AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 2008
Registration No. 333-___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement
Under the Securities Act of 1933
SANTOS RESOURCE CORP.
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11450 - 201A Street
Maple Ridge, British Columbia
Canada V2X 0Y4
Telephone No.: (604) 460-8440
(Address and telephone number of principal executive office)
Business First Formations, Inc.
3990 Warren Way
Reno, Nevada
USA 89509
Telephone No.: (775) 338-2598
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
Fraser and Company LLP
999 West Hastings Street, Suite 1200
Vancouver, British Columbia
Canada V6C 2W2
Telephone No.: (604) 669-5244
Facsimile No.: (604) 669-5791
Approximate date of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ý
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. r
1
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. r
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. r
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer r |
Accelerated filer r |
Non-accelerated filer
r
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Smaller reporting company ý |
Calculation Of Registration Fee
Title of Each Class of Securities to be Registered |
Amount to be Registered |
Proposed Maximum Offering Price per Share |
Proposed Maximum Aggregate Offering Price |
Amount of Registration Fee |
Common |
13,836,500 |
$0.25 |
$3,459,125 |
$135.94 |
Up to 13,836,500 shares of our common stock may be sold by the selling shareholders to the public at a fixed price of $0.25 per share until such time as the shares of our common stock are quoted on the NASD Over-the-Counter Bulletin Board ("OTCBB") or listed on an exchange. Although we intend to apply for quotation of our common stock on the OTCBB, public trading of our common stock may never materialize. If our common stock becomes quoted on the OTCBB, then the sale price to the public will vary according to prevailing market prices or privately negotiated prices by the selling shareholders.
The Company hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Company shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
(COVER CONTINUED ON FOLLOWING PAGES)
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Prospectus, Subject to Completion, Dated ________________ , 2008
Santos Resource Corp.
This prospectus relates to the resale, from time to time, of up to 13,836,500 shares of our common stock by the selling shareholders named in the "Selling Shareholders" section of this prospectus. Santos Resource Corp. will not receive any proceeds from this offering and has not made any arrangements for the sale of these securities. See "Risk Factors" commencing on page 8 for a full discussion of the risks involved in this offering.
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Offering Price |
Commissions |
Proceeds to Selling Shareholders |
Per Share |
$0.25 |
n/a |
$0.25 |
Total |
$3,459,125 |
n/a |
$3,459,125 |
The information in this prospectus is not complete and may be changed. We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.
This prospectus is not an offer to sell our securities and it is not soliciting an offer to buy our securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offence.
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TABLE OF
CONTENTS
Page
PROSPECTUS SUMMARY
6
THE OFFERING
6
SUMMARY FINANCIAL INFORMATION
7
RISK FACTORS
8
FORWARD-LOOKING STATEMENTS
12
USE OF PROCEEDS
12
DETERMINATION OF OFFERING PRICE
12
DILUTION
13
SELLING SHAREHOLDERS
13
PLAN OF DISTRIBUTION
16
LEGAL PROCEEDINGS
20
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
20
Executive Officers And Directors
20
Executive Compensation
21
Summary Compensation Table
22
Director Compensation Table
22
Significant Personnel
22
Committees Of The Board Of Directors
22
Code Of Ethics
22
Involvement In Certain Legal
Proceedings
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
23
DESCRIPTION OF CAPITAL STOCK
23
Common Stock
24
Preferred Stock
24
Dividend Policy
24
Share Purchase Warrants
24
Options
24
Convertible Securities
25
Nevada Anti-Takeover Laws
25
Combinations With Interested
Stockholders
25
INTERESTS OF NAMED EXPERTS AND COUNSEL
25
LEGAL MATTERS
25
EXPERTS
25
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
25
MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
26
No Public Market For Common Stock
26
New Rule 144
26
Penny Stock Regulation
26
Holders
27
4
Page
Dividends
27
Disclosures of Commission Position on
Indemnification for Securities Act Liabilities
27
TRANSACTIONS WITH RELATED PERSONS
27
BUSINESS
28
History And Organization
28
Property Option Agreement
28
Technical Report on Properties
30
Recommended Exploration Program
30
Geological Exploration Program
30
Location, Accessibility, Climate, Local
Resources Infrastructure and Physiography
32
History of the Property
32
Conclusions and Recommendations
33
Geological and Technical Staff
33
Competitive Factors
33
Location Challenges
34
Regulations
34
Environmental Factors
35
Employees
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS PLAN OF OPERATIONS
35
Overview
35
Plan of Operations
35
Risk Factors
36
Financial Condition
36
Liquidity
37
Capital Resources
37
Results Of Operations
37
Off-balance Sheet Arrangements
37
AVAILABLE INFORMATION
37
INDEX TO FINANCIAL STATEMENTS
38
You should
rely only on the information contained in this prospectus and in any
accompanying prospectus supplement. We have not, and the Selling Shareholders
have not, authorized anyone to provide you with information different from the
information contained in this prospectus. The information in this prospectus is
accurate only as of the date of this prospectus, regardless of when this
prospectus is delivered or when any sale of our common stock occurs.
5
Prospectus Summary
The following
summary highlights selected information contained in this prospectus. This
summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the "RISK FACTORS" section, the
financial statements and the notes to the financial statements. As used
throughout this prospectus, the terms "Santos", the "Company", "we," "us," and
"our" refer to Santos Resource Corp. All dollar amounts in this prospectus are
in U.S. dollars unless otherwise stated.
Unless the context otherwise
requires, we have used an exchange rate of CAD$1 to US$1 in reference to amounts
in Canadian dollars.
Santos
Resource Corp. was incorporated under the laws of the State of Nevada on May 24,
2006. In connection with the organization of our Company, nine founding
shareholders of our Company contributed an aggregate of $15,520 cash in exchange
for a total of 31,040,000 shares of common stock. In June 2007, we entered into
a property option agreement to acquire the Lourdeau Property in Quebec. In
January 2008, we raised $144,225 from 32 BC resident placees by issuing 961,500
shares of common stock. We have not commenced active business operations. As
of the date hereof, all our cash has been raised from the issuance of
securities. We are a "shell company" as defined under Rule 405 of the
Securities Act and Rule 12b-2 of the Exchange Act.
We are an
exploration stage company, and our business plan is to explore for minerals on
our mineral property. In June 2007, we entered into a Property Option Agreement
that allows us to acquire a 75% interest in and to the Lourdeau claims (the "Lourdeau
Property" or "Lourdeau Claims"), which consist of 18 mineral claims covering
900.75 hectares (9.01km2) located in the La Grande geological area of the
province of Quebec in the James Bay Territory about 620 miles (1,000 km) north
of Montreal, Quebec. We intend to explore for uranium on our property. There
can be no assurance that valuable uranium deposits exist on the Lourdeau
Property until proper geological work and analysis is performed. The Lourdeau
Property has no proven or probable mineral reserves. Under the Property Option
Agreement, we have an option to acquire a 75% interest in and to the Lourdeau
Claims by paying a total of $10,000 in cash; issuing 75,000 shares to Starfire
Minerals Inc., the registered owner of the Lourdeau Claims; and incurring at
least a total of $25,000 of expenditures on the property before September 30,
2008, and another $25,000 of expenditures before July 25, 2009. As of the date
hereof, $10,000 has been paid and 75,000 shares have been issued to Starfire.
The Lourdeau Property is subject to a 3% Net Smelter Royalty ("NSR") interest
payable to Starfire. We may purchase in the aggregate up to two-thirds of the
NSR by paying Starfire an aggregate of $2,500,000 (CAD$2,500,000) on the basis
of $100,000 per 0.1% NSR acquired on the first one-half of the NSR and $150,000
per 0.1% NSR thereafter for the remaining 1% NSR.
Our
administrative office is located at 11450 - 201A Street, Maple Ridge, British
Columbia, Canada V2X 0Y4, telephone (604) 460-8440. Our registered office is
located at 3990 Warren Way, Reno, Nevada 89509. Our fiscal year end is February
28 (on a leap year our fiscal year end is February 29).
Securities
Being Offered
Up to 13,836,500 shares of our common stock held by the
selling shareholders named in this prospectus.
Offering
Price and Plan of Distribution
The selling shareholders named in this prospectus will
sell the 13,836,500 shares of our common stock offered under this
prospectus at an offering price of $0.25 per share unless the offered
shares are quoted on the over-the-counter bulletin board. We intend to
apply to the over-the-counter bulletin board to allow for the trading of
our common stock when we become a reporting entity under the Securities
Exchange Act of 1934. If our common stock becomes so traded and a market
for the stock develops, the actual price of our stock will be determined
by prevailing market prices at the time of sale or by private
transactions negotiated by the selling shareholders named in this
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prospectus. The offering price would thus be determined
by market factors and the independent decisions of the selling
shareholders named in this prospectus.
Minimum
number of Shares to be sold in this Offering
None.
Securities
issued and to be issued
32,076,500 shares of our common stock are issued and
outstanding as of the date of this prospectus. All of the 13,836,500
shares to be sold under this prospectus will be sold by existing
shareholders.
Use of
Proceeds
We will not receive any proceeds from the sale of the
common stock offered through this prospectus by the selling
shareholders.
Summary Financial Information
As of Fiscal Year
Balance
Sheet Data:
Working
Capital
$
111,059
Total
Assets
$
132,623
Total
Liabilities
$
21,564
Shareholder's Equity
$
111,059
Statement
of Operations Data:
For the Period from Incorporation on May 24, 2006 to
February 29, 2008
Revenue
NIL
Total
Expenses
$
70,888
Net Income
(Loss)
($
70,888
)
INVESTMENT
IN OUR COMPANY INVOLVES SIGNIFICANT RISKS BECAUSE OUR MINERAL CLAIMS ARE AT THE
EXPLORATION STAGE AS OPPOSED TO THE DEVELOPMENT STAGE. OUR MINERAL CLAIMS DO
NOT HAVE A KNOWN BODY OF COMMERCIAL ORE. THE COMPANY WILL NOT BE RAISING ANY
FUNDS IN THIS OFFERING. THE COMPANY WILL USE AVAILABLE WORKING CAPITAL TO MEET
OUR GENERAL OPERATING EXPENSES AND TO MEET OUR OBLIGATIONS UNDER THE PROPERTY
OPTION AGREEMENT. WE DO NOT HAVE THE FUNDS TO CONDUCT THE RECOMMENDED
EXPLORATION PROGRAM, WHICH CONSISTS OF GRAB AND CHANNEL SAMPLING AND
HELICOPTER-BORNE GEOPHYSICAL SURVEY AND COSTS APPROXIMATELY $107,570. WE WILL
NEED TO RAISE ADDITIONAL MONEY BY PRIVATE PLACEMENTS TO MEET ANY FUTURE FUNDING
REQUIREMENTS. WE ARE ALSO CONSIDERED
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A
SHELL COMPANY AS DEFINED BY RULE 405 OF THE SECURITIES ACT AND EXCHANGE ACT RULE
12B-2 BECAUSE WE HAVE NOMINAL OPERATIONS AND NOMINAL ASSETS.
Risk Factors
There is no
assurance that our business will be profitable. We must conduct exploration to
determine what amount, type and quality of minerals, if any, exist on our
property. We do not claim to have any reserves whatsoever at this time on any of
our claims. An investment in our common stock involves a high degree of risk.
You should carefully consider the risks described below and the other
information in this prospectus before investing in our common stock. If any of
the following risks occur, our business, operating results and financial
condition could be seriously harmed.
You cannot evaluate the investment merits of our Company because we
have no operating history.
We were
incorporated in May 2006, and we have not started our proposed business
operations or realized any revenues, which makes it difficult to evaluate the
investment merits of our Company. We are a start-up company. We have no
operating history and we do not have any business prior to our organization. As
of February 29, 2008, we incurred total expenses of $70,888.
We may not be able to continue as a going concern if
we do not obtain additional financing.
Because of our
lack of sufficient funds and short operating history incurring only expenses,
and no revenues, our independent accountants' audit report states that there is
substantial doubt about our ability to continue as a going concern. Our
independent auditor in their audit report have stated that we incurred only
losses since our inception raising substantial doubt about our ability to
continue as a going concern. Therefore, our ability to continue as a going
concern is highly dependent upon obtaining additional financing for our planned
operations. As of the date hereof, all our cash has been raised from the
issuance of securities.
In order for
us to perform any exploration program, we will need to obtain additional
financing. As of February 29, 2008, we had cash in the amount of $132,303. We
currently do not have any operations and we have no income. Our business plan
calls for incurring approximately $107,570 on an exploration program
incorporating grab and channel sampling followed by a helicopter-borne
geophysical survey, which would define the targets acquired during the
geophysical surveys and sampling campaign. We have sufficient funds to meet our
general operating expenses and to meet our obligations under the Property Option
Agreement. We do not have funds to conduct the exploration program. If we
raised the funds and conducted the exploration programs, and if our exploration
programs are successful in discovering ore of commercial tonnage and grade, we
will require additional funds in order to place the Lourdeau Claims into
commercial production. We currently do not have any arrangements for financing
and we may not be able to obtain financing when required. Obtaining additional
financing would be subject to a number of factors, including the market price
for uranium, gold, silver, copper, base and precious metals and the cost of
exploring for these minerals. These factors may make the timing, amount, terms
or conditions of additional financing unavailable to us.
Because our
sole executive officer does not have formal training specific to the mining
industry, there is a higher risk our business will fail.
Mr. Richard
Pierce, our sole executive officer, does not have any formal training as a
geologist, or in the technical aspects of management of a company specializing
in mining and exploration for base and precious metals. Mr. Pierce has no
business experience with exploration companies, his decisions and choices may
not take into account standard exploration or mining approaches commonly used in
the
8
industry. As a result of this inexperience, there is a higher risk of our being
unable to complete our business plan for the exploration of our mineral claims.
In addition, we will have to rely on the technical services of others with
expertise in geological exploration in order for us to carry our planned
exploration program. If we are unable to contract for the services of such
individuals, it will make it difficult and maybe impossible to pursue our
business plan. There is thus a higher risk of business failure.
Because our
sole executive officer has only agreed to provide his services on a part-time
basis, he may not be able or willing to devote a sufficient amount of time to
our business operations, causing our business to fail.
Our sole
executive officer is employed on a full time basis by other companies. Because
we are in the early stages of our business, Mr. Pierce, our executive officer,
devotes approximately 10 hours per week to our affairs. If the demands of our
business require the full business time of Mr. Pierce, he is prepared to adjust
his timetable to devote up to 15 hours a week. However, Mr. Pierce may not be
able to devote sufficient time to the management of our business, as and when
needed. It is possible that the demands of Mr. Pierce's other business interests
will increase with the result that he would no longer be able to devote
sufficient time to the management of our business. Competing demands on Mr.
Pierce's time may lead to a divergence between his interests and the interests
of other shareholders.
We are highly dependent on our senior management. The loss of our sole
executive officer could hinder our ability to pursue our stated plan of
operations and obtain debt or equity financing, if and when required.
We believe
that our continued success depends to a significant extent upon the efforts and
abilities of our senior management and in particular Richard Pierce, our sole
executive officer. Mr. Pierce has been in management for over 20 years. We
believe that the loss of Mr. Pierce's business and management experience could
hinder our ability to pursue our stated plan of operations and obtain debt or
equity financing, if and when required.
Because the
owner of the Lourdeau Property is Starfire, where our sole executive officer is
also a director, there may be conflicts of interest when our Company transacts
any business with Starfire.
There may be
conflict of interest situations whenever our Company conducts any business with
Starfire, the registered owner of the Lourdeau Property. Richard Pierce, our
sole executive officer, is also a director of Starfire. Shareholders of Santos
will be dependent upon our management exercising, in a manner fair to all of our
shareholders, his fiduciary duties as an officer or as a member of our board of
directors. There is no way to prevent or control any business transactions
between Santos and Starfire relating to the Lourdeau Property that could have a
negative or unfavorable consequence for Santos. There is a significant risk
that Santos may not receive fair treatment in any transaction connected to the
Lourdeau Property and as a result the shareholders of Santos will be adversely
affected.
We have no
known mineral resources and if we cannot find any mineral resources we may have
to cease operations.
We have no
measured mineral bodies. If we do not find a mineral body or bodies containing
valuable minerals or metals or if we cannot conduct further exploration of any
minerals, either because we do not have money to do it or because it is not
economically feasible to do it, we may have to cease operations and you will
loose your investment.
Our sole asset is a Property Option Agreement and if we fail to make
the required payments on a timely basis, we will lose the right to acquire a 75%
interest in and to the Lourdeau Property.
Under the
Property Option Agreement we have a right and option to acquire a 75% interest
in and to the Lourdeau Claims by paying a total of $10,000 in cash; issuing
75,000 shares to Starfire Minerals Inc., the
9
registered owner of the Lourdeau Claims; and incurring at least a total of
$25,000 of expenditures on the property before September 30, 2008, and another
$25,000 of expenditures before July 25, 2009. The failure of our Company to
make any cash payments and incurring the expenditures within the contractual
time limit will allow Starfire to terminate the Property Option Agreement. If
the Property Option Agreement is terminated, we will lose all rights to the
Lourdeau Property, including any payments previously made to Starfire. The
Property Option Agreement is our sole asset and if we lose the contractual
rights to acquire the Lourdeau Property, we will have no assets and you may lose
all your investment.
Title to the Lourdeau Claims is registered in the name of Starfire
Minerals Inc. and Starfire may transfer title to third parties without our
knowledge.
The Property
Option Agreement only gives us a right to acquire a 75% interest in and to the
Lourdeau Claims by fulfilling our obligations under the contract. We cannot
prevent Starfire from transferring the Lourdeau Property to third parties. A
third party has no way of knowing that we have rights to the Lourdeau Property
since ownership is registered in the name of Starfire with the government of
Quebec. If the Lourdeau Property is transferred to third parties we may have to
litigate in order to determine our ownership rights. There is no way of knowing
if Starfire will or has transferred the property to third parties. Our only
protection is our contractual rights under the Property Option Agreement.
Weather interruptions in the province of Quebec may affect and delay
our proposed exploration operations and as a result, there may be delays in
generating revenues.
We may not
have access to the Lourdeau Property during the winter season due to snow in the
area and road closures. Extreme weather can also occur in other seasons and
limit access to the Lourdeau Property. The summers are very short (from early
June to late August). As a result, any attempts to visit, test, or explore the
property may be limited to these few months of the year when weather permits
such activities. These limitations can result in significant delays in
exploration efforts, as well as mining and production in the event that
commercial amounts of minerals are found. Such delays can result in our
inability to meet deadlines for exploration expenditures required to be made in
order to retain title to our claims under provincial mineral property laws.
There are
several governmental regulations that materially restrict mineral exploration or
exploitation. We will be subject to the mining laws of Quebec as we carry out
our exploration programs. Because we are a foreign company working on mining
claims in Quebec, we will need to register with the government of Quebec before
we work on the Lourdeau Claims. We may be required to obtain work permits, post
bonds and perform remediation work for any physical disturbance to the land in
order to comply with these regulations. While our planned exploration program
budgets for regulatory compliance, there is a risk that new regulations could
increase our costs of doing business and prevent us from carrying out our
exploration program.
Risks associated with this Offering
Because we have nominal assets, we are considered a "shell company"
and will be subject to more stringent reporting requirements.
The Securities
and Exchange Commission ("SEC") adopted rules which defines (as defined by Rule
405 of the Securities Act and Exchange Act Rule 12b-2) a shell company as a
registrant that has no or nominal operations, and either (a) no or nominal
assets; (b) assets consisting solely of cash and cash equivalents; or (c) assets
consisting of any amount of cash and cash equivalents and nominal other assets.
Our balance sheet states that we have cash as our only asset therefore, we are
defined as a shell company. The rules prohibit shell companies from using a
Form S-8 to register securities pursuant
10
to
employee compensation plans. However, the rules do not prevent us from
registering securities pursuant to registration statements. Additionally, the
rules require shell companies to provide more detailed disclosure upon
completion of a transaction that causes it to cease being a shell company. We
must file a current report on Form 8-K containing the information required
pursuant to Regulation S-K and in a registration statement on Form 10, within
four business days following completion of the transaction together with
financial information of the private operating company. In order to assist the
SEC in the identification of shell companies, we are required to check a box on
Form 10-Q and Form 10-K indicating that we are a shell company. To the extent
that we are required to comply with additional disclosure because we are a shell
company, we may be delayed in executing any mergers or acquiring other assets
that would cause us to cease being a shell company. Effective February 15,
2008, the SEC amended Rule 144, which will make resales of restricted securities
by shareholders of a shell company more difficult. See discussion under heading
"New Rule 144" below.
Because our
directors control approximately 66% of our outstanding common stock, investors
may find that corporate decisions influenced by our directors are inconsistent
with the best interests of other stockholders.
Our three
directors and executive officer, Richard Pierce, Shih-Yi Chuang and Andrew Lee
Smith, control approximately 66% of our outstanding shares of common stock. The
interests of our directors may not be, at all times, the same as that of other
shareholders. Since our directors are not simply passive investors but are also
our directors and Mr. Pierce is our sole executive, their interests as
management may, at times, be adverse to those of passive investors. Where those
conflicts exist, our shareholders will be dependent upon our management
exercising, in a manner fair to all of our shareholders, his fiduciary duties as
an officer or as a member of our board of directors. Also, management will have
the ability to significantly influence the outcome of most corporate actions
requiring shareholder approval, including the merger of Santos with or into
another company, the sale of all or substantially all of our assets and
amendments to our articles of incorporation. This concentration of ownership
with our directors may also have the effect of delaying, deferring or preventing
a change in control of Santos, which may be disadvantageous to minority
shareholders.
The selling
shareholders are offering 13,836,500 shares of our common stock through this
prospectus. Our common stock is presently not traded or quoted on any market or
securities exchange, but should a market develop, shares sold at a price below
the current market price at which the common stock is quoted will cause that
market price to decline. Moreover, the offer or sale of a large number of
shares at any price may cause the market price to fall. The shares of common
stock covered by this prospectus represent 43.1% of the common shares
outstanding as of the date of this prospectus.
Our Company
plans to have its shares quoted on the NASD OTC Bulletin Board. There are no
assurances that we will be successful in listing our shares. There is currently
no public trading market for our common stock. Therefore there is no central
place, like a stock exchange or electronic trading system, to resell your
shares. If you do want to resell your shares, you will have to locate a buyer
and negotiate your own sale. Therefore, you may not be able to resell your
shares.
Re-sale restrictions for British Columbia residents
and other Canadian residents may limit the ability of our shareholders to sell
their securities.
