As filed with the Securities and Exchange Commission on August 25, 2000
Registration Statement No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LRS CAPITAL INC.
(Name of Small Business Issuer in its Charter)
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Delaware 212299 N/A
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
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240 Richmond Street West - Suite 201
Toronto, Ontario, Canada M5V 1V6
(416) 597-0202
(Address and telephone number of principal executive offices)
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Mitchell Geisler , President
LRS Capital Inc.
240 Richmond Street West - Suite 201
Toronto, Ontario, Canada M5V 1V6
(416) 597-0202
(Name, address and telephone number of agent for service)
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Copies to:
Andrew D. Hudders, Esq.
Graubard Mollen & Miller
600 Third Avenue - 32nd Floor
New York, NY 10016
Telephone: (212) 818-8800
Facsimile (212) 818-8881
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
<PAGE>
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis under Rule 415 under the Securities Act of 1933,
as amended, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities To Be Price Per Offering Registration
To Be Registered Registered per Security Price Fee
-------------------------------------------------------------------------------
Common Stock, $.001
par value 8,000,000 $.125 $1,000,000 $264.00
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Total Amount Due $264.00
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The registrant will amend this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Commission, acting under Section 8(a), may determine.
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<PAGE>
Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted or would be
unlawful prior to registration or qualification under the securities laws of any
state.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED August 25, 2000
LRS CAPITAL INC
8,000,000 Shares of Common Stock
All 8,000,000 shares of our common stock are being sold by the company on
a self-underwritten, best efforts basis, with no minimum. The offering will
commence on the date of this prospectus and continue for nine months or until
all the shares offered are sold, if earlier.
No public market exists for our common stock. A public market may not
develop after the sale of the shares.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Per Share Total
Public offering price........................ $.125 $1,000,000(1)
_____________________
(1) The expenses of this offering, estimated at $50,000, will be deducted
from the total proceeds to LRS.
The date of this prospectus is August 25, 2000
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<PAGE>
Table of Contents
<TABLE>
Page Page
---- ----
<S> <C> <C> <C>
Summary................................1 Management.............................17
Risk Factors...........................3 Executive Compensation.................18
Use of Proceeds........................7 Principal Stockholders.................19
Dividend Policy........................8 Description of Securities..............19
Determination of Offering Price .......8 Shares Eligible for Future Resale......21
Dilution of the Price Paid Plan of Distribution...................21
for the Shares......................9 Legal Matters..........................22
Capitalization.........................10 Experts................................22
Management's Discussion and Where You Can Find
Analysis of Financial Condition Additional Information..............22
and Results of Operations...........10 Index to Financial Statements..........23
Business...............................12
</TABLE>
LRS Capital Inc., referred to in this prospectus as LRS, we or us, is
engaged in the identification, acquisition, exploration and initial development
of mining properties with tungsten bearing ore and other minerals normally found
in tungsten bearing ore. We were incorporated in Delaware in October 1998. Our
executive offices are located at 240 Richmond Street West, Suite 201, Toronto,
Ontario, Canada M5V 1V6. Our telephone number is (416) 597-0202. We refer to
prospective investors as you or the investor(s).
-iv-
<PAGE>
Summary
This summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, paying particular
attention to the section entitled Risk Factors.
Generally about us
LRS is engaged in the identification and acquisition of mining properties
with tungsten bearing ore. We currently have a lease on one property in
west-central Nevada. The property consists of 30 unpatented claims. We plan to
conduct further exploration of this property to determine reserves and mining
feasibility, and then we will initially develop them for extraction of the
minerals. We may also attempt to locate other properties and stake additional
claims. We plan to lease, joint venture or otherwise work with other mining
companies for full development and extraction of minerals. We may also consider
selling viable, staked mining properties as a means to realize a return on their
value. We have had no revenues to date from any mining operations. We expect to
incur substantial expenses in the above stated phases of operations before we
realize any revenues from our efforts. Because we are in the very early stages
of implementing our business plan, we cannot indicate now if we will ever be
profitable.
The Offering
Securities offered.............. 8,000,000 shares of common stock.
Common stock outstanding
prior to the offering........... 2,654,721 shares
Common stock to be outstanding
after the offering.............. 10,654,721 shares
Use of proceeds................. We intend to use the net proceeds of this
` offering as follows:
o Identify and acquire mineral rights
o Update past exploration results and
conduct feasibility studies on staked
claims
o Commence initial development of mining
properties
o Obtain permits for properties
o Working capital and general corporate
purposes
<PAGE>
Summary Financial Data
The information below should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
accompanying financial statements and notes included in another section of this
prospectus. The as adjusted column reflects the sale of 8,000,000 shares of
common stock in this offering at an assumed offering price of $.125 per share,
after deducting the estimated offering expenses payable by us.
June 30, 2000 June 30, 2000
Actual As Adjusted
------ -----------
Assets
Cash $ 14,778 $1,014,778
Investment - Mineral Rights 34,861 34,861
Organization Costs 742 742
Total Assets $ 50,382 $1,050,382
Liabilities and Stockholder's Equity
Liability
Due to Related Parties $ 18,514 $ 18,514
Stockholders' Equity
Common Stock - $.001 Par Value, 15,000,000
authorized, 2,654,720 shares issued and
outstanding; 10,654,720 shares issued and 2,654 10,654
outstanding as adjusted 36,186 1,028,186
Additional Paid in Capital (6,973) (6,973)
Retained (Deficit)
Total Stockholders' Equity 31,868 1,031,868
Total Liability and Stockholder's Equity $ 50,382 $1,050,382
Book Value Per Share .02 .10
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<PAGE>
Risk Factors
You should consider carefully the following risks before you decide to
invest in our common stock. Our business, financial condition or results of
operation could be materially adversely affected by any of these risks. Any of
these risks could cause the trading price of our common stock to decline, and
you could lose all or part of your investment.
Risks Relating to Our Business
We have no history operating our mining business upon which investors may
evaluate our performance.
We are in the development stage of our business. We have not
engaged in any substantive operations to date. More particularly, we have not
engaged in any mining operations beyond that of obtaining 30 unpatented claims
for one mining property through a consultant company. We have not engaged in
exploratory activities, feasibility studies or established initial developmental
plans in respect of the mining properties. You should consider our prospects
based on the risks associated with our early stage and lack of experience.
Our ability to operate will depend on our ability to face all the challenges of
a new business.
We expect to face many challenges in the start up of our business and its
development. These will include:
o Engaging the services of qualified support personnel and consultants;
o Establishing and maintaining budgets;
o Implementing appropriate financial controls;
o Acquiring relevant information efficiently;
o Staking and evaluating appropriate mining properties; and
o Establishing initial development plans for workable mining properties.
The failure to address one or more of these may impair our ability to carry out
our business plan.
We will be dependant on others for the implementation of our business plan in
the early periods.
To initially locate and obtain, including leasing and staking, mining
properties, we have relied upon and will continue to rely on an outside
consultant. We also will rely on other consultants and independent contractors
in the exploratory and initial development stages to implement our business
plan. More particularly, these stages will include exploration for and
verification of mineral deposits on the staked mining properties and the
subsequent evaluation and assessment activities necessary to determine the
viability of a mining property. We may not be able to locate or employ persons
with the appropriate experience and skills to successfully execute our business
plan. The inability to do these actions on a timely basis or at all may result
in the delay of implementing our business plan thereby causing additional
expense or our business failure.
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<PAGE>
Mining has many inherent risks of operations which may prevent ultimate success.
Mineral exploration, development and production has significant risks.
Some of these include the following:
o It is dependant on locating mineral reserves in staked mining properties
and skillful management of these reserves and properties once found or
located.
o Mineral deposits and ore grades may vary substantially in a property,
rendering what was initially believed a profitable deposit of little or
no value.
o Profitable mining may be affected by unforeseen changes in operating
circumstances including:
- Changes in the value of minerals,
- Changes in regulations,
- Environmental concerns,
- Technical issues relating to extraction, such as rock
falls, subsidence, flooding and weather conditions, and
- Labor issues.
