U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_____________________
AMENDMENT NUMBER 3
TO
FORM 10-SB
SEC FILE NO.: 000-51302
_____________________
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
_____________________
MADISON EXPLORATIONS, INC.
_______________________________________________
(Name of Small Business Company in its charter)
Nevada
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 Seymour Street, Suite 807
Vancouver, BC, Canada V6B 3H7
________________________________________ __________
(Address of principal executive offices) (Zip code)
1-604-974-0568
__________________________
Company's telephone number
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
$.001 Common Stock
__________________
(Title of Class)
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Plan of Operation . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Description of Property . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . . . . . . . . . . 16
Item 5. Directors, Executive Officers, Promoters
and Control Persons . . . . . . . . . . . . . . . . . . . . . . 17
Item 6. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . 20
Item 7. Certain Relationships and
Related Transactions. . . . . . . . . . . . . . . . . . . . . . 20
Item 8. Description of Securities . . . . . . . . . . . . . . . . . . . . 21
PART II
Item 1. Market for Common Equities and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 3. Changes in and Disagreements with Accountants . . . . . . . . . . 24
Item 4. Recent Sales of Unregistered Securities . . . . . . . . . . . . . 24
Item 5. Indemnification of Directors and Officers . . . . . . . . . . . . 25
PART F/S
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 26
PART III
Item 1. Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 27
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Madison Explorations, Inc. was incorporated on July 15, 1998 under the
laws of the State of Nevada to engage in any lawful corporate activity. We have
incorporated one wholly owned subsidiary named Scout Resources, Inc. to conduct
our Canadian exploration activities and for us to be in compliance with local
law that requires a domestic Canadian corporation to conduct local exploration
activities. Both Madison Explorations, Inc. and Scout Resources, Inc. will be
sometimes referred to collectively as the "Company."
Our principal executive offices are at 525 Seymour Street, Suite 807,
Vancouver, BC, Canada and our telephone number is 1 604 974 0568, and our fax
number is 1 604 974 0569. We maintain a website at
HTTP://WWW.MADISONEXPLORATION.COM. Our website and its linked contents are not
part of this form for the registration of our securities.
We are currently engaged in the business of diamond exploration in the
Southern area of the Province of Saskatchewan, Canada. The Southern area of
Saskatchewan has been explored for diamonds since at least 1963 by other
exploration companies with limited success. Other than conducting some
exploration work on our "Scout Lake" property in 2004 and 2005 and granting an
option to Echo Resources Inc. whereby it may earn a 20% interest in our "Bulls
Eye" property (also known and referred to as the Herbert Anomaly) and a 15%
interest in our "Bronco" target, we have conducted no operations to date and we
do not expect to receive any revenues for at least two years. During these two
years, we plan to concentrate our efforts on exploration and data gathering.
Because the Company is an exploration stage company, there is no assurance that
a commercially viable mineral deposit exists on any of our properties. Further
exploration will be required before the economic and legal feasibility of
developing the properties can be determined.
At the present time, we do not hold any interest in a mineral property
that is in production. The Company's viability and potential success lie in our
ability to develop, exploit and generate revenue from our interests. There can
be no assurance that such revenues will be obtained. The exploration of mineral
deposits involves significant financial risks over a long period of time which
even a combination of careful evaluations, experience and knowledge may not
eliminate. It is impossible to ensure that our current or proposed exploration
programs on the exploration claims will be profitable or successful. The
inability of the Company to locate a viable diamond deposit on the properties
will have a material adverse effect on its operations and could result in a
total loss of its business.
We have signed an Acquisition Agreement on June 16, 2004 and an
Amendment to the Acquisition Agreement on September 16, 2005 (the "Acquisition
Agreement") with Dr. Joseph Montgomery, PhD (Geology) and Frankie Fu to acquire
certain mineral exploration claims in Southern Saskatchewan, Canada. The Company
has also acquired several additional mineral claims directly from the government
of Saskatchewan.
The option of our Bulls Eye property occurred on September 19, 2004.
Pursuant to our agreement, we granted an option to Echo Resources Inc. whereby
it may earn a 20% interest in the mineral claim by paying $44,000 and funding
50% of the costs of the exploration and data gathering program on the Bulls Eye
property. The Company shall be responsible for funding the remaining 50% of
proposed exploration. Echo Resources has paid the $44,000 due to us. If Echo
funds half of the proposed exploration, then it will earn a 20% interest in the
property. However, it is under no obligation to do so. However, unless Echo
Resources Inc. complies with all requirements to exercise the option, it will
not earn any interest in the Bulls Eye property.
Echo Resources, Inc., formerly known as TVE Corporation ("Echo") is a
Delaware corporation with its principle office located at 500 Austrailian
Avenue, West Palm Beach, FL. It has approximately 200 shareholders, and is
pubically traded on the Over the Counter Bulletin Board under the symbol "ECHR."
Echo is engaged as a pre-exploration stage company with its business strategy
focussing on the development and exploration of diamond and gold mines in
Canada. Echo became aware of Madison through Madison's website and followup
discussions resulting therefrom.
-3-
The Company will report to Echo Resources, Inc. the results of our
efforts and to keep in good standing our claims on the property. In the event we
determine not to proceed with our exploration and data gathering program or in
the event we abandon the project, we have agreed to give Echo Resources, Inc.
the right of first refusal to continue to develop and exploit the property. On
August 16th, 2005, the Company provided Echo Resources Inc. with an extension to
this agreement to permit the exploration activities to be funded up to February
28, 2006.
The sale-option of our Bronco property occurred on September 14, 2005.
Pursuant to our agreement, we granted a 15% interest in the mineral claim to
Echo Resources, Inc. in exchange for the payment of $50,000 that we treated as a
deposit. The deposit is reflected as a liability on the balance sheet in order
to better match the expenses to their related revenue source. As funds are spent
on this property, the company will bring the corresponding revenue amount into
income. If the Company decides to abandon the property then any remaining
deposit will be brought into income in that year. Echo Resources, Inc. has
agreed to fund 50% of the costs of the exploration and data gathering program on
the Bronco property. We will report to Echo Resources, Inc. the results of our
efforts and to keep in good standing our claims on the property. In the event we
determine not to proceed with our exploration and data gathering program or in
the event we abandon the project, we have agreed to give Echo Resources, Inc.
the right of first refusal to continue to develop and exploit the property.
Acquisition Agreement
Our Acquisition Agreement with Dr. Joseph Montgomery and Frankie Fuis
to acquire an 80% interest in various properties in Southern Saskatchewan. Dr.
Montgomery and Frankie Fu have a pre-existing personal and business relationship
with each other. With Mr. Fu as the financial partner, they acquired the Scout
Lake Property on April 30, 2002 and title to the interest in the property was
vested in the name of Joseph Montgomery. In addition, Dr. Montgomery provides
certain data gathering and exploration services under the name Montgomery
Consultants Ltd. Dr. Montgomery is the President of Montgomery Consultants Ltd.
Mr. Fu and Dr. Montgomery purchased the Scout Lake Property for CAD $7,800 or
approximately USD $6,610. The Acquisition Agreement does require Madison to loan
the mine development costs to be borne by Dr. Montgomery and Mr. Fu.
We intend to develop the properties from their present early stage
exploration through completion of the exploration phase. Prior to any further
exploration decisions, a mineral deposit must be appropriately assessed by us.
Gathering this data usually takes several years. Once the appropriate data has
been gathered, we will determine whether and how to proceed. We will use the
services of Montgomery Consultants Ltd. (related party) as well as other third
party contractors to conduct surveys and exploration at the properties to begin
to enable us to determine whether we can extract and produce diamonds. Under the
terms of the Acquisition Agreement, we must spend CAD $150,000 (approximately US
$120,000) on exploration work May 31, 2006, and approximately an additional CAD
$200,000 (approximately US $170,000) by May 31, 2007. Dr. Montgomery and Frankie
Fu will not be required to fund any exploration work on the property until a
positive feasibility study is obtained, after which they will be required to
fund their 20% of mine development costs. We may be required to provide the
funding of Dr. Montgomery and Mr. Fu to develop the property.
Under the terms of the Acquisition Agreement, we will issue shares to
Dr. Montgomery and Frankie Fu to provide them 10% of the Company's outstanding
shares calculated as of July 1, 2004. These shares are issuable upon the
completion of the initial required exploration work ("work program") and our
determination to continue developing any of the properties listed in the
Acquisition Agreement. If it is determined after the work program that no
further development will be undertaken, no shares will be issued. The shares to
be issued by us upon the completion of the work program and our decision to
continue exploration are not to exceed 12,813,334 shares of common stock. In
determining the terms and conditions of the Acquisition Agreement, we considered
-4-
other arms length agreements entered into between similarly situated parties,
both public and private. We may take into account the dilution in value of our
then outstanding shares of common stock as compared to our then valuation of the
work program in determining if we will continue exploration. In addition, we
will consider the amount of diamond bearing rock, if any, the discovery of any
other materials with a potential market value and the potential to resell the
property to unrelated exploration companies predicated upon the perceived value
of the property when developed. As of today, we have made no determination as to
the feasibility of our work program.
The Saskatchewan Mineral Disposition Regulations stipulates that a
claim holder must spend CAD $12 Canadian per hectare (approximately US$10) per
year in claim year 2 to 10 in order to keep its mineral claims in good standing.
After 10 years a claim holder must spend CAD $25 (approximately US $21) per
hectare per year in order to keep its mineral claims in good standing. The
claims acquired under the Acquisition Agreement were initially claimed by Dr.
Montgomery in April of 2002. All of the claims initially acquired are a part of
the "Scout Lake Property. The claims recorded under numbers S-135705, S-135706,
and S-135707 are the original land claims comprising the Scout Lake Property on
which drilling activity occurred. After assessing the drill results on the
property claimed in April of 2002 these claims have been allowed to lapse and
are no longer of interest to the Company. The claim numbers relating to the
Scout Lake property are S-137962 and S-137963, were claimed by Scout Resources
in July 2004. These claims are now in year two.
We intend to explore the properties from early stage exploration
through completion of the exploration phase. Prior to any decision to develop
the properties, a diamond deposit must be assessed to determine the total
tonnage of diamond bearing material, the average grade of the rock, the
estimated size distribution of the diamonds in the deposit and the average value
per carat of the diamonds. Gathering this data usually takes several years. At
that time, the Company will evaluate whether, and if so, how to proceed.
Exploration Program
We have no independent exploration capabilities.
