U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: September 30, 2002
Commission File Number:
Prelude Ventures, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada
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(State or other jurisdiction of incorporation or organization)
98-0232018
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(IRS Employer Identification No.)
2585 West 14th Avenue
Vancouver, BC, Canada V6K 2W6
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(Address of principal executive offices)
None
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(Former name or former address, if changed since last report)
V6K 2W6
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(Zip Code)
(604) 817-8095
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(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days: Yes __X__ No ____.
The number of shares of the registrant's only class of common stock issued
and outstanding, as of September 30, 2002 was 2,500,000 common shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three-month period ended
September 30, 2002 are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update forward
looking statements.
OVERVIEW
History And Organization
Prelude Ventures, Inc. (the "Company") was incorporated under the
laws of the state of Nevada on May 24, 2000. We have not commenced business
operations and we are considered a pre-exploration stage enterprise. To date,
our activities have been limited to organizational matters, obtaining a
mining engineer's report 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 shareholder of our company contributed
an aggregate of $25,000 cash in exchange for 1,000,000 shares of common stock
and conducting a public offering of 1,500,000 common shares for $75,000. We have
no significant assets.
Proposed Business
On March 9, 2001, we acquired a 20 year mining lease from Steve
Sutherland, the owner of 24 unpatented lode mining claims, sometimes referred to
as the Medicine Project, located in Elko County, Nevada. An unpatented claim is
one in which more assessment work is necessary before all mineral rights can be
claimed. As the owner of the claims, Mr. Sutherland has the right to lease the
claims to a third party but he remains responsible for compliance with all
applicable federal, state and county laws and regulations. Under the terms of
our lease with Mr. Sutherland, we are entitled to all of Mr. Sutherlands mineral
rights and we are also made responsible for compliance for all laws and
regulations that apply to the claims. We are presently in the pre-exploration
stage and there is no assurance that a commercially viable precious mineral
deposit exists in our property until appropriate geological exploration is done
and a final comprehensive evaluation concludes that there is economic and legal
feasibility to conduct mining operations.
The exploration program proposed by Prelude is designed to determine
whether mineralization exists to the extent that mining operations would be
economically feasible. It is uncertain at this time the precise quantity of
minerals in the property that would justify actual mining operations.
Prelude has leased the claims from Mr. Sutherland who is our landlord.
We also have the right to locate additional claims within one mile of the claims
which become part of the lease. Under the terms of the lease, Prelude must pay a
three percent production royalty and may extend the initial term of 20 years for
one additional period of 20 years provided that all conditions of the lease have
previously been met. Prelude has the exclusive possession of the property for
mining purposes during the term of the lease.
By a lease letter agreement the lease was amended March 4, 2002. Under
the terms of the lease, the Company was granted the exclusive right to explore,
develop and mine the Medicine Project property located in Elko County of the
State of Nevada. The term of the lease is for 20 years, with automatic
extensions so long as the conditions of the lease are met. Minimum payments and
performance commitments are as follows: Minimum Advance Royalty Payments: The
owner shall be paid a royalty of 3% of the net smelter returns from a
production. In respect to this royalty, the Company is required to pay minimum
advance royalty payments of the following:
- $5,000 upon execution (paid);
- $1,500 on March 9, 2002 (paid);
- $6,000 on September 9, 2002 (paid);
- $10,000 on March 9, 2003
- $20,000 on March 9, 2004
- $50,000 on March 9, 2005 and every March 9 thereafter
The Company can reduce the net smelter return royalty to 0.5% by payment
of a buy-out price of $5,000,000. Advance royalty payments made to the date of
the buy-out will be applied to reduce the buy-out price. In the event that the
Company terminates the lease after June 1 of any year, it is required to pay all
federal and state mining claim maintenance fees for the next assessment year.
The Company is required to perform reclamation work in the property as required
by federal state and local law for disturbances resulting from the Company's
activities on the property.
If Prelude fails to meet the above lease payments, the lease may be
terminated if the landlord gives written notice of such default. After receipt
of default, Prelude has 15 days to cure the default. In addition, the lease may
be terminated if Prelude fails to make federal, state, and county maintenance
payments or filing fees at least 15 days prior to due date. In that event, the
landlord must notify Prelude of a possible default. After 10 days, if the
default is not cured the landlord may initiate payment on the claims. Prelude
will be able to cure this default by reimbursing all federal, state and county
payments made by the landlord plus a 20% penalty within 30 days.
