As filed with the Securities and Exchange Commission on December 27, 2000.
Registration Statement No. 333-44530
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LRS CAPITAL INC.
(Name of Small Business Issuer in its Charter)
------------------------
Delaware 212299 N/A
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
------------------------
240 Richmond Street West - Suite 201
Toronto, Ontario, Canada M5V 1V6
(416) 597-0202
(Address and telephone number of principal executive offices)
------------------------
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)
------------------------
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. [X]
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. [ ]
The registrant hereby amends 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 pursuant to said 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 DECEMBER 27, 2000
LRS CAPITAL INC
8,000,000 Shares of Common Stock
Up to 8,000,000 shares of our common stock are being sold by the officers
and directors of LRS 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. We will
not escrow the funds received in the purchase of our common stock. We will issue
certificates for common stock purchased within ten business days after receipt
of a fully executed subscription agreement that is accepted by us and good funds
for the purchase are in our account.
No public market exists for our common stock. A public market may not
develop after the sale of the shares.
We are entirely dependent on the proceeds of this offering to fund our
operations.
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
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Public offering price ..................... $.125 $1,000,000(1)
-----------------
(1) Assumes all 8,000,000 shares offered are sold. The expenses of this
offering, estimated at $50,000, will be deducted from the total
proceeds to LRS.
The date of this prospectus is ___________, 2000
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Table of Contents
Page
----
Summary .................................................................. 1
Risk Factors ............................................................. 3
Use of Proceeds .......................................................... 9
Dividend Policy .......................................................... 10
Determination of Offering Price .......................................... 10
Dilution of the Price Paid
for the Shares ........................................................ 10
Capitalization ........................................................... 12
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............................................. 12
Business ................................................................. 14
Management ............................................................... 22
Executive Compensation ................................................... 24
Principal Stockholders ................................................... 25
Description of Securities ................................................ 26
Shares Eligible for Future Resale ........................................ 26
Plan of Distribution ..................................................... 27
Legal Matters ............................................................ 28
Experts .................................................................. 28
Where You Can Find
Additional Information ................................................ 28
Index to Financial Statements ............................................ F-1
LRS Capital Inc., referred to in this prospectus as LRS, we or us, is
engaged in the identification, acquisition and exploration of mining prospects
with tungsten bearing mineralization. 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).
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<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, acquisition and exploration of mining
prospects with tungsten mineralization.
We currently have one mining prospect in west-central Nevada. The prospect
consists of 30 unpatented claims. We plan to conduct further exploration of this
prospect to determine reserves and mining feasibility. We may also attempt to
locate other prospects and stake additional claims with tungsten mineralization.
If our exploration results are positive, we plan to lease, joint venture or
otherwise work with other mining companies for full development and extraction
of minerals or sell the viable, staked mining prospects as a means to realize a
return on their value. There is no assurance that commercially viable
mineralized body of tungsten or other minerals exists in any of our current or
possible future prospects. We will not know this until sufficient and
appropriate exploration work and a final evaluation of the legal and economic
feasibility is done.
We have had no revenues to date. We expect to incur substantial expenses in
the exploration for tungsten mineralization 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.
LRS contracted with Wolfranium Corporation Inc. to locate, stake and record
20 to 40 mining claims likely to contain high concentrations of tungsten.
Wolfranium has staked 30 unpatented claims for LRS. Under this agreement, LRS
paid $13,000 and is obligated to pay an additional $75,000 in the aggregate over
the five years commencing May 6, 2001. LRS is also responsible for reimbursement
of the yearly registration and filing fees for the staked claims which
Wolfranium is obligated to maintain on our behalf. If the claims are developed,
LRS will pay a net smelter royalty of two percent. LRS is obligated to issue
shares of common stock to Wolfranium as additional consideration, the number
being issued annually on May 6, 2000 through May 6, 2003, and the calculation
being based on the shares of LRS outstanding on the date of issuance pursuant to
an upward and downward anti-dilution clause. LRS was obligated to issue and has
issued 2,700 shares in respect of the May 6, 2000 obligation.
Obligations by the parties to the Wolfranium agreement must be performed on
the basis of "time is of the essence." If LRS is in default, the remedy is that
LRS will transfer and convey to Wolfranium all of its rights, title and interest
in and to the mining claims and to all the mineral resources located therein to
which the agreement relates, and Wolfranium will retain all prior payments.
Because the only current mining claims of LRS are those subject to the
agreement, in the event of a default by LRS, it will lose substantially all its
assets and not be able to continue in business. In such a circumstance,
investors in LRS would lose their entire investment.
THE OFFERING
<TABLE>
<S> <C>
Securities offered.................. Up to 8,000,000 shares of common stock.
Common stock outstanding
prior to the offering............... 2,654,720 shares
Common stock to be outstanding
after the offering.................. 10,654,720 shares (assuming all 8,000,000 shares are sold)
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<PAGE>
Use of proceeds..................... We intend to use the net proceeds of this offering as follows:
o Identification and acquisition of mining prospects
o Update prior exploration studies
o Permitting expenses
o Working capital
Subscription method................. Investors will be asked to complete an investor subscription
agreement and return it to us with the purchase price.
Certificate issuance................ Within ten business day after receipt and acceptance of
investor subscription agreement and good funds, a certificate
for the shares will be sent to the address supplied.
</TABLE>
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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 RUNNING 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 business operations to date. More particularly, we have not engaged
in any mining operations beyond that of obtaining 30 unpatented claims for one
mining prospect 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 business future 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. 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 prospects; and
o Establishing initial exploration plans for mining prospects.
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 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 stage of our business
plan. More particularly, these stages will include exploration for and
verification of mineral deposits on staked mining prospects and the subsequent
evaluation and assessment activities necessary to determine the viability of a
mining prospect. 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.
OUR OFFICERS AND DIRECTORS HAVE NO PRIOR EXPERIENCE IN OPERATING A COMPANY IN
THE MINING INDUSTRY.
Our officers and directors have business experience in fields other than
exploration for mineral deposits and the mining industry. It is possible that
they may make mistakes in business judgment that a person with mining experience
would not make. They are dependent on the experience of consultants for
implementation of the business plan.
MINERAL EXPLORATION HAS MANY INHERENT RISKS OF OPERATIONS WHICH MAY PREVENT
ULTIMATE SUCCESS.
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<PAGE>
Mineral exploration has significant risks. Some of these include the
following:
o It is dependant on locating mineral reserves in staked claims and skillful
management of these prospects once found or located.
o Mineral deposits and mineralization may vary substantially in a prospect,
rendering what was initially believed a profitable deposit of little or no
value.
o Mineral exploration and ultimate exploitation may be affected by unforeseen
changes 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.
OUR BUSINESS FUTURE IS DEPENDENT ON FINDING DEPOSITS WITH SUFFICIENT
MINERALIZATION AND GRADE.
Our business model depends on our locating prospects with a sufficient
amount of mineralization to justify surface and drilling sampling. No assurance
can be give that our current data resources will be valuable in locating
mineralization. Even if initial mineralization reports are positive, subsequent
activities may determine that deposits are not commercially viable. Thus, at any
stage in the exploration process, we may determine there is no business reason
to continue, and at that time, our resources may not enable us to continue
exploratory operations and will cause us to terminate our business.