Selling
shareholders, who are residents of British Columbia, have to rely on an
exemption from prospectus and registration requirements of B.C. securities laws
to sell their shares, which are being registered for resale by this prospectus.
Selling shareholders have to comply with B.C. Securities Commission's BC
Instrument 72-502 "Trade In Securities of U.S. Registered Issuers" to resell
their
11
shares.
BC Instrument 72-502 requires, among other conditions, that B.C. residents hold
the shares for four months and limit the volume of shares sold in a 12-month
period. (See "Canadian Securities Law"). These restrictions will limit the
ability of the B.C. residents to resell the securities in the United States and
therefore, may materially affect the market value of your shares. Residents of
other Canadian provinces have to rely on available prospectus exemptions to
re-sell their securities and if no exemptions can be relied upon, then the
shareholders may have to hold the securities for an indefinite period of time.
Shareholders of other Canadian provinces should consult with independent legal
counsel to determine the availability and use of prospectus exemptions to
re-sell their securities.
Forward-Looking Statements
Some of the
statements under the "Prospectus Summary," "Risk Factors," "Plan of Operations,"
"Business" and elsewhere in this prospectus constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of activity,
performance, or achievements to be materially different from any future results,
levels of activity, performance, or achievement expressed or implied by such
forward-looking statements. Such factors include, among other things, those
listed under "Risk Factors" and elsewhere in this prospectus.
In some cases,
you can identify forward-looking statements by terminology such as "may,"
"should," "could," "intend", "expects," "plan," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms or other comparable terminology.
Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements. Moreover, neither we nor any other person assumes
responsibility for the accuracy and completeness of such statements. We are
under no duty to update any of the forward-looking statements after the date of
this prospectus.
Use Of Proceeds
Determination Of Offering Price
The $0.25 per
share offering price of our common shares by which our selling shareholders will
sell their shares prior to the quotation of the Company's shares on the NASD OTC
Bulletin Board ("OTCBB") was arbitrarily chosen based on our internal assessment
of what the market would support. Our founding shareholders purchased
31,040,000 of our common shares at a price of $0.0005 per share on June 19, 2007. The offering price of our shares is substantially higher than the price
paid by our founding shareholders, and exceeds the per share value of our net
tangible assets. Therefore, if you purchase shares in this offering, you will
experience immediate and substantial dilution.
You may also
suffer additional dilution in the future from the sale of additional shares of
common stock or other securities, if the need for additional financing forces us
to make such sales. Investors should be aware of the risk of judging the real
or potential future market value, if any, of our common stock by comparison to
the offering price.
There is no
established public market for the shares of common stock being registered. As a
result, the offering price and other terms and conditions relative to the shares
of common stock offered hereby have been arbitrarily determined by us and do not
necessarily bear any relationship to assets, earnings, book value or any other
objective criteria of value. In addition, no investment banker, appraiser or
other independent, third party has been consulted concerning the offering price
for the shares or the fairness of the price used for the shares.
12
We
intend to apply to the OTCBB to allow the quotation of our common stock upon us
becoming a reporting entity under the Securities Exchange Act of 1934. We intend
to file a registration statement under the Exchange Act concurrently with the
effectiveness of the registration statement of which this prospectus forms a
part. If our common stock becomes so quoted and a market for the stock develops,
the actual price of stock will be determined by prevailing market prices at the
time of sale or by private transactions negotiated by the selling shareholders.
The offering price would thus be determined by market factors and the
independent decisions of the selling shareholders.
Dilution
The common
stock to be sold by the selling shareholders is common stock that is currently
issued and outstanding. Accordingly, there will be no dilution to our existing
shareholders.
Selling shareholders
The selling
shareholders named in this prospectus are offering 13,836,500 shares of common
stock acquired by the selling shareholders from us in offerings that were exempt
from registration under Regulation S of the Securities Act of 1933 ("Regulation
S").
1. The selling shareholders,
nine founding shareholders, acquired 12,800,000 shares of our common
stock from us at a price of $0.0005 per share in an offering that was exempt
from registration under Regulation S and completed on June 19, 2007.
2. The selling shareholder,
optionor of the Lordeau Property, acquired 75,000 shares of our common stock
from us at a deemed price of $0.15 per share in an offering that was exempt from
registration under Regulation S and completed on June 25, 2007.
3. The selling shareholders,
32 private placees, acquired 961,500 shares of our common stock
from us at a price of $0.15 per share in an offering that was exempt from
registration under Regulation S and completed on February 1, 2008.
The term
"selling shareholders" includes donees, pledges, transferees or other
successors-in-interest selling shares received after the date of this prospectus
from a selling shareholder as a gift, pledge or other non-sale related transfer.
Based on
information provided to us by the selling shareholders, the following table
provides information as of July 9, 2008, regarding the number of shares of our
common stock held by each of the selling shareholders as of the date hereof,
including: (1) the total number of shares that are to be offered by each; (2)
the percentage owned by each prior to the offering; (3) the percentage owned by
each upon completion of the offering; and (4) the identity of the beneficial
holder of any entity that owns the shares.
Except as
disclosed in the table below, to the best knowledge of management of the
Company, the named party beneficially owns and has sole voting and investment
power over all shares or rights to these shares. The numbers in this table
assume that none of the selling shareholders sells shares of common stock not
being offered in this prospectus or purchases additional shares of common stock,
and assumes that all shares offered are sold.
Except as
disclosed below, none of the selling shareholders
(i) has had a material relationship with us or any of our affiliates
other than as a security holder at any time within the past three years; or
(ii) has
ever been one of our officers or directors.
13
Except as disclosed in the
table below, none of our selling shareholders are broker-dealers or affiliates
of broker-dealers.
Name
and Address of Selling Shareholders
Shares
Beneficially Owned Prior to the Offering
Total
Shares Offered by this Prospectus
(1)
Shares
Beneficially Owned After the Offering
Number
Percent
Number
Percent
1
Robert Birarda
1,155,000
(2)
3.6%
1,155,000
0
0%
2
Heather Birarda
15,000
(2)
0%
15,000
0
0%
3
James Borkowski
15,000
(3)
0%
15,000
0
0%
4
Julian Borkowski
15,000
(3)
0%
15,000
0
0%
5
John David Brougham
1,310,000
(4)
4.1%
160,000
0
0%
6
Caamano Sound Fishing
20,000
0.1%
20,000
0
0%
7
Marc Casavant
20,000
0.1%
20,000
0
0%
8
Yung Hsuan Chou
1,150,000
3.6%
1,150,000
0
0%
9
Shih-Yi Chuang
7,022,000
(5)
21.9%
1,550,000
5,472,000
17.1%
10
Geoff Cribbs
15,000
0%
15,000
0
0%
11
Jean Sui De Melt
20,000
0.1%
20,000
0
0%
12
Cale Dougans
5,000
0%
5,000
0
0%
13
Craig Engelsman
20,000
0.1%
20,000
0
0%
14
Paul Guedes
20,000
0.1%
20,000
0
0%
15
Graham Heal
20,000
0.1%
20,000
0
0%
16
Nick Houghton
1,140,000
3.6%
1,140,000
0
0%
17
Holly Johnson
1,150,000
3.6%
1,150,000
0
0%
18
Judith G. King
160,000
0.5%
160,000
0
0%
14
Name
and Address of Selling Shareholders
Shares
Beneficially Owned Prior to the Offering
Total
Shares Offered by this Prospectus
(1)
Shares
Beneficially Owned After the Offering
Number
Percent
Number
Percent
19
Mark Likness
20,000
0.1%
20,000
0
0%
20
Rob Marwood
20,000
0.1%
20,000
0
0%
21
Jane MacDonald
15,000
0%
15,000
0
0%
22
Greg MacRae
20,000
0.1%
20,000
0
0%
23
Dan Moshor
20,000
0.1%
20,000
0
0%
24
Walter Mustapich
15,000
0%
15,000
0
0%
25
Pamela Estelle Nendick
15,000
0%
15,000
0
0%
26
Brenton Nichols
20,000
(6)
0.1%
20,000
0
0%
27
David Nichols
20,000
(6)
0.1%
20,000
0
0%
28
Kazuhiro Okitsu
15,000
0%
15,000
0
0%
29
Richard Bruce Pierce
7,022,000
(7) (8)
21.9%
1,550,000
5,472,000
17.1%
30
RoseMarie Pierce
1,310,000
(4)
4.1%
1,150,000
0
0%
31
Leslie Robertson
6,500
0%
6,500
0
0%
32
Gwen Roland
30,000
(9)
0.1 %
15,000
0
0%
33
Raymond W. Roland
30,000
(9)
0.1%
15,000
0
0%
34
Andrew Shannon
15,000
0%
15,000
0
0%
35
David W. Smalley
3,104,000
(10)
9.7%
1,280,000
1,824,000
5.7%
36
Andrew Lee Smith
7,182,000
(11)
22.4%
1,710,000
5,472,000
17.1%
37
John Carson Speers
1,140,000
3.6%
1,140,000
0
0%
15
Name
and Address of Selling Shareholders
Shares
Beneficially Owned Prior to the Offering
Total
Shares Offered by this Prospectus
(1)
Shares
Beneficially Owned After the Offering
Number
Percent
Number
Percent
38
Starfire Minerals Inc.
75,000
(8)
0.2%
75,000
0
0%
39
Craig Taylor
15,000
0%
15,000
0
0%
40
Douglas Tettman
15,000
0%
15,000
0
0%
41
Nicholas F. Watters
20,000
0.1%
20,000
0
0%
Total
13,836,500
Ended February 29, 2008
Vancouver, BC
West Vancouver, BC
Vancouver, BC
Surrey, BC
Roberts Creek, BC
Vancouver, BC
Port Coquitlam, BC
Taipei, Taiwan
Chu-Chi Shiang Cha-Yi, Taiwan
Vancouver, BC
North Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Port Coquitlam, BC
Vancouver, BC
Maple Ridge, BC
Langley, BC
Vancouver, BC
Surrey, BC
Langley, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Maple Ridge, BC
Gibsons, BC
(7)
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Pitt Meadows, BC
Vancouver, BC
Vancouver, BC
Vancouver, BC
Victoria, BC
(1) Shares offered by this Prospectus do not include shares deemed beneficially held by the selling shareholders.
(2) Robert Birarda is the son of Heather Birarda. Robert Birarda has no beneficial interest in the shareholding of Heather Birarda, neither does Heather Birarda have a beneficial interest in the shareholding of Robert Birarda.
(3) James Borkowski is the son of Julian Borkowski. James Borkowski has no beneficial interest in the shareholding of Julian Borkowski, neither does Julian Borkowski have a beneficial interest in the shareholding of James Borkowski.
(4) John David Brougham is the common-law husband of RoseMarie Pierce. The beneficial ownership of shares by John David Brougham and RoseMarie Pierce may be attributable to the other party's respective holdings, and the number of shares owned and percentage ownership of John David Brougham includes shares owned by RoseMarie Pierce and vice versa.
(5) Shih-Yi Chuang is a director of the Company.
(6) Brenton Nichols is the brother of David Nichols. Brenton Nichols has no beneficial interest in the shareholding of David Nichols, neither does David Nichols have a beneficial interest in the shareholding of Brenton Nichols.
(7) Richard Pierce is a director and our President, Secretary and Treasurer, sole executive officer. Richard Pierce is the brother of RoseMarie Pierce. Richard Pierce has no beneficial interest in the shareholding of RoseMarie Pierce, neither does RoseMarie Pierce have a beneficial interest in the shareholding of Richard Pierce.
(8) Richard Pierce is also a director of Starfire Minerals Inc. Mr. Pierce disclaims ownership over shares held by Starfire.
(9) Gwen Roland is the wife of Raymond W. Roland. The beneficial ownership of shares by Gwen Roland and Raymond W. Roland may be attributable to the other party's respective holdings, and the number of shares owned and percentage ownership of Gwen Roland includes shares owned by Raymond W. Roland and vice versa.
(10) David W. Smalley is legal counsel to the Company.
(11) Andrew Lee Smith is a director of the Company.
Plan Of Distribution
Summary
We have agreed to register for public resale our common shares, which have been issued to the selling shareholders. This offering will terminate on the earlier of (i) the date on which the shares may be resold by the selling stockholders without registration and without regard to any volume limitations by reason of Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The selling shareholders will receive all of the net proceeds from their sales. Prior to having its shares quoted on OTCBB, the selling shareholders may, from time to time, sell all or a portion of the shares of common stock of our Company, which they own at $0.25 per share. After the shares of the Company are quoted for trading on the OTCBB, the selling shareholders may sell their shares at the then market prices on the OTCBB or privately negotiated prices, which may be less than or greater than $0.25 per share. Presently, the selling shareholders cannot sell their common stock of our Company in accordance with new Rule 144 under the Securities Act because we are defined as a "shell company".
16
The selling shareholders may sell their shares of common stock of our Company directly to purchasers or may use brokers, dealers, underwriters or agents to sell such shares. Brokers or dealers may receive commissions, discounts or concessions from a selling shareholder or, if any such broker or dealer acts as agent for the purchaser of such shares, from a purchaser in amounts to be negotiated. Such compensation may, but is not expected to, exceed that which is customary for the types of transactions involved.
The selling shareholders and any brokers, dealers or agents that participate with the selling shareholders in sales of their shares of common stock of our Company may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by such brokers, dealers or agents and any profit on the resale of such shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933.
We are required to pay all fees and expenses incident to the registration of our shares of common stock offered hereby other than broker or dealer discounts and commissions.
Selling shareholder's "Underwriter" Status; prospectus Delivery Requirement
Shareholders of the Company who resell their securities pursuant to this prospectus may be deemed to be statutory "underwriters" (as defined in Securities Act of 1933 Section 2(11)) and "engaged in a public distribution". Accordingly, Santos intends to deliver a prospectus to each shareholder. Each selling shareholder should review it carefully and deliver it to any broker or dealer engaged to sell stock or to any buyer in a direct sale. Selling shareholders and certain brokers and dealers are required to deliver a prospectus 48 hours prior to confirming sales. Additional copies of the prospectus may be printed by accessing it on the SEC website at http://www.sec.gov, or it may be obtained by writing or calling Santos Resource Corp. at 11450 - 201A Street, Maple Ridge, British Columbia, Canada V2X 0Y4, telephone (604) 460-8440. See "Selling Shareholders" above for information as to the largest shareholders, the amounts owned, and any relationships with Santos.
Suggested Selling Shareholder's Underwriting Compliance Procedures
Except as indicated under "Selling Shareholders" none of the shareholders is known to Santos to be a broker- dealer or affiliates of broker-dealers or to have any experience in the distribution of securities or to have any material relationships with Santos. Santos is not aware of any intent by a shareholder to engage in passive market making transactions as permitted by Rule 10b-6A under the Securities Exchange Act of 1934 or in stabilization or other transactions affecting the market price. We are not aware of any intent by our officers, directors or principal shareholders to purchase shares from selling shareholders.
It is suggested to selling shareholders that, to avoid technical violations of underwriting regulations, they should observe the prospectus delivery requirement described herein and also consult with their legal counsel. These suggestions do not constitute legal advice or any representation or warranty that these are necessary or sufficient to comply with, or avoid enforcement action (civil or criminal) for alleged violations of, any type of law. Shareholders engaging in any direct or indirect transactions of any nature as to any of Santos' securities do so at their own risk and expense. All sales should be conducted through brokers or dealers, who should be given a copy of the prospectus and advised of the SEC and NASD position that such sales may be deemed to be part of a "public distribution" by statutory "underwriters" (selling shareholders). No purchases of shares or other transactions having the purpose or effect of affecting the price should be engaged in by or on behalf of shareholders before or after the sale. Santos' public reporting status should be brought to the brokers' or dealers' and buyers' attention. Updated information about Santos will be in its reports to the SEC at http://www.sec.gov. See "Available Information" near the end of the prospectus, for further details on how to obtain copies of such reports.
Although isolated resales often are exempt from state "blue sky" securities regulation and registration requirements, and the reporting company status of an issuer broadens the availability of resale exemptions, selling shareholders should be cautious in view of their "underwriter" status in the eyes of the
17
SEC and NASD. They are urged to consult qualified local securities counsel. Santos is not undertaking, and it will be the selling shareholders' responsibility, to file any necessary state exemption, qualification, or registration statements or notices (such as Form U-1) and offering documents (such as this prospectus) if needed for resales in a particular state.
The selling shareholders may offer their shares of common stock at various times in one or more of the following transactions:
in the over-the-counter market;
in private transactions other than in the over-the-counter market;
in connection with short sales of our shares;
by pledge to secure debts and other obligations; or
in a combination of any of the above transactions.
The selling shareholders may sell their shares at market prices prevailing at the time of the sale, at prices related to such prevailing market prices, at negotiated prices or fixed prices. Until the shares of the Company are quoted for trading on the OTCBB, the selling shareholders will sell their shares at a price of $0.25 per share. After the shares of the Company are quoted for trading on the OTCBB, the selling shareholders may sell their shares at the then market prices on the OTCBB or privately negotiated prices, which may be less than or greater than $0.25 per share.
The selling shareholders may use brokers or dealers to sell their shares. Sales through brokers or dealers may involve one or more of the following:
block trades in which the broker or dealer so engaged will attempt to sell the selling shareholder's shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus; or
ordinary brokerage transactions and transactions in which the broker solicits purchasers.
If a broker or dealer is engaged by a selling shareholder, such broker or dealer may either receive discounts or commissions from the selling shareholders, or they will receive commissions from purchasers of shares for whom they acted as agents. Affiliates of one or more of the selling shareholders may act as principals or agents in connection with the offer or sale of shares by selling shareholders.
Selling shareholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act of 1933, as amended, provided that they meet the criteria and conform to the requirements of that Rule.
Selling shareholders have been advised that during the time each is engaged in distribution of the securities covered by this prospectus, to the extent applicable, each must comply with Regulation M under the Securities Exchange Act of 1934, as amended, and pursuant to such Regulation:
shall not engage in any stabilization activity in connection with our securities;
shall furnish each broker through which securities covered by this prospectus may be offered the number of copies of this prospectus which are required by each broker; and
18
shall not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Securities Exchange Act of 1934, as amended.
The selling shareholders and any brokers, dealers or agents that participate with the selling shareholder in sales of the shares may be deemed to be underwriters within the meaning of the Securities Act in connection with such sales and subject to any liabilities under such Act. Any commissions received by such brokers, dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
Canadian Securities Law
Selling shareholders who are resident of a province other than British Columbia will have to rely on available prospectus exemptions to resell their securities. If they cannot rely on an available prospectus exemption, such non-British Columbian Canadian residents may be subject to an indefinite hold period with respect to their securities of Santos. All Canadian shareholders should consult independent legal counsel with respect to ascertaining any available prospectus exemptions for reselling their securities of Santos. Selling shareholders who are residents of British Columbia may to rely on an exemption from prospectus and registration requirements of B.C. securities laws to sell their shares, which are being registered for resale by this prospectus. The selling shareholders may rely on the B.C. Securities Commission's Instrument 72-502 "Trade In Securities of U.S. Registered Issuers" to comply with B.C. securities laws to resell their shares.
According to BC Instrument 72-502, a B.C. resident who acquired securities under a prospectus exemption in a company that is not a reporting issuer under the B.C. Securities Act may sell those securities without filing a prospectus under the Act, if the following conditions are met:
(1) The securities of the company are registered under section 12 of the U.S. Securities Exchange Act of 1934, as amended, or the company is required to file reports under section 15(d) of that Act.
(2) The seller's residential address or registered office is in British Columbia.
(3) A 4-month period has passed since the date the company issued the securities to the seller, or a control person sold the securities to the seller.
(4) If the seller is a control person of the company, then the seller has held the securities for at least 6 months.
(5) The number of securities the seller proposes to sell under BCI 72-502, plus the number of securities of the company of the same class that the seller has sold in the preceding 12-month period, does not exceed 5% of the company's outstanding securities of the same class.
(6) The seller sells the securities through a registered investment dealer.
(7) The registered investment dealer executes the trade through an exchange, or market, outside Canada.
(8) There has been no unusual effort made to prepare the market or create a demand for the securities.
(9) The seller has not paid any extraordinary commission or other consideration for the trade.
(10) If the seller is an insider of the company, the seller reasonably believes that the company is not in default of the securities legislation (including U.S. federal and state securities legislation) that governs the company.
19
Legal Proceedings
We are not
currently a party to, nor is any of our property currently the subject of, any
pending legal proceeding. None of our directors, officers or affiliates is
involved in a proceeding adverse to our business or has a material interest
adverse to our business.
Our agent for
service of process is Business First Formations, Inc., of 3990 Warren Way, Reno,
Nevada USA 89509.
Directors, Executive Officers, Promoters And Control
Persons
Executive Officers And Directors
The following
table sets forth the directors and executive officers of our Company, their
ages, term served and all officers and positions with our Company. Pursuant to
our bylaws, our directors are elected at our annual meeting of stockholders and
each director holds office until his successor is elected and qualified.
Officers are elected by our Board of Directors and hold office until an
officer's successor has been duly appointed and qualified unless an officer
sooner dies, resigns or is removed by the Board.
There are no
arrangements or understandings regarding the length of time a director of our
company is to serve in such a capacity.
Name |
Age |
Position |
Richard Pierce |
47 |
Director and President, Secretary and Treasurer |
Shih-Yi Chuang |
30 |
Director |
Andrew Lee Smith |
52 |
Director |
Set forth below is a brief description of the background and business experience of our current executive officers and directors:
Richard Pierce has been a Director, President and Secretary-Treasurer of the Company since September 13, 2006. Mr. Pierce is also presently the President and CEO of GFR Pharma Ltd. (since 1998), GFR Health Ltd. (since 1998) and Biologic Nutritional Resources Inc. (since 2006). GFR Pharma is a contract manufacturer of Nutraceutical products, GFR Health distributes Nutraceutical products for the human market, and Biologic distributes nutraceuticals for the pet (animal) market. Mr. Pierce was also President and CEO of GFR Pharmaceuticals Inc. (from 2000 to 2006), a Nevada company whose shares are quoted on the NASD OTC Bulletin Board. Mr. Pierce is also presently a director of Starfire Minerals Inc., a British Columbia company whose shares are listed on the TSX Venture Exchange, and the Berlin, Frankfurt and Struttgart Stock Exchanges in Germany. Starfire is also an exploration company with mineral properties and projects in Ontario and British Columbia. Mr. Pierce is one of five directors of Starfire, and in the event of a conflict, Mr. Pierce will abstain from voting on a directors resolution in both Santos and Starfire.