We are relying on dated geological reports to locate potential mining properties
which may be inaccurate.
We rely on reports typically several decades old to determine which
mining properties to lease, acquire and stake. There is no sure method of
verifying the care and manner used to prepare these reports without further
verification by us and our agents of the properties once we have rights to them.
Verification is expected to be costly and may take a considerable period of
time. Verification may result in our rejecting a property; however, we will have
borne the expense of this determination with no likelihood of recovering the
amounts expended. Decisions made without adequately checking the mining
properties could result in significant unrecoverable expenses. Mining properties
initially thought to be valuable may turn out to be of little value.
If we are in default to Wolfranium Corporation Inc., we will have to transfer
all our interests in the mining properties to Wolfranium which are the subject
of the agreement.
The obligations of LRS under its agreement with Wolfranium Corporation
Inc. include payment of royalties and reimbursement of expenses. If LRS is in
default of any obligation to Wolfranium, the remedy is that Wolfranium will be
able to have LRS transfer to it all the right, title and interest in the mining
properties and minerals located therein to Wolfranium and retain all amounts and
shares previously paid or issued to it. Obligations under the agreement must be
carried out immediately, with only a fifteen day grace period. Therefore, if LRS
is in default to Wolfranium, it will lose all its assets and will not be able to
carry on its business. In such event, investors would lose their entire
investment.
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<PAGE>
Regulatory compliance is complex and the failure to meet all the various
requirements could result in fines or other limitations on the proposed
business.
Once development of a mining property begins, we will be subject to
regulation by numerous Federal and state governmental authorities, but most
importantly, by the Federal Environmental Protection Agency, the Bureau of Land
Management, and comparable state agencies. The failure or delay in obtaining
regulatory approvals or licenses will adversely affect our ability to extract
and market the mineral resources. The failure to comply with any regulations or
licenses may result in fines or other penalties. We expect compliance with these
regulations to be substantial. Therefore, compliance with or the failure to
comply with applicable regulation will affect the ability of LRS to succeed in
its business plans and to generate revenues and profits.
Risks Relating to this Offering
This offering is being made without an underwriter, therefore, it is
possible that LRS will not sell all the shares offered.
The offering is self-underwritten. This means LRS will not engage the
services of an underwriter to sell the shares. We intend to sell the shares
through the efforts of our officers, and we will not pay any commissions.
Without the services of a professional finance firm, it is possible that we will
not sell all the shares offered. If LRS does not raise the full amount being
sought, it will have to modify its business plan to reduce its proposed
expenditures. A substantial reduction in the business plan may impair the
business and financial ability of the company and require it to cease
operations.
Future sales of shares by our principal stockholders could adversely affect the
market price of our common stock.
After completion of this offering, there will be 10,654,721 shares of
our common stock outstanding, of which 2,654,721 shares, or 25%, will be held by
our directors, officers and principal stockholders. Of this amount, 900,200
shares may be sold in the public market from time to time, without registration,
subject to limits on the timing, amount and method of these sales imposed by the
securities laws under Rule 144. After June 6, 2001, an additional 1,754,521
shares will be eligible for sale under Rule 144. You should be aware that the
possibility of sales may, in the future, have a depressive effect on the price
of the common stock in any market which may develop and, therefore, the ability
of any investor to market his shares may depend upon the number of shares that
are offered and sold. Moreover, the perception in the public markets that these
sales by principal stockholders might occur could also adversely affect the
market price of our common stock.
The offering price has been established by the board of directors arbitrarily.
The offering price has been arbitrarily established by the board of
directors. It is not based on market factors, business appraisal or other
established criteria of business valuation. We have not consulted with any
finance professionals to determine the offering price.
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<PAGE>
There has been no prior market for our common stock and the market price of the
shares may fluctuate.
There has been no market for our common stock prior to this offering.
The price of our common stock after the offering may fluctuate widely and may
trade at prices significantly below its initial public offering price. We cannot
guarantee that a trading market for our common stock will develop or, if a
market does develop, the depth of the trading market for the common stock or the
prices at which the common stock will trade.
There can be no assurance that a public market will develop for the common
stock.
We plan to take action so that our common stock will trade on the
Over-the-Counter Bulletin Board, operated by NASDAQ. Because the OTC BB is a
broker driven market, before our stock may be listed and quoted, brokers must
apply for it to be listed and then establish market levels for it to trade. We
must wait until brokers take the appropriate action before our common stock will
trade in that market. There can be no assurance that a market will develop for
the common stock.
Investors may be able to resell the shares acquired in the offering in the
public markets.
The shares are defined as penny stock under the Securities and Exchange
Act of 1934 and rules of the SEC. These rules impose additional sales practice
and disclosure requirements on broker-dealers who sell our shares to persons
other than certain accredited investors. For covered transactions, a
broker-dealer must make a suitability determination for each purchaser and
receive a purchaser's written agreement prior to sale. In addition, the
broker-dealer must make certain mandated disclosures in transactions of penny
stocks. Consequently, these rules may affect the ability of broker-dealers to
make a market in our common stock and may affect the investors ability to resell
shares purchased in this offering.
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<PAGE>
Use of Proceeds
If all the shares are sold, we estimate that we will receive proceeds
from the sale of our common stock in this offering of approximately $950,000,
after deducting the expenses payable by us estimated at $50,000. We intend to
use those proceeds approximately as follows:
Application Amount Percent of Net Proceeds
----------- ------ -----------------------
o Identification and acquisition of $100,000 10.5%
rights
o Update exploration studies and
conduct feasibility studies $450,000 47.4%
o Initial development activities $100,000 10.5%
o Property permitting $100,000 10.5%
o Working capital and general
corporate purposes $200,000 21.1%
Total $950,000 100.0%
The identification and acquisition of rights will be primarily those
costs associated with locating new properties to exploit and will include the
costs associated with the obligations to Wolfranium Corporation Inc.
Because the information relating to the claims on the one property that
we have acquired is dated, we plan to use a majority of the proceeds of this
offering to update the exploration studies and then to conduct feasability
studies. This will include employing geologists and paying for laboratory and
field testing. Associated costs will include hiring equipment and paying labor
expenses.
Initial development expenses are expected to be the costs associated
with locating and contracting with persons to carry out our chosen means of
development or realization on investment. We believe that we will need
considerable amounts of additional capital for any actual development of the
property unless the developmental means is one that we lease or otherwise employ
the capital of others in exchange for income or purchase price payments.
Property permitting expenses are those relating to maintain our mining
stakes and state and federal safety and environmental permits which must be
issued before we commence mining activities. Our expenses will include the costs
of employing mining consultants, legal expenses and filing fees.
The working capital requirements of our company includes general
administrative expenses, salaries, corporate overhead, office rental expense,
accounting and professional expenses and similar expenses.
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<PAGE>
Proceeds not immediately required for the purposes described above will
be invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.
Based upon our current business plan, we believe that the funds
generated by this offering will be sufficient to fund the foregoing applications
for at least twelve months after receipt of the funds.
Although we have made allocations for the use of the net proceeds of
the offering, management may change the allocations in its sole discretion based
on the amount of funds actually received. If less than all the shares are sold,
we will delay the expenses associated with property permitting and initial
development because these are likely to occur later in our development process.
We also would reduce the working capital allocation and try to reduce the other
anticipated expenses, especially in the area of updating exploration studies and
conducting feasibility studies. Significant reductions in our business plan or
delays in taking action may impair our ability to implement our business plan
causing us to curtail all or substantial parts of our potential business
operations
In addition to changing allocations because of the amount of proceeds
received, we may change the uses of proceeds because of required changes in our
business plan or management decisions based on arbitrary decision making.
Investors should understand that we have wide discretion over the use of
proceeds. Therefore, our decisions may not be in line with the initial
objectives of investors who will have little ability to influence these
decisions other than through the process of changing the directors of LRS.