The Company intends to use third party service providers as well as
Montgomery Consultants Ltd. to perform its exploration activities. The Company
pays an hourly rate for the field services of Dr. Montgomery and his staff as
well as reimbursement for expenses, including equipment, transportation, lodging
and meals. In determining the terms and conditions of the consideration paid or
to be paid, we considered other arms length agreements entered into between
similarly situated parties, both public and private, and have determined that
the payments to Dr. Montgomery and Montgomery Consultants Ltd are on terms equal
to or more favorable than those that would have been paid to other third
parties. Pursuant to oral agreements, Dr. Montgomery is paid not to exceed the
sum of CAD$400 per day (approximately US $332), plus expenses for field days, a
value comparable to that of similar professionals with the education and
experience of Dr. Montgomery. Dr. Montgomery receives no remuneration for
services performed as an officer and director.
Over the next two years, during its exploration phase, the Company
intends to continue to retain Montgomery Consultants Ltd. to co-ordinate crews
of workers who will gather samples of rock from the properties and transport the
samples to a facility where they can be tested for properties which tend to
indicate the presence of diamonds. At the end of the two years of exploration,
we will seek either a joint venture partner or a senior partner that will
undertake the exploration of the properties. However, there is a substantial
risk that no commercially viable diamond deposit will be found. If so, we will
have difficulty finding any partners to undertake further exploration.
-5-
The Company has begun its early stage exploration activities and has
gathered samples from the Scout Lake Properties for analysis. A total of 96 soil
samples were taken by us over the Scout Lake magnetic anomaly. These were
analyzed by SGS Laboratories (SGS) of Toronto, Canada. At the Company's request,
SGS used the MMI D Kimberlite package developed for the detection of kimberlites
and related rocks. Mobile Metal Ions (MMI) soil geochemistry is a technology
developed in Australia for the detection of metal ions through considerable
depths of overburden. This analytical method was used to analyze for palladium,
niobium, yttrium, rubidium, nickel, cobalt, chromium, titanium and magnesium
(Pd, Nb, Y, Rb, Ni, Co, Cr, Ti, and Mg). These minerals are deemed to be diamond
indicating minerals. The location of these minerals tend to indicate a higher
possibility or probability of locating diamonds in the proximity of the mineral
predicated upon the concentration of the mineral. Statistical analyses were
performed for each element and a "background" value determined as the mean of
the lowest quartile. The ratios of actual values to background were calculated
and stacked bar graphs were used to illustrate the results.
A total of 96 MMI samples were collected at 50 meter intervals along
two profiles. Anomalous values were obtained for the elements magnesium,
chromium, rubidium, nickel, and palladium. These elements are typically
associated with kimberlites and ultramafic rocks. The highest response ratios
for each element from the survey were: magnesium-7, chromium-6, yttrium-8,
cobalt-24, and palladium-32.
The Company has also conducted a ground magnetic survey over the Scout
Lake property. The survey was done by Discovery International Geophysics Inc. A
total of 41 line-km. was completed. The raw data was processed to remove
culture, spikes and a regional gradient. The resulting data imaged the magnetic
response from the interpreted dyke successfully showing more detail than the
aeromagnetic survey and some additional structures which may also be dykes.
After a study of the ground magnetic survey and integration with the
MMI geochemical data, four sites were selected for test drilling.
A drilling program on Scout Lake was completed recently. The drill hole
encountered sedimentary rocks of the Ravenscrag formation. These Tertiary
sediments consisted of poorly consolidated sandstone, clay, gravel and coal
seems. The formation, in this area, is of unknown thickness. The unexpected
intersection of Tertiary sediments of unknown thickness has resulted in a change
in the direction of Madison's exploration program. After discussions with Dr
Joseph Montgomery, the Company's claims in the Willow Bunch district will not be
renewed. The main thrust of our program will now be in the Val Marie area of the
Wood Mountain district in Southern Saskatchewan. The Company has 17 mineral
claims in this area which covers the richest indicator mineral concentration so
far encountered.
Two areas in Saskatchewan have been designated as having diamond
discovery potential. They are the Fort a la Corne District and the Wood Mountain
District.
The Fort a la Corne District is the area surrounding Prince Albert in
North-Central Saskatchewan Canada. The Fort a la Corne area of Saskatchewan
hosts one of the most extensive kimberlite fields in the world. Over 70
kimberlites exist in the Fort a la Corne area and over 70 percent of these have
been shown to contain diamonds. Shore Gold Inc has discovered a diamond bearing
kimberlite within the Fort a la Corne area, and is currently conducting a
Pre-Feasibility Study to determine the commercial viability of their find.
The Wood Mountain area an area in which high occurances of diamond
indicator minerals have been found, similar to those at Fort a la Corne. The
Wood Mountain area is in South-West Saskatchewan
The Company's focus will be on properties that are in or near the Wood
Mountain area, near the towns of Val Marie and Wideview. It is noted that both
of these towns lie in defined Wood Mountain area.
-6-
The combination of numerous indicator minerals (pyrope garnets and
chrome diopsides) and magnetic anomalies make this area a prime target. The
indicator mineral suite is identical chemically to that of the Fort a la Corne
district. An early drilling program is anticipated for this area. Additional
targets in the Wood Mountain district and other areas will also be investigated
Competition
The mineral exploration business is competitive in all of its phases.
The Company expects to compete with numerous other exploration companies and
individuals, including competitors with greater financial, technical and other
resources than the Company, for resources required for exploration. Their
greater resources will likely position these competitors to conduct exploration
within a shorter time frame than the Company.
Government Regulation and Licensing
The operations of the Company require licenses and permits from various
governmental authorities. The Company believes that it presently holds all
necessary licenses and permits required to carry on with its intended activities
under applicable laws and regulations and the Company believes it is presently
complying in all material respects with the terms of such licenses and permits.
However, such licenses and permits are subject to change in regulations and in
various operating circumstances. The Company may not be able to obtain all
necessary licenses and permits required to carry out exploration.
The Company is currently subject to environmental regulation under The
Environmental Management and Protection Act (Saskatchewan), the Crown Minerals
Act (Saskatchewan) and the Forest Resources Management Act (Saskatchewan). We
believe that we are in compliance with all of these acts. Moreover, the Company
believes that an environmental impact of its exploration activities will be
minimal. To the extent that the Company removes large amounts of rock or soil
from the properties, we will likely have to replace such rock or soil and
remediate any environmental disruption caused by its activities. It is
impossible for us to assess with any certainty the cost of such replacement or
remediation or the potential liability the Company would face if we were found
to have violated one or more of these acts.
Employees
We currently have three part time employees, our officers and
directors, who work of the Company on a part time basis. None of these employees
devote more than 10% of their time to the Company. Except for the compensation
to Dr. Montgomery unrelated to his activities as an officer and director, no
officer or director is paid for services rendered.
Seasonality
Due to the potential for extremely cold weather in Saskatchewan during
the period from November to March, there may be years when exploration is not
possible during these months.
Currency Fluctuation
The Company's currency fluctuation exposure is primarily to the
Canadian dollar as all of the Company's properties are in Saskatchewan. Such
fluctuations may materially affect the Company's financial position and results
of operations.
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ITEM 2. PLAN OF OPERATION
The following discussion regarding the Company and our business and
operations contains "forward-looking statements." These statements consist of
any statement other than a recitation of historical fact and can be identified
by the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or its negative or other variations or comparable
terminology. All forward-looking statements are necessarily speculative and
there are certain risks and uncertainties that could cause actual events or
results to differ materially from those referred to in such forward-looking
statements.
Plan of Operation
We were incorporated in June of 1998 under the name of "Madison-Taylor
General Contractors, Inc." and we intended to engage as a general contractor for
constructing temporary buildings at exploratory mining locations. We were unable
to implement our business and remained inactive from 1998 until 2004. We
commenced operations under our current name in April of 2004. After implementing
our current plan of operation, we have relied on advances and contributions of
capital of approximately $28,925 from our principal stockholders, and proceeds
of approximately $44,000 from the sale of a 20% interest in one of the Company's
claims (Bulls Eye) to support its limited operations. As of December 31, 2004,
we had approximately $30,800 of cash. We will need additional equity or debt
financing of up to $2,000,000 that we plan to use for the second phase of its
exploration program to commence in 2005.
Geological Report: Southern Saskatchewan
Dr. Joseph Montgomery has prepared a geological report on the Wood
Mountain District. The report summarizes the Company's claims in the area and
the geological formations on the claims that have been identified by
aeromagnetic survey and other mineral exploration activities done in the past.
In his report, Dr. Joseph Montgomery has recommend to us that we
proceed with a three-phase, staged exploration program in the Wood Mountain
District based on his conclusion that prospecting, geophysical surveys and soil
and rock sampling are the exploration techniques that have been the most
successful in diamond bearing kimberlite rock in the region.
The Company has several specific exploration objectives:
(1) To locate one or more Kimberlite/Lamproite pipes, dykes or
sills;
(2) To determine whether the Kimberlite/Lamproite contains
Diamonds; and
(3) To determine if the diamond-bearing pipe could be the source
of an economically viable mine.
Even if the Company locates Kimberlite, the finding of diamonds in
Kimberlite is rare and the finding of a commercial grade of diamonds is rarer.
We believe that exploration is by its very nature is evolutionary. Each
subsequent step is based on the foundation established by previous results. Even
then, diverse factors affect the process. Weather and seasons influence when
work can be commissioned. Previous results determine the direction for future
exploration and the availability of funds dictates what work can be budgeted for
each phase of exploration.
-8-
Phase One
The Company has completed its initial phase of work on the Scout Lake
properties and intends to complete the initial phase of work on some of its
other properties in the Wood Mountain District by June 30, 2006. The results at
our Scout Lake properties do not warrant spending further time and money at this
location. Phase one work should consist of aground magnetometer survey at
approximately 500 meter line-spacing. At the same time, surface samples should
be taken of till for heavy mineral evaluation. About 50 samples would cover the
grid area satisfactorily. If results warrant, a few lines of gravimetric
surveying could be done. Two or three RC drill holes(about 500 meter) would then
test the anomaly.
Phase 1 - Initial Wood Mountain Evaluation
- Ground Magnetometer - 1 month Instrument Rental 1,800
- 50 Sample Collections - Processing @ $50 each 2,500
- Gravimetric Survey - Instrument Rental 600
- Chemical Analysis - 50 @ $10 each 500
- Personnel - Geologist 2 weeks @ $300/day 4,200
- Personnel - Assistant 2 weeks @ $200/day 2,800
- Accommodation - $100/day x 2 2,800
- Transportation - Truck Rental, Maintenance 2,000
Engineering & Supervision
- Engineering & Supervision 2,000
- Contingencies approximately 5% 900
Phase 1 Total $20,100
Phase Two - Regional Program
The regional program of exploration is being proposed to locate
kimberlite diatremes. At present, we have regional to detailed heavy mineral
anomalies and regional to detailed magnetic anomalies. Unfortunately, the heavy
mineral dispersion is too widespread and the magnetic anomalies are too numerous
to allow reasonable drill target selection. The following systematic approach
may help us to alleviate this problem:
Regional Structural Study
Kimberlite pipe emplacement is governed by deep-seated structures that
penetrate stable Archean Cratons and allow the rapid rise of lower mantle
ultramafic magmas through diamond-bearing strata. Some of the major structures
in southern Saskatchewan are known, but it appears that a satellite imagery
interpretation, in particular of radar data, would be of value to us.