Shih-Yi Chuang has been a Director of the Company since June 26, 2007. Mr. Chuang has been working in the investment field as a wealth management advisor for Cathay Life in Taiwan since 2001. Mr. Chuang is currently an assistant manager in the wealth management division and as one of the largest life insurance companies in Asia, Mr. Chuang's experience includes working with some of Cathay Life's largest clients advising them on insurance and equity investment strategies. Mr. Chuang is also heavily involved in training Cathay Life advisors and giving speeches on investing for Cathay Life.
20
Mr. Chuang holds a Masters Degree in Information Management in 2001 from Trans World University in Tai-Nai, Taiwan. Presently, Mr. Chuang is not on the board of any public companies, although he has previously served as a director of public companies.
Andrew Lee Smith , B.Sc., P.Geo., has been a Director of the Company since May 24, 2006. Mr. Smith was the President of the Company from May 24, 2006 to September 13, 2006. Mr. Smith has over 20 years of experience in exploring, developing and operating North American base and precious metal mining projects. He is presently the President of Iron Mask Exploration Ltd., a Vancouver-based corporate and geological management firm that consults to the mining industry. Mr. Smith is also presently Chief Executive Officer and a director of Canaco Resources Inc., and Chief Executive Officer, President and a director of True North Gems, both companies listed on the TSX Venture Exchange. Mr. Smith is also a director of Daytona Energy Corp. and Cincoro Capital Corp., companies listed on the TSX Venture Exchange; and a director of Candente Resource Corp., a company listed on the Toronto Stock Exchange.
Mr. Smith holds a Hons. BSc in Earth Sciences from the University of Waterloo and is a professional geologist. He has been a registered member of the Association of Professional Engineers and Geoscientists of British Columbia since January 2001. Prior to this date, he was a Fellow of the Geological Association of Canada and the Society of Economic Geologists.
We intend to rely on Mr. Smith to provide the expertise in geological exploration in order for us to carry our planned exploration program. If we do retain the services of Mr. Smith, we will compensate Mr. Smith at the public going rate. However, Mr. Smith may not be able to devote sufficient time to our exploration program, as and when needed. We may need to rely on the technical services of others with expertise in geological exploration in order for us to carry our planned exploration program. We have not contracted with any geologist to assist with the exploration programs. At the right time, we will hire from the available pool of contract geologists depending on the time of the year and availability of experience. Presently, there are no other agreements or understandings to hire such geologists or engineers.
During our early stages of business development, our President intends to devote approximately 10 hours per week of his time to our business. If, however, the demands of our business require more business time, such as raising additional capital or addressing unforeseen issues with regard to our plan of operations, he is prepared to adjust his timetable to devote up to 15 hours a week on our business in furtherance of our plan of operations. However, Mr. Pierce may not be able to devote sufficient time to the management of our business, as and when needed.
Executive Compensation
Presently, we do not pay our directors or officers any salary or consulting fees. Our directors and executive officer do not currently receive and have never received any compensation for serving as a director or executive officer of the Company. In addition, at present, there are no ongoing plans or arrangements for compensation of any of our officers. Presently, there are no plans or agreements for compensation of our officers and directors even if certain milestones are achieved in the business plan. However, we expect to adopt a plan of reasonable compensation to our officers and employees when and if we become operational and profitable.
The following table sets forth all compensation awarded to, earned by, or paid for services rendered to us in all capacities during the period ended February 29, 2008, by Mr. Richard Pierce, our sole executive officer, and our directors.
21
Summary Compensation Table
Compensation - February 29, 2008
($) Number of shares Underlying
Name and Principal Position
Salary
($) Bonus
Options (#)
Richard Pierce
None
None
None
President, Secretary and Treasurer
Director Compensation Table
Name |
Fees
Earned or Paid in Cash
|
Stock
Awards or Options
|
All
other Compensation All other Compensation
|
Richard Pierce |
None |
None |
None |
Shih-Yi Chuang |
None |
None |
None |
Andrew Lee Smith |
None |
None |
None |
We do not presently have a stock option plan but intend to develop an incentive based stock option plan for our officers and directors in the future and may reserve up to 20% of our outstanding shares of common stock for that purpose.
Significant Personnel
We have no significant personnel other than our officers and directors. We presently rely on consultants and other third party contractors to perform administrative and geological services for the Company. We have no formal contracts with any of these consultants and contractors.
Committees of the Board of Directors
The functions of the audit committee are currently carried out by our Board of Directors. We do not have an audit committee or financial expert on our Board carrying out the duties of the audit committee. Our Board has determined that we do not need such an expert because we are a start-up exploration company and have no revenue. The cost of hiring a financial expert to act as a director of Santos and to be a member of the audit committee or otherwise perform audit committee functions outweighs the benefits of having a financial expert on the audit committee. We do not have a compensation committee, nominating committee, an executive committee of our board of directors, stock plan committee or any other committees.
Code of Ethics
We have adopted a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller and persons performing similar functions within the Company. A copy of the code of ethics is filed with the SEC as an exhibit to this registration statement and a copy may also be obtained without charge by contacting the Secretary of the Company at 11450 - 201A Street, Maple Ridge, British Columbia, Canada V2X 0Y4.
Involvement in certain legal proceedings
None of our directors, executive officers, promoters or control persons has been involved in any of the following events during the past five years:
22
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information as of July 9, 2008, with respect to the beneficial ownership of our company's common stock with respect to each named director and executive officer of our Company, each person known to our Company to be the beneficial owner of more than five percent (5%) of said securities, and all directors and executive officers of our Company as a group. Unless otherwise indicated, the address for each listed person is c/o Santos Resource Corp., 11450 - 201A Street, Maple Ridge, British Columbia V2X 0Y4.
Name and Address |
Title of Class |
Amount and Nature of Beneficial Ownership |
Percentage
|
Richard Pierce
|
Common |
7,022,000 |
21.9% |
Shih-Yi Chuang
|
Common |
7,022,000 |
21.9% |
Andrew Lee Smith
|
Common |
7,182,000 |
22.4% |
David W. Smalley
|
Common |
3,104,000 |
9.7% |
All officers & directors as a group (3 persons) |
Common |
21,226,000 |
66.2% |
(1) The percentage of class is based on 32,076,500 shares of common stock outstanding as of the date hereof.
The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the Securities and Exchange Commission, a person (or group of persons) is deemed to be a "beneficial owner" of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.
Description of Capital Stock
The shares registered pursuant to this registration statement are shares of common stock, all of the same class and entitled to the same rights and privileges as all other shares of common stock.
23
Common Stock
Santos is presently authorized to issue 75,000,000 shares of common stock, with a par value of $0.001 per share. As of the date hereof, there were 32,076,500 shares of our common stock issued and outstanding, held by 41 stockholders of record.
Our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law or provided in any resolution adopted by our board of directors with respect to any series of preferred stock, the holders of our common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy, subject to any voting rights granted to holders of any preferred stock. Holders of our common stock representing ten-percent (10%) of our capital stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding series of preferred stock created by our board of directors from time to time, the holders of shares of our common stock will be entitled to such cash dividends as may be declared from time to time by our board of directors from funds available therefore. See "Dividend Policy."
Subject to any preferential rights of any outstanding series of preferred stock created from time to time by our board of directors, upon liquidation, dissolution or winding up of Santos, the holders of shares of our common stock will be entitled to receive pro rata all assets of Santos available for distribution to such holders.
In the event of any merger or consolidation of our company with or into another company in connection with which shares of our common stock are converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our common stock will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash).
Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Preferred Stock
As of the date hereof, Santos has no preferred stock authorized or issued.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Share Purchase Warrants
We have not issued and do not have outstanding any warrants to purchase shares of our common stock.
Options
We have not issued and do not have outstanding any options to purchase shares of our common stock.
24
Convertible Securities
We have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible or exchangeable into shares of our common stock.
Nevada Anti-Takeover laws
Nevada revised statutes sections 78.378 to 78.3793 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation state that these provisions do not apply.
Combinations with Interested Stockholders
Nevada revised statues sections 78.411 to 78.444 provide state regulations over combination with the interested stockholder or any corporation, which is, or after the merger or consolidation, would be, an affiliate or associate of the interested stockholder, unless the articles of incorporation or bylaws of the corporation provide that the provisions of those sections do not apply. Our articles of incorporation state that these provisions do not apply.
Interests of Named Experts and Counsel
David W. Smalley is counsel for Santos, owns 3,104,000 shares of common stock of Santos and is named as a Selling Shareholder in this prospectus. Mr. Smalley is also a partner of Fraser and Company LLP, a law firm that has provided an opinion on the validity of our common stock offered by the Selling Shareholders.
Except as described above, no experts or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest exceeding $50,000, direct or indirect, in Santos. Nor was any such person connected with Santos as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
Legal Matters
Fraser and Company LLP has provided an opinion on the validity of our common stock offered by the Selling Shareholders.
Experts
MacKay LLP, Chartered Accountants ("MacKay"), our independent registered public accounting firm, has audited our financial statements included in this prospectus and registration statement to the extent and for the period set forth in their audit report. MacKay has presented their report with respect to our audited financial statements. The report of MacKay is included in reliance upon their authority as experts in accounting and auditing.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have not been any changes in or disagreements with our accountants on accounting and financial disclosure or any other matter.
25
Market For Common Equity and Related Stockholder
Matters
No Public
Market for Common Stock
There is
presently no public market for our common stock. We anticipate making an
application for trading of our common stock on the OTCBB upon the effectiveness
of the registration statement of which this prospectus forms a part. We are
qualifying for resale up to 13,836,500 common shares pursuant to this
registration statement. However, we can provide no assurance that our shares
will be traded on the bulletin board or, if traded, that a public market will
materialize.
New Rule
144
Santos is
presently a "shell company" as defined under Rule 405 of the Securities Act and
Rule 12b-2 of the Exchange Act. Effective February 15, 2008, the SEC amended
Rule 144 of the Securities Act of 1933, which do not allow shareholders to rely
on Rule 144 for the resale of securities of a shell company. Shareholders may
only rely on new Rule 144 if Santos ceases to be a shell company and only if all
of the following conditions are met: the issuer has ceased to be a shell
company; the issuer is subject to the reporting requirements of the Exchange
Act; the issuer has filed all Exchange Act reports required for the past 12
months; and at least one year has elapsed from the time that the issuer filed
current Form 10 information on Form 8-K changing its status to a non-shell
company.
If Santos is
defined as not a "shell company", a total of 18,240,000 shares of our restricted
common stock will be available for resale to the public, in accordance with the
volume and trading limitations of new Rule 144. Also pursuant to the amended
provisions of Rule 144, following the six-month holding period but before one
year after their acquisition of the securities, a person who is not an affiliate
and has not been an affiliate for at least three months prior to the sale, will
be able to make unlimited public resales under Rule 144 except that the current
public information requirement will still apply. After the one-year holding
period, such non-affiliates may make unlimited public resales under Rule 144 and
need not comply with any other Rule 144 requirements.
If Santos is
not a "shell company", then under the new Rule 144, a person who has
beneficially owned shares for at least six months is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
(1) one percent of the then outstanding shares of common stock, which in our
case is 320,765 shares as of the date of this prospectus; or (2) the average
weekly trading volume in the common stock in the over-the-counter market during
the four calendar weeks preceding the date on which notice of the sale is filed,
provided several requirements concerning availability of public information,
manner of sale and notice of sale are satisfied.
The one year
and six month holding periods described above do not begin to run until the full
purchase price or other consideration is paid by the person acquiring the shares
from the issuer or an affiliate.
However, we are a "shell company" and
shareholders holding restricted stock cannot rely on Rule 144 to resell their
restricted shares.
Penny Stock
Regulation
Our shares
will have to comply with the Penny Stock Reform Act of 1990, which may
potentially decrease your ability to easily transfer our shares. Broker-dealer
practices in connection with transactions in "penny stocks" are regulated. Penny
stocks generally are equity securities with a price of less than $5.00. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules generally require that prior to a
transaction in a penny stock, the broker-dealer make a special written
determination that the penny stock
26
is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that has to comply with the penny stock rules. As our shares immediately
following this offering will likely have to comply with such penny stock rules,
investors in this offering will in all likelihood find it more difficult to sell
their securities.
Holders
There are 41
shareholders of record for the common shares.
Dividends
No dividends
have been declared on the common shares as of the date hereof.
Disclosures
of Commission Position on Indemnification for Securities Act Liabilities
Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Transactions with Related Persons
On June 19,
2007, we issued 24,170,000 shares of our common stock to Richard Pierce,
Shih-Yi Chuang and Andrew Lee Smith, our directors and officers, at $0.0005 per
share and an aggregate proceeds of $12,085. Also on June 19, 2007, we
issued 1,150,000 shares of common stock $0.0005 per share to RoseMarie Pierce,
sister of our sole officer and a director Richard Pierce.
On June 25,
2007, we entered into a Property Option Agreement with Starfire Minerals Inc.
that allows us to acquire a 75% interest in and to the Lourdeau Claims.
Pursuant to the Property Option Agreement we paid Starfire $10,582 (CAD$10,000)
and issued 75,000 shares of common stock to Starfire. Under the Property Option
Agreement we are obligated to incur $50,000 of expenditures on Lourdeau Property
or pay Starfire 50% in cash and 50% in shares. One of the directors of Starfire
is Richard Pierce, our President, Secretary-Treasurer and a director. The
75,000 shares have a deemed value of $11,250.
On July 16,
2007, we entered into a services retainer agreement with Fraser and Company LLP,
to provide legal services to Santos. David Smalley, a partner of Fraser and
Company LLP, owns 3,104,000 shares of common stock of Santos. Pursuant to the
agreement, Fraser and Company LLP will provide legal services in connection with
the organization and set up of Santos and the preparation and filing of a
registration statement with the SEC for a fee of approximately $50,000
(CAD$50,000). An initial payment of $30,000 (CAD$30,000) is payable on filing
of the initial registration statement, and the balance of $20,000 (CAD$20,000)
is payable upon the registration statement being declared effective by the SEC.
On February 1,
2008, we issued 160,000 shares of common stock at $0.15 per share, to Andrew Lee
Smith, a director of Santos.
27
We have
no formal written employment agreement or other contracts with our officers, and
there is no assurance that the services to be provided by them, and facilities
to be provided by Mr. Pierce, will be available for any specific length of time
in the future. Mr. Pierce anticipates initially devoting up to approximately 10
hours a week of his business time to the affairs of our Company. If and when the
business operations of our company increase and a more extensive time commitment
is needed, Mr. Pierce is prepared to devote up to 15 hours a week in the event
that becomes necessary. The amounts of compensation and other terms of any full
time employment arrangements with our Company would be determined if and when
such arrangements become necessary.
Business
History and Organization
Santos was
incorporated under the laws of the state of Nevada on May 24, 2006. We have not
commenced business operations and we are considered an exploration stage
company. We are defined as a "shell company" under the Rule 405 of the
Securities Act and Rule 12b-2 of the Exchange Act because we have nominal
operations and nominal assets. To date, our activities have been limited to
organizational matters, obtaining a geological report on the Lourdeau Claims and
the preparation and filing of the registration statement of which this
prospectus is a part. In connection with the organization of our Company, the
founding shareholders of our Company contributed an aggregate of $15,520 cash in
exchange for a total of 31,040,000 shares of common stock. In January 2008, we
raised another $144,225 from 32 BC resident placees by issuing 961,500 shares of
common stock.
Property Option Agreement
Under the
Property Option Agreement entered into in June 2007, we acquired an option to
acquire a 75% interest in and to 18 mineral claims called the Lourdeau Claims
from Starfire Minerals Inc., the registered owner of the Lourdeau Claims. The
Lourdeau Claims consist of 18 mineral claims covering approximately 900.75
hectares (9.01km
2
), located in the La Grande geological area of
Quebec in the James Bay Territory about 620 miles (1,000 km) north of Montreal,
Quebec. The following table sets forth the details of the claims.
Under the
Property Option Agreement, Starfire Minerals Inc. has a 3% Net Smelter Return ("NSR")
royalty interest in the Lourdeau Claims, if and when Santos exercises its option
to acquire a 75% interest in the Lourdeau Claims by making the required cash and
share payments. NSR means the actual
28
proceeds
received from the sale of ore, metals or concentrated products from the Lourdeau
Property derived from commercial production as recorded by the producer and net
of any smelting and refining charges, penalties, costs of transportation of
ores, metals or concentrates from the Lourdeau Property to any mint, smelter or
other purchaser, cost of insurance of the products, and any export and import
taxes levied with respect to production from the Lourdeau Property.
Santos also
has the right to purchase up to two-thirds of the NSR royalty (i.e. 2% of the
NSR royalty) on the basis of $100,000 for each 0.1% of the NSR royalty (i.e.
$100,000 per 0.1% NSR royalty) acquired on the first one-half of the NSR
royalty, and $150,000 for each 0.1% of the NSR royalty (i.e. $150,000 per 0.1%
NSR royalty) thereafter for the remaining NSR royalty (i.e. the remaining 1% NSR
royalty). To exercise its option to purchase the NSR royalty or any portion
thereof, Santos must provide Starfire with at least 30 days advance written
notice of its intention to do so, and must close upon each purchase within 60
days of each notice.
Under the
Property Option Agreement, Santos is required to make all filings related to the
Lourdeau Property and to maintain the Lourdeau Claims in good standing by
preparing and filing the assessment reports, paying taxes and keeping the
Lourdeau Property free and clear of all liens and encumbrances.
As of the date hereof, all required filings have been
made to maintain the 18 mineral claims in good standing until July 18, 2009.
In order to
exercise the Option and to earn its 75% interest in the Property, Santos has to
pay Starfire $10,582 (CAD$10,000) in cash payment and issue 75,000 shares to
Starfire, and incur an aggregate of $50,000 (CAD$50,000) in expenditures before
September 30, 2009, within the following time schedule:
(a) pay $10,582 (CAD$10,000) upon signing of the Property Option
Agreement (paid);
(b) issue and deliver 75,000 shares within 10 business days of the date
of approval of the Property Option Agreement by the board of directors of Santos
(issued);
(c) incur $25,000 (CAD$25,000) of expenditures on the Lourdeau Property
on or before September 30, 2008; and
(d) incur $25,000 (CAD$25,000) of expenditures on the Lourdeau Property
between July 25, 2008 to July 25, 2009.
Any shares
delivered, cash payments made, or expenditures incurred toward the option price
that is over and above that required to be made . During a particular time
shall be carried forward and applied against the required payment in subsequent
periods.
If Santos does
not incur the full amount of expenditures within the set time period, Santos
may, within 45 days after the end of the period, pay Starfire the outstanding
balance to be incurred for that specific year by way of 50% cash and 50%
shares. After these payments, the option from Starfire remains in good standing
and Santos will be deemed to have acquire 75% of the Lourdeau Claims from
Starfire.
Specifically,
we anticipate spending the following over the next 12 months:
$22,000
for operating expenses and $58,800 for payment of offering expenses related
to this Registration Statement; and
$107,570
(CAD$107,570) in connection with the completion of our recommended
geological work program.
We expect our
total expenditures for the next 12 months to be in the range of $105,800 (if we
pay Starfire the required expenditures by way of 50% cash and 50% shares) to
$190,000 (if we carry out the exploration program).
29
In the
event Santos earns a 75% interest in the Lourdeau Property, Starfire and Santos
agree to negotiate in good faith the terms and conditions of entering into a
joint venture agreement to carry out further exploration and mining activities
on the Lourdeau Property, with the intention that all costs and profits will be
split proportionately the by the parties according to their ownership of the
property.
Technical Report on Properties
Mr. Michel
Boily, Ph.D., P. Geo. was hired by Santos to provide a Technical Report in July
2007 on the Lourdeau Claims. Mr. Boily has been continuously practicing in his
profession as a geologist since 1988, and is a specialist of granitoid-hosted
precious and rare metal deposits in Quebec. He graduated from the University of
Montreal (1988) in Quebec, Canada, with a PhD in geology. He is a registered
Professional Geologist in good standing with l'Ordre des Geologues du Quebec
(permit no. 1097). Mr. Boily does not have any interest in the Lourdeau
Property or the Company.
Mr. Boily does not have any interest in the Lourdeau
Property or the Company. The report is based on published and private reports,
maps and data provided by the Company and in the public domain. Mr. Boily's
report details the geological and exploration history of the Lourdeau Property,
including the land status, climate, geology and mineralization. Based upon
previous exploration activity in the area, Mr. Boily recommends the Company
conduct a specific exploration program on the Lourdeau Property. The
purpose of this report was to evaluate the area of the claim group, and the
prior exploration work conducted on the claims, and to recommend an exploration
program.
Recommended Exploration Program
Mr. Boily
recommends a systemic surface sampling program of the Lourdeau Vein site and its
vicinity, and the northern edge of the Lourdeau Hill, incorporating grab and
channel sampling, in order to get a solid geochemical assay database. Mr. Boily
recommends obtaining a helicopter-borne geophysical survey to cover the rest of
the Lourdeau Property. Mr. Boily recommends the geophysical magnetic and
radiometric surveys to be done on a 100 m spaced grid. This program is
estimated to cost approximately $107,570.
Depending on
the results of this program, the next phase could involve a drilling campaign
which would define the targets acquired during the geophysical surveys and
sampling campaign. The focus of the drilling will be the uranium-mineralized
sandstones at the Lourdeau Hill, with the gold, copper and silver-mineralized
metavolcanic constituting secondary targets.
Geological Exploration Program
Our mineral
claims presently do not have any mineral reserves. There is no mining plant or
equipment located on the property.
We have not
yet commenced physical exploration of the Lourdeau Claims. Our exploration
program is exploratory in nature and there is no assurance that mineral reserves
will be found.
The
exploration program proposed by the Company's independent consultant is designed
to determine whether mineralization exists to the extent that further
exploration is recommended to outline any such mineralized zones. It is
uncertain at this time the precise quantity of minerals in the property that
would justify actual mining operations. If we decide to abandon our mineral
claim at any stage of our exploration program, we intend to acquire other
properties and conduct similar exploration programs. The other properties may be
located in the same mining district or we may in the future explore properties
located in other jurisdictions, which may include other provinces in Canada, or
in the United States. Currently, the Company does not have any other properties
or any intentions of acquiring any other properties.
We plan to
conduct a systemic surface sampling program of the Lourdeau Vein site and its
vicinity, and the northern edge of the Lourdeau Hill, incorporating grab and
channel sampling, in order to get a solid
30
geochemical assay database. Mr. Boily recommends obtaining a helicopter-borne
geophysical survey to cover the rest of the Lourdeau Property. Mr. Boily
recommends the geophysical magnetic and radiometric surveys to be done on a 100
m spaced grid.
