been
translated to US dollars. Assets and liabilities are translated at the year end
exchange rates and the income and expenses at the average rates of exchange
prevailing during the period reported on.
Amortization of Capitalized Mining Claim Costs
The Company will use the successful efforts method to amortize the capitalized
costs of any oil and gas claims it acquires, which provides for capitalizing the
purchase price of the project and the additional costs directly related to
24
<PAGE>
proving the properties, and amortizing these amounts over the life of the
mineral deposit. All other costs will be expensed as incurred. Unamortized
capitalized costs will be expensed if the property is shown to have an
impairment in value or proven to be of no value.
Financial Instruments
The carrying amounts of financial instruments, including cash and accounts
payable, are considered by management to be their estimated fair values. These
values are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
3. RELATED PARTY TRANSACTIONS
Related parties have acquired 58% of the common stock issued.
The officers and directors of the Company are involved in other business
activities and they may, in the future, become involved in additional business
ventures which also may require their attention. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between the Company and their other business interests. The Company has
formulated no policy for the resolution of such conflicts.
4. GOING CONCERN
Management is currently seeking oil and gas leases which it believes can be
profitable. To be successful in this effort the Company will need additional
working capital.
Continuation of the Company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through additional
equity funding, and long term financing, which will enable the Company to
operate in the future.
Management recognizes that, if it is unable to raise additional capital, the
Company cannot be successful in its efforts.
25
<PAGE>
PART III
<TABLE>
<CAPTION>
ITEM 1. INDEX TO EXHIBITS
<S> <C> <C>
Exhibit No. . Description of Document Page
- ------------ ----------------------- ----
2 Articles of Incorporation, Amendments 27
and Bylaws
6.1 Agreement and Declaration of Trust 42
6.2 Assignment of Oil and Gas Leases to 43
W.G. Van Bebber
6.3 Oil and Gas Leases - Omitted
**Confidential Information** 44
6.3 Termination of Option to Purchase 45
Agreement
10 Consent of Auditors 46
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this Form 10-SB to be signed on its behalf by the undersigned,
thereunto duly authorized.
HADRO RESOURCES, INC.
Date: July 19, 1999 By: /s/ Frank W. Donis, Chief Executive Officer
Date: July 19, 1999 By: /s/ Marilyn Rafter, Director
26
<PAGE>
ARTICLES OF INCORPORATION
OF
HADROSAURUS RESOURCES, INC.
FILED in the Office of the
Secretary of the State of Nevada
December 3, 1997 - File No. C26970-97
/s/ Dean Heller, Secretary of State
THE UNDERSIGNED natural person of the age of twenty-one (21) years or
more, acting as incorporator of a corporation under the Nevada Business
Corporation Act, adopts the following Articles of Incorporation for such
corporation.
ARTICLE I - NAME
The name of the corporation is HADROSAURUS RESOURCES, INC.
ARTICLE II - DURATION
The duration of the corporation is perpetual.
ARTICLE III - PURPOSES
The corporation is organized to engage in any lawful act or activity for
which corporations may be organized under Nevada's Private Corporations Act.
ARTICLE IV - STOCK
The aggregate number of shares which this corporation shall have authority
to issue is 100,000,000 shares of Common Stock, having a par value of $.001 per
share. All stock of the corporation shall be of the same class, Common, and
shall have the same rights and preferences. Fully-paid stock of this
corporation shall not be liable to any further call or assessment.
ARTICLE V- AMENDMENT
These Articles of Incorporation may be amended by the affirmative vote of
a majority of the shares entitled to vote on each such amendment.
ARTICLE VI - SHAREHOLDERS RIGHTS
The authorized and treasury stock of this corporation may be issued at
such time, upon such terms and conditions and for such consideration as the
Board of Directors shall determine. Shareholders shall not have preemptive
rights to acquire unissued shares of the stock of this corporation.
ARTICLE VII - RESIDENT AGENT
The name of the Corporation's resident agent in the State of Nevada and the
street address of the resident agent where process may be served upon the
Corporation is: Caraway Enterprises, Inc.
3230 East Flamingo Road, Suite 156
Las Vegas, NV. 89121
27
<PAGE>
ARTICLE VIII - DIRECTOR
The directors are hereby given the authority to do any act on behalf of
the corporation by law and in each instance where the Business Corporation Act
provides that the directors may act in certain instances where the Articles of
Incorporation authorize such action by the directors, the directors are hereby
given authority to act in such instances without specifically numerating such
potential action or instance herein.
The directors are specifically given the authority to mortgage or pledge
any or all assets of the business without stockholders' approval.