Regional Heavy Mineral Study
Heavy mineral data is already available to us from the government and
other available for purchase proprietary surveys. However, a large proportion of
the area of our interest remains without data.
-9-
It is proposed that a detailed heavy mineral survey be conducted over
the area with one sample being taken per township to start. The usual method of
processing heavy mineral samples, which includes, washing, sizing, gravity
separation by jig, tables or heavy liquids, microscopic hand-picking and
microprobe analysis would be prohibitively expensive. Therefore, the following
processing methodology is suggested:
(a) Sample till or stream sediments (about 20 kg).
(b) Wash and sieve sample in the field or nearby portable
equipment to obtain a clean, sized fraction suitable for
hydrosizing.
(c) Use a laboratory-sized elutriator (hydrosizer) to obtain a
sized, heavy mineral fraction. Adjust density to retain all
indicator minerals.
(d) Analyze for chromium and nickel and other trace elements by
total fusion and ICP. This will provide an indicator for
ultramafic rocks.
(e) Plot results and evaluate for trends.
(f) Some detailed HM testing, - microprobing grain-picking.
Wood Mountain Formation Study
Heavy minerals including standard indicator minerals and micro-diamonds
have been recovered from the unconsolidated sand and gravel deposits of the Wood
Mountain formation. We believe that a heavy mineral study of this formation and
a paleo-current study should be undertaken. The samples should be processed in
the same manner as in the "Regional Heavy Mineral Study."
Compilation of Geophysical Data
(a) Aeromagnetic
(b) Ground magnetic
(c) Gravimetric
(d) Seismic
G.I.S. Compilation of all Data
A G.I.S. (Geographic Information Systems) compilation of the following
data should be undertaken in order to select the best drill targets:
(a) Bedrock Geology
(b) Surficial Geology (i.e. land surface to approximately 5 feet
below)
(c) Our HM Surveys
(d) Government surveys
(e) Federal-provincial geochem and HM
(f) Aeromagnetic Data surveys
(g) Gravity Data
(h) Seismic Data
(i) Ground Magnetic Data
(j) Cratonic Age Data
(k) Satellite Radar Imagery Interpretation
Phase 2 - Regional Program
Regional Structural Study
- Satellite Photos - 10 @ $200 each 2,000
- Interpretation - 10 hours @ $500 5,000
- Digitizing
- 3,000
-10-
Regional Heavy Mineral Study
- Sample collection - 600 samples @ $15 each 9,000
- Vehicle - FWD - 3 months @ $2,000/month 6,000
- Detail Sample Collection - 1000 samples @ $15 each 15,000
- Initial Processing 24,000
- Washer/Sieve rental - 3 months @ $2,000/month 6,000
- Sample Bags - 1,600 20Kg bags @ $1 each 1,600
- Sample Bags - 1,600 2Kg bags @ $1 each 1,600
- Elutriation (Hydraulic Separation of HM) - 1600 @ $18.75 each 30,000
- ICP (Induced Coupled Polarization) (total) - 1600 @ $10 each 16,000
- Digitizing 3,000
Regional Surficial Geology Study
- Data Interpretation 4,000
- Digitizing 3,000
Compilation of Geophysical Data
- Data Collection 2,500
- Data Interpretation 5,000
- Digitizing 4,000
G.I.S. Compilation
- Additional Data Collection 5,000
- Data Interpretation 5,000
- Digitizing 5,000
Engineering & Supervision
- Engineering & Supervision 15,000
- Contingencies approximately 5% 7,800
Phase 2 Total $178,500
Phase Three - Drilling and Confirmation
The goal of this phase will be to locate anomalous areas by the use of
ground magnetic surveys, and to prioritize each for test drilling.
Gravimetric Surveys will be completed over the ground magnetic anomalies - 1 or
2 lines per anomaly. Test Drilling will then be conducted to test the best
targets.
Phase 3 - Drilling and Confirmation
Ground Magnetic Surveys
- Instrument Rental - 3 months @ $1,600/month 4,800
- Field computer Rental - 3 month @ $300/month 900
- Operator/Assistant - 70 Days @ $300/day 21,000
Gravimetric Survey
- Instrument Rental - 3 months @ $1,600/month 3,000
- Operator/Assistant - 70 Days @ $300/day 21,000
- Surveying 6,000
Test Drilling
- 5,000 ft. @ $10 50,000
- Cutting Analysis - 50 samples @ $500 each 25,000
-11-
Engineering & Supervision
- Engineering & Supervision 13,000
Contingencies approximately 5% 6,700
Phase 3 Total $151,400
24 Month Exploration Budget on new and future claims
The Company intends to option additional property by way of claim
staking or acquiring companies with promising mineral claims in the area of
Southern Saskatchewan and Northern Montana
__________________________________________________________________
Planned Exploration on future Claims Year 1 Year 2
__________________________________________________________________
Claim Staking/property acquisition 50,000 50,000
__________________________________________________________________
Property Exploration Expenditures 500,000 650,000
__________________________________________________________________
$550,000 $700,000
__________________________________________________________________
The Company's business plan for the year 2006 will consist of further
exploration on the properties over which we hold mineral exploration claims and
options. As part of Phase Two, the Company also plans to continue staking
strategically important areas as more information becomes available with respect
to the geology of Southern Saskatchewan. The Company intends to continue using
Montgomery Consulting Ltd. and third party contractors to collect soil samples,
process and analyze the results, plot drill targets, drill the identified
targets and other exploration related work. The Company completed its drill
program at Scout Lake in 2005. The results of the drill program do not warrant
spending further time and money at this location. The main thrust of our program
will now be in the Val Marie area of the Wood Mountain district in Southern
Saskatchewan. The Company has 19 mineral claims in this area which covers the
richest indicator mineral concentration so far encountered.
The combination of numerous indicator minerals (pyrope garnets and
chrome diopsides) and magnetic anomalies make this area a prime target. The
indicator mineral suite is identical chemically to that of the Fort a la Corne
district. An early drilling program is anticipated for this area. Additional
targets in the Wood Mountain district and other areas will also be investigated.
The Company estimates that we will require approximately $2,000,000
Canadian to conduct its full exploration program over a two year period. This
amount will be used to pay for prospecting and geological mapping, airborne
surveys, lodging and food for workers, transportation of workers to and from the
work sites, fuel, pick-up truck rentals, assays, drilling, equipment rental,
additional claim staking, and supervision, including a daily rate payable to Dr.
Montgomery of $400 per day in Canadian funds (approximately US $332), plus out
of pocket expenses, for time spent in the field.
-12-
The officers and directors have agreed to pay all costs and expenses of
having us comply with the federal securities laws (and being a public company).
We estimate that these costs will be approximately $20,000 per year. Our
officers and directors have also agreed to pay the other expenses of the
Company, excluding those direct costs and expenses of data gathering and mineral
exploration, should the Company be unable to do so. To implement our business
plan, we will need to secure financing for our business development. We have no
source for funding at this time.
If we are unable to raise additional funds to satisfy our reporting
obligations, investors will no longer have access to current financial and other
information about our business affairs.
Additional funding to conduct either our full exploration program or a
partial exploration program will depend upon our ability to secure loans or
obtain either private or public financing. We have had some preliminary
negotiations for funding that have been unsuccessful and we currently have not
undertaken any further negotiations. There is no assurance that we will be able
to obtain such funding on any terms or terms acceptable to us and if adequate
funds are not available, we believe that our business development will be
adversely affected. Accordingly, there is no assurance that we will be able to
continue in business.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not own real property nor do we hold any lease or
other real property interest except for the exploration claims we have acquired
pursuant to the Acquisition Agreement as described under "Description of
Business" and from staking claims directly with the government of Saskatchewan.
We have entered into an agreement to acquire an 80% interest in various
properties, located in Southern Saskatchewan.
Scout Lake Property
The Scout Lake Property is located on Canadian NTS Map Sheet 72G.
The property lies approximately 150 kilometers southwest of Regina at
geographical coordinates 49 20'N latitude, 106 57'W longitude. The property is
serviced by local roads, power and water. The legal descriptions of the three
claims that make up the Scout Lake property are noted in the following table.
___________________________________________________________________________
Claim number Location NTS Area Recorded Area
___________________________________________________________________________
S-137962 All of Sections 19 and 30 72-H-05 512 Hectares
and 26, Township 4 Range
29, West of the Second
Meridian
___________________________________________________________________________
S-137963 All of Section 13 72-H-05 512 Hectares
Township 4 Range 30
West of the Second
Meridian
___________________________________________________________________________
The Bronco Target is located on Canadian NTS Map Sheet 72-G.
The Bronco target lies in Southern Saskatchewan near the town of Val
Marie, approximately 400 km southwest of the Star Kimberlite - Fort al La Corne.
This area is in the area defined by the Saskatchewan Geological Survey as being
high diamond exploration potential.
___________________________________________________________________________
S-137774 The North half of sections 7, 8 72-G-03 1152 Hectares and 9 and
all of sections 16, 17 and 18, Township 3, Range 9, West of the
Third Meridian.
___________________________________________________________________________
-13-
S-137775 All of section 19, Township 3, 72-G-03 256 Hectares
RANGE 9, West of the Third
Meridian
___________________________________________________________________________
S-137776 The North half of sections 10, 72-G-03 1152 Hectares
11 and 12 and all of sections
13, 14 and 15, Township 3,
Range 10, West of the Third
Meridian.
___________________________________________________________________________
The Val Marie Target is located on Canadian Map Sheet 72-G.
There are numerous anomalies within the Val Marie target, and an
abundance of indicator minerals have been found in past ground exploration. The
chemistry of these minerals is consistent with a kimberlitic source. An
abundance of chrome diopsides suggests a local source within a few kilometers.
Altered Bearpaw Formation rocks were identified 1.5 km from the site. The
alteration of these rocks reflects the proximity of intrusive rocks.