Depending on
the results of this program, the next phase could involve a drilling campaign
which would define the targets acquired during the geophysical surveys and
sampling campaign. The focus of the drilling will be the uranium-mineralized
sandstones at the Lourdeau Hill, with the gold, copper and silver-mineralized
metavolcanic constituting secondary targets.
We presently
have funds to meet our general operating expenses and to meet our obligations
under the Property Option Agreement. We do not have the funds to conduct the
recommended exploration program. If we are able to raise additional money, we
plan to conduct the exploration program on the Lourdeau Property in the summer
of 2008. Due to extreme weather conditions, exploration activities can only be
conducted between June and August of each year.
The
recommended exploration program costs approximately $107,570 and consists of the
following:
Geophysical Survey
Spectrometry, Gradiomag (Helimager)
and VLF
$200 x 120 km (line spacing: 100 m)
$24,000
Mobilization/demobilization
$15,000
Channel
and Grab Sampling
Analyses: 150 samples @ $50/sample
$7,500
Supervision: geologist/ 2
technicians for 5 days @ $925/day
$4,625
Transport and Lodging
Transport Montreal-Radisson .
$1,000
Lodging and food for 3 people x
5days
$3,750
Rentals (truck, ATV, saws, etc.)
$5,000
Helicopter
3 hours/day x 5 days x $1,250/day
$18,750
Fuel: 3 hours/day x 5 days x 160
liters x $2/liters
$4,800
Mineralogy: SEM Analyses
5 samples x $500/sample
$2,500
Subtotal
$86,925
Contingency (10%)
$8,693
Total
before taxes
$95,618
GST (5%)
$4,781
QST (7.5%)
$7,171
Grand
Total
$107,570
We have not
hired any personnel to perform the geological work on the Lourdeau Property.
Any geologist that we hire in the future will be responsible for selecting the
appropriate personnel and incurring all worker-related costs, which we will
reimburse for such services.
The
sections below describing the property are excerpts from a technical report
dated August 2007 prepared by Mr. Boily, our consulting geologist. Mr. Boily
has not visited the site and no visual inspection has been performed. Mr.
Boily's recommendations are based solely on his
31
interpretation of published reports. No drilling was conducted for
the benefit of his technical report.
Location,
Accessibility, Climate, Local Resources Infrastructure and Physiography
The Lourdeau
Property is located in the La Grande geological area of Quebec in the James Bay
Territory about 1,000 km north of Montreal. The property lies on the eastern
shore of the La Grande 3 Reservoir (LG-3) roughly 2.6 km ENE from a major
Hydro-Quebec levee. The property consists of 18 continuous map designed claim
units (or cells) in the NTS 32G/12 sheet for a total surface of 900.75 hectares
or 9.01 km2.
The nearest
village, Radisson (with a population of 400) is located roughly 165 km west of
the property. Several services, including lodging, food, gas, hospital, car and
truck rental and a regional airport can be obtained within this modern village.
To reach the Lourdeau Property, travel from Radisson by road 52 km south on
James Bay Road, 90 km west on Trans Taiga Road, and either take a helicopter
from the LG-3 airport to the property or take a boat from a major Hydro Quebec
levee.
Alternatively,
from the town of Matagami travel 568 km north on James Bay Road, and 90 km west
on Trans Taiga Road, and either take a helicopter from the LG-3 airport to the
property or take a boat from a major Hydro Quebec levee.
The James Bay
area is characterized by a continental climate. Summers are very short (from
early June to late August) but temperate with average maximum of 60
o
F
(20.0
o
C) and minimum of 45
o
F (7.4
o
C) in July.
Winter is harsh and starts in September and lasts until May, with extensive snow
precipitations (294 inches or 267 cm) from October to May. Average temperatures
during winter months reach -19.3
o
F (-28.5
o
C) (minimum) and
-.9
o
F (-18.3
o
C) (maximum) in January. The topography is
typical of the Canadian Shield. The physiography of the region is rough and
undulating, glaciation producing a rolling morainal plain with numerous small
shallow lakes. The vegetation, adapted to the harsh climate, typifies the Taiga
forest where the trees are sparse and small. The dominant species are black
spruce and jack pine, but larch, birch and aspen are also present. The ground
is covered by pale green lichen commonly called reindeer moss that is highly
inflammable during the dry season.
History of the Property
The property
has been unexplored since the late 1970's. In the 1960's and 1970's, the
Ministere des Richesses naturelles et de la Faune du Quebec (MRNFQ), conducted a
systematic mapping campaign covering the regions of the La Grande River
hydrographic system before the LG-2 and LG-3 reservoirs were progressively
filled in the late 1970's.
In 1973, the
Societe de Developpement de la Baie James (SDBJ) undertook a regional
geochemical survey of lake bottom sediments that covered the entire James Bay
area. Lasting over 5 years, the survey was carried out with a sample density of
1 sample per 9 km2. Geoterrex completed a regional airborne radiometric survey
in the James Bay area. The results of the survey are published in aeromagnetic
maps pointing out the anomalous sectors (GM 34130). Other general unpublished
airborne and ground-based mag survey were completed by Canico, the SDBJ.
In 1974-1975,
SES-SDBJ recognized a regional N140
o
-oriented fault along the La
Grande River which was associated in some places with radiometric values greater
than 1,000 cps. A follow-up prospection by helicopter identified an anomalous
radiometric zone in argillaceous sediments north of the Lourdeau Hill. Later
that year, geologists discovered a boulder train of Sakami Fm sandstones resting
at the northern base of the hill. The boulder contained yellow and green
impregnations in fractures later identified as autunite, malachite and
chalcocite. A clearing of the hill summit later allowed the recognition of a
network of N125
o
E oriented fractures through a lenticular layer of
sericitic siltstone. The uranium mineralization was associated to this layer,
whilst the copper impregnated the surrounding sandstone. This discovery sparked
a systematic exploration campaign by the SES-SDBJ throughout 1976 and 1977.
32
The
campaign included ground prospection along grids, ground-based radiometric, mag
and VLF surveys, rock and soil sampling and ultimately percussion and core
drilling.
A series 79
percussion and core drill holes totaling 2.89 miles (4.66 km) were conducted on
the Lourdeau Hill on the different targets delimited from the previous
exploration work. A close examination of the drill sections reveals the
mineralization to be largely confined to a filled zone associated with the main
N125
o
E-oriented fractures. Out of the 25 percussion drill holes
conducted on the Lourdeau Vein site, 12 showed interesting values, one showed an
isolated radioactive peak.
Conclusions and Recommendations
The Lourdeau
Property, unexplored since the late 1970's, holds a potential for high-grade
uranium mineralization in Proterozoic silicilastic sediments and in gold, copper
and silver in the basement metavolcanic rocks surrounding the sedimentary
rocks. Unconformity associated uranium deposits are generally high grade.
The Lourdeau
Property, notably the uranium, copper and silver unconformity showing associated
to Mid-Proterozoic siliciclastic sediments, represents one of the prime targets
of exploration in the James Bay Territory of Quebec. The main uranium showing,
the Lourdeau Vein, holds a significant potential for a high grade uranium
mineralization. Short percussion drill holes exploring the fracture zone were
carried by the SES-SDBJ in the late 1970's and produced interesting uranium
values extrapolated from radiometric downhole measurement. We will benefit from
the present survey techniques that were not available in the 1970's.
Mr. Boily
recommends a systemic surface sampling program of the Lourdeau Vein site and its
vicinity, and the northern edge of the Lourdeau Hill, incorporating grab and
channel sampling, in order to get a solid geochemical assay database. Mr. Boily
recommends obtaining a helicopter-borne geophysical survey to cover the rest of
the Lourdeau Property. Mr. Boily recommends the geophysical magnetic and
radiometric surveys to be done on a 100 m spaced grid.
Depending on
the results of this program, the next phase could involve a drilling campaign
which would define the targets acquired during the geophysical surveys and
sampling campaign. The focus of the drilling will be the uranium-mineralized
sandstones at the Lourdeau Hill, with the gold, copper and silver-mineralized
metavolcanic constituting secondary targets.
Geological and Technical Staff
We have not
contracted with any geologist to assist with the exploration programs. At the
right time, we will hire from the available pool of contract geologists
depending on the time of the year and availability of experience. Presently,
there are no other agreements or understandings to hire such geologists or
engineers.
Competitive Factors
The mineral
industry is fragmented. We compete with other exploration companies looking for
a variety of mineral resources. We are a very small exploration company compared
to many of our competitors. Although we will be competing with other
exploration companies, there is no competition for the exploration of minerals
on our mineral claim. We intend to explore and find sufficient mineralization
to a point in which major mining companies or mining financial groups would
seriously consider pursuing the mineral claim as a valuable and significant
acquisition.
33
Location Challenges
We do not
expect any major challenges in accessing the property during the initial
exploration stages. However, due to the seasonal winter conditions of the area,
we can only access the property between June and August of each year.
Regulations
We will be
required to comply with all regulations, rules and directives of governmental
authorities and agencies applicable to the exploration of minerals in Canada
generally, and in Quebec specifically.
The key
government agency in charge of mining in Quebec, Canada is the Ministry of
Natural Resources, or ministere des Ressources naturelles. The Ministry of
Natural Resources administers three laws relevant to the mining industry in
Quebec: (i) The Mining Act (Loi sur les mines); (ii) The Mining Duties Act (Loi
concernant les droits sur les mines); and (iii) SOQUEM Act (Loi sur la societe
quebecoise d'exploration miniere).
The Quebec
Mining Act allows a mineral explorer to claim a portion of available
governmental lands for the exclusive ownership of the mining rights area.
Pursuant to the Quebec Mining Act, a foreign company working on mining claims in
the Province of Quebec must register with the provincial government of Quebec.
We are not registered with the government of Quebec, and we will need to
register with the government of Quebec before we work on the Lourdeau Claims.
We currently
have no costs to comply with environmental laws concerning our exploration
program. A permit is required to penetrate the forested areas with the
obligation to store along access zones cut lumber of potential commercial value.
We do not expect to be required to obtain additional governmental authorizations
or to undertake studies of environmental impact and project approval unless and
until we discover commercially viable quantities of mineral deposits. Under the
Quebec Mining Act, should we discover mineral deposits and desire to commence
mining operations, we will be required to file a mining site rehabilitation plan
with the Natural Resources Ministry. This rehabilitation plan discusses how the
operator intends to rehabilitate the property following its intended use of the
property and includes an estimate of the costs involved in the rehabilitation.
We may also be required to obtain permits and distribution rights-of-way from
the Natural Resources Ministry for the construction of the access roads and
power lines.
Other laws are
indirectly relevant to our business, including the Quebec Environmental Quality
Act and the Canadian Environmental Assessment Act. These acts are administered
by separate provincial and federal governmental agencies that have the separate
authority to approve or require changes to a company's impact assessment.
Notwithstanding this separate authority, these federal and provincial
governmental agencies generally attempt to coordinate their review and approval
procedures.
The Quebec
Environment Quality Act, includes standards related to protection of the soil,
water, and air quality. Article 22 of the Environmental Quality Act requires
that any proponent who wants to build or modify the environment in any way
obtain a certificate of approval from the Quebec Environment Ministry. Directive
19, established under the Environmental Quality Act, sets criteria for
environmental impact studies to accompany applications for certificates of
approval under the Act, and also sets standards on the ways different types of
mines should operate.
We are
prepared to engage professionals, if necessary, to ensure regulatory compliance,
but in the near term we expect our activities to require minimal regulatory
oversight. If we expand the scope of our activities in the future, it is
reasonable to expect expenditures on compliance to rise.
34
Environmental Factors
We will also
have to sustain the cost of reclamation and environmental remediation for all
work undertaken which causes sufficient surface disturbance to necessitate
reclamation work. Both reclamation and environmental remediation refer to
putting disturbed ground back as close to its original state as possible. Other
potential pollution or damage must be cleaned-up and renewed along standard
guidelines outlined in the usual permits. Reclamation is the process of
bringing the land back to a natural state after completion of exploration
activities. Environmental remediation refers to the physical activity of taking
steps to remediate, or remedy, any environmental damage caused, i.e. refilling
trenches after sampling or cleaning up fuel spills. Our initial programs do not
require any reclamation or remediation other than minor clean up and removal of
supplies because of minimal disturbance to the ground. The amount of these
costs is not known at this time as we do not know the extent of the exploration
program we will undertake, beyond completion of the recommended three phases
described above. Because there is presently no information on the size, tenor,
or quality of any resource or reserve at this time, it is impossible to assess
the impact of any capital expenditures on our earnings or competitive position
in the event a potentially economic deposit is discovered.
Employees
Initially, we
intend to use the services of contractors and consultants for exploration work
on our properties. At present, we have no paid employees. We believe keeping a
low number of full-time employees will conserve cash and allow greater
flexibility in the future.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following
presentation of management's discussion and analysis of Santos should be read in
conjunction with the financial statements and other financial information
included herein.
Overview
Santos was
incorporated under the laws of the state of Nevada on May 24, 2006. We have not
commenced business operations and we are considered an exploration stage
company. We are defined as a "shell company" under the Rule 405 of the
Securities Act and Rule 12b-2 of the Exchange Act because we have nominal
operations and nominal assets. To date, our activities have been limited to
organizational matters, obtaining a geological report on the Lourdeau Claims and
the preparation and filing of a registration statement on Form S-1.
Plan of Operations
Our business
plan is to proceed with the exploration of the Lourdeau Claims to determine
whether there are commercially exploitable reserves of base and precious
metals. We presently have funds to meet our general operating expenses and to
meet our obligations under the Property Option Agreement. We do not have the
funds to conduct the recommended exploration program. If we are able to raise
additional money, we plan to conduct the exploration program recommended by Mr.
Michel Boily, PhD, P.Geo, in the summer of 2008. We anticipate the recommended
program will cost approximately $107,570.
We have not
hired any personnel to perform the geological work on the Lourdeau Property.
Any geologist that we hire in the future will be responsible for selecting the
appropriate personnel and incurring all worker-related costs, which we will
reimburse for such services.
During this
exploration stage, Mr. Richard Pierce, our president, will only be devoting
approximately 10 hours per week of his time to our business. We do not foresee
this limited involvement as negatively impacting our company over the next 12
months as an outside consultant is performing all exploratory work. If,
however, the demands of our business require more time of Mr. Pierce, such as
raising additional capital or addressing unforeseen issues with regard to our
exploration efforts, he is prepared to
35
adjust
his timetable to devote more time to our business, up to 15 hours. Mr. Pierce
is also the principal of GFR Pharma Ltd., GFR Health Ltd. and Biologic
Nutritional Resources Inc., and he may not be able to devote the necessary time
to the affairs of our business because of competing demands from his other
companies.
In the event
that we require additional funding, we anticipate that such funding will be in
the form of equity financing from the sale of our common stock. We will not be
using this prospectus in any subsequent unregistered offering and we will comply
with applicable integration rules as set forth in Rule 502(a) of Regulation D.
However, we cannot provide investors with any assurance that we will be able to
raise sufficient funding from the sale of our common stock to fund additional
phases of the exploration program should we decide to proceed. We believe that
debt financing will not be an alternative for funding any further phases in our
exploration program. The risky nature of this enterprise and lack of tangible
assets places debt financing beyond the credit-worthiness required by most banks
or typical investors of corporate debt until such time as an economically viable
mine can be demonstrated. We do not have any arrangements in place for any
future equity financing.
Risk Factors
An investment
in our common stock involves a number of very significant risks. Prospective
investors should refer to all the risk factors described under "Risk Factors"
commencing on page 8.
Financial
Condition
As at February
29, 2008, Santos had a cash balance of $132,303. Management does not anticipate
generating any revenue for the foreseeable future. When additional funds become
required, the additional funding will come from equity financing from the sale
of Santos' common stock. If Santos is successful in completing an equity
financing, existing shareholders will experience dilution of their interest in
Santos. Santos does not have any financing arranged and Santos cannot provide
investors with any assurance that Santos will be able to raise sufficient
funding from the sale of its common stock. In the absence of such financing,
Santos' business will fail.
Based on the
nature of Santos' business, management anticipates incurring operating losses in
the foreseeable future. Management bases this expectation, in part, on the fact
that very few mineral claims in the exploration stage ultimately develop into
producing, profitable mines. Santos' future financial results are also
uncertain due to a number of factors, some of which are outside its control.
These factors include, but are not limited to:
Due to Santos'
lack of operating history and present inability to generate revenues, Santos'
auditors have stated their opinion that there currently exists a substantial
doubt about Santos' ability to continue as a going concern. This means that
there is substantial double whether Santos can continue as an on going business
for the next 12 months unless we obtain additional capital to pay our bills. We
presently do not have the funds to conduct the recommended exploration program.
Further, even if Santos completes its current exploration program, we will
require additional funds in order to place the Lourdeau Claims into commercial
production.
36
Liquidity
Santos'
internal sources of liquidity will be loans that may be available to Santos from
management. Although Santos has no written arrangements with any of directors
and officers, Santos expects that the directors and officers will provide Santos
with internal sources of liquidity, if it is required.
Also, Santos'
external sources of liquidity will be private placements for equity conducted
outside the United States. Since inception on May 24, 2006 to February 29,
2008, Santos did not complete any definitive arrangements for any external
sources of liquidity.
Capital
Resources
As of February
29, 2008, Santos had total assets of $132,623 and total liabilities of $21,564
for a net working capital of $111,059.
There are no
assurances that Santos will be able to achieve further sales of its common stock
or any other form of additional financing. If Santos is unable to achieve the
financing necessary to continue its plan of operations, then Santos will not be
able to continue its exploration programs and its business will fail.
Management
estimates that Santos' current cash will be sufficient to fully finance its
operations at current and planned levels through February 2009. Management
intends to manage Santos' expenses and payments to preserve cash until Santos is
profitable, otherwise additional financing must be arranged. Specifically, such
cash management actions include donation of office space and services by Santos'
sole executive officer.
Results of Operations
We did not
earn any revenues from inception on May 24, 2006 to February 29, 2008. We do
not anticipate earning revenues until such time as we have entered into
commercial production of our mineral properties. We are presently in the
exploration stage of our business and we can provide no assurance that we will
discover commercially exploitable levels of mineral resources on our properties,
or if such resources are discovered, that we will enter into commercial
production of our mineral properties.
We incurred
operating expenses in the amount of $70,888 from inception on May 24, 2006 to
February 29, 2008. These operating expenses comprised mainly of mineral
property costs of $31,580 and accounting and legal expenses of $38,682. We
incurred a loss in the amount of $70,888 from inception on May 24, 2006 to
February 29, 2008.
Off-balance Sheet Arrangements
Santos has no
off-balance sheet arrangements including arrangements that would affect its
liquidity, capital resources, market risk support and credit risk support or
other benefits.
Available Information
We are filing
a registration statement on Form S-1 with the United States Securities and
Exchange Commission, under the Securities Act of 1933, covering the securities
in this offering. As permitted by rules and regulations of the Commission, this
prospectus does not contain all of the information in the registration
statement. For further information regarding both Santos Resource Corp. and the
securities in this offering, we refer you to the registration statement,
including all exhibits and schedules. As of the effective date of this
prospectus, we will have to comply with the information requirements of the
Securities Exchange Act of 1934. Upon effectiveness of the Form S-1 registration
statement, we will be required to file reports with the SEC under section 15(d)
of the Securities Act. The reports we will be required to file are Forms 10-K,
10-Q and 8-K. These materials will be available for inspection and
37
copying
at the public reference facilities maintained by the Commission at Room 100 F
Street, NE Washington, DC 20549. Copies of the material may be obtained from
the public reference section, at prescribed rates. Please call the Commission
at 1-800-SEC-0330. The Commission maintains an Internet Web site located at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding issuers that file reports electronically with the
Commission. The site is accessible by the public through any Internet access
service provider. Our registration statement and the referenced exhibits can
also be found on this site.
38
SANTOS RESOURCE CORP.
|
|
|
|
Report of Independent Registered Public Accounting Firm |
41 |
|
Balance Sheets |
42 |
|
Statements of Operations |
43 |
|
Statement of Stockholders' Equity |
44 |
|
Statements of Cash Flows |
45 |
|
Notes to Financial Statements |
46 |
39
Santos Resource Corp.
Financial Statements
February 29, 2008
(Presented In US Dollars)
40
1100 -
1177 West Hastings Street
|
Report of Independent Registered Public Accounting Firm
To the Directors of
Santos Resource Corp.
(an Exploration Stage Enterprise)
Vancouver, Canada
We have audited the balance sheets of Santos Resource Corp. (an Exploration Stage Enterprise) as at February 29, 2008 and 2007 and the statement of operations and deficit, stockholders' equity, and cash flows for the year ended February 29, 2008 and the periods from incorporation on May 24, 2006 to February 28, 2007 and February 29, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatements. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material respects, the financial position of the Company as at February 29, 2008 and 2007 and the results of its operations and its cash flows for the year ended February 29, 2008 and the periods from incorporation on May 24, 2006 to February 28, 2007 and February 29, 2008 in conformity with U.S. generally accepted accounting principles.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to financial statements, the Company is in the exploration stage, and has no permanently established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. These factors, along with other matters as set forth in Note 1, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Vancouver, Canada
|
"MacKay LLP"
|
41
Santos Resource Corp.
|
|
|
29-Feb-08 |
|
28-Feb-07 |
Assets |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash |
$ |
132,303 |
$ |
- |
|
GST Receivable |
|
320 |
|
- |
|
Total Assets |
$ |
132,623 |
$ |
- |
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Accrued Payables |
$ |
11,712 |
$ |
- |
|
Payable to Shareholders Note 3(b) |
|
9,852 |
|
- |
|
Total Current Liabilities |
|
21,564 |
|
- |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
Common
Stock (Note 5) 75,000,000 shares authorized,
|
|
32,077 |
|
- |
|
Additional paid in capital |
|
149,871 |
|
- |
|
Subscriptions receivable |
|
- |
|
- |
|
Deficit accumulated during the exploration stage |
|
(70,888) |
|
- |
|
Total Stockholders' Equity |
|
111,059 |
|
- |
|
Total Liabilities and Stockholders' Equity |
$ |
132,623 |
$ |
- |
On Behalf of the Board:
/s/ Richard Pierce
Director
/s/ Andrew Lee Smith
Director
The accompanying notes are an integral part of these financial statements
42
Santos Resource Corp.
|
|
Year Ended
|
|
Period from
|
|
Cumulative to
|
Expenses |
|
|
|
|
|
|
General and administrative |
$ |
627 |
$ |
- |
$ |
627 |
Mineral Property Costs |
|
31,580 |
|
- |
|
31,580 |
Professional Fees |
|
38,682 |
|
- |
|
38,682 |
|
|
|
|
|
|
|
Total Expenses |
|
70,888 |
|
- |
|
70,888 |
|
|
|
|
|
|
|
Net loss and comprehensive loss |
$ |
(70,888) |
$ |
- |
$ |
(70,888) |
Net loss per share |
|
|
|
|
|
|
Basic and diluted |
$ |
(0.00) |
$ |
- |
|
|
|
|
|
|
|
|
|
Weighted average number of
shares
|
|
21,813,036 |
|
N/A |
|
|
The accompanying notes are an integral part of these financial statements
43
|
|
Common |
Stock |
Additional
|
Deficit
|
Total
|
|
|
Number |
Par Value |
Capital |
Stage |
Equity |
|
|
|
|
|
|
|
Balance, May 24, 2006
|
|
- |
$ - |
$ - |
$ - |
$ - |
Net loss for the period ending
|
|
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
Balance, February 28, 2007 |
|
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
Capital Stock issued for
subscriptions
|
19-Jun-07 |
31,040,000 |
31,040 |
(15,520) |
- |
15,520 |
Mineral Property Option
|
25-Jun07 |
75,000 |
75 |
11,175 |
- |
11,250 |
Private Placement at $0.15 per share |
1-Feb-08 |
961,500 |
962 |
143,264 |
- |
144,225 |
Private Placement Fees |
1-Feb-08 |
- |
- |
(4,568) |
- |
(4,568) |
Net loss for the year ending
|
|
- |
- |
15,520 |
(70,888) |
(55,368) |
|
|
|
|
|
|
|
Balance, February 29, 2008 |
|
32,076,500 |
$ 32,077 |
$ 149,871 |
$ (70,888) |
$ 111,059 |
The accompanying notes are an integral part of these financial statements
44
Santos Resource Corp.