The number of directors constituting the initial Board of Directors of this
corporation is from 1-9. The initial number of directors constituting the
initial Board of Directors is one. The name and address of this person who is
to serve as Director until the first annual meeting of stockholders or until
successors are elected and qualify is:
Shawnee M. Larrabee
372 East 12600 South
Draper, Utah 84020
ARTICLE IX - INCORPORATOR
The name and address of the incorporator is:
Shawnee M. Larrabee
372 East 12600 South
Draper, Utah 84020
ARTICLE X - COMMON DIRECTORS TRANSACTIONS
BETWEEN CORPORATIONS
No contact or other transaction between this corporation and any one or
more of its directors or officers or any other corporation, firm, association,
or entity in which one or more of its directors or officers are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such person is present at the meeting of the Board of
Directors, or a committee thereof, which authorizes, approves or ratifies such
contract or transaction, or because his or their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves or ratifies
the contract or transaction in good faith by vote or consent sufficient for the
purpose without counting the votes or consents of such interested director; or
(b) the fact of such relationship of interest is disclosed or known to the
stockholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or (c) the fact of the
common directorship, office or financial interest is not disclosed or known to
the director or officer at the time the transaction is brought before the Board
of Directors of the corporation for action; or (d) the contract or transaction
is fair and reasonable to the corporation at the time it is approved.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or committee thereof which
authorizes, approves or ratifies such contract or transaction.
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ARTICLE XI - LIABILITY OF DIRECTORS AND OFFICERS
No director or officer shall be personally liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extend provided by applicable law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
NRS 78.300.
The provisions hereof shall not apply to or have any effect on the
liability or alleged liability of any officer or director of the corporation for
or with respect to any acts or omissions of such person occurring prior to such
amendment.
Under penalties of perjury, I declare that these Articles of Incorporation
have been examined by me and are, to the best of my knowledge and belief, true,
correct and complete.
Dated this 24th day of November, 1997.
/s/ Shawni M. Larrabee, Incorporator
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
On the 24th day of November, 1997, personally appeared before me Shawni M.
Larrabee, who signed the foregoing Articles of Incorporation.
/s/ Gloria O.W. Kemker, Notary Public
Residing at Salt Lake County
CERTIFICATE OF AMENDMENT OF ARTICLES OF
INCORPORATION OF
HADROSAURUS RESOURCES, INC.
(a Nevada corporation)
The undersigned, Shawni Larrabee, incorporator and Director of Hadrosaurus
Resources, Inc. and representing over 2/3 of the Board of Directors, do hereby
certify as follows:
That on January 12, 1998, the Board of Directors adopted a resolution to
amend the Articles of the Corporation (originally filed December 3, 1997) as
follows:
Article I presently reads as follows:
ARTICLE I - NAME
The name of the Corporation shall be : HADROSAURUS RESOURCES, INC.
Article I is hereby amended to read as follows:
ARTICLE I - NAME
The name of the Corporation shall be: HADRO RESOURCES, INC.
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The undersigned do hereby certify that the company has issued no stock as
of January 12, 1998. This amendment is to be effective upon filing with the
State of Nevada.
/s/ Shawni Larabee, Director
and Incorporator
STATE OF UTAH )
) ss:
COUNTY OF SALT LAKE )
On the 12th day of January, 1998, personally appeared before me Shawni M.
Larrabee, who signed the foregoing Articles of Incorporation.
/s/ Janamarie McAllister, Notary Public
EXHIBIT NO. 3.2
- ---------------
BYLAWS
OF
HADROSAURUS RESOURCES, INC.
a Nevada corporation
ARTICLE I
OFFICES
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Section 1. Principal Offices.
The principal office for the transaction of business of the corporation is fixed
and located at 145 Tyee Drive #1526, Point Roberts, Washington 98281-9602. The
Board of Directors may change the principal office from one location to another
as from time to time may be necessary. Any change of this location shall be
noted by the Secretary on these Bylaws opposite this section, or this section
may be amended to state the new location.
Section 2. Other Offices.
The Board of Directors may, at any time, establish branch or subordinate offices
at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
- --------------------------
Section 1. Annual Meeting.
The annual meeting of the shareholders may be held on a date and time which
may be scheduled by the Board of Directors to the extent that such scheduling is
in compliance with the laws of the state of incorporation of the Company. At
this meeting, Directors shall be elected, and any other proper business within
the power of the shareholders may be transacted. In the event that an annual
meeting is not held in any year, the Board of Directors, as then constituted,
shall continue to perform their duties until such annual or special meeting is
properly called and they, or any of them, are reelected or replaced.