___________________________________________________________________________
S-137460 ALL OF SECTIONS 14, 15, 22, 72-G-03 & 72-G-06 2048 Hectares
23, 26, 27, 34 AND 35,
TOWNSHIP 3, RANGE 11, WEST
OF THE THIRD MERIDIAN
___________________________________________________________________________
S-137461 ALL OF SECTIONS 2 AND 3, 72-G-06 512 Hectares
TOWNSHIP 4, RANGE 11, WEST
OF THE THIRD MERIDIAN
___________________________________________________________________________
The Bulls Eye Target is located on Canadian NTS Map Sheet 72J.
The Bulls Eye Target was initially claimed by the Company on August 31,
2004. The property lies approximately 200 kilometers West of Regina at
geographical coordinates 50 30'N latitude, 107 15' longitude. The property is
serviced by local roads, power and water. The legal descriptions of the two
claims that make up the Bulls Eye Target are noted in the following table.
Claim number Location NTS Area Recorded Area
___________________________________________________________________________
S-137654 All of section 11, 72-J-06 & 256 Hectares
Township 18, Range 10, 72-J-11
West of the Third Meridian
___________________________________________________________________________
S-137655 All of section 12, 72-J-06 & 256 Hectares
Township 18, Range 10, 72-J-11
West of the Third Meridian
___________________________________________________________________________
-14-
The Wood Mountain North Target was initially claimed by the Company on
November 18, 2004. The Wood Mountain North Target is located on Canadian NTS Map
Sheet 72G. The property lies approximately 100 kilometers Southwest of Regina at
geographical coordinates 49 30'N latitude, 106 30' longitude. The property is
serviced by local roads, power and water. The legal descriptions of the claim
that make up the Wood Mountain North Target is noted in the following table.
___________________________________________________________________________
Claim number Location NTS Area Recorded Area
___________________________________________________________________________
S-137742 All of Sections 27, 28, 29 72-G-07, 1024 Hectares
and 30, Township 6, Range 72-G-08,
4, West of the Third 72-G-09
Meridian & 72-G-10
___________________________________________________________________________
The Company has also claimed other unnamed properties in Saskatchewan
as at December 31, 2004. The legal descriptions of the unnamed claims is noted
in the following table.
___________________________________________________________________________
Claim number Location NTS Area Recorded Area
___________________________________________________________________________
S-137765 All of section 31, 72-G-04 256 Hectares
Township 1, RANGE 13, West
of the Third Meridian
___________________________________________________________________________
S-137766 All of section 9, Township 72-G-04 256 Hectares
1, RANGE 14, West of the
Third Meridian
___________________________________________________________________________
S-137767 All of section 5, Township 72-F-08 256 Hectares
4, RANGE 18, West of the
Third Meridian
___________________________________________________________________________
S-137768 All of section 29, Township 6, 72-F-08 & 256 Hectares
RANGE 18, West of the 72-F-09
Third Meridian
___________________________________________________________________________
-15-
S-137769 All of section 4, Township 2, 72-F-02 256 Hectares
RANGE 22, West of the
Third Meridian
___________________________________________________________________________
S-137770 All of sections 28 and 33, 72-F-14 512 Hectares
Township 9, RANGE 25, West of
the Third Meridian
___________________________________________________________________________
S-137771 All of sections 5 and 6, 72-F-05 512 Hectares
Township 5, RANGE 28, West of
the Third Meridian
___________________________________________________________________________
S-137772 All of section 7, Township 5, 72-F-05 256 Hectares
RANGE 28, West of the Third
Meridian
___________________________________________________________________________
S-137773 All of section 9, Township 5, 72-F-05 256 Hectares
RANGE 28, West of the
Third Meridian
___________________________________________________________________________
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the name and address of each officer and
director of the Company and each person who owns beneficially more than five
percent of the Common Stock of the Company, and the number of shares owned by
each such person and by all officers and directors as a group:
Name and Amount and
Address of Nature of
Beneficial Beneficial Percent
Title of Class Owner Owner of Class
___________________________________________________________________________
Common Kevin M. Stunder 32,035,000 27.78
3880 Lynn Valley Rd.
North Vancouver, BC
V7K 2S6
Joel Haskins 32,035,000 27.78
807 - 525 Seymour Street
Vancouver, BC
V6B 3H7
All Officers and
Directors as a Group 64,070,000 55.56
(three [3] individual)
-16-
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth the name, address and position of each
of our executive officers and directors as of the date hereof:
Name Age Position
____ ___ ________
Kevin M. Stunder 36 Director and
807 - 525 Seymour Street President
Vancouver, BC
Canada, V6B 3H7
Joel Haskins 34 Director, Secretary
807 - 525 Seymour Street and Treasurer
Vancouver, BC
Canada, V6B 3H7
Dr. Joseph Montgomery 78 V.P. Director and
525 Seymour Street VP Exploration
Suite 807
Vancouver, BC
Canada, V6b 3H7
Kevin Stunder, President and Director
Mr. Stunder has over 10 years experience in business strategy and
marketing. He has acted in a Director role of several public companies including
VantagePoint Systems Inc., Intrawest Corporation, and Rhino Resources, Inc. He
brings leadership operational expertise and vision to the management team. Kevin
holds a degree in Business Administration from Simon Fraser University. During
his tenure with Intrawest, Mr. Stunder has spoken at several executive
engagements and Mr. Stunder was awarded "Best Integrated Customer Relationship
Management/Ebusiness Solution" from the Microsoft Industry Solutions Awards in
2000 and Internet World's "Best Canadian Recreational Website" in 1998. Both of
these awards were achieved while Mr. Stunder was employed by Intrawest
Corporation as the Director of Ecommerce.
Dr. Joseph Montgomery, PhD, P. Eng., VP Exploration and Director
Dr. Montgomery received his Ph.D. in Geology from Queen's University
(Ontario) and University of British Columbia in 1967. In 1968, he founded
Montgomery consultants consulting firm engaged in mining exploration, property
evaluation, property development, syndicate management, ore reserve estimates
and computer application in the mining industry. Clients have included many
major and junior mining companies, Canadian federal and provincial governments
and United Nations. In 1994, Dr. Montgomery presented "Diamond Exploration in
Canada" - An Update, for the Canadian Institute of Gemology.
As part of his continuing role with the Company, Dr. Montgomery will
act as the Company's Vice President of Exploration. Dr. Montgomery will oversee
all exploration activities and provide market analysis and geologic and reserve
analysis for The Company. He has prepared more than 300 geological reports on
various mineral deposits including precious metals, base metals, industrial
minerals and gemstones for clients and regulatory agencies. Dr. Montgomery has
undertaken mineral investigations in North America and South America, Africa,
Europe, Asia and Australia.
Joel Haskins, CA, Director, Secretary & Treasurer
Mr. Haskins will provide the financial expertise required to direct The
Company's financial affairs. Mr. Haskins has worked as the CFO and Executive
Director of Vontobel Private Equity Management (Cayman) Ltd.,a Swiss Venture
capital firm managing over USD 1 Billion in public and private investments. He
graduated from Simon Fraser University in Canada, with a degree in Business
Administration and then went on to become a Chartered Accountant in 1997.
-17-
Executive Compensation
The executive officers, Mssrs. Stunder and Haskins, have not yet
received any annual salary compensation for their services. However, the
executive officers will likely receive an annual salary or other compensation in
the future. The Company has not entered into employment agreements with any of
its officers or directors of the Company.
The officers and directors may be deemed parents and promoters of the
Company as those terms are defined by the Securities Act of 1933, as amended.
All directors hold office until the next annual stockholder's meeting or until
their death, resignation, retirement, removal, disqualification, or until their
successors have been elected and qualified. Officers of the Company serve at the
will of the Board of Directors.
No remuneration has been paid for officers and directors except
reimbursement for out-of-pocket expenditures for activities on the Company's
behalf. None of the officers and directors anticipates devoting more than 10% of
his time to Company activities.
The Company has paid no compensation or consulting fees to its
executive officers as a group. The Company is not a party to any employment
agreements. The Company has no retirement pension, profit sharing or stock
option plans or insurance or medical reimbursement plans covering its officers
and directors, and does not contemplate implementing any such plans at this
time.
Conflicts of Interest
Members of the Company's management are associated with other firms
involved in a range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and directors of the
Company. Insofar as the officers and directors are engaged in other business
activities, management anticipates it will devote only a minor amount of time to
the Company's affairs.
Our officers and directors are now and may in the future become
shareholders, officers or directors of other companies which may be engaged in
business activities similar to those conducted by the Company. Accordingly,
additional direct conflicts of interest may arise in the future with respect to
such individuals acting on behalf of the Company or other entities. Moreover,
additional conflicts of interest may arise with respect to opportunities which
come to the attention of such individuals in the performance of their duties or
otherwise. The Company does not currently have a right of first refusal
pertaining to opportunities that come to management's attention insofar as such
opportunities may relate to the Company's proposed business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their attention,
either in the performance of their duties or in any other manner, will be
considered opportunities of, and be made available to the Company and the
companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or director.
-18-
If the Company or the companies in which the officers and directors are
affiliated with both desire to take advantage of an opportunity, then said
officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so. Except as set forth above,
the Company has not adopted any other conflict of interest policy with respect
to such transactions.
Any transactions between the Company and our officers and directors or
five (5%) shareholders and their respective affiliates (to include Frankie Fu,
Dr. Joseph Montgomery's partner) will be on terms no less favorable than those
terms which could be obtained from unaffiliated third parties and said
transactions will be approved by a majority of the disinterested directors.
Independent Directors.
We have no independent directors. The Company does intend to secure
independent directors; however, until such time as it is financially able to
attract independent directors and the Company is able to meet the cost of
insuring each director, the Company will not, in all likelihood, be able to have
a board containing independent directors.
Subject to the Company attracting independent directors and providing
insurance for each director, so long as the Company has an outstanding class of
securities registered under the Securities Exchange Act of 1934, as amended, and
the outstanding securities are held of record by 100 or more persons of record,
after the annual meeting in 2006, the Company contemplates having not less than
one independent director and after the annual meeting in 2007, the Company
contemplates having a majority of independent directors.
Audit Committee and Other Committees.
Our board of directors has not established an audit committee.
We recognize that an audit committee, when established, will play a
critical role in its financial reporting system by overseeing and monitoring
management's and the independent auditors' participation in the financial
reporting process. The audit committee will adopt its own charter.
Until such time as an audit committee has been established, the board
of directors will continue to undertake those tasks normally associated with an
audit committee to include, but not by way of limitation, the (i) review and
discussion of the audited financial statements with management, and (ii)
discussions with the independent auditors the matters required to be discussed
by the Statement On Auditing Standards No. 61, as may be modified or
supplemented.
The auditor is subject to peer review consistent with the American
Institute of Certified Public Accountants (AICPA) procedures.