(an Exploration stage company)
Statements of Cash Flows
(Expressed in US Dollars)
|
|
Year Ended
|
|
Period from
|
|
Cumulative to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in Operating Activities |
|
|
|
|
|
|
Net loss for the period |
$ |
(70,888) |
$ |
- |
$ |
(70,888) |
Adjustments to net loss for non-cash activities |
|
|
|
|
|
|
Shares issued for property acquisition |
|
11,250 |
|
- |
|
11,250 |
Services provided by founders
in exchange
|
|
15,520 |
|
- |
|
15,520 |
Decrease (Increase) in GST Receivable |
|
(320) |
|
- |
|
(320) |
Increase (Decrease) in accrued payables |
|
11,712 |
|
- |
|
11,712 |
Net cash used in operating activities |
|
(32,726) |
|
- |
|
(32,726) |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Capital Stock issued |
|
|
- |
|
159,745 |
|
Private Placement Fees |
|
(4,568) |
|
- |
|
(4,568) |
Advances from shareholders |
|
9,852 |
|
- |
|
9,852 |
Net cash flows from financing activities |
|
165,030 |
|
- |
|
165,030 |
|
|
|
|
|
|
|
Cash increase (decrease) during the period |
|
132,303 |
|
- |
|
132,303 |
|
|
|
|
|
|
|
Cash beginning of the period |
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
Cash end of the period |
$ |
132,303 |
$ |
- |
$ |
132,303 |
|
|
|
|
|
|
|
Interest paid in the period |
$ |
- |
$ |
- |
$ |
- |
Income taxes paid in the period |
$ |
- |
$ |
- |
$ |
- |
The accompanying notes are an integral part of these financial statements
45
Santos Resource Corp.
1) Nature of Operations and Continuance of Business
Santos Resource Corp. (the "Company") was incorporated in the state of Nevada on May 24, 2006. The Company is an Exploration Stage Company. The Company's principal business is the acquisition and exploration of mineral properties. The Company has not presently determined whether its properties contain mineral reserves that are economically recoverable.
The accompanying financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, confirmation of the Company's interests in the underlying properties, and the attainment of profitable operations. As at February 29, 2008, the Company has never generated any revenues and has an accumulated loss of $70,888, since inception. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2) Summary of Significant Accounting Policies
a) Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company's fiscal year-end is February 28 (29 in leap years).
b) Use of 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.
46
Santos Resource Corp.
(an exploration stage company)
Notes to the Financial Statements
For the year ending February 29, 2008
(Expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
c) Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS No. 128, " Earnings per Share ". SFAS No. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period would be used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. There were no dilutive instruments outstanding at February 29, 2008.
d) Comprehensive Loss
SFAS No. 130, " Reporting Comprehensive Income ," establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 29, 2008, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
e) Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
f) Mineral Property Costs
The Company has been in the exploration stage since its inception on May 24, 2006 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized when incurred using the guidance in EITF 04-02, " Whether Mineral Rights Are Tangible or Intangible Assets ". The Company assesses the carrying costs for impairment under SFAS No. 144, " Accounting for Impairment or Disposal of Long Lived Assets " at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.
g) Long-lived Assets
In accordance with SFAS No. 144, " Accounting for the Impairment or Disposal of Long-Lived Assets ", the carrying value of long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
47
Santos Resource Corp.
(an exploration stage company)
Notes to the Financial Statements
For the year ending February 29, 2008
(Expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
h) Financial Instruments
The fair values of financial instruments, which include cash and accounts payable and accrued liabilities, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. The Company's mineral property is in Quebec and its administrative operation is in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company's operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
i) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted SFAS No. 109 " Accounting for Income Taxes " and Interpretation No. 48 "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No,. 109" ("FIN No. 48") as of its inception. Pursuant to this guidance the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years. FIN 48 prescribes a recognition and measurement model for uncertain tax positions taken or expected to be taken in the Company's tax returns. FIN 48 provides guidance on recognition, classification, presentation, and disclosure of unrecognized tax benefits.
j) Foreign Currency Translation
The Company's functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 " Foreign Currency Translation ", using the exchange rate prevailing at the balance sheet date. Non-monetary assets are translated at historical exchange rates, and revenue and expense items at the average rate of exchange prevailing during the period. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
k) Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140" and No. 156 "Accounting for Servicing of Financial Assets - an amendment of FASB Statement No. 140", but they are not expected to have a material effect in the Company's results of operations or financial position.
In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands fair value disclosures. The standard does not require any new fair value measurements. This standard is effective for fiscal years beginning after November 15, 2007. The adoption of this new announcement is not expected to have a material effect on the Company's financial position or results of operations.
48
Santos Resource Corp.
(an exploration stage company)
Notes to the Financial Statements
For the year ending February 29, 2008
(Expressed in U.S. dollars)
2. Summary of Significant Accounting Policies (continued)
k) Recent Accounting Pronouncements (continued)
In February, 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" (hereinafter "SFAS No. 159"). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. Management has not determined the effect that adopting this statement would have on the Company's financial condition or results of operation.
3. Related Party Transactions
a) On June 25, 2007, the Company issued 75,000 shares of common stock at $0.15 per share to Starfire Minerals as part of its contract to Option to Purchase Property in Quebec. Richard Pierce, President of Santos Resource Corp. is a director on the board of each company.
b) A shareholder loaned the company US$9,852 (CAD$10,000) in April 2007. The loan is non interest bearing and unsecured and is payable upon request from the shareholder.
4. Mineral Properties
On June 25, 2007 the Company signed an option agreement to acquire a 75% interest in 18 mineral property claims in Northern Quebec known as the Lordeau Property, with Starfire Minerals Inc. ("Starfire"). Santos was granted an option to acquire 75% of the right, title and undivided interest in the property (subject to the NSR Royalty reserved to Starfire). Terms and conditions are as follows:
a) $60,000 cash payment by Santos:
(i) $10,000 on execution of this agreement (paid);
(ii) $25,000 on or before September 30, 2008;
(iii) $25,000 on or before July 25, 2009; and
b) 75,000 common shares of Santos to be allotted and issued and certificates therefore delivered to Starfire as follows:
(i) 75,000 common shares (issued June 25, 2007)
49
Santos Resource Corp.
(an exploration stage company)
Notes to the Financial Statements
For the year ending February 29, 2008
(Expressed in U.S. dollars)
4. Mineral Properties (continued)
In addition, any shares delivered, cash payments made, or Expenditures incurred toward the option price that is over and above that required to be made during a particular time shall be carried forward and applied against the required payment in subsequent periods.
Santos will pay Starfire a 3% net smelter return royalty ("NSR Royalty"). Santos may purchase in the aggregate up to two-thirds (i.e., 2% NSR Royalty) of the NSR Royalty on the basis of one hundred thousand dollars for each one-tenth percent of the NSR Royalty (i.e., $100,000 per 0.1% NSR Royalty) acquired on the first one-half of the NSR Royalty (i.e., the first 1% NSR Royalty), and one hundred fifty ($150,000) dollars for each one-tenth percent of the NSR Royalty (i.e., $150,000 per 0.1% NSR Royalty) thereafter for the remaining NSR Royalty (i.e., the remaining 1% NSR Royalty). To exercise its option to purchase the NSR Royalty or any portion thereof, Santos must provide the Owner with at least 30 days advance written notice of its intention to do so, and must close upon each purchase within 60 days of each notice.
5. Common Stock
On June 19, 2007, the Company issued 31,040,000 shares of common stock at $0.0005 per share for cash proceeds of $15,520 and contributed services of $15,520, to Directors, officers and a relative of a Director.
On June 25, 2007 the Company issued 75,000 shares of common stock to Starfire Minerals at $0.15 per share for proceeds of $11,250, as part of its contract to Option to purchase Property in Quebec.
On February 1, 2008, the Company issued 961,500 shares of common stock at $0.15 per share for proceeds of $144,225, all collected in the current year.
6. Commitments
On July 16, 2007, we entered into a services retainer agreement with Fraser and Company LLP, to provide legal services to Santos. Pursuant to the agreement, Fraser and Company LLP will provide legal services in connection with the organization and set up of Santos and the preparation and filing of a registration statement with the SEC for a fee of approximately $50,000 (CAD$50,000). An initial payment of $30,000 (CAD$30,000) is payable on filing of the initial registration statement, and the balance of $20,000 (CAD$20,000) is payable upon the registration statement being declared effective by the SEC.
50
Santos Resource Corp.
(an exploration stage company)
Notes to the Financial Statements
For the year ending February 29, 2008
(Expressed in U.S. dollars)
7. Financial Instruments
The Company's financial instruments consist of cash and accrued liabilities unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency, or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying value, unless otherwise noted.
Currency risk is the risk to the Company's earnings that arises from fluctuations of foreign exchange rates and the degree of volatility of these rates. The Company does not use derivative instruments to reduce its exposure to foreign currency risk.
At February 29, 2008 the Company had the following financial assets and liabilities in Canadian dollars:
|
|
|
USD equivalent |
|
CDN Dollars |
|
Cash on deposit |
$ |
132,303 |
$ |
129,630 |
|
Accounts payable and accrued liabilities |
$ |
11,712 |
$ |
11,484 |
At February 29, 2008 US dollar amounts were converted at a rate of $0.9798 Canadian dollars to $1.00 US dollar.
8. Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has a net operating loss of $35,222, which expires in 2028. Pursuant to SFAS No. 109, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
The components of the net deferred tax asset at February and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are scheduled below:
|
|
|
February 29,
|
|
February 28,
|
|
Net Loss |
|
70,888 |
|
- |
|
Statutory Tax Rate |
|
35% |
|
35% |
|
Deferred Tax Asset |
|
24,811 |
|
- |
|
Valuation Allowance |
|
(24,811) |
|
- |
|
Net Deferred Tax Asset |
|
- |
|
- |
51
13,836,500 SHARES
OF SANTOS RESOURCE CORP.
COMMON STOCK
PROSPECTUS
Date: , 2008
All dealers that effect transactions in our shares, whether or not participating in this offering, may be required to deliver a prospectus.
We have not authorized any dealer, salesperson or other person to provide any information or make representation about Santos Resource Corp. except the information or representation contained in this prospectus. You should not rely on any additional information or representation if made.
52
SANTOS
RESOURCE CORP.
11450 - 201A Street, Maple Ridge
British Columbia, Canada V2X 0Y4
Part II - Information Not Required In Prospectus
Item 24. Indemnification of Directors and Officers
Sections 78.7502 and 78.751 of the Nevada Revised Statutes provide for indemnification of the Company's officers and directors in certain situations where they might otherwise personally incur liability, judgments, penalties, fines and expenses in connection with a proceeding or lawsuit to which they might become parties because of their position with the Company. Sections 78.7502 and 78.791 provide as follows:
Section 78.7502. Discretionary and mandatory indemnification of officers, directors, employees and agents: General provisions.
(1) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
(2) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
(3) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.
53
Section 78.751 Authorization required for discretionary indemnification; advancement of expenses; limitation on indemnification and advancement of expenses.
(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 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.
(2) The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
(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.
To the extent that indemnification may be related to liability arising under the Securities Act, the Securities and Exchange Commission takes the position that indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth all estimated costs and expenses, other than underwriting discounts, commissions and expense allowances, payable by the issuer in connection with the offering for the securities included in this registration statement:
54
|
|
|
Amount |
|
|
SEC Registration Fee |
$ |
136 |
|
|
Transfer Agent and Miscellaneous Fees |
$ |
1,000 |
|
|
Accounting Fees and Expenses |
$ |
11,200 |
|
|
Legal Fees and Expenses |
$ |
56,000 |
|
|
Printing and Shipping Expenses |
$ |
464 |
|
|
Total |
$ |
68,800 |
|
All amounts are estimates, other than the SEC's registration fee.
We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders named in this prospectus. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.
Item 26. Recent Sales of Unregistered Securities
On June 19, 2007, we issued an aggregate of 31,040,000 shares of common stock at a price of $0.0005 per share to nine founding shareholders, which include our directors and sole officer. We received $15,520 from this offering. These shares were issued pursuant to Regulation S of the Securities Act of 1933. The purchasers represented to us that they were non-US persons, as defined in Regulation S, and that their intentions to acquire the securities was for investment only and not with a view toward distribution. We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.
On June 17, 2007, we issued 75,000 shares of common stock to Starfire Minerals Inc., a British Columbia company, as partial consideration for Starfire granting us an option to acquire 75% of the Lourdeau Claims. These shares are issued at a deemed price of $0.15 per share. These shares were issued pursuant to Regulation S of the Securities Act of 1933. Starfire represented to us that it was a non-US person, as defined in Regulation S, and that its intentions to acquire the securities was for investment only and not with a view toward distribution. We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.
On September 18, 2007, we issued 13,836,500 shares of common stock to 40 purchasers at $0.15 per share pursuant to Regulation S of the Securities Act. The purchasers represented to us that they were non-US persons, as defined in Regulation S, and that their intentions to acquire the securities was for investment only and not with a view toward distribution. We did not engage in a distribution of this offering in the United States and no general solicitation was made to the public and no advertising was conducted for the offering.
Item 27. Exhibits Index
No. |
|
Exhibit Name |
3.1 |
|
Articles of Incorporation |
3.2 |
|
Bylaws |
55
No. |
|
Exhibit Name |
4.1 |
|
Specimen Stock Certificate |
5.1 |
|
Opinion of Counsel |
10.1 |
|
Mineral Property Option Agreement dated June 25, 2007 between Starfire Minerals Inc. and Santos Resource Corp., whereby Santos has an option to acquire a 75% interest in and to the Lourdeau Property |
14 |
|
Code of Ethics |
23.1 |
|
Consent of MacKay LLP, Chartered Accountant |
23.2 |
|
Consent of Counsel (included in 5.1) |
23.3 |
|
Consent of Michel Boily, Ph.D., P. Geo., Geologist |
All other Exhibits called for by Rule 601 of Regulation S-K are not applicable to this filing. Information pertaining to our common stock is contained in our Articles of Incorporation and Bylaws.
The undersigned registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and
(iii) Include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
(4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are
56
offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and
(iv) Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.
Signatures
In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements of filing on Form S-1 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Vancouver, British Columbia, Canada on July 9, 2008.
SANTOS RESOURCE CORP. |
|
Date: July 9, 2008 |
Richard
Pierce
|
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated.
Signatures |
Title |
Date |
/s/ Richard Pierce Richard Pierce |
President, Secretary, Treasurer and Director (Principal Executive Officer and Principal Financial Officer) |
July 9, 2008 |
/s/ Shih-Yi Chuang Shih-Yi Chuang |
Director |
July 9, 2008 |
/s/ Andrew Lee Smith Andrew Lee Smith |
Director |
July 9, 2008 |
57
Exhibit 3.1
ARTICLES OF INCORPORATION
ARTICLE 1
The name of the corporation is:
SANTOS RESOURCE CORP.
ARTICLE 2
The resident agent for this Corporation shall be: Business First Formations, Inc.
The address of said agent, and, the registered or statutory address of this Corporation in the state of Nevada, shall be: 3990 Warren Way, Reno, Nevada 89509.
This Corporation may maintain an office, or offices, in such other place within or without the state of Nevada as may be from time to time designated by the Board of Directors, or by the bylaws of this Corporation, and that this Corporation may conduct all Corporation business of every kind and nature, including the holding of all meetings of Directors and Stockholders, outside the state of Nevada as well as within the state of Nevada.
ARTICLE 3
The aggregate number of shares that the Corporation will have authority to issue is Seventy-Five Million (75,000,000) shares of common stock, with a par value of $0.001 per share. Said shares may be issued by the Corporation from time to time for such considerations as may be fixed by the Board of Directors.
ARTICLE 4
The governing board of this Corporation shall be known as directors, and the number of directors may from time to time be increased or decreased in such manner as shall be provided by the bylaws of this Corporation, providing that the number of directors shall not be reduced to fewer than one (1).
The name and post office address of the first board of Directors shall be listed as follows:
(PURSUANT TO NRS 78)
STATE OF NEVADA
SECRETARY OF STATE
NAME
RESIDENT AGENT
NUMBER OF SHARES THE CORPORATION IS AUTHORIZED TO ISSUE
BOARD OF DIRECTORS
Name |
Address |
|
Kevin Mizuno |
1535 Nelson Street, Vancouver, B.C. V6G 1M2 |
ARTICLE 5
PURPOSE OF CORPORATION
The objects for which this Corporation is formed are to engage in any lawful activity provided for a corporation organized under the provisions of NRS 78.
ARTICLE 6
ACQUISITION OF CONTROLLING INTEREST and
COMBINATIONS OF INTERESTED STOCKHOLDERS
The Corporation elects not to be governed by the terms and provisions of Sections 78.378 through 78.3793, inclusive, and Sections 78.411 through 78.444, inclusive, of the Nevada Revised Statutes, as the same may be amended, superseded, or replaced by any successor section, statute, or provision. No amendment to these Articles of Incorporation, directly or indirectly, by merger or consolidation or otherwise, having the effect of amending or repealing any of the provisions of this paragraph shall apply to or have any effect on any transaction involving acquisition of control by any person or any transaction with an interested stockholder occurring prior to such amendment or repeal.
ARTICLE 7
OTHER MATTERS
7.1 Stock Not Subject to Assessment . The capital stock, after the amount of the subscription price, or par value, has been paid in, shall not be subject to assessment to pay the debts of the Corporation.
7.2 Perpetual Existence . The Corporation is to have perpetual existence.
7.3 Powers of Board of Directors . In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:
(A) Subject to the bylaws, if any, adopted by the Stockholders, to make, alter or amend the bylaws of the Corporation.
(B) To fix the amount to be reserved as working capital over and above its capital stock paid in; to authorize and cause to be executed, mortgages and liens upon the real and personal property of this Corporation.
(C) By resolution passed by a majority of the whole Board, to designate one (1) or more committees, each committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution, or in the bylaws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. Such committee, or committees, shall have such name, or names, as may be stated in the bylaws of the Corporation, or as may be determined from time to time by resolution adopted by the Board of Directors.
(D) When and as authorized by the affirmative vote of the Stockholders holding stock entitling them to exercise at least a majority of the voting power given at a Stockholders meeting called for that purpose, or when authorized by the written consent of the holders of at least a majority of the voting stock issued and outstanding, the Board of Directors shall have power and authority at any meeting to sell, lease or exchange all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions as its board of Directors deems expedient and for the best interests of the Corporation.7.4 Stockholders Have No Subscription Rights . No Stockholder shall be entitled as a matter of right to subscribe for or receive additional shares of any class of stock of the Corporation, whether now or hereafter authorized, or any bonds, debentures or securities convertible into stock, but such additional shares of stock or other securities convertible into stock may be issued or disposed of by the Board of Directors to such persons and on such terms as in its discretion it shall deem advisable.
7.5 Stockholders Meetings . Meeting of Stockholders may be held outside the State of Nevada, if the bylaws so provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Nevada at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Corporation.
7.6 Limitation of Director's Liabilities . No director or officer of the Corporation shall be personally liable to the Corporation or any of its Stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any amendment to or repeal of this Article shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts or omissions prior to such amendment or repeal.
7.7 Indemnification of Directors . To the fullest extent permitted by the bylaws and Nevada law, this Corporation is authorized to indemnify any of its directors. The Board of Directors shall be entitled to determine the terms of indemnification, including advance of expenses, and to give effect thereto through the adoption of bylaws, approval of agreements, or by any other manner approved by the Board of Directors. Any amendment to or repeal of this Article shall not adversely affect any right of an individual with respect to any right to indemnification arising prior to such amendment or repeal.
7.8 Amendment of Articles of Incorporation . This Corporation reserves the right to amend, alter, change or repeal any provision contained in the Articles of Incorporation, in the manner now or hereafter prescribed by statute, or by the Articles of Incorporation, and all rights conferred upon Stockholders herein are granted subject to this reservation.
ARTICLE 8
SIGNATURE OF INCORPORATOR
The signature, name and address of the Incorporator signing the Articles of Incorporation is as follows:
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I, Megan Hughes, for Business First Formations, Inc., hereby accept as Resident Agent for the previously named Corporation.
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Exhibit 3.2
BYLAWS
OF
SANTOS RESOURCE CORP.
(the "Corporation")
(A Nevada Corporation)
ARTICLE 1
OFFICES
Section 1.01 - Principal And Registered Office.
The Corporation may have a principal office either within or outside the State of Nevada as the Corporation's board of directors (the "Board") may designate or as the business of the Corporation may require from time to time.
Section 1.02 - Other Offices.
Branch or subordinate offices may at any time be established by the Board at any place or places wherein the Corporation is qualified to do business.