WE ARE RELYING ON DATED GEOLOGICAL REPORTS TO LOCATE POTENTIAL MINERAL DEPOSITS
WHICH MAY BE INACCURATE.
We rely on reports typically several decades old to determine which
potential mineral deposits to 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. Verification is expected to be costly and may take a
considerable period of time. Verification may result in our rejecting a
prospect; 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 prospects could result in significant unrecoverable
expenses. Mineral deposits 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 STAKED CLAIMS TO WOLFRANIUM CORPORATION INC.
LRS has an agreement with Wolfranium Corporation Inc., an independent
company, to locate, stake and register 20 to 40 claims likely to contain high
concentrations of tungsten. The obligations of LRS under its agreement with
Wolfranium include payment of royalties and reimbursement of expenses and
issuance of shares of common stock based on a formula until May 6, 2003. 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
staked claims 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 current assets and may 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.
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 explore for economic mineralization and our subsequent
business stages. 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.
THE LRS BUSINESS PLAN IS PREMISED ON GROWTH IN THE USE OF TUNGSTEN, WHICH IF IT
DOES NOT OCCUR, MAY MAKE TUNGSTEN MINING UNECONOMICAL IN THE UNITED STATES.
The LRS business plan depends in large part on an increased demand in the
use of tungsten with a concomitant rise in market prices. An increase in market
use and prices for tungsten will assure industry interest in United States
tungsten mine development and improve the likelihood of our overall success. If
the use of tungsten does not increase, then it is likely current sources of
tungsten will remain adequate for market supply and sources like those LRS is
attempting to identify and explore will become marginalized. The result may be
that LRS will have to curtail its business plan and investors will lose their
investment.
COMPETITION MAY DEVELOP WHICH WILL BE BETTER ABLE TO LOCATE, STAKE AND DEVELOP
TUNGSTEN SOURCES MORE COST EFFECTIVELY AND QUICKER THAN LRS.
There are numerous junior and developed mining and exploration companies in
existence that may be attracted to the tungsten mining business if the use of
the mineral increases. LRS believes there are a significant number of companies
that could command greater resources than those available to LRS to locate,
stake, explore and develop tungsten resources. These companies may be able to
reach production stages sooner than LRS and obtain market share before LRS.
LRS WILL COMPETE WITH MINING ENTERPRISES FOR APPROPRIATE CONSULTANTS AND
EMPLOYEES.
LRS will compete in the hiring of appropriate geological and environmental
experts to assist with location and exploration of claims and implementation of
its business plan. The success of LRS will largely depend on its financial
resources and the opportunities offered to be associated with a growing company.
RISKS RELATING TO CAPITAL REQUIREMENTS
LRS IS ENTIRELY DEPENDENT ON THE PROCEEDS OF THIS OFFERING TO FUND OUR
EXPLORATORY ACTIVITIES.
LRS currently has insufficient capital to engage in exploratory activities
and no sources for financing other than the proposed offering. The extent to
which we will be able to implement our exploration for tungsten mineralization
will be determined by the amount of proceeds from this offering.
LRS WILL REQUIRED ADDITIONAL FUNDS TO THOSE OF THIS OFFERING TO FUND ITS
OPERATIONS.
The proceeds of this financing will not be sufficient for full development
of our mining prospects. LRS will need additional capital to fund the full
exploratory work on the current mining stakes and to locate, verify and develop
additional mining prospects with viable mineralization of sufficient grade. LRS
will have to obtain the funds from external sources from the sale of additional
equity securities or debt securities. Without additional capital, LRS will have
to curtail its business plan or abandon it.
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<PAGE>
LRS DOES NOT HAVE ANY IDENTIFIED SOURCES OF ADDITIONAL CAPITAL, THE ABSENCE OF
WHICH MAY PREVENT LRS FROM CONTINUING ITS OPERATIONS.
LRS does not have any arrangements with any investment banking firms of
institutional lenders. Because LRS will need additional capital, it will have to
expend significant effort to raise operating funds. These efforts may not be
successful. If not, LRS will have to limit or curtail operations.
SINCE MINERAL EXPLORATION AND MINING IS CAPITAL INTENSIVE AND IS SUBJECT TO MANY
VAGARIES, LRS WILL NEED ADDITIONAL CAPITAL.
Full development of staked mines will require substantial funds in excess
of those currently sought by LRS. If the estimates about the one prospect to
which LRS has staked claims prove incorrect or more costly to determine, LRS
will need additional capital to identify and evaluate new prospects. The absence
of necessary funds will force LRS to change its business plan and long-term
strategy and, possibly, to curtail operations.
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 directors, and we will not pay them 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.
THIS OFFERING IS BEING MADE WITHOUT ANY ESCROW OF INVESTOR FUNDS OR PROVISIONS
TO RETURN FUNDS.
When investors make a subscription for our common stock that is accepted,
the purchase price will not be placed in any escrow accounts and will become a
general asset of LRS. There is no minimum offering amount. Subscriptions will be
accepted on a rolling basis. There are no investor protections for the return of
invested monies. All proceeds will become property of the company for use in its
exploration activities and business.
BECAUSE THERE IS NO MINIMUM OFFERING REQUIREMENT, EARLY INVESTORS IN THIS
OFFERING BEAR A DISPROPORTIONATE RISK OF LRS BEING ABLE TO OPERATE ON THE FUNDS
RAISED.
This offering is made on a rolling basis with no minimum amount having to
be raised. Therefore, early investors will participate in the offering with no
assurance that a sufficient amount of funds will be raised for the intended use
of proceeds. If insufficient funds are the result of this offering, LRS may have
to curtail its operations, but investors will not be able to get their
investment funds back.
FUTURE SALES OF SHARES BY OUR CURRENT STOCKHOLDERS COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.
After completion of this offering, there will be 10,654,720 shares of our
common stock outstanding if all the shares offered hereby are sold, of which
2,654,720 shares, or approximately 25%, will be held by our current
stockholders. Of the amount held by the current stockholders, 900,200 shares may
be sold under Rule 144 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. After June 6, 2001, an
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<PAGE>
additional 1,754,520 shares held by directors, officers and principal
stockholders 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.
THE OFFICERS WILL HAVE BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING.
Although we have allocated the proceeds from this offering among several
categories of uses, they may be changed by management at any time. The amount
allocated to a use also may be changed depending on management's determination
about the best use of the funds at the particular time. Therefore, investors
must rely entirely on the business judgment of management in the use the
offering proceeds and to determine how and what portions of the business plan
will be implemented.
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 give
any assurance 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 NOT 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.
OUR DIRECTORS AND OFFICERS WILL HAVE SUBSTANTIAL ABILITY TO CONTROL OUR BUSINESS
DIRECTION.
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<PAGE>
Because our directors and officers own a substantial number of shares of
common stock, they are in a position to control, or at the least, influence the
election of our directors. Therefore, they are able to influence the business
operation of LRS.
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USE OF PROCEEDS
The offering is on a best efforts, no minimum basis. The principal use of
proceeds will be to conduct exploratory actions to determine the mineralization
and grade levels of our current mining prospect. Below are offered three
alternatives of the application of proceeds that may be received in the
offering. In each instance the applications assume net proceeds after offering
expenses estimated at $50,000.