Dividend Policy
We expect to retain all earnings generated by our operations, if any,
for the development and growth of our business. We do not anticipate paying any
cash dividends to our stockholders in the foreseeable future. The payment of
future dividends on the common stock and the rate of such dividends, if any,
will be determined by our board of directors in light of our earnings, financial
condition, capital requirements and other factors.
Determination of Offering Price
The price of the shares was arbitrarily determined in order for LRS to
raise up to a total of $1,000,000 in this offering. The offering price bears no
relationship whatsoever to our assets, earnings, book value, or other
established criteria of value. We also did not consult finance professionals to
help establish the offering price. There is no assurance that the price paid for
a share in the offering will be recoverable by a sale of the share in the public
market, or that a public market will value the company as we have determined its
value.
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<PAGE>
Dilution of the Price Paid for the Shares
At June 30, 2000, we had a pro forma net tangible book value of
$1,050,381 or $.10 per share of common stock. Net tangible book value is equal
to total tangible assets minus total liabilities. Our net tangible book value
per share is calculated by dividing our net tangible book value by 10,654,720,
the total number of shares of common stock outstanding.
At June 30, 2000, after giving pro forma effect to the sale of
8,000,000 shares of common stock in this offering at an assumed initial public
offering price of $.125 per share and the receipt by us of the net proceeds from
this offering, our pro forma net tangible book value at June 30, 2000 would have
been approximately $1,050,000, or approximately $.10 per share of common stock.
The dilution is $.25 per share, or approximately 20%, less than the price you
are paying per share in this offering. The following table illustrates this
dilution:
Assumed public offering price per share........................$.125
-----
Net tangible book value per share of common stock
as of June 30, 2000............................................$.02
Increase per share attributable to sale of common
stock in this offering.........................................$.08
----
Pro forma net tangible book value per share of
common stock after this offering...............................$.10
Dilution per share of common stock to investors
in this offering...............................................$.025
=====
The public offering price is substantially higher than the pro forma
net tangible book value per share. Investors will incur immediate and
substantial dilution.
The following table summarizes the number and percentage of shares
purchased, the amount and percentage of consideration paid and the average
price per share of common stock paid by our existing stockholders and by
new investors in this offering:
<TABLE>
<CAPTION>
Number of Percent of Total Percentage of
Price Per Share Shares Held Ownership Consideration Consideration
Paid
<S> <C> <C> <C> <C> <C>
Existing Stockholders $.015 2,654,721 22.1% $ 38,840 3.7%
Investors in this offering $.125 8,000,000 77.9% $1,000,000 96.3%
----- ----------- ------- ---------- -----
Total $.140 10,764,721 100.0% $1,038,840 100%
</TABLE>
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<PAGE>
Capitalization
The following table sets forth our capitalization. The actual
column shows our capitalization as of June 30, 2000. The pro forma column shows
our capitalization on June 30, 2000, on a pro forma basis adjusted to reflect
our reorganization, the issuance of 8,000,000 shares of common stock in this
offering at an assumed public offering price of $.125 per share.
<TABLE>
<CAPTION>
June 30, 2000
Actual As Adjusted
-------- -----------
<S> <C> <C>
Short Term Debt $18,514 $ 18,514
Stockholders' Equity
Common stock - $.001 par value, 15,000,000 shares
authorized, 2,654,721 shares issued and
outstanding; 10,654,721 issued and outstanding as 2,654 10,654
adjusted 36,186 1,028,186
Paid in Capital (6,973) (6,973)
Accumulated (Deficit)
Total Stockholder's Equity 31,867 1,031,867
Total Capitalization $ 50,381 $1,050,381
</TABLE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
LRS is a development stage company. To date, LRS has had no revenues
and incurred organizational and other start up expenses.
The expenses of LRS during the period of inception (October 7, 1998) to
June 30, 2000 were general and administrative expenses relating to taxes, legal
and accounting services, transfer agent fees, miscellaneous charges and
amortization. During this period, LRS paid $6,972 for these expenses. For all
periods reported on, LRS had losses.
Liquidity and Capital Resources
LRS had working capital of $3,735 at June 30, 2000. At December 31,
1999 the working capital was $26,949. LRS has funded its expenses and losses
from the sale of shares of common stock in 1998 and 2000. These sales were to a
limited member of investors in private placement transactions under an exemption
from registration under the Securities Act of 1933.
LRS will require additional capital to continue to fund its expenses
during the development stage and for the implementation of the business plan of
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<PAGE>
locating, verifying and exploiting mining properties with viable quantities of
minerals, notably tungsten. At this time, all of LRS's capital requirements will
have to come from external sources, either from the sale of securities or
incurring of debt. Without additional capital, LRS will have to curtail its
development plans, and it will not be able to implement its business plan.
LRS does not have any identified capital resources. Moreover, it does
not have any arrangements with investment banking firms or institutional
lenders. This offering is a self- underwritten transaction. This means that
officials of LRS plan to sell all the shares offered without the services of any
investment professionals or broker-dealers. LRS will not pay any commissions on
the sale of the shares offered by this prospectus. The ability of LRS to
implement its business plan and the extent to which it will be able to implement
the different aspects of it depend on the amount of funds raised in this
offering. Because this is a best efforts offering without a minimum, there is no
assurance that any or all the shares offered will be purchased. Also, because
this is an offering without any minimum, early investors bear a disproportionate
risk that insufficient funds will be raised thereby limiting the ability of LRS
to operate as planned.
The business of mining is generally capital intensive. If the estimates
about the one property to which LRS has rights prove incorrect or more costly to
determine, both possible outcomes, it will need capital additional to this
offering to identify and evaluate new properties. Although LRS plans to exploit
mining properties in a manner that will not require it to conduct the full
permitting, extraction, processing and mineral selling aspects of mining, it may
need additional capital to support some of these aspects of property development
or to induce others to work the LRS properties. LRS does not have any sources
for such additional funds.
Other Matters
Year 2000 computer issues
Because LRS began operations after the beginning of the year 2000, it
believes that the computer programs that it uses are Y2K compliant. At this
time, LRS believes that it does not have any assets with embedded computer chips
or programs. Mining data that LRS has used to determine the mining properties to
stake and will use in the future evaluation of the mining properties are
primarily in paper format and therefore not susceptible to year 2000 issues.
Therefore, management of LRS does not expect to experience any Y2K failures.
LRS does not engage in electronic data interchange with any other
entity. Therefore, management of LRS believes it does not have any Y2K exposure
directly from other entities and their failure to be Y2K compliant. Tangently,
however, the failure of other entities to be Y2K compliant may cause LRS issues,
none of which are apparent to management.
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<PAGE>
Business
Introduction
LRS is engaged in the identification, acquisition, and exploration of
tungsten mineral ores located in the Western United States.
LRS was organized under the laws of the state of Delaware on October 8,
1998. The executive offices are at 240 Richmond Street West - Suite 201,
Toronto, Ontario, Canada M5V 1V6. Its telephone number is (416) 597-0202.
Overall Business Methodology
Identify and Acquire Tungsten Properties
LRS has entered into an agreement with a mineral exploration company,
Wolfranium Corporation Inc. which has access to a data base of geological
exploration information on approximately 1,500 mineral properties, the majority
of which are located in the United States. The data base was compiled in the
1950 through 1970 period, and it is believed to contain exploration results and
feasibility studies that still have valuable, useful information. LRS contracted
with Wolfranium to locate an initial mining property with reports of viable
tungsten bearing ore and may use Wolfranium in the future to locate additional
properties. LRS views access to the resources of Wolfranium to be of competitive
advantage in the identification of high quality mineral properties with
significant potential for further exploration and acquisition.
The initial plan of LRS is to locate and acquire one or more viable
tungsten bearing properties. It will then update the original exploration
results and feasibility studies for these properties and begin the permitting
process on the properties that are determined to be the most feasible for the
extraction of minerals. If necessary, additional properties will be identified
and evaluated in a similar manner.