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Section 2. Place of Meeting.
All annual shareholders meetings shall be held at the Corporation's principal
office, or a location selected by the Board of Directors and notice to the
shareholders as required by Section 4 of these Articles, and all other
shareholders meeting shall be held either at the principal office or any other
place within or outside the State of Nevada that may be designated either by the
Board of Directors in accordance with these Bylaws, or by the written consent of
all persons entitled to vote at the meeting, given either before or after the
meeting and filed with the Secretary of the Corporation.
Section 3. Shareholder Action Without Meeting.
Pursuant to Nevada law, any action which could be taken at a meeting of the
shareholders may be taken without a meeting, if a written consent thereto is
signed by shareholders holding at least a majority of the voting power of the
corporation, except that if a different proportion of voting power is required
for such action at a meeting, then that proportion of written consent shall be
required.
Section 4. Special Meetings.
A Special shareholders meeting for any purpose whatsoever may be called at any
time by the President, any Vice-President, the Board of Directors, or one or
more shareholders holding not less than one-tenth (1/10) of the voting power or
the Corporation.
Section 5. Notice of Meetings.
Written notices specifying the place, day, and hour of the meeting and, in the
case of a special meeting, the general nature of the business to be transacted,
shall be given not less than ten (10) days, nor more than fifty (50) days before
the date of the meeting. Such notice must be given personally or by mail or by
other means of written communication, addressed to the shareholder at the
address appearing on the books of the corporation or given by the share-holder
to the corporation for the purpose of notice. If no such address appears or is
given by a shareholder of record entitled to vote at the meeting, notice is
given at the place where the principal executive office of the corporation is
located, or by publication at least once in a newspaper of general circulation
in the county where the principal executive office is located.
The notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any notice in accordance with the
provisions of this section executed by the Secretary shall be prima facie
evidence of the giving of notice.
Section 6. Waiver of Notice.
A shareholder may waive notice of any annual or special meeting by signing a
written notice of waiver either before or after the date of such meeting.
Section 7. Quorum.
The presence in person or by proxy of the holders of at least fifty-one percent
(51%) of the outstanding shares entitled to vote at any meeting of the
shareholders shall constitute a quorum for the transaction of business. The
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shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, any action taken
(other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 8. Proxies.
Every person entitled to vote at a shareholders meeting of the corporation, or
entitled to execute written consent authorizing action in lieu of a meeting, may
do so either in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from the date of its execution unless otherwise provided in the proxy.
Section 9. Voting.
Except as otherwise provided in the Articles of Incorporation or by agreement or
by the general corporation law, shareholders at the close of business on the
record date are entitled to notice and to vote.
Section 10. List of Shareholders.
The Secretary shall prepare, at least ten (10) days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of each shareholder
and the number of shares registered in the name of each shareholder. Such list
shall be open to the examination of any shareholder, for any purpose germane to
the meeting. This fist shall be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any shareholder
present.
Section 11. Inspectors.
At each meeting of shareholders, the chairman of the meeting may appoint one or
more inspectors of voting, whose duty it shall be to receive and count the
ballots and make a written report showing the result of the balloting. The
Secretary of the Corporation may perform this function.
Section 12, Election by Ballot.
Election for directors need not be by ballot unless a shareholder demands
election by ballot at the meeting and before the voting begins. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected. No cumulative voting shall be allowed.
Section 13. Order of Business.
The order of business at the annual meeting of the shareholders, insofar as
possible, and at all other meetings of shareholders, shall be as follows:
1. Call to order.
2. Proof of notice of meeting.
3. Reading and disposing of any unapproved minutes.
4. Reports of officers.
5. Reports of committees.
6. Election of Directors.
7. Disposition of unfinished business.
8. Disposition of new business.
9. Adjournment.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers.
Subject to the provisions of the Nevada Corporation Act, and any limitations in
the Articles of Incorporation and these Bylaws relating to actions required to
be approved by the shareholders or by the outstanding shares, the business and
affairs of the Corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
Section 2. Enumeration of Directors' Powers.
Without prejudice to these general rules, and subject to the same limitation,
the Board of Directors shall have the power to:
(a) Select and remove all officers, agents and employees of the Corporation;
prescribe any powers and duties for them that are consistent with law, with the
Articles of Incorporation, and these Bylaws; fix their compensation; and require
from them security for faithful service.
(b) Change the principal executive office or the principal business office from
one location to another; cause the Corporation to be qualified to do business in
any other state, territory, dependency, or country and conduct business within
or outside the State of Nevada; and designate any place within or outside the
State of Nevada for the holding of any shareholders meeting of meetings,
including annual meetings.