In addition, the Company does not have any compensation or executive or
similar committees.
-19-
ITEM 6. EXECUTIVE COMPENSATION.
Employment Agreements
No remuneration has been paid for officers and directors except
reimbursement for out-of-pocket expenditures for activities on the Company's
behalf. None of the officers and directors anticipates devoting more than 10% of
his or her time to Company activities. The Company has not entered into
employment agreements with any of its officers or directors of the Company.
Stock Option and Other Agreements
No compensation is payable to directors of the Company in connection
with attendance at board meetings, except as to such directors who also serve as
officers of the Company in capacities other than directors and/or officers. At
this time, no other compensation has been scheduled for any other member of the
Board of Directors of officers of the Company.
Future compensation of officers will be determined by the Board of
Directors based upon financial condition and performance of the Company, the
financial requirements of the Company, and upon individual performance of each
officer. The Board of Directors intends to insure that the salaries paid to the
Company's officers and employees are reasonable and prudent and are based upon
both the financial condition and performance of the Company and upon the
performance of the individual officers.
The Company has no retirement pension, profit sharing or stock option
plans or insurance or medical reimbursement plans covering its officers and
directors, and does not contemplate implementing any such plans at this time.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Certain Relationships and Related Transactions
We have entered into an Acquisition Agreement dated June 16, 2004 and
as amended dated on September 15, 2005 with Dr. Montgomery and Frankie Fu. Under
the terms of the Acquisition Agreement, the Company must spend CAD 150,000
(approximately US $120,000) by May 31, 2006 and an additional CAD 200,000
(approximately US $170,000) by May 31, 2007 on exploration work. Dr. Montgomery
and Mr. Fu will not be required to fund any exploration work on the property
until a positive feasibility study is obtained, after which they will be
required to fund their 20% of mine development costs.
Dr. Montgomery and Frankie Fu have a pre-existing personal and business
relationship with each other. With Mr. Fu as the financial partner, they
acquired the Scout Lake Property on April 30, 2002 and title to the interest in
the property was vested in the name of Joseph Montgomery. In addition, Dr.
Montgomery provides certain data gathering and exploration services under the
name Montgomery Consultants Ltd.
Dr. Montgomery serves as the company's Vice President of Exploration,
and therefore is responsible for the planning and execution of our exploration
plans. It is assumed that he is involved in all aspects of our work that he is
capable of, all other work is contracted.
Under the terms of the Acquisition Agreement, we will issue shares to
Dr. Montgomery and Frankie Fu to provide them 10% of the Company's outstanding
shares calculated as of July 1, 2004. These shares are issuable upon the
completion of the initial required exploration work and the determination to
continue developing the Scout Lake properties. If it is determined after the
work program that no further development will be undertaken, no shares will be
issued. The shares to be issued by us upon the completion of the work program
and a decision of the Company to continue exploration are not to exceed
12,813,334 shares of common stock.
-20-
The officers and directors may be deemed parents and promoters of the
Company as those terms are defined by the Securities Act of 1933, as amended.
All directors hold office until the next annual stockholder's meeting or until
their death, resignation, retirement, removal, disqualification, or until their
successors have been elected and qualified. Officers of the Company serve at the
will of the Board of Directors.
Any transactions between the Company and our officers and directors or
five (5%) shareholders and their respective affiliates (to include Frankie Fu,
Dr. Joseph Montgomery's partner) will be on terms no less favorable than those
terms which could be obtained from unaffiliated third parties and said
transactions will be approved by a majority of the disinterested directors.
ITEM 8. DESCRIPTION OF SECURITIES.
Generally.
The authorized capital stock of the Company consists of 500,000,000
shares of Common Stock, par value $.001 of which 115,320,000 are issued and
outstanding on December 31, 2004 and as of today. We have no preferred stock
authorized for issuance.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, are entitled to one vote per share in all matters to be
voted upon by shareholders. The shares of Common Stock have no preemptive,
subscription, conversion or redemption rights and may be issued only as
fully-paid and nonassessable shares. Cumulative voting in the election of
directors is not permitted, which means that the holders of a majority of the
issued and outstanding shares of Common Stock represented at any meeting at
which a quorum is present will be able to elect the entire Board of Directors if
they so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any. All shares of the Company's Common Stock issued and outstanding are
fully-paid and nonassessable.
Holders of our shares of Common Stock are entitled to share pro rata in
dividends and distributions with respect to the Common Stock, as may be declared
by the Board of Directors out of funds legally available. We have not paid any
cash dividends on our Common Stock since inception and we intend to follow a
policy of retaining any earnings to finance the development and growth of its
business. Accordingly, we do not anticipate the payment of cash dividends in the
foreseeable future.
Shares Eligible for Future Sale
The Company has 115,320,000 shares of common stock outstanding, of
which 64,070,000 shares are considered "restricted securities" and in the
future, may be sold only in compliance with Rule 144 or in an exempt transaction
under the Securities Act of 1933, as amended, (the "Act") unless registered
under the Act (the "Restricted Shares").
-21-
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned the Restricted
Shares of common stock beneficially for at least one year is entitled to sell,
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the common stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months preceding
the sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
PART II
ITEM 1. MARKET PRICE FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
There is no established trading market in our Common Stock.
We have been assigned a trading symbol of MDEX in connection with the
reporting of a secondary market transaction or transactions by a broker or
dealer in the Automated Confirmation Transaction Service. The symbol was
assigned at the request of a broker-dealer from the NASD Regulators, Inc.
-22-
Shareholders
There are one hundred ninety (197) holders of the Company's Common
Stock.
Shares Eligible for Resale
Except for the shares of stock held by our officers and directors, all
of our issued and outstanding shares of Common Stock held by non-affiliates are
eligible for sale under Rule 144 promulgated under the Securities Act of 1933,
as amended, subject to certain limitations included in said Rule. In general,
under Rule 144, a person (or persons whose shares are aggregated), who has
satisfied a one year holding period, under certain circumstances, may sell
within any three-month period a number of shares which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of shares without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
In summary, Rule 144 applies to affiliates (that is, control persons)
and nonaffiliates when they resell restricted securities (those purchased from
the Company or an affiliate of the Company in nonpublic transactions).
Nonaffiliates reselling restricted securities, as well as affiliates selling
restricted or nonrestricted securities, are not considered to be engaged in a
distribution and, therefore, are not deemed to be underwriters as defined in
Section 2(11), if six conditions are met:
(1) Current public information must be available about the Company
unless sales are limited to those made by nonaffiliates after
two years.
(2) When restricted securities are sold, generally there must be a
one-year holding period.
(3) When either restricted or nonrestricted securities are sold by
an affiliate after one year, there are limitations on the
amount of securities that may be sold; when restricted
securities are sold by non-affiliates between the first and
second years, there are identical limitations; after two
years, there are no volume limitations for resales by
non-affiliates.
(4) Except for sales of restricted securities made by
nonaffiliates after two years, all sales must be made in
-23-
brokers' transactions as defined in Section 4(4) of the
Securities Act of 1933, as amended, or a transaction directly
with a "market maker" as that term is defined in Section
3(a)(38) of the 1934 Act.
(5) Except for sales of restricted securities made by
nonaffiliates after two years, a notice of proposed sale must
be filed for all sales in excess of 500 shares or with an
aggregate sales price in excess of $10,000.
(6) There must be a bona fide intention to sell within a
reasonable time after the filing of the notice referred to in
(5) above.
ITEM 2. LEGAL PROCEEDINGS
We are not party to any material pending legal proceedings and has no
knowledge that any such proceedings are threatened.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements with the findings of any of the
accountants.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Prior to June 30, 1998, we sold and issued securities in a single
transaction that was exempt from the registration requirements of the Securities
Act of 1933, as amended. The Company relied upon Section 4(2) of the Securities
Act of 1933, as amended. There have been no sales of unregistered stock by us
between June 30, 1998 and June 2, 2004. We are informed that after 1992, there
have been some transfers of shares of stock by our shareholders, excluding any
officers and directors or their affiliates.
On June 2, 2004 the Issuer authorized the sale of 11,814 shares
(59,070,000 shares after stock 5000 for 1 stock split) of its common stock for
$.04 per share to the following persons in the amount indicated opposite each
person's name:
______________________________________________________________________
Name of Purchaser Amount of Shares Purchased Amount Paid
______________________________________________________________________
Joel DC Haskins 5,907 (29,535,000 after split) $236.28
______________________________________________________________________
Kevin M Stunder 5,907 (29,535,000 after split) $236.28
______________________________________________________________________
Total 11,814 (59,070,000 after split) $472.56
______________________________________________________________________
-24-
These shares were issued on July 1, 2004 and were sold pursuant to
Section 4(2) of the Act and were not issued in connection with any public
offering. Kevin Stunder is our President and Joel Haskins is our Treasurer. At
the time of the sale and issuance of the common stock, Mssrs. Stunder and
Haskins owned 4,300,000 shares of common stock.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has been informed that liability is not eliminated or
limited unless the Company includes the provision, like it has, in its original
articles of incorporation or ads the provision by amendment. Under Nevada law,
liability may be eliminated or limited as to both directors and officer. Thus,
the liability of a director may be eliminated for breach of his or her fiduciary
duty as an officer. Similarly, an officer may be relieved of liability to the
Company for breach of his or her duties as an officer. However, the law does not
permit the elimination of limitation of liability for acts or omissions which
involve intentional misconduct, fraud, or a knowing violation of law. The
Company has also been informed that the adoption of a provision eliminating
liability of directors or officers does not mean that these individuals will
never find themselves as a defendant in actions or suits arising from the
performance of their duties. First, liability may not be eliminated or limited
for acts or omissions which involve intentional misconduct, fraud, or knowing
violation of law. Second, liability may not be eliminated or limited for the
payment of dividends in violation of Nevada Revised Statutes. The Company has
also been informed that the statute refers only to liability for damages. Thus,
the article provision will not protect a director or officer from suits seeking
equitable relief or orders requiring the return of corporate property. Since the
statute is limited to liability of a director or officer to the corporation or
stockholders, the provision will afford no protection in suits brought by third
parties. As the statute reflects, it applies only to liability for breach of
fiduciary duty as a director or officer. If a director or officer is also a
majority stockholder, he or she may be liable for monetary damages for breach of
duty to the minority. Further, the Company has been advised that the directors
and officers will not be able to escape liability for violations of federal and
state securities laws.
Nevada Revised Statutes, Section 78.751 reads, in full, as follows:
1. Any discretionary indemnification under NRS 78.7502, unless ordered by a
court or advanced pursuant to subsection 2, may be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made:
(a) By the stockholders;
(b) By the board of directors by a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding so orders, by independent
legal counsel in a written opinion; or
(d) If a quorum consisting of directors who were not parties to the
action, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director of officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation.