Under applicable federal, state, and county laws and regulations,
annual mining claim maintenance or rental fees are required to be paid by
Prelude for the unpatented mining claims which constitute all or part of the
leased property, beginning with the annual assessment work period of September
1, 2001 to September 1, 2002. Prelude must timely and properly pay the federal,
state, and county annual mining claim maintenance or rental fees, and must
execute and record or file, as applicable, proof of payment of the federal,
state, and county annual mining claim maintenance or rental fees and the
landlord's intention to hold the unpatented mining claims. If Prelude does not
terminate the agreement before June 1 of any subsequent lease year, Prelude will
be obligated either to pay the federal, state, and local annual mining claim
maintenance or rental fees for the property due that year or to reimburse the
landlord.
Prelude also has the right to buy out the landlord's interest in
exchange for a payment of $5,000,000 from which royalty payments made up to the
time of the buyout may be deducted. If a buyout occurs, Prelude must also pay
the landlord a perpetual 0.5% royalty on all minerals recovered from the
property.
The lease may be terminated at any time by Prelude provided that we
give written notice 30 days prior to relinquishing the leased property. In the
event Prelude desires to terminate the agreement after June 1 of any year, we
are responsible for all federal, state, and county maintenance and filing fees
for the next assessment year regarding the leased property. In addition, we must
deliver to the landlord in reproducible form all data generated or obtained for
the leased property, whether factual or interpretive. Finally, we must quitclaim
to the landlord all claims located or acquired by us.
Our business activities to date have been restricted to obtaining a
report from our mining engineer, Edward P. Jucevic and preparing this offering.
Mr. Jucevic's report details the geological and mining history of the claims
leased by Prelude, including the land status, climate, geology and
mineralization. In preparing his report, Mr. Jucevic did not perform any actual
field work on the claims. Mr. Jucevic believes that based upon previous mining
activity in the area, sufficient evidence exists to warrant further exploration
on the leased property which could then lead to actual mining operations.
The property leased by Prelude is located in Elko County, Nevada and
comprises 24 unpatented claims. Mr. Jucevic has concluded that the claims
demonstrate a potential for surface-mineable oxidized-zinc deposits and
surface-mineable heap leachable silver deposits. Heap leaching is a process for
the extraction of valuable minerals utilizing chemical solutions that percolate
through crushed ore. A two phase exploration and drilling program has been
proposed. Phase 1, including a recommendation to stake four neighboring targets,
with estimated costs of $50,000. No exploration work will be performed until the
additional claim staking has taken place. We have not yet determined whether Mr.
Jucevic will be commissioned to perform additional research on the claims for
us. That would be followed by Phase 2 with estimated costs of $100,000. The
purpose of this offering is to finance the implementation of Phase I.
Location and Access
The leased property is located in Elko County, Nevada, approximately 50
airline miles southeast of the town of Elko, Nevada. Access from Elko, Nevada is
obtained by driving 20 miles on I-80 to Halleck, Nevada and then turning
southeast on paved Highway 229 for forty-two miles through Secret Pass across
the Ruby Mountains and then proceeding about 24 miles south on dirt roads to the
property. The claims are in what is known as the Mud Springs mining district.
Claim Status
The claims have been leased by Prelude form Steve Sutherland who currently
holds the property via 24 unpatented mining claims located during the month of
September 2000. The owner of the property is the United States government. The
land is administered by the Bureau of Land Management (BLM). Mr. Sutherland has
documentation that all requisite county and United States Bureau of Land
Management (BLM) papers have been filed and all fees paid. Two claims not
belonging to Mr. Sutherland lie within the claim boundary and are held by a
local prospector. Mr. Jucevic believes these two claims are most likely
available for lease under reasonable terms. We do intend to lease these claims
if possible. The local prospector who owns these two claims is Jerry Baughman.
He has no relationship to Prelude. At this time, he has not been approached by
us about leasing his two unpatented claims. We believe that reasonable terms for
the lease of these two claims would include a standard mining lease including an
anticipated $5,000 payment upon execution, with an option to purchase priced at
approximately $50,000 payable over a period of five years. The Sutherland claim
block comprises about 460 acres.