<TABLE>
<CAPTION>
ACTIVITY NET PROCEEDS AMOUNT
-------- -------------------
<S> <C> <C> <C>
Identification and acquisition of mining prospects $ 30,000 $100,000 $250,000
Update prior exploration studies $100,000 $280,000 $450,000
Permitting expenses $ 60,000 $100,000
Working capital $ 20,000 $ 60,000 $150,000
-------- -------- --------
Total $150,000 $500,000 $950,000
</TABLE>
The identification and acquisition of mining prospects will be primarily
those costs associated with locating new ones. This also will include the costs
associated with the current cash obligations to Wolfranium Corporation Inc.
which are the annual payments aggregating $75,000 over the next five years and
the annual filing and registration expenses of $260 per claim staked and
reimbursement of out of pocket expenses that are expected to be minimal.
Because the information we are using to identify mining claims is dated, we
must use a substantial amount of the proceeds of this offering to verify and
update the previous exploration studies. Thereafter, we must conduct feasibility
studies, including surface and drilling sampling and laboratory testing.
Associated costs will be hiring geologists, boring equipment and paying labor
costs.
Prospect permitting expenses are those relating to maintaining our mining
stakes and state and federal safety and environmental permits which must be
issued before we commence exploratory 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, compensation, corporate overhead, office rental
expense, accounting and professional expenses and similar expenses.
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.
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
correspondingly will limit our activities to fewer prospects and will delay the
expenses associated with permitting because this is 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
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<PAGE>
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 by
stockholder action.
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.
DILUTION OF THE PRICE PAID FOR THE SHARES
At September 30, 2000, we had a pro forma net tangible book value of
$925,079 or $.09 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 September 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 September 30, 2000 would
have been approximately $925,000, or approximately $.09 per share of common
stock. The dilution is $.035 per share, or approximately 28%, less than the
price you are paying per share in this offering. The following table illustrates
this dilution:
Assumed public offering price per share.............................$.125
-----
Net tangible book value per share of common stock
as of September 30, 2000 (actual)...................................$.00
Increase per share attributable to sale of common
stock in this offering..............................................$.09
----
Pro forma net tangible book value per share of
common stock after this offering....................................$.09
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<PAGE>
Dilution per share of common stock to investors
in this offering....................................................$.035
=====
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 2,654,720 22.1% $ 35,290 3.4%
Investors in this offering $.125 8,000,000 77.9% $1,000,000 96.6%
----- ---------- ------ ---------- -----
Total $.140 10,654,720 100.0% $1,035,290 100%
</TABLE>
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2000.
September 30,
2000
----
Short Term Debt $ 18,514
Stockholders' Equity
Common stock - $.001 par value, 15,000,000 shares
authorized, 2,654,720 shares issued and outstanding;
Paid in Capital 2,655
Accumulated (Deficit) 35,035
(62,611)
Total Stockholder's Equity $ (24,921)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PLAN 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
September 30, 2000 were general and administrative expenses relating to
acquisition of mining claims, taxes, legal and accounting services, transfer
agent fees, miscellaneous charges and amortization. During this period, LRS paid
$62,611 for these expenses. For all periods reported on, LRS had losses.
LRS had working capital of $(24,921) at September 30, 2000. At December 31,
1999 the working capital was $(28,282). 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.
Our plan of operations includes the location of mining claims to explore
for mineralization and mineral levels. Once claims are located and staked, we
will perform feasibility studies. LRS will have to adjust the level of
implementation of its business plan according to the amount of proceeds raised
in this offering. LRS is entirely dependent on the offering for its capital
requirements at this time. Because its exploratory plan has some
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flexibility, we believe that LRS will be able to continue its operations for
approximately 12 months after the offering, even if the full amount is not
raised. This estimate does not take into account costs of unforseen expenses
arising from unanticipated problems. In the event of additional expenses, we
will further adjust our business plan or obtain additional capital.
Our research development activities for the next 12 months are those
associated with exploring the mineralization of identified and staked claims.
LRS will require additional capital to continue to fund its expenses during
the exploratory stage and for the implementation of the business plan of
locating, verifying and developing mining prospects with viable mineralization
of sufficient grade. 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 officers and
directors 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. 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 mineral exploration and mining is generally capital
intensive. If the estimates about the one prospect to which LRS has staked
claims prove incorrect or more costly to determine, both possible outcomes, it
will need capital additional to this offering to identify and evaluate new
prospects. Although LRS plans to exploit mining prospects in a manner that will
not require it to conduct the full permitting, extraction, processing and
mineral selling aspects of mining, it will need additional capital to support
some of these aspects of 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
mining prospects with tungsten mineralization 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.
DESCRIPTION OF MINING INDUSTRY
Basic Geology
Geology is the science of the earth's composition. The five most abundant
elements in the earth's crust are oxygen, silicon, aluminum, iron and calcium.
Elements bond together in chemical compounds to form solid crystalline
substances known as minerals. There are many thousands of different minerals,
each with a definite chemical composition and crystalline structure.
Where minerals are concentrated in sufficient quantity, the zones or bodies
in which they are found are called mineral deposits. These mineralized deposits
become ore when the minerals are present in sufficient quantity (or tonnage) and
adequate quality (or grade) to be recovered profitably.
Mineral deposits often form in areas where the earth's underground plates
collide causing seismic and geologic activity. Geologic activity happens very
slowly; a mountain range thousands of meters high is lifted at a rate of only a
few centimeters per year - erosion wears away such a mountain range just as
slowly.
The earth has a solid core of iron and nickel surrounded by a mantle of
molten rock. When this material forces itself into the many cracks and other
points of weakness in the earth's crust, it is called magma. This material moves
through cracks, in many directions, and heats the surrounding rock, altering it
and in some cases causing it to re-melt. The whole mass then cools, and this is
when minerals, some of which are valuable, begin to crystallize. As each
different mineral crystallizes out of the magma, the composition of the magma
changes. Some magmas have no valuable minerals, while others contain
economically exploitable mineral deposits.
Prospecting
The first step in prospecting for valuable minerals involves geological
mapping and surface prospecting. The prospector looks for trace amounts of ore
minerals and/or favorable rock types. One valuable sign of mineralization is a
gossan, an area of rusty staining on the rocks that is formed when minerals are
oxidized.
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<PAGE>
When a potential mining area is identified, it is sampled and the samples
may be sent for chemical analysis.
Another useful technique is remote sensing. This technique uses
photographic and radar images taken by satellites or aircraft. Aerial and
satellite imagery can show large-scale geological structures like faults or
geological contacts where mineralization often occurs. In some areas - deserts
are a good example - color changes on satellite imagery may denote changes in
rock type or show areas of rock alteration.
Sampling and Drilling
Sampling is the process of taking a small representative portion of a
larger mass. By analyzing the sample to determine the concentration of metal it
contains, the potential value of the larger mass can be determined. Sampling can
be as simple as removing a piece of rock from an outcrop, but often the
exploration crew will use a bulldozer or backhoe, or use explosives to blast a
trench in the rock.
The first samples taken from a potential mineral site are called grab
samples. Prospectors and geological field crews gather grab samples from
outcrops, road cuts, trenches or river beds. These rocks are selected
specifically because they appear to contain a significant amount of metal, so
they are not considered representative of the outcrop or road cut from which
they come.