The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
-25-
3. The indemnification and advancement of expenses authorized in or ordered by
a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
articles of incorporation or any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an
action in his official capacity or an action in another capacity while
holding his office, except that indemnification, unless ordered by a
court pursuant to NRS 78.7502 or for the advancement of expenses made
pursuant to subsection 2, may not be made to or on behalf of any
director or officer if a final adjudication establishes that his acts
or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director, officer,
employee or agent and inures to the benefit of the heirs, executors
and administrators of such a person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company pursuant to the foregoing, the Company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is therefore unenforceable.
PART F/S
Financial Statements.
The following financial statements are attached to this report and
filed as a part thereof.
1) Table of Contents
2) Independent Auditors' Report
3) Assets
4) Liabilities and Stockholders' Equity
5) Statement of Operations
6) Statement of Changes in Shareholders' Equity
7) Statement of Cash Flows
8) Notes to Financial Statements
-26-
PART III
ITEM 1. EXHIBIT INDEX
Sequential
No. Page No.
(3) Articles of Incorporation and Bylaws
3.1 Articles of Incorporation, as amended (filed as an Exhibit
to our Form 10KSB)
3.2 Bylaws (adopted prior to name change) (filed as an Exhibit
to our Form 10KSB)
(10) Material Contracts
10.1 Mineral Property Agreement Contract (filed as an Exhibit
to our Form 10KSB)
10.2 Amendment to Agreement [10.1] dated September 16, 2005 (filed
as an Exhibit to our Form 10KSB)
10.3 Option Agreement dated September 14, 2005 with Echo
Resources, Inc. (filed as an Exhibit to our Form 10KSB)
(23) Consents - Experts
23.1 Consent of Kyle Tingle
(99) Additional Exhibits
99.1 Mineral Resource Map Of Saskatchewan (filed as an Exhibit
to our Form 10KSB)
-27-
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: January 17, 2006 MADISON EXPLORATIONS, INC.
By: /s/ KEVIN M. STUNDER
____________________
Kevin M. Stunder
President
-28-
MADISON EXPLORATIONS, INC.
(A Development Stage Enterprise)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
DECEMBER 31, 2003
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6-12
________________________________________________________________________________
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Madison Explorations, Inc.
Vancouver, British Columbia
I have audited the accompanying consolidated balance sheet of Madison
Explorations, Inc. (A Development Stage Enterprise) as of December 31, 2004 and
the related consolidated statements of income, stockholders' equity (deficit),
and cash flows for the year then ended and the period June 15, 1998 (inception)
through December 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these consolidated financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Madison
Explorations, Inc. (A Development Stage Enterprise) as of December 31, 2004 and
the results of its operations and cash flows for the year then ended and the
period June 15, 1998 (inception) through December 31, 2004, in conformity with
U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has limited operations and has no established
source of revenue. This raises substantial doubt about its ability to continue
as a going concern. Management's plan in regard to these matters is also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Kyle L. Tingle, CPA, LLC
March 14, 2005, except for Note 3, which is dated December 5, 2005
Las Vegas, Nevada
F-1
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
____________ ____________
ASSETS
CURRENT ASSETS
Cash $ 30,841 $ 450
_________ ________
Total current assets $ 30,841 $ 450
_________ ________
Total assets $ 30,841 $ 450
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,927 $ -
Deferred revenue 44,000 -
Officers loans and advances 26,654 -
_________ ________
Total current liabilities $ 76,581 $ -
_________ ________
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: $.001 par value;
authorized 500,000,000 shares;
issued and outstanding: 56,250,000 shares
at December 31, 2003 and 115,320,000
shares at December 31, 2004 $ 115,320 $ 56,250
Additional paid-in capital (109,398) -
Accumulated other comprehensive income (2,554) -
Accumulated deficit during development stage (49,108) (55,800)
_________ ________
Total stockholders' equity (deficit) $ (45,740) $ 450
_________ ________
Total liabilities and
stockholders' equity (deficit) $ 30,841 $ 450
========= ========
See Accompanying Consolidated Notes to Financial Statements.
F-2
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF INCOME
June 15, 1998
Year Ended (inception) to
December 31, December 31, December 31,
2004 2003 2004
____________ ____________ ______________
Revenues $ - $ - $ -
Cost of revenue - - -
____________ ____________ ___________
Gross profit $ - $ - $ -
Operating expenses
Exploration and development $ 28,815 $ - $ 28,815
General and administrative 19,380 - 19,380
____________ ____________ ___________
Operating (loss) $ (48,195) $ - $ (48,195)
Other expense 913 - 913
____________ ____________ ___________
Net loss $ (49,108) $ - $ (49,108)
============ ============ ===========
Net loss per share, basic
and diluted $ (0.00) $ 0.00 $ 0.00
============ ============ ===========
Average number of shares
of common stock outstanding 90,465,410 56,250,000 61,485,301
============ ============= ===========
See Accompanying Consolidated Notes to Financial Statements.
F-3
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Accumulated
Deficit Accumulated
Common Stock Additional During Other
_______________________ Paid in Development Comprehensive
Shares Amount Capital Stage Income Total
__________ ________ __________ ___________ _____________ ________
June 15, 1998, issue
common stock 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 1999
__________ ________ _________ ________ ________ ________
Balance, December 31, 1999 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2000
__________ ________ _________ ________ ________ ________
Balance, December 31, 2000 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2001
__________ ________ _________ ________ ________ ________
Balance, December 31, 2001 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2002
__________ ________ _________ ________ ________ ________
Balance, December 31, 2002 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2003
__________ ________ _________ ________ ________ ________
Balance, December 31, 2003 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Issuance of common stock 59,070,000 59,070 (58,598) 472
June 14, 2004 forward stock split
5000:1
Capital contribution 5,000 5,000
Foreign currency translation
adjustments (2,554) (2,554)
Net loss, December 31, 2004 (49,108) (49,108)
__________ ________ ________ _________ ________ ________
Balance, December 31, 2004 115,320,000 $115,320 $(109,398) $ (49,108) $ (2,554) $(45,740)
=========== ======== ======== ========= ======== ========
See Accompanying Consolidated Notes to Financial Statements.
F-4
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
June 15, 1998
Year Ended (inception) to
December 31, December 31, December 31,
2004 2003 2004
____________ ____________ ______________
Cash Flows From
Operating Activities
Net loss $(49,108) $ - $ (49,108)
Adjustments to reconcile net loss
to cash used in operating activities:
Changes in assets and liabilities
Increase (decrease) in accounts payable and accruals 5,588 - 5,588
Increase in deposits on investments 44,000 - 44,000
________ _____ _________
Net cash used in
operating activities $ 480 $ - $ 480
________ _____ _________
Cash Flows From
Investing Activities $ - $ - $ -
________ _____ _________
Net cash provided used in
investing activities $ - $ - $ -
________ _____ _________
Cash Flows From
Financing Activities
Issuance of common stock $ 472 $ - $ 922
Capital contribution 5,000 - 5,000
Officer loans and advances 23,897 - 23,897
________ _____ _________
Net cash provided by
financing activities $ 29,369 $ - $ 29,819
________ _____ _________
Effect of exchange rate changes on cash and
cash equivalents $ 542 $ - $ 542
________ _____ _________
Net increase (decrease)
in cash $ 30,391 $ - $ 30,841
Cash, beginning of period 450 450 $ -
________ _____ _________
Cash, end of period $ 30,841 $ 450 $ 30,841
======== ===== =========
See Accompanying Consolidated Notes to Financial Statements.
F-5
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
Madison Explorations Inc. (the "Company"), formerly known as Madison-Taylor
General Contractors, Inc., was incorporated in the State of Nevada on June 15,
1998. The Company is engaged in activities related to the exploration for
mineral resources in Canada. The Company currently has operations in the
exploration of natural resources and, in accordance with Statement of Financial
Accounting Standard (SFAS) No. 7, "Accounting and Reporting by Development Stage
Enterprises," is considered a Development Stage Enterprise.
As further explained in Note 3, the Company has entered into an agreement with
Dr. Joseph Montgomery to acquire an 80% working interest in the Scout Lake
Property, located near the town of Scout Lake, Saskatchewan. The parties have
also agreed to work exclusively with each other in the Provinces of
Saskatchewan, Alberta and the State of Montana. The Company intends to develop
the properties from early stage exploration through completion of the
exploration phase. Prior to any further exploration decisions, a mineral deposit
must be appropriately assessed. Gathering this data usually takes several years.
Once the appropriate data has been gathered, management will determine whether
and how to proceed. The Company will use the services of Montgomery Consultants
Ltd. as well as other 3rd party contractors to conduct surveys and exploration
at the properties to begin to enable it to determine whether it can extract and
produce diamonds (see Note 3).
The Company incorporated Scout Resources, Inc. as a wholly owned subsidiary to
conduct the Canadian exploration activities of the Company.
A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES IS AS
FOLLOWS:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiary. All significant intercompany
balances and transactions have been eliminated.
ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-6
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. These financial statements show that Madison
Explorations, Inc. had a substantial working capital deficiency and that it has
suffered losses since inception. Management believes that, at a minimum, the
Company will still need total additional financing of approximately $2,000,000
to continue to operate as planned during the twelve-month period subsequent to
December 31, 2004. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. These financial statements have been
prepared on the basis of generally accepted accounting principles as applicable
to a going concern, however the future of Madison Explorations, Inc. will depend
upon the company's ability to obtain adequate financing, successfully resolve
any outstanding contingencies and attain profitable operations. Although the
successful resolution of these uncertainties is not assured, management is of
the opinion that current negotiations for financing and ultimate satisfactory
settlement of any contingencies will allow the company to continue its
operations.
Management plans to obtain such financing through private and public offerings
of debt and equity securities. However management cannot assure that the Company
will be able to obtain any or all of the additional financing it will need to
continue to operate through at least December 31, 2005 or that, ultimately, it
will be able to generate any profitable commercial mining operations. If the
Company is unable to obtain the required financing, it may have to curtail or
terminate its operations and liquidate its remaining assets and liabilities.
The accompanying financial statements do not include any adjustments related to
the recoverability and classifications of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue its operations as a going concern.
CASH
For the Statements of Cash Flows, all highly liquid investments with maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of December 31, 2004 and December 31, 2003.
INCOME TAXES
Income taxes are provided for using the liability method of accounting in
accordance with SFAS No. 109 "Accounting for Income Taxes." A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effect of
changes in tax laws and rates on the date of enactment.