Climate And Local Resources
The claims leased by Prelude are located at elevations ranging from
5900 to 7950 feet in gently rolling hills covered with sagebrush and Pinion
pines. The climate is temperate with moderate snow cover from December to March.
No perennial streams exist on the property. However, groundwater is plentiful.
Power lines are located about three miles east of the property. The closest
population center is Bishop, located about 48 miles to the northwest.
History Of The Claims
Mr. Jucevic has examined the available literature on the claims.
According to these sources, base metals and silver were discovered on the
property in 1910. Production from high grade veins started as early as 1915.
Partial records indicate lead, silver and zinc were produced through 1956.
Recent exploration efforts were started in the 1980's by United States Minerals
Exploration (USMX), and Cominco American Inc. USMX made 105 drill holes totaling
11,190 feet between 1980 and 1996 which defined a mineralization of ore
containing silver, lead and zinc. Cominco controlled the property for a short
time and conducted geophysical surveys which identified potential mineralization
through the claims area that extend north of the claims.
Our Proposed Exploration Program
We must conduct exploration to determine what amount of minerals, if any,
exist on our properties, and if any minerals which are found can be economically
extracted and profitably processed. Our exploration program is designed to
economically explore and evaluate our claims.
We do not claim to have any minerals or reserves whatsoever at this time on
any of our claims. We intend to implement a pre-exploration program and to
proceed in the following two phases:
Phase I will involve expanding our block of claims by locating
approximately 50 additional claims and acquiring third party claims within the
area. There has been no staking of additional claims at this time. The initial
work of Phase I will be centered on opportunities and targets within the
boundaries of the leased claims. However, it is anticipated that expansion of
the existing claim position will be advisable following completion of the
geological investigations in Phase I. For example, U. S. Minerals Exploration, a
previous explorer of the claims, calculated potential mineralization along the
northeast area of the leased claims. Therefore, it appears probable that
additional claim staking in northeast and southwest extensions off this trend
would capture neighboring mineralization, as well as northeast trending fault
zones within the claims. With respect to maintenance costs, the current 24
claims are subject to total annual fees of $2,580.00 Annual maintenance fees for
an additional 50 claims would be $5,375.00. No land status work has been
conducted on neighboring lands by Mr. Jucevic. We will also take 200 rock
samples and 300 soil samples and perform geological mapping and geophysical
surveys followed by a written analysis of this exploration. The cost of Phase I
will is estimated to be $50,000 and will take approximately two months to
complete.
Upon completion of Phase I, we will determine the cost effectiveness of
proceeding to Phase II. In making this determination, we will undertake to have
our data from Phase I independently verified for accuracy by an independent
registered engineer to confirm the existence of mineralization.
Phase II will consist of substantial test drilling of a total of 5,000
feet to determine the extent, depth and dip of ore discovered in Phase I. It is
anticipated that Phase II will cost $100,000 and will also take approximately
two months to complete. If we decide not to proceed to Phase II, we will likely
cancel the lease and search for other mineral exploration sites to lease. As of
the date of this prospectus, no such search has been undertaken.
Competitive Factors
The mineral industry is fragmented. We compete with other exploration
companies looking for a variety of mineral reserves. We may be one of the
smallest exploration companies in existence. Although we will be competing with
other exploration companies, there is no competition for the exploration or
removal of minerals from our property. Readily available markets exist in North
America and around the world for the sale of minerals. Therefore, we intend to
develop mining claims to the production point in which major mining production
companies would seriously consider pursuing the property as a valuable and
significant acquisition.
Regulations
We will secure all necessary permits for exploration and, if development is
warranted on the property, will file final plans of operation before we start
any mining operations. We anticipate no discharge of water into active stream,
creek, river, lake or any other body of water regulated by environmental law or
regulation. No endangered species will be disturbed. Restoration of the
disturbed land will be completed according to law. All holes, pits and shafts
will be sealed upon abandonment of the property. It is difficult to estimate the
cost of compliance with the environmental law since the full nature and extent
of our proposed activities cannot be determined until we start our operations
and know what that will involve from an environmental standpoint.
The initial drilling program outlined in Phase I will be conducted on
BLM lands. The BLM will require the submittal of a plan of operation which would
be used as the basis for the bonding requirement, water permit and reclamation
program. The reclamation program could include both surface reclamation and
drill hole plugging and abandonment. The amount of the bonding would be based
upon an estimate by the BLM related to the cost of reclamation if done by an
independent contractor. Bonding costs vary on case by case basis. The scope of
the proposed program determines amount of reclamation bond required by the BLM.