(c) Adopt, make, or use a corporate seal; prescribe the forms of certificates of
stock; and otter the form of the seal and certificate.
(d) Authorize the issuance of shares of stock of the corporation on any lawful
terms, in consideration of money paid, labor done, services actually rendered,
debts or. securities canceled, or tangible or intangible property actually
received.
(e) Borrow money and incur indebtedness on behalf of the Corporation, and cause
to be executed and delivered for the Corporation's purposes, in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities.
(f) Engage in and/or adopt employment agreements, contracts, or other employment
contracts with independent contractors, companies, government agencies, or
individuals.
Section 3. Number, Tenure, Qualification and Elections.
To the extent allowed by the Articles of incorporation, the Board of Directors
shall be fixed from time to time by resolution of the Board, but shall not be
less than one (1). Directors need not be shareholders of the Corporation. The
Directors of the Corporation shall be elected at the annual meeting of the
shareholders and shall serve until the next annual or special meeting is
properly called and they, or any of them, are re-elected and until their
successors have been elected and qualified.
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Section 4. Vacancies.
A vacancy or vacancies on the Board of Directors shall be deemed to exist in
the event of the death, resignation, or removal of any Director, or if the Board
of Directors by resolution declares vacant that office of a Director who has
been declared of unsound mind by an order of court or convicted of a felony, or
if the authorized number of Directors is increased, the shareholders fail at any
meeting of shareholders at which any Director of Directors are elected, to elect
the number of Directors to be voted for at that meeting.
Any Director may resign effective on giving written notice to the Chairman of
the Board, the President, the Secretary, or the Board of Directors, unless a
notice specifies a later time for that resignation to become effective. If the
resignation of a Director is effective at a future time, the Board of Directors
may elect a successor to take office when the resignation becomes effective.
Section 6. Notice of Meetings.
Notice need not be given of regular meetings of the Board of Directors, nor is
it necessary to give notice of adjourned meetings. Notice of special meetings
shall be in writing by mail at least four (4) days prior to the date of the
meeting or forty-eight (48) hours' notice delivered personally or by telephone
or telegraph or telecopier. Neither the business to be transacted at, nor the
purpose of any such meeting need be specified in the notice. Attendance of a
Director at a meeting shall constitute a waiver of notice of that meeting except
when the Director attends for the express purpose of objecting to the
transaction of any business in that the meeting is not lawfully called or
convened.
Section 7. Place of Meetings and Meetings By Telephone.
Regular and special meetings of the Board of Directors may be held at any place
within or outside the State of Nevada that has been designated from time to time
by the Board. In the absence of such designation, meetings shall be held at the
principal executive office of the Corporation. Any meeting, regular or special,
may be held by conference telephone, or similar communication equipment, as long
as all Directors participating in the meeting can hear one another, and ail such
Directors shall be deemed to be present in person at the meeting.
Section 8. Special Meetings.
Special meetings of the Board of Directors for any purpose or purposes may be
called at any time by the Chairman of the Board or the President, any Vice-
President, or the Secretary.
Section 9. Majority or Quorum.
A majority of the authorized number of Directors constitutes a quorum of the
Board for the transaction of business except as hereinafter provided.
Section 10. Transactions of Board.
Except as otherwise provided in the Articles or these Bylaws, or by taw, every
act or decision done or made by a majority of the Directors present at a duly
held meeting at which a quorum is present, is the act of the Board, provided,
however, that any meeting at which a quorum was initially present may continue
to transact business notwithstanding the withdrawal of Directors if any action
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taken is approved by at least a majority of the required quorum for such
meeting.
Section 11. Adjournment.
A majority of Directors present at any meeting, whether or not a quorum is
present, may adjourn the meeting to another time and place. If the meeting is
adjourned for more that twenty-four (24) hours, notice of the adjournment to
another time and place must be given prior to the time of the adjourned meeting
to the Directors who were present at the time of the adjournment.
Section 12. Conduct of Meetings.
The Chairman of the Board, or if there is no such officer, the President, or in
his absence, any Director selected by the Director present shall preside at the
meeting of the Board of Directors. The Secretary of the Corporation or, in the
Secretary's absence any person appointed by the presiding officer, shall act as
Secretary of the Board.
Section 13. Action Without Meeting.
Any action required or permitted to be taken by the Board of Directors may be
taken without a meeting, if all members of the Board shall individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of the Board of
Directors. Such written consent(s) shall be filed with the minutes of the
proceedings of the Board.
Section 14. Fees and Compensation of Directors.