Update of Past Exploration Results and Feasibility Studies on Staked Claims
Once LRS has acquired mining properties and staked claims based on the
Wolfranium work, it will contract with independent geological and environmental
consultants to update the exploration results, feasability studies and
environmental reports to determine if the properties are viable and can be
permitted for full-scale mining. Each property will be studied to determine the
production price that will support positive cash flow and that will be
attractive to develop using modern mining methods.
LRS will then determine the most logical methodology for capitalizing
on the value of the property. Management believes that it will most likely
either sell the property outright or will lease or joint venture properties to
other companies for royalty revenues. LRS believes that there are sufficient
numbers of mining companies that would be interested in acquiring viable mineral
resources by any of these means. Claims that are not feasible to develop will
not be renewed with the appropriate federal and state authorities.
- 12 -
<PAGE>
By electing to use others to commercially develop the properties, LRS
will avoid the expense and responsibilities of having to apply for various
mining permits with respect to the properties and will be able to limit its
liability for regulatory compliance and failures. Of course, where it retains
ownership of a mine it may have residual liability, most likely in the area of
environmental regulatory compliance. Also, by using others for development of
the properties, LRS will reduce its capital requirements.
Tungsten Ore Orientation
The recent trend of increased use of tungsten has resulted in LRS
focusing on this particular mineral. Tungsten is often found with other
important minerals, notably copper and silver, which may also prove to be in
viable levels for recovery on a particular mining property.
During the last several decades, the tungsten market has been
controlled by the government of the Peoples Republic of China in which country
the largest deposits of the mineral are located. As a result, the price of
tungsten has been level and is often at a price that does not permit commercial
mining of the mineral in other areas of the globe. Recently, there has been
development in the uses of tungsten which if accepted will significantly
increase the demand for the mineral. Any significant increase in its demand and
use is expected to have a beneficial effect on the price of the mineral in the
world market, and thereby making previously perceived marginal properties viable
sources. It is not believed that China would be able to increase its production
levels significantly to continue to control the world price of the mineral as it
has been able to do in the past.
The U.S. Army has developed a new bullet that has physical attributes
similar to lead bullets, but is made with tungsten which is perceived to be much
more environmentally friendly. This development was from a directive made by the
U.S. Department of Defense to eliminate hazardous materials from both the
manufacture of small-caliber ammunition and from the bullets themselves. The new
bullets have tungsten cores inside the standard copper jackets. By eliminating
lead, they will be a more environmentally friendly and safer bullet to
manufacture with similar performance as its lead counterparts. The bullets also
appear ballistically identical to those using lead.
Firing ranges using lead ammunition face high cleanup costs. Animals
are at particular risk of accumulating lead in their tissues from this source
through the food chain. Lead is especially dangerous because it impairs brain
development. Tungsten, which is extremely dense and hard, is less toxic than
other metals. An alternative for the core of ammunition is depleted uranium.
However, uranium also raises environmental concerns because of fears that it
poses health dangers during the manufacturing process, to soldiers during its
storage and use, and to civilians who will end up living in uranium contaminated
areas after conflicts.
If the tungsten ammunition is widely adopted, there is ultimately a 200
million bullet market from the U.S. Army. This level of use would represent
about one-eight of the current global consumption of tungsten. If the U.S. Army
adopts tungsten ammunition, it is expected that the use of tungsten in
ammunition used by other military bodies and by police and related law
enforcement services in the United States and around the world would increase.
In these events, it is believed that global demand for tungsten will
significantly increase.
- 13 -
<PAGE>
Correspondingly, with the rise in the demand for the mineral, prices would
increase making previously unused sources of the mineral viable mining
properties.
Pilot Mountain Project
LRS has acquired a 100% interest in the tungsten project known as Pilot
Mountain in west-central Nevada. The property consists of 30 unpatented claims
located in Mineral County, approximately 45 miles west-northwest of Tonopah. The
claims have been staked and recorded for LRS by Wolfranium. The property is
easily accessible via improved gravel roads leading from U.S. highways. The
property lies at elevations raging from 6,300 to 7,600 feet and enjoys year
round access.
The Pilot Mountain Project encompasses the historic workings of the
Desert Scheelite, Gunmetal, Garnet and Good Hope mines, all of which are former
tungsten producers.
The Desert Scheelite mine first produced ore in the early 1940's. Early
production was about 1,000 tons. Small addition tonnages were mined between 1952
and 1957. Total production amounted to less than 10,000 tons. In the early
1970's, there was further exploration of the property and extensive skarn
deposits were discovered and found to contain substantial tonnages of tungsten
bearing ore. The property was optioned to W.R. Grace which continued exploration
but did not put the property into production. Published reserves were
approximately 8 million tons containing 0.32% tungsten . With the tungsten was
found significant copper and silver. The property was sold to Union Carbide
which conducted additional exploration and pre- development activities in the
early 1980's. With the plunge in tungsten prices in the mid to late 1980's and
the contemporaneous demise of the mining division of Union Carbide, the property
was dropped.
The Gunmetal mine was first worked during World War 1. Intermittent
operations continued through 1956 by various operators. Historical production
grades were between 0.5% and 1.0% tungsten. The property lay dormant until Union
Carbide began exploration in 1977. This property was also dropped in the 1980's.
The Garnet mine was operated intermittently from 1941 to 1943 by the
Victory Tungsten Company. Historic production figures indicate that the average
ore approached 0.5% in tenor.
LRS does not have any historical production data on the Good Hope mine.
General Geology of the Project Area
The general geology of the properties is characterized by structurally
complex calcareous, clastic and volcanic rocks of the Paleozoic and Mesozoic age
intruded by monsonitic to granitic rocks. Cenozoic bi-modal volcanics cover much
of this terrain. There have been several periods of folding and faulting. The
properties consist largely of the Luning formation which is limestone to
dolomite with lesser amounts of sharel, argillite and congolomerate with
granitic intrusions.
- 14 -
<PAGE>
The ore deposits of each of the four mines consist of contact
metamorphic deposits with tungsten occurring as scheelite and powellite within
the tactite or skarn zone formed by metamorphism and metasomatism of the
limestone where in intimate contact with the intrusives. Other important metals
occur within some of the properties and are of economic interest. These include
silver and zinc. At lesser amounts, copper and molybdenum have been encountered
in the properties. All these metals should clearly enhance the overall economics
of exploring and developing the properties.
LRS has access to various historic databases relating to the mining
properties This information includes prior exploratory reports, metallurgical
and feasibility documents. Not all the reports are complete and many assumptions
relating to the value of the ores within the properties are based on dated
assumptions, including prior market prices and regulatory costs. In any event,
LRS must establish new reserve estimates, feasibility studies and flow sheets.
LRS cannot give any assurance that the properties will prove to have the ores
and reserves indicated in the existing documentation or that the properties will
be worth mining in the current economic and regulatory climate.
Agreement with Wolfranium Corporation Inc.
LRS has an agreement with Wolfranium Corporation Inc., a Colorado
corporation, to locate, stake and record between 20 and 40 mining claims that
Wolfranium reasonably believes will contain high concentrations of tungsten. The
agreement was entered into on May 6, 1999. Wolfranium has staked the 30
unpatented claims for LRS described in this prospectus pursuant to this
contract. LRS has paid an initial amount of $13,000 and is obligated to pay an
additional $75,000 in the aggregate over the next five years, commencing May, 6,
2001. LRS is also responsible for the filing and registration expenses of up to
$260 per claim staked and the out-of- pocket expenses of Wolfranium. In
addition, if the properties are developed, LRS will pay a net smelter royalty of
two percent of the actual proceeds from the sale of ore, concentrates, bullion,
minerals and other products located in, on or under the mining properties.
Notwithstanding the former requirement, if LRS does not sell any gold or silver
credited to its account by electing to hold on to the precious metals, a royalty
of 2% will be due nonetheless, payable within ninety days of the crediting to
the LRS account.