In the field, grab samples are gathered, their original location is
recorded, each rock is labeled and the most promising ones are sent to a lab for
metal analysis. If worthwhile or significant amounts of metal are present in
such grab samples, channel sampling may be warranted.
A surface channel, the most desirable type of sample, is normally a cut
about 4 inches wide and 3/4 inch deep across the proposed ore zone. The chips of
rock removed are carefully collected, marked and bagged for analysis.
Surface sampling alone, however, cannot give a definitive indication of
how tremendous - or how mediocre - a deposit lies below. Thus, after surface
sampling indicates a possible concentration of valuable minerals, drilling is
undertaken.
Drilling is the only means to ascertain the quantity and quality (tonnage
and grade) of a deposit. A circular cut is made in the rock and continuous
cylindrical core samples are extracted from the center of the cut . To do this,
a special type of drill, with a rotating core barrel that grinds down through
the bedrock, is used.
Mining
There are many methods of extraction (mining) to choose from. The shape and
orientation of an orebody, the strength of the ore and surrounding rock, and the
manner in which the valuable minerals are distributed are different for each ore
zone. These factors will influence the selection of a mining method and the
overall plan for developing the orebody.
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<PAGE>
The primary opening into an underground mine can be either a shaft or a
decline (also called a ramp), driven down into the earth, or an adit, a
horizontal opening driven into the side of a hill or mountain. All have the same
purpose - to provide access for people, materials and equipment, and to provide
a way for ore to be brought to surface.
Surface drilling will indicate whether a mineralized zone has sufficient
potential to become an orebody. To outline the zone with greater accuracy, and
confirm the mineralization is continuous and the estimates of grade and tonnage
are correct, surface work is followed by underground development and detailed
drilling. Only then can the developer make plans for production.
Processing Ore
Digging ore from the earth is only half the battle. Often just as
challenging and costly is the ore processing, which takes place in mills,
smelters and refineries.
The end product from a mill is called a concentrate. All milling and
concentrating processes begin with a crushing and grinding stage, which usually
represents most of the total cost of processing ore.
OVERALL BUSINESS METHODOLOGY
Identify and Acquire Tungsten Prospects
LRS has entered into an agreement with a mineral exploration company,
Wolfranium Corporation Inc. which owns paper based data of geological
exploration on approximately 1,500 mineral prospects, the majority of which are
located in the United States. The data base was compiled in the 1950 through
1970 period, and contains exploration reports, metallurgical studies and
feasibility documents. Based on the mining experience of Wolfranium's management
and their review of a number of the properties covered by the data, the
materials are believed to still have valuable, useful information. LRS
contracted with Wolfranium to locate an initial mining prospect with reports of
viable tungsten mineralization and to locate additional prospects in the future.
The initial plan of LRS is to locate and acquire one or more prospects with
viable tungsten mineralization prospects that have associated, existing reports
from the Wolfranium data resources. It will then update the original exploration
and feasibility reports for the prospects and begin the permitting process on
the prospects that are determined to be the most feasible for the extraction of
minerals. If necessary, additional prospects will be identified and evaluated in
a similar manner.
After identification of a potential prospect. LRS will acquire the right to
explore it. This is done by staking a claim which is a process or registration
with state and federal officials LRS rights to the minerals in the land.
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<PAGE>
Update of Past Exploration Results and Feasibility Studies on Staked Claims
Once LRS has acquired the right to explore for mineral deposits on specific
prospects, it will contract with independent laboratories, sampling companies
and geological and environmental consultants to update existing and produce
necessary exploration, feasability and environmental reports to determine the
mineral reserves and whether the minerals can be mined in a cost effective
manner under current regulations and in the current economic environment.
Mineral reserves are the estimated amounts of mineralization in a given
location. Estimates are determined by taking samples of the earth at the surface
and by drilling core samples and then having laboratories and geologists study
the samples to determine the amounts and locations of the mineral deposits. Once
the mineralization levels are determined, which includes the concentration and
identification of minerals, LRS will then be able to start analyzing and
estimating reserves, methods of recovery and environmental requirements which
will affect the final decision of whether or not a prospect is viable to explore
and, later, develop. Part of this process will be to estimate the possible
revenues against the potential expenses to arrive at the estimated positive cash
flow amount.
LRS will then determine the most logical method for capitalizing on the
value of the prospect. Management believes that it will most likely either sell
the prospect outright or will lease or joint venture prospects 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.
By electing to use others to commercially develop the prospects, LRS will
avoid the expense and responsibilities of having to apply for various mining
permits with respect to the prospects 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 ORIENTATION
Tungsten is an important metal. It has many uses in the modern
industrialized world. When it is used with certain other metals, it has provided
strength and wear resistance for various kinds of tools used in construction,
mining and medal working. Tungsten is used in many household products such as
light bulbs, television sets and magetrons for microwave ovens.
During the last several decades, the tungsten market has been controlled
largely by the government of the Peoples Republic of China in which country the
largest worked 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 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
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<PAGE>
properties viable sources. 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 in a particular
mining prospect.
TUNGSTEN BULLETS
One of the single most significant new uses of tungsten will be in bullets.
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 resulted from the need to eliminate
hazardous materials from both the manufacture of ammunition and from the bullets
themselves because lead bullets were being found to be environmentally
hazardous. The new bullets have tungsten cores inside the standard copper
jackets. By eliminating lead, they will be a more environmentally friendly and a
safer bullet to manufacture with similar performance as its lead counterparts.
The bullets also appear ballistically identical to those using lead.
The U.S. Army Public Affairs Office released a press statement on October
6, 1999 announcing that the Army began production of bullets for the M-16 rifle
which uses a tungsten-tin or tungsten-nylon core encased in copper. Production
was targeted for one million tungsten core bullets for 1999, and production is
expected to increase as tooling becomes more widespread and the designs mature
to include different sizes of bullets for rifles and for small caliber guns.
Mass quantity is expected to be in the hundreds of millions of rounds per year.
In an article by the International Tungsten Industry Association published in
2000, according to the project manager for environmental armament technologies
at the Picatinny Arsenal in New Jersey, although tungsten is more expensive than
lead, the cleanup of the manufacturing process is expected to save $0.01 to
$0.05 per round or $5 million to $20 million per year.
Lead bullets tend to bioaccummulate in the environment, often ending up in
sediments, surface water and ground water. This can adversely affect wildlife
and people. Because firing ranges have such high concentrations of lead bullets
in the ground, some have been closed.
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. Not only is tungsten more environmentally "benign" than lead, but the
manufacture of tungsten bullets is less polluting. Ozone depleting chemicals and
volatile organic compounds are not used in the manufacturing process as they are
in making lead bullets.
If tungsten bullets are determined to have beneficial properties in
military use, it is expected that the use of tungsten will spread to other
ammunition manufacture.