Among the factors considered are the degree of proposed land disturbance,
whether there have been previous disturbances and the nature of previous
reclamation efforts. Since there is a substantial infrastructure of existing
roads across the property the amount of initial bonding would likely be reduced.
In addition, the terrain is relatively subdued which should further reduce the
necessity for road building. The estimate for Phase II reclamation and bonding
would depend upon the results of Phase I.
We would be subjected to the BLM rules and regulations governing
federal lands including a draft environmental impact statement or EIS, public
hearings and a final EIS. The final EIS would address county and state needs and
requirements and would cover issues and permit requirements concerning: air
quality, heritage resources, geology, energy, noise, soils, surface and ground
water, wetlands, use of hazardous chemicals, vegetation, wildlife, recreation,
land use, socioeconomic impact, scenic resources, health and welfare,
transportation and reclamation. Bonding requirements are developed from the
final EIS.
We are in compliance with the all laws and will continue to comply with the
laws in the future. We believe that compliance with the laws will not adversely
affect our business operations. Prelude anticipates that it will be required to
post bonds in the event the expanded work programs involve extensive surface
disturbance.
Employees
Initially, we intend to use the services of subcontractors for manual labor
exploration work on our properties. Prelude will consider hiring technical
consultants as funds from our public offering and additional offerings or
revenues from operations in the future permit. At present, our only employee is
William Iverson.
Mr. Iverson has been the President, Secretary-Treasurer and Director since our
company's inception on May 24, 2000. Since November 1999, Mr. Iverson has also
been employed by First Quantum Minerals Corporation of Vancouver, British
Columbia where he performs corporate relations services, including the
preparation of corporate profiles, brochures and advertisements. From November
1999 to February 2000 Mr. Iverson was also employed by Nevada Pacific Gold, Ltd.
From January 1996 to August 1997, Mr. Iverson was employed by Treminco
Resources, Ltd., a pre-exploration stage company, located in Vancouver, British
Columbia, where he performed corporate development services. In this capacity he
acted as a liaison between Tremninco and the financial community. From October
1997 to November 1998, Mr. Iverson was employed by Cee Bee Natural Gas, Ltd.
From January of 1988 until December of 1995 Mr. Iverson was also employed as a
stockbroker with Georgia Pacific Securities Corporation in Vancouver, British
Columbia. Mr. Iverson will continue to serve in his present positions with
Prelude until the next annual meeting of shareholders and devote approximately
15 hours per week of his time to the Prelude. Mr. Iverson has no formal training
or experience with mineral exploration. Mr. Iverson completed two years of
college in 1974 from the University of Alberta but he did not obtain a degree.
In addition, he was formerly licensed as a stockbroker in Canada between 1995
and 1998. That license, however, was allowed to lapse by Mr. Iverson in 1998
because he was pursuing a career in corporate relations. Mr. Iversen's
responsibilities with Prelude consist mainly of communicating with the
appropriate governmental agencies to ensure the company claims are kept in good
standing and coordinating the filing of this offering. In addition, Phase I of
the company's business plan will be performed by subcontractors, the activities
of which will be managed by Mr. Iverson. It is anticipated that additional
officers will be hired if Phase I of our business plan is successful to manage
the company's day to day mineral exploration activities.
Executive Compensation
Our sole director does not currently receive and has never received any
compensation for serving as a director to date. In addition, at present, there
are no ongoing plans or arrangements for compensation of any of our officers.
However, we expect to adopt a plan of reasonable compensation to our officers
and employees when and if we become operational and profitable.
Employees and Employment Agreements
At present, we have no employees, other than Mr. Iverson, our president and
sole director who has received no compensation for his services. Mr. Iverson
does not have an employment agreement with us. We presently do not have pension,
health, annuity, insurance, stock options, profit sharing or similar benefit
plans; however, we may adopt plans in the future. There are presently no
personal benefits available to any employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
We are a start-up, exploration stage company and have not yet started our
business operations or generated or realized any revenues from our business
operations.
Our auditors have issued a going concern opinion. This means that our
auditors believe there is doubt that we can continue as an on-going business for
the next twelve months unless we obtain additional capital to pay our bills.