Directors and members of committees may receive such compensation, if any, for
their services, and such reimbursement of expenses, as may be fixed or
determined by resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any Director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.
Section 15. Approval of Bonuses for Directors and Officers.
No bonuses or share in the earnings or profits of the Corporation shall be paid
to any of the officers, Directors, or employees of the Corporation except as
approved by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Officers.
The officers of the Corporation shall be a President, a Vice-President, a
Secretary, and a Chief Financial Officer (Treasurer). The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, one
or more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article IV. Any number of offices may be held by the same person, except
the offices of President and Secretary.
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Section 2. Election of Officers.
The officers of the Corporation, except such officer as may be appointed in
accordance with the provisions of Section 3 or Section 5 of this Article IV
shall be chosen by the Board of Directors, and each shall serve at the pleasure
of the Board, subject to the rights, if any, of an officer under any contract of
employment.
Section 3. Subordinate Officers.
The Board of Directors may appoint, and may empower the President to appoint,
such other officers as the business
meetings or committee meetings, the number of shares present or represented at
share-holders meetings, and the proceedings.
The Secretary shall keep, or cause to be kept, at the principal executive office
or at the office of the Corporation's transfer agent or registrar, as determined
by resolution of the Board of Directors, a record of shareholders, or a
duplicate record of shareholders showing the names of all shareholders and their
addresses, the number of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary or Assistant Secretary, if they are absent or unable to act or
refuse to act, any other officer of the Corporation shall give, or cause to be
given, notice of all meetings of the shareholders, of the Board of Directors,
and of committees of the Board of Directors required by the Bylaws or by law to
be given. The Secretary shall keep the seal of the Corporation, if one is
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 9. Chief Financial Officer.
The Chief Financial Officer (Treasurer) shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The book of accounts shall at all reasonable
times be opened to inspection by any Director.
The Chief Financial Officer shall deposit all monies and other valuables in the
name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of ail of his
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have other powers and perform other such duties as may be
prescribed by the Board of Directors or the Bylaws.
ARTICLE V
INDEMNIFICATION OF DIRECTOR, OFFICERS, EMPLOYEES AND OTHER AGENTS
Section 1. Agents, Proceedings and Expenses.
For the purpose of this Article, "agent'.' means any person who is or was. a.
Director, officer, employee, or other agent of this Corporation, or is or was
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serving at the request, of this.
Corporation as a Director, officer, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
was a Director, officer, employee, or agent of a foreign or domestic corporation
which was a predecessor corporation of this corporation or of another enterprise
at the request of such predecessor corporation; "proceeding" means any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5(c) of this Article.
Section 2. Actions other than by the Corporation.
This Corporation shall defend and indemnify any person who was or is a party, or
is threatened to be made a party, to any proceeding (other than an action by or
in the right of this Corporation) by reason of the fact that such person is or
was an agent of this Corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if that person acted in good faith and in a manner that
person reasonably believed to be in the best interests of this corporation and,
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct of that person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction, or upon a pleas of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in the best interest of this Corporation or that the person had reasonable cause
to believe that the person's conduct was lawful.
Section 3. Actions by the Corporation.
This 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 by
or in the right of this Corporation to procure a judgment in its favor by reason
of the fact that said person is or was an agent, counsel to the Corporation,
officer or director of this Corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if that person acted in good faith, in a manner that person
believed to be in the best interests of this Corporation and with such care,
including reasonably inquiry, that such action would not be deemed grossly
negligent on the part of such agent (for the purposes of this Article V, the
term "agent" shall mean and include all officers, directors, counsel, and
employees). Indemnification shall be available under this Section 3, conditioned
only upon the following:
(a) In respect of any claim, issue or matter as to which that person may be
liable to this Corporation, the duty and obligation of the Corporation to defend
and indemnify such agent shall be absolute unless and only to the extent that
the court in which that action was brought shall determine, upon application,
that in view of all the circumstances of the case, said person acted with
reckless disregard equated to gross negligence with regard to the specific
claims made against said person;
(b) The indemnification provisions set forth herein are to be interpreted as
broadly as possible in their application to any officer, director, counsel or
agent of the corporation, to include accountants and counsel for the
corporation. Such interpretation shall treat these provisions as continuing
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contractual obligations of the corporation and subsequent modification shall not
limit the effect of these provisions as applied to the covered classes who were
so covered, at any time following adoption hereof.
Section 4. Successful Defense by Agent.
To the extent that an agent of this corporation has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 2 or 3
of this Article, or in defense of any claim, issue, or matter therein, the agent
shall be indemnified against expenses actually and reasonably incurred by the
agent in connection therewith. An agent shall be deemed successful if the Court
fails to make a specific finding regarding the degree of fault as set forth in
Section 3 hereinabove
Section 5. Required Approval.