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<PAGE>
PILOT MOUNTAIN PROJECT
LRS has acquired a 100% interest in the tungsten project known as Pilot
Mountain in west-central Nevada. The LRS interest is the filing of mining stakes
which allows LRS to explore the prospect. The mining stakes prevent others from
exploring the land subject to the stakes for mineralization. The prospect
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 prospect is easily accessible via improved gravel roads
leading from U.S. highways. The prospect 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 tungsten 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 prospect and extensive
skarn deposits were discovered and found to contain substantial tonnages of
tungsten bearing ore. The prospect was optioned to W.R. Grace which continued
exploration but did not put the prospect into production. Published reserves
were approximately 8 million tons containing 0.32% tungsten . With the tungsten
was found significant copper and silver. The prospect 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 prospect
became free of mining claims because they were not renewed by Union Carbide.
Because they were not renewed by Union Carbide, Wolfranium was able to stake the
claims for the benefit of LRS in accordance with state and county filing
requirements and is now the record owner of the unpatented claims.
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 prospect lay dormant until Union
Carbide began exploration in 1977. The registration of mine stakes related to
this prospect were also not renewed in the 1980's; therefore, they became
available for staking by Wolfranium for the benefit of LRS.
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 prospect 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
prospect consist largely of the Luning formation which is limestone to dolomite
with lesser amounts of sharel, argillite and congolomerate with granitic
intrusions.
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The mineral 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 prospects and are of economic interest. These include
silver and zinc. At lesser amounts, copper and molybdenum have been encountered
in the prospect. All these metals should clearly enhance the overall economics
of exploring and developing the prospects.
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 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 prospects 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 prospects. 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 was initially obligated to issue an aggregate of 120,000
shares of common stock from May 6, 2000 through May 6, 2003. The number of
shares is subject to an anti-dilution adjustment that requires either additional
or fewer shares to be issued if on the issuance date the number of shares
outstanding is either greater than or less than 10,000,000 shares. On May 6,
2000, Wolfranium was due 2,700 shares because of the adjustment provision, and
these shares have been issued. The agreement provides for an additional 90,000
shares to be issued, but the actual number will be calculated on the issuance
date and may result in either fewer or more shares being issued. Wolfranium was
issued an additional 4,800 shares on May 6, 2000 as an advance for the future
shares to be issued.
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.
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
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<PAGE>
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.
Through its consulting arrangement with Wolfranium Corporation Inc., LRS
has access to various historic databases relating to the mining prospects.
Wolfranium Corporation Inc. acquired paper based data relating to approximately
1,500 mining prospects which they make available to companies like LRS. The data
largely was compiled between 1950 and 1970. Our agreement requires Wolfranium
Corporation Inc. to sort through their data and identify potential prospects for
LRS. Once LRS reviews the data, copies of which we are permitted to keep,
Wolfranium Corporation Inc. conducts the mine staking process on our behalf. The
information that LRS obtains from Wolfranium Corporation Inc. includes prior
exploration reports, metallurgical studies and feasibility documents. Not all
the reports are complete and many assumptions relating to the value of the
mineralization within the prospects 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 prospects will prove to have the mineralization and reserves
indicated in the existing documentation or that the prospects will be worth
mining in the current economic and regulatory climate.
Our agreement with Wolfranium Corporation Inc. is not exclusive in that
Wolfranium may provide similar data sales and conduct claim staking for other
persons or entities. While we maintain a staked claim that Wolfranium identified
for us, it is our understanding that Wolfranium will not disclose related data
to other parties.
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. Currently
the cost of compliance with these laws during the staking and exploratory stages
is not significant, but we expect that the regulation will cause us to spend
significant amounts in our operations if we reach the stage of mining
development of our prospects. Regulatory compliance also will take considerable
amounts of time 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 engaged in mining development and extraction on our
behalf or as an operator, we may bear some or all of these costs and liabilities
as the mine stakeholder. To date, we have not been required to spend anything on
compliance with environmental laws because we are not exploring, developing or
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.
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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. 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.
LRS believes the existence of the prior studies of mining prospects will help it
identify prospects more likely to have mineralization in a more cost efficient
manner than if LRS searched for prospects using public resources, hiring
geologists to make initial surveys and conducting other mineral identification
and exploratory actions to identify prospects on which to stake claims.
Moreover, we believe having the specific data will aid our efforts when we begin
our exploratory efforts in respect of a particular prospect because it may
provide information helpful in the process.
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.
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 prospects 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
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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.
Directors
Each director will hold office until the next meeting of stockholders or
until his successor is duly appointed and qualified. Directors are not
compensated for their services to LRS. In the future, if LRS has non-employee
directors, it expects it will provide a compensation package primarily based on
stock options and reimbursement for direct expenses.
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
- 23 -
<PAGE>
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. Cash compensation amounts will be determined in the future based on the
services to be rendered and time devoted to the affairs of LRS and the
availability of funds. Other elements of compensation, if any, will be
determined at that time or at other times in the future.
On June 6, 2000, LRS issued an aggregate of 200,000 shares of common stock
to Messrs. Geisler and Wagman and Ms. Roach. Each person paid the par value of
$.001 per share, or an aggregate of $200, and the balance of the aggregate value
of the shares, $3,800, was compensation for past services by these persons
during fiscal year 2000.
- 24 -
<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 2,654,720 shares of
common stock issued and outstanding.
NAME AND ADDRESS OR NUMBER OF SHARES PERCENTAGE OWNED
IDENTITY OF GROUP BENEFICIALLY OWNED BEFORE OFFERING
----------------- ------------------ ---------------
Mitchell Geisler(1) 104,501 3.9
Cindy Roach(1) 50,000 1.9
Kevin Wagman(1) 50,000 1.9
Marni Miller(2)(3) 1,177,100 44.3
David Roff(4) 640,080 24.1
Glen Akselrod(5) 218,004 8.2
Brice Scheschuk(6) 259,002 9.7
All officers and directors as a group 204,501 7.7
(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.
(3) The address of Ms. Miller is 23 Sandfield Road, Toronto, Ontario, Canada
M3B 2B5.
(4) The address of Mr. Roff is 31 Walmer Road, Unit 6, Toronto, Ontario, Canada
M5R 2W7.
(5) The address of Mr. Akselrod is 5785 Yonge Street, #701, Toronto, Ontario,
Canada M2M 4J2
(6) The address of Mr. Scheschuk is 7 Walmer Road, Suite 1504, Toronto,
Ontario, Canada M5R 2W8.
- 25 -
<PAGE>
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 2,654,720 shares
issued and outstanding as of the date of this prospectus. Upon completion of
this offering, there will be 10,654,720 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
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 the full offering, we will have 10,654,720 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 the
amount of shares outstanding 900,200 shares may be sold from time to time in the
public market without registration pursuant to Rule 144 and 1,754,520 shares,
will be eligible for public sale without registration in June 2001 pursuant to
Rule 144.
- 26 -
<PAGE>
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.
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.
- 27 -
<PAGE>
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. A copy of this agreement will accompany a
prospectus or may be obtained from us by persons who have received a prospectus
and requested the agreement.
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. Subscription funds will not
be deposited in an escrow account. Certificates for the shares purchased will be
issued and distributed by our transfer agent, within ten business days after a
subscription is accepted and "good funds" are received in our account.
Certificates will be sent to the address supplied in the investor subscription
agreement by regular mail.
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.
- 28 -
<PAGE>
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.
- 29 -
<PAGE>
LRS CAPITAL, INC.