As additional compensation LRS has agreed to issue shares of common
stock to Wolfranium. LRS is obligated to issue an aggregate of 120,000 shares of
common stock from May 6, 2000 through May 6, 2004. Ten thousand shares were
required to be issued in May 2000. This issuance has not yet been made. Twenty
thousand shares are to be issued in each of the years 2001 and 2002. Thirty
thousand shares are to be issued in 2003. Forty thousand shares are to be issued
in 2004. The number of shares is subject to changes in the aggregate
capitalization of LRS so as to maintain Wolfranium's relative ownership. This
adjustment, however, will not apply if LRS issues shares of common stock for
valuable consideration.
The royalty payment obligation may be terminated by payment of
specified amounts to Wolfranium. To terminate the royalty obligation prior to
May 6, 2005, LRS may pay $2,600,000, less all cash amounts theretofore paid by
LRS to Wolfranium. After May 6, 2005, the termination payment is $4,000,000,
less all cash amounts theretofore paid by LRS to Wolfranium.
- 15 -
<PAGE>
Obligations under the contract must be performed on the basis of "time
is of the essence." Therefore, there is no ability for either party to not
perform or make a payment later than obligated without being in breach of the
agreement. If LRS is in default under the agreement, the remedy specified in the
agreement is that it will transfer and convey to Wolfranium all of its right,
title and interest in and to the mining claims and to all the mineral resources
located therein to which the agreement relates. In addition, in such default,
Wolfranium will retain all amounts previously paid to it and retain all shares
previously issued to it under the agreement. In such event, LRS will lose
substantially all its assets and would likely not be able to continue in
business. Moreover, in such event, investors in LRS will lose their entire
investment.
Regulation
We will be subject to regulation by numerous federal and state
governmental authorities. The most significant will be the Federal Environmental
Protection Agency, the Bureau of Land Management and comparable state agencies.
We expect that the regulation will cause us to spend significant amounts in our
operations once we reach the state of mining our properties. Regulatory
compliance also will take considerable amounts of time prior and during mining
operations to meet and assure compliance. If we fail to comply with these laws,
will be subject to possible fines, many of which are considerable in amount.
Even if others are doing the land preparation and extraction, we may bear some
or all of these costs and liabilities. To date, we have not been required to
spend anything on compliance with environmental laws because we are not
operating any mining properties. We cannot estimate when these costs will begin
or their amount.
Currently we and our agents must only comply with the annual staking
and patent maintenance requirements of the State of Nevada and the United States
Bureau of Land Management.
Competition
We expect to compete with numerous junior mining and exploration
companies to identify and acquire claims with strong development potential. We
believe that our contract with Wolfranium Corporation Inc, and its relationship
with Platoro West, LLC, for the identification of claims from a large database
of previously explored properties gives us a competitive advantage over many
other junior mining and exploration companies. We also expect to compete for the
hiring of appropriate geological and environmental experts to assist with
exploration, feasibility studies and obtaining mining patents. In the future, we
expect to compete for development and extraction consultants, employees and
equipment. Most of our current competitors have, and our future competitors are
expected to have, greater resources than us. Therefore, we anticipate that our
ability to compete largely will depend on our financial resources and capacity
and the opportunity to be associated with a growing company.
Employees
LRS has one full time employee as of June 30, 2000. We expect to hire
consultants and independent contractors during the early stages of implementing
our business plan.
- 16 -
<PAGE>
Properties
The executive office of LRS is located at 240 Richmond Street, West,
Suite 201, Toronto, Ontario, Canada. At this location it shares an undesignated
amount of space with another entity. Currently, the landlord and primary tenant
are not charging LRS any rent. If LRS is obligated to pay rent at this location
or obtain rental space for itself, it believes that space is readily available
at market rates that it would be able to afford after the financing.
See the description mining properties under business for a description
of the unpatented claims staked by LRS in Nevada.
Management
Our directors and executive officers are as follows:
Name Age Position
---- --- ---------
Mitchell Geisler 29 President, Director (Chairman of the Board)
Cindy Roach 37 Secretary, Director
Kevin Wagman 28 Director
Mr. Mitchell Geisler, has been the president and director of LRS
Capital since 2000. Mr. Geisler has over 15 years experience in the hospitality
and services industry. Mr. Geisler has been involved predominantly with
establishing and consulting to entrepreneurs who are entering the industry and
require expert advice on preparing and organizing their operations. From
September 1995 to May 1997, Mr. Geisler managed Ruby Beets restaurant in
Toronto, Ontario, From May 1997 to May 1998, he was a manager of bar operations
at Summit House Grill, and since May 1998, he is a consultant to and president
of 52 Restaurants Inc. Mr. Geisler holds a Bachelor of Arts degree from York
University, Toronto, Canada.
Ms. Cindy Roach, has been the Secretary and a director of LRS Capital
since 2000. Ms. Roach has over 10 years experience as a consultant with group
benefits and human resources administration. From 1990 to 2000, Ms. Roach was a
group benefits consultant at Watson Wyatt Worldwide, a multi national benefits
consulting organization.
Mr. Kevin Wagman, has been the director of LRS Capital since 2000.
Mr. Wagman is an experienced marketing and special promotions consultant. Since
January 1997 Mr. Wagman has been the marketing and special event consultant with
MONDO Events and Promotions. From August 1994 to December 1996 Mr. Wagman was
the production manager with "Applause Applause" Productions in Toronto, Ontario,
and the special events manager for JF&L Limited. Mr. Wagman earned a Masters of
Business Administration in Marketing form the Schulich School of Business, York
University, Toronto, Canada, and a Bachelors of Arts Honors in Mass
Communications/Sociology also from York University.
Each director will hold office until the next meeting of stockholders
or until his successor is duly appointed and qualified.
- 17 -
<PAGE>
Committees of the Board of Directors
The board of directors of LRS has no committees. In the future, it may
establish audit and compensation committees.
Limitation on Directors' Liabilities
Our certificate of incorporation limits, to the maximum extent
permitted under Delaware law, the personal liability of directors and officers
for monetary damages for breach of their fiduciary duties as directors and
officers, except in circumstances involving wrongful acts, such as a breach of
the director's duty of loyalty or acts of omission which involve intentional
misconduct or a knowing violation of law.
Delaware Law permits us to indemnify officers, directors or employees
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement in connection with legal proceedings if the officer, director or
employee acted in good faith and in a manner he reasonably believed to be in or
not opposed to our best interest, and, with respect to any criminal act or
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Indemnification is not permitted as to any matter as to which the person is
adjudged to be liable unless, and only to the extent that, the court in which
such action or suit was brought upon application that, despite the adjudication
of liability, but 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. Individuals who successfully defend this type of action are entitled to
indemnification against expenses reasonably incurred in connection therewith.
Our by-laws require us to indemnify directors and officers against, to
the fullest extent permitted by law, liabilities which they may incur under the
circumstances described in the preceding paragraph.
Executive Compensation
No executive officer receives any cash compensation or other benefits
from LRS. On June 6, 2000, LRS issued an aggregate of 200,000 shares upon
payment of the par value to Messrs. Mitchell Geisler, Kevin Wagman and Ms. Cindy
Roach as their compensation for past services and services to be rendered until
LRS has sufficient cash to be able to pay salary compensation. Cash compensation
amounts will be determined in the future based on the services to be rendered
and time devoted to the affairs of LRS. Other elements of compensation, if any,
will be determined at that time or at other times in the future.
- 18 -
<PAGE>
Principal Stockholders
The following table sets forth the beneficial ownership of our common
stock by all stockholders that hold 5% or more of the outstanding shares of our
common stock, each director and executive officer. Each stockholder named has
sole voting and investment power with respect to his or its shares. This table
does not include options not exercisable within 60 days of the date of this
prospectus. As of the date of this prospectus, there were 2,654,721 shares of
common stock issued and outstanding.