This is because we have not generated any revenues and no revenues are
anticipated until we begin removing and selling minerals. Accordingly, we must
raise cash from sources other than the sale of minerals found on our property.
Our only other source for cash at this time is investments by others in our
company. We must raise cash to implement our project and stay in business.
To meet our need for cash we are attempting to raise money from this
offering. There is no assurance that we will be able to raise enough money
through to stay in business. Whatever money we do raise will be applied first to
exploration and then to development, if development is warranted. If we do not
raise all of the money we need from this offering, we will have to find
alternative sources, like a second public offering, a private placement of
securities, or loans from our officers or others. At the present time, we have
not made any arrangements to raise additional cash, other than through this
offering. If we need additional cash and cannot raise it, we will either have to
suspend operations until we do raise the cash, or cease operations entirely.
We will be conducting research in connection with the exploration of our
property. We are not going to buy or sell any plant or significant equipment. We
do not expect a change in our number of employees.
Limited Operating History; Need for Additional Capital
There is no historical financial information about our company upon which
to base an evaluation of our performance. We are a pre-exploration stage company
and have not generated any revenues from operations. We cannot guarantee we will
be successful in our business operations. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources, possible delays in the exploration of our properties, and
possible cost overruns due to price and cost increases in services. To become
profitable and competitive, we conduct research and exploration of our
properties. We are seeking equity financing to provide for the capital required
to implement our research and exploration phases.
We have no assurance that future financing will be available to us on
acceptable terms. If financing is not available on satisfactory terms, we may be
unable to continue, develop or expand our operations. Equity financing could
result in additional dilution to existing shareholders.
Results of Operations
From Inception on May 24, 2000
We just recently acquired our first interest in lode mining claims. At this
time we have not yet commenced the research and/or exploration stage of our
mining operations on that property. We have paid $5,000 for a mining lease. As
of September 30, 2002 we have experienced operating losses of $76,468.
Plan of Operations
Since inception, we have used our common stock to raise money for our
property acquisition, for corporate expenses and to repay outstanding
indebtedness. Net cash provided by financing activities from inception on May
24, 2000 to March 31, 2001 was $5,500 as a result of proceeds received from our
president and sole director. On April 11, 2001 we received additional cash
financing of $19,500 as a result of proceeds received from our president and
sole director. Our business activities to date have been restricted to obtaining
a mining engineer's report and preparing this offering.
Prelude's plan of operations for the next twelve months is to undertake
Phase I of our exploration program. We can commence Phase I assuming at least
50% of the offering is sold. However, the total cost of Phase I is estimated to
be $50,000.00 and therefore can not be completed unless nearly all of the
offering is sold. We have no plan to engage in any alternative business if
Prelude ceases or suspends operations as a result of not having enough money to
complete any phase of the exploration program.
Phase I will involve staking of 50 additional claims at a cost of
$15,000. Obtaining leases for third party claims in the area is estimated to
cost $5,000. We will then initiate rock sampling at a cost of $4,000 and soil
sampling at a cost of $6,000 in areas of potential interest that indicate the
presence of ore. Thereafter, geological mapping will be conducted that will cost
approximately $10,000 along with geophysical surveying that will cost
approximately $2,000. The total cost of Phase I will is estimated to be $50,000
and will take approximately two months to complete.
Upon completion of Phase I, we will determine the cost effectiveness of
proceeding to Phase II. We will undertake to have our data from Phase I
independently verified for accuracy by an independent registered engineer to
confirm the existence of mineral deposits.
Our public offering will only be adequate to finance Phase I. Assuming
we decide to proceed with Phase II, we will be required to obtain additional
financing. Phase II will consist of extensive drilling totaling approximately
5,000 feet which is estimated to cost $100,000 to determine the extent, depth
and dip of mineralization discovered in Phase I. Phase II will take
approximately two months to complete.
Liquidity and Capital Resources
As of the date of this report, we have yet to generate
any revenues from our business operations. Since our inception, Mr. Iverson has
paid $25,000 in cash in exchange for 1,000,000 shares of common stock. We have
also issued 1,500,000 shares of stock pursuant to our Form SB-2 registration
statement. This money has been utilized for organizational and start-up costs
and as operating capital. As of September 30, 2002 we had sustained operating
losses of $76,468.