TABLE OF CONTENTS
================================================================================
INDEPENDENT AUDITORS' REPORT F - 2
FINANCIAL STATEMENTS
BALANCE SHEET F - 4
STATEMENT OF OPERATIONS AND (DEFICIT) ACCUMULATED
DURING THE DEVELOPMENT STAGE F - 5
STATEMENT OF SHAREHOLDERS' EQUITY F - 6
STATEMENT OF CASH FLOWS F - 7
NOTES TO FINANCIAL STATEMENTS F - 8
F - 1
<PAGE>
SIMON KROWITZ BOLIN & ASSOCIATES, P.A.
11300 ROCKVILLE PIKE, SUITE 800
ROCKVILLE, MARYLAND 20852
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 company
in the development stage) as of December 31, 1999 and 1998 and the related
statements of operations and (deficit) accumulated during development stage and
cash flows for the period October 7 (inception) to December 31, 1998, the year
ended December 31, 1999 and the period from October 7, 1998 (inception) to
December 31, 1999. 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 1998 and the results of its operations and cash flows for
the period October 7 (inception) to December 31, 1998, the year ended December
31, 1999 and for the period October 7, 1998 (inception) to December 31, 1999 in
conformity with generally accepted accounting principles.
As explained in Note 2 to the financial statements, the Company has changed its
method of accounting for costs of mineral rights. Previously these costs were
capitalized but are now expensed. The Company also expensed organization costs
and is being charged certain expenses not previously charged.
F - 2
<PAGE>
We have reviewed the accompanying balance sheet of LRS Capital, Inc. (a company
in the development stage) as of September 30, 2000 and 1999 and the related
statement of operations and deficit accumulated during development stage and
comprehensive income and of cash flows for the nine month periods ended
September 30, 2000 and 1999. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated interim financial statements for them
to be in conformity with accounting principles generally accepted in the United
States.
/s/ Simon Krowitz Bolin & Associates, PA
Rockville, Maryland
June 30, 2000
December 20, 2000 (as to Review and Note 2)
F - 3
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
============================================================================================================================
Unaudited Unaudited
December 31, December 31, Sept. 30, Sept. 30,
1998 1999 1999 2000
----------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash (Note 1) $ 200 $ 2,505 $ 3,507 $ 2,223
Prepaid Expenses 96
----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 200 $ 2,505 $ 3,507 $ 2,319
============================================================================================================================
LIABILITIES AND SHAREHOLERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ $ 1,333 $ 1,333 $ 8,726
Due to Related Parties (Note 3) 1,484 29,454 29,454 18,514
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,484 30,787 30,787 27,240
----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common Stock - $0.001 par value; 15,000,000
shares authorized, September 30, 2000 - 2,654,720
shares issued and outstanding; December 31, 1999 900 900 900 2,655
- 900,200 shares issued and outstanding (Note 4)
Additional Paid in Capital (400) 800 200 35,035
Deficit Accumulated during the Development
Stage (1,784) (29,982) (28,680) (62,611)
----------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY (1,284) (28,282) (27,280) (24,921)
----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 200 $ 2,505 $ 3,507 $ 2,319
============================================================================================================================
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F - 4
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS AND (DEFICIT) ACCUMULATED DURING THE DEVELOPMENT STAGE
FOR THE PERIODS
==============================================================================================================================
January 1, January 1,
1999 to 2000 to Inception to
Inception to Year Ended Inception to September September September 30,
December 31, December 31, December 31, 30, 1999 30, 2000 2000
1998 1999 1999 (Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues $ $ $ $ $ $
Cost of Revenues
------------------------------------------------------------------------------------------------------------------------------
Gross Profit
------------------------------------------------------------------------------------------------------------------------------
General and Administrative
Expenses
Mineral Rights 22,361 22,361 22,361 8,264 30,625
Taxes 380 380 330 380
Legal and Accounting 3,987 3,987 3,305 17,159 21,146
Transfer Agent 2,480 2,480
Office 300 1,200 1,500 900 900 2,400
Compensation 3,800 3,800
Organization 1,484 1,484 1,484
Miscellaneous 270 270 26 296
------------------------------------------------------------------------------------------------------------------------------
Total 1,784 28,198 29,982 26,896 32,629 62,611
------------------------------------------------------------------------------------------------------------------------------
(Deficit) from Operations (1,784) (28,198) (29,982) (26,896) (32,629) (62,611)
------------------------------------------------------------------------------------------------------------------------------
Net (Deficit) $ (1,784) $ (28,198) $ (29,982) $ (26,896) $ (32,629) $ (62,611)
Deficit Accumulated During the
Development Stage at Beginning
of Period $ $ (1,784) $ $ (1,784) $ (29,982) $
------------------------------------------------------------------------------------------------------------------------------
Deficit Accumulated During the
Development Stage at End
of Period $ (1,784) $ (29,982) $ (29,982) $ 28,680 $ (62,611) $ (62,611)
==============================================================================================================================
Net Deficit per Share - Basic $ (0.00) $ (0.03) $ (0.03) $ (0.01)
Net Deficit per Share - Diluted $ (0.00) $ (0.03) $ (0.03) $ (0.01)
Shares Used in Per Share
Calculation - Basic 879,019 900,200 900,200 1,643,838
Shares Used in Per Share
Calculation - Diluted 879,019 900,200 900,200 1,643,838
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDERS' EQUITY
====================================================================================================================================
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development Comprehensive
Shares Amount Capital Stage Total Income
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 7, 1998 $ $ $ $ $
Issuance of common stock to founders for
proceeds of $200, October 9, 1998 (Note 4) 900,200 900 (700) 200
Fair value of services performed (Note 4) 300 300
Comprehensive Income
Net Income (Deficit) (1,784) (1,784) $ (1,784)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 900,200 $ 900 $ (400) $ (1,784) $ (1,284)
------------------------------------------------------------------------------------------------------------------------------------
Fair value of services performed (Note 4) 1,200 1,200
Comprehensive Income
Net Income (Deficit) (28,198) (28,198) $ (28,198)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 900,200 $ 900 $ 800 $ (29,982) $ (28,282)
------------------------------------------------------------------------------------------------------------------------------------
Issuance of common stock to Wolfranium
Corporation, Inc. as compensation for a service
agreement at the fair value of securities issued,
May 6, 2000 (Note 4) 7,500 8 142 150
Issuance of common stock to directors for
payment of par value and compensation at the net
fair value of securities, issued, June 6, 2000 (Note 4) 200,000 200 3,800 4,000
Issuance of common stock for conversion of
related party balances owing to shareholders,
June 6, 2000 (Note 4) 1,547,020 1,547 29,393 30,940
Fair value of services performed (Note 4) 900 600
Comprehensive Income
Net Income (Deficit) (32,629) (32,629) $ (32,629)
------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2000 2,654,720 $ 2,655 $ 35,035 $ (62,611) $ (24,921)
------------------------------------------------------------------------------------------------------------------------------------
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F - 6
<PAGE>
<TABLE>
<CAPTION>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD
========================================================================================================================
January 1, January 1,
1999 to 2000 to Inception to
Inception to Year Ended Inception to September September September
December 31, December 31, December 31, 30, 1999 30, 2000 30, 2000
1998 1999 1999 (Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Deficit $ (1,784) $ (28,198) $ (29,982) $ (26,896) $ 32,629 $ (62,611)
Adjustments to Reconcile Net
Deficit to Net Cash Provided
by (Used in) Operations
Office 300 1,200 1,500 900 900 2,400
Changes in Assets and
Liabilities
Prepaid Expenses (96) (96)
Accounts Payable 1,333 1,333 1,333 7,393 8,726
------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY
OPERATING ACTIVITIES (1,484) (25,665) (27,149) 24,663 (24,432) (51,581)
------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM
FINANCING ACTIVITES
Due to Related Parties 1,484 27,970 29,454 27,970 (10,940) 18,514
Issuance of Common Stock 200 200 35,090 35,290
------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY
FINANCING ACTIVITIES 1,684 27,970 29,654 27,970 24,150 53,804
------------------------------------------------------------------------------------------------------------------------
NET CHANGE IN CASH AND
CASH EQUIVALENTS 200 2,305 2,505 3,307 282 2,223
CASH AND CASH EQUIVA-
LENTS AT BEGINNING OF
PERIOD 200 200 2,505
------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVA-
LENTS AT END OF PERIOD $ 200 $ 2,505 $ 2,505 $ 3,507 $ 2,223 $ 2,223
========================================================================================================================
SUPPLEMENTARY
SCHEDULE OF NON-CASH
OPERATING AND
FINANCING ACTIVITIES
Issuance of Common Shares
for Services $ $ $ $ $ 3,950 $ 3,950
------------------------------------------------------------------------------------------------------------------------
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F - 7
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
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.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash and all
highly liquid financial instruments with purchased maturities of three
months or less.