ARTICLE 2
MEETINGS OF SHAREHOLDERS
Section 2.01 - Meeting Place.
All annual meetings of shareholders and all other meetings of shareholders shall be held either at the principal office or at any other place within or outside the State of Nevada which may be designated either by the Board, pursuant to authority hereinafter granted, or by the written consent of all shareholders entitled to vote thereat, given either before or after the meeting and filed with the secretary of the Corporation.
Section 2.02 - Annual Meetings.
A. The annual meeting of the shareholders shall be held at such time on such day as shall be fixed by the Board for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the Board shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient.
B. Written notice of each annual meeting signed by the president or vice president, or the secretary, or an assistant secretary, or by such other person or persons as the Board may designate, shall be given to each shareholder entitled to vote thereat. All such notices shall be sent to each shareholder entitled thereto, or published, not less than ten (10) nor more than sixty (60) days before each annual meeting, and shall specify the place, the day and the hour of such meeting, and shall also state the purpose or purposes for which the meeting is called.
C. Failure to hold the annual meeting shall not constitute dissolution or forfeiture of the Corporation, and a special meeting of the shareholders may take the place thereof.
Section 2.03 - Special Meetings.
Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the president or by the Board, or by one or more shareholders holding not less that twenty-five percent (25%) of the voting power of the Corporation. Except in special cases where other express provision is made by statute, notice of such special meetings shall be given in the same manner as for annual meetings of shareholders. Notices of any special meeting shall specify in addition to the place, day and hour of such meeting, the purpose or purposes for which the meeting is called.
Section 2.04 - Entry Of Notice.
Whenever any shareholder entitled to vote has been absent from any meeting of shareholders, whether annual or special, an entry in the minutes to the effect that notice has been duly given shall be conclusive and incontrovertible evidence that due notice of such meeting was given to such shareholder, as required by law and these bylaws.
Section 2.05 - Quorum.
The presence of at least two persons either in person or by proxy of the holders of not less than ten (10%) percent of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business, except as otherwise provided by Nevada corporate law and the Articles. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum.
Section 2.06 - Chair of Shareholder Meetings
The chairman of the Board shall preside as chair of all meetings of shareholders. If there is no chairman of the Board or if the chairman is not present or is unwilling to act as chair of a shareholder meeting, then the chief executive officer of the Corporation, if he is willing to act, shall preside as chair of the meeting. If there is no chairman of the Board or chief executive officer, or the chairman and chief executive officer are not present or are unwilling to act as chair of a shareholder meeting, then the president of the Corporation shall preside as chair of the meeting if present and willing to act. In any other case, the directors present shall choose one of their number to be the chair of the meeting.
Section 2.07 - Voting.
At all annual and special meetings of shareholders, each shareholder entitled to vote thereat shall: on a poll have one vote for each share of stock so held and represented at such meetings, either in person or by written proxy; or on a vote by show of hands, every person present who is a shareholder or proxy holder and entitled to vote on the matter has one vote, unless the Corporation's articles of incorporation, as amended from time to time, (the "Articles") provide otherwise, in which event, the voting rights, powers and privileges prescribed in the Articles shall prevail. Upon demand of any shareholder, upon any question at any meeting, shall be by ballot. If a quorum is present at a meeting of the shareholders, the vote of a majority of the shares represented at such meeting shall be sufficient to bind the Corporation, unless otherwise provided by law or the Articles.
Section 2.08 - Casting Vote by Chair.
In case of an equality of votes, either on a show of hands or on a poll, the chair of a meeting of shareholders, if he or she is a registered shareholder, has a second or casting vote in addition to the vote or votes to which the chair may be entitled as a shareholder.
Section 2.09 - Motion Need Not be Seconded .
No motion proposed at a meeting of shareholders need be seconded unless the chair of the meeting rules otherwise, and the chair of any meeting of shareholders is entitled to propose or second a motion.
Section 2.10 - Consent Of Absentees.
The transactions of any meeting of shareholders, either annual or special, however called and notice given thereof, shall be as valid as though done at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before of after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, sign a written Waiver of Notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of such meeting.
Section 2.11 - Proxies.
Every person entitled to vote or execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the secretary of the Corporation; provided however, that no such proxy shall be valid after the expiration of six (6) months from the date of its execution, unless the shareholder executing it specifies therein the length of time for which such proxy is to continue in force, which in no case shall exceed seven (7) years from the date of its execution.
Section 2.12 - Who May Attend Shareholder Meeting.
The only persons entitled to attend a meeting of shareholders are voting persons, the directors, the auditor, the chief executive officer, the president and the secretary of the Corporation, if any, as well as others permitted by the chair of the meeting.
Section 2.13 - Participation By Communication Facility.
The Board may determine that a person entitled to attend a meeting of shareholders may participate in the meeting as required by law by means of a telephonic, electronic or other communication facility made available by the Corporation that permits all participants to communicate adequately with each other during the meeting and a person participating in a meeting by such means is deemed to be present at the meeting. A meeting of the shareholders may be held entirely by means of such a telephonic, electronic or other communications facility that permits all participants to communicate adequately which each other during the meeting if the directors calling the meeting so determine.
Section 2.14 - Adjourned Meetings And Notice Thereof.
A. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but in the absence of a quorum, no other business may be transacted at any such meeting.
B. When any shareholders' meeting, either annual or special, is adjourned for sixty (60) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Otherwise, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken.
Section 2.15 - Shareholder Action Without A Meeting.
Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a written consent thereto is signed by shareholders holding at least a majority of the voting power, except that if a different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required. In no instance where action is authorized by this written consent need a meeting of shareholders be called or notice given. The written consent must be filed with the proceedings of the shareholders.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.01 - Powers.
Subject to the limitations of the Articles, these bylaws, and the provisions of Nevada corporate law as to action to be authorized or approved by the shareholders, and subject to the duties of directors as prescribed by these bylaws, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be controlled by, the Board. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers:
A. To select and remove all the other officers, agents and employees of the Corporation, prescribe such powers and duties for them as are not inconsistent with law, with the Articles, or these bylaws, fix their compensation, and require from them security for faithful service.
B. To conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefore not inconsistent with the law, the Articles, or these bylaws, as they may deem best.
C. To change the principal office for the transaction of the business if such change becomes necessary or useful; to fix and locate from time to time one or more subsidiary offices of the Corporation within or without the State of Nevada, as provided in Section 1.02 of Article 1 hereof; to designate any place within or without the State of Nevada for the holding of any shareholders' meeting or meetings; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificates shall at all times comply with the provisions of law.
D. To authorize the issuance of shares of stock of the Corporation from time to time, upon such terms as may be lawful, in consideration of money paid, labor done or services actually rendered, debts or securities canceled, or tangible or intangible property actually received, or in the case of shares issued as a dividend, against amounts transferred from surplus to stated capital. To describe and determine the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, and qualifications and rights of any Preferred Stock to be issued by the Corporation.
E. To borrow money and incur indebtedness for the purposes of the Corporation, and to cause to be executed and delivered therefore, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecation or other evidences of debt and securities therefore.
F. To appoint an executive committee and other committees and to delegate to the executive committee any of the powers and authority of the Board in management of the business and affairs of the Corporation, except the power to declare dividends and to adopt, amend or repeal bylaws. The executive committee shall be composed of one or more directors.
Section 3.02 - Number And Qualification Of Directors.
The number of directors of the Corporation shall not be less than one or more than fifteen directors. The number of directors may at any time be increased or decreased by resolution of the Board or by the shareholders at the annual meeting, provided that no decrease in the number of directors shall shorten the term of any incumbent directors. Directors need not be shareholders of the Corporation or residents of the State of Nevada.
Section 3.03 - Election And Term Of Office.
The directors shall be elected at each annual meeting of shareholders, but if any such annual meeting is not held, or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders. All directors shall hold office until their respective successors are elected.
Section 3.04 - Newly Created Directorships and Vacancies
Unless otherwise provided in the Articles of the Corporation, newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, including the removal of directors without cause, may be filled only by (a) the affirmative votes of a majority of the remaining directors; or (b) if there are no such remaining directors, then by a plurality of the votes cast by shareholders that, as of the date such vacancy is filled, would be entitled to elect such directorship at the next annual meeting of shareholders, voting as a separate class at a meeting, special or otherwise. A director elected to fill a vacancy shall be elected to hold office until a successor is elected and qualified.
Section 3.05 - Vacancies.
A. Vacancies in the Board may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected or appointed shall hold office until his successor is elected at an annual or a special meeting of the shareholders.
B. A vacancy or vacancies in the Board shall be deemed to exist in case of the death, resignation or removal of any director, or if the authorized number of directors be increased, or if the shareholders fail at any annual or special meeting of shareholders at which any director or directors are elected to elect the full authorized number of directors to be voted for at that meeting.
C. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors.
D. No reduction of the authorized number of directors shall have the effect of removing any director unless also authorized by a vote of the shareholders.
Section 3.06 - Resignation.
Any director may resign at any time by delivering his written resignation to the Board, in the event of an officer who is not the president, to the president, in the event of an officer who is not the secretary, to the secretary. Any such resignation shall take effect on the date such notice is received or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 3.07 - Compensation.
The Board shall have the sole authority to fix the amount of compensation of directors.
ARTICLE 4
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.01 - Place Of Meetings.
Regular meetings of the Board shall be held at any place within or without the State of Nevada which has been designated from time to time by resolution of the Board or by written consent of all members of the Board. In the absence of such designation, regular meetings shall be held at the principal office of the Corporation. Special meetings of the Board may be held either at a place so designated, or at the principal office. Failure to hold an annual meeting of the Board shall not constitute forfeiture or dissolution of the Corporation.
Section 4.02 - Organization Meeting.
Immediately following each annual meeting of shareholders, the Board shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Notice of such meeting is hereby dispensed with.
Section 4.03 - Other Regular Meetings.
Other regular meetings of the Board shall be held, whether monthly or quarterly or by some other schedule, at a day and time as set by the president; provided however, that should the day of the meeting fall upon a legal holiday, then such meeting shall be held at the same time on the next business day thereafter which is not a legal holiday. Notice of all such regular meetings of the Board is hereby required.
Section 4.04 - Special Meetings.
A. Special meetings of the Board may be called at any time for any purpose or purposes by the president, or, if he is absent or unable or refuses to act, by any vice president, the secretary or by any two directors.
B. Written notice of the time and place of special meetings shall be delivered personally to each director or sent to each director by ordinary mail, private carrier, telegraph or teletype, facsimile transmission, or electronic transmission or email. No such notice is valid unless delivered to the director to whom it was addressed at least twenty-four (24) hours prior to the time of the holding of the meeting. However, such mailing, telegraphing, or delivery as above provided herein shall constitute prima facie evidence that such director received proper and timely notice.
Section 4.05 - Meetings by Telephone or Other Communications Medium
A director may participate in a meeting of the directors or of any committee of the directors in person or by telephone if all directors participating in the meeting, whether in person or by conference telephone or similar communications equipment, are able to hear each other. Participation by such means shall constitute presence in person at such meeting.
Section 4.06 - Chair of Board Meetings
The chairman of the Board shall preside as chair of all meetings of the Board. If there is no chairman of the Board or if the chairman is not present or is unwilling to act as chair of a Board meeting, then the chief executive officer of the Corporation, if he is a director and willing to act, shall preside as chair of the meeting. If there is no chief executive officer who is a director or if the said chief executive officer and chairman of the Board are not present or are unwilling to act as chair of a Board meeting, then the president of the Corporation, if he is a director, present and willing to act, shall preside as chair of the meeting. In any other case, the directors present at the meeting shall choose a director to preside as chair of the meeting.
Section 4.07 - Votes at Board Meetings
Each director present at a meeting of the Board shall have 1 vote on each motion arising. Motions arising at meetings of the Board shall be decided by a majority of the votes cast.
Section 4.08 - Casting Vote by Chair.
In the case of an equality of votes the chair of the meeting shall be entitled to a second or casting vote.
Section 4.09 - Notice Of Adjournment.
Notice of the time and place of holding an adjourned meeting need not be given to absent directors, if the time and place be fixed at the meeting adjourned.
Section 4.10 - Waiver Of Notice.
The transactions of any meeting of the Board, however called and noticed or wherever held, shall be as valid as though a meeting had been duly held after regular call and notice, if a quorum be present, and if, either before or after the meeting, each of the directors not present sign a written waiver of notice or a consent to holding such meeting or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 4.11 - Quorum.
If the Corporation has only one director, then the presence of that one director constitutes a quorum. If the Corporation has only two directors, then the presence of both such directors is necessary to constitute a quorum. If the Corporation has three or more directors, then a majority of those directors shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. A director may be present at a meeting either in person or by telephone. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present, shall be regarded as the act of the Board, unless a greater number be required by law or by the Articles.
Section 4.12 - Adjournment.
A quorum of the directors may adjourn any directors' meeting to meet again at a stated day and hour; provided however, that in the absence of a quorum, a majority of the directors present at any directors' meeting, either regular or special, may adjourn such meeting only until the time fixed for the next regular meeting of the Board.
Section 4.13 - Action Without A Meeting.
Any action required or permitted to be taken at a meeting of the Board, or a committee thereof, may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the Board or of the committee. The written consent must be filed with the proceedings of the Board or committee.
ARTICLE 5
OFFICERS
Section 5.01 - Executive Officers.
The executive officers of the Corporation shall be a president, a secretary, and a treasurer/chief financial officer. The Corporation may also have, at the direction of the Board, a chairman of the Board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.03 of Article 5 hereof. Any one person may hold two or more offices, unless otherwise prohibited by the Articles or by law.
Section 5.02 - Appointment.
The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.03 and 5.05 hereof, shall be appointed by the Board, and each shall hold his office until he resigns or is removed or otherwise disqualified to serve, or his successor is appointed and qualified.
Section 5.03 - Subordinate Officers.
The Board may appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.
Section 5.04 - Removal And Resignation.
A. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board.
B. Any officer may resign at any time by giving written notice to the Board or to the president or secretary. Any such resignation shall take effect on the date such notice is received or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Section 5.05 - Vacancies.
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to such office.
Section 5.06 - Chairman Of The Board.
The chairman of the Board, if there be such an officer, shall, if present, preside at all meetings of the Board, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board or prescribed by these bylaws.
Section 5.07 - President.
Subject to such supervisory powers, if any, as may be given by the Board to the chairman of the Board (if there be such an officer), the president shall be the chief executive officer of the Corporation and shall, subject to the control of the Board, have general supervision, direction and control of the business and officers of the Corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the Board, or if there be none, at all meetings of the Board. He shall be an ex-officio member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board or these bylaws.
Section 5.08 - Vice President.
In the absence or disability of the president, the vice presidents, in order of their rank as fixed by the Board, or if not ranked, the vice president designated by the Board, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or these bylaws.
Section 5.09 - Secretary.
A. The secretary shall keep, or cause to be kept, at the principal office or such other place as the Board may direct, a book of (i) minutes of all meetings of directors and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present and absent at directors' meetings, the number of shares present or represented at shareholders' meetings, and the proceedings thereof; and (ii) any waivers, consents, or approvals authorized to be given by law or these bylaws.
B. The secretary shall keep, or cause to be kept, at the principal office, a share register, or a duplicate share register, showing (i) the name of each shareholder and his or her address; (ii) the number and class or classes of shares held by each, and the number and date of certificates issued for the same; and (iii) the number and date of cancellation of every certificate surrendered for cancellation.
C. The secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board required by these bylaws or by law to be given, and he shall keep the seal of the Corporation, if any, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board or these bylaws.
Section 5.10 - Treasurer/Chief Financial Officer.
A. The treasurer/chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all times be open to inspection by any director.
B. The treasurer/chief financial officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board. He shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these bylaws.
ARTICLE 6
MISCELLANEOUS
Section 6.01 - Fiscal Year
The fiscal year of the Corporation shall be fixed by resolution of the Board.
Section 6.02 - Record Date And Closing Stock Books.
The Board may fix a time in the future, for the payment of any dividend or distribution, or for the allotment of rights, or when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, or entitled to receive any such dividend or distribution, or any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares, and in such case only shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meetings, or to receive such dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after any record date fixed as herein set forth. The Board may close the books of the Corporation against transfers of shares during the whole, or any part, of any such period.
Section 6.03 - Inspection Of Corporate Records.
The share register or duplicate share register, the books of account, and records of proceedings of the shareholders and directors shall be open to inspection upon the written demand of any shareholder or the holder of a voting trust certificate, at any reasonable time, and for a purpose reasonably related to his interests as a shareholder or as the holder of a voting trust certificate, and shall be exhibited at any time when required by the demand of ten percent (10%) of the shares represented at any shareholders' meeting. Such inspection may be made in person or by an agent or attorney, and shall include the right to make extracts. Demand of inspection other than at a shareholders' meeting shall be made in writing upon the president, secretary, or assistant secretary, and shall state the reason for which inspection is requested.
Section 6.04 - Checks, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board.
Section 6.05 - Contracts: How Executed.
The Board, except as otherwise provided in these bylaws, may authorize any officer, officers, agent, or agents, to enter into any contract, deed or lease, or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board, no officer, agent, or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or render it liable for any purpose or for any amount.
Section 6.06 - Issuance; Certificates of Shares.
No shares of the Corporation shall be issued unless authorized by the Board. Such authorization shall include the number of shares to be issued, the consideration to be received, and a statement that the Board considers the consideration to be adequate. Shares may but need not be represented by certificates. Certificates for shares of the Corporation shall be in such form as is consistent with the provisions of Nevada corporate law or the law of a predecessor corporation and after the effective date of these bylaws shall state:
A. The name of the Corporation and that the Corporation is organized under the laws of the State of Nevada;
B. The name of the person to whom issued; and
C. The number and class of shares and the designation of the series, if any, which such certificate represents.
The certificate shall be signed by original or facsimile signature of two officers of the Corporation, and the seal of the Corporation may be affixed thereto.
Section 6.07 - Rules and Regulations Concerning the Issue, Transfer and Registration of Shares.
The Board shall have power and authority to make all such rules and regulations as the Board may deem proper or expedient concerning the issue, transfer and registration of shares of stock. In case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board shall authorize. The Board shall have power and authority to appoint from time to time one or more transfer agents and registrar of the shares of stock.
Section 6.08 - Shares without Certificates.
The Board may authorize the issue of some or all of the shares without certificates. If required by law and within a reasonable time after the issue or transfer of shares without certificates, the Corporation shall send the shareholder a written statement of the information required on certificates by Nevada corporate law.
Section 6.09 - Representations Of Shares Of Other Corporations.
The president or any vice president and the secretary or assistant secretary of this Corporation are authorized to vote, represent, and exercise on behalf of this Corporation, all rights incident to any and all shares of any other corporation or corporations standing in the name of this Corporation. The authority herein granted to said officers to vote or represent on behalf of this Corporation may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers.
Section 6.10 - Inspection Of Bylaws.
The Corporation shall keep in its principal office for the transaction of business the original or a copy of these bylaws, as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the shareholders at all reasonable times during office hours.
Section 6.11 - Indemnification.
A. The Corporation shall indemnify its officers and directors for any liability including reasonable costs of defense arising out of any act or omission of any officer or director on behalf of the Corporation to the full extent allowed by the laws of the State of Nevada, if the officer or director acted in good faith and in a manner the officer or director reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful.
B. Any indemnification under this section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because the officer or director has met the applicable standard of conduct. Such determination shall be made by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or, regardless of whether or not such a quorum is obtainable and a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the shareholders.
ARTICLE 7
NOTICES
Section 7.01 - Method of Giving Notice
Unless the Articles, these bylaws or the provisions of Nevada corporate law provide otherwise, a notice, statement, report or other record required or permitted by these bylaws or the provisions of Nevada corporate law to be sent by or to a person may be sent by any one of the following methods:
A. ordinary mail or private carrier, addressed to the person at the applicable address for that person as follows:
(1) for a record mailed to a shareholder, addressed to such shareholder at his address appearing on the books of the Corporation or given by him to the Corporation for the purpose of notice;
(2) for a record mailed to a director or officer, the prescribed address for mailing shown for the director or officer in the records kept by the Corporation or the mailing address provided by the recipient for the sending of that record or records of that class;
(3) in any other case, the mailing address of the intended recipient;
B. sending the record by facsimile transmission to the fax number provided by the intended recipient for the sending of that record or records of that class;
C. sending the record by electronic transmission or email to the email address provided by the intended recipient for the sending of that record or records of that class; or
D. physical delivery to the intended recipient.
Section 7.02 - Deemed Receipt of Mailing
A record that is mailed to a person by ordinary mail or sent by private carrier to the applicable address for that person referred to in Section 7.02 hereof is deemed to be received by the person to whom it was mailed on the day, Saturdays, Sundays and holidays excepted, following the date of mailing. A record that is sent by facsimile transmission, electronic transmission or email, or personal delivery is deemed to be received by the intended recipient on the day the record is sent.
Section 7.03 - Certificate of Sending
A certificate signed by the secretary, if any, or other officer of the Corporation or of any other corporation acting in that behalf for the Corporation stating that a notice, statement, report or other record was addressed as required by Section 7.01 hereof, prepaid and mailed or otherwise sent as permitted by Section 7.01 hereof is conclusive evidence of that fact.
Section 7.04 - Notice to Joint Shareholders
A notice, statement, report or other record may be provided by the Corporation to the joint shareholders of a share by providing the notice to the joint shareholder first named in the central securities register in respect of the share.
Section 7.05 - Revocation of Email Notices
A shareholder or director who has consented to receipt of electronically transmitted notices may revoke this consent by delivering a revocation to the Corporation in the form of a record. The consent of any shareholder or director is revoked if (a) the Corporation is unable to electronically transmit two consecutive notices given by the Corporation in accordance with the consent, and (b) this inability becomes known to the Secretary, the transfer agent, or any other person responsible for giving the notice. The inadvertent failure by the Corporation to treat this inability as a revocation does not invalidate any meeting or other action.
ARTICLE 8
AMENDMENTS
Section 8.01 - Power Of Directors.
New bylaws may be adopted, or these bylaws may be altered, amended or repealed by the Board by resolution of a majority of the Board.
Section 8.02 - Power Of Shareholders.
New bylaws may be adopted, or these bylaws may be altered, amended or repealed, by the affirmative vote of the shareholders collectively having a majority of the voting power or by the written assent of such shareholders.