ITEM 3 CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, the Company carried out an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures within the 90 days prior to the filing date
of this report. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer and Company's Chief Financial Officer. Based upon that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
There have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which we (or any of our
officers and directors in their capacities as such) is a party or to which our
property is subject and no such material proceedings is known by our management
to be contemplated.
ITEM 2. CHANGES IN SECURITIES - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits - 99.1
(b) Reports on Form 8-K - NONE
SIGNATURE
In accordance with the requirements of the Securities and Exchange Act of 1934,
as amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRELUDE VENTURES, INC.
Dated: November 15, 2002 /s/ William Iverson
William Iverson President
CERTIFICATIONS*
I, William Iverson, certify that;
1. I have reviewed this quarterly report on Form10-QSB of Prelude Ventures,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other facts that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 15, 2002
/s/ William Iverson
William Iverson, Chief Executive Officer
Exhibit 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, William Iverson, Chief Executive Officer and Chief Financial Officer,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-QSB of
Navigator Ventures, Inc. for the quarterly period ended September 30, 2002 fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the information contained in the Quarterly Report
on Form 10-QSB fairly presents in all material respects the financial condition
and results of operations of Prelude Ventures, Inc.
By:
/s/William Iverson
William Iverson
Chief Executive Officer &
Chief Financial Officer
Date: November 15, 2002
PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEETS
September 30, 2002 and March 31, 2002
(Stated in US Dollars)
(Unaudited)
ASSETS September 30, March 31,
------
2002 2002
---- ----
Current
Cash $ 29,594 $ 7,495
Prepaid expenses 700 -
$ 30,294 $ 7,495
LIABILITIES
Current
Accounts payable and accrued liabilities $ 2,762 $ 9,205
Loan payable - Note 3 5,000 -
7,762 9,205
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, $0.001 par value
5,000,000 shares authorized, none outstanding
Common stock, $0.001 par value
45,000,000 shares authorized
2,500,000 (March 31, 2002: 1,000,000) shares outstanding 2,500 1,000
Paid-in capital 97,500 24,000
Stock subscriptions - 31,000
Deficit accumulated during the pre-exploration stage ( 77,468) ( 57,710)
22,532 ( 1,710)
$ 30,294 $ 7,495
PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF
OPERATIONS for the three and six month period
ended September 30, 2002 and 2001
and for the period May 24, 2000 (Date of Incorporation) to September 30, 2002
(Stated in US Dollars)
(Unaudited)
May 24, 2000
(Date of Incor-
poration) to
Three months ended September 30, Six months ended September 30, September 30,
2002 2001 2002 2001 2002
Expenses
Accounting and $ 1,683 $ 807 $ 2,683 $ 1,807 $ 9,174
audit fees
Bank charges 27 75 122 170 451
Filing fees - - 25 - 7,185
Foreign 692 - 692 - 692
exchange loss
Legal fees - 22,362 - 22,362 23,078
Management fees 8,000 - 11,000 1,500 20,500
Office and - - 53 - 660
miscellaneous
Resource 1,000 2,580 3,608 7,580 12,688
property costs
Transfer agent 1,165 - 1,575 1,435 3,040
fees
Net loss for the $ 12,567 $ 25,824 $ 19,758 $ 34,854 $ 77,468
period
Loss per share $ 0.01 $ 0.03 $ 0.01 $ 0.03
Weighted average 2,076,087 1,000,000 1,549,180 1,000,000
number of shares
outstanding
PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
for the six month period ended September
30, 2002 and 2001 and for the period May 24, 2000
(Date of Incorporation) to September 30, 2002
(Stated in US Dollars)
(Unaudited)
May 24, 2000
(Date of Incor-
poration) to
Six months ended September 30, September 30,
2002 2001 2002
---- ---- ----
Cash Flows from Operating Activities
Net loss for the period $ ( 19,758) $ ( 34,854) $ ( 77,468)
Changes in non-cash working capital balances
related to operations
Share subscription receivable - 19,500 -
Prepaid expenses ( 700) - ( 700)
Accounts payable and accrued liabilities ( 6,443) 11,612 2,762
Loan payable 5,000 9,500 5,000
( 21,901) 5,758 ( 70,406)
Cash Flows from Financing Activity
Shares issued for cash 44,000 - 100,000
Increase in cash during the period 22,099 5,758 29,594
Cash, beginning of the period 7,495 396 -