Percentage
Name and Address or Number of Shares Before After
Identity of Group Beneficially Owned Offering Offering
Mitchell Geisler(1) 104,501 3.9 1.0
Cindy Roach(1) 50,000 1.9 .5
Kevin Wagman(1) 50,000 1.9 .5
Marni Miller(2) 1,177,100 44.3 11.0
David Roff 640,080 24.1 6.0
Glen Akselrod 218,004 8.2 2.1
Brice Scheschuk 259,002 9.7 2.4
All officers and 204,501 7.7 1.9
directors as a group
(3 persons)
(1) The address of each of these persons is c/o LRS Capital Inc., 240 Richmond
Street West, Suite 201, Toronto, Ontario, Canada M5V 1V6.
(2) Includes 817,020 shares owned of record by ZDG Investments of which Ms.
Miller is the sole owner.
Description of Securities
Common Stock
Our certificate of incorporation authorizes us to issue up to
15,000,000 shares of common stock, par value $.001 per share. There are
2,654,721 shares issued and outstanding as of the date of this prospectus. Upon
completion of this offering, there will be 10,654,721 shares of common stock
issued and outstanding.
Holders of common stock are entitled to receive dividends as may be
declared by our board of directors from funds legally available for these
dividends. Upon liquidation, holders of shares of common stock are entitled to a
- 19 -
<PAGE>
pro rata share in any distribution available to holders of common stock. The
holders of common stock have one vote per share on each matter to be voted on by
stockholders, but are not entitled to vote cumulatively. Holders of common stock
have no preemptive rights. All of the outstanding shares of common stock are,
and all of the shares of common stock to be issued in connection with this
offering will be, validly issued, fully paid and non-assessable.
Transfer Agent
The transfer agent and registrar for common stock is Olde Monmouth
Stock Transfer Co. Inc., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey, 07716.
Limitations on Stockholder Proposals
Our certificate of incorporation limits the ability of stockholders to
nominate directors or propose resolutions for adoption by the stockholders at
meetings of stockholders. In both instances, nominations and proposals must be
submitted not less than 70 days prior to the scheduled meeting date with
substantial information about the nominee or proposal, information about the
proposing stockholder and reasons for the proposal. The certificate of
incorporation also provides that consent actions by the stockholders without a
meeting may only be taken by unanimous action. These above provisions may only
be changed by a vote of two-thirds of the shares outstanding at the time of
vote.
The above provisions may deter or hinder the change of control of LRS
thereby making it more difficult for a third-party to acquire the company, even
if doing so would benefit the stockholders.
Shares Eligible for Future Sale
After the completion of this offering, we will have 10,654,721 shares
of common stock outstanding. All 8,000,000 shares sold in the offering will be
freely tradeable without restriction under the Securities Act of 1933. Of that
amount 900,200 shares may be sold from time to time in the public market without
registration pursuant to Rule 144 and 1,754,521 shares, will be eligible for
public sale without registration in June 2001 pursuant to Rule 144.
Under Rule 144, a person (or persons whose shares are aggregated) who
has beneficially owned restricted securities for at least one year, including
the holding period of any prior owner except an affiliate, would be generally
entitled to sell within any three month period a number of shares that does not
exceed the greater of (i) 1% of the number of then outstanding shares of the
common stock or (ii) the average weekly trading volume of the common stock in
the public market during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to manner of sale provisions, notice requirements and
the availability of current public information about the company. Any person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the company at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years (including any period of
ownership of preceding nonaffiliated holders), would be entitled to sell shares
under Rule 144(k) without regard to the volume limitations, manner-of-sale
provisions, public information requirements or notice requirements.
- 20 -
<PAGE>
Plan of Distribution
The shares in this offering will be sold by the efforts of Mitchell
Geisler, our President and the other officers and directors of LRS. They will
not receive any commission from the sale of any shares. They will not register
as a broker-dealer pursuant to Section 15 of the Securities and Exchange Act of
1934 in reliance upon Rule 3a4-1, which sets forth those conditions under which
a person associated with an issuer may participate in the offering of the
issuer's securities and not be deemed to be a broker-dealer. These conditions
included the following:
1. None of the selling persons are subject to a statutory
disqualification, as that term is defined in Section 3(a)(39) of
the Exchange Act, at the time of participation,
2. None of such persons are compensated in connection with his or
her participation by the payment of commissions or other
remuneration based either directly or indirectly on transactions
in securities,
3. None of the selling persons are, at the time of participation, an
associated person of a broker-dealer, and
4. All of the selling persons meet the conditions of paragraph (a)
(4) (ii) of Rule 3a4- 1 of the Exchange Act, in that they (A)
primarily perform or are intending primarily to perform at the
end of the offering, substantial duties for or on behalf of the
issuer otherwise than in connection with transactions in
securities, and (B) are not a broker or dealer, or an associated
person of a broker or dealer, within the preceding twelve months,
and (C) do not participate in selling and offering of securities
for any issuer more than once every twelve months other than in
reliance on this rule.
Since the offering is self-underwritten, we intend to advertise and
hold investment meetings in various states where the offering will be registered
and will distribute this prospectus to potential investors at the meetings and
to persons with whom management is acquainted who are interested in LRS and a
possible investment in the offering.
We are offering the shares subject to prior sale and subject to
approval of certain matters by our legal counsel.
This offering will commence on the date of this prospectus and continue
for a period of nine months, unless we sell all the shares prior to that final
date. We may terminate this offering at any time, for any reason; thus not
selling any or all of the shares offered. There is no minimum number of shares
that we are required to sell.
Procedure of Subscription
If you decide to subscribe for shares in this offering, you will be
required to execute a subscription agreement and tender it, together with a
check or wired funds to us, for acceptance or rejection. All checks should be
made payable to LRS Capital Inc.
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<PAGE>
We have the right to accept or reject subscriptions in whole or in
part, for any reason or for no reason. All monies from rejected subscriptions
will be returned immediately by us to the subscriber, without interest or
deductions. Subscriptions for securities will be accepted or rejected promptly.
Once accepted, the funds will be deposited in an account maintained by LRS and
considered property of LRS once cleared by our bank. Certificates for the shares
purchased will be issued and promptly distributed by our transfer agent,
however, it is anticipated that the issuance and distribution of certificates
will take several weeks from the time a subscription is accepted.
Legal Matters
Graubard Mollen & Miller, will opine as to the validity of the common
stock offered by this prospectus and legal matters for us.
Experts
Our financial statements have been included in the registration
statement in reliance upon the report of Simon Krowitz Bolin & Associates, PA,
independent certified public accountants, appearing in the registration
statement, and upon the authority of this firm as experts in accounting and
auditing.
Where You Can Find Additional Information
We intend to furnish our stockholders annual reports, which will
include financial statements audited by independent accountants, and all other
periodic reports as we may determine to furnish or as may be required by law,
including Sections 13(a) and 15(d) of the Exchange Act.
We have filed with the SEC a registration statement on Form SB-2 under
the Securities Act with respect to the securities offered by this prospectus.
This prospectus does not contain all the information set forth in the
registration statement and the accompanying exhibits, as permitted by the rules
and regulations of the SEC. For further information, please see the registration
statement and accompanying exhibits. Statements contained in this prospectus
regarding any contract or other document which has been filed as an exhibit to
the registration statement are qualified in their entirety by reference to these
exhibits for a complete statement of their terms and conditions. The
registration statement and the accompanying exhibits may be inspected without
charge at the offices of the SEC and copies may be obtained from the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549 or at of its
regional offices located at 7 World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, upon
payment of the fees prescribed by the SEC. Electronic reports and other
information filed through the Electronic Data Gathering, Analysis, and Retrieval
System, known as EDGAR, are publicly available on the SEC's website,
http://www.sec.gov.
- 22 -
<PAGE>
FINANCIAL STATEMENTS OF LRS CAPITAL, INC.
Table of Contents
--------------------------------------------------------------------------------
Independent Auditors' Report 24
Financial Statements
Balance Sheet 25
Statement of Income and Retained Earnings 26
Statement of Stockholders' Equity 27
Statement of Cash Flows 28
Notes to Financial Statements 29
<PAGE>
Independent Auditors' Report
To the Board of Directors of
LRS Capital, Inc.