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 DEFICIT PER SHARE - Basic net deficit per share is
computed using the weighted average number of common shares outstanding
during the period. Diluted net deficit 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.
IMPAIRMENT OF ASSETS - Management reviews assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Management assesses impairment by comparing
the carrying amount to individual cash flows. If deemed impaired,
measurement and recording of an impairment loss is based on the fair value
of the asset.
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.
COMPREHENSIVE INCOME - In June 1997, the FASB issued SFAS No. 130,
"Reporting Comprehensive Income", which was adopted by the Company. SFAS
No. 130 establishes standards for reporting and display of comprehensive
income and its components in an entity's financial statements.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. The Company has no significant
components of other comprehensive income and accordingly, comprehensive
income is the same as net income for all periods.
F - 8
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
During the third quarter of 2000, the Company adopted, on a retroactive
basis to 1998 and all years after 1998, the accounting provisions of SFAS
No. 121 (Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of), SOP 98-5 (Reporting on the Costs of
Start-Up Activities), SAB Topic 1:B (Allocation of Expenses and Related
Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser
Business Components of Another Entity), and APB Opinion No. 29 (Accounting
for Nonmonetary Transactions). The Company adopted these accounting
provisions on a retroactive basis to better portray the financial results
of the Company in accordance with GAAP and SEC requirements and to better
serve potential investors in the Company's initial registered offering.
Earnings for 1998, 1999 and 2000 included additional charges of $1,487,
$23,264 and $9,306, net of tax or ($0.00), ($0.03) and ($0.01) per fully
diluted share, respectively to adjust the Company's results of operations
for compliance with the accounting provisions adopted by the Company.
The adoption of SFAS No. 121 resulted in the Company taking a charge to
earnings for an investment in mineral rights that had previously been
capitalized. The effect was to decrease 1999 and 2000 earnings by $22,361
and $5,054 or ($0.02) and ($0.00) per fully diluted share, respectively.
The adoption of SOP 98-5 resulted in the Company taking a charge to
earnings for organization costs that had previously been capitalized. The
effect was to decrease 1998 earnings by $1,187 or ($0.00) per fully diluted
share. The effect was to increase 1999 and 2000 earnings by $297 and $148
or $0.00 and $0.00 per fully diluted share, respectively.
The adoption of SAB Topic 1:B resulted in the Company taking a charge to
earnings for the estimated fair value of general and administrative
expenses including rent that has been provided to the Company by
shareholders, officers and directors of the Company without charge. The
effect was to decrease 1998, 1999 and 2000 earnings by $300, $1,200 and
$600 or ($0.00), ($0.00) and ($0.00) per fully diluted share, respectively.
The adoption of APB Opinion No. 29 resulted in the Company taking a charge
to earnings for common shares paid to three directors for compensation for
services from the time of their appointment in 2000 through June 30, 2000.
The effect was to decrease 2000 earnings by $3,800 or ($0.00) per fully
diluted share.
NOTE 3 - 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
and 1998, 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 $29,662 and $1,484 that expire in 2020 and 2019 respectively.
F - 9
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
NOTE 4 - RELATED PARTY TRANSACTIONS
Stockholders of the Company had outstanding loans due from the Company of
$18,514, $29,454 and $1,484 at September 30, 2000 and December 31, 1999 and
1998 respectively. On June 6, 2000, the Company converted $30,940 of
amounts due to related parties by issuing 1,547,020 common shares.
NOTE 5 - SHAREHOLDERS EQUITY
At September 30, 2000, the Company had 15,000,000 authorized common shares,
$.001 par value.
On October 9, 1998, the Company issued 200 common shares to its founders
for proceeds of $200. At December 31, 1998, the Company had 900,200 common
shares issued and outstanding after retroactive adjustment for the stock
dividend described below.
On October 28, 1999, the board of directors declared a 4,500 stock dividend
for each common share issued and outstanding for shareholders of record on
October 28, 2000. The stock dividend has been applied retroactively to
prior periods. At December 31, 1999, the Company had 900,200 common shares
issued and outstanding.
On May 6, 2000, the Company issued 7,500 common shares to Wolfranium
Corporation, Inc. ("WCI") or its proxies for services which were valued at
$0.02 per share, or $150, the equivalent price paid on June 6, 2000 for the
conversion of due to related party balances into common shares. Refer to
Note 7 for a full discussion of the Wolfranium contract. On June 6, 2000,
the Company issued 200,000 common shares to three directors for
consideration of $200 and compensation for services from the time of their
appointment in 2000 through June 30, 2000. Each common share was valued at
$0.02, the equivalent price paid on June 6, 2000 for the conversion of due
to related party balances into common shares, and a charge of $3,800 taken
to general and administrative expenses, compensation. On June 6, 2000, the
Company converted $30,940 of amounts due to related parties by issuing
1,547,020 common shares. At September 30, 2000, the Company had 2,654,720
common shares issued and outstanding.
Since inception, the Company has recorded a monthly charge of $100 for the
estimated fair value of general and administrative expenses including rent
that has been provided to the Company by shareholders, officers and
directors of the Company without charge. These expenses have been charged
to the Company with a corresponding contribution to additional paid in
capital.
F - 10
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
NOTE 6 - FINANCIAL INSTRUMENTS
FAIR VALUE - The carrying value of cash approximates fair value.
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 U.S. dollar checking account at a
Canadian financial institution and does not constitute a deposit that is
insured under the Canada Deposit Insurance Corporation Act. The company
holds $200 in petty cash on its premises.
NOTE 7 - CONTINGENCIES
LEGAL - The company is not currently aware of any 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.
NOTE 8 - CONTRACT WITH WOLFRANIUM CORPORATION, INC.