Cash, end of the period $ 29,594 $ 6,154 $ 29,594
Supplementary disclosure of cash flow information:
Cash paid for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Non-cash Transaction - Note 5
PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF
STOCKHOLDERS' EQUITY for the period May 24, 2000
(Date of Incorporation) to September 30, 2002
(Stated in US Dollars)
(Unaudited)
Deficit
Accumulated
Additional During the
Common Shares Paid-in Share Pre-exploration
----------------------------------
----------------------------------
Number Par Value Capital Subscriptions Stage Total
Capital
stock
subscribed 1,000,000 $ 1,000 $ 24,000 $ - $ - $ 25,000
pursuant to
an offering
memorandum,
for cash at $0.025
Net loss for - - - - ( 7,301) ( 7,301)
the period
Balance, as 1,000,000 1,000 24,000 - ( 7,301) 17,699
at March 31,
2001
Stock - - - 31,000 - 31,000
subscriptions
received
Net loss for - - - - ( 50,409) ( 50,409)
the year
Balance, 1,000,000 1,000 24,000 31,000 ( 57,710) ( 1,710)
March 31,
2002
Stock - - - 44,000 - 44,000
subscriptions
received
Shares
issued 1,500,000 1,500 73,500 ( 75,000) - -
pursuant to
an initial
public
offering at $0.05
Net loss for - - - - ( 19,758) ( 19,758)
the period
Balance, as 2,500,000 $ 2,500 $ 97,500 $ - $ ( 77,468) $ 22,532
at September
30, 2002
PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
September 30, 2002 and March 31, 2002
(Stated in US Dollars)
(Unaudited)
Note 1 Interim Reporting
While information presented in the accompanying interim six months
financial statements is unaudited, it includes all adjustments
which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash
flows for the interim period presented. All adjustments are of a
normal recurring nature. It is suggested that these interim
financial statements be read in conjunction with the company's
March 31, 2002 financial statements.
Note 2 Continuance of Operations
The financial statements have been prepared using generally
accepted accounting principles in the United States of America
applicable for a going concern which assumes that the Company will
realize its assets and discharge its liabilities in the ordinary
course of business. The Company has accumulated losses of $77,468
since its commencement. Its ability to continue as a going concern
is dependent upon the ability of the Company to obtain the
necessary financing to meet its obligations and pay its
liabilities arising from normal business operations when they come
due.
Note 3 Loan Payable
The loan payable is unsecured, non-interest bearing and due on
demand.
Note 4 Commitments
a) Mining Lease
By a lease letter agreement effective March 9, 2001 and
amended March 4, 2002 and September 4, 2002, the Company was
granted the exclusive right to explore, develop and mine the
Medicine Project property located in Elko County of the State
of Nevada. The term of the lease is for 20 years, with
automatic extensions so long as the conditions of the lease
are met. Minimum payments and performance commitments are as
follows:
Note 4 Commitments - (cont'd)
-----------
Minimum Advance Royalty Payments:
The owner shall be paid a royalty of 3% of the net smelter
returns from a production. In respect to this royalty, the
Company is required to pay minimum advance royalty payments of
the following:
- $5,000 upon execution (paid); - $1,500 on March 9, 2002 (paid); - $1,000 on
September 9, 2002 (paid); - $5,000 on February 9, 2003; - $10,000 on March 9,
2003 - $20,000 on March 9, 2004
- $50,000 on March 9, 2005 and every March 9 thereafter
The Company can reduce the net smelter return royalty to 0.5%
by payment of a buy-out price of $5,000,000. Advance royalty
payments made to the date of the buy-out will be applied to
reduce the buy-out price.
Performance Commitment:
In the event that the Company terminates the lease after June
1 of any year, it is required to pay all federal and state
mining claim maintenance fees for the next assessment year.
The Company is required to perform reclamation work in the
property as required by federal state and local law for
disturbances resulting from the Company's activities on the
property.
Note 5 Non-cash Transaction
Investing and financing activities that do not have a direct
impact on current cash flows are excluded from the cash flow
statement. During the period ended September 30, 2002, the Company
issued 1,500,000 common shares at $0.05 per share for $75,000
pursuant to a public offering. $31,000 was recorded as stock
subscriptions at March 31, 2002. This transaction has been
excluded from the cash flows statement.