Except as provided in Section 4 of this Article, any indemnification under this
Article shall be made by this Corporation only if authorized in the specific
case on a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in Sections 2 or 3 of this Article. by:
(a) A majority vote of a quorum consisting of Directors who are not parties to
the proceeding;
(b) Approval by the affirmative vote of a majority of the shares of this
corporation entitled to vote represented at a duly held meeting at which a
quorum is present or by written consent of holders of a majority of the
outstanding shares entitled to vote; or
(c) The court in which the proceeding is or was pending, on application made by
this corporation or the agent or the attorney or other person rendering services
in connection with the defense, whether or not such application by the agent,
attorney or other person is opposed by this Corporation.
Section 6. Advance of Expenses.
Expenses incurred in defending any proceeding may be advanced by this
Corporation before the final disposition of the proceeding on receipt of an
undertaking by or on behalf of the agent to repay the amount of the advance
unless it shall be determined ultimately that the agent is entitled to be
indemnified as authorized in this Article.
Section 7. Other Contractual Rights.
Nothing contained in this Article shall affect any right to indemnification to
which persons other than Directors and officers of this Corporation or any
subsidiary hereof may be entitled to contract or otherwise.
Section 8. Insurance.
Upon and in the event of a determination by the Board of Directors of this
Corporation to purchase such insurance, this Corporation shall purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this corporation would have the
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power to indemnify the agent against that liability under the provisions of this
section.
Section 9. Fiduciaries of Corporate Employee Benefit Plan.
This Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in that person's
capacity as such, even though that person may also be an agent of the
Corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such trustee,
investment manager, or other fiduciary may be entitled by contract or otherwise,
which shall be enforceable to the extent permitted by applicable law other than
this Article.
ARTICLE VI
STOCK CERTIFICATES
Section 1. Form.
The shares of the Corporation shall be represented by certificates signed by the
President or Vice- President, and the Chief Financial Officer or the Secretary
of the Corporation. Any or all of such signatures may be facsimiles if
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. Each such certificate
shall also state:
(a) The name of the record holder of' the shares represented by such
certificate;
(b) The number of shares represented thereby;
(b) A designation of any class or series of which such shares are a part;
(d) That the shares have a par value of $0.001;
(e) That the corporation is organized under the laws of the State of
Nevada.
(f) Any restrictions applicable to the shares shall be so designated on the
face thereof.
Section 2. Transfers.
Transfer of shares of the Corporation shall be made in the manner set forth in
the Nevada Uniform Commercial Code. The Corporation shall maintain stock
transfer books, and any transfers shall be registered thereon only on request
and surrender of the stock certificate representing the transferred shares, duly
endorsed; if transfer is by Power of Attorney, the Power of Attorney shall be
deposited with the Secretary of the Corporation or with the designated Transfer
Agency.
Section 3. Lost, Destroyed and Stolen Certificates
No certificate or shares of stock in the Corporation shall be issued in place of
any certificate alleged to have been lost, destroyed, stolen, or mutilated
except on production of such evidence and provision of such indemnity to the
Corporation as the Board of Directors may prescribe.
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ARTICLE VII
CORPORATE ACTIONS
Section 1. Contracts.
The Board of Directors may authorize any officer or officers, or any agent or
agents of the Corporation, to enter into any contract or to execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans.
No loan shall be made by the Corporation to its officers or Directors, and no
loan shall be made by the Corporation secured by its shares. No loan shal1 be
made or contracted on behalf of the Corporation and no evidences of indebted-
ness shall be issued in its name unless authorized by resolution of the Board of
Directors. Such authority may be general or confined to specific instances.
Section 3. Checks, Drafts or Orders.
All checks, drafts, or other orders for the payment of money by or to the
Corporation and all notes and other evidence of indebtedness issued in the name
of the Corporation shall be signed by such officer or officers, agent or agents
of the Corporation, and in such manner as shall be determined by resolution of
the Board of Directors.
Section 4. Bank Deposits.
All funds of the Corporation not otherwise employed, shall be deposited to the
credit of the Corporation in such banks, trust companies, or other depositories
as the Board of Directors may select.
ARTICLE VIII
MISCELLANEOUS
Section 1. Inspection of Corporate Records.