Toronto, Ontario
CANADA
We have audited the accompanying balance sheet of LRS Capital, Inc. (a
development stage company) as of December 31, 1999 and the related statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of LRS Capital's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 LRS Capital, Inc. as of
December 31, 1999 and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
The financial statements as of June 30, 2000 and for the six months then ended
and indicated as unaudited are representations of management. We did not audit
or review them and accordingly, express no opinion or other form of assurance on
them.
/s/ Simon Krowitz Bolin & Associates P.A.
------------------------------------------
Simon Krowitz Bolin & Associates P.A.
June 30, 2000
24
<PAGE>
LRS CAPITAL, INC.
(A Development Stage Company)
BALANCE SHEET
-------------------------------------------------------------------------------
June 30,
December 31, 2000
1999 (Unaudited)
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash (Note 1) $ 2,505 $ 14,779
--------------------------------------------------------------------------------
Other Assets
Organization Costs (Net of Amortization) 890 742
Investment - Mineral Rights 22,361 34,861
--------------------------------------------------------------------------------
Total Other Assets 23,251 35,603
--------------------------------------------------------------------------------
TOTAL ASSETS $ 25,756 $ 50,382
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 1,333 $ 0
Due to Related Parties 29,454 18,514
--------------------------------------------------------------------------------
Total Liabilities 30,787 18,514
--------------------------------------------------------------------------------
Stockholders' Equity
Common Stock - $0.001 par value;
15,000,000 shares authorized,
2,654,720 shares issued and outstanding 900 2,654
Additional Paid in Capital (700) 36,186
Retained Earnings (Deficit) (5,231) (6,972)
--------------------------------------------------------------------------------
Total Stockholders' Equity (5,031) 31,868
--------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,756 $ 50,382
================================================================================
25
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A Development Stage Company)
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Period
-------------------------------------------------------------------------------------------
October 7,
January 1, 1998
2000 to (inception)
Year Ended June 30, 2000 to June 30,
December 31, (Unaudited) 2000
1999 (Unaudited)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0
-------------------------------------------------------------------------------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Taxes 380 0 380
Legal and Accounting 3,987 323 4,310
Transfer Agent Fee 0 1,250 1,250
Miscellaneous 270 20 290
Amortization 297 148 742
-----------------------------------------------------------------------------------------
TOTAL EXPENSES (4,934) (1,741) 6,972
-----------------------------------------------------------------------------------------
NET (LOSS) (4,934) (1,741) (6,972)
RETAINED EARNINGS (DEFICIT) - BEGINNING (297) (5,231) 0
-----------------------------------------------------------------------------------------
RETAINED EARNINGS - ENDING $ (5,231) $ (6,972) $ (6,972)
=========================================================================================
NET (LOSS) PER SHARE - BASIC $ (.07) $ (0.00) $ (0.00)
NET (LOSS) PER SHARE - DILUTED (.07) (0.01) (0.01)
WEIGHTED AVERAGE SHARES USED IN PER SHARE
CALCULATION - BASIC 75,200 2,654,720 2,654,720
WEIGHTED AVERAGE SHARES USED IN PER SHARE
CALCULATION - DILUTED 75,200 1,192,620 825,755
========================================================================================
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A Development Stage Company)
STATEMENT OF CHANGE OF STOCKHOLDERS' EQUITY
For the Period October 7, 1998 (inception) to June 30, 2000
---------------------------------------------------------------------------------------------------------------------
Compre-
Retained hensive
Shares Amount Earnings Total Income
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 7, 1998
(inception) 0 $ 0 $ 0 $ 0 $ 0
Issuance of Common Stock 200 200 200
Net Loss 0 (297) (297) (297)
---------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998 200 200 (297) (97) (297)
Stock Dividend 900,000 0 0
Net Loss- Year Ended December 31,
1999 (4,934) (4,934) (4,934)
---------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 900,200 200 (5,231) (5,031) (5,231)
Stock Subscribed by Conversion of
Due to Related Parties 1,472,709 29,454 29,454
Stock Subscribed 74,311 1,486 1,486
Subscribed of Common Stock 207,500 7,700 7,700
Net Loss - June 30, 2000 (1,741) (1,741) (1,741)
---------------------------------------------------------------------------------------------------------------------
Balance - June 30, 2000 (Unaudited) 2,654,721 $ 38,840 $ (6,972) $ 31,868 $ (6,972)
=====================================================================================================================
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period
October 7,
January 1, 1998
January 1, 2000 to (inception)
1999 to June 30, 2000 to June 30,
December 31, (Unaudited) 2000
1999 (Unaudited)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $ (4,934) $ (1,741) $ (6,972)
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Amortization 297 148 742
Changes in assets and liabilities:
(Decrease) Increase in Accounts Payable 1,333 (1,333) 0
Increase in Due to Related Parties 27,970 (10,940) 18,514
---------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY OPERATING ACTIVITIES 24,666 (13,866) 12,284
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Mineral Rights (22,361) (12,500) (34,861)
Organization Costs 0 0 (1,484)
---------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES (22,361) (12,500) (36,345)
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Common Stock 0 38,640 38,440
---------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 2,305 12,274 14,779
CASH - Beginning 200 2,505 0
---------------------------------------------------------------------------------------------------------------------
CASH - Ending $ 2,505 $ 14,779 $ 14,779
=====================================================================================================================
Non Cash Transaction
Fee for Consulting Services for 7,500 Shares Stock $ 0 $ 7,500 $ 7,500
=====================================================================================================================
</TABLE>
28
<PAGE>
LRS CAPITAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
June 30, 2000
(Unaudited)
-------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Business Activity - LRS Capital, Inc. ("LRS Capital" or the
"company") is a development stage company with no current business
operations. The company was incorporated in the state of Delaware on
October 7, 1998 under the name LRS Group Incorporated. On October 15, 1998,
the name of the corporation was changed to LRS Capital, Inc. The Company is
currently acquiring certain mining claims.
Organization Costs - The company incurred organization costs of $1,484.
These costs are being amortized on a straight-line basis over a five-year
period.
Investment - The Company has invested for the acquisition of mineral rights
resource at a cost of $34,861. This is equivalent to fair market value.
Income Taxes - Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income tax assets
and liabilities are determined based on the differences between the
financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws. A valuation
allowance is provided for the amount of deferred tax assets that, based on
available evidence, are not expected to be realized.
Basic and Diluted Net Income (Loss) Per Share - Basic net income (loss) per
share is computed using the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is also
computed using the weighted average number of common shares outstanding
during the period. The company has no convertible debentures or shares
outstanding and no stock options or warrants outstanding.
Cash and Cash Equivalent - The company maintains a petty cash fund on hand,
which it classifies as cash for purposes of the statement of cash flows.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses
during the reported period. Actual results could differ from those
estimates.
29
<PAGE>
LRS CAPITAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
June 30, 2000
(Unaudited)
-------------------------------------------------------------------------------
NOTE 2 - INCOME TAXES
Since the company has not yet realized income as of the date of this
report, no provision for income taxes has been made. At December 31, 1999 a
deferred tax asset has not been recorded due to the company's lack of
operations to provide income to use the net operating loss carryover of
$4,934 and $297 which expire in 2002 and 2001.
NOTE 3 - SHAREHOLDERS EQUITY
Common Stock - In 1999, the Company amended the certificate of
incorporation to increase the authorized shares from 200 to 15,000,000
common shares; $.001 par value per share and 2,654,520 shares issued and
outstanding of which 1,547,021 shares were issued due to/from conversion of
related parties.
NOTE 4 - RELATED PARTY TRANSACTIONS
An officer and stockholder of the company loaned the company $1,484 in
fiscal year 1998 with no interest rate and no fixed repayment term. During
1999, none of the principal balance related to the loan was paid in fiscal
year 1999.
NOTE 5 - FINANCIAL INSTRUMENTS
Fair Value - The carrying values of cash and due to related parties
approximate fair values.