On May 6, 1999, the Company entered into an agreement with WCI under which
WCI will locate, stake out and record not less than 20 and not more than 40
mining claims within 30 business days of the date of the agreement that WCI
believes to contain high concentrations of tungsten. WCI staked 30
unpatented claims for the Company pursuant to this contract and met its
staking obligation.
Per the terms of the contract, the Company has made cash payments to WCI of
$8,000 in 1999 and $5,000 in 2000. The Company is obligated to pay
additional cash amounts to WCI as follows:
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
-------------
$75,000
-------------
WCI is responsible for maintaining the claims for the Company in accordance
with state filing requirements. The primary maintenance activity is the
physical act of paying the annual fees to the state and county. As long as
the claims are held by or for the Company on the dates payment is due to
WCI, the Company will be obligated to make the payments. The Company
accounts for these payments as expenses at the time the payment is due to
WCI.
F - 11
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
NOTE 8 - CONTRACT WITH WOLFRANIUM CORPORATION, INC. (CONTINUED)
As additional compensation, the Company has agreed to issue common shares
to WCI. The Company was initially obligated to issue an aggregate of
120,000 common shares from May 6, 2000 through May 6, 2003 as follows:
May 6, 2000 30,000 shares
May 6, 2001 20,000 shares
May 6, 2002 30,000 shares
May 6, 2003 40,000 shares
---------------
120,000 shares
---------------
The number of shares to be issued is subject to an anti-dilution adjustment
that requires either additional or fewer common shares to be issued if on
the issuance date the number of common shares issued and outstanding is
either greater than or less than 10,000,000 shares. On May 6, 2000, the
30,000 common shares owed to WCI was adjusted down to 2,700 common shares
based on the ratio of 900,200 common shares outstanding to the 10,000,000
common share base provided for in the agreement. The 2,700 common shares
owing to WCI have been issued. There are no additional common shares owing
to WCI for the May 6, 2000 issuance date obligation. For the remainder of
the agreement, 90,000 common shares are required to be issued if the total
common shares outstanding are 10,000,000 on each issuance date. The actual
number will be calculated on the issuance dates and may result in either
fewer or more shares being issued using a ratio of the number of common
shares outstanding on the issuance date to the 10,000,000 common share base
specified in the agreement.
The contract contains a clause that obligates WCI to pay a subscription
price of $0.0001 per share issued. The Company has waived this clause.
The Company accounted for the issuance of the 2,700 common shares as an
expense at the time the payment was due to WCI at the fair value of the
common shares issued. Fair value was calculated as $0.02 per share, or $54,
and was based on the planned conversion of amounts due to related parties
that occurred on June 6, 2000. WCI is responsible for maintaining the
claims for the Company in accordance with state filing requirements. The
primary maintenance activity is the physical act of paying the annual fees
to the state and county. As long as the claims are held by or for the
Company on the dates payment is due to WCI, the Company will be obligated
to make the payments. The Company accounts for these payments as expenses
at the time the payment is due to WCI. On May 6, 2000 WCI was issued an
additional 4,800 common shares as an advance for future shares to be
issued. The Company accounted for the advance of 4,800 common shares as a
prepaid expense at the time of issuance at the fair value of the common
shares issued using a fair value of $0.02, or $96. As long as the mining
claims continue to be held by the Company, the Company anticipates
recognizing the expense relating to the 4,800 shares on May 6, 2001. If the
Company does not continue to hold the mining claims prior to May 6, 2001,
the expense relating to the 4,800 shares will be recognized at the time the
claims are terminated by the Company.
F - 12
<PAGE>
LRS CAPITAL, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999 AND DECEMBER 31, 1999 AND 1998
================================================================================
NOTE 8 - CONTRACT WITH WOLFRANIUM CORPORATION, INC. (CONTINUED)
The Company is also responsible for paying the filing and registration
expenses of up to $260 per claim staked and the out-of-pocket expenses of
WCI. In addition, if the prospects are developed, the Company 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 prospects. If the Company does not sell any minerals
credited to its account by electing to hold on to the precious metals, a
royalty of 2% will be due nonetheless, payable within 90 days of the
crediting to the Company account.
The royalty payment obligation may be terminated by payment of specified
amounts to WCI. To terminate the royalty obligation prior to May 6, 2005,
the Company must pay $2,600,000, less all cash amounts theretofore paid by
the Company to WCI. After May 6, 2005, the termination payment is
$4,000,000, less all cash amounts paid by the Company to WCI.
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 contract. If the Company is in default under the contract, the remedy
specified in the contract is that it will transfer and convey to WCI all of
its right, title and interest in and to the mining claims and to all the
mineral resources located therein to which the contract relates. In
addition, in such default, WCI will retain all amounts previously paid to
it and retain all shares previously issued to it under the contract. At
September 30, 2000, the Company believed that it had met all its past
obligations to WCI.
F - 13
<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.
- 30 -
<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
-i-
<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 May 6, 1999, the Registrant entered into an agreement for the issuance
of up to 120,000 shares of common stock to Wolfranium Corporation, Inc. The
actual amount to be issued is subject to an anti-dilution provision that
provides for either additional or fewer shares to be issued depending if
the number of shares of common stock on the issuance date is less than or
greater than 10,000,000 shares. On May 6, 2000 the Registrant was obligated
to issue 2,700 shares of common stock which were issued. The agreement
provides for an additional 90,000 shares to be issued, but the actual
number will be calculated on the issuance date. Wolfranium was issued an
additional 4,800 shares of common stock on May 6, 2000 as an advance for
the future shares to be issued. All the shares were issued as "restricted
stock." The exemption for the issuance of these shares was Section 4(2) of
the Securities Act of 1933. The consideration for the shares is the
obligations under their consulting agreement with the Registrant. The
subscription amount provided in the agreement has been waived.
(3) On June 6, 2000, the Registrant issued an aggregate of 200,000 shares of
common stock to three persons who are officers and directors of the
Registrant. The exemption for the issuance of these shares was Section 4(2)
of the Securities Act of 1933. Each of the officers paid the par value of
$.001 per share and the Registrant took an expense of $3,800 as
consideration for past services by these persons in fiscal year 2000.
(4) 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 $0.02 per
share for an aggregate of $30,940.
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*
-ii-
<PAGE>
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)*
----------------------
* Previously filed
** Filed herewith
ITEM 28. UNDERTAKINGS
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
-iii-
<PAGE>
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.
(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.
-iv-
<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 this Amendment No. 2 to Form SB-2 and authorized
this registration statement to be signed on its behalf by the undersigned,
hereunto duly authorized, in Toronto, Ontario on December 27, 2000
LRS CAPITAL INC.
By: /s/ MITCHELL GEISLER
--------------------------------
Mitchell Geisler
President
(Principal Executive Officer)
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and December 27, 2000
------------------------------- President (Principal Financial
Mitchell Geisler Officer and Principal Accounting
Officer)
* Secretary and Director December 27, 2000
-------------------------------
Cindy Roach
* Director December 27, 2000
-------------------------------
Kevin Wagman
</TABLE>
By Power of Attorney
/s/ Mitchell Geisler
--------------------
Attorney-in-Fact
-v-
<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)*
----------------------
* Previously filed
** Filed herewith
-vi-