The stock ledger and minute books may be kept by any information storage device
if readily convertible into legible form. Any shareholder of record, in person
or by an attorney or agent who presents proof of such position with guaranteed
signature on such proof, may, upon written demand under oath, stating purpose,
inspect for any proper purpose, the stock ledger, list of shareholders and make
written extracts of the same. Such extracts shall be made in writing by the
individual preparing or requesting such inspection and such inspection shall be
during normal business hours and shall not be made without at least five (5)
business days written notice thereof. Such notice, to be effective must be
received not at least five (5) business days prior to the proposed inspection
date, a signed receipt from the US Postal Service shall be proof of such notice
and the date of receipt.
Section 2. Inspection of Articles of Incorporation and Bylaws.
The original or a copy of the Articles of Incorporation and Bylaws of the
Corporation, as amended or otherwise altered to date, and certified by the
Secretary of the Corporation, shall at all times be kept at the principal
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executive office of the Corporation. Such Articles and Bylaws shall be open for
inspection to all shareholders of record or holders of voting trust certificates
at all reasonable times during the business hours of the Corporation.
Section 3. Fiscal Year.
The fiscal year of the Corporation shall begin on the first day of January of
each year and end at midnight on the last day of December of the same year or as
otherwise determined by the Board of Directors.
Section 4. Construction and Definition.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions contained in the applicable Nevada Statutes which
shall govern the construction of these Bylaws.
Without limiting the foregoing, the masculine gender where used included
the feminine and neuter; the singular number includes the plural, and the plural
number includes the singular, "shall" is mandatory and "may" is permissive; and
"person" includes the Corporation as well as a natural person.
ARTICLE IX
AMENDMENTS TO BYLAWS
These Bylaws may be amended at any time by a majority vote of the Board of
Directors or by a majority vote of the outstanding shares held by the share-
holders of the corporation.
CERTIFICATE OF SECRETARY OF ADOPTION BY DIRECTORS
I HEREBY CERTIFY that I am the duly elected, qualified and acting Secretary of
the above-named Corporation and that the above and foregoing Bylaws were adopted
as the Bylaws of said Corporation on the date set forth above by a majority of
vote of the shareholders of said Corporation.
Dated: December 10, 1997 /s/ Shawni M. Larrabee
Incorporator/Initial Director
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AGREEMENT AND DECLARATION OF TRUST
- ---------------------------------------------------------------
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, CERTAIN OIL AND GAS LEASES OR OTHER FORMS OF MINERAL ACQUISITIONS MAY
BE TAKEN BY OR IN THE NAME OF W.G. VAN BEBBER AS LESSEE, GRANTEE, ASSIGNEE (OR
IN OTHER CAPACITIES AS A RECIPIENT OR TRANSFEREE) PERTAINING TO PROPERTIES
LOCATED IN COLORADO, AND NEW MEXICO; AND
WHEREAS, SAID LEASES ARE TO BE TAKEN IN THE NAME OF W.G. VAN BEBBER, OR HIS
DESIGNEE, AS TRUSTEE FOR THE EXCLUSIVE USE AND BENEFIT OF HADRO RESOURCES, INC.
AND ALL APPROVED COST AND EXPENSES INCURRED IN SUCH LEASING AND ACQUISITIONS
HAVE BEEN AND WILL BE PAID BY HADRO, OR ITS NOMINEE(S).
NOW THEREFORE, IN CONSIDERATION OF THE PREMISES, I HEREBY DECLARE THAT I SHALL
ACQUIRE AND HOLD THE AFORESAID LEASES AND OTHER FORMS OF MINERAL CONVEYANCES IN
TRUST FOR HADRO, ITS SUCCESSORS AND ASSIGNS, AND I HEREBY AGREE TO CONVEY AND
ASSIGN SAME TO HADRO OR ITS NOMINEE(S) AT SUCH TIME OR TIMES AND IN SUCH MANNER
AS IT SHALL REQUEST.
IN WITNESS WHEREOF, THIS AGREEMENT AND DECLARATION OF TRUST HAS BEEN DULY
EXECUTED AND DELIVERED EFFECTIVE AS OF THE 1ST DAY OF NOVEMBER, 1998.
/S/ W.G. VAN BEBBER
STATE OF COLORADO )
)SS:
COUNTY OF DENVER )
THE FOREGOING INSTRUMENT WAS ACKNOWLEDGED BEFORE ME BY W.G. VAN BEBBER
WITNESS MY HAND AND NOTARIAL SEAL.
/S/ LAREN PASSAVANTO GROSS, NOTARY PUBLIC
1291 HIGH STREET #H
DENVER, CO 80218
MY COMMISSION EXPIRES: JULY 2, 1999.