Concentrations of Risk - Financial instruments that potentially subject the
company to significant concentration of credit risk consist primarily of
cash. The company's cash is held in a Canadian financial institutions and
does not constitute a deposit that is insured under the Canada Deposit
Insurance Corporation Act and petty cash held on its premises of $200.
NOTE 6 - CONTINGENCIES
Legal - The company is not currently aware of any other legal proceedings
or claims that the company believes will have, individually or in the
aggregate, a material adverse effect on the company's financial position or
results of operations.
30
<PAGE>
LRS CAPITAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENT
June 30, 2000
(Unaudited)
-------------------------------------------------------------------------------
NOTE 7 - COMMITMENTS, CONTINGENCIES
The Company entered into an agreement on May 6, 1999 with Wolfranium
Corporation Inc. (WCI), under which WCI will locate, stake out and record
not more than forty mining claims nor less than twenty mining claims that
WCI believes to contain high concentrations of minerals and metal ores. LRS
Capital, Inc. (LRS) agreed to pay to WCI Net Smelter Royalties of an amount
equal to 2% of the actual cash proceeds from sales of valuable minerals and
ores from subject mining claims. The Company also has an obligation to pay
WCI $8,000 within five business days from the date of the agreement, plus
the following:
May 6, 2000 $5,000
May 6, 2001 $5,000
May 6, 2002 $15,000
May 6, 2003 $15,000
May 6, 2004 $20,000
May 6, 2005 $20,000
The Company also agreed to issue shares of LRS common stock to Wolfranium
Corporation Inc. at a subscription price of $0.001 per share, as follows:
May 6, 2000 10,000 shares
May 6, 2001 20,000 shares
May 6, 2002 20,000 shares
May 6, 2003 30,000 shares
May 6, 2004 40,000 shares
Additionally, in lieu of royalty payments, LRS has an option to pay WCI
$2,600,000 during the first 6 years or $4,000,000 after 6 years less any
amounts paid previously paid.
The above shares are to be issued based on 10,000,000 shares outstanding.
If less than 10,000,000 shares are issued, the amount due Wolfranium is
correspondingly less.
31
<PAGE>
[back cover page]
You should rely only on the information contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is correct only as of the date of this
prospectus, regardless of the time of the delivery of this prospectus or any
sale of these securities.
LRS CAPITAL INC.
<PAGE>
PART TWO
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the Delaware permit the indemnification of directors,
employees, officers and agents of Delaware corporations. Our articles of
incorporation and bylaws provide that we shall indemnify to the fullest extent
permitted by Delaware law any person whom we indemnify under that law.
The provisions of Delaware law that authorize indemnification do not
eliminate the duty of care of a director. In appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available. In addition, each director will continue to be subject to
liability for (a) violations of criminal laws, unless the director has
reasonable cause to believe that his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful, (b) deriving an improper personal
benefit from a transaction, (c) voting for or assenting to an unlawful
distribution and (d) willful misconduct or conscious disregard for our best
interests in a proceeding by or in our right to procure a judgment in its favor
or in a proceeding by or in the right of a stockholder. The statute does not
affect a director's responsibilities under any other law, such as the federal
securities laws.
The effect of the foregoing is to require us to indemnify our officers
and directors for any claim arising against such persons in their official
capacities if such person acted in good faith and in a manner that he or she
reasonably believed to be in or not contrary to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
To the extent that we indemnify our management for liabilities arising
under securities laws, we have been informed by the SEC that this
indemnification is against public policy and is therefore unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by us in connection with the
distribution of the securities being registered are as follows:
SEC Registration and Filing Fee................................ $ 264.00
Legal Fees and Expenses........................................ 15,000.00
Accounting Fees and Expenses................................... 15,000.00
Financial Printing and Engraving............................... 1,000.00
Blue Sky Fees and Expenses..................................... 2,500.00
Miscellaneous.................................................. 16,236.00
TOTAL................................................ $50,000.00
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
(1) On October 9, 1998, the Registrant issued to nine persons, an aggregate of
200 shares of common stock as founder shares. The exemption for the
issuance of these shares was Section 4(2) of the Securities Act of 1933.
The consideration paid per share was $1.00 The Registrant declared a share
dividend on October 28, 1999 so that each outstanding share would equal
after the dividend 4,500.
(2) On June 6, 2000, the Registrant issued an aggregate of 200,000 shares of
common stock to three persons who were then officers and directors of the
Registrant. The exemption for the issuance of these shares was Section 4(2)
of the Securities Act of 1933. The consideration for the shares was the
payment of par value and past and future services.
(3) On June 6, 2000 the Registrant issued an aggregate of 1,547,020 shares to
four persons. Each of the persons was a stockholder of the Registrant. The
exemption for the issuance of these shares was Section 4(2) of the
Securities Act of 1933. The consideration for the shares was $.0129 per
share for an aggregate of $20,000.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description of Document
3.1 Certificate of Incorporation of Registrant
3.2 Amendment to Certificate of Incorporation of Registrant
3.3 Bylaws of Registrant
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Graubard Mollen & Miller*
10.1 Agreement between Wolfranium Corporation Inc. and Registrant
10.2 Amendment to Wolfranium Corporation Inc. Agreement
10.3 Form of Investor Subscription Agreement*
23.1 Consent of Simon Krowitz Bolin & Associates P.A.
23.2 Consent of Graubard Mollen & Miller (Contained in Exhibit 5.1)*
24.1 Powers of Attorney (included on signature page)
----------------------
*To be filed by amendment
2
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned issuer hereby undertakes to provide to the
underwriters, the closing specified in the underwriting agreement, certificates
in such denominations and registered in such names as required by the
underwriters, to permit prompt delivery to each purchaser.
The undersigned issuer also undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(1) include any prospectus required by section 10(a)(3) of the
Securities Act;
(2) reflect in the prospectus any facts or events arising after
the effective date of the registration statement;
(3) include any additional or changed material information
regarding the plan of distribution;
(4) for determining liability under the Securities Act, we will
treat each post- effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering; and
(5) file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(b) As indemnification for liability arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant under the above provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by any director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) We undertake:
(1) For the purpose of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by us under Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
3
<PAGE>
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered in the prospectus and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering of the securities.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in Toronto, Ontario on August 25, 2000
LRS CAPITAL INC.
By: /s/ MITCHELL GEISLER
-------------------------
Mitchell Geisler
President
(Principal Executive Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mitchell Geisler and Cindy Roach, and
each of them, with full power to act without the other, such person's true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign this Registration Statement, any and all amendments thereto
(including post-effective amendments), any subsequent Registration Statements
pursuant to Rule 462 of the Securities Act of 1933, as amended, and any
amendments thereto and to file the same, with exhibits and schedules thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Form
SB-2 registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Mitchell Geisler Chairman of the Board and August 25, 2000
---------------------
Mitchell Geisler President (Principal Financial
Officer and Principal Accounting
Officer)
/s/ Cindy Roach Secretary and Director August 25, 2000
---------------------
Cindy Roach
/s/ Kevin Wagman Director August 25, 2000
---------------------
Kevin Wagman
5
<PAGE>
Exhibit Index
Exhibit No. Description of Document
----------- ------------------------
3.1 Certificate of Incorporation of Registrant
3.2 Amendment to Certificate of Incorporation of Registrant
3.3 Bylaws of Registrant
4.1 Specimen Common Stock Certificate*
5.1 Opinion of Graubard Mollen & Miller*
10.1 Agreement between Wolfranium Corporation Inc. and Registrant
10.2 Amendment to Wolfranium Corporation Inc. Agreement
10.3 Form of Investor Subscription Agreement*
23.1 Consent of Simon Krowitz Bolin & Associates P.A.
23.2 Consent of Graubard Mollen & Miller (Contained in Exhibit 5.1)*
24.1 Powers of Attorney (included on signature page)
----------------------
*To be filed by amendment
6