CERTIFICATE
The undersigned does hereby certify that the undersigned is the Secretary of the Corporation as named at the outset in these bylaws, a corporation duly organized and existing under and by virtue of the laws of the State of Nevada; that the above and foregoing bylaws of said Corporation were duly and regularly adopted as such by the Board of Directors of the Corporation at a meeting of said Board, which was duly held on the 24 th day of May, 2006, that the above and foregoing bylaws are now in full force and effect.
DATED this 24 th day of May, 2006.
/s/ Kevin Mizuno
Kevin Mizuno, Secretary
Exhibit 4.1
SPECIMEN STOCK CERTIFICATE
NUMBER
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INCORPORATED IN NEVADA
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SHARES
|
|
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Authorized Common Stock:
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75,000,000
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THIS CERTIFIES THAT *** Sample Name ***
IS THE REGISTERED HOLDER OF *** XXXX ***
fully paid and non-assessable shares of common stock in the Capital of the above named Corporation transferable on the books of the Corporation by the registered holder hereof in person or by duly authorized Attorney upon surrender of this Certificate properly endorsed and assigned. This certificate and the shares represented hereby are subject to the laws of the State of Nevada, and to the Articles of Incorporation and Bylaws of the Corporation, as now or hereafter amended.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed on its behalf by the facsimile signatures of its duly authorized officers.
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Issued on: [Date]
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[BACK OF SHARE CERTIFICATE]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
PLEASE INSERT SOCIAL INSURANCE NUMBER,
|
|
_________________________________________________________________________________________________
Please print or typewrite name and address (including postal code or zip code, as applicable) of transferee
_______________________________________________ shares registered in the name of the undersigned on the books of the Corporation named on the face of this certificate and represented hereby, and irrevocably constitutes and appoints a duly authorized officer of the transfer agent and registrar as the attorney of the undersigned to transfer the said shares on the register of transfers and books of the Corporation with full power of substitution hereunder.
Exhibit 5.1
FRASER AND COMPANY LLP
Barristers & Solicitors
999 West Hastings Street, Suite 1200
Vancouver, British Columbia, Canada V6C 2W2
Tel: (604) 669-5244
Fax: (604) 669-5791
July 9, 2008
Santos Resource Corp.
11450-201A Street
Maple Ridge, British Columbia V2X 0Y4
Attention: Richard Pierce, President
Dear Sir:
Re: Registration Statement on Form S-1
13,836,500 Shares of Common Stock, $.001 par value
We are writing as your counsel in connections with a Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission (the "SEC") for the purpose of registering under the Securities Act of 1933, as amended (the "Securities Act"), the offering of up to 13,836,500 shares (the "Shares") of Common Stock, $0.001 par value, of Santos Resource Corp., a Nevada corporation (the "Company"), by the selling shareholders named in the Registration Statement (the "Selling Shareholders").
In connection with rendering this opinion we have examined originals or copies of the following documents and instruments (collectively, the "Documents"):
(a) the Articles of Incorporation of the Company;
(b) the By-Laws of the Company;
(c) certain records of the Company's corporate proceedings related to the issuance of the Shares; and
(d) such other records and documents as we have deemed relevant for the purpose of rendering this opinion.
In our examination, we have assumed, without investigation, the authenticity of the Documents, the genuineness of all signatures to the Documents, the legal capacity of all persons who executed the Documents and valid execution by all parties to the Documents, and that such Documents are free from any form of fraud, misrepresentation, duress or criminal activity, and the conformity of the originals of the Documents which were submitted to us as copies.
Based upon the foregoing and in reliance thereof, it is our opinion that the Shares will, when sold by the Selling Shareholders, be legally issued, fully paid and non-assessable. This opinion is expressly limited in scope to the Shares enumerated herein which are to be expressly covered by the referenced Registration Statement.
This opinion is limited to the laws of the State of Nevada and opines upon Nevada law, including the statutory provision of the State of Nevada, all applicable provisions of the Nevada Constitution and all reported judicial decisions interpreting those laws. However, we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein.
We consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to our law firm under "Legal Matters" in the related Prospectus. In giving the foregoing consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act, or the rules and regulations of the SEC promulgated thereunder or Item 509 of Regulation S-K.
Very truly yours,
FRASER AND COMPANY LLP
per: /s/ Ailin Wan
Ailin Wan*
* Also a member of Massachusetts bar
Exhibit 10.1
THE SECURITIES TO BE ISSUED BY SANTOS RESOURCE CORP. PURSUANT TO THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A "U.S. PERSON" (AS DEFINED IN REGULATION S UNDER THE 1933 ACT) UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE TRANSFER OF THE SAID SECURITIES IS PROHIBITED EXCEPT (I) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S (RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES), PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED; (II) PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED; OR (III) PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED.
MINERAL PROPERTY OPTION AGREEMENT
THIS AGREEMENT is
dated the 25 day of June 2007.BETWEEN:
STARFIRE MINERALS INC. , a company duly incorporated in the Province of British Columbia, having an office at 520 - 355 Burrard Street, Vancouver, BC V6C 2G8
(" Starfire ")
(the " Owner ")
OF THE FIRST PART
AND:
, a Nevada corporation having an office at 11450 - 201A Street, Maple Ridge, British Columbia V2X 0Y4SANTOS RESOURCES CORP.
(
"
Santos
"
)
(
the
"
acquiring party
"
)
OF THE SECOND PART
WHEREAS
A. The Owner owns certain mineral property interests (commonly referred to as the " Lordeau property" ) located in upper part of Quebec, which mineral property interests are more particularly described in Schedule "A" attached hereto and forming a material part of this Agreement; and
B. The Owner wishes to grant an option to Santos to acquire a seventy five percent (75%) interest in and to the Property (as hereinafter defined), and Santos wishes to acquire the same on the terms and conditions set forth herein.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual covenants and agreements herein contained, the parties agree as follows:
1. DEFINITIONS
1.1 In this Agreement and in the Schedules and the recitals hereto, unless the context otherwise requires, the following expressions shall have the following meanings:
"Acquiring Party" has the meaning ascribed to it in section 10.1 below.
"Area of Mutual Interest" has the meaning ascribed to it in section 10.1 below.
"Exchange" means any stock exchange or bulletin board that Santos may be listed on from time to time;
"Execution Date" means the date the parties hereto have executed this Agreement.
"Expenditures" means all expenses, obligations and liabilities of whatever kind or nature spent or incurred directly or indirectly by Starfire from the date hereof in connection with the exploration and development of the Property; including monies expended in maintaining the Property in good standing and in applying for and securing all necessary leases or permits; monies expended toward all taxes, fees and rentals; monies expended in doing and filing assessment work; monies expended in staking or acquiring claims in the Area of Mutual Interest; expenses paid for or incurred in connection with any program of surface or underground prospecting, exploring, geophysical, geochemical and geological surveying, drilling and drifting, raising and other underground work, assaying and metallurgical testing and engineering, environmental studies, data preparation and analysis; costs of acquiring or preparing research materials, technical or geological reports and data; costs of paying the fees, wages, salaries and traveling expenses of all persons engaged directly in work with respect to and for the benefit of the Property, in paying for the food, lodging and other reasonable needs of such persons; and including a charge in lieu of overhead, management and other unallowable costs equal to ten (10%) percent of all such expenditures for contracts of less than $100,000, and five (5%) percent for contracts of $100,000 or more.
"Option" has the meaning ascribed to it in section 2.1 below.
"Property" means those mineral claims described in Schedule "A" hereto, together with all prospecting, research, exploration, exploitation, operating and mining permits, licenses and leases associated therewith, mineral, surface, water and ancillary or appurtenant rights attached or accruing thereto, and any mining license or other form of substitute or successor mineral title or interest granted, obtained or issued in connection with or in place of or in substitution for any such Property (including, without limitation, any property issued to cover any internal gaps or fractions in respect of such ground, and any land or mineral title or interest acquired in the Area of Mutual Interest pursuant to section 10 hereof).
"NSR Royalty" has the meaning ascribed to it in section 2.6 below.
"Shares" mean common shares in the capital of Santos or any successor company resulting from any merger, amalgamation or other corporate reorganization(s).
"Title Dispute" shall have the meaning ascribed to it in section 13.1 below.
2. GRANT OF OPTION
2.1 The Owner hereby gives and grants to Santos the sole and exclusive right and option (the " Option ") to acquire from the Owner a seventy five percent (75%) undivided interest in and to the Property (subject to the NSR Royalty reserved to the Owner as referred to in section 2.6) in accordance with the terms of this Agreement.
2.2 In order to exercise the Option and to earn its interest in the Property, Starfire shall:
(a) issue and deliver to the Owner a total of 75,000 Shares as follows:
(i) 75,000 Shares within ten business days of the date of approval of this Agreement by the board of directors of Santos;
(b) make cash payments to the Owner of a total of $10,000 as follows:
(i) ten thousand ($10,000) dollars on the Execution Date, which sum is non-refundable and the receipt of which is hereby acknowledged by the Owner;
(c) subject to section 2.4 below, incur at least fifty thousand ($50,000) dollars of Expenditures on the Property, as follows:
(i) twenty five thousand ($25,000) dollars on or before September 30, 2008; and
(ii) an additional twenty five thousand ($25,000) dollars with in one year from July 25, 2008 expiry July 25, 2009.
The issuance of 75,000 Shares, the cash payments totaling $10,000 and the requisite $50,000 in Expenditures required to exercise the Option, all as set out above, are herein collectively referred to as the " Option Price ".
2.3 Any Shares delivered, cash payments made, or Expenditures incurred toward the Option Price that is over and above that required to be made during a particular time period in section 2.2 shall be carried forward and applied against the required payment in the subsequent period(s).
2.4 In the event Santos fails to incur the full amount of Expenditures in any given year within the periods required under section 2.2, then Santos may, within 45 days after the end of such period, pay to the Owner an amount equal to the outstanding balance to be incurred for that specific year by way of 50% cash and 50% Shares, subject to Exchange approval if required at the time, or if such Exchange approval is required but not granted then 100% cash, whereupon deliverance of the cash and Shares to the Owner the Option shall remain in good standing. For the purpose of this section, Shares shall be valued at the weighted average trading price per Share during the 10 trading days preceding the period end date (subject to any minimum price per Share required by policies of the Exchange).
2.5 Upon the failure of Santos to deliver the consideration comprising the Option Price within the time periods set forth herein, the Owner shall provide Santos with written notice of default and Santos shall have a period of 30 days following receipt of such notice of default to rectify the same, failing which the Option and this Agreement shall automatically terminate at the end of such 30 day notice period without further notice from the Owner.
2.6 The purchase and sale of the Property is subject to a 3% net smelter return royalty (" NSR Royalty ") in favour of the Owner, which NSR Royalty shall be calculated in accordance with the formula set out in Schedule "B" attached hereto and forming a material part of this Agreement. Santos may purchase in the aggregate up to three-quarters (i.e., 2% NSR Royalty) of the NSR Royalty on the basis of one hundred thousand dollars for each one-tenth percent of the NSR Royalty (i.e., $100,000 per 0.1% NSR Royalty) acquired on the first one-half of the NSR Royalty (i.e, the first 1.0% NSR Royalty), and one hundred fifty ($150,000) dollars for each one-tenth percent of the NSR Royalty (i.e., $150,000 per 0.1% NSR Royalty) thereafter for the remaining NSR Royalty (i.e., the remaining 0.5% NSR Royalty). To exercise its option to purchase the NSR Royalty or any portion thereof, Santos must provide the Owner with at least 30 days advance written notice of its intention to do so, and must close upon each purchase within 60 days of each notice.
3. ACQUISITION OF INTEREST IN THE PROPERTY
3.1 At such time as Santos has paid to the Owner the Option Price in accordance with section 2.2 above, within the time periods specified therein, the Option shall be deemed to have been exercised by Santos and Santos shall have thereby, without any further act, acquired a seventy five percent (75%) undivided interest in and to the Property.
3.2 In the event that Santos has earned a 75% interest in the Property pursuant to section 3.1, the Owner and Santos agree to negotiate in good faith the terms and conditions of entering into a joint venture agreement to carry out further exploration and mining activities on the Property, with the intention that all costs and profits will be split proportionately by the parties according to their ownership of the Property.
4. REGISTRATION AND TRANSFER OF PROPERTY INTERESTS
4.1 Upon the request of Santos after execution of the Agreement and at any time during the term of this Agreement, the Owner shall assist Santos to record this Agreement with the appropriate mining recorder.
4.2 The Owner shall further provide Santos with such recordable transfers as Santos and its counsel shall require to record its due interests in respect of the Property.
5. REPRESENTATIONS AND WARRANTIES
5.1 Santos represents and warrants to the Owner that:
(a) it has full power and authority to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated by this Agreement;
(b) all necessary corporate approvals have been obtained and are in effect with respect to the transactions contemplated hereby;
(c) neither the execution and delivery of this Agreement nor any of the agreements contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by any agreement to which it is a party; and
(d) upon issuance, the Shares shall be validly issued as fully paid and non-assessable common shares of the Company.
5.2 The Owner hereby represents and warrants to Santos that:
(a) it has full power, capacity and authority to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated herein;
(b) neither the execution and delivery of this Agreement nor any of the agreements referred to herein or contemplated hereby, nor the consummation of the transactions hereby contemplated conflict with, result in the breach of or accelerate the performance required by any agreement to which he is a party;
(c) it is the legal and beneficial owner of all of the mineral interests comprising the Property, free and clear of all liens, charges and encumbrances and no taxes or rentals are due with respect to the Property;
(d) the Property is accurately described in Schedule "A" attached hereto and forming a material part of this Agreement;
(e) each of the mineral claims comprising the Property has been duly and validly granted to or staked by the Owner, and is properly located and recorded with the appropriate mining authorities pursuant to all applicable laws and regulations of the jurisdiction in which the Property is situate
(f) to the best of its knowledge, there are no restrictions on exploration and development on the Property or of the removal of minerals from the Property;
(g) the Owner has the exclusive right to enter into this Agreement and has all necessary authority to dispose of his interests in and to the Property in accordance with the terms of this Agreement;
(h) t o the best of its knowledge, there is no adverse claim or challenge against or to the ownership of or title to any of the mineral interests comprising the Property or which may impede development, nor to the knowledge of the Owner is there any basis for any potential claim or challenge, and there are no outstanding agreements or options to acquire or purchase the Property or any portion thereof, and no persons have any royalty, net profits or other interests whatsoever in production from any of the mineral interests comprising the Property;
(i) there are no pending or threatened actions, suits, claims or proceedings regarding the Property or any portion thereof of which the Owner is aware;
(j) t he Owner has the full right and authority to exercise the Owner's rights and remedies under this Agreement, to waive any default of Santos under this Agreement, to exercise any and all claims which the Owner may have as against Santos under this Agreement and to collect, distribute and account for any and all payments and issuances made by Santos to the Owner under this Agreement;
Shares Representations
(k) Offer not made in U.S. The offer to acquire the Shares was not made to the Owner when the Owner was in the United States and at the time the Owner's buy order was made, the Owner was outside the United States;
(l) Execution and Delivery of Agreement Outside U.S. The Owner was outside the United States at the time this Agreement was executed and delivered;
(m) Not a U.S. Person . The Owner is not a U.S. Person, as that term is defined in Regulation S, promulgated under the United States Securities Act of 1933, as amended (the "1933 Act") . The Owner acknowledges that a "U.S. Person" is defined by Regulation S to be any person who is:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated under the laws of the United States;
(iii) any estate of which any executor or administrator is a U.S. person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in the United States;
(vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporate, or (if an individual) resident in the United States; and
(vii) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign jurisdiction; and
(B) formed by a U.S. person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned, by accredited investors [as defined in Section 230.501(a) of the 1933 Act] who are not natural persons, estates or trusts;
(n) Not Acquiring for a U.S. Person . The Owner is not and will not be acquiring, the Shares are not being acquired directly or indirectly, for the account or benefit of a U.S. Person or a person in the United States and the Owner does not have any agreement or understanding (either written or oral) with any U.S. Person or a person in the United States respecting:
(i) the transfer or assignment of any rights or interest in any of the Shares;
(ii) the division of profits, losses, fees, commissions, or any financial stake in connection with this subscription; or
(iii) the voting of the Shares;
(o) No Directed Selling Efforts . The Owner will not engage in any Directed Selling Efforts, as that term is defined in Regulation S, in respect of the Shares;
(p) Distribution Compliance Period . The Owner agrees not the resell the Shares in the United States or to a U.S. Person during the distribution compliance period, which is one year from the date the Shares are issued;
(q) Restrictions on Resale . The Owner acknowledges that there are restrictions on the resale of the Shares, agrees not to resell or distribute the Shares to the public and agrees to comply with the Shares laws of the United States and the Shares laws of the residence of the Owner. The Owner agrees not to engage in hedging transactions with regard to the Shares prior to the expiration of the one-year distribution compliance period unless in compliance with the 1933 Act;
(r) Securities Not Registered . The Owner acknowledges that the Shares have not been registered under any securities laws, including US federal or state securities laws. The Owner also understands that Santos is under no obligation and has no intention to register the Shares or to take any actions to make available exemptions from the registration requirements of state and federal securities laws and the securities laws of the jurisdiction of in which the Owner is a resident, and that the Shares cannot be sold or otherwise distributed in the United States in the absence of an exemption from such registration requirements;
(s) Santos May Refuse Transfer . The Owner acknowledges that Santos shall refuse to register any transfer of the Shares not made in accordance with the provisions of Regulation S, pursuant to registration under the 1933 Act, or pursuant to an available exemption from registration under the 1933 Act; provided, however, that if the Shares are in bearer form or foreign law prevents Santos from refusing to register Shares transfers, other reasonable procedures are implemented to prevent any transfer of the Shares not made in accordance with the provisions of Regulation S; and
(t) Legends on Share Certificates . The Owner hereby consents to the placement of restrictive legends on all certificates representing the Shares, in substantially the following form:
"The securities represented by this certificate have not been registered under the U.S. Securities Act of 1933, as amended, or other applicable securities laws. These securities have been acquired for investment and not with a view to distribution or resale and may not be offered, sold, pledged or otherwise transferred except (i) in accordance with the provisions of Regulation S (Rule 901 through Rule 905, and preliminary notes), promulgated under the Securities Act of 1933, as amended; (ii) pursuant to registration under the Securities Act of 1933, as amended; or (iii) pursuant to an available exemption from registration. Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act of 1933, as amended.
"Unless permitted under securities legislation, the holder of this security must not trade the security before the date that is 4 months and a day after the later of (i) [the distribution date], and (ii) the date the Company became a reporting issuer in any Canadian province or territory."
5.3 The representations and warranties hereinbefore set out are conditions on which the parties have relied in entering into this Agreement and shall survive the acquisition of any interest in the Property by Santos and each of the parties shall indemnify and save the other harmless from all loss, damage, costs, actions and suits arising out of or in connection with any breach of any representation, warranty, covenant, agreement or condition made by it and contained in this Agreement.
6. COVENANTS OF THE OWNER
6.1 While the Option remains outstanding, the Owner covenants and agrees with Santos to:
(a) for so long as Santos is not in default hereunder, not do any act or thing which would in any way adversely affect the rights of Santos hereunder;
(b) make available to Santos and its representatives all records, maps, reports, drill core and files in its possession relating to the Property and permit Santos and its representatives at their own risk and expense to take abstracts there from and make copies thereof;
(c) co-operate as reasonably necessary with Santos in obtaining any access, surface and other rights on or related to the Property as Santos reasonably deems desirable; and
(d) promptly provide Santos with any and all notices and correspondence received by the Owner from the any relevant government agencies in respect of the Property.
7. PRE-EXERCISE ACTIVITIES
7.1 Prior to exercise of the Option, Santos shall have full right, power and authority to do everything necessary or desirable in accordance with good mining practice in connection with the exploration and development of the Property, including without limiting the generality of the foregoing, the exclusive right to:
(a) enter the Property and have exclusive and quiet possession of the Property, to regulate access to the Property, as well as the use and enjoyment thereof without interruption by or disturbance from the Owner, or any person claiming by, through or under the Owner;
(b) do such prospecting, exploration, development, exploitation and other mining work thereon and thereunder as Santos may in its sole discretion consider advisable or desirable subject to the approval of all applicable laws and regulations;
(c) bring and erect upon the Property such equipment and facilities as Santos may in its sole discretion consider advisable or desirable;
(d) remove materials from the Property for the purposes of assaying and testing, bulk sampling or otherwise as Santos may in its sole discretion consider advisable or desirable, and dispose of such materials by way of sale or otherwise as Santos may in its sole discretion consider advisable or desirable; and
(e) participate with the Owner in negotiating such agreements as may be necessary or in Santos best interests with the owners of and other persons having interests in the Property concerning surface or access rights affecting the Property, provided that if and to the extent that the Owner has any such rights affecting the Property, such rights are hereby included in the Property and are subject to the Option hereunder.
7.2 Prior to exercise of the Option, Santos shall have the following duties and obligations:
(a) To manage, direct and control all exploration, development and production operations in, on and under the Property in a prudent and workmanlike manner, and in compliance with all applicable laws, rules, orders and regulations;
(b) Subject to the terms and conditions of this Agreement, to pay all taxes, rentals and maintenance fees on the Property as may be necessary to keep the Property in good standing and free and clear of liens, charges and encumbrances of every character arising from operations hereunder (except liens for taxes not yet due, and other claims and liens contested in good faith by Santos) and to proceed with all diligence to contest or discharge any lien that is filed;
(c) file all applicable work for assessment credits against the respective claims comprising the Property. Any excess work shall be applied equally to the portable assessment credit account of Santos and the Owner;
(d) to obtain and maintain, or cause any contractor engaged to obtain and maintain, adequate insurance coverage with respect to activities on or with respect to the Property;
(e) to perform its duties and obligations in a manner consistent with good exploration and mining practices;
(f) defend, indemnify and save the Owner and its directors, officers and employees harmless from any and all losses, damages, expenses, claims, suits, actions or demands of any kind or nature whatsoever in any way referable to or arising out of any work done by Santos on or with respect to the Property;
(g) prior to commencing any operations or activities on the Property, obtain all necessary operating and environmental permits and post any required reclamation or other bonds or safekeeping agreements required by any governmental agency; and
(h) Santos shall permit the Owner, or his representatives duly authorized in writing, to visit and inspect the Property at all reasonable times and intervals, and inspect all data obtained by Santos as a result of its operations thereon, subject to such confidentiality arrangements as Santos may reasonably consider appropriate.
7.3 Until such time as the Option is exercised in full, Santos agrees to offer all contracts to undertake Exploration work on the Property to Integrated Minerals Management Inc. ("Integrated"), provided that the rates quoted by Integrated are competitive commercial rates and Integrated can provide the services in a timely manner, to the satisfaction of Santos.