42
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ASSIGNMENT
FOR GOOD AND VALUABLE CONSIDERATION, RECEIPTS OF WHICH IS HEREBY ACKNOWLEDGED,
**NAME OMITTED - CONFIDENTIAL INFORMATION** ASSIGNOR, DOES HEREBY SELL,
ASSIGN, TRANSFER AND CONVEY TO W.G. VAN BEBBER, OF DENVER, COLORADO AS
ASSIGNEE, ALL OF ASSIGNOR'S RIGHT, TITLE AND INTEREST IN AND TO THOSE
PARTICULAR LEASEHOLDS LOCATED IN **PROPERTY LOCATION OMITTED-CONFIDENTIAL
INFORMATION** NEW MEXICO, AS MORE PARTICULARLY DESCRIBED IN EXHIBIT A
ATTACHED HERETO AND BY THIS REFERENCE INCORPORATED HEREIN. **EXHIBIT A
OMITTED - CONFIDENTIAL INFORMATION**.
THE ASSIGNMENT AND TRANSFER OF INTERESTS IS SUBJECT TO THE FOLLOWING:
1. ASSIGNOR HEREBY RETAINS, AND ASSIGNEE ACKNOWLEDGES A TWO-PERCENT (2%)
GROSS OVERRIDING ROYALTY INTEREST IN AND TO SAID LEASES, TO BE HELD BY ASSIGNOR.
2. ASSIGNEE ACKNOWLEDGES THE GROSS OVERRIDING ROYALTY INTERESTS SET FORTH IN
EXHIBIT B ATTACHED HERETO AND BY THIS REFERENCE INCORPORATED HEREIN.
3. ASSIGNEE, BY ACCEPTANCE OF THIS ASSIGNMENT COVENANTS AND AGREES THAT ALL
FUTURE LEASE PAYMENTS, CHARGES, COSTS, FEES, OR OTHER SUCH EXPENSE NECESSARY TO
THE CONTINUATION OR DEVELOPMENT OF THE LEASES SHALL BE THE RESPONSIBILITY OF
ASSIGNEE, AND SHALL BE PAID OR PERFORMED ON A TIMELY BASIS.
4. THIS ASSIGNMENT IS WITHOUT WARRANTY OF TITLE OR REPRESENTATION.
5. ASSIGNEE SHALL NOTIFY IN WRITING THE ASSIGNOR OF ANY DESIRE OR INTENTION
TO SURRENDER ANY OR ALL OF THE SAID LEASES 30 DAYS PRIOR TO ANY SURRENDER.
6. THIS ASSIGNMENT IS MADE AND ACCEPTED PURSUANT TO THAT PARTICULAR
AGREEMENT BY AND BETWEEN THE PARTIES DATED THIS 14 DAY OF JUNE, 1999.
ASSIGNOR
/S/ PRESIDENT AND CEO
ASSIGNEE
/S/ W.G. VAN BEBBER
43
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**TEXT OF OIL AND GAS LEASES OMITTED - **CONFIDENTIAL INFORMATION**
44
HADRO RESOURCES, INC.
145 TYEE ROAD #1526
POINT ROBERTS, WA. 20549
JUNE 15, 1999
DONN CAPITAL CORP.
204-5405 12TH AVENUE
DELTA, B.C., CANADA V4M 2B2
RE: TERMINATION OF AGREEMENT TO PURCHASE, DATED AUGUST 1, 1998
DEAR FRANK:
THIS IS TO INFORM YOU THAT THE DIRECTORS OF HADRO RESOURCES, INC. HAVE MADE
THE DECISION AS OF JUNE 15, 1999, NOT TO EXERCISE THE OPTION AS PER THE
AGREEMENT WITH DONN CAPITAL CORP., DATED AUGUST 1, 1998.
YOURS TRULY,
/s MARILYN RAFTER
CC: BOARD OF DIRECTORS
45
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HADRO RESOURCES, INC.
145 TYEE ROAD #1526
POINT ROBERTS, WA. 20549
JUNE 15, 1999
DONN CAPITAL CORP.
204-5405 12TH AVENUE
DELTA, B.C., CANADA V4M 2B2
RE: TERMINATION OF AGREEMENT TO PURCHASE, DATED AUGUST 1, 1998
DEAR FRANK:
THIS IS TO INFORM YOU THAT THE DIRECTORS OF HADRO RESOURCES, INC. HAVE MADE
THE DECISION AS OF JUNE 15, 1999, NOT TO EXERCISE THE OPTION AS PER THE
AGREEMENT WITH DONN CAPITAL CORP., DATED AUGUST 1, 1998.
YOURS TRULY,
MARILYN RAFTER
CC: BOARD OF DIRECTORS
46
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