F-7
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
Advertising costs are charged to operations as incurred. Advertising costs for
the years ended December 31, 2004 and 2003 were $1,797 and $0, respectively.
MINING COSTS
Exploration and evaluation costs are expensed as incurred. Management's decision
to develop or mine a property will be based on an assessment of the viability of
the property and the availability of financing. The Company will capitalize
mining exploration and other related costs attributable to reserves in the event
that a definitive feasibility study establishes proven and probable reserves.
Capitalized mining costs will be expensed using the unit of production method
and will also be subject to an impairment assessment.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, the balances of which,
at times, may exceed Federal insurance limits. Exposure to credit risk is
reduced by placing such deposits with major financial institutions and
monitoring their credit ratings.
IMPAIRMENT OF LONG-LIVED ASSETS
Impairment losses on long-lived assets, such as mining claims, are recognized
when events or changes in circumstances indicate that the undiscounted cash
flows estimated to be generated by such assets are less than their carrying
value and, accordingly, all or a portion of such carrying value may not be
recoverable. Impairment losses are then measured by comparing the fair value of
assets to their carrying amounts.
FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
The functional currency of the Company's operations is Canadian dollars. The
assets and liabilities arising from these operations are translated at current
exchange rates and related revenues and expenses at the exchange rates in effect
at the time the revenue or expense is incurred. Resulting translation
adjustments, if material, are accumulated as a separate component of accumulated
other comprehensive income in the statement of stockholders' deficiency while
foreign currency transaction gains and losses are included in operations.
The Company recorded a foreign currency loss of $243 and $0 during the year
ended December 31, 2004 and the year ended December 31, 2003, respectively.
F-8
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs (an amendment
of Accounting Research Bulletin No. 43, Chapter 4)." SFAS No. 151 seeks to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) in the determination of inventory
carrying costs. The statement requires such costs to be treated as a current
period expense and is effective for fiscal years beginning after July 15, 2005.
The Company does not believe the adoption of SFAS No. 151 will have a
significant impact on its financial position or results of operations.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment." SFAS No. 123R replaced SFAS No. 123 and superceded APB Opinion No. 25.
SFAS No. 123R will require compensation costs related to share-based payment
transactions to be recognized in the financial statements. The adoption of SFAS
No. 123 (revised 2004) should not have a significant impact on the Company's
financial position or results of operations until such time the Company has
share-based payments. The Company will adopt the provisions of SFAS No. 123R at
that time.
NOTE 2. STOCKHOLDERS' EQUITY
COMMON STOCK
The authorized common stock of the Company consists of 500,000,000 shares of
$0.001 par stock. On June 15, 1998 the Company authorized and issued 56,250,000
shares of its common stock in consideration of $450 in cash.
On June 7, 2004 the Company issued 59,070,000 in consideration of $472 in cash.
On June 14, 2004, the State of Nevada approved the Company's restated Articles
of Incorporation, which increased its capitalization from 25,000 common shares
to 500,000,000 common shares. The no par value was changed to $0.001 per share.
On June 14, 2004, the Company's shareholders approved a forward split of its
common stock at five thousand shares for one share of the existing shares. The
number of common stock shares outstanding increased from 23,064 to 115,320,000.
Prior period information has been restated to reflect the stock split.
F-9
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 2. STOCKHOLDERS' EQUITY
NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with SFAS No. 128, "Earnings Per
Share." The weighted-average number of common shares outstanding during each
period is used to compute basic loss per share. Diluted loss per share is
computed using the weighted averaged number of shares and dilutive potential
common shares outstanding. Dilutive potential common shares are additional
common shares assumed to be exercised.
The Company has no warrants or options outstanding at December 31, 2004 and
December 31, 2003.
NOTE 3. MINERAL CLAIMS
SCOUT LAKE
Pursuant to an agreement consummated on June 16, 2004, the Company acquired an
80% interest in certain mineral dispositions near the Town of Scout Lake,
Saskatchewan from two third parties. One of the parties is a key consultant and
advisor to the Company
Under the terms of the agreement the Company must spend Canadian Adjusted
Dollars ("CAD") $150,000 CAD (approximately $125,000 USD) on exploration work by
October 1, 2005 and an additional $200,000 CAD (approximately $166,000 USD) by
July 1, 2006. The other third parties will not be required to fund any
exploration work on the property until a positive feasibility study is obtained,
after which they will be required to fund their 20% of mine development costs.
On September 1, 2005, the Company amended the agreement to extend the work
program deadlines to May 31, 2006 and May 31, 2007 instead of the October 1,
2005 and August 1, 2006 dates, respectively.
Under the terms of the agreement, the Company will issue shares to these third
parties to provide them 10% of the Company's outstanding shares calculated as of
July 1, 2004. These shares are issuable upon the completion of the initial
required exploration work ("work program") and the determination to continue
developing the Scout Lake properties. If it is determined after the work program
that no further development will be undertaken, no shares will be issued.
Issuable shares upon the completion of the work program and a decision of the
Company to continue exploration are 12,813,334.
HERBERT ANOMALY (aka Bulls-Eye Target)
Pursuant to an agreement consummated on September 19, 2004, the Company sold an
option for 20% interest in revenue from the mineral claims the Company has in
the Herbert Anomaly in Saskatchewan to Echo Resources, Inc. ("Echo") in
non-refundable consideration of $44,000. This is treated as a deferred income on
the financial statements to be recognized when the expenses of the exploration
occur to match revenues to the associated expenses.
After February 28, 2006, Echo will be required to fund 50% of any additional
exploration work on the property to maintain its 20% interest. If the Company
decides not to continue work on the property, Echo will have the first right of
refusal to continue development of the site.
F-10
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 4. RELATED PARTY TRANSACTIONS
The officers of the Company have advanced funds to the Company to continue
ongoing operations. On June 25, 2004, two officers executed demand notes at 5%
interest for $15,000 in CAD ($12,479 USD) each. Also, funds were advanced to the
Company to form its subsidiary. A total of $147 in US dollars was advanced for
this purpose. Since all funds advanced are due on demand, this amount has been
classified as a liability in the accompanying financial statements. The officers
of the Company also submit expense reports on a regular basis of expenses
incurred on behalf of the Company in the normal performance of their duties.
These payable to the officers for unreimbursed expenses totaled $1,091 in
Canadian funds at December 31, 2004.
For the year ended December 31, 2004, $12,186 of exploration and development
expenses was paid to Montgomery Consultants, Ltd., a related party controlled by
a director of the Company.
For the year ended December 31, 2004, $643 in interest was accrued on the notes
payable. As of December 31, 2004, the officer advances in USD was $26,654.
NOTE 5. COMPREHENSIVE INCOME
Accumulated other comprehensive income consists of the following:
Dec. 31, 2004 Dec. 31,2003
_____________ ____________
Foreign currency translation
adjustment $ (2,554) $ -
============= =======
The components of other comprehensive income for the year ended December 31,
2004 and June 15, 1998 (date of inception) through December 31, 2004:
Dec. 31, 2004 Since inception
_____________ _______________
Foreign currency translation
adjustment $ (2,554) $(2,554)
============= =======
NOTE 6. INCOME TAXES
We did not provide any current or deferred Canadian federal income tax provision
or benefit for any of the periods presented because we have experienced
operating losses since inception. We provided a full valuation allowance on the
net deferred tax asset, consisting of net operating loss carryforwards, because
management has determined that it is more likely than not that we will not earn
income sufficient to realize the deferred tax assets during the carryforward
period.
F-11
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 6. INCOME TAXES (CONTINUED)
The components of the Company's deferred tax asset as of December 31, 2004 and
2003 is as follows:
2004 2003
_____________ _____________
Net operating loss carryforward $ 16,654 $ -
Valuation allowance (16,654) -
_____________ _____________
Net deferred tax asset $ - $ -
============= =============
A reconciliation of income taxes computed at the statutory rate to the income
tax amount recorded is as follows:
2004 2003 Since Inception
_____________ _____________ _______________
Tax at statutory rate (35.1%) $ 16,654 $ - $ 16,654
Increase in valuation allowance (16,654) - (16,654)
_____________ _____________ _______________
Net deferred tax asset $ - $ - $ -
============= ============= =============
The net non-capital loss carry forward will expire in 2011. This carry forward
may be limited upon the consummation of a business combination Canadian tax
regulations.
F-12
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MADISON EXPLORATIONS, INC.
(A Development Stage Enterprise)
CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
SEPTEMBER 30, 2005
DECEMBER 31, 2004
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONTENTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-1
Consolidated Statements of Operations F-2
Consolidated Statements of Stockholders' Equity (Deficit) F-3
Consolidated Statements of Cash Flows F-4
Notes to Consolidated Financial Statements F-5 - F-8
________________________________________________________________________________
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2005 2004
_____________ ____________
ASSETS
CURRENT ASSETS
Cash $ 65,911 $ 30,841
_________ _________
Total current assets $ 65,911 $ 30,841
_________ _________
Total assets $ 65,911 $ 30,841
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 994 $ 5,927
Deferred revenue 94,000 44,000
Due to affiliates 25,000 -
Officers loans and advances 27,621 26,654
_________ _________
Total current liabilities $ 147,615 $ 76,581
_________ _________
STOCKHOLDERS' (DEFICIT)
Common stock: $.001 par value;
authorized 500,000,000 shares;
issued and outstanding: 115,320,000 shares
at December 31, 2004 and 115,320,000
shares at September 30, 2005 $ 115,320 $ 115,320
Additional paid-in capital (109,398) (109,398)
Accumulated other comprehensive income (2,935) (2,554)
Accumulated deficit during development stage (84,691) (49,108)
_________ _________
Total stockholders' (deficit) $ (81,704) $ (45,740)
_________ _________
Total liabilities and
stockholders' (deficit) $ 65,911 $ 30,841
========= =========
See Accompanying Consolidated Notes to Financial Statements.
F-1
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
June 15, 1998
Nine months ended (inception) to
September 30, September 30, September 30,
2005 2004 2005
_____________ _____________ ______________
Revenues $ - $ - $ -
Cost of revenue - - -
____________ ___________ ________
Gross profit $ - $ - $ -
Operating expenses
Exploration and development $ 22,226 $ 27,094 $ 51,041
General and administrative 12,118 10,210 31,498
____________ ___________ ________
Operating (loss) $ (34,344) (37,304) $(82,539)
Other expense 1,239 483 2,152
____________ ___________ ________
Net loss $ (35,583) $ (37,787) $(84,691)
============ =========== ========
Net loss per share, basic
and diluted $ (0.00) $ (0.00)
============ ===========
Average number of shares
of common stock outstanding 115,320,000 82,120,073
============ ===========
See Accompanying Consolidated Notes to Financial Statements.