8. TERMINATION OF OPTION
8.1 This Agreement, except for the provisions of sections 9 and 11, and the Option shall (unless otherwise agreed by the Owner in writing) terminate:
(a) at the end of the 30 day notice period set out in section 2.5, if the outstanding Option Price required to be paid by Santos pursuant to this Agreement has not been paid by Santos to the Owner by such date;
(b) if Santos gives notice to the Owner in accordance with section 8.2; or
(c) upon Santos being or becoming in default of any other material obligation hereunder, and upon Santos failing to rectify the same within 30 days following receipt from the Owner of notice of such default.
8.2 At any time prior to the exercise of the Option, Santos shall have the right to terminate this Agreement and the Option by giving not less than thirty (30) days' notice to that effect to the Owner.
9. OBLIGATIONS OF SANTOS ON TERMINATION OF THE OPTION
9.1 If this Agreement is terminated for any reason whatsoever prior to the exercise of the Option, this Agreement, including the Option, (but excluding this section 9 and section 11 which shall both continue in full force and effect for so long as is required to give full effect to the same) shall be of no further force and effect except that Santos shall:
(a) vacate the Property, and leave the Property:
(i) in good standing and in accordance with the applicable laws and regulations, with a minimum of six months of assessment credits filed against the same;
(ii) free and clear of all liens, charges and encumbrances arising from this Agreement or its operations hereunder;
(iii) in a safe and orderly condition; and
(iv) in a condition which is in compliance with all applicable rules and orders of governmental authorities with respect to reclamation and restoration of the surface to the Property;
(b) deliver to the Owner, within ninety (90) days of termination, a report on all work carried out by Santos on the Property together with copies of all maps, drillhole logs, assay results, reports and other information compiled or prepared by or on behalf of Santos with respect to work on or with respect to the Property, and make available to the Owner (at the place of storage) all core, samples and sample pulps and rejects;
(c) unless otherwise agreed by the Owner, remove from the Property within six months of the effective date of termination all materials, equipment and facilities erected, installed or brought upon the Property by or at the instance of Santos. If the same is not completely removed, then the Owner may, at his option, retain the same as the Owner's property, or remove the same from the Property at Santos's expense; and
(d) deliver to the Owner a duly executed quitclaim of all right, title and interest of Santos in and to the Property in favour of the Owner.
10. AREA OF MUTUAL INTEREST
10.1 An area of mutual interest (the " Area of Mutual Interest ") shall exist for all lands within that area being two kilometers from the outer boundaries of the Property. If either party (the " Acquiring Party ") acquires any mineral interest covered by the lands within the Area of Mutual Interest, or the Acquiring Party enters into any type of agreement by which such an interest may be earned or otherwise acquired, then the Acquiring Party shall promptly notify the other party of such acquisition or of such agreement, and this Agreement shall apply thereto, and such lands or interests within the Area of Mutual Interest shall form part of the Property, without cost to the non-Acquiring Party. Any interest acquired by a party in the lands outside the Area of Mutual Interest shall not be subject to the terms hereof. The Area of Mutual Interest shall exist only for so long as the Option remains unexercised.
11. CONFIDENTIAL NATURE OF INFORMATION
11.1 Each party agrees that all information obtained hereunder shall be the exclusive property of the parties and not publicly disclosed or used other than for the activities contemplated hereunder except as required by law or by the rules and regulations of any regulatory authority or stock exchange having jurisdiction or with the written consent of the other party, such consent not to be unreasonably withheld.
12. ASSIGNMENT
12.1 Either party may at any time assign or transfer any or all of its interest herein, provided such assignee agrees to abide by and be bound by the terms of this Agreement in the same manner and to the same effect as if an original signatory hereto.
13. NOTICES
13.1 Any notice, direction or other instrument required or permitted to be given under this Agreement shall be in writing and may be given by the delivery of the same or by mailing the same by prepaid registered or certified mail or by sending the same by facsimile in each case addressed to the address first listed above or the following facsimile numbers:
(a) If to the Owner at facsimile no.(604) 596 8592; and
(b) If to Santos at facsimile no.: (604) 648 8052.
13.2 Any party may at any time give to the others notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified shall be deemed to be the address of such party for the purposes of giving notice hereunder.
14. FORCE MAJEURE
14.1 Santos shall not be deemed to be in default hereunder for failure or delay to perform any of its covenants pursuant to this Agreement including payments toward the Option Price, if prior to the requirement to perform such covenant any event of force majeure arises which precludes Santos from undertaking work on the Property (except for Santos's lack of funds or inability to raise funds), or a material dispute arises as to the ownership or title to any part of the Property or to the minerals therein, including land claims by indigenous people (a " Title Dispute" ).
14.2 Should Santos seek to rely on the provisions of subsection 13.1 it shall promptly give written notice to the Owner of the particulars thereof and all time limits imposed by this Agreement shall be extended from the date of delivery of such notice by a period equivalent to the period of delay resulting from such event of force majeure or Title Dispute.
15. ARBITRATION
15.1 If any question, difference or dispute shall arise between the parties in respect of any matter arising under this Agreement or in relation to the construction hereof, the same shall be referred to a mutually acceptable mediator. If an agreement is not settled within 30 days of the referral, the award of one arbitrator shall determine the dispute. The decision of the arbitrator shall be made within 30 days after the selection. The expense of the arbitration shall be borne equally by the parties to the dispute. The arbitration shall be conducted in accordance with the provisions of the Commercial Arbitration Act (British Columbia), as amended, and the decision of the arbitrator shall be conclusive and binding upon the parties. The rules and procedures for the arbitration shall be procedures established by the B.C. Arbitrators Institute. The place of arbitration shall be Vancouver, British Columbia, Canada.
16. GENERAL
16.1 The parties shall execute such further and other documents and do such further and other things as may be necessary or convenient to carry out and give effect to the intent of this Agreement.
16.2 All references to dollar amounts in this Agreement shall be to lawful currency of Canada, unless specifically provided to the contrary. All payments to be made to any party hereunder may be made by cheque or bank draft mailed or delivered to such party at its address for notice purposes as provided herein, or deposited for the account of such party at such bank or banks in Canada as such party may designate from time to time by notice to the paying party.
16.3 This Agreement shall ensue to the benefit of and be binding upon the parties hereto and their respective successors and assigns.
16.4 Time shall be of the essence hereof.
16.5 This Agreement shall constitute the entire agreement between the parties and, except as hereafter set out, replaces and supersedes all prior agreements, memoranda, correspondence, communications, negotiations and representations, whether oral or written, express or implied, statutory or otherwise between the parties with respect to the subject matter herein.
16.6 Any modification of this Agreement will be effective only if it is in writing and signed by both parties hereto.
16.7 This Agreement shall be governed by and construed according to the laws of British Columbia and the laws of Canada applicable therein. All actions arising from this Agreement shall be commenced and maintained in the Supreme Court of British Columbia.
16.8 This Agreement is subject to regulatory approval and the parties agree to make any reasonable amendments hereto as may be required by any regulatory authorities.
16.9 The parties have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any party the partner, agent or legal representative of any other party, nor create any fiduciary relationship between them for any purpose whatsoever. No party shall have any authority to act for, or to assume any obligations or responsibility on behalf of, any other party except as may be, from time to time, agreed upon in writing between the parties or as otherwise expressly provided.
16.10 No consent or waiver expressed or implied by either party in respect of any breach or default by the other in the performance by such other of its obligations hereunder shall be deemed or construed to be a consent to or a waiver of any other breach or default.
16.11 If any provision to this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.
16.12 If any one or more of the provisions contained herein should be invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction, and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
16.13 This Agreement may be executed in any number of counterparts, each of which when delivered, either in original or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document.
IN WITNESS WHEREOF the parties hereto have executed these presents as of the date first above written.
STARFIRE MINERALS INC.
per:
/s/
(signed)
Authorized Signatory
SANTOS RESOURCE CORP
per:
/s/ Richard
Pierce
Authorized Signatory
[2367/110q/PropOp-Agr]
SCHEDULE "A"
THIS IS SCHEDULE " A " to the Mineral Property Option Agreement dated the day of June , 2007, between Starfire Minerals Inc. and Santos Resource Corp. .
This scheduled includes additional properties acquired since May 12, 2005
MINERAL CLAIMS COMPRISING THE PROPERTY
TITLE #
|
Row/Block |
LOT |
SURFACE AREA |
87500 |
23 |
1 |
51.02 |
87501 |
23 |
2 |
51.03 |
87502 |
23 |
3 |
51.03 |
87503 |
23 |
4 |
51.03 |
87504 |
23 |
5 |
51.03 |
87505 |
22 |
1 |
51.04 |
87506 |
22 |
2 |
51.04 |
87507 |
22 |
3 |
51.04 |
87508 |
22 |
4 |
51.04 |
87509 |
22 |
5 |
51.04 |
87510 |
21 |
1 |
51.05 |
87511 |
21 |
2 |
51.05 |
87512 |
21 |
3 |
51.05 |
87513 |
21 |
4 |
51.05 |
87514 |
21 |
5 |
51.05 |
87515 |
21 |
6 |
51.05 |
87516 |
21 |
7 |
51.05 |
87517 |
21 |
8 |
51.05 |
SCHEDULE "B"
THIS IS SCHEDULE " B " to the Mineral Property Option Agreement dated the day of June , 2007, between Starfire Minerals Inc. and Santos Resources Corp.
NET SMELTER
RETURN ROYALTY
(NSR ROYALTY)
1. Pursuant to the Mineral Property Option Agreement to which this Schedule "B" is attached, the Owner (the " Recipient ") may receive a Net Smelter Return royalty (the " NSR Royalty ") based on proceeds received by Santos (the " Producer ") from production from the Property as described in Schedule "A" of the Agreement, free and clear of all costs of development and operations.
2. " Net Smelter Return " shall mean the actual proceeds received by the Producer from any mint, smelter, or other purchaser for the sale of ores, metals or concentrated products (" Product ") from the Property derived from commercial production (and not from bulk sampling, pilot plant operations or preliminary production) and sold after deducting from such proceeds the following charges to the extent that they were not deducted from such proceeds by the purchaser in computing payment: smelting and refining charges; penalties; cost of transportation of ores, metals or concentrates from the Property to any mint, smelter or other purchaser; cost of insurance of the products; and any export and import taxes on said ores, metals or concentrates levied by the country into which such ore, metals or concentrates are imported, if such charges or costs are deducted from the proceeds received.
3. Payment of the NSR Royalty shall be made quarterly within 45 days after the end of each fiscal quarter of the Producer, on actual proceeds received by the Producer from the sale of Product from the Property, and shall be accompanied by unaudited calculations and statements pertaining to the operations carried out on the Property. Within 120 days after the end of each fiscal year of the Producer in which the NSR Royalty is payable, the records relating to the calculation of Net Smelter Return for such year shall be audited and any resulting adjustments in the payment of the NSR Royalty payable shall be made forthwith. A copy of the said audit shall be delivered to the Recipient within 30 days of the end of such 120-day period.
4. Each annual audit shall be final and not subject to adjustment unless the Recipient delivers to the Producer written exceptions in reasonable detail within three months after the Recipient receives the report. The Recipient, or its representative duly authorized in writing, shall at its expense have the right to audit the books and records of the Producer related to the Net Smelter Return to determine the accuracy of the report, but shall not have access to any other books and records of the Producer. The audit shall be conducted by a chartered or certified public accountant of recognized standing (the " Auditor "). The Producer shall have the right to restrict access to its books and records until execution of a written agreement by the Auditor that all information shall be held in confidence and used solely for purposes of audit and resolution of any disputes related to the report. A copy of the Auditor's report shall be delivered to the Producer and the amount, which should have been paid according to the Auditor's report, shall be paid forthwith, one party to the other. In the event that the said discrepancy is to the detriment of the Recipient and exceeds 5.0% of the amount actually paid by the Producer, then the Producer shall pay the entire cost of the audit.
5. In the event smelting or refining are carried out in facilities owned or controlled, in whole or in part, by the Producer, charges, costs and penalties with respect to such operations, excluding transportation, shall mean reasonable charges, costs and penalties for such operations but not in excess of the amounts that the Producer would have incurred if such operations were carried out at facilities not owned or controlled by the Producer then offering comparable custom services.
Exhibit 14
SANTOS RESOURCE CORP.
(the "Company")
CODE OF ETHICS AND BUSINESS CONDUCT
FOR SENIOR OFFICERS
(the "Code")
This Code applies to the Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller and persons performing similar functions within the Company (the "Senior Officers"). This Code also applies to the Directors of the Company where applicable, and references to Senior Officer will include Director where applicable. This Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all Senior Officers of the Company. All Senior Officers should conduct themselves accordingly and seek to avoid the appearance of improper behaviour in any way relating to the Company.
Any Senior Officer who has any questions about the Code should consult with the Chief Executive Officer, the Company's board of directors (the "Board") or the Company's audit committee (the "Audit Committee").
The Company has adopted the Code for the purpose of promoting:
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
full, fair, accurate, timely and understandable disclosure in all reports and documents that the Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company that are within the Senior Officer's area of responsibility;
compliance with applicable governmental laws, rules and regulations;
the prompt internal reporting of violations of the Code; and
accountability for adherence to the Code.
HONEST AND ETHICAL CONDUCT
Each Senior Officer owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest and candid. Senior Officers must adhere to a high standard of business ethics and are expected to make decisions and take actions based on the best interests of the Company, as a whole, and not based on personal relationships or benefits. Generally, a "conflict of interest" occurs when a Senior Officer's personal interests is, or appears to be, inconsistent with, interferes with or is opposed to the best interests of the Company or gives the appearance of impropriety.
Business decisions and actions must be made in the best interests of the Company and should not be influenced by personal considerations or relationships. Relationships with the Company's stakeholders - for example suppliers, competitors and customers - should not in any way affect a Senior Officer's responsibility and accountability to the Company. Conflicts of interest can arise when a Senior Officer or a member of his or her family receive improper gifts, entertainment or benefits as a result of his or her position in the Company.
Specifically, each Senior Officer must:
1. act with integrity, including being honest and candid while still maintaining the confidentiality of information when required or consistent with the Company's policies;
2. avoid violations of the Code, including actual or apparent conflicts of interest with the Company in personal and professional relationships;
3. disclose to the Board or the Audit Committee any material transaction or relationship that could reasonably be expected to give rise to a breach of the Code, including actual or apparent conflicts of interest with the Company;
4. obtain approval from the Board or Audit Committee before making any decisions or taking any action that could reasonably be expected to involve a conflict of interest or the appearance of a conflict of interest;
5. observe both the form and spirit of laws and governmental rules and regulations, accounting standards and Company policies;
6. maintain a high standard of accuracy and completeness in the Company's financial records;
7. ensure full, fair, timely, accurate and understandable disclosure in the Company's periodic reports;
8. report any violations of the Code to the Board or Audit Committee;
9. proactively promote ethical behaviour among peers in his or her work environment; and
10. maintain the skills appropriate and necessary for the performance of his or her duties.
DISCLOSURE OF COMPANY INFORMATION
As a result of the Company's status as a public company, it is required to file periodic and other reports with the SEC. The Company takes its public disclosure responsibility seriously to ensure that these reports furnish the marketplace with full, fair, accurate, timely and understandable disclosure regarding the financial and business condition of the Company. All disclosures contained in reports and documents filed with or submitted to the SEC, or other government agencies, on behalf of the Company or contained in other public communications made by the Company must be complete and correct in all material respects and understandable to the intended recipient.
The Senior Officers, in relation to his or her area of responsibility, must be committed to providing timely, consistent and accurate information, in compliance with all legal and regulatory requirements. It is imperative that this disclosure be accomplished consistently during both good times and bad and that all parties in the marketplace have equal or similar access to this information.
All of the Company's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company's transactions, and must conform both to applicable legal requirements and to the Company's system of internal controls. Unrecorded or "off the book" funds, assets or liabilities should not be maintained unless permitted by applicable law or regulation. Senior Officers involved in the preparation of the Company's financial statements must prepare those statements in accordance with generally accepted accounting principles, consistently applied, and any other applicable accounting standards and rules so that the financial statements materially, fairly and completely reflect the business transactions and financial statements and related condition of the Company. Further, it is important that financial statements and related disclosures be free of material errors.
Specifically, each Senior Officer must:
1. familiarize himself or herself with the disclosure requirements generally applicable to the Company;
2. not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, including the Company's independent auditors, governmental regulators, self-regulating organizations and other governmental officials;
3. to the extent that he or she participates in the creation of the Company's books and records, promote the accuracy, fairness and timeliness of those records; and
4. in relation to his or her area of responsibility, properly review and critically analyse proposed disclosure for accuracy and completeness.
CONFIDENTIAL INFORMATION
Senior Officers, Directors and employees must maintain the confidentiality of confidential information entrusted to them by the Company of its customers, suppliers, joint venture partners, or others with whom the Company is considering a business or other transaction except when disclosure is authorized by an executive officer or required or mandated by laws or regulations. Confidential information includes all non-public information that might be useful or helpful to competitors or harmful to the Company or its customers or suppliers, if disclosed. It also includes information that suppliers, customers and other parties have entrusted to the Company. The obligation to preserve confidential information continues even after employment ends.
Records containing personal data about employees or private information about customers and their employees are confidential. They are to be carefully safeguarded, kept current, relevant and accurate. They should be disclosed only to authorized personnel or as required by law.
All inquiries regarding the Company from non-employees, such as financial analysts and journalists, should be directed to the Board or the Audit Committee. The Company's policy is to cooperate with every reasonable request of government investigators for information. At the same time, the Company is entitled to all the safeguards provided by law for the benefit of persons under investigation or accused of wrongdoing, including legal representation. If a representative of any government or government agency seeks an interview or requests access to data or documents for the purposes of an investigation, the Senior Officer should refer the representative to the Board or the Audit Committee. Senior Officers also should preserve all materials, including documents and e-mails that might relate to any pending or reasonably possible investigation.
COMPLIANCE WITH LAWS
The Senior Officers must respect and obey all applicable foreign, federal, state and local laws, rules and regulations applicable to the business and operations of the Company.
Senior Officers who have access to, or knowledge of, material nonpublic information from or about the Company are prohibited from buying, selling or otherwise trading in the Company's stock or other securities. "Material nonpublic" information includes any information, positive or negative, that has not yet been made available or disclosed to the public and that might be of significance to an investor, as part of the total mix of information, in deciding whether to buy or sell stock or other securities.
Senior Officers also are prohibited from giving "tips" on material nonpublic information, that is directly or indirectly disclosing such information to any other person, including family members, other relatives and friends, so that they may trade in the Company's stock or other securities.
Furthermore, if, during the course of a Senior Officer's service with the Company, he or she acquires material nonpublic information about another company, such as one of the Company's customers or suppliers, or the Senior Officer learns that the Company is planning a major transaction with another company (such as an acquisition), the Senior Officer is restricted from trading in the securities of the other company.
REPORTING ACTUAL AND POTENTIAL VIOLATIONS OF THE CODE AND ACCOUNTABILITY FOR COMPLIANCE WITH THE CODE
The Company, through the Board or the Audit Committee, is responsible for applying this Code to specific situations in which questions may arise and has the authority to interpret this Code in any particular situation. This Code is not intended to provide a comprehensive guideline for Senior Officers in relation to their business activities with the Company. Any Senior Officer may seek clarification on the application of this Code from the Board or the Audit Committee.
Each Senior Officer must:
1. notify the Company of any existing or potential violation of this Code, and failure to do so is itself a breach of the Code; and
2. not retaliate, directly or indirectly, or encourage others to do so, against any employee or Senior Officer for reports, made in good faith, of any misconduct or violations of the Code solely because that employee or Senior Officer raised a legitimate ethical issue.
The Board or the Audit Committee will take all action it considers appropriate to investigate any breach of the Code reported to it. All Senior Officers, Directors and employees are required to cooperate fully with any such investigations and to provide truthful and accurate information. If the Board or the Audit Committee determines that a breach has occurred, it will take or authorize disciplinary or preventative action as it deems appropriate, after consultation with the Company's counsel if warranted, up to and including termination of employment. Where appropriate, the Company will not limit itself to disciplinary action but may pursue legal action against the offending Senior Officer involved. In some cases, the Company may have a legal or ethical obligation to call violations to the attention of appropriate enforcement authorities.
Compliance with the Code may be monitored by audits performed by the Board, Audit Committee, the Company's counsel and/or by the Company's outside auditors. All Senior Officers, Directors and employees are required to cooperate fully with any such audits and to provide truthful and accurate information.
Any waiver of this Code for any Senior Officer or Director may be made only by the Board or the Audit Committee and will be promptly disclosed to stockholders and others, as required by applicable law. The Company must disclose changes to and waivers of the Code in accordance with applicable law.
Adopted this 15 th day of February, 2008.
/s/ Richard Pierce
Richard Bruce Pierce, President
ACKNOWLEDGMENT AND CERTIFICATION
I acknowledge and certify that I have read and understand the information set forth in the Code of Ethics of Santos Resource Corp. and will comply with these principles in my daily work activities. I am not aware of any violation of the standards of the Company's Code of Ethics.
I understand that my agreement to comply with the Code of Ethics does not constitute a contract of employment.
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This signed and completed form must be returned to the President of the Company.
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT
The Board of Directors
Santos Resource Corp.
(an exploration stage company)
We consent to the use in the Registration Statement dated July 9, 2008 of Santos Resource Corp. (an exploration stage company) on Form S1 (the "Registration Statement") of our Auditors' Report dated May 7, 2008 on the balance sheet of Santos Resource Corp. (an exploration stage company) as at February 29, 2008 and February 28, 2007 and the related statements of operations, stockholders' equity (deficit) and cash flows for the periods from incorporation May 24, 2006 to February 28, 2007 and 2008 and the year ended February 29, 2008.
In addition, we consent to the reference to us under the heading "Experts" in the Registration Statement.
MACKAY LLP
CHARTERED ACCOUNTANTS
\s\ MacKay LLP
Vancouver, British Columbia
Canada
July 9, 2008
Exhibit 23.3
CONSENT TO USE OF TECHNICAL REPORT
To the Board of Directors of
Santos Resource Corp.
I hereby consent to the inclusion of my name in connection with the Form S-1 Registration Statement filed with the Securities and Exchange Commission and reference to my Technical Report and Recommendations of August, 2007, for the registrant, Santos Resource Corp.
/s/ Michel Boily
Michel Boily, PhD., P. Geo
Montreal, Quebec
July 9, 2008