F-2
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
Accumulated
(Deficit) Accumulated
Common Stock Additional During Other
__________________________ Paid-In Development Comprehensive
Shares Amount Capital Stage Income Total
___________ ________ _________ __________ _____________ __________
June 15, 1998, issue
common stock 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 1999
___________ ________ _________ _________ ________ _________
Balance, December 31, 1999 56,250,000 $ 56,250 $ (55,800) - $ - $ 450
Net loss, December 31, 2000
___________ ________ _________ _________ ________ _________
Balance, December 31, 2000 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2001
___________ ________ _________ _________ ________ _________
Balance, December 31, 2001 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2002
___________ ________ _________ _________ ________ _________
Balance, December 31, 2002 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Net loss, December 31, 2003
___________ ________ _________ _________ ________ _________
Balance, December 31, 2003 56,250,000 $ 56,250 $ (55,800) $ - $ - $ 450
Issuance of common stock 59,070,000 59,070 (58,598) 472
June 14, 2004 forward stock split
5000:1
Capital contribution 5,000 5,000
Foreign currency translation
adjustments (2,554) (2,554)
Net loss, December 31, 2004 (49,108) (49,108)
___________ ________ _________ _________ ________ _________
Balance, December 31, 2004 115,320,000 $115,320 $(109,398) $ (49,108) $ (2,554) $ (45,740)
Foreign currency translation
adjustments (381) (381)
Net loss, nine month period
ended September 30, 2005 (35,583) (35,583)
___________ ________ _________ _________ ________ _________
Balance, September 30, 2005 115,320,000 $115,320 $(109,398) $ (84,691) $ (2,935) $ (81,704)
=========== ======== ========= ========= ======== =========
See Accompanying Consolidated Notes to Financial Statements.
F-3
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
June 15, 1998
Nine months ended (inception) to
September 30, September 30, September 30,
2005 2004 2005
____________ _____________ _____________
Cash Flows From
Operating Activities
Net loss $(35,583) $(37,787) $(84,691)
Adjustments to reconcile net loss
to cash used in operating activities:
Changes in assets and liabilities
(Increase) in advances to consultant - -
Increase (decrease) in accounts payable and accruals (4,933) 5,327 994
Increase in deferred revenue 50,000 44,000 94,000
________ ________ ________
Net cash used in
operating activities $ 9,484 $ 11,540 $ 10,303
________ ________ ________
Cash Flows From
Investing Activities
Net cash provided used in
investing activities $ - $ - $ -
________ ________ ________
Cash Flows From
Financing Activities
Issuance of common stock $ - $ 472 $ 922
Capital contribution - 5,000 5,000
Officer loans and advances 967 22,362 27,621
Loan from affiliate 25,000 - 25,000
________ ________ ________
Net cash provided by
financing activities $ 25,967 $ 27,834 $ 58,543
________ ________ ________
Effect of exchange rate changes on cash and
cash equivalents $ (381) $ 460 $ (2,935)
________ ________ ________
Net increase (decrease)
in cash $ 35,070 $ 39,834 $ 65,911
Cash, beginning of period 30,841 450 -
________ ________ ________
Cash, end of period $ 65,911 $ 40,284 $ 65,911
======== ======== ========
See Accompanying Consolidated Notes to Financial Statements.
F-4
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-QSB. They
do not include all information and notes required by generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there has been no material change in the information disclosed
in the notes to the consolidated financial statements included in the Annual
Report on Form 10-SB of Madison Explorations, Inc. for the year ended December
31, 2004. When used in these notes, the terms "Company," "we," "us" or "our"
mean Madison Explorations, Inc. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 2005 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2005.
NOTE 2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiary. All significant intercompany
balances and transactions have been eliminated.
ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. These financial statements show that Madison
Explorations, Inc. had a substantial working capital deficiency and that it has
suffered losses since inception. Management believes that the Company will still
need additional financing of approximately $2,000,000 to continue to operate as
planned during the twelve-month period subsequent to September 30, 2005. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements have been prepared on the basis of
generally accepted accounting principles as applicable to a going concern,
however the future of Madison Explorations, Inc. will depend upon the company's
ability to obtain adequate financing, successfully resolve any outstanding
contingencies and attain profitable operations. Although the successful
resolution of these uncertainties is not assured, management is of the opinion
that current negotiations for financing and ultimate satisfactory settlement of
any contingencies will allow the company to continue its operations.
F-5
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Management plans to obtain such financing through private and public offerings
of debt and equity securities. However management cannot assure that the Company
will be able to obtain any or all of the additional financing it will need to
continue to operate through at least September 30, 2006 or that, ultimately, it
will be able to generate any profitable commercial mining operations. If the
Company is unable to obtain the required financing, it may have to curtail or
terminate its operations and liquidate its remaining assets and liabilities.
The accompanying financial statements do not include any adjustments related to
the recoverability and classifications of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue its operations as a going concern
MINING COSTS
Exploration and evaluation costs are expensed as incurred. Management's decision
to develop or mine a property will be based on an assessment of the viability of
the property and the availability of financing. The Company will capitalize
mining exploration and other related costs attributable to reserves in the event
that a definitive feasibility study establishes proven and probable reserves.
Capitalized mining costs will be expensed using the unit of production method
and will also be subject to an impairment assessment.
NOTE 3. ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of Accounting Research Bulletin No. 43, Chapter 4" ("SFAS No. 151"). SFAS No.
151 requires that abnormal amounts of idle facility expense, freight, handling
costs and wasted materials (spoilage) be recorded as current period charges and
that the allocation of fixed production overheads to inventory be based on the
normal capacity of the production facilities. SFAS No. 151 becomes effective for
our Company on January 1, 2006. The Company does not believe that the adoption
of SFAS No. 151 will have a material impact on our consolidated financial
statements.
In December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment." SFAS No. 123R replaced SFAS No. 123 and superseded Accounting
Principles Board Opinion No. 25. SFAS No. 123R will require compensation costs
related to share-based payment transactions to be recognized in the financial
statements. The effective date of SFAS No. 123R is the first reporting period
beginning after June 15, 2005. The adoption of SFAS No. 123 (revised 2004)
should not have a significant impact on the Company's financial position or
results of operations until such time the Company has share-based payments. The
Company will adopt the provisions of SFAS No. 123R at that time.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29" ("SFAS No. 153"). SFAS No. 153 is
based on the principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. APB Opinion No. 29, "Accounting
for
F-6
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 3. ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Nonmonetary Transactions," provided an exception to its basic measurement
principle (fair value) for exchanges of similar productive assets. Under APB
Opinion No. 29, an exchange of a productive asset for a similar productive asset
was based on the recorded amount of the asset relinquished. SFAS No. 153
eliminates this exception and replaces it with an exception of exchanges of
nonmonetary assets that do not have commercial substance. SFAS No. 153 became
effective for our Company as of July 1, 2005. The Company will apply the
requirements of SFAS No. 153 on any future nonmonetary exchange transactions.
On April 14, 2005, the Securities and Exchange Commission issued an announcement
amending the compliance dates for the FASB's SFAS 123R that addresses accounting
for equity based compensation arrangements. Under SFAS 123R registrants would
have been required to implement the standard as of the beginning of the first
interim or annual period that begins after June 15, 2005. The Commission's new
rule will allow companies to implement SFAS 123R at the beginning of the next
fiscal year after June 15, 2005. The Company anticipates adopting SFAS 123R in
the first quarter 2006
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections, a replacement of APB No. 20 and FASB Statement No. 3" ("SFAS No.
154"). SFAS No. 154 requires retrospective application to prior periods'
financial statements of a voluntary change in accounting principle unless it is
impracticable. APB Opinion No. 20 "Accounting Changes," previously required that
most voluntary changes in accounting principle be recognized by including in net
income of the period of the change the cumulative effect of changing to the new
accounting principle. This statement is effective for our Company as of January
1, 2006. The Company does not believe that the adoption of SFAS No. 154 will
have a material impact on our consolidated financial statements.
NOTE 4. STOCKHOLDERS' EQUITY
NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with SFAS No. 128, "EARNINGS PER
SHARE." The weighted-average number of common shares outstanding during each
period is used to compute basic loss per share. Diluted loss per share is
computed using the weighted averaged number of shares and dilutive potential
common shares outstanding. Dilutive potential common shares are additional
common shares assumed to be exercised.
The Company has no warrants or options outstanding at September 30, 2005 and
December 31, 2004.
F-7
MADISON EXPLORATIONS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
NOTE 5. RELATED PARTY TRANSACTIONS
The officers of the Company have advanced funds to the Company to continue
ongoing operations. On June 25, 2004, two officers executed demand notes at 5%
interest for $15,000 in CAD ($12,479 USD) each. Also, funds were advanced to the
Company to form its subsidiary. A total of $147 in US dollars was advanced for
this purpose. Since all funds advanced are due on demand, this amount has been
classified as a liability in the accompanying financial statements. The officers
of the Company also submit expense reports on a regular basis of expenses
incurred on behalf of the Company in the normal performance of their duties.
These payable to the officers for unreimbursed expenses totaled $0 and $1,091 in
Canadian funds at September 30, 2005 and December 31, 2004, respectively.
Exploration and development expenses were paid to Montgomery Consultants, Ltd.,
a related party controlled by a director of the Company, for the three and nine
months ended September 30, 2005 of $164 and $3,148, respectively and for the
three and nine months ended September 30, 2004 of $12,186 and $12,186,
respectively.
For the year ended December 31, 2004, $643 in interest was accrued on the notes
payable. As of September 30, 2005, the officer advances in USD was $27,621,
including $1,634 in accrued interest.
A Company affiliated through common ownership advanced funds of $25,000 for
working capital. The advance is non-interest bearing, due on demand.
NOTE 6. COMPREHENSIVE INCOME
Accumulated other comprehensive income consists of the following:
September 30, 2005 Dec. 31, 2004
------------------ -----------------
Foreign currency translation adjustment $ (2,935) $ (2,554)
================== =================
The components of other comprehensive income for the nine-month period ended
September 30, 2005 and the year ended December 31, 2004:
September 30, 2005 Dec. 31, 2004 Inception to Date
------------------ ----------------- -----------------
Foreign currency translation adjustment $ (381) $ (2,554) $ (2,935)
================== ================= =================
NOTE 7. INCOME TAXES
We did not provide any current or deferred Canadian federal income tax provision
or benefit for any of the periods presented because we have experienced
operating losses since inception. We provided a full valuation allowance on the
net deferred tax asset, consisting of net operating loss carryforwards, because
management has determined that it is more likely than not that we will not earn
income sufficient to realize the deferred tax assets during the carryforward
period.
